29th Sep 2006 16:18
Brainspark PLC29 September 2006 For immediate release 29 September 2006 Brainspark Plc Interim Results 2006 For the six month period ended 30 June 2006 Chairman's statement In the six months ended 30 June 2006, the Company incurred a loss beforetaxation of £550k, compared to a loss for the comparative period last year of£551k. Of the loss, £79k principally represents operating costs and £478k ismainly attributable to the amortisation of goodwill on associates and our shareof their losses. Operating costs for the period ended 30 June 2005 of £79k represent a decreaseof £51k from the comparative period last year. We targeted to reduce monthly operating costs below £20k. This has been achievedBrainspark now runs its operations for £13k per month. The Company has entered into a new expansion cycle, by starting to make newinvestments and exploring innovative projects. In order to maximise shareholdervalue, we are exploring various business projects including taking a Partner ormaking an acquisition. Shareholders will be kept informed of any progress. Atthe same time we are trying to realise value from the existing assets and recentsales of portfolio assets ought to be viewed as a way to finance the newBrainspark development phase; after the completion of restructuring and £850kcash injection in December 2005 issue of a convertible loan. Financial Summary The consolidated net asset value at 30 June 2006 was £1,924k - down from £2,474kat 31 December 2005. This is a result of six months amortisation and our shareof losses of £478k on Geosim. At the end of 2007 Geosim goodwill will be fullyamortised resulting in a final charge of £70k in that year. At 30 June 2006 the Group's cash reserves stood at £257k compared with £446k at31 December 2005. During the first six months Brainspark made two investmentsfor a total cash consideration of £92k. As of 29th September 2006, after thesale of our equity stake in Kerb Ltd on 6th July, for a cash consideration of£205k cash reserves stood at £405k. At 30 June 2006, Brainspark's mid-market price per share of 0.65p valued theCompany's issued capital of 330,697,003 shares at £2,149k against a consolidatednet asset value of £1,924k. First Half 2006 Events. On 11 January 2006 Mr.Bailey was appointed a Director of Brainspark withimmediate effect. Mr. Bailey became a member of the London Stock Exchange in1968, and was a Partner in Hichens Harrison & Co, one of the oldest firms ofstockbrokers which was established in 1803. On 8th March 2006 Prof. Francesco Gardin, Company Chairman, indicated that hewould like to convert further amounts of his outstanding £208k worth of LoanStock into shares and raise his personal shareholding to 29.99%. However, thePanel on Takeovers & Mergers ("the Panel") has indicated that, because Mr.Fogliani is a relative of Professor Gardin by marriage, they should be treatedas acting in concert and therefore if either acquires shares so that theyjointly hold in excess of 30%, they would be required to make a cash bid underRule 9 of the Takeover Code (a "Rule 9 Offer").The Loan Stock was convertible atProfessor Gardin's option at any time prior to its repayment and at any timeprior to 31 March 2006 at the Company's option. As announced on 8 March 2006, the Company and Professor Gardin have agreed thatneither will exercise its right to demand conversion on or before 31 March 2006(which could result in a mandatory offer obligation arising under Rule 9 atsubstantially less than the prevailing market price), that the repayment date forthe Loan Stock will be postponed to 31 December 2007 and that the rights ofeither party to demand conversion will be extended to the same date. The LoanStock will remain interest free. On 24th March 2006 Brainspark's lease for the two floors on the Lightwellpremises expired; releasing the Company from an annual commitment ofapproximately £240k. Dilapidation costs were less than £10k since the liabilityfor the dilapidation costs was transferred to two new tenents: Metapack andFortune Cookies, both Brainspark porfolio companies, in exchange for someCompany assets (telephone, furniture, networks, cabling, etc.) which they werealready using in their premises. While in the case of the other former tenant,Foviance, Brainspark had previously agreed to transfer to them dilapidation inexchange for the right to make modifications to the office layout. Brainsparkunder a new service agreement with Metapack will retain an office at theLightwell for an annual cost of less than £4k. Portfolio Review As of 30 June 2006 Brainspark had holdings in 8 companies, 4 in the UK(excluding Kerb Limited since we had already agreed on 7th June to dispose ofits entire holding in company) , one in Italy, one in Israel and one in theUnited States. Its stakes range from nearly 2% to 50.1% of the relevantportfolio companies. The portfolio covers a wide range of business sectors,including web services, application service providers and advanced IT solutions. On 29th March 2006 Brainspark made a $100k (£55k) investment in Polarizonics aDelaware company holding a technology with the potential for over 100GB discs.This innovation is of particular importance for satisfying the future demand forincreased disc capacity of HD video content of movies and video games.Brainsparkholds Series B preferred Polarizonics Stock representing a holding of 22,941shares or approximately 1.96% of the enlarged issued share capital of thecompany. The price is based on a pre-investment valuation of $5 million (£2.85million or $4.359 (£2.485) per share. This investment is part of a funding roundraising $250k (£142k) for PL in total, with $695k (£396k) having already beenraised with private US investors On 17th May 2006 Brainspark invested Euro 49k (£34k) in Mediapolis SpA, anItalian real estate development company which owns the land and the planningpermission for a major development project in Piemonte, between Turin and Milan.The development includes a major theme park, a specialised commercial centre andtwo hotels Brainspark will invest Euro 49k (£34k) in ordinary Mediapolis Stockrepresenting a holding of 38,000 shares or approximately 0.47% of the enlargedissued share capital of the company. The price is based on a pre-investmentvaluation of Euro 9 million (£6.5 million) This investment is part of a fullysubscribed round of funding raising Euro 1.5 million (£1.05 million) forMediapolis in total. Investors in this round include local entrepreneurs. On 7th June 2006 Brainspark agreed to dispose of its entire holding in KerbLimited an internet services for a cash consideration of £205k. The holding was-purchased by the company;the transaction was completed on 6 July 2006. On 21st June 2006 Crash LLC has entered into a new agreement with Geosim underwhich they will assist Geosim in raising a total of $2 million of which$585k hasalready been raised. At the time Brainspark held a 50.1% stake in Geosim; on fullsubscription of the $2 million Brainspark's holding will be diluted toapproximately 42%. Geosim designs high-tech 3D city modelling technology.Applications include urban planning and development, tourism, estate agency, lawenforcement,advertising, entertainment and the security and rescue services. On 29th June 2006 Fortune Cookie shareholders approved the company results forthe year ended 31st August 2005, which showed a post-tax profit of £184k (Anincrease of 247% against the prior year) on turnover of £1,291k, this representsan increase of 56.78% against the prior year) Brainspark holds a 29.44% equitystake in the company. Major events after June 2006 On 6th July 2006 Brainspark completed the disposal of its entire holding of30,167 1p ordinary shares, which represented 25% of the issued share capital ofKerb Limited, an internet services for a cash consideration of £205k Kerbreported revenues for the year ended February 2006 of approximately £600k withpre-tax profit of around £13k. The holding is being re-purchased by the company;in the Brainspark accounts, the current book value of Kerb is £64k. A profit of£151k for the transaction will be recorded in the 2006 Annual Report. During the second half of July 2006 the Company Chairman, Prof. Francesco Gardin, and one of the directors, Mr. Edward Burman, who lives in Beijin, met with anumber of potential Chinese partners in several Chinese cities as part of anongoing internal project focused on investments in China, through a specificvehicle to be set up for this purpose. On 31 July 2006 Brainspark participated in the £250k new round of financing inMetapack Ltd, the leading UK provider of delivery software for multi-Channelhome delivery. Investors in this round include existing investors andmanagement, Cross Atlantic Capital Partners and Brainspark. Brainspark hasinvested £30k in this round by converting existing debt into equity andsubsequently will hold 10.72% of the company. MetaPack already provides software solutions to leading retailers such as JohnLewis, B&Q, Boots, Dixons, PCWorld and Comet and will continue to benefit frominternet driven growth in home delivery. In addition, MetaPack sees significantgrowth potential in providing "software as a service" using an ASParchitecture.This will allow MetaPack to target the thousands of medium sizedcompanies in retail and non-retail who currently use proprietary carriermanagement systems. The new investment will support ASP development andmarketing. On 26th September, Geosim informed Brainspark that they had received anadditional $435k from US private investors, under the current Crash LLCagreement, of which $135k was received to complete the first $720k financing at$10 million pre-money valuation of the $2 million which Crash LLC is assistingthe company to raise. And the remaining $300k, of the second $1.28 million hasbeen raised at a pre-money valuation of $20 million.As a result of dilutionafter this initial $1.02 million and prior to conversion by Crash LLC of theiroptions, current equity held by Brainspark in Geosim is 43.56%. After Crash LLCconversion it will be 41.03%. At a valuation of $20 million Brainspark's equitystake in Geosim is valued $8.2 million (£4.36 million). This is equivalent to1.31 p a share and takes no credit for Brainspark cash and other investment. Prof. Francesco Gardin Chairman 29 September 2006 Consolidated profit and loss account For the period ended 30 June 2006 Financial Statements +--------------------------------+------+-------------+-------------+----------------+| |Notes |Six months to|Six months to| Year ended|| | | 30 June 2006| | || | | | 30 June 2005|31 December 2005|| | | (Unaudited)| | || | | | (Unaudited)| (Audited)|| | | £'000| | || | | | £'000| £'000|+--------------------------------+------+-------------+-------------+----------------+| | | | | |+--------------------------------+------+-------------+-------------+----------------+|Turnover | 2 | -| -| -|| | | | | |+--------------------------------+------+-------------+-------------+----------------+|Net operating expenses - | | (79)| (130)| (258)||recurring | | | | |+--------------------------------+------+-------------+-------------+----------------+|Net operating income - | | -| -| 122||exceptional | | | | |+--------------------------------+------+-------------+-------------+----------------+| | | | | |+--------------------------------+------+-------------+-------------+----------------+|Total net operating expenses/ | | (79)| (130)| (136)||Group operating loss | | | | || | | | | |+--------------------------------+------+-------------+-------------+----------------+| | | | | |+--------------------------------+------+-------------+-------------+----------------+|Share of operating loss of | 3 | (478)| (418)| (675)||associated undertakings | | | | |+--------------------------------+------+-------------+-------------+----------------+| | | | | || | | | | ||Total operating loss: Group and | | | | ||share of associated undertakings| | | | || | | (557)| (548)| (811)|| | | | | || | | | | |+--------------------------------+------+-------------+-------------+----------------+| | | | | |+--------------------------------+------+-------------+-------------+----------------+|Loss on ordinary activities | | (557)| (548)| (811)||before interest | | | | || | | | | |+--------------------------------+------+-------------+-------------+----------------+|Interest receivable / (payable) | | 7| (3)| -|+--------------------------------+------+-------------+-------------+----------------+|Amounts written off investments | | -| -| (119)|+--------------------------------+------+-------------+-------------+----------------+|Loss on ordinary activities | | (550)| (551)| (930)||before taxation | | | | || | | | | |+--------------------------------+------+-------------+-------------+----------------+| | | | | |+--------------------------------+------+-------------+-------------+----------------+|Tax on loss on ordinary | | -| -| -||activities | | | | || | | | | |+--------------------------------+------+-------------+-------------+----------------+|Loss on ordinary activities | | (550)| (551)| (930)||after taxation | | | | || | | | | |+--------------------------------+------+-------------+-------------+----------------+| | | | | || | | | | ||Retained loss for the financial | | (550)| (551)| (930)||period | | | | || | | | | |+--------------------------------+------+-------------+-------------+----------------+| | | | | |+--------------------------------+------+-------------+-------------+----------------+|Loss per 0.01p ordinary share | | | | || | | | | ||Basic and diluted | 4 | (0.17p)| (0.29p)| (0.48p)|+--------------------------------+------+-------------+-------------+----------------+ The loss for period is derived wholly from continuing activities. The Company has no recognised gains or losses other than the loss for theperiod. Consolidated Balance sheet at 30 June 2006 +--------------------------------+-------+------------+------------+---------------+| | Notes | Six months| Six months| Year ended|| | | to 30 June| to 30 June| || | | 2006| 2005| 31 December|| | | | | 2005|| | | (Unaudited)| (Unaudited)| || | | | | (Audited)|| | | £'000| £'000| || | | | | £'000|+--------------------------------+-------+------------+------------+---------------+| | | | | |+--------------------------------+-------+------------+------------+---------------+|Fixed assets | | | | || | | | | |+--------------------------------+-------+------------+------------+---------------+|Tangible assets | | -| 26| 9|+--------------------------------+-------+------------+------------+---------------+|Investments in associated | 5 | 545| 1,059| 1,023||undertakings | | | | |+--------------------------------+-------+------------+------------+---------------+|Other investments | 6 | 1,222| 1,549| 1,130|+--------------------------------+-------+------------+------------+---------------+| | | | | |+--------------------------------+-------+------------+------------+---------------+| | | 1,767| 2,634| 2,162|+--------------------------------+-------+------------+------------+---------------+| | | | | |+--------------------------------+-------+------------+------------+---------------+|Current assets | | | | || | | | | |+--------------------------------+-------+------------+------------+---------------+|Debtors | | 270| 402| 327|+--------------------------------+-------+------------+------------+---------------+|Cash at bank and in hand | | 257| 57| 446|+--------------------------------+-------+------------+------------+---------------+| | | 527| 459| 773|+--------------------------------+-------+------------+------------+---------------+| | | | | || | | | | ||Creditors: amounts falling due | | (370)| (755)| (461)||within one year | | | | || | | | | |+--------------------------------+-------+------------+------------+---------------+|Net current assets/ | | 157| (296)| 312||(liabilities) | | | | || | | | | |+--------------------------------+-------+------------+------------+---------------+|Total assets less current | | 1,924| 2,338| 2,474||liabilities | | | | || | | | | |+--------------------------------+-------+------------+------------+---------------+|Provisions for liabilities and | | -| (122)| -||charges | | | | || | | | | |+--------------------------------+-------+------------+------------+---------------+|Net assets | | 1,924| 2,216| 2,474|+--------------------------------+-------+------------+------------+---------------+| | | | | |+--------------------------------+-------+------------+------------+---------------+|Capital and reserves | | | | || | | | | |+--------------------------------+-------+------------+------------+---------------+|Called up share capital | | 1,936| 1,923| 1,936|+--------------------------------+-------+------------+------------+---------------+|Share premium account | | 29,186| 28,562| 29,186|+--------------------------------+-------+------------+------------+---------------+|Other reserves | | 6,813| 6,813| 6,813|+--------------------------------+-------+------------+------------+---------------+|Profit and loss account | | (36,011)| (35,082)| (35,461)||(deficit) | | | | |+--------------------------------+-------+------------+------------+---------------+|Total equity shareholders' funds| | 1,924| 2,216| 2,474|+--------------------------------+-------+------------+------------+---------------+ Reconciliation of movements in Group shareholders' funds For the period ended 30 June 2006 +--------------------------------+-------+------------+------------+---------------+| | Notes | Six months| Six months| Year ended|| | | to 30 June| to 30 June| || | | 2006| 2005| 31 December|| | | | | 2005|| | | (Unaudited)| (Unaudited)| || | | | | (Audited)|| | | £'000| £'000| || | | | | £'000|+--------------------------------+-------+------------+------------+---------------+| | | | | |+--------------------------------+-------+------------+------------+---------------+|Loss for the period | | (550)| (551)| (930)|+--------------------------------+-------+------------+------------+---------------+|New share capital issued | | -| -| 637|+--------------------------------+-------+------------+------------+---------------+| | | | | |+--------------------------------+-------+------------+------------+---------------+|Net reduction in shareholders' | | (550)| (551)| (293)||funds | | | | |+--------------------------------+-------+------------+------------+---------------+|Opening shareholders' funds | | 2,474| 2,767| 2,767|+--------------------------------+-------+------------+------------+---------------+|Closing shareholders' funds | | 1,924| 2,216| 2,474|+--------------------------------+-------+------------+------------+---------------+ Consolidated cash flow statement For the period ended 30 June 2006 +----------------------------------+-------+------------+-------------+---------------+| |Notes | Six months|Six months to| Year ended|| | | to| 30 June 2005| || | | | | 31 December|| | |30 June 2006| (Unaudited)| 2005|| | | | | || | | (Unaudited)| £'000| (Audited)|| | | | | || | | £'000| | £'000|+----------------------------------+-------+------------+-------------+---------------+| | | | | |+----------------------------------+-------+------------+-------------+---------------+|Net cash flow from operating | 7 | (104)| -| (297)||activities | | | | |+----------------------------------+-------+------------+-------------+---------------+| | | | | |+----------------------------------+-------+------------+-------------+---------------+|Returns on investments and | | | | ||servicing of finance | | | | || | | | | |+----------------------------------+-------+------------+-------------+---------------+|Interest paid on shareholder loan | | -| -| (11)|+----------------------------------+-------+------------+-------------+---------------+|Interest received | | 7| | |+----------------------------------+-------+------------+-------------+---------------+|Net cash outflow from returns on | | | | ||investments and servicing of | | | | ||finance | | 7| -| (11)|+----------------------------------+-------+------------+-------------+---------------+| | | | | |+----------------------------------+-------+------------+-------------+---------------+|Acquisitions and disposals | | | | || | | | | |+----------------------------------+-------+------------+-------------+---------------+|Sale of investments in associated | | -| 55| 105||undertakings | | | | |+----------------------------------+-------+------------+-------------+---------------+|Purchase of investments | | (92)| -| -|+----------------------------------+-------+------------+-------------+---------------+|Loans to associated undertakings | | -| (26)| (56)|+----------------------------------+-------+------------+-------------+---------------+|Net cash inflow (outflow) from | | (92)| 29| 49||acquisitions and disposals | | | | || | | | | |+----------------------------------+-------+------------+-------------+---------------+| | | | | |+----------------------------------+-------+------------+-------------+---------------+|Net cash inflow (outflow) before | | (189)| 29| (259)||financing | | | | || | | | | |+----------------------------------+-------+------------+-------------+---------------+|Financing | | | | |+----------------------------------+-------+------------+-------------+---------------+|Receipt from convertible loan | | -| -| 850||issue | | | | |+----------------------------------+-------+------------+-------------+---------------+|Partial repayment of loan to major| | -| -| (173)||shareholder and others | | | | |+----------------------------------+-------+------------+-------------+---------------+|Net cash inflow from financing | | -| -| 677|+----------------------------------+-------+------------+-------------+---------------+|(Decrease)/increase in net cash | | (189)| 29| 418||for the period | | | | |+----------------------------------+-------+------------+-------------+---------------+| | | | | |+----------------------------------+-------+------------+-------------+---------------+|Reconciliation of cash flow to | | | | ||movement in net funds | | | | || | | | | |+----------------------------------+-------+------------+-------------+---------------+|Net cash at beginning of period | | 446| 28| 28|+----------------------------------+-------+------------+-------------+---------------+|Increase (decrease) in net cash in| | (189)| 29| 418||the period | | | | |+----------------------------------+-------+------------+-------------+---------------+|Net cash at end of period | | 257| 57| 446|| | | | | |+----------------------------------+-------+------------+-------------+---------------+ Notes to the financial statements 1. Basis of preparation Principal accounting policies The financial statements have been prepared under the historical cost conventionmodified to include certain investments at valuation, and in accordance withapplicable accounting standards. Fixed annual charges are appointed to theinterim period on the basis of time elapsed and other expenses are accrued inaccordance with the same principles used in the preparation of the annualaccounts. The financial information contained in this interim statements isunaudited and does not constitute statutory accounts as defined in Section 240of the Companies Act 1985. The comparative information for the year ended 31 December 2005 is an abridgedversion of the statutory accounts for that year and those accounts, upon whichthe auditors issued an unqualified opinion. 2. Profit and Loss Six months to Six months Year ended 30 June 2006 to 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 TurnoverGroup turnover including share 257 238 570of associated undertakingsLess: share of associated (257) (238) (570)undertakings - - - 3. Share of operating loss of associated undertakings Six months to Six months to Year ended 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Share of operating loss of (136) - (13)associated UndertakingsAmortisation of goodwill on (342) (418) (662)acquisitionImpairment of goodwill - - - (478) (418) (675) 4. Basic and diluted loss per share amount pence ordinary share Six months to Six months to Year ended 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Loss attributable to ordinary (550) (551) (930)shareholdersAdjusted loss (550) (551) (930)Weighted average number of 330,697 192,273 193,091ordinary sharesAdjusted weighted average number 330,697 192,273 193,091of ordinary sharesBasic loss per share (0.17p) (0.29p) (0.48p)Diluted loss per share (0.17p) (0.29p) (0.48p) 5. Investments in associated undertakings Six months to Six months to Year ended 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Share of net (liabilities) /assetsAt beginning of period 15 28 28Share of loss for the period (136) - (13)At period end (121) 28 15GoodwillAt beginning of period 651 1,313 1,313Amortisation of goodwill (342) (418) (662)At period end 309 895 651Loans to associated undertakingsAt beginning of period 357 410 410Further advances in the period - 26 56Further advance as a result of - - 191set-off agreementProvisions against loans and - (300) (300)disposalAt period end 357 136 357Net book amount at period end 545 1,059 1,023 6. Other investments Six months to Six months to Year ended 30 June 2006 30 June 2005 31 December (Unaudited) (Unaudited) 2005 £'000 £'000 (Audited) £'000At beginning of period 1,130 1,549 1,549Call-option "initial payment" - - (300)Provision against investments - - (119)New investments made in the period 92 - -At period end 1,222 1,549 1,130 7. Reconciliation of operating loss to net cash inflow from operating activities Six months to Six months to Year ended 30 June 2006 30 June 2005 31 December (Unaudited) (Unaudited) 2005 £'000 £'000 (Audited) £'000 Operating loss (79) (133) (136)Depreciation charge 9 18 35 Decrease in debtors 57 5 30(Decrease) /increase in creditors (91) 110 (104) Reduction in provision for liabilities - - (122)and chargesNet cash flow from operating activities (104) - (297) 8. Ultimate controlling party The group has no ultimate controlling party. 9. Availability of Interim Results Copies of the interim results will be available from The Lightwell, 12-16Laystall Street, London EC1R 4PF. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
CLP.L