LVCG Live Company Group Plc

NOTES TO THE FINANCIAL INFORMATION

1.       Basis of preparation

The condensed consolidated interim financial report for the half-year reporting period ended 30 June 2023 are unaudited and have been prepared in accordance with Accounting Standard IAS 34 Interim Financial Reporting and the same accounting policies and methods of computation are followed in the interim financial report as compared with the most recent annual financial statements. They do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial statements for the year ended 31 December 2022 were prepared in accordance with UK adopted International Accounting Standards (IFRS), and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS as at 31 December 2022. 

The report of the auditor on those financial statements was qualified, on the basis of three matters:

Matter 1: Inventories

The report of the auditor identified uncertainty as to the carrying value of inventories of loose plastic bricks held for use in the Groups events and for construction of models used for tour and trails recognised in the Consolidated Statement of Financial Position at £2,480,000 (31 December 2022: £2,480,000), in the carrying value of LEGO sets held for resale recognised in the Consolidated Statement of Financial Position at £63,000 (31 December: 2022 £63,000) and other merchandise held for resale recognised in the Consolidated Statement of Financial Position at £70,000 (31 December: 2022 £70,000).

Matter 2: Goodwill and accounting for business acquisition

The report of the auditor identified uncertainty as to the carrying value of the assets and liabilities of Start Art Global Ltd and the Group's calculation of goodwill amounting to £3,924,000 relating to the acquisition and its subsequent impairment. Goodwill is recognised in the Consolidated Statement of Financial Position at £738,000 (31 December: 2022 £738,000).

Matter 3: Carrying value of investments - Brick Live Group

The report of the auditor identified uncertainty in the carrying value of the Company's investment in Brick Live Group held in the Company balance sheet as an investment in subsidiary at £8,841,000 (31 December 2022: £8,841,000) due to the uncertainty over future projections and the sensitivity of the discounted cashflow projections to the choice of discount rate adopted by the Company.

In addition the audit report drew attention to a material uncertainty that may cast significant doubt on the group's ability to continue as a going concern, it concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements was appropriate.

The interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 December 2022 and any public announcements made by the Live Company Group Plc during the interim reporting period.

1.1     Going Concern

After careful assessment, the Directors have adopted the going concern basis in preparing these financial statements.

For the purposes of the going concern assessment, the Directors have prepared monthly cash flow projections for the period to 31 January 2025 (the assessment period). The Directors consider this to be a reasonable period for the going concern assessment as it enables us to consider the potential impact of macroeconomic and geopolitical factors over an extended period. The cash flow projections show that the Group requires additional external support in the form of an underwritten financial guarantee from the majority shareholder and a binding conversion of a loan to equity swap. This will enable the business to meet its financial obligations and comply with all covenants in our banking facilities.

The Group has also performed stress tests against the base monthly cash flow projections referred to above in order to determine the performance level that would result in reduction in headroom against its cash facilities to nil. As a further stress test, the Group considered the impact of event cancellations due to market uncertainty. Each of the stress tests would require a further guarantee or refinancing of the business.

In addition, mitigating actions available to the Group, should they be required, include reductions in discretionary expenditure and ceasing dividend payments.

After considering the monthly cash flow projections, and the facilities available to the Group and Company outlined within the directors report, the Directors have a reasonable expectation that the Group and Company will secure the additional £1.5m loan facility and £500k placing agreement, described in the Chairman's statement on page 8, enabling them to meet their existing obligations with the added support of the guarantee from the majority shareholder to 31 January 2025. Accordingly, and having reassessed the principal risks and uncertainties, the Directors considered it appropriate to adopt the going concern basis in preparing the Group and Company financial statements. However there remains a material uncertainty related to events or conditions, that may cast significant doubt on the Group's and Company's ability to continue as a going concern. This is due to the Group's current and recent trading performance and the remaining uncertainty relating to the proposed loan of £1,500,000 from the new cornerstone investor and £500,000 placing agreement.

2.       Segment Information

The Group has four operating segments: BRICKLIVE Tours and Trails, BRICKLIVE Models and Sets, Sports and Entertainment division (LCSE), KPOP and StART.Art.

The Group uses PXEBITDA as a measure to assess the performance of the segments. This excludes discontinued operations and the effects of exceptional items of expenditure which may have an impact on the quality of earnings such as restructuring costs, fundraising costs, legal expenses and impairments when the impairment is the result of an isolated, non-recurring event.

Content depreciation is included with amortisation and depreciation in this note but in cost of sales in the Consolidated Statement of Comprehensive Income. Administrative expenses are apportioned to each trading segment in proportion to the revenue earned. Interest expenditure is not allocated to segments as this type of activity is driven by the central treasury function which manages the cash position of the Group.

3.       Exceptional Items

Share option and warrant charge

The Group uses the Black-Scholes model to value its share options and warrants. Certain judgement is required in determining the assumptions such as the risk-free interest rate and standard deviation rate used. The charge for the six months to 30 June 2023 is £18,000 (six months to 30 June 2022: £88,000).

During the six months to 30 June 2023 no options and no warrants lapsed (six months to June 2022: 1,744,457 options and 8,028,840 warrants lapsed resulting in a transfer of £71,000 from share option reserve to retained earnings).

Transactional costs

The group incurred £10k due diligence and legal fees in connection with a loan from Riverfort during the period.

During the six months to 30 June 2022 transactional costs relate to the acquisition of the remaining share capital of Start Art Global Ltd. not already owned, the acquisition was completed in July 2022.

4.       Earnings per share

The basic loss per share is calculated by dividing the loss attributable to equity shareholders by the weighted average number of shares in issue during the period. In calculating the diluted loss per share, any outstanding share options and warrants are considered where the impact of these is dilutive.

Diluted profit or loss per share in both 2022 and 2021 are the same as basic profit or loss per share, as the options in issue had no dilutive effect on continuing operations.

5.       Dividends

No dividend was recommended or paid for the period under review.

6.       Property, plant, and equipment

7.       Intangible assets

Trademarks

Trademarks are obtained or each show in each jurisdiction around the world.  Trademarks are amortised over their estimated useful lives, which is on average 10 years. The carrying value of trademarks at 30 June 2023 is £82k (31 December 2022: £86k).

LCSE novated contracts

In December 2020 the Company formed a new Sports and Entertainment division ('LCSE') through the acquisition of the entire issued share capital of Live Company Sports and Entertainment Limited together with its wholly owned subsidiary Live Company Sports and Entertainment (Pty) Limited and 50% interest in K-Pop Europa Limited for £650,000. Prior to the acquisition Live Company Sports and Entertainment Limited was 100% owned by David Ciclitira.

The Company also purchased certain contracts from World Sport South Africa (Pty) Limited for £500,000 and acquired the entire issued share capital of E Movement Holdings Ltd for £300,000. Prior to the acquisition E Movement Holdings Ltd was 33.34% owned by David Ciclitira.

The substance of these transactions being the acquisition of a series of contracts rather than a business combination as defined in IFRS 3 'Business Combinations'. The acquired contracts are amortised over the period of the rights acquired, where contracts are renewable and are likely to be renewed for a further period such further period, but no subsequent periods, is considered to be part of the period of the rights acquired. The carrying value of these contracts at 30 June 2023 is £753,000 (31 December 2022: £893,000)

StART.Art

In July 2022 the Company acquired the remaining 80.6% of StART.Art not already owned by the Group from David Ciclitira and Ranjit Murugason. Prior to July 2022 the Company did not exercise significant influence over StART.Art and the Company's interest was included in investments in Other Financial Assets in the Consolidated Statement of Financial Position as 31 December 2021.

On acquisition StART.Art included intangible assets, comprising the capitalised costs of developing the online StART.Art software platform, the carrying value of these assets at 30 June 2023 is £78,000 (31 December 2023: £78,000).

The directors have reviewed the value of the online software platform included in Intangible Assets and determined that there is no impairment of its value. This conclusion is based on a detailed assessment of various factors, including market conditions, technological advancements, and the platform's ongoing performance and strategic importance.

The Company has agreed with David Ciclitira and Ranjit Murugason, as original owners of Start Art Global Limited ("StartArt"), to cancel the acquisition of the 80.06% of Start Art as announced on 8 July 2022 in return for the cancellation of all amounts owing to the being up to an aggregate of £500,000 in cash and £519,800 in Ordinary Shares, with the Company retaining a 19.94% interest.  The StART.Art disposal is classified as a Related Party transaction under AIM Rules for Companies (the 'AIM Rules').  The Company intends to seek approval from shareholders at a General Meeting by no later than 28 March 2024, details of which will be provided in due course.  The General Meeting circular will provide all information with regards to the Related Parties and the opinion of the independent director and the Company's Nominated Adviser, Beaumont Cornish Limited.  Any changes in the goodwill will be reflected in the Annual Report and Accounts for the Company ending 31 December 2023. 

8.       Investments

The Directors considered the carrying value at 30 June 2023 for each investment identified below, and it was determined that no further impairment was required.

Prior to July 2022, and the acquisition of the remaining 80.06% of StART.Art, the Company did not exercise significant influence over StART.Art and the Company's interest was included in Investments in Other Financial Assets in the Consolidated Statement of Financial Position at 31 December 2021. From July 2022 the results of StART.Art have been consolidated and the investment previously included in Investments in Other Financial Assets treated as a disposal.

In November 2021 the Company purchased 271 ordinary shares, representing 20% of the total issued share capital, in E-Movement (PTY) Limited ('EMPL') from David Ciclitira for a total consideration of £113,460. These shares were originally purchased by David Ciclitira (acting in his personal capacity) for the same amount in anticipation of them being transferred to the Company. EMPL is the South African based promoter of the Cape Town E Prix which has been confirmed for Series 9 of the ABB FIA Formula E World Championship which took place in February 2023. Following the issue of further shares in EMPL in October 2022 the Group's interest in the company was reduced to 14.8%.

9.  Borrowings         

In April 2020 the Group entered into a £500,000 loan agreement with David Ciclitira, in March 2022 the outstanding balance was repaid in full.

In April 2020 the Company entered into a £250,000 CBILS loan agreement with NatWest Bank plc of which £157,400 remained outstanding at the balance sheet date.  The loan is unsecured, for a term of six years with an effective interest rate of 4.08%.

In August 2020 the Group entered into an agreement with Close Leasing Limited whereby stock totalling £1,500,000 included under Inventories in the Statement of Financial Position in these condensed consolidated financial statements was sold to Close Leasing Limited and purchased back under the terms of a £1,500,000 Hire Purchase Facility (HP Agreement) provided in conjunction with the CBILS, of which £911,500 remained outstanding at the balance sheet date. The HP Agreement was for a term of five years at an effective interest rate of 5.14% secured against the £1,500,000 of stock subject to the agreement and a fixed and floating charge over the Groups other assets.

In August 2020 Start Art (2013) Ltd entered into a £50,000 bounce back loan agreement with Coutts of which £29,800 remained outstanding at the balance sheet date. The loan is unsecured, for a term of six years with an effective interest rate of 2.52%.

In February 2023, LVCG entered into a short-term prepayment facility with Riverfort Global Opportunities PCC Ltd.  Under this agreement, LVCG immediately drew down £217,000 (£200,000 net) repayable within 6 months at a fixed coupon of 10%.   To repay this loan, LVCG subsequently raised £200,000 in cash by way of a new equity subscription by a number of long-term existing shareholders.  The balance due as at 30th June 2023 was £45,000.

David Ciclitira has agreed to provide a £1,200,000 two-year convertible loan note to the Company, of which £570,000 has already been advanced.   The convertible loan note is classified as a Related Party transaction under AIM Rules for Companies (the 'AIM Rules').  The terms of the convertible loan note have been agreed by the independent directors and announced separately today.  I have also confirmed a guarantee of £1,000,000 to support the cash flow of the business from 12 months of date of signing these financial statements.

10.     Share capital

During the six months to June 2023, 1,700,000 Ordinary 1p shares were issued in satisfaction of £51,000 of fees due to contractors, 5,654,316 Ordinary 1p share were issued for £56,543.16 in part settlement of future equity placings associated with a short-term facility from Riverfort Global Opportunities PCC Ltd ('Riverfort') and 9,975,000 Ordinary 1p shares were issued to existing shareholders who participated in direct subscriptions to repay the £200,000 short term prepayment facility from Riverfort.

During the six months to 30 June 2022 6,223,859 Ordinary 1p shares were issued in satisfaction of £218,000 of salary and fees due to employees, Directors and suppliers,16,500,000 new Ordinary 1p shares were issued for £825,000 and 1,428,571 new Ordinary 1p shares were issued on the exercise of 1,428,571 warrants at 5p.

The Deferred shares do not entitle their holders to receive dividend or other distribution, nor do they entitle their holders to receive notice, attend speak or vote at any General Meeting of the Group.

The rights of Deferred shareholders are set out in full in the financial statements for the year ended 31 December 2022.

Issued share capital as at 30 June 2023 is comprised as follows:

11.     Related Parties

The following amounts were owed to/(due from) Directors of the Group :

David Ciclitira

David Ciclitira injected funds during the period as set out below:

David Ciclitira received payments during the period as set out below:

12.     Other

Copies of the unaudited half-yearly results have not been sent to shareholders; however, copies are available at www.livecompanygroup.com or on request from the Company's Registered Office.

13.     Approval of Half-Yearly Financial Statements

The half-yearly financial statements were approved by the Board on 2 February 2024.

Enquiries:

About Live Company Group

Live Company Group Plc ("LVCG", the "Company" or the "Group") is a live events, entertainment and sports events Company, that has been trading on AIM since 2017.

The Group is divided into four divisions:

·    BRICKLIVE - consisting of a network of partner-driven fan-based and touring shows using BRICKLIVE created content worldwide. The Company owns the rights to BRICKLIVE - an interactive experience built around the creative ethos of the world's most popular construction toy bricks. The Group is an independent producer of BRICKLIVE and is not associated with the LEGO Group. 

·    LVCG owns the brand KPOP Lux and is the Executive Producer of KPOP Lux.

·    StART Art Global (SAG) - SAG owns StART Art Fair in London which has been staged over the last 10 years at the Saatchi Gallery. SAG has licensed the rights to the StART brand in Korea. The licence includes the right to create and run StART Art Fair Seoul and various StART+ exhibitions.

·    Live Company Sports and Entertainment (LCSE) - LCSE owns LCSE Pty in South Africa.

LVCG is a founder shareholder in E-Movement - the promoter of the Formula E Race in Cape Town. As part of this relationship E-Movement has retained LCSE (through E-Movement holdings) as its implementation partner. E-Movement Holdings a 100% subsidiary of Live Company Group has the right to sell sponsorship for the Formula E race in Cape Town.

IMPORTANT NOTICES

Neither this Announcement, nor any copy of it, may be taken or transmitted, published or distributed, directly or indirectly, in or into the United States, Australia, Canada, Japan, New Zealand, the Republic of Ireland or the Republic of South Africa or to any persons in any of those jurisdictions or any other jurisdiction where to do so would constitute a violation of the relevant securities laws of such jurisdiction. This Announcement is for information purposes only and does not constitute an offer to sell or issue, or the solicitation of an offer to buy, acquire or subscribe for any shares in the capital of the Company in the United States, Australia, Canada, Japan, New Zealand, the Republic of Ireland or the Republic of South Africa or any other state or jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation.  Any failure to comply with these restrictions may constitute a violation of securities laws of such jurisdictions. The securities referred to in this Announcement have not been, and will not be, registered under the US Securities Act of 1933, as amended (the "US Securities Act"), or with any securities regulatory authority of any state or jurisdiction of the United States, or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, resold, pledged, transferred or delivered, directly or indirectly, in or into the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and, in each case, in compliance with the securities laws of any state or other jurisdiction of the United States.

Beaumont Cornish Limited ("Beaumont Cornish") is the Company's Nominated Adviser and is authorised and regulated by the FCA. Beaumont Cornish's responsibilities as the Company's Nominated Adviser, including a responsibility to advise and guide the Company on its responsibilities under the AIM Rules for Companies and AIM Rules for Nominated Advisers, are owed solely to the London Stock Exchange. Beaumont Cornish is not acting for and will not be responsible to any other persons for providing protections afforded to customers of Beaumont Cornish nor for advising them in relation to the proposed arrangements described in this announcement or any matter referred to in it.

Cautionary statements

This Announcement may contain and the Company may make verbal statements containing "forward-looking statements" with respect to certain of the Company's plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "seek", "may", "could", "outlook" or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the control of the Company. As a result, the actual future financial condition, performance and results of the Company may differ materially from the plans, goals and expectations set forth in any forward-looking statements. Any forward-looking statements made in this Announcement by or on behalf of the Company speak only as of the date they are made. The information contained in this Announcement is subject to change without notice and except as required by applicable law or regulation (including to meet the requirements of the AIM Rules, MAR, the Prospectus Regulation Rules and/or FSMA), the Company expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this Announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statements are based. Statements contained in this Announcement regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Announcement.

No statement in this Announcement is intended to be a profit forecast and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future years would necessarily match or exceed the historical published earnings per share of the Company. Any indication in this Announcement of the price at which ordinary shares have been bought or sold in the past cannot be relied upon as a guide to future performance.

This Announcement does not identify or suggest, or purport to identify or suggest, the risks (direct or indirect) that may be associated with an investment in the Placing Shares. Any investment decisions to buy Placing Shares in the Placing must be made solely on the basis of publicly available information, which has not been independently verified by the Sole Bookrunner.

The Offer Shares to be issued pursuant to the Capital Raise will not be admitted to trading on any stock exchange other than AIM.

Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this Announcement.