Interim Results
Brainspark PLC
28 September 2007
FOR IMMEDIATE RELEASE 28 SEPTEMBER 2007
BRAINSPARK Plc ('Brainspark' or 'the Company')
UNAUDITED INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2007
CHAIRMAN'S STATEMENT
In the six months ended 30 June 2007, the Company incurred a profit before
taxation of £4k, compared to a loss of the comparative period last year of £72k.
Brainspark has finally entered the expansion cycle and launched its first new
project with the incorporation of China IPO Group Limited, an investment company
focusing on opportunities in China. Meanwhile Brainspark management continue to
realise value from existing assets.
Financial Summary
The consolidated net asset value at 30 June 2007 was £3,515k up from £3,511k at
31 December 2006..At 30 June 2007, Brainspark's mid-market share price of 0.65p
valued the at £2,149k against a consolidated net asset value of £3,515k.
First Half 2007 Events.
On 12 March Brainspark incorporated China IPO Group Limited., a Jersey company,
managed in Jersey that will make investments in China, both on 6-12 months
returns, in pre-IPO situations, and in 3-5 year return with high growth small-
to medium- sized technology companies. China IPO Group Limited, has entered into
first refusal relationships with some of the most significant Chinese Science
Parks and Incubators in China. The Directors of China IPO Group Limited are the
Rt. Hon. Earl of Cromer, Non-Executive Chairman, Professor F. Gardin, Executive
CEO Director, Mr. E. Burman, Executive Director, and as Non-Executive Directors:
Mr. Dennis Bryan Bailey, Professor Liu Man Hong and Mr. Patrick Go. Bedell Trust
in Jersey act as company secretary. Allen & Overy in Beijing has been retained
as the law firm. Successful private placement of China IPO shares could
ultimately secure Brainspark approximately a 25% share in a company.
On 2 April 2007 China IPO Group made its first pre-IPO investment in ET-China
Holdings Ltd ('ET-China'), a travel company with its main operations in
Guangzhou (Guangdong Province). China IPO Group has invested $200k (£100k) as
part of a $7,000k (£3,500k) unsecured convertible loan note for pre-IPO funding.
On 26 June the Company has agreed with Professor. F. Gardin to extend the terms
of the interest-free convertible loan of £213,000 for a period of two years such
that it is now repayable on 31 December 2009, with the right on either party to
demand conversion into Ordinary Shares at the price of 0.46 p per share at any
time. The Loan Stock will remain interest free.
Portfolio Review
At of 30 June 2007 Brainspark had holdings in 8 companies, 3 in the UK, 1 in
Jersey, 2 in Italy, 1 in Israel and 1 in the United States. Its stakes range
from nearly 2% to 100% in these companies. The portfolio covers a wide range of
business sectors, including web services, application service providers,
advanced IT solutions and an investment company.
On 22 February, Cotterford, a UK investment company subscribed £400k for an
issue of new Metapack (www.metapack.co.uk) shares representing 17.78 % of the
enlarged issued share capital. Following the dilution Brainspark holds 8.23% of
the enlarged capital (10.58% pre-investment).
On 2 May Geosim (www.geosim.co.il), the 3D city technology and modelling
producer, in which Brainspark (www.brainspark.com) holds 44.11%, raised
additional finance for working capital and development. Private investors in the
United States have subscribed US$980k (£490k)to complete the second round of
financing at a pre-money valuation of $20,000k (£10,000k)The first round of
financing was undertaken at pre-money valuation of US$10,000k (£5,000k)was
closed in September 2006. After these additional subscriptions Brainspark has a
39.53% interest in Geosim
Further progress for the second half of 2007
During the second half of 2007 Brainspark continued the positive trend of the
first six months, here are some of the main events.
In July 2007 China IPO Group Limited entered in two further exclusive contracts
with Tianjin TEDA International Business Incubator (which has more than 180
companies currently being incubated) and the Tianjin TIDI Technology Incubation
Centre (which has more than 100 companies being incubated). TEDA is part of the
Tianjin Economic Development Zone. Tianjin is one of China's largest ports, and
a key centre for Electronics, Bio-chemicals, Automobiles, Manufacturing and
Logistics.
On 3 August 2007 Et-China.com International Holdings ('ET-China') went public on
AIM and China IPO Group Limited converted the option awarded to holders of
unsecured convertible loan notes in ET-China China IPO Group has converted its
$200k (£9100k) loan notes into 153,639 ET-China shares, which at listing rice of
127p a share were worth £200k. On listing China IPO realized approximately £15k
from sale of part of the shares at 127p a share.
As from 17 August Brainspark website (www.brainspark.com) contains all the
information required to be disclosed pursuant to AIM Rule 26.
On 24 September Brainspark announced that Geosim (www.geosim.co.il), had entered
into a new agreement with CRASH Ventures LLC, under which Crash LLC will act as
an exclusive consultant. Under this new agreement the exclusivity period has
been extended from 31 May 2008 to 31 May 2010. Crash LLC will assist Geosim in
raising a total of US$3,000k (£1,500k) of which private investors in the United
States have already subscribed US$200k (£100k), at a pre-money valuation of
US$22,000k (£11,000k). This alone is equivalent to 1.30p per share. The carrying
value of Geosim in our books is £1.83million, or 0.55p per share. The new
Philadelphia 3D online website is due for launch before year-end.
On 26 September Mediapolis SpA, the amusement park in North of Italy were
Brainsaprk has a small investment, was given the final green light to start the
implementation phase of the project, which is expected to begin in Spring 2008.
Brainspark management remains committed to continue the positive trend of the
Company during the final part of the year.
Prof. Francesco Gardin
Chairman
27 September 2007
FINANCIAL STATEMENTS
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 30 JUNE 2007
Note Six months to 30 Six months to 30 Year ended
June 2007 June 2006 31 December 2006
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Continuing operations
Investment revenue 9 7 9
Gain on disposal of investments 75 - 300
Share of profits of associates - - 92
Finance charges - - (31)
Other operating expenses (80) (79) (196)
Impairment of available for sale investments - - (156)
Profit/(loss) before tax 4 (72) 18
Tax - - -
Profit/(loss) for the period from continuing 4 (72) 18
operations
Attributable to:
Equity holders of the parent 4 (72) 18
Earnings per share
Basic and diluted earnings per 0.01p ordinary 3 0.001p (0.02p) 0.005p
share
CONSOLIDATED BALANCE SHEET
FOR THE PERIOD ENDED 30 JUNE 2007
Notes Six months to Six months to Year Ended
30 June 2007 30 June 2006 31 December
(Unaudited) (Unaudited) 2006
(Audited)
£'000 £'000 £'000
Non-current assets
Investments in associates 4 2,023 2,010 2,023
Available for sale investments 5 818 1,222 718
Total non-current assets 2,841 3,232 2,741
Current assets
Trade and other receivables 626 270 626
Cash and cash equivalents 305 257 410
Total current assets 931 527 1,036
Current liabilities
Trade and other payables (257) (370) (266)
Total current liabilities (257) (370) (266)
Net current assets 674 157 770
Net assets 3,515 3,389 3,511
Equity
Share capital 1,936 1,936 1,936
Share premium account 29,186 29,186 29,186
Other reserves 6,813 6,813 6,813
Equity component of convertible instrument 32 - 32
Retained losses (34,452) (34,546) (34,456)
Equity attributable to equity holders of the 3,515 3,389 3,511
parent
STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2007
Six months to 30 Six months to 30 Year ended
June 2007 June 2006 31 December 2006
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Profit /(Loss) for the period 4 (72) 18
Net addition/(reduction) in equity 4 (72) 18
Opening equity attributable to equity holders 3,511 3,461 3,493
of the parent
Closing equity equity attributable to equity 3,515 3,389 3,511
holders of the parent
CONSOLIDATED CASHFLOW STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2007
Six months to 30 June Six months to 30 Year ended
2007 June 2006 31 December 2006
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Net cash used in operating activities (89) (104) (183)
Cash flows from investing activities
Interest received 9 7 9
Proceeds from sale of investments in associates 75 - 230
Purchase of investments (100) (92) (92)
Net cash generated from investing activities (16) (85) 147
Decrease in net cash for the period (105) (189) (36)
Cash and cash equivalents at beginning of period 410 446 446
Cash and cash equivalents at end of the period 305 257 410
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting policies
Basis of preparation
The interim financial statements have been prepared using accounting policies
consistent with International Financial Reporting Standards and in accordance
with International Accounting Standard (IAS) 34 Interim Financial Reporting.
The financial information contained in this interim statement is unaudited and
does not constitute statutory accounts as defined in Section 240 of the
Companies Act 1985.
Significant accounting policies
The interim financial statements have been prepared under the historical cost
convention, except for the revaluation of certain properties and financial
instruments.
The same accounting policies, presentation and methods of computation are
followed in these interim financial statements as were applied in the
preparation of the Group's financial statements for the year ended 31 December
2006.
2 Segment reporting
The Group carries on its business in five geographical locations, namely the UK,
Italy, Israel, United States and China. Its principal activity is the investment
in technology start up businesses.
Based on risks and returns, the Directors consider that the Group had only one
business segment during the period ended 30 June 2007, that of investing in
technology start up companies. Therefore the disclosure for the primary segment
has already been given in these financial statements.
The secondary reporting would be as shown below.
Six month to Six month to Year ended
30 June 2007 30 June 2006 31 December 2006
(Unaudited) (Unaudited) (Audited)
Segment assets Segment assets Segment assets
£'000 £'000 £'000
United Kingdom 834 816 938
Continental Europe 688 688 688
Middle East 1,830 1,830 1,830
China 105 - -
United States 58 55 55
3,515 3,389 3,511
3 Earnings per share
The basic earnings / (loss) per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period. Diluted earnings per share is computed
using the same weighted average number of shares during the period adjusted for
the dilutive effect of share warrants and convertible loans outstanding during
the period.
The profit/ (loss) and weighted average number of shares used in the calculation
are set out below:
Six months to 30 Six months to Year ended
June 2007 30 June 2006 31 December 2006
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Profit/(loss) attributable to ordinary 4 (72) 18
shareholders
Adjusted loss 4 (72) 18
Weighted average number of ordinary shares 330,697 330,697 330,697
Adjusted weighted average number of ordinary 330,697 330,697 330,697
shares
Basic profit/ (loss) per share 0.001p (0.02p) 0.005p
Diluted profit /(loss) per share 0.001p (0.02p) 0.005p
IAS 33 requires presentation of diluted earnings per share when a company could
be called upon to issue shares that would decrease earnings per share or
increase net loss per share. For a loss making company with outstanding share
options and warrants, net loss per share would only be increased by the exercise
of out-of-the money options and warrants. Since it seems inappropriate that
option holders would act irrationally, no adjustment has been made to diluted
earnings per share for out-of-the money options and warrants in the
comparatives. There are no other diluting share issues, in either financial
period, consequently diluted earnings per share equals basic earnings per share.
4 Investments in associates
Six months to Six months to Year ended
30 June 2007 30 June 2006 31 December 2006
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Share of assets
At beginning of period 145 15 132
Share of profit for the period - - 92
Disposal - (79)
At period end 145 15 145
Goodwill
At beginning of period 1,878 1,638 1,521
Capitalisation of loans - - 357
At period end 1,878 1,638 1,878
Loans
At beginning of period - 357 357
Capitalisation of loans - - (357)
At period end - 357 -
Carrying value at period end 2,023 2,010 2,023
5 Available for sale investments
Six months to 30 Six months to 30 Year ended
June 2007 June 2006 31 December 2006
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
At beginning of period 718 1,130 1,130
Additions 100 92 122
Disposal - - (378)
Impairment charge - - (156)
At period end 818 1,222 718
6 Transition to IFRS
Brainspark Plc reported under IFRS in its previously published financial
statements for the year ended 31 December 2006. The analysis below shows a
reconciliation of net assets and profit reported under UK GAAP as at 30 June
2006 to the revised net assets and profit under IFRS as reported in these
financial statements.
Reconciliation of equity at 30 June 2006
Previous GAAP Effect of IFRS
transition to
2006 IFRS
£'000 £'000 £'000
Non-current assets
Investments in associates 545 1,465 2,010
Available for sale investments 1,222 - 1,222
Total non-current assets 1,767 1,465 3,232
Current assets
Trade and other receivables 270 - 270
Cash and cash equivalents 257 - 257
Total current assets 527 - 527
Current Liabilities
Trade and other payables (370) - (370)
Total current liabilities (370) - (370)
Net current assets 157 - 157
Net assets 1,924 1,465 3,389
Equity
Share capital 1,936 - 1936
Share premium account 29,186 - 29,186
Other reserves 6,813 - 6,813
Retained losses (36,011) 1,465 (34,546)
Equity attributable to equity holders of the parent 1,924 1,465 3,389
Reconciliation of equity for the six months ended 30 June 2006
There has been a net improvement in equity of £1,465,000. IFRS do not permit
goodwill amortisation. Goodwill amortisation of £1,004,000 has been reversed and
the carrying value of goodwill has been reviewed for impairment in accordance
with IAS 36. Furthermore under IAS 28 any losses incurred by the associate are
only recognised to the point the investor's interest is reduced to nil. This has
resulted in a reversal of £461,000.
Reconciliation of loss for the six months ended 30 June 2006
Previous GAAP Effect of transition IFRS
to IFRS
£'000 £'000 £'000
Continuing operations
Investment revenue 7 - 7
Other operating expenses (79) - (79)
Share of profits /(losses) of associates (478) 478 -
Loss before tax (550) 478 (72)
Tax - - -
Loss for the year from continuing operations (550) 478 (72)
Attributable to:
Equity holders of the parent (550) 478 (72)
IFRS do not permit goodwill amortisation, as a consequence goodwill amortisation
has been reversed and the carrying value of goodwill has been reviewed for
impairment. In addition, GeoSim's losses for the six moths to 30 June 2006 of
£136,000 have been written back in order to adjust the carrying amount of the
investment to nil.
Explanation of material adjustments to the cash flow statement for the six moths
ended 30 June 2006
There are no other material differences between the cash flow statement
presented under IFRSs and the cash flow statement presented under previous UK
GAAP.
7 Related party transactions
Prof. Francesco Gardin and 'S.I.C.I. sas di F. Gardin' are paid
£80,000 per annum for the provision of services. Financial Fun Limited, of which
Mr. Bailey is Chairman, is paid £20,000 per annum for the provision of Mr.
Bailey's services.
8 Board Approval
The Interim Statement was approved by the Board on 27 September 2007.
9 Availability of Interim Results
Copies of the Interim Results will be available from the offices of the Company,
Lightwell, 12-16 Laystall Street, London, EC1R 4PF and from the Company's
website www.brainspark.com.
For further information, please contact:
Francesco Gardin, Brainspark plc, telephone: 00 39 335 296573
Roland Cornish, Beaumont Cornish Limited, telephone: 020 7628 3396
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