RNS Number:4086I
Bright Things plc
23 November 2007
Bright Things plc
23 November 2007
Bright Things plc
('Bright Things' or the 'Company')
Interim Results for the six months ended 30 September 2007
Highlights:
*Operating Loss reduced by 70% to #433,000 (2006 - #1,429,000)
*Completion of development of Tiger Woods PGA Tour 07 and subsequently
launched on schedule in the US and UK in time for Christmas
*Reduction of overheads and cost base including a relocation of head
office to a more cost effective location
*Cash at the end of the period of #336,000
*Positive progress in the pursuit of new initiatives and opportunities
Dominic Wheatley, CEO of Bright Things, said:
'Throughout the period we have made encouraging progress in our pursuit of new
initiatives to enhance shareholder value whilst controlling our costs and
continuing to develop our existing product line in time for its recent launch.
We hope to be in a position to announce further details in respect of any new
initiatives in due course.'
For further information please contact:
Bright Things PLC: Tel: 0870 351 7770
Dominic Wheatley, CEO
Edward Levey, Finance Director
HB Corporate
Luke Cairns/ Rory Creedon Tel: +44 (0) 207 510 8600
Brunswick Group
Giles Croot / Mark Antelme Tel: +44 (0) 207 404 5959
Chairman's Statement
====================
Introduction
As announced in our results for the period ending 31 March 2007, your board has
been reviewing a number of new initiatives and opportunities with a view to
growing the business and, in doing so, create value for shareholders. Work has
continued on the Company's existing products and the Tiger Woods PGA Tour 07
game has, subsequent to the period end, been launched on schedule with over
30,000 units ordered. In addition we continue to explore new opportunities for
the ASIC chip.
We do not expect further orders from the distributor of Bubble and will consider
any future Bubble activity at the end of the current distribution agreement.
The results for the six months ended 30 September reflect the seasonal nature of
sales in the interactive DVD market. The main focus of activity within the
Company during the period has been on completing development work on Tiger Woods
PGA Tour '07 for its pre Christmas launch both in UK and USA. Product has now
been shipped to both the UK distributor and US distributor.
In the Annual Report I stated 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.
Progress
--------
The group has made progress in a number of areas:
*Completed development and launched a Tiger Woods PGA Tour '07 game for
release in the US and other territories for Christmas 2007.
*Reduced the overhead and cost base and relocated our head office to a
more cost effective location
*Considered new business opportunities to enhance shareholder value.
Results
-------
Revenue at #96,000 (2006 H1 - #20,000) reflects limited sales of the ASIC
development kit, component chips and interactive DVD software. As previously
stated, the i-DVD market is seasonal and sales from the launch of the new Tiger
Woods PGA '07 game will impact on the second half results
The operating loss was #433,000 (2006 H1 loss #1,429,000), with Research &
development costs at #82,000 (2006 H1 - #622,000) and Other administrative
expenses at #448,000 (2006 H1 - #827,000).
Cost reductions have reflected on the above overheads and this trend will
increase during the remainder of the current year. Investment in development is
now largely complete on current products. All overhead expenditure continues to
be closely monitored.
The Group had cash deposits of #336,000 (2006 H1 - #765,000) at the Balance
Sheet date
Prospects
---------
As previously reported opportunities for new applications for the ASIC chip
continue to be explored.
New iDVD products will be considered in the New Year with the Company intending
to remain selective in identifying premium licenses.
The Company intends to extend its product range, and enter new markets
organically and by acquisition.
Summary
-------
We continue to explore all opportunities to utilise the Company's expertise and
intellectual property.
Overheads have been significantly reduced 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
21 November 2007
Operational and financial review
================================
Unaudited interim results for the 6 months ended 30 September 2007 and future
product portfolio.
Bright Things had no software or hardware product launches in the six month
period to 30 September 2007.
On 12 November 2007 'Tiger Woods PGA Tour '07' was released in the United
Kingdom.
Development model
-----------------
We continue to retain the core management and technical skills in house and
subcontract game development to external studios with appropriate expertise in
DVD authoring and DVD game development.
Manufacturing capabilities
--------------------------
The i-DVDs are manufactured by Sony DADC located in the UK.
Further revenue streams
------------------------
The Group's Patent and Intellectual Property portfolio is presenting
opportunities to generate revenue using our technology within the Interactive
DVD industry.
Results for operations
======================
The Group made an operating loss of #433,000 (2006 H1 - #1,429,000).
Key figures:
6 Months 6 Months Year
Ended Ended Ended
30 30 31
September September March
2007 2006 2007
#'000 #'000 #'000
(as restated) (as restated)
Revenue 96 20 205
________ ________ ________
Gross Profit/(Loss) 97 20 101
________ ________ ________
Research and
Development 82 622 847
________ ________ ________
Other administrative
expenses 448 827 2,598
________ ________ ________
Net assets 236 1,429 627
________ ________ ________
Decrease in cash and cash
equivalents 528 1,010 911
________ ________ ________
Basic and diluted
loss per share (1.4p) (6.9p) (13.5p)
________ ________ ________
Revenue, #96,000 (2006 H1 - #20,000)
Revenue for the period primarily consists of ASIC revenue. Revenue is split
between: ASIC revenue #62,000; i-DVD software #5,000; sales development kit
#16,000; and chip sales #13,000.
Cost of sales, (#1,000) (2006 H1 - nil)
Cost of sales is made up of #1,000 commission on chip sales and a credit of
#2,000 on royalties payable.
Gross profit, #97,000 (2006 H1 - #20,000)
The overall gross profit for the year is #97,000. This is split between: Gross
profit on ASIC revenue of #62,000 achieving a gross margin of 100%; Gross Profit
on i-DVD of #5,000 achieving a gross margin of 100%; Gross Profit on chip sales
of #12,000 achieving a Gross Margin of 77%; Gross profit on royalties of #2,000,
and a Gross Margin of #16,000 on sales development kit revenue.
Administrative expenses
Administrative expenses for the six months ended 30 September 2007 are the main
component of the loss on ordinary activities during the period. Administrative
expenses are in line with expectation and are analysed into four categories:
Research & Development, #82,000 (2006 H1 - #622,000)
Research and development expenditure in the 6 month period included #18,000
spent on the iDVD ASIC platform; #5,000 was spent on software titles that were
not developed; and #94,000 on costs relating to the licensing and development of
Tiger Woods PGA Tour 07 (revenue for this title will be included in the year
ended 31 March 2008). There was also a credit of #35,000 relating to the Bubble
(this cost was included in year ended 31 March 2006).
Other administrative expenditure - #422,000 (2006 H1 - #777,000)
The main component of general and administrative expenditure relates to human
resource costs, totalling #203,000 (2006 H1 - #366,000) for the period. Also
included in other administrative expenditure is depreciation and amortisation of
#54,000 (2006 H1 - #37,000).
Office and administration costs reduced to #48,000 (2006 H1 - #116,000) for the
period, of which office costs were #23,000 (2006 H1 - #83,000).
Travel and subsistence costs reduced to #25,000 (2006 H1 - #68,000).
Marketing costs reduced to #20,000 (2006 H1 - #51,000) in the period. These
costs primarily relate to retained agencies and consultants. #17,000 relate to
the Tiger Woods iDVD.
Professional expenses decreased in the year to #49,000 (2006 H1 - #107,000).
Included in this, the amount relating to the portfolio of patent applications
reduced to #1,000 (2006 H1 - #21,000) for the period. The decrease is as
expected as the cost is maintaining patents acquired in previous years.
Finance expenses for the period were #23,000 (2006 H1 - #32,000).
Share based payment charges - IFRS 2
The charge in respect of share options totalled #26,000 (2006 H1 - #50,000).
Exceptional administrative expenditure - Nil (2006 H1 - Nil)
In the year to 31 March 2007, due to the uncertain nature of future cash flow,
the Group decided to fully impair the goodwill, which related wholly to the
acquisition of PushPlay Interactive LLC.
Taxation
No tax charge arises on the loss for the financial period. At 30 September 2007
the Group has approximately #11 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 1.4p (2006 H1 loss of 6.9p) has decreased
due to the scaling back of the research and development activities and a further
reduction in general overheads.
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.
Cash at bank at 30 September 2007 is #336,000. This comprises #298,000 held in a
Special Interest Bearing Account (SIBA) with the remainder of the funds held in
current accounts. At the end of the financial period the group had net assets of
#236,000 (2006 H1 - #1,429,000).
Net assets have decreased to #236,000 as at 30 September 2007 from #627,000 at
31 March 2007. This is due principally to the operating loss for the period.
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 assess the appropriate application of these funds.
Financial Instruments
During the period, the Group's financial instruments, comprised cash and various
items such as trade debtors and 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
21 November 2007
Consolidated income statement for the six month period ended 30 September 2007
Note 6 months ended 6 months ended 12 months to
30 September 30 September 31 March 2007
2007 2006 (audited)
(unaudited) (unaudited) (as restated)
#'000 (as restated) #'000
#'000
Revenue 96 20 205
Cost of sales 1 - (104)
_______ _______ _______
Gross profit 97 20 101
------------ ------------ ---------
Research and
development costs (82) (622) (847)
Administrative
expenses - other (422) (777) (1,659)
Administrative
expenses -
exceptional
- - (832)
Share based payment
charge (26) (50) (107)
------------ ------------ ----------
Administrative
expenses (530) (1,449) (3,445)
_______ _______ _______
Loss from operations (433) (1,429) (3,344)
Finance income 16 28 52
_______ _______ _______
Loss before tax and
for the financial
period (417) (1,401) (3,292)
_______ _______ _______
Attributable to:
=== === ===
Equity shareholders (417) (1,401) (3,292)
_______ _______ _______
Loss per share
=== === ===
Basic and diluted
(1.4p) (6.9p) (13.5p)
========= =========
Consolidated balance sheet at 30 September 2007
Note 30 September 30 September 31 March
2007 2006 2007
(unaudited) (unaudited) (audited)
#'000 (as restated) (as restated)
#'000 #'000
Non-current assets
Property, plant and equipment 22 61 38
Goodwill - 832 -
Intangible assets 54 191 89
_______ _______ _______
76 1,084 127
_______ _______ _______
Current assets
Inventories 10 - 7
Trade and other receivables 17 29 165
Prepayments and accrued income 134 48 16
Cash and cash equivalents 336 765 864
_______ _______ _______
497 842 1,052
_______ _______ _______
Total assets 573 1,926 1,179
Current liabilities
Trade and other payables (120) (190) (194)
Tax liabilities (8) (16) (11)
Accruals and deferred income (209) (291) (347)
_______ _______ _______
Total liabilities (337) (497) (552)
_______ _______ _______
Net assets 236 1,429 627
_______ _______ _______
Equity
Called up share capital
4 3,045 2,045 3,045
Share premium 9,589 9,559 9,589
Warrant reserve 267 267 267
Merger reserve (286) (286) (286)
Share based payment reserve 246 163 220
Retained deficit (12,625) (10,319) (12,208)
_______ _______ _______
Total Equity 236 1,429 627
_______ _______ _______
Consolidated cash flow statement for the six month period ended 30 September
2007
Note 6 months ended 6 months ended 12 months to 31
March
30 September 30 September 2007
2007 2006 (audited)
(unaudited) (unaudited) (as restated)
#'000 (as restated) #'000
#'000
Operating activities
Net loss before
taxation (417) (1,401) (3,292)
Share based payments 26 50 107
Depreciation on
property plant and
equipment 18 26 38
Amortisation of
intangible assets 35 11 113
Goodwill
amortisation and
impairment - - 832
_______ _______ _______
(338) (1,314) (2,202)
(Increase)/decrease
in inventory (3) - 7
Decrease in trade
and other
receivables 30 354 250
(Decrease)/increase
in trade and other
payables and
accruals and
deferred income (215) (50) 5
_______ _______ _______
Cash generated from
operations (526) (1,010) (1,940)
Investing activities
Purchase of
property, plant and
equipment (3) - (6)
Sale of property,
plant and equipment 1 - 5
_______ _______ _______
Net cash used in
investing activities (2) - (1)
Financing activities
Proceeds from issue
of new share capital - - 1,100
Costs of issue of
new share capital - - (70)
_______ _______ _______
Net cash generated
by financing
activities - - 1,030
Net decrease in cash
and cash equivalents (528) (1,010) (911)
Cash and cash equivalents at
start of period
864 1,775 1,775
_______ _______ _______
Cash and cash
equivalents at end
of period 336 765 864
_______ _______ _______
Consolidated statement of changes in equity for the period ended 30 September
2007
Other reserves Retained earnings
---------------- -------------------
Called up Share premium Merger reserve Warrant reserve Share based Retained Total
share capital payment reserve deficit
#'000 #'000 #'000 #'000 #'000 #'000 #'000
At 1 April
2006 -
restated 2,045 9,559 (286) 267 113 (8,918) 2,780
Share based
payment - - - - 50 - 50
charge
Loss for the
period - - - - - (1,401) (1,401)
------- -------- ------- ------- ------- ------- -------
Total
recognised
income and
expense for
the period - - - - 50 (1.401) (1,351)
------- -------- ------- ------- ------- ------- -------
Net increase
/(decrease) - - - - 50 (1.401) (1,351)
------- -------- ------- ------- ------- ------- -------
At 30
September
2006
- restated 2,045 9,559 (286) 267 163 (10,319) 1,429
(unaudited)
Issue of
shares 1,000 30 - - - - 1,030
Share based
payment - - - - 57 - 57
charge
Unrealised
FX
gain on
translation
of - - - - - 2 2
foreign
subsidiaries
Loss for the
period - - - - - (1,891) (1,891)
------- -------- ------- ------- ------- ------- -------
Total
recognised
income and
expense for
the period 1,000 30 - - 57 (1,889) (802)
------- -------- ------- ------- ------- ------- -------
Net increase
/ 1,000 30 - - 57 (1,889) (802)
(decrease)
------- -------- ------- ------- ------- ------- -------
At 31 March
2007 -
restated 3,045 9,589 (286) 267 220 (12,208) 627
Share based
payment - - - - 26 - 26
charge
Loss for the
period - - - - - (417) (417)
------- -------- ------- ------- ------- ------- -------
Total
recognised
income and
expense for
the period - - - - 26 (417) (391)
------- -------- ------- ------- ------- ------- -------
Net increase
/ - - - - 26 (417) (391)
(decrease)
------- -------- ------- ------- ------- ------- -------
At 30
September
2007 3,045 9,589 (286) 267 246 (12,625) 236
(unaudited)
------- -------- ------- ------- ------- ------- -------
Notes forming part of the interim financial statements for the period ended 30 September 2007
=============================================================================================
Accounting Policies
---------------------
Accounting policies adopted under IFRS
These interim financial statements have been prepared using the recognition and
measurement principles of International Financial Reporting Standards as adopted
by the European Union ('IFRS').
The basis of preparation and accounting policies used in preparing the interim
accounts for the six months ended 30 September 2007 are set out below. The basis
of preparation describes how IFRS has been applied under IFRS 1, the assumptions
made by the Group about the Standards and Interpretations expected to be
effective, and the policies expected to be adopted, when the Group issues its
first complete set of IFRS financial statements for the year ending 31 March
2008.
Basis of preparation
--------------------
The financial information for the six months ended 30 September 2007, six months
ended 30 September 2006 and the year ended 31 March 2007 is unreviewed and
unaudited and, within the meaning of section 240 of the Companies Act 1985, such
accounts do not constitute full statutory accounts of the Group.
The accounting policies which follow set out those policies which are expected
to apply in preparing the financial statements for the year ended 31 March 2008.
These policies have been followed in producing these interim statements.
The comparative figures for the financial year ended 31 March 2007 are not the
statutory financial statements of Bright Things Plc for that financial year.
Those financial statements, which were prepared under UK Generally Accepted
Accounting Principles, have been reported on by the Company's auditors and
delivered to the registrar of companies. The report of the auditors was
unqualified and did not contain statements under section 237(2) or (3) of the
Companies Act 1985, however the auditors' report on those accounts included an
emphasis of matter paragraph with regards to the going concern basis of
preparation of the financial statements. Their opinion was not qualified in this
respect.
Significant accounting judgements and estimates
-----------------------------------------------
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. These judgements and
estimates are based on managements' best knowledge of the relevant facts and
circumstances, having regard to prior experience, but actual results may differ
from the amounts included in the financial statements. Information about such
judgements and estimations is contained in the accounting policies and
accompanying notes to the financial statements.
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 30 November 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.
Revenue recognition
-------------------
Revenue comprises:
(a) sales of games and technology chips to retailers and external distributors
at invoiced and accrued amounts less value added tax and provision against any
subsequent returns. Where advance payments against sales are received, in so far
as the Group's obligations have been fulfilled, such advances are recognised at
the point at which they become non-returnable. The Group makes provision against
any subsequent returns or price protection, and
(b) royalty payments received or accrued from external distributors under
licence of the right to distribute games in certain territories. Where advance
payments against royalties are received under licence, in so far as the Group's
obligations have been fulfilled, such advances are recognised at the point at
which they become non-returnable.
Revenue from sales of games and technology chips is recognised at the point at
which the product is delivered.
Basis of Consolidation
---------------------
The consolidated Group financial statements incorporate the results of Bright
Things Plc and its subsidiary undertaking, Bright Entertainment Limited, using
the merger accounting method.
The results also include the results of its other subsidiaries, Bright Things
International Limited (date of incorporation 16 February 2005), Bright Things
Inc (date of incorporation 6 April 2005) and PushPlay Interactive LLC (purchase
date 28 June 2005), using the acquisition accounting method.
Merger accounting
-----------------
In the Group financial statements, merged subsidiary undertakings are treated as
if they had always been a member of the Group. The results of such a subsidiary
are included for the whole period in the year it joins the group. The
corresponding figures for the previous year include its results for that period,
the assets and liabilities at the previous balance sheet date and the shares
issued by the company as consideration as if they had always been in issue. Any
difference between the nominal value of the shares acquired by the company and
those issued by the company to acquire them is taken to reserves.
Acquisition accounting
----------------------
In the Group financial statements, the results of acquired subsidiary
undertakings are taken from the date of acquisition. Any difference between the
fair value of assets acquired and the consideration paid is treated as goodwill
in the consolidated balance sheet.
Property, plant and equipment
Property, plant and equipment are stated at cost, net of depreciation and
provision for impairment. Depreciation is provided on all property plant and
equipment, at rates calculated to write off the cost less estimated residual
value, of each asset on a straight-line basis over its expected useful life, as
follows:
Computer equipment and software - 3 years straight line
Office fixtures, fittings & equipment - 3 years straight line
Goodwill and business combinations
----------------------------------
Goodwill results from the acquisition of subsidiaries, associates and joint
entities and corresponds to the difference between the acquisition cost and the
fair value of the assets, liabilities and contingent liabilities identified at
the date of acquisition.
The Group has elected to take the exemption not to apply IFRS 3 retrospectively
to business combinations occurring prior to the date of transition to IFRS.
Under IFRS 3 Business Combinations and IAS 38 Intangible Assets goodwill is not
amortised, but it is subject to an annual impairment review. As the Group has
elected not to apply IFRS 3 retrospectively to business combinations prior to 1
April 2006 the original UK GAAP goodwill balance at 1 April 2006 (#832,000) has
been included in the opening IFRS consolidated balance sheet and is no longer
amortised, but continues to be subject to impairment reviews. The goodwill
amortisation charge previously calculated under UK GAAP has been credited to the
profit and loss account.
The recoverable value of goodwill is then estimated on the basis of the higher
of market value or value in use. Value in use is defined as the present value
relating to the cash flow generating units with which the goodwill is
associated. When the market value or value in use is less than the accounting
value, impairment is recorded and is irreversible.
IFRS 1 First-time Adoption of International Financial Reporting Standards
requires that an annual impairment review of goodwill is conducted in accordance
with IAS 36 Impairment of Assets at the date of transition, irrespective of
whether there is an indication of impairment. The directors conducted impairment
reviews at the date of transition and also at 31 March 2007 and at that time
fully impaired goodwill (#832,000).
Intangible assets
-----------------
Intangible assets acquired by the Group are recorded at their valuation or cost
less the total of amortisation and impairment. In accordance with IAS 38
"Intangible assets", only elements whose cost can be determined reliably and for
which it is probable that future benefits exist are recorded as non current
assets.
Intangible assets are amortised over the expected period of use:
Intellectual Property - 3 years straight line (2006 - 10 years straight line)
Licences - 10 years straight line
Having given regard to the market opportunities relating to intellectual
property the estimated useful life is now considered to be 3 years.
Inventory
Inventory comprise finished goods for resale, and are stated at the lower of
cost and net realisable value. Cost is calculated as cost of materials. Net
realisable value is based on estimated selling price, less further disposal
costs.
The Company reviews the net realisable value of and demand for its inventory on
an annual basis to ensure recorded inventory is stated at the lower of cost or
net realisable value, after making due allowance for obsolete and slow-moving
items.
Factors that could impact estimated demand and selling prices are the timing and
success of future technological innovations, competitor actions, supplier prices
and economic trends.
Foreign currency
----------------
Transactions entered into by Group entities in a currency other than the
currency of the primary economic environment in which it operates (the
"functional currency") are recorded at the rates ruling when the transactions
occur. Foreign currency monetary assets and liabilities are translated at the
rates ruling at the balance sheet date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are similarly
recognised immediately in the income statement.
On consolidation, the results of overseas operations are translated into
sterling at rates approximating to those ruling when the transactions took
place. All assets and liabilities of overseas operations, including goodwill
arising on the acquisition of those operations, are translated at the rate
ruling at the balance sheet date. Exchange differences arising on translating
the opening net assets at opening rate and the results of overseas operations at
actual rate are recognised directly in equity (the "foreign currency translation
reserve"). Exchange differences recognised in the income statement of Group
entities' separate financial statements on the translation of long-term monetary
items forming part of the Group's net investment in the overseas operation
concerned are reclassified to the foreign exchange reserve if the item is
denominated in the functional currency of the Group or the overseas operation
concerned. On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign exchange reserve relating to that
operation up to the date of disposal are transferred to the income statement as
part of the profit or loss on disposal.
Financial assets
----------------
The Group classifies its financial assets into one of the following categories,
depending on the purpose for which the asset was acquired. The Group's
accounting policy for each category is as follows:
Fair value through profit or loss:
This category comprises only in-the-money derivatives. They are carried in the
balance sheet at fair value with changes in fair value recognised in the income
statement. The Group does not have any assets held for trading nor does it
voluntarily classify any financial assets as being at fair value through profit
or loss.
Loans and receivables: These assets are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They
arise principally through the provision of goods and services to customers
(trade debtors), but also incorporate other types of contractual monetary asset.
They are carried at amortised cost using effective rate method.
Held-to-maturity investments: These assets are non-derivative financial assets
with fixed or determinable payments and fixed maturities that the Group's
management has the positive intention and ability to hold to maturity. These
assets are measured at amortised cost, with changes through the income
statement.
Available-for-sale: Non-derivative financial assets not included in the above
categories are classified as available-for-sale and comprise the Group's
strategic investments in entities not qualifying as subsidiaries, associates or
jointly controlled entities. They are carried at fair value with changes in fair
value recognised directly in equity. Where a decline in the fair value of an
available-for-sale financial asset constitutes objective evidence of impairment,
the amount of the loss is removed from equity and recognised in the income
statement.
Financial liabilities
---------------------
The Group classifies its financial liabilities into one of two categories,
depending on the purpose for which the asset was acquired. The Group's
accounting policy for each category is as follows:
Fair value through profit or loss: This category comprises only out-of-the-money
derivatives. They are carried in the balance sheet at fair value with changes in
fair value recognised in the income statement.
Other financial liabilities: Other financial liabilities include the following
items: Trade payables and other short-term monetary liabilities, which are
recognised at cost. Bank borrowings are initially recognised at the amount
advanced net of any transaction costs directly attributable to the issue of the
instrument. Such interest bearing liabilities are subsequently measured at
amortised cost using the effective interest rate method, which ensures that any
interest expense over the period to repayment is at a constant rate on the
balance of the liability carried in the balance sheet. "Interest expense" in
this context includes initial transaction costs and premia payable on
redemption, as well as any interest payable while the liability is outstanding.
Capitalised development costs
-----------------------------
Capitalised development costs correspond to the development of new products once
the Group has determined that: the product is technically and commercially
feasible; the project is clearly defined and related expenditure is separately
identifiable; current and future costs are expected to be exceeded by future
sales; the Group has the intention and ability to complete the intangible asset
and use or sell it; and adequate resources exist for the product to be
completed. Capitalised development costs are amortised over the period that
prudently simulates the flow of revenues from a typical product. At the close of
each fiscal year products are reviewed for any loss of value. Where contribution
made by a product does not exceed the expected total cost of development then an
impairment provision is made.
All research and development expenditure in these Group financial statements has
been charged to the income statement as incurred.
Licence fees
------------
Licence fees payable to organisations for use of their Intellectual Property are
charged to the income statement over their useful economic lives, which, to the
Group, equates to the forecast period of product sales. Management regularly
reviews the carrying value of such licences. All licence fees in these Group
financial statements have been charged to the income statement as incurred.
Royalties payable
----------------
Royalties are accounted for as payable when units of hardware or software are
sold into the sales channel by our distributor and calculated in accordance with
the commercial terms entered into with licensors.
Share based compensation
------------------------
Where share options are awarded to employees, the fair value of the options at
the date of grant is charged to the income statement over the vesting period.
Non-market vesting conditions are taken into account by adjusting the number of
equity instruments expected to vest at each balance sheet date so that,
ultimately, the cumulative amount recognised over the vesting period is based on
the number of options that eventually vest. Market vesting conditions are
factored into the fair value of the options granted. As long as all other
vesting conditions are satisfied, a charge is made irrespective of whether the
market vesting conditions are satisfied. The cumulative expense is not adjusted
for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before they vest, the
increase in the fair value of the options, measured immediately before and after
the modification, is also charged to the income statement over the remaining
vesting period.
Where equity instruments are granted to persons other than employees, the income
statement is charged with the fair value of goods and services received. If it
is not possible to identify the fair value of these goods or services provided,
the income statement us charged with the fair value of the options granted.
Deferred taxation
-----------------
Deferred income tax is calculated using the balance sheet asset-liability method
of tax allocation for all temporary differences arising between the book value
of assets and liabilities and their tax bases, except for differences arising on
the initial recognition of goodwill.
A deferred income tax asset is recognised only to the extent that it is probable
that there will be future taxable profits on which this asset can be charged.
Deferred income tax assets are reduced to the extent that it is no longer likely
that a sufficient taxable benefit will arise.
Deferred taxation is shown on the balance sheet separately from current tax
assets and liabilities and categorised among non-current items.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the deferred
tax assets and liabilities relate to taxes levied by the same tax authority on
either the same taxable Group company or different Group entities which intend
to either settle current tax assets and liabilities on a net basis, or to
realise the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax assets or liabilities are
expected to be settled or recovered.
Deferred tax balances are not discounted.
Changes in accounting policies
IFRS 2 (FRS 2) 'Share based payment'
During the year ended 31 March 2007 the Group adopted IFRS 2 (FRS 20) 'Share
based payment' application of which is obligatory for AIM listed companies with
accounting periods commencing on or after 1 January 2006. The impact of this was
reflected in the 2007 results and the interim 2006 figures have been restated to
reflect the change in policy.
IFRS 2 (FRS 20) 'Share based payment' requires the recognition of share based
payment transactions with employees or other parties at fair value at the date
of grant. Prior to the adoption of IFRS 2 (FRS 20), the group recognised the
financial effect of the share based payment in the following way: when shares
and share options were awarded to employees a charge was made to the profit and
loss account based on the difference between the market value of the company's
shares at the date of grant and the option excise price in accordance with UTIF
Abstract 17 (revised 2003) 'Employee Share Schemes'. The credit entry for this
charge was taken to the profit and loss reserve and reported in the
reconciliation of movements in shareholder's funds.
For the year to 31 March 2007, the change in accounting policy resulted in net
increase in loss for the year of #107,000. For the year ended 31 March 2006 the
impact of share based payments was a net charge to income of #113,000. In the
six months to 30 September 2007 the net charge to income is #26,000 (2006 H1 -
#50,000).
The share based payments expense has been included in the following line of the
consolidated income statement: administrative expenses #530,000 (2006 H1 -
#1,449,000).
Taxation
--------
Corporation tax payable is provided on taxable profits at prevailing rates.
Transition to IFRS
The consolidated financial information for the six months ended 30 September
2007 and the year ended 31 March 2007 and the opening balance sheet at 1 April
2006 have been prepared in accordance with International Financial Reporting
Standards (IFRS) for the first time.
The Group's transition date to IFRS is 1 April 2006. The rules for first-time
adoption of IFRS are set out in IFRS 1 'First time adoption of international
reporting standards'. In preparing the IFRS financial information, these
transition rules have been applied to the amounts reported previously under
generally accepted accounting principles in the United Kingdom ('UK GAAP'). IFRS
1 generally requires full retrospective application of the Standards and
Interpretations in force at the first reporting date. However, IFRS 1 allows
certain exemptions in the application of particular Standards to prior periods
in order to assist companies with the transition process.
As the Group has elected not to apply IFRS 3 retrospectively to business
combinations prior to 1 April 2006 the original UK GAAP goodwill balance at 1
April 2006 (#832,000) has been included in the opening IFRS consolidated balance
sheet and is no longer amortised, but continues to be subject to impairment
reviews.
No amortisation has been charged for the 6 months to 30 September 2006.
Previously #45,000 had been charged under UK GAAP.
There is no net impairment of IFRS restatement to 31 March 2007. Opening
goodwill at 1 April 2006 was fully impaired at 31 March 2007.
Under UK GAAP the figures to 30 September 2006 and 31 March 2007 needed no IFRS
2 adjustment as this charge was already reflected by FRS 20.
For the period to 30 September 2006, the impact of the restatement of the share
based payments charge resulted in net charge for the period of #50,000.
The IFRS conversion statements have neither been audited nor reviewed by the
Company's auditors BDO Stoy Hayward LLP.
IFRS restatement of Income Statement for the year ended 31 March 2007
=====================================================================
UK GAAP Adjustment IFRS
Year ended Year ended Year ended
31 March 2007 31 March 2007 31 March 2007
#'000 #'000 #'000
Revenue 205 205
Cost of sales (104) (104)
_______ _______ _______
Gross profit/loss 101 101
------------- ------------- ------------
Research and development costs (847) (847)
Administrative expenses -
other (1, 749) 90 (1,659)
Administrative expenses -
exceptional (742) (90) (832)
Share based payment charge (107) (107)
------------- ------------- ------------
Administrative expenses (3,445) (3,445)
_______ _______ _______
Operating loss (3,344) (3,344)
Finance income 52 52
_______ _______ _______
Loss before tax and for the
financial period (3,292) (3,292)
_______ _______ _______
Attributable to:
=== === ===
Equity shareholders (3,292) (3,292)
=== =========
_______ _______ _______
Loss per share
Basic and diluted (13.5p) (13.5)p
=======================================
UK GAAP Adjustment IFRS
Six months Six months Six months
ended ended ended
30 September 30 September 30 September
2006 2006 2006
(as restated) #'000 #'000
#'000
Revenue 20 20
Cost of sales - -
_______ _______ _______
Gross profit/loss 20 20
------------- ------------- -------------
Research and
development costs (622) (622)
Administrative
expenses - other (822) 45 (777)
Administrative expenses - - -
exceptional
Share based
payment charge (50) (50)
------------- ------------- -------------
Administrative
expenses (1,494) 45 (1,449)
_______ _______ _______
Operating
(loss)/profit (1,474) 45 (1,429)
Finance income 28 28
_______ _______ _______
(Loss)/profit
before tax and for
the financial
period (1,446) 45 (1,401)
_______ _______ _______
Attributable to:
=== === ===
Equity
shareholders (1,446) 45 (1,401)
_______ _______ _______
Loss per share
Basic and diluted (7.1p) 0.2p (6.9p)
========= ======= =========
IFRS restatement of Balance sheet as at 31 March 2007
=====================================================
UK GAAP Adjustment IFRS
31 March 31 March 31 March
2007 2007 2007
#'000 #'000 #'000
Non-current assets
Property, plant and
equipment 38 38
Intangible assets 89 89
________ ________ ________
127 127
Current assets
Inventories 7 7
Trade and other
receivables 165 165
Prepayments and accrued
income 16 16
Cash and cash equivalents 864 864
________ ________ ________
1,052 1,052
________ ________ ________
Total assets 1,179 1,179
Current liabilities
Trade and other payables (194) (194)
Tax and social security (11) (11)
Accruals and deferred
income (347) (347)
________ ________ ________
Total liabilities (552) (552)
________ ________ ________
Net assets 627 627
________ ________ ________
Capital and reserves attributable to equity shareholders
Called-up share
capital 3,045 3,045
Share premium account 9,589 9,589
Warrant reserve 267 267
Merger reserve (286) (286)
Share based compensation 220 220
Retained losses (12,208) (12,208)
________ ________ ________
Capital and reserves 627 627
________ ________ ________
IFRS restatement of Balance sheet as at 1 April 2006
====================================================
UK GAAP Adjustment IFRS
1 April 1 April 1 April
2006 2006 2006
#'000 #'000 #'000
Non-current assets
Property, plant and
equipment 87 87
Intangible assets 1,034 1,034
________ ________ ________
1,121 1,121
Current assets
Inventories - -
Trade and other
receivables 347 347
Prepayments and accrued
income 84 84
Cash and cash
equivalents 1,775 1,775
________ ________ ________
2,206 2,206
________ ________ ________
Total assets 3,327 3,327
Current liabilities
Trade and other payables (227) (227)
Tax and social security (32) (32)
Accruals and deferred
income (288) (288)
________ ________ ________
Total liabilities (547) (547)
________ ________ ________
Net assets 2,780 2,780
________ ________ ________
Capital and reserves attributable to equity shareholders
Called-up share capital 2,045 2,045
Share premium account 9,559 9,559
Warrant reserve 267 267
Merger reserve (286) (286)
Share based compensation 113 113
Retained losses (8,918) (8,918)
________ ________ ________
Capital and reserves 2,780 2,780
________ ________ ________
IFRS restatement of Balance sheet as at 30 September 2006
=========================================================
UK GAAP Adjustment IFRS
30 Sept 30 Sept 30 Sept
2006 2006 2006
(as restated)
#'000 #'000 #'000
Non-current assets
Property, plant and
equipment 61 61
Intangible assets 978 45 1,023
________ ________ ________
1,039 45 1,084
Current assets
Inventories - -
Trade and other
receivables 29 29
Prepayments and accrued
income 48 48
Cash and cash equivalents 765 765
________ ________ ________
842 842
________ ________ ________
Total assets 1,881 45 1,926
Current liabilities
Trade and other payables (190) (190)
Tax and social security (16) (16)
Accruals and deferred
income (291) (291)
________ ________ ________
Total liabilities (497) (497)
________ ________ ________
Net assets 1,384 45 1,429
________ ________ ________
Capital and reserves attributable to equity shareholders
Called-up share capital 2,045 2,045
Share premium account 9,559 9,559
Warrant reserve 267 267
Merger reserve (286) (286)
Share based compensation 163 163
Retained losses (10,364) 45 (10,319)
________ ________ ________
Capital and reserves 1,384 45 1,429
________ ________ ________
The interim report and financial statements is available in full on the
Company's website www.brightthings.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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