X-Phonics plc
31 March 2008



31 March 2007


                  X-PHONICS PLC ("X-Phonics" or the "Company")

            Preliminary Results for the year ended 30 September 2007


                              CHAIRMAN'S STATEMENT


I am pleased to announce the results of our trading activities for the year
ended 30th September 2007.

In our interim report for the six months period to 31 March 2007 I referred to a
number of bands and artists that were signed to the Group amongst them Attic
Lights, Maeve O'Boyle and The Poems.

These acts have all continued to develop and are now showing significant promise
both artistically and commercially. Of particular note are the Attic Lights who
have been signed to Universal Island and who are now being heavily promoted by
them as one of their acts for 2008.


Financial Report

Turnover for the year was £339,074 (18 months to 30 September 2006: £124,539)
and has increased 172% over the previous 18 month period, primarily as a result
of the contract with Universal Island for the Attic Lights. This is a 5 album
deal worth potentially £1,500,000 in advances over the contract period as well
as an ongoing royalty of up to 24% based upon net receipts from sales into the
worldwide territories that will be exploited by Universal Island. We expect
royalties from the Attics Lights to be earned over a 6 to 8 year period starting
in 2009.

Additional revenues have been earned in this period from other record label
activities as well as from our music publishing activities and our video
production activities.

Cost of sales represents all the costs associated with the signing and
development of the bands and artists and continue to be accounted for as
incurred. Costs are matched with revenues only once the revenues are certain.
Cost of sales in the year were £404,993 (18 month period 30 September 2006:
£453,041) and includes costs derived from the production of the Attic Light's
first album as well as the band's share of the advance from Universal Island.
Other costs incurred include video production costs.

Administrative expenses for the year were £422,778 (18 month period 30 September
2006: £604,127) and continue to reflect the reduction and control over costs
necessary whilst the Group is building the numbers of activities and revenues
during its development phase.


The Group has made a loss on ordinary activities before taxation of £483,584 (18
month period 30 September 2006: £936,165).

At the end of the year the Group held cash balances of £136,719 (2006:
£752,473), had debtors of £139,913 (2006: £36,978) and creditors falling due
within one year of £114,036 (2006: £202,505).



Trading Update

Record Label Activities

The long term value for X-Phonics in the Attic Lights contract with Universal
Island stems from the fact that Island Records have the resources to promote and
the experience and influence to break bands such as the Attic Lights into the
mainstream, as they have done in recent years with Amy Winehouse and The
Frattelis.

Following the same, previously successful strategy, Island Records are building
the momentum for the Attic Lights: initially in Scotland where "Never Sick of
the Sea" has enjoyed a soft release, encouraging plays on XFM radio and coverage
in national press, to build a strong Scottish following. In addition the band
are touring throughout the UK and are active in the university and college
campuses, building a broader fan base on which to release their next single
scheduled for 28 of April 2008, followed by a bigger release during the summer
of their song "Bring You Down". It is expected that following the success of
this promotion work, touring and single releases, Island will release the Attics
Lights album later in the year.

The Poems album was released as a download in February 2008 and is picking up
support and plays most noticeably from BBC Radio One and 6Music. Given this
initial success the main commercial strategy is to seek synchronisation deals
whereby the album tracks are selected for inclusion within television programmes
and films for reasonably significant one off and repeat fees. The band has had
some earlier success in this area with "syncs" on the Ghost Whisperer and Greys
Anatomy which bodes well for the future.   In parallel, revenues should be
generated over the longer term from sales of the album through i-Tunes and other
digital media.

Maeve O'Boyle continues to progress both musically and in terms of commercial
opportunity. The feedback from the industry as she starts to become better known
through her shows, both inside and outside Scotland, is that she is a great
singing and song writing talent. Recent shows have seen some interest from
smaller labels and we expect momentum to keep building with Maeve.

Since the last statement we have started to work with a number of new artists
including Emma Curran who is getting a lot of press and PR from the fact that
she was discovered initially by Gary Lightbody, the lead singer of Snow Patrol
and who is a fan.  Emma's album is currently in production and early discussions
with record labels are underway.

Keith Jack came a close second in BBC television's "Any Dream Will Do", (The
Search for Joseph) and has recorded an album with X-Phonics. As part of his
promotion Keith is to front this years' "Choices for Life", a major event
promoting drugs awareness for teenagers; this entails a dozen concerts where
Keith will play in front of 60-70,000 school children across Scotland.

During the late summer of 2007, X-Phonics was contracted by the Scottish Sun to
run and manage a competition to find and record new musical talent. Part of the
prize was a recording contract for the winner, a drummer and base player called
"The Fire and I" who are already being supported by the Scottish Sun and XFM. We
will be able to gauge support for the band from the single that we have produced
before determining the opportunity for an album.

Otherwise, in our A&R space, the Group continues to seek and work with a number
of other artists who are believed to have creative and commercial potential.

In addition to the more traditional record label projects, the Group has
undertaken selective other projects where our marketing and promotional
capabilities can generate revenues. The Zimmers, a band that was formed as part
of the BBC television documentary "Power to the People", that went on to win
Best Documentary at this years Royal Television Society Awards, is one of
X-Phonics successes in 2007.

Consisting of 40 old aged pensioners the Zimmers produced their debut video "My
Generation" that became a You Tube success almost overnight watched by over 4.4
million people. Off the back of the video, the single was released and remained
in the UK charts for two weeks peaking at number 26.

Since they were launched the band has appeared in numerous television shows
including the Tonight Show with Jay Leno in the United States, the Graham Norton
Show in the UK and many others.

As a result of this initial success the band are in the middle of recording
their debut album with promotion scheduled to commence at the end of March 2008.
Of particular interest is the fact that the album has been funded for X-Phonics'
benefit by the American Association of Retired Persons ("AARP") which boasts a
membership of 59 million. The AARP will assist in the launch in the band's album
later in the year and the Group expects to see revenues generated from UK, US
and other overseas markets with CD sales, sponsorship and merchandising.


Music Publishing

Publishing revenues continue to be developed and are expected to create a
recurring revenue stream in due course. Part of the strategy to ensure this is
to have strong relationships between the Group's bands and its writers so that,
as the bands become successful through promotion and market development, the
revenues from the writers increase.

As an example Robert Hodgens' writing for The Poems will result in the
Group's share of revenues increasing as albums and "Syncs" are successfully
sold.

Urbnri have had success with their first top 40 hit and are scheduled to release
their second single for the end of April 2008. They are currently touring and
supporting one of the UK's leading rock bands, The Enemy which is broadening
their fan base and should help them gain a good chart position for the new
release. In addition Urbnri's raised profile has led to interest in the
publishing rights currently owned by X-Phonics.

I have previously mentioned Valentina, a talented singer and pianist from
Austin, Texas who is being groomed for success with help from our Managing
Director, John McLaughlin. Having worked with Valentina and her management over
the last six months we are confident that a major record label contract will be
signed from which the Group will benefit by way of a share of revenues from the
future success of the album.

The Group has made significant progress with our artists over the last 6 months
and continues to benefit from the increased profile brought about by its initial
success with the Attic Lights and the Zimmers.

With the revenues building the Directors remain conscious of the need to closely
monitor and control costs which they will continue to do. In addition the Board
are conscious of the opportunities that come as a result of the need for
consolidation in this part of the music industry. Many companies are sub-scale
and below critical mass. The Directors will seek and take advantage of any
opportunities to acquire businesses that represent a good fit with the current
businesses within the Group.



Name R Davies
Chairman


Date  28 March 2008





X-PHONICS PLC

CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30 September 2007
                                                    Notes         Year ended 30               18 month period
                                                                 September 2007                         ended
                                                                                            30 September 2006

                                                                              £                             £
Turnover                                              1                 339,074                       124,539
Cost of Sales                                                         (404,993)                     (453,041)

GROSS LOSS                                                             (65,919)                     (328,502)
Administrative expenses                                               (422,778)                     (604,127)

OPERATING LOSS                                                        (488,697)                     (932,629)
Interest receivable                                                       6,826                         1,459
Interest payable                                                        (1,713)                       (4,995)

LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION                           (483,584)                     (936,165)

Tax on loss on ordinary activities                                        1,257                             -
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION                            (482,327)                     (936,165)



All amounts relate to continuing operations.

There were no recognised gains and losses for 2007 or 2006 other than those
included in the Profit and loss Account.





EARNING PER SHARE
                                                    2007                                               2006
                                                   pence                                              pence

Basic                                             (0.73)                                             (2.92)

Diluted                                           (0.73)                                             (3.48)






X-PHONICS PLC

CONSOLIDATED BALANCE SHEET
as at 30 September 2007

                                                                       2007                           2006


                                                            £             £             £                £
FIXED ASSETS
Intangible fixed assets                                             311,188                        327,639
Tangible fixed assets                                                65,440                         78,642
                                                                    376,628                        406,281
                                                                          

CURRENT ASSETS
Debtors                                               139,913                      36,978
Cash at bank and in hand                              136,719                     752,473
                                                      276,632                     789,451



CREDITORS:
amounts falling due within one year                 (114,036)                   (202,505)
NET CURRENT ASSETS                                                  162,596                        586,946

TOTAL ASSETS LESS CURRENTS                                          539,224                        993,227
LIABILITIES

CREDITORS: amounts failing due after                                (6,768)                        (2,440)
more than one year
NET ASSETS                                                          532,456                        990,787



CAPITAL AND RESERVES
Called up share capital                                           2,803,119                      2,798,320
Share premium account                                               743,474                        724,277
Other reserves                                                    (738,578)                      (738,578)
Profit and loss account                                         (2,275,559)                    (1,793,232)
SHAREHOLDERS' FUNDS                                                 532,456                        990,787



The financial statements were approved and authorised for issue by the board and
were signed on its behalf on 28 March 2008.




X-PHONICS PLC

CASH FLOW STATEMENT
For the year ended 30 September 2007
                                                                                             18 month period
                                                                    Year ended                         ended
                                                             30 September 2007             30 September 2006

                                                                             £                             £

Net cash from operating activities                                   (617,426)                     (898,637)
Returns on investments and servicing of finance                          5,113                       (3,536)
Taxation                                                               (3,762)                         3,762
Capital expenditure and financial investment                          (27,607)                     (393,843)

CASH OUTFLOW BEFORE FINANCING                                        (643,682)                   (1,292,254)
Financing                                                               27,928                     2,057,710

(DECREASE)/INCREASE IN CASH IN THE YEAR                              (615,754)                       765,456






RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/DEBT
for the year ended 30 September 2007
                                                                                             18 month period
                                                                    Year ended                         ended
                                                             30 September 2007             30 September 2006

                                                                             £                             £

(Decrease)/Increase in cash in the year                              (615,754)                       765,456
Cash (inflow)/outflow from (increase)/decrease in
debt and lease financing                                               (3,932)                         6,930

MOVEMENT IN NET DEBT IN THE YEAR                                     (619,686)                       772,386

Net funds/(debt) at 1 October 2006                                     745,413                      (26,973)

NET FUNDS AT 30 SEPTEMBER 2007                                         125,727                       745,413





X-PHONICS PLC

NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2007


1. ACCOUNTING POLICIES

1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements have been prepared under the historical cost convention
and in accordance with applicable accounting standards.


1.2 BASIS OF CONSOLIDATION

The financial statements consolidate the accounts of X-Phonics plc and all of
its subsidiary undertakings ('subsidiaries').

The results of subsidiaries acquired during the year are included from the
effective date of acquisition with the exception of X-Phonics Music Limited (see
below).

X-Phonics plc was incorporated on 17 May 2005 and on 1 July 2005 the company
acquired the entire share capital of X-Phonics Music Limited (formerly Diablo
Music Limited) by way of a share for share exchange. In accordance with the
principles set out in Financial Reporting Standards  ("FRS") 6 "Acquisitions
and Mergers", 100% of the shares acquired have been accounted for under merger
accounting. Consequently, although X-Phonics plc was not incorporated until 17
May 2005 and the combination did not take place until 1 July 2005, the financial
information is presented as though the merged businesses had always been a
single group.


1.3 TURNOVER

Turnover comprises revenue recognised by the company in respect of goods and
services supplied, exclusive of Value Added Tax and trade discounts.


1.4 ADVANCES TO ARTISTES

Advances to artists and expenses incurred in supporting new acts are assessed
and the value of the un-recouped portion to be included in debtors is determined
by the prospects of future recoupement, based on past sales performance, current
popularity and projected sales.

As at 30th September 2007, £15,000 (2006: £nil) is being carried forward in
respect of such expenditure within debtors.


1.5 MUSIC PUBLISHING AND RECORD ROYALTIES AND RECORD PRODUCER SERVICES

Music publishing and record royalties are accounted for on a notified earnings
basis, with any advances, if any, carried forward until the end of the relevant
contract period. Royalties received for record producer services are accounted
for on a cash basis. Royalties payable are expensed on an accruals basis except
that music publishing advances are carried forward and recognised as an asset,
where such advances relate to proven artistes or songwriters and where it is
estimated that sufficient future royalties will be recouped against those
advances.


1.6 INTANGIBLE FIXED ASSETS AND AMORTISATION

Goodwill is the difference between amounts paid on the acquisition of a business
and the fair value of the identifiable assets and liabilities. It is amortised
to the profit and loss account over its estimated economic life.

Amortisation is provided at the following rates:

Goodwill    -    5%   straight line



1.7 TANGIBLE FIXED ASSETS AND DEPRECIATION

Tangible fixed assets are stated at cost less depreciation. Depreciation is
provided at rates calculated to write

off the cost of fixed assets, less their estimated residual value, over their
expected useful lives on the following bases:


Short Term Leasehold Property        -         over the period of the lease
Equipment                            -         20%   straight line
Motor vehicles                       -         25%   straight line
Fixtures & fittings                  -         20%   straight line



1.8 INVESTMENTS

Investments in subsidiaries are valued at cost less provision for impairment.


1.9 LEASING AND HIRE PURCHASE

Assets obtained under hire purchase contracts and finance leases are capitalised
as tangible fixed assets. Assets acquired by finance lease are depreciated over
the shorter of the lease term and their useful lives. Assets acquired by hire
purchase are depreciated over their useful lives. Finance leases are those where
substantially all of the benefits and risks of ownership are assumed by the
company. Obligations under such agreements are included in creditors net of the
finance charge allocated to future periods. The finance element of the rental
payment is charged to the Profit and loss Account so as to produce a constant
periodic rate of charge on the net obligation outstanding in each period.


1.10 OPERATING LEASES

Rentals under operating leases are charged on a straight line basis over the
lease term.

Benefits received and receivable as an incentive to sign an operating lease are
recognised on a straight line basis over the period until the date the rent is
expected to be adjusted to the prevailing market rate.


1.11 DEFERRED TAXATION

Full provision is made for deferred tax assets and liabilities arising from all
timing differences between the recognition of gains and losses in the financial
statements and recognition in the tax computation.

A net deferred tax asset is recognised only if it can be regarded as more likely
than not that there will be suitable taxable profits from which the future
reversal of the underlying timing differences can be deducted.

Deferred tax assets and liabilities are calculated at the tax rates expected to
be effective at the time the timing differences are expected to reverse.

Deferred tax assets and liabilities are not discounted


1.12  FOREIGN CURRENCIES

Monetary assets and liabilities denominated in foreign currencies are translated
into sterling at rates of exchange ruling at the balance sheet date.

Transactions in foreign currencies are translated into sterling at the rate
ruling on the date of the transaction. Exchange gains and losses are recognised
in the profit and loss account


1.13  FINANCIAL INSTRUMENTS

Financial  instruments  are  classified  and  accounted  for,  according  to
the  substance  of  the  contractual arrangement, as either financial assets,
financial liabilities or equity instruments. An equity instrument is any
contract that evidences a residual interest in the assets of the company after
deducting all of its liabilities.


Investments

All investments are initially recorded at cost, being the fair value of the
consideration given and including acquisition costs associated with the
investment.


Trade and other debtors

Trade and other debtors are recognised and carried forward at invoices amounts
less provisions for any doubtful debts. Bad debts are written off when
identified.


Cash and cash equivalents

Cash and cash equivalents are included in the balance sheet at cost. Cash and
cash equivalents comprise cash at bank and in hand and short term deposits with
an original maturity of three months or less.


2. Publication of non-statutory accounts

The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985.

The accounts for the year ended 30 September 2007 will be posted to shareholders
shortly and laid before the Annual General Meeting to be held at the Company's
registered office: Grand Prix House, 126-129 Power Road, Chiswick, London, W4
5PY on 28th April 2008 at 10.30 a.m.

Copies will also be available via the website (www.x-phonics.com) in accordance
with AIM Rule 26.




                      This information is provided by RNS
            The company news service from the London Stock Exchange

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