30 Sep 2009 16:10
30 September 2009
Brainspark plc
("Brainspark or the "Company")
Unaudited interim results for the six month period ended 30 June 2009
Update on London Asia Capital plc arrangements
Chairman's Statement
In the six months ended 30 June 2009, the Company made a loss before taxation of £194,000, compared to a profit in the comparative period last year of £12,000. Brainspark's efforts in the period were devoted to the development of China IPO Group PLC ("China IPO"), our wholly-owned investment company focusing on opportunities in China, and the finalising of the contract between London Asia Capital plc ("LAC") and China IPO which was signed on 30 June 2009. In addition, Brainspark's management continued to realise value from its existing UK asset portfolio, with proceeds being utilized to develop its Chinese operations.
Financial Summary
The consolidated net asset value at 30 June 2009 was £1.05 million, down from £1.24 million at 31 December 2008. At 30 June 2009, Brainspark's mid-market share price of 0.225p valued the company at £0.74 million against a consolidated net asset value of £1.05 million. The Group's cash position at 30 June 2009 was £183,000.
First Half 2009 Events
A General Meeting was held on 22 April 2009, where the Company requested the consent of its shareholders to eliminate (i) its share premium account and (ii) the deferred shares of 0.01 penny each that were created in 2005 (the "Deferred Shares"). At the same time, the Company requested shareholders' consent to eliminate the Deferred Shares. All resolutions were approved by shareholders and the capital reduction has been granted.
On 30 June 2009 China IPO agreed new terms with LAC. Under these new terms China IPO was entitled to receive a success fee based solely on the return of cash to LAC shareholders. The agreement provided that China IPO would receive a rising percentage fee of the cash returned to LAC shareholders on or before 31st December 2012. As detailed below Brainspark has today accepted an offer to terminate this agreement with LAC.
Portfolio Review
In the first week of January 2009 the Company completed the disposal of Fortune Cookie. The Company has a carrying interest in any future sale of Fortune Cookie at a valuation exceeding £1.8m.
As announced on 30 June 2009, at the end of January 2009 GeoSim accepted a $1m loan from US investors which resulted in Brainspark's equity stake in GeoSim being reduced to 13.4%. The investment in GeoSim has been written down to zero by the Board of Brainspark. As announced on 30 June 2009 Brainspark has received an approach for its shares in GeoSim, further details of which are provided below.
During the first six months of 2009, Brainspark provided China IPO with working capital loans totalling £245,000.
Brainspark currently has investments in six companies spread across the UK, Italy, Israel, United States and China.
Events for the second half of 2009
On 1 July 2009 Francesco Gardin, Chairman of the Company, entered into an option agreement with Moggle, Inc. ("Moggle") about the possible sale of his £218,000 convertible loan in Brainspark. Moggle (OTC BB: MMOG.OB) is a Philadelphia based entertainment media company focusing on massively multiplayer new generation 3D online games. Mr Alfredo Villa, Non-Executive Director of Brainspark, is a non-Executive Director of Moggle and 13% shareholder. This option can only be exercised by Moggle after 1 October 2009 and the transfer of the option is, inter alia, subject to the approval of the Board of Brainspark. The option agreement between Francesco Gardin and Moggle has not changed the terms of the Company's convertible loan with Francesco Gardin. The £218,000 convertible loan is part of the $1m personal guarantee to Infusion 2002 Limited made by the Chairman of the Company. The conversion price of the instrument is at 0.46p.
Separately Moggle has made an indicative offer to the board of Brainspark to acquire Brainspark's 13.4% equity stake in GeoSim. It is anticipated that the consideration will be satisfied by Moggle issuing Moggle paper to Brainspark shareholders. The transaction has yet to be completed and remains subject to, inter alia, further negotiations and agreement of terms between Moggle and Brainspark. Brainspark will make further announcements in due course with regards to GeoSim.
Board Changes
On 27 August 2009 the Company announced that Dennis Bailey and David Meacher had resigned from the Board of Brainspark and that Alfredo Villa and Alessandro Malacart were proposed to join the Board as Non-Executive Directors. On 18 September 2009 the Company announced their appointments as Non-Executive Directors of the Company.
On 1 September 2009 Mr Dennis Bailey also resigned from the Board of China IPO, together with The Earl of Cromer and Mr Patrick Go.
The Company has today announced the appointment of Haresh Kanabar as a Non-Executive Director of the Company with immediate effect.
Change of Nominated Adviser and Broker
On 27 August 2009 Beaumont Cornish resigned as nominated adviser and broker. On 18 September 2009, Allenby Capital Limited were appointed as Company nominated adviser and broker.
Capital Reconstruction
In September 2009 the Company appointed MacIntyre Hudson LLP to arrange the formal procedure of capital reconstruction of the Group, subject to Inland Revenue approval. The objective will be to separate China IPO and Infusion 2002 Ltd businesses from Brainspark plc. Shareholders will maintain directly, pro-rata, their interest in the two entities, while remaining Brainspark shareholders. The capital reconstruction is expected to be completed by the end of 2009.
China IPO - London Asia Capital Plc termination agreement
On 30 September 2009 China IPO accepted an offer of £230,000 in cash to terminate the agreement between China IPO and LAC dated 30 June 2009. The consideration payable to China IPO on termination of the agreement is expected to be received by the beginning of October 2009. Prof. Francesco Gardin will continue to serve on the Board of LAC. China IPO will only provide the services of Prof. Francesco Gardin to LAC (as defined in the agreement which has been terminated) under a new separate service contract.
Investing strategy based on acquisition and fund raising
In line with the AIM Rules for Companies, the new Board of Brainspark is in the process of defining the Company's new investing strategy. It is anticipated that this investing strategy will be based on acquisitions of assets, mainly in Europe, to be satisfied through the issue of new Brainspark shares and cash raised via private placements. Some of these assets have already been identified by Brainspark; however fund raising will be subject to market conditions. Brainspark will announce its investing strategy and, if required, seek shareholder approval for the investing strategy by no later than 1 December 2009 in line with the AIM Rules for Companies.
For further information please contact:
Brainspark plc +39 335 296 573
Francesco Gardin, Chairman
Allenby Capital Limited +44(0) 20 7510 8600
Nick Athanas/James Reeve
Leander PR +44(0) 7795 168 157
Christian Taylor-Wilkinson
Financial Statements
Consolidated Income Statement for the six months ended 30 June 2009
| Note | Six months to 30 June 2009 (Unaudited) | Six months to 30 June 2008 (Unaudited) | Year ended 31 December 2008 (Audited) | |
| £'000 | £'000 | £'000 | ||
| Continuing operations | ||||
| Investment revenue | 6 | 8 | 13 | |
| Gain on disposal of investments | 197 | 200 | 200 | |
| Exchange gain | - | - | 181 | |
| Finance charges | - | - | (15) | |
| Other operating expenses | (397) | (196) | (485) | |
| Impairment of investments | - | - | (2,199) | |
| Loss before tax | (194) | 12 | (2,305) | |
| Tax | - | - | - | |
| Loss for the period from continuing operations | (194) | 12 | (2,305) | |
| Attributable to: | ||||
| Equity holders of the parent | (194) | 12 | (2,305) | |
| Earnings per share | ||||
| Basic and diluted loss per 0.01p ordinary share | 3 | (0.06p) | 0.003p | (0.70p) |
Consolidated Balance sheet at 30 June 2009
| Notes | Six months to 30 June 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year Ended 31 December 2008 (Audited) £'000 | |
| Non-current assets | ||||
| Property, plant and equipment | 6 | - | 7 | |
| Investments in associates | 4 | - | 1,830 | - |
| Available for sale investments | 5 | 403 | 919 | 438 |
| Trade and other receivables | 691 | - | 691 | |
| Total non-current assets | 1,100 | 2,749 | 1,136 | |
| Current assets | ||||
| Available for sale investments | 5 | - | - | 103 |
| Trade and other receivables | 16 | 560 | 21 | |
| Cash and cash equivalents | 183 | 502 | 310 | |
| Total current assets | 199 | 1,062 | 434 | |
| Current liabilities | ||||
| Trade and other payables | (23) | (228) | (100) | |
| Total current liabilities | (23) | (228) | (100) | |
| Net current assets | 176 | 834 | 334 | |
| Total assets less current liabilities | 1,276 | - | 1,470 | |
| Non-current liabilities | ||||
| Trade and other payables | (226) | - | (226) | |
| Net assets | 1,050 | 3,583 | 1,244 | |
| 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 | 32 | |
| Fair value adjustment to available for sale investments | - | 22 | - | |
| Retained losses | (36,917) | (34,406) | (36,723) | |
| Equity attributable to equity holders of the parent | 1,050 | 3,583 | 1,244 |
Statement of changes in equity
For the six month period ended 30 June 2009
| Six months to 30 June 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | ||
| Loss for the period | (194) | 12 | (2,305) | |
| Net reduction in equity | (194) | 12 | (2,305) | |
| Opening equity attributable to equity holders of the parent | 1,244 | 3,571 | 3,549 | |
| Closing equity equity attributable to equity holders of the parent | 1,050 | 3,583 | 1,244 |
Consolidated cash flow statements
For the six months ended 30 June 2009
| Six months to 30 June 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | ||
| Net cash used in operating activities | (383) | (205) | (432) | |
| Cash flows from investing activities | ||||
| Interest received | 6 | 8 | 13 | |
| Proceeds from sale of investments | 250 | 200 | 250 | |
| Purchase of investments | - | - | (20) | |
| Net cash generated from investing activities | 256 | 208 | 243 | |
| Decrease in net cash for the period | (127) | 3 | (189) | |
| Cash and cash equivalents at beginning of period | 310 | 499 | 499 | |
| Cash and cash equivalents at end of the period | 183 | 502 | 310 |
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 2006.
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 2008.
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 2009, 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 30 June 2009 (Unaudited) | Six month to 30 June 2008 (Unaudited) | Year ended 31 December 2008 (Audited) | |
| Segment assets | Segment assets | Segment assets | |
| £'000 | £'000 | £'000 | |
| United Kingdom | - | 960 | 162 |
| Continental Europe | 332 | 630 | 332 |
| Middle East | 677 | 1,830 | 691 |
| China | 41 | 105 | 59 |
| United States | - | 58 | - |
| 1,050 | 3,583 | 1,244 |
3 Earnings per share
The basic earnings 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 and weighted average number of shares used in the calculation are set out below:
| Six months to 30 June 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | |
| Loss attributable to ordinary shareholders | (194) | 12 | (2,305) |
| Adjusted loss | (194) | 12 | (2,305) |
| Weighted average number of ordinary shares | 330,697 | 330,697 | 330,697 |
| Adjusted weighted average number of ordinary shares | 330,697 | 330,697 | 330,697 |
| Basic loss per share | (0.06p) | 0.003p | (0.70p) |
| Diluted loss per share | (0.06p) | 0.003p | (0.70p) |
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 30 June 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | |
| Share of assets | |||
| At beginning of period | - | - | - |
| Transfer | - | - | - |
| Disposal | - | - | - |
| At period end | - | - | - |
| Goodwill | |||
| At beginning of period | - | 1,830 | 1,830 |
| Investment in the period | - | - | 13 |
| Impairment charge | - | - | (1,843) |
| At period end | - | 1,830 | - |
| - | - | - | |
| Carrying value at period end | - | 1,830 | - |
5 Available for sale investments
| Six months to 30 June 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | |
| At beginning of period | 541 | 919 | 919 |
| Fair value adjustment | (35) | - | (22) |
| Impairment charge | (356) | ||
| Disposal | (103) | - | - |
| At period end | 403 | 919 | 541 |
6 Related party transactions
Prof. Francesco Gardin and "S.I.C.I. sas di F. Gardin" was paid £40,000 and Financial Fun Limited, of which Mr. Bailey is Chairman, was paid £10,000 for the provision of services for the six month period. Mr. Bailey resigned as director on 26th August 2009.
In addition, Prof. Francesco Gardin and "S.I.C.I. sas di F. Gardin" was paid £116,000 for reimbursable costs incurred, across all group companies, in respect of travel and accommodation in Europe and Asia, Milan satellite office expenses and other associated costs for the six month period.
7 Board Approval
The Interim Statement was approved by the Board on 30 September 2009.
8 Availability of Interim Results
Copies of the Interim Results will be available from the Lightwell, 12-16 Laystall Street, London, EC1R 4PF.