Update, Unaudited Results and Share Suspension

30 September 2014

SNACKTIME PLC ("SnackTime" or the "Company")

Update on Re-financing, Unaudited Results to 31 March 2014 and Share Suspension

In advance of further shareholder communication, the Board of SnackTime is updating the market today on the on-going re-financing negotiations and the unaudited results for the year ended 31 March 2014 and that the Company's shares will be suspended from trading on AIM .

1. Re-financing Negotiations. Negotiations regarding the future funding of SnackTime which were announced on 4 September 2014 are at an advanced stage with both The Co-operative Bank and the Group's new shareholder, Versatel Co Limited. While all parties are seeking the same ends, and considerable progress has been made, we are not yet in a position to announce the details of the new proposals. Shareholders will be kept fully informed of progress.

2. Unaudited results for the year ended 31 March 2014. Set out below is a Chairman's Statement and the unaudited results for the year ended 31 March 2014. These are unaudited statements as the re-financing negotiations referred to above with Versatel Co Ltd and The Co-operative Bank have not been concluded. As a result, the Company's auditors have not yet been able to provide a clean audit opinion on the Company's financial statements for the year ended 31 March 2014. It is the Board's intention to publish the Report and Accounts for the year ended 31 March 2014, with a clean audit opinion, as soon as possible after the re-financing has been completed.

3. Share Suspension. As SnackTime has been unable to publish its Report & Accounts for the year ended 31 March 2014 within 6 months of the year end as required under the AIM Rules for Companies, trading in the Company's shares on AIM will be suspended at 7.30am on 30 September 2014.

For further information:

Unaudited results for the year ended 31 March 2014

Financial Highlights

· Revenues decreased by 8.3% to £18,810,814(2013 £20,506,814 - decreased by 7.6%)

· Profit before finance income and charges, depreciation, exceptional items, amortisation & share option charges and tax improved by 74% to £1,138,941 (2013 £655,382)*

· Loss before taxation of £8,537,680 (2013 - Loss of £8,254,895)

· Net assets of £ 2,696,688 (2013 - £10,249,031) following goodwill impairment of £4,106,375 (2013 - £5,440,000)

· Gross profit has increased from 52% to 55%

· Net cash inflow from operating activities of £193,827 after exceptional items. (2013 - Outflow of £203,080)

· Administration expenses, before exceptional items, amortisation and share option expenses but including depreciation, reduced by 8.2% to £10,784,838 (2013 - £11,754,507)**

*- Arrived at from taking the Loss before tax ,finance income and charges, exceptional items, amortisation and share option charges of £427,433 from the Statement of Comprehensive Income and adding back depreciation of £1,566,373.

** - As set out on the Statement of Comprehensive Income

CHAIRMAN'S STATEMENT

I have pleasure in presenting the unaudited results of SnackTime plc for the year ended 31st March 2014. It has been a difficult year in which the refinancing of the Group has been the over-riding priority. Whilst the operating performance before exceptional costs has improved it has been due largely to cost cutting whilst our vending machine estate has continued to decline. For the second year in succession significant write-downs have been required to our intangible assets reflecting the Company's trading performance. These results are being released, ahead of the audit sign-off which is pending the conclusion of the advanced discussions being held with both Versatel Company Ltd and The Cooperative Bank as announced on 4 September 2014.

Financials

Turnover was down 8.3% to £18.811m (2013: £20.506m) producing an operating loss before amortisation and exceptional costs of £0.427m (2013: loss £1.125m). Operating loss for the period was £8.033m (2013: Loss £7.873m). Ebitda before exceptional costs and share based payments for the year was up 74% to £1.138m (2013: £655k). Following exceptional costs of £7.2m including non-cash goodwill and intangible impairments of £6.579m (2013: £6.391m including a non cash goodwill impairment charge of £5.440m), the pre-tax loss was £8.537m (2013: loss £8.255m) and loss after tax attributable to the shareholders was £7.742m (2013: loss £8.312m). Gross margins improved by 3% to 55% (2013: 52%) while our distribution and administration costs before exceptional, share option costs and amortisation dropped by 8.3% to £10.784m (2013: £11.755m). Net finance charges, excluding exceptional costs, increased to £504k (2013: £271k) and net borrowings at 31st March 2014 had increased to £4.806m (2013: £3.845m) including shareholder loans of £1.621m (2013: £600k).

Audit position

This statement, together with the unaudited results below, is being released in advance of audit sign-off . The funding position of the Group for the next 12 months is reliant on the successful conclusion of the discussions with Versatel Co Limited and The Co-operative Bank, which are currently at an advanced stage and which are expected to be concluded soon. However a 6 month period has now elapsed since our year end on 31st March 2014 and the Board has decided to release the financial results in advance of the final audit sign-off in order to keep shareholders as fully informed of the situation as we can.

Re-financing

On 5 April 2013, we announced the successful completion of a £1.011m fundraising by way of shareholder loan notes and the re-negotiation of our banking facilities, the details of which are on our website. Subsequent to this a further £11k was raised under the same loan note instrument.

During the year £180k term loan repayments were made reducing the bank term loan to £3.21m in line with the terms of our agreement at 31st March 2014.

In an effort to fund future bank loan repayments, the Company contracted Smith & Williamson in the Autumn of 2013 to manage the sale of Drinkmaster Limited, a wholly owned subsidiary. Despite considerable interest being received, the Board announced on 4 September 2014 that it had not received an acceptable offer for the business and that the sale process had therefore been stopped.

Re-financing - Post Balance Sheet

On 9th June 2014, as part of the Company's efforts to reduce its indebtedness and increase its available working capital, the Company raised £570,000 by way of a subscription for 3.8 million new Ordinary Shares at a price of 15p per Ordinary Share. The shares were subscribed for by Versatel Co Limited. Following the subscription, Boris Belotserkovsky, a director of Versatel and a shareholder in SnackTime plc, and Gillian White were appointed as Non-executive Directors of the Company. In view of the Company's continued high gearing and limited free cash flow, the Board has recognised the need for a further injection of capital and, as announced on 4 September 2014, it is in advanced

discussions with Versatel regarding a further equity investment and The Co-operative Bank regarding new facilities. It is hoped that we will be announcing the results of these discussions very soon.

Since 31st March 2014, the Company has repaid The Co-operative Bank the sum of £410k reducing the outstanding term loan to £2.804m. Discussions with the bank regarding an extension of the term of the loan and overdraft facilities are at an advanced stage and it is hoped that we will be in a position to announce the details of the new facilities soon.

Strategy

Throughout FY14 the focus has been on stabilising sales, reducing costs and refinancing the business. Whilst considerable progress has been made on the latter two, the size of our operated estate has continued to decline. Much of this decline has involved extricating ourselves from unprofitable sites which is evidenced by the improvement in our gross margin 3% up to 55% (2013: 52%). The key aspects of our strategy are as follows: -

· More use of technology - the introduction of handheld data capture technology was our first priority and this project has now been completed. However the introduction of wave and pay and other cashless methods of payment along with telemetry are in their infancy. These remain our priority and will demand considerable time and investment in future months. As well as increasing customer expenditure these developments will over time enable the reduction of operating costs within our now combined vending division.

· A growing Franchise network - with the support of our key brand partners Mars, Walkers and Coca Cola we can offer an attractive franchise proposition with strong growth potential to the right franchisee. Our increasingly professional franchise support team should allow us to expand our network for several years to come by attracting franchisees who themselves are committed to growing their own businesses.

· The need for growth is paramount. The stabilisation of our funding will allow us to compete for larger contracts which in recent years have been outside our scope. This combined with an emphasis on city centres and certain business sectors will be the key to returning the company to growth.

· The opportunities for seal cup sales at Drinkmaster need to be followed through particularly for export where we are seeing a number new enquiries. The capacity we created during FY14 with the new production line offers significant growth potential for the Group in the travel and 'while you wait' sectors.

Operations

During FY14 we have combined the operating activities of Simply Drinks and VMI under the management of Sue Sproston and combined the sales team under Steve Hartland. The Franchise division is now under the management of Andrew Hardill and Paul Vickers continues to manage Drinkmaster. The benefits of merging the two vending divisions continue to accrue as a common approach is implemented across both divisions. This was evidenced in August 2014 as the Group attained ISO9001 certification.

Operating costs have fallen while service levels have improved during the year. Data capture is now consistently achieved from our operators' handheld smart phones and the resulting data is available to inform management decisions. Further progress is needed however to optimise the benefits that can be derived.

The franchise network has had a strong performance since the start of 2014 with 12 franchise sales or resales in the last 9 months. More importantly these new franchisees are generally meeting or exceeding the forecasts against which they made their investment decisions. With a number of areas of the country still without franchise activity there is the opportunity for further expansion.

The sales level achieved following the launch of the Drinkmaster seal cup product in the Autumn of 2013 was disappointing due in part to a tight restriction on marketing spend. This coincided with a change of approach from Drinkmaster's largest customer both deciding not to take on the new seal cup and then subsequent to the year-end stopping all wholesale purchases. This has had a material impact upon the first 4 months results of the new financial year at Drinkmaster. However since the year-end a number of export customers have shown interest or taken their first orders of the new seal cup where considerable production capacity remains unutilised.

People

In June we announced the appointment of Boris Belotserkovsky and Gillian White to the Board as Non-executive Directors following the subscription by Versatel. Their vending experience is going to be invaluable to us and I would like to welcome them both.

I would also like to thank all of our staff, who have supported us through another difficult period of considerable change and I look forward to working with them as we continue to develop the business and its operations.

Current Trading & prospects

As announced on 4 September 2014 our new financial year has started a little behind last year due largely to the loss of business at Drinkmaster and slow coinage receipts on our operated estate. The successful conclusion of the advanced discussions being undertaken with Versatel and The Cooperative Bank are fundamental to our future and I hope to be updating you on the successful conclusion of these negotiations very soon.

BUSINESS REVIEW AND FUTURE DEVELOPMENTS

The Chairman's statement sets out the review of the business in the year and future developments.

RESULTS AND DIVIDENDS

The Group revenue for the year was £18.810m (2013 - £20.506m). Normalised profit* was £1.138m (2013 - £0.655m). The Group's operating loss was £8.033m (2013 - £7.874m). Losses after tax were £7,742m (2013 - £8.312m) and the loss per share was 47.45p (2012 - 50.84p).

The Directors do not recommend payment of a dividend in respect of the year ended 31 March 2014 (2013: £nil).

*Normalised profit is defined as the statutory profit before interest, tax, amortisation, depreciation, exceptional items and share option charges. Normalised profit is arrived as set out in the Consolidated Statement of Cash Flows by taking the Operating cash inflow/(outflow) pre-exceptional costs and subtracting the Loss/(profit) on disposal of fixed assets.

GOING CONCERN

Accounting standards require the Directors to consider the appropriateness of the going concern basis when preparing the financial statements. The Directors are of the opinion that they consider the going conern basis will remain appropriate on the basis that the loan facility is expected to be renegotiated and the share subscription passed. The Directors have taken notice of the Financial Reporting Council guidance 'Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2010' which requires the reasons for this decision to be explained. The Directors regard the going concern basis as remaining appropriate as the Group is expected to have adequate resources to continue in operational existence for the foreseeable future. Following the successful renegotiation of banking facilities and the share subscription there will be sufficient cash reserves along with adequate financing arrangements. A substantial portion of the share subscription proceeds will provide the necessary working capital to allow continued operations and reduce the group's indebtedness. See post balance sheet Note 10. Thus the Directors have adopted the going concern basis of accounting in preparing this preliminary release on the basis that the share subscription and facility renegotiation will complete in the near future.. 

KEY PERFORMANCE INDICATORS

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 March 2014

1 presentation of financial statements

General information

SnackTime plc is a public limited company incorporated in England and Wales under the Companies Act (registered number 06135746). The Company is domiciled in the United Kingdom and its registered address is 17 Rufus Business Centre, Ravensbury Terrace, London, SW18 4RL. The Company's shares are traded on the AIM market of the London Stock Exchange.

Basis of preparation

This preliminary release is presented on the basis of International Financial Reporting Standards (IFRS) as adopted by the European Union and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and have been prepared in accordance with AIM rules and the Companies Act 2006, as applicable to companies reporting under IFRS.

This preliminary release has been prepared in accordance with the accounting policies set out in note 2 and under the historical cost convention.

All companies in the Group use sterling as presentational and functional currency.

Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The principal areas where judgement was exercised are as follows:

§ Property, plant and equipment includes the value of the vending machine estate. The Directors annually assess both the residual value of these assets and the expected useful life of such assets.

§ The Directors have estimated the useful economic lives of intangible assets. The economic lives and the amortisation rates are reviewed annually by the directors.

§ The Group receives branding fees to contribute to the installation and refurbishment of vending machines. The Directors are required to assess the amounts receivable at each reporting date and whether all the conditions have been met to enable these to be recognised.

§ The sales from vending machines disclosed are recognised at the point of sale to the customer. At each year end, the Directors are required to make an estimate of sales where the vending machine has not been emptied or inspected at the year end date.

Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The principal areas where judgement was exercised are as follows:

§ Property, plant and equipment includes the value of the vending machine estate. The Directors annually assess both the residual value of these assets and the expected useful life of such assets.

§ The Directors have estimated the useful economic lives of intangible assets. The economic lives and the amortisation rates are reviewed annually by the directors.

§ The Group receives branding fees to contribute to the installation and refurbishment of vending machines. The Directors are required to assess the amounts receivable at each reporting date and whether all the conditions have been met to enable these to be recognised.

§ The sales from vending machines disclosed are recognised at the point of sale to the customer. At each year end, the Directors are required to make an estimate of sales where the vending machine has not been emptied or inspected at the year end date.

§ The convertible loan notes disclosed in Note 9 have been split between the debt and equity element in accordance with IAS 32. This requires calculating the present value of the debt element using an effective interest rate. 12% was assumed to be an effective interest rate that would be charged on a similar loan by a third party.

§ Share based payment and warrant valuations are based upon a Black-Scholes based model which requires various assumptions to be made.

§ An impairment of goodwill and other intangibles has the potential to significantly impact upon the Group's statement of comprehensive income for the year. In order to determine whether impairments are required the Directors estimate the recoverable amount of the goodwill. This calculation is based on the cash flow forecasts, applicable to the Group, of cash-generating units for the following financial year extrapolated over an eight year period assuming growth rates in the region of 2-3%. A terminal value has been included which extrapolates the growth of the year 8 cash flow at 2.0% in perpetuity. A discount factor, based upon the Group's weighted average cost of capital is applied to obtain a current value ('value in use'). The fair value less costs to sell of the cash generating unit is used if this results in an amount in excess of value in use.

Estimated future cash flows for impairment calculations are based on management's expectations of future volumes and margins based on plans and best estimates of the productivity of the income generating unit in their current condition. Future cash flows therefore exclude benefits from major expansion projects requiring future capital expenditure.

Future cash flows are discounted using a discount rate based on the Group's weighted average cost of capital. The weighted average cost of capital is impacted by estimates of interest rates, equity returns and market related risks. The Group's weighted average cost of capital is reviewed on an annual basis.

2. significant ACCOUNTING POLICIES

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the preliminary release.

a) Basis of consolidation

The Group preliminary release consolidates the results of the Company and its subsidiary undertakings. The merger method of accounting was adopted in respect of the group reconstruction involving Snacktime Plc and Snacktime UK Limited. The acquisitions of Snack in a Box Limited and Vendia UK Limited were accounted for using acquisition accounting in accordance with IFRS 3 "Business Combinations (Revised)".

Intra-group revenues and profits are eliminated on consolidation and all revenue and profit figures relate to external transactions only.

b) Revenue recognition

Revenue is measured by reference to the fair value of consideration received or receivable by the group for goods and services supplied, excluding VAT and trade discounts. Revenue for goods sold from vending machines is recognised at the date of sale. Revenue in respect of installation and refurbishment of branded vending machines (branding fees) is recognised at the date of installation or refurbishment. Franchising fees are recognised when the franchisee starts trading. Managed estate sales are recognised in full once the customer has taken over operation of the machine.

c) Income tax

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year.  

Deferred tax is recognised on all temporary differences. This involves comparison of the carrying amount of assets and liabilities in the consolidated financial statements with their respective tax bases. However, deferred tax is not provided on the initial recognition of goodwill, or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. 

Deferred tax liabilities are provided for in full. Deferred tax assets and liabilities are calculated without discounting, at tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (tax laws) that have been enacted or substantively enacted by the balance sheet date. All changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity. 

Tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. Deferred tax assets are only recognised to the extent that it is probable that future taxable profits will be available against which the asset can be recognised and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

d) Cost of sales

Cost of sales represents amounts payable for supplies of products for resale.

e) Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment provisions.

Depreciation is provided to write off the cost, less the estimated residual value of property, plant and equipment by equal instalments over their estimated useful economic lives as follows:

Leasehold improvements - over the term of the lease

Plant & machinery - 10 - 25% straight line basis

Fixtures, fittings & equipment - 25% straight line basis

Motor vehicles - 25% straight line basis

Land and buildings - 2 - 4% straight line basis

Material residual value estimates are updated as required, but at least annually, whether or not the asset is revalued.

Impairment reviews of property, plant and equipment are undertaken if there are indications that the carrying values may not be recoverable or that the recoverable amounts may be less than the asset's carrying value.

f) Intangible assets

In accordance with 'IFRS 3 Business Combinations(Revised)', an intangible asset acquired in a business combination is deemed to have a cost to the Group of its fair value at the acquisition date.

After initial recognition, intangible assets are carried at deemed cost less any accumulated amortisation and any accumulated impairment losses. Impairment reviews are conducted annually from the first anniversary following acquisition, where indicators of impairment arise.

Brands are amortised to the income statement over their estimated economic life on a reducing balance basis. The average useful economic life of brands has been estimated at 10-15 years. The customer relationships are amortised on a straight line basis over its 15 year useful economic life.

g) Goodwill

Goodwill is calculated as the difference between the fair value of the consideration exchanged and the net fair value of the identifiable assets and liabilities acquired and is capitalised. Goodwill is tested for impairment annually and whenever there is an indication of impairment. Goodwill is carried at cost less accumulated impairment losses.

When the acquired interest in the net fair value of the identifiable assets and liabilities exceeds the cost of the business combination, the excess is recognised immediately in the income statement.

Gains and losses on the disposal of a business combination include the carrying amount of goodwill relating to the entity sold.

Goodwill was fully impaired in the year ended 31 March 2014.

h) Impairment of assets

Assets that have a finite useful life but that are not yet in use and are therefore not subject to amortisation or depreciation are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment annually and when events or circumstances suggest that the carrying amount may not be recoverable, an impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

Goodwill is allocated to cash-generating units ('CGU') for the purpose of impairment testing to the extent that it is possible to allocate goodwill to a CGU on a non-arbitrary basis. A CGU is identified at the lowest aggregation of assets that generate largely independent cash inflows, and that which is looked at by management for monitoring and managing the business.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised immediately in the statement of comprehensive income, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Impairment losses on goodwill are not reversed.

The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the income statement.

Goodwill was fully impaired in the year ended 31 March 2014

i) Leases

Where a lease is entered into which entails taking substantially all the risks and rewards of ownership of an asset, the lease is treated as a finance lease. The asset is recorded in the balance sheet as an item of property, plant and equipment and is depreciated over the shorter of its estimated useful life or the term of the lease.

Future instalments under such leases, net of finance charges, are included within payables. Rentals payable are apportioned between the finance element, which is charged to the income statement, and the capital element, which reduces the outstanding obligation for future instalments. Land and building elements of lease agreements are separately assessed in accordance with IAS 17.

All other leases are treated as operating leases and the rentals payable are charged on a straight line basis to the income statement over the lease term.

j) Inventories

Inventories are stated at the lower of purchase cost from third parties and net realisable value on a first in first out basis. Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula.

k) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

l) Share-based payments

The Group has applied the requirements of IFRS 2 'Share-based payment', as amended by IFRIC Interpretation 2 - IFRS 2 Group and Treasury share transactions.

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. Where services are from employees fair value is determined indirectly by reference to the fair value of the instrument granted. The fair value determined at the grant date of the equity settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting. 

Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital.

Fair value is measured based upon a Black-Scholes pricing model.

m) Financial instruments

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the group becomes a party to the contractual provisions of the instrument. Financial liabilities are recorded initially at fair value, net of direct issue costs as an expense in the income statement with a corresponding credit to equity.

Financial liabilities are subsequently recorded at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance costs in the income statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the income statement on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual terms of the instrument. 

All financial assets are classified as loans and receivables.

Bank borrowings

Bank loans and overdrafts are initially recorded at fair value net of transaction costs. Finance charges including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis to the income statement using the effective interest method and are added to the carrying value of the instrument to the extent that they are not settled in the period in which they arise.

Convertible Loan

Convertible loan notes, as disclosed in Note 9, have been split between debt and equity elements in accordance with IAS 32.

Trade payables

Trade payables are not interest bearing and are stated at their fair value on initial recognition. They are then accounted for using the effective interest rate method.

n) Equity instruments

Equity instruments, which are detailed below, issued by the Group are recorded at the proceeds received, net of direct costs except for warrants, share options and convertible loans which are recorded at fair value at the time of issue.

Equity comprises the following:

· "Share capital" represents the nominal value of equity shares.

· "Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

· "Merger reserve" represents an amount arising on the consolidation which was accounted for in accordance with FRS 6.

· "Capital redemption reserve" which arose on the redemption of shares.

· "Retained earnings" represents retained profits.

· "Share option reserve" relates to the company's share option scheme.

· "Equity element of compound financial instruments" represents the equity element of the convertible loan notes in Note 9.

· "Warrants reserve" represents the fair value at the time the warrants were issued.

o) Pensions

The Group contributed to personal pension plans of one of the directors and defined contribution pension schemes for certain employees. The amount charged to the Income Statement represents the amount payable in respect of that year.

p) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including the Executive Chairman and Chief Financial Officer.

q) Exceptional Costs

It is the Group's policy to show items that it considers are of a significant nature separately on the face of the Consolidated Statement of Comprehensive Income in order to assist the reader to understand the accounts. The Group defines exceptional costs as items that are material in respect of their size and nature, for example, a major restructuring of the activities of the Group. Summary details of exceptional costs are shown in note 3

r) Provisions

The Group recognises a provision where a legal or constructive obligation exists at the balance sheet date and a reliable estimate can be made of the likely outcome.

3. Loss from operations

Exceptional costscomprise of:

Exceptional costs in 2014 denoted as redundancy costs following the continued restructuring of the group and legal costs incurred following the loss of an ongoing court case.

Exceptional costs in 2013 denoted as restructuring and redundancy, onerous lease provisions, dilapidation provisons, professional fees on restructuring and reorganisation of national accounts represent further essential restructuring of the group.

The impairment of intangible assets include the full impairment of the recognised goodwill across both the vending and specialist drinks division which has arisen following continued difficult trading conditions. The carrying value of the goodwill was not large enough to support the full impairment charge and an allocation has subsequently been passed to the remaining intangibles.

4 segment information

The Group has three main reportable segments:

§ Specialist drinks - The manufacture and sale of single portion beverages called 'Drinkpacs' together with the sale of associated food and drink products.

§ Franchising - The marketing and franchising of operations in the provision of snack solutions.

§ Vending - Vending activities.

Factors that management used to identify the Group's reportable segments

The Group's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies.

Measurement of operating segment profit or loss, assets and liabilities

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.

The Group evaluates performance on the basis of profit or loss from operations but excluding non-recurring profits/losses, such as goodwill impairment, and the effects of share-based payments.

Inter-segment sales are priced on the same basis as sales to external customers, with an appropriate discount being applied to encourage use of group resources at a rate acceptable to local tax authorities. This policy was applied consistently throughout the period.

Segment assets exclude tax assets and assets used primarily for corporate purposes. Segment liabilities exclude tax liabilities. Details are provided in the reconciliation from segment assets and liabilities to the group position.

As at 31 March 2014 there were no non-current assets held outside of the United Kingdom (2013: £Nil).

5 Taxation

Factors affecting tax (credit) charge for the year:

The tax assessed for the year differs from the standard rate of corporation tax in the UK of 23% (2013: 24%). The differences are explained below:

Legislation to reduce the main rate of corporation tax from 23% to 21% from 1 April 2014 and then a further reduction to 20% from 1 April 2015 was enacted on 3 July 2013. Deferred tax assets and liabilities have therefore been recognised at a rate of 20%.

6 Loss per share

The calculation of basic loss per share is calculated on the basis of the result for the year after tax, divided by the weighted average number of shares in issue for the year ended 31 March 2014 of 16,349,014 (2013 - 16,349,014).

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares (16,349,014 shares). Potential dilutive ordinary shares arise from share options and convertible loans. For these, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the exercise price attached to outstanding share options. Thus the dilutive weighted average number of shares considers the number of shares that would have been issued assuming the exercise of the share options. If these are proved to be anti-dilutive (increase the potential earnings per share) they are omitted from the calculation. As the group has made a loss in the current year the options, warrants and convertible loan notes are therefore anti-dilutive and diluted earnings per share are therefore not provided for the current year.

7 INTANGIBLE ASSETS

Current estimates of useful economic lives of intangible assets are as follows:

Goodwill Indefinite

Customer relationships Amortised over 15 years

Snack In The Box brands Amortised over 15 years

Vendia brands Amortised over 10 years

8 Goodwill and impairment

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGUs) that are expected to benefit from that business combination as follows:

The group tests annually for impairment or more frequently if there are indications that goodwill may be impaired. The recoverable amounts of all the above CGUs have been determined from value in use calculations based on cash flow projections from formally approved budgets for 2014, which are then extrapolated over 8 years and a terminal value applied to the year 8 cashflow. The major assumptions are as follows:

Operating margins have been based on past experience and future expectations in the light of anticipated economic and market conditions. Discount rates are based on the Group's weighted average cost of capital, this is then adjusted to reflect management's assessment of specific risks related to the cash generating unit. Growth rates beyond the first eight years are based on economic data pertaining to the region concerned.

The recoverable amount for the CGU is set out below:

· Specialist drinks exceeded its carrying amount by £nil (2013 - £74,000)

· Vending exceeded its carrying amount by £nil (2013 - £Nil)

At 31 March 2014, an impairment charge of £2,149,188 and £1,957,187 was recognised against the goodwill of the Vending and Specialist Drinks divisions respectively which arose from the acquisition of Vendia UK Limited in 2010. The cash flow forecasts of Vending were reassessed to reflects the tough trading conditions and more closely align forecasts with actual performance during the financial year and post year end. The Specialist Drinks division lost a key contract post year end resulting in a reforecast of their EBITDA prediction. Based on these change in assumptions the value-in-use was no longer able to support the recognition of goodwill and therefore impairment charges were recognised at 31 March 2014.

9 BoRrowings

Terms and conditions of outstanding loans at the year end were as follows:

The fair value in each case equates to the carrying book value with the exception of the convertible loan note. All loans are denominated in sterling.

The Group's borrowing facilities at the year end date included a requirement to comply with certain specified covenants in relation to rolling quarterly EBITDA and asset cover. The group expected to breach their 31 March 2014 covenant for which they obtained a waiver. The Directors entered into discussions with the bank during Q4 regarding refinancing their banking facilities, These discussions are ongoing however the group expects to have a formal offer for the continued financing in the near future.

* Convertible loan stock of £600,000 was issued on 16 December 2008. An extension was granted on the repayment of the loan notes for a further 2 years and the loan stock is now repayable in December 2015. Of this £55,163 was treated as equity with the remainder of £589,081 being included in long term borrowings. The convertible loan stock bears interest at a rate of 8% per annum. The loan stock is convertible to Ordinary shares at £1.10 per share. The conversion date is the earlier of 5 years or at the loan note holder's request from the 3rd anniversary of the date of issue. The present value of the debt element has been calculated using an effective interest rate of 12%.

Also included within the terms of the loan note is a redemption premium of 12% of the value of the loan stock.

** Convertible loan stock of £511,228 was issued on 4 April 2013. Fundraising costs of £10,514 were offset against the loan stock. Of this £92,143 as treated as equity with the remainder of £433,038 being included in long term borrowings. The convertible loan stock bears interest at a rate of 7% per annum. The loan stock is convertible to Ordinary shares at 10p per share. The conversion date is 5 years and 1 day from the date of issue. The present value of the debt element has been calculated using an effective interest rate of 12%.

***Redeemable loan stock of £511,228 was issued on 4 April 2013. Fundraising costs of £12,594 were offset against the loan stock. The redeemable loan stock bears interest at a rate of 12% per annum. Also included within the terms of the loan note is a redemption premium of 30% of the value of the loan note. As at 31 March 2014 and amount of £30,253 has been included in the financial statements in relation to the redemption premium liability.

Obligation under finance leases

Hire purchase and finance lease liabilities are secured upon the underlying assets.

It is the Group's policy to lease certain parts of its property, plant and equipment under finance leases. For the year ended 31 March 2014 the average effective borrowing rate was 7.0%. Interest rates are fixed at the contract dates. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. All lease obligations are denominated in sterling.

The fair value of the Group's lease obligations approximates to their carrying amount.

The analysis below shows the gross cash flows for the bank loan and loan notes, which may differ to the carrying values of the liabilities at the balance sheet date.