Results for the year ended 31 July 2013

Chairman's Report

As I predicted last year, 2012 was bound to be a difficult year with our main UK market disrupted by substantial changes in the NHS commissioning process. International development took longer to deliver income than we initially anticipated, although the increasingly widespread enthusiasm for "Beating the Blues" bodes well for the future. So, this year's results are disappointing. Not surprisingly, our response has been to review comprehensively our strategy to take account of new market conditions at home and abroad.

That strategy includes a review of our cost base to align it more closely with revenues.

The welcome investment in the Company in early 2013 by Mr Paul Anthony Bell has enabled us to focus our energy on shaping a much more aggressive strategy to grow the Company, both by acquisition and organic growth, also refreshing and adding to our product suites and services.

In June, John Smith was appointed as Chief Executive and the Board has tasked him with delivering this strategy. The acquisition of the wellbeing company, Screenetics, in September 2013 and the assets of Step Success in November 2013 show the strategy is on course. The recent announcement that Screenetics, just six weeks after joining the Ultrasis Group, has secured contracts which will add approximately £2 million per annum to Group revenues is early evidence that rapid growth by acquisition is an attainable goal. In October, shareholders gave the Board sufficient authority to issue shares to enable the Company to take advantage of future suitable acquisition opportunities.

I believe that the growing reputation of Ultrasis' wellbeing products, especially "Beating the Blues", will be reflected in a revival of sales revenues as markets increasingly appreciate the economic and social benefits they deliver. With the growing strength of our international relationships there is an opportunity for the Ultrasis Group to become a market leader in the delivery of health and wellbeing services on a global basis.

The Board is looking forward to a constructive year ahead as it pursues its goal of restoring the Group to profitability.

Gerald Malone

Chairman

The performance of the Company in 2013 fell well short of expectations. The Company failed to secure revenue growth and although cost cutting initiatives were implemented which reduced the operating loss before exceptional items to £1,238,000 from £1,429,000 in 2012, the loss for the year transferred to reserves increased to £3,455,000 (2012: £3,406,000). There are three key reasons for this disappointing outcome:

The NHS continued to be in a state of flux whilst the new Clinical Commissioning Group ("CCG") arrangements were established, delaying purchasing decisions and it remained difficult to make sales in this, our primary market.

Internationally we underestimated the time it takes to break into new markets, especially in the USA where our partnership venture with UPMC, U Squared Interactive, continues to grow steadily, but more slowly than expected.

Despite the excellent clinical evidence of our products the technology platforms upon which they are built is perceived now as dated by customers and users. We have had insufficient resources to invest in keeping them ahead of competitors' offerings which has had an impact on sales.

We have also taken the prudent decision to write down the value of the licence acquired with the acquisition of Healthstar in 2006 to the English Speaking Consumer market, This resulted in a significant non cash charge to the Income Statement of £1,965,000.

Turning to positive events, in February 2013 we secured significant investment and financial support from Mr Paul Anthony Bell. This has enabled the Company to pursue a strategy of growth through acquisition that the Board believes will reverse the decline in the Company's fortunes in the next financial year.

In June 2013 I was delighted to be given the opportunity to lead the Company and was immediately charged with creating a strategy that will bring about significant growth, so increasing shareholder value.

Of course we need to learn lessons from the past, but it is the future strategy of the Group that deserves more scrutiny. To demonstrate and measure the future performance, the Board has adopted straightforward, transparent key performance indicators (KPI's) which for 2013/14 are:

· Grow our customer base, both in the UK and Internationally;

· Increase income and achieving profitability;

· Widen the range of services we provide;

· Develop new and innovative products and services;

· Increase the number of partners who distribute our services;

· Form strategic partnerships with public, voluntary and private sector partners to the mutual benefit of the parties;

· Enhance our reputation for quality products and services.

It is intended to deliver an aggressive and focused approach to growing the business. A key component will be the acquisition of companies which will quickly enhance the Group's revenues and hasten the return to profitability.

Already progress has been made, through the acquisition of the wellness provider, Screenetics. The screening and wellbeing market is poised for significant growth; a point proven when within six weeks of the acquisition three new contract wins were announced by Screenetic's delivering forecast additional Group income of £2 million per annum. Screenetics is ahead of forecast sales for the year and we are confident its growth will be enhanced now that it is part of the Ultrasis Group.

We have also added the assets of the Step Success business to our Group. This is an exciting wellness product which will integrate well into our existing health manager program, allowing us to provide a more complete solution for customers.

The Company is identifying further acquisition opportunities that will add further products and services to the Group. Our aim is to create an eco-system of complementary businesses that allows for both up-sell and cross-sell opportunities.

We believe there is significant potential in direct-to-consumer market and it is our intention to widen the range of the Company's products and services in the next financial year. More and more people are looking for ways to manage their own health and wellbeing and we will be innovating marketing techniques to increase uptake of our services and widen awareness of The Wellness Shop.

Technology improvements - especially the migration of healthcare solutions to mobile platforms and increasing reliance on e-health solutions to curb cost, create new opportunities within healthcare, in both the public and private sectors, to which Ultrasis is increasingly well placed to respond.

The NHS remains a key customer and our recently announced joint venture company with the NHS, The Ki Group, will become the core sales vehicle through which we will secure future public sector contracts. Ki Group will begin to offer services in partnership with the NHS from January 2014 and we are already engaged in discussions with a number of CCGs on how we can help then to deliver effective and affordable access to mental health care for their patients.

During the past year the clinical and technology teams at Ultrasis have been engaged in a "top to bottom" redevelopment of Beating the Blues so that it can be deployed through mobiles, tablets and other devices, as well as through laptop and desktop computers. Beating the Blues 2.0, currently in the final stages of testing, will initially go live in the USA early in the New Year.

Achieving recognition on the National Register of Evidence-based Programs and Practices by The Substance Abuse and Mental Health Services Administration is a significant achievement and has led to raised awareness of Beating the Blues in the USA. We are confident that this recognition, combined with the introduction of Beating the Blues 2.0, will lead to an increase in contracts in the US in the coming year.

Conclusion

Changes already implemented and under way should lead to a significant improvement on the results achieved in the year ended 31 July 2013. Our future focus, on becoming a healthcare company with a broad product portfolio that helps people to maintain, re-gain or improve their physical, emotional and social health and wellbeing, will not only open new commercial opportunities, but mitigate the risks associated with being reliant on one product for revenue delivery, which has historically been our weakness.

Next year is about successfully achieving three key objectives:

· Implementing the strategy agreed by the Board.

· Increased revenues, with a return to profitability.

· Looking to increase shareholder value through the achievement of the above.

2013

2012

Notes

£'000

£'000

Revenue

977

1,069

Cost of sales

(20)

(27)

Gross profit

957

1,042

Operating expenses

Exceptional costs

(2,195)

(2,471)

Impairment of intangible fixed assets

5

(1,965)

-

Directors severance costs

(256)

-

Administrative expenses

(4,416)

(2,471)

Operating loss before exceptional costs

(1,238)

(1,429)

Operating loss after exceptional costs

(3,459)

(1,429)

Finance costs

(1)

(8)

Finance income

9

2

Loss before taxation

(3,451)

(1,435)

Taxation

3

-

(1,966)

Loss for the year

(3,451)

(3,401)

Other comprehensive loss

Items that may be reclassified subsequently to profit or loss:

Exchange differences on foreign currency net investments in subsidiaries

(4)

(5)

Total comprehensive loss for the year attributable to equity holders of the parent

(3,455)

(3,406)

Loss per share:

Basic and diluted loss per share (p)

4

(0.21)

(0.23)

Share capital

£'000

Share premium

£'000

Share option reserve

£'000

Capital reduction reserve

£'000

Merger reserve

£'000

Translation reserve

£'000

Retained losses

£'000

Total

£'000

Balance brought forward

1,508

21,302

1,659

6,650

2,324

(6)

(26,704)

6,733

1 August 2011

Foreign exchange translation differences on foreign currency

-

-

-

-

-

(5)

-

(5)

Retained loss for the year

-

-

-

-

-

-

(3,401)

(3,401)

Total comprehensive income for the year

-

-

-

-

-

(5)

(3,401)

(3,406)

New shares issued under Share Incentive Plan

3

11

-

-

-

-

-

14

Movement on share option reserve

-

-

5

-

-

-

-

5

Balance carried forward 31 July 2012

1,511

21,313

1,664

6,650

2,324

(11)

(30,105)

3,346

Share capital

£'000

Share premium

£'000

Share option reserve

£'000

Capital reduction reserve

£'000

Merger reserve

£'000

Translation reserve

£'000

Retained losses

£'000

Convertible loan stock

£'000

Total

£'000

Balance brought forward

1,511

21,313

1,664

6,650

2,324

(11)

(30,105)

-

3,346

1 August 2012

Foreign exchange translation differences on foreign currency

-

-

-

-

-

(4)

-

-

(5)

Retained loss for the year

-

-

-

-

-

-

(3,451)

-

(3,451)

Total comprehensive income for the year

-

-

-

-

-

(4)

(3,451)

-

(3,455)

New convertible loan stock issued during year

-

-

-

-

-

-

-

24

24

New shares issued

198

388

-

-

-

-

-

-

586

Movement on share option reserve

-

-

(665)

-

-

-

680

-

15

Balance carried forward 31 July 2013

1,709

21,701

999

6,650

2,324

(15)

(32,876)

24

515

31-Jul

31-Jul

Notes

2013

2012

£'000

£'000

Non-current assets

Intangible assets

5

613

2,687

Plant and equipment

29

36

Total non-current assets

642

2,723

Current assets

Trade and other receivables

303

425

Cash and cash equivalents

734

1,284

Total current assets

1,037

1,709

Current liabilities

Trade and other payables

(1,164)

(902)

Total current liabilities

(903)

(902)

Net current assets

134

807

Long term liabilities

Trade and other payables due in more than one year

(261)

(184)

Net assets

515

3,346

Equity

Share capital

1,709

1,511

Share premium

21,701

21,313

Share option reserve

999

1,664

Capital reduction reserve

6,650

6,650

Merger reserve

2,324

2,324

Translation reserve

(16)

(11)

Convertible loan stock

24

-

Retained losses

(32,876)

(30,105)

515

3,346

Geographical Segments

UK

Rest of the World

Unallocated

TOTAL

2013

2012

2013

2012

2013

2012

2013

2012

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

External Revenue:

818

866

159

203

-

-

977

1,069

Total Revenues

818

866

159

203

-

-

977

1,069

Operating loss:

(3,377)

(1,122)

(82)

(307)

-

-

(3,459)

(1,429)

Finance costs

-

-

-

-

(1)

(8)

(1)

(8)

Finance income

-

-

-

-

9

2

9

2

(Loss)/Profit before taxation

(3,377)

(1,122)

(82)

(307)

8

(6)

(3,451)

(1,435)

Taxation

-

(1,966)

-

-

-

-

-

(1,966)

(Loss)/Profit for the period from continuing operations

(3,377)

(3,088)

(82)

(307)

8

(6)

(3,451)

(3,401)

Assets

778

3,064

167

84

734

1,284

1,679

4,432

Liabilities

(775)

(903)

(389)

(183)

-

-

(1,164)

(1,086)

Capital expenditure

(31)

(33)

(58)

-

-

-

(89)

(33)

Depreciation, Amortisation & Impairment

(2,171)

(210)

-

-

-

-

(2,170)

(210)

Share based payments

(109)

(17)

-

-

-

-

(109)

(17)

2013

2012

£'000

£'000

Corporation tax

-

7

Deferred tax

-

(1,973)

-

(1,966)

2013

2012

%

%

Standard rate of tax applying to profits on ordinary activities before tax

23.67

25.33

Effect of:

Expenses not deductible for tax purposes

-

-

Reversal of deferred tax assets previously recognised

(13)

(123)

Tax losses utilised

-

-

Tax losses not recognised

(9)

(22)

Research and development claims

-

-

Capital allowances for period greater than depreciation

(1)

(3)

Impact of changes in future applicable tax rates on deferred tax assets

-

(16)

Total tax charge/(credit) rate for the year as a percentage of (loss)/profit

-

(139)

2013

2012

Applicable tax rate

26%

26%

£'000

£'000

Trading losses and other losses

3,860

4,122

Capital losses

1,366

1,570

Depreciation in excess of capital allowances

40

45

Fair value adjustments

(348)

(400)

4,918

5,337

Pence per share

2013

2012

Basic loss per share

(0.21)

(0.23)

Diluted loss per share

(0.21)

(0.23)

Basic and diluted

2013

2012

£'000

£'000

Loss for the financial year

(3,451)

(3,401)

Number

Number

of shares

of shares

2013

2012

Weighted average number of shares for basic earnings per share:

1,613,147,408

1,508,952,463

Contingently issuable shares

39,785,714

1,733,333

Weighted average number of shares for diluted earnings per share:

1,652,933,122

1,510,685,796

Retail product rights

Capitalised Development Costs

BtB Intellectual Property Licence

Intellectual Property of the Getfit product range

Total

Group

£'000

£'000

£'000

£'000

£'000

Cost

At 1 August 2011

2,485

796

168

216

3,665

Additions

 -

21

 -

 -

21

At 31 July 2012

2,485

817

168

216

3,686

Amortisation & Impairment

At 1 August 2011

396

374

24

20

814

Charge for year

124

43

8

10

185

At 31 July 2012

520

417

32

30

999

Net book value

1,965

400

136

186

2,687

Retail product rights

Capitalised Development Costs

BtB Intellectual Property Licence

Intellectual Property of the Getfit product range

Software licences

Total

Group

£'000

£'000

£'000

£'000

£'000

£'000

Cost

At 1 August 2012

2,485

817

168

216

-

3,686

Additions

-

45

-

-

32

77

Disposals

-

(521)

-

-

-

(521)

At 31 July 2013

2,485

341

168

216

32

3,242

Amortisation & Impairment

At 1 August 2012

520

417

32

30

-

999

Charge for year

-

168

8

10

-

186

Impairment charge*

1,965

-

-

-

-

1,965

Disposals

-

(521)

-

-

-

(521)

At 31 July 2013

2,485

64

40

40

-

2,629

Net book value

-

277

128

176

32

613