Mineral & Fin Regulatory News (MAFL)

27 Sep 2007 12:50

Upstream Marketing and Comms Inc.27 September 2007 Upstream Marketing and Communications Inc. ("Upstream" or "the Company") Interim Results For the six month period ended 30 June 2007 Interim Statement27 September, 2007, Upstream Marketing and Communications Inc. (AIM: UPS)announces its interim results for the six month period ended 30 June 2007. CHAIRMAN'S STATEMENT The Board is pleased to report Upstream's unaudited interim results for the six months ended 30 June 2007. This is the first interim results report since completion of the reverseacquisition of Upstream Asia Limited ("UAL"), and change of the Company's nameto Upstream Marketing and Communications Inc. (UPS) in October 2006. Gross revenues for the period were US$ 1.973 million, representing a 63%year-on-year increase. With US$ 2.718 million in operating expenses Upstreamposted a US$ 0.727 million loss before tax for the period (June 2006: US$ 0.086million profit). This performance reflects the financial investment made by theCompany to achieve an expansion in the firm's revenue producing capability. Thisincludes one-off expenses associated with senior management hires made duringthe period and acquisition activities by the Group. UAL is a full service marketing and corporate communications network positioned to help its client companies make the most of business opportunities in the Asia Pacific region. The Group has offices in Beijing, Hong Kong, Shanghai, Singapore, Sydney, Taipei and Tokyo, as well as regional and global affiliates. The Company's objective in the period under review has been to build a solid foundation for future growth in the business. The Directors believe that the investment made in building a robust platform of network offices, capabilities and sources of revenue will drive continued organic growth with increased profitability, which will gain incremental momentum with the addition of strategic acquisitions. In the eight months following the reverse acquisition, the Directors believe that Upstream has made significant progress in executing its business plan: Financial Highlights o Revenue for the period is 63% higher than the same period the previous yearo Revenue generated since January 2007 has been increasing consistently on a month by month basiso Completion of the acquisition of Macro Consulting in Australia with additional acquisition targets under consideration Organic Growth A key part of Upstream's growth strategy is to continue increasing revenue throughout each of the Company's existing Asia-Pacific regional network of offices. In late 2006, Upstream put in place an enhanced management team, including senior managing director hires in Beijing, Hong Kong and Singapore. These executives, along with Upstream's existing management team have led an aggressive business development drive which has resulted in significant revenue being generated from such world-class companies as California Fitness, China Telecom, Deloitte, Embraer, ESPN, Fiat, JP Morgan, Skype, Sony Ericsson, SWIFT and Yellow Pages. The Company has achieved revenue growth in China of approximately 117% over the previous year, in line with its strategy of capitalizing on this buoyant market and the opportunities provided by the Olympics. In addition, revenue in the Southeast Asia region grew organically by 31% over the comparable period in the prior year. Cash in the Company at the time of the reverse acquisition was used to fund investments in the Company's operations during this period of rapid growth. The Company is now operating on a cash positive basis while continuing to grow. We are very encouraged by the Group's pipeline of new business, and the buoyancy in the Asia Pacific economies. The consumer & travel and corporate & financial sectors are showing particular promise, as is our business in China. In China, one of the network's focus markets, the Group continued to make progress in expanding its operations, client base and revenue. Upstream was named one of China's 10 Most Prominent Public Relations Agencies of 2007 by influential Chinese business newspaper Fortune Times. A new subsidiary, Media Services Asia, focusing on online marketing anddistribution, is growing and adding new services and customers to capturerevenue from the growth in digital marketing expenditure in the Asia-Pacificregion. The Company has also launched a second regional network brand called CamberCommunications to reach a new customer base and ensure client confidentialityand focused client service as the Group grows. Acquisitions The second key part of Upstream's growth strategy is expansion through the acquisition of complementary business. On 29 March 2007, Upstream completed its first acquisition of its affiliateMacro Consulting (now re-named Upstream Australia), for a maximum aggregateconsideration of £800,000 to be satisfied by the issue of up to 4 million newordinary shares in Upstream. The initial tranche of 1 million shares was issuedto the vendors following completion of the acquisition with the remaining threepotential future tranches of 1 million shares each, becoming payable on theachievement of specific performance targets from 2007 to 2009. Upstream Australian has been providing a profitable contribution to the Group since April 2007. In addition, this sixth wholly-owned office has expanded the Group's network capabilities and has lead to additional international business assignments from clients. Upstream has a solid pipeline of boutique and medium-sized acquisition targetsunder consideration in strategic sectors for the Group such as public relations,branding and design, advertising, digital marketing, and video production. TheGroup's management intend to pursue acquisitions which have a sound commercialbasis, where there is a clear financial benefit to shareholders and wheremanagement of the target company is strongly incentivised to grow their businesswithin the enlarged Group. It is the Company's intention that acquisitions will provide a significantsource of the Group's growth for 2007 and beyond. Current Trading and Outlook Upstream's financial performance has been steadily strengthening through thefinancial year as investments have started to yield returns.The Directors believe that the Group's focus on delivering corporate andmarketing communications services in the Asia Pacific region presents anexcellent opportunity for sustainable growth and accordingly they look forwardto the future with confidence. Demand for corporate and marketing communicationsservices remains strong -- driven by rising consumer spending, the desire ofmultinational companies to expand their business in the region, and Asia-basedcompanies seeking to spread their message to the global market place.The Directors believe that the Group's strong regional management and uniqueportfolio of marketing, business development mean that the Group is wellpositioned to drive growth in the network's offices throughout the region at anabove market rate. David Ketchum, Chief Executive Shahed Mahmood, Chairman27 September 2007 27 September 2007 Enquiries: Ajay Kejriwalm: + 44(0)7957 488104 James Harris/Angela PeaceStrand Partnerst:+44(0) 20 7409 3494 www.aboutupstream.com Upstream Marketing & Communications Inc.Income StatementFor the six months ended 30 June 2007 Six month Six month Year ended 31 period ended period ended December 2006 30 June 2007 30 June 2006 Audited Unaudited Unaudited US$'000 US$'000 US$'000 Continuing operationsRevenue 1,973 1,211 2,693Other income 18 - 170 --------- -------- --------Total income 1,991 1,211 2,863 Operating expenses (2,718) (1,125) (2,952) --------- -------- --------Operating(loss)/profit prior togoodwill write off (727) 86 (89) Goodwill write off - - (10,783) --------- -------- --------(Loss)/profit for the periodfrom operations before tax (727) 86 (10,872) Tax expense 4 (3) - - --------- -------- -------- Net(loss)/profit for the period (730) 86 (10,872) ========= ========= ========= US cents US cents US cents(Loss)/profit per ordinary share- Basic 5 (0.5) 0.1 (11.5) --------- -------- -------- Upstream Marketing & Communications Inc.Statement of Changes in EquitySix months ended 30 June 2007 Share capital Share Capital Foreign Profit and Total and shares to premium reserve exchange loss equity be issued reserve account US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 At 1 January 2006 16 136 - (1) (68) 83Issue of new shares prior to reverse acquisition 2 159 - - - 161Issue of new shares on reverse acquisition 106 3,700 - - - 3,806Cost of issue of new shares - (9) - - - (9)Foreign exchange - - - 14 - 14Net loss for the period - - - - (10,872) (10,872)Adjustment on reverse acquisition 493 153 6,547 - - 7,193 -------- -------- -------- -------- --------- ------- At 31 December 2006 617 4,139 6,547 13 (10,940) 376(audited) Net loss for the period - - - - (730) (730)On acquisition in period 335 155 - - - 490Other share issues 10 210 - - - 220Foreign exchange - - - 158 - 158 -------- -------- -------- -------- --------- ------- At 30 June 2007 (unaudited) 962 4,504 6,547 171 (11,670) 514 ======== ======== ======== ======== ========= ======= Share capital and shares to be issued at 30 June 2007 includes an amount ofUS$330,000 in connection with shares to be issued as part of the deferredconsideration for the acquisition of Macro Consulting Pty Ltd as detailed innote 12. Upstream Marketing & Communications Inc. Balance Sheet As at 30 June 2007 30 June 2007 30 June 2006 31 December Unaudited Unaudited 2006 Audited Note US$'000 US$'000 US$'000 Assets Non current assets Property, plant and equipment 123 96 88 Goodwill 454 4 - --------- -------- -------- 577 100 88 Current Trade and other receivables 6 1,081 392 612 Cash and cash equivalents - 316 307 --------- -------- -------- 1,081 708 919 --------- -------- --------Total assets 1,658 808 1,007 ========= ======== ======== Liabilities Current Bank overdraft 78 - - Trade and other payables 7 1,011 473 602 Deferred income 31 - 26 Current tax provision 24 - 3 --------- -------- --------Total liabilities 1,144 473 631 ========= ======== ======== Equity Share capital 9 632 19 617 Reserves (118) 316 (241) --------- -------- --------Total equity 514 335 376 ========= ======== ========Total equity and liabilities 1,658 808 1,007 ========= ======== ======== Upstream Marketing & Communications Inc.Cash Flow StatementFor the six months ended 30 June 2007 Six month Six month Year ended period ended period ended 31 December 30 June 2007 30 June 2006 2006 Unaudited Unaudited Audited US$'000 US$'000 US$'000 Operating activities (Loss)/profit before taxation (727) 86 (10,872)Adjustments for:Interest income - - (3)Depreciation of property, plant and equipment 14 14 37Share based expenses 220 - -Write off of goodwill - - 10,783 --------- -------- --------Operating cashflow before working capital changes (493) 100 (55) (Increase)/decrease in trade and other receivables (469) 172 29Increase/(decrease) in trade and other payables 409 (127) (90)Increase in deferred income 5 - 26 --------- -------- --------Cash (used from)/generated by operations (548) 145 (90)Tax received/(paid) 18 (9) (10) --------- -------- --------Net cash (outflow)/inflow used in operating activities (530) 136 (100) ========= ======== ======== Investing activitiesAcquisition of subsidiary (24) - -Interest received - - 3Purchases of property, plant and equipment (49) (75) (89)Reverse acquisition expenses - - (730)Cash acquired on reverse acquisition - - 95 --------- -------- --------Net cash outflow from investing activities (73) (75) (721) ========= ======== ======== Financing activitiesIssue of shares - - 928Expenses in connection with shares issue - - (9) --------- -------- --------Net cash inflow from financing activities - - 919 ========= ======== ======== Net (decrease)/increase in cash and equivalents (603) 61 98 Cash and cash equivalents brought forward 307 104 104Effect of exchange rate fluctuations 218 151 105 --------- -------- --------Cash and cash equivalents carried forward (78) 316 307 ========= ======== ======== Upstream Marketing & Communications Inc.Notes to the Interim ReportFor the six months ended 30 June 2007 1 General Information The information for the period ended 30 June 2007 does not constitute statutoryaccounts as defined in Section 240 of the Companies Act 1985. The figures forthe year ended 31 December 2006 have been extracted from the 2006 statutoryfinancial statements prepared under International Financial Reporting Standards(IFRS). The auditors' report on those accounts was unqualified and did notcontain a statement under section 237(2) of the Companies Act 1985. The interimfinancial statements have been neither audited or reviewed by the Group'sauditors. 2 Accounting Policies Basis of preparationThe Company was incorporated as a Corporation in the Cayman Islands which doesnot prescribe the adoption of any particular accounting framework. The Boardhave resolved that the Company will follow IFRS and apply the Companies Act 1985when preparing its annual financial statements.The principal accounting policies of the Group are set out below. Basis of consolidationThe acquisition of Upstream Asia Limited by the Company has been accounted foras a reverse acquisition in accordance with International Financial ReportingStandard 3 on business combinations (IFRS3). Therefore, the income and cashflowstatements for the year ended 31 December 2006 comprises Upstream Asia Limitedand its subsidiary undertakings from 1 January 2006 to 31 December 2006 and forthe Company from 16 October 2006 to 31 December 2006. The income and cashflowstatements for the six months ended 30 June 2006 comprise Upstream Asia Limitedand its subsidiary undertakings only. The consolidated balance sheet at 31December 2006 comprises of the Company and Upstream Asia Limited and itssubsidiary undertakings. The consolidated balance sheet at 30 June 2006comprises of Upstream Asia Limited and its subsidiary undertakings only.Material intra-group balances and transactions, and any unrealised gains/lossesarising from intra-group transactions, are eliminated in preparing theconsolidated financial statements. SubsidiaryA subsidiary is a company over which the Company has the power, directly orindirectly, to govern its financial and operating decisions so as to deriveeconomic benefits. The results of subsidiaries are included in the consolidatedfinancial statements from the date that control effectively transferred to theGroup and cease to be consolidated from the date on which control is transferredout of the Group. GoodwillGoodwill arising on acquisitions represents the excess of the fair value of thecost of the acquisition over the Group's interest in the fair value of theidentifiable assets and liabilities of the acquired entity at the date ofacquisition. Such goodwill is tested annually for impairment and carried at costless accumulated impairment losses. Goodwill is allocated to cash-generatingunits for the purpose of impairment testing. Impairment of assetsProperty, plant and equipment and goodwill are subject to impairment testing.For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows (cash-generatingunits). As a result, some assets are tested individually for impairment and someare tested at cash-generating unit level, particularly goodwill.Individual assets or cash-generating units that include goodwill with anindefinite useful life are tested for impairment at least annually, irrespectiveof whether there is any indication that they are impaired. All other individualassets or cash-generating units are tested for impairment whenever events orchanges in circumstances indicate that the carrying amount may not berecoverable. An impairment loss is recognized as an expense immediately for the amount bywhich the asset's or cash-generating unit's carrying amount exceeds itsrecoverable amount. The recoverable amount is the higher of fair value,reflecting market conditions less costs to sell and value in use based on aninternal discounted cash flow evaluation. Impairment losses recognized forcash-generating units, to which goodwill has been allocated, are creditedinitially to the carrying amount of goodwill. Any remaining impairment loss ischarged pro rata to the other assets in the cash-generating unit except that thecarrying value of the asset will not be reduced below its individual fair valueless costs to sell, or value in use, if determinable.An impairment loss on goodwill is not reversed in subsequent periods. In respectof other assets, an impairment loss is reversed if there has been a favourablechange in estimates used to determine the assets recoverable amount and only tothe extent that the asset's carrying amount does not exceed the carrying amountthat would have been determined, net of depreciation, if no impairment loss hadbeen recognized. Property, plant and equipment(i) Measurement basesProperty, plant and equipment are stated at cost less accumulated depreciationand impairment losses. The cost of an asset comprises its purchase price and anydirectly attributable costs of bringing the asset to the working condition andlocation for its intended use. Subsequent expenditure relating to property,plant and equipment is added to the carrying amount of the assets if it can bedemonstrated that such expenditure has resulted in an increase in the futureeconomic benefits expected to be obtained from the use of the assets. When assets are sold or retired, any gain or loss resulting from their disposal,being the difference between the net disposal proceeds and the carrying amountof the assets, is included in the income statement. (ii) DepreciationDepreciation is provided to write off the cost of property, plant and equipmentless their residual values over their estimated useful lives, using the straightline method, at the following rates : Computer hardware and software 1-4 yearsFurniture and fixtures and office equipment 3-4 yearsLeasehold improvements over the term of the lease The residual values and useful lives of property, plant and equipment arereviewed, and adjusted if appropriate, at each balance sheet date. TaxationCurrent income tax assets and/or liabilities comprise those obligations to, orclaims from, fiscal authorities relating to the current or prior reportingperiod, that are unpaid at the balance sheet date. They are calculated accordingto the tax rates and tax laws applicable to the fiscal periods to which theyrelate, based on the taxable result for the period. All changes to current taxassets or liabilities are recognised as a component of tax expense in the incomestatement. Deferred income taxes are calculated using the liability method on temporarydifferences. This involves the comparison of the carrying amounts of assets andliabilities in the consolidated financial statements with their respective taxbases. In addition, tax losses available to be carried forward as well as otherincome tax credits to the Group are assessed for recognition as deferred taxassets. Deferred tax liabilities are always provided for in full. Deferred tax assetsare recognised to the extent that it is probable that they will be able to beoffset against future taxable income. Deferred tax assets and liabilities arecalculated, without discounting, at tax rates that are expected to apply totheir respective period of realisation, provided they are enacted orsubstantively enacted at the balance sheet date. Most changes in deferred tax assets or liabilities are recognised as a componentof tax expense in the income statement. Only changes in deferred tax assets orliabilities that relate to a change in value of assets or liabilities that ischarged directly to equity are charged or credited directly to equity. Financial assetsThe Group's financial assets include cash and cash equivalents and trade andother receivables. All financial assets are recognised when the Group becomes party to thecontractual provisions of the instrument. All financial assets are initiallyrecognised at fair value, plus transaction costs. Non-compounding interest and other cash flows resulting from holding financialassets are recognised in profit or loss when received, regardless of how therelated carrying amount of financial assets is measured. Trade and other receivables are provided against when objective evidence isreceived that the Group will not be able to collect all amounts due to it inaccordance with the original terms of the receivables. The amount of thewrite-down is determined as the difference between the asset's carrying amountand the present value of estimated future cash flows. A financial asset is derecognized only where the contractual rights to the cashflows from the asset expire or the financial asset is transferred and thattransfer qualifies for derecognition. Cash and cash equivalentsCash and cash equivalents comprise cash on hand and demand deposits, togetherwith other short-term, highly liquid investments that are readily convertibleinto known amounts of cash and which are subject to an insignificant risk ofchanges in value. EquityShare capital is determined using the nominal value of shares that have beenissued by the legal parent. The share premium account represents premiums received on the initial issuing ofthe share capital. Any transaction costs associated with the issuing of sharesare deducted from share premium, net of any related income tax benefits. Shares to be issued represent the estimate of shares to be issued in respect ofdeferred consideration on acquisition of businesses. Foreign currency translation differences are included in the translationreserve. Retained earnings include all current and prior period results as disclosed inthe income statement. Financial liabilitiesThe Group's financial liabilities include trade and other payables.Financial liabilities are recognised when the Group becomes a party to thecontractual agreements of the instrument. All interest related charges arerecognised as an expense in "finance cost" in the income statement. Trade payables are recognised initially at their nominal value and subsequentlymeasured at amortised cost less settlement payments. Dividend distributions to shareholders are included in 'other short termfinancial liabilities' when the dividends are approved by the shareholders'meeting. Other provisions, contingent liabilities and contingent assetsOther provisions are recognised when present obligations will probably lead toan outflow of economic resources from the Group and they can be estimatedreliably. Timing or amount of the outflow may still be uncertain. A presentobligation arises from the presence of a legal or constructive commitment thathas resulted from past events, for example, legal disputes or onerous contracts. Provisions are measured at the estimated expenditure required to settle thepresent obligation, based on the most reliable evidence available at the balancesheet date, including the risks and uncertainties associated with the presentobligation. Any reimbursement expected to be received in the course ofsettlement of the present obligation is recognised, if virtually certain as aseparate asset, not exceeding the amount of the related provision. Where thereare a number of similar obligations, the likelihood that an outflow will berequired in settlement is determined by considering the class of obligations asa whole. In addition, long term provisions are discounted to their presentvalues, where time value of money is material. All provisions are reviewed at each balance sheet date and adjusted to reflectthe current best estimate. In those cases where the possible outflow of economic resource as a result ofpresent obligations is considered improbable or remote, or the amount to beprovided for cannot be measured reliably, no liability is recognised in thebalance sheet. Probable inflows of economic benefits to the Group that do not yet meet therecognition criteria of an asset are considered contingent assets. Revenue recognitionRevenue is recognized by reference to the fair value of consideration receivedor receivable by the Group for services provided. Consultancy fee income, including the recovery of direct costs, is recognizedupon completion of the provision of services which is the point at which theinvoices are then raised. Revenue from retainer fees and services is recognized when the service isperformed in accordance with the terms of the contractual arrangement. Operating leasesLeases where substantially all the risks and rewards of ownership of the assetsremain with the lessor are treated as operating leases. Annual rentals underoperating leases are charged to the income statement on a straight line basisover the lease term. Employee benefitsEmployee entitlements to annual leave are recognized when they accrue toemployees. A provision is made for the estimated liability for annual leave asresult of services rendered by employees at the balance sheet date. The Group participates in defined contribution retirement plans and payscontributions to publicly or privately administered pension plans on a mandatoryor contractual basis. The Group has no further payment obligations once thecontributions have been paid. The contributions are recognised as employeebenefit expenses when they are due. Foreign currenciesThe financial statements are presented in United States Dollars, which is alsothe functional currency of the Group. In the individual financial statements of the consolidated entities, foreigncurrency transactions are translated into the functional currency of theindividual entity using the exchange rates prevailing at the date of thetransactions. Foreign currency exchange gains and losses resulting from thesettlement of such transactions and from the translation of monetary assets andliabilities denominated in foreign currencies at year end exchange rates arerecognised in the income statement. In the consolidated financial statements, all individual financial statements ofsubsidiaries originally presented in a currency different from the Group'spresentation currency, have been converted into United States Dollars. Assetsand liabilities have been translated into United States Dollars at the closingrates at the balance sheet date. Income and expenses have been converted intoUnited States Dollars at the exchange rates ruling at the transaction dates orat the average rates over the reporting period. Any differences arising fromthis have been dealt with in the foreign exchange reserve in equity. Other exchange differences arising from the translation of the net investment inforeign entities are taken to shareholders equity. Related partiesParties are considered to be related if one party has the ability, directly orindirectly, to control the other party or exercise significant influence overthe other party in making financial and operating decisions or vice versa.Parties are also considered to be related if they are subject to common controlor common significant influence. Related parties may be individuals (being members of key management personnel,significant shareholders and/or their close family members) or other entitiesand include entities which are under the significant influence of relatedparties of the Group where those parties are individuals and post-employmentplans which are for the benefit of employees of the Group or any entity that isa related party to the Group. Segmental reportingA segment is a distinguishable component of the Group that is engaged either ina particular business (business segment) or conducting business in a particulareconomic environment (geographical segment) which is subject to risks andreturns that are different from those of other economic environments. 3 Segmental Reporting (a) By business segment (primary segment):As defined under International Accounting Standard 14 (IAS14), the only materialbusiness segment the Group has is that of marketing and public relations. (b) By geographical segment (secondary segment):Under the definitions contained in IAS 14, the only material geographic segmentthat the Group operates in is Asia. 4 Tax Income The Group does not operate in the United Kingdom and there is no tax arising onits operations. The relationship between the expected tax expense at 30% and thetax expense actually recognised in the income statement can be reconciled asfollows: Six month Six month Year ended period ended period ended 31 December 30 June 2007 30 June 2006 2006 Unaudited Unaudited Audited US$'000 US$'000 US$'000 (Loss)/profit for the periodbefore taxation (727) 86 (10,872) ========= ======== ======== Expected tax(credit)/expense (218) 26 (1,903)Expenses not deductible for tax - - 1,889Other adjustments - (26) -Losses not recognised as deferred tax asset 221 - 14 --------- -------- --------Actual tax expense (3) - - ========= ======== ======== 5 (Loss)/Earnings per ShareThe calculation of the basic (loss)/earnings per share is based on the net lossfor the period of US$730,000 (period ended 30 June 2006 : profit US$86,000, yearended 31 December 2006 : loss US$10,872,000) divided by the weighted averagenumber of shares in issue during the period of 134,298,962 (period ended 30 June2006 : 79,675,002, year ended 31 December 2006 : 94,479,385). The impact of the warrants on the loss per share is anti-dilutive. 6 Trade and Other Receivables 30 June 2007 30 June 2006 31 December Unaudited Unaudited 2006 Audited US$'000 US$'000 US$'000 Trade and other receivables, gross 818 256 510Impairment of trade and otherreceivables (9) (12) (22) --------- --------- ---------Trade and other receivables, net 809 244 488 Other receivables 51 130 29Deposits and prepayments 221 18 95 --------- --------- --------- 1,081 392 612 ========= ========= ========= Trade and other receivables are usually due within 30 - 60 days and do not bearany effective interest rate. The fair value of these short term financial assets is not individuallydetermined as the carrying amount is a reasonable approximation of fair value. 7 Trade and Other Payables 30 June 2007 30 June 2006 31 December Unaudited Unaudited 2006 Audited US$'000 US$'000 US$'000 Trade and other payables 642 360 272Other payables and accrued charges 188 61 285Amounts due to directors 181 52 45 --------- --------- --------- 1,011 473 602 ========= ========= ========= The fair value of trade and other payables is considered by management to be areasonable approximation of their fair value. 8 Deferred Tax Assets and Liabilities Deferred tax assets have not been recognised in respect of the following: 30 June 2007 30 June 2006 31 December Unaudited Unaudited 2006 Audited US$'000 US$'000 US$'000 Unused tax losses 69 - 30 ========= ========= ========= No recognition of potential deferred tax assets of the Group has been made asrecoverability of the potential asset is uncertain. 9 Share Capital 30 June 2007 Unaudited US$'000Authorised4,000,000,000 ordinary shares of 0.25p 18,470 ========Allotted, issued and fully paid136,544,795 (31 December 2006 133,541,670) ordinary shares of0.25p 632 ========Issues in periodOn 29 March 2007, 1,000,000 shares were issued as initial consideration for theacquisition of Macro Consulting Pty Ltd as detailed in note 12. On 8 June 2007, 2,003,125 shares were issued to an employee in accordance withthe terms of their service agreement. WarrantsOn 25 November 2004 a warrant was issued to Strand Partners Limited, theCompany's Nominated Advisor, in connection with their role in the admission ofthe Company to the AIM market. The warrant entitles Strand Partners Limited tosubscribe, at a price of 10p per share, for such number of ordinary shares asare equivalent (on a fully diluted basis) to one per cent. of the issuedordinary share capital of the Company at that time. The issued warrant may beexercised at any time during the period from 15 December 2004 to 14 December2009. The fair value of warrants granted was determined using the Black-Scholesvaluation model. Significant inputs into the calculations were:• share price of 5p per share at date of grant of warrant• exercise price of 10p per warrant as detailed above• 50% volatility based on expected share price• a risk free interest rate of 5.0%. In total £20,000 of share based expense has been included in the share premiumaccount as a cost of the admission to AIM which gave rise to share based paymentreserve. No liabilities were recognised due to share based payment transactions. 10 Related Party Transactions David Ketchum, a Director of the Company, has made a loan available to the Groupof US$123,000 (period ended 30 June 2006: US$31,000, year ended31 December 2006: US$45,000). The balance due is unsecured, interest free andhas no fixed terms of repayment. During the period ended 30 June 2007 the Group secured a loan from ashareholder, Corvus Capital Inc. of US$98,000 (period ended 30 June 2006:Nil,year ended 31 December 2006: US$98,000) which is unsecured and interest free.The loan is repayable in 10 monthly instalments, commencing in November 2006.The balance outstanding at 30 June 2007 was US$64,000 (30 June 2006 Nil ,31 December 2006 US$88,000). Another shareholder, techpacific.com (BVI) Investments Limited and itsaffiliated companies, Techpacific Capital Limited and Crosby Capital Partners(Hong Kong) Limited, has used the services of the Group for which it paid fees,out of pocket expenses and mark ups of US$34,000 (period ended 30 June 2006:Nil,year ended 31 December 2006: US$36,000). 11 Risk Management Objectives and Policies The Group is exposed to a variety of financial risks which result from both itsoperating and investing activities. The Group's risk management is coordinatedat its headquarters, in close cooperation with the board of directors, andfocuses on actively securing the Group's short to medium term cash flows byminimizing the exposure to financial markets. (a) Market riskMarket risk encompasses three types of risk being currency risk, fair valueinterest rate risk and price risk. The Group's policies for managing fair valueinterest rate risk are considered along with those for managing cash flowinterest rate risk as set out below. The Group is not exposed to significantprice risk. (b) Foreign currency riskThe Group's exposure to foreign currencies is limited to its investments inforeign subsidiaries and to its trading in overseas operations. The investmentsin foreign subsidiaries are financed internally. The overseas operations tradein their local currency and because their sales to other countries are notsignificant they do not seek to hedge their foreign currency exposure. TheDirectors will keep this policy under review particularly if sales to othercountries increase significantly. (c) Credit riskGenerally, the maximum credit risk exposure of financial assets is the carryingamount of the financial assets as shown on the face of the balance sheet (or inthe detailed analysis provided in the notes to the financial statements). Creditrisk, therefore, is only disclosed in circumstances where the maximum potentialloss differs significantly from the financial assets carrying amount.The Group's trade and other receivables are actively monitored to avoidsignificant concentrations of credit risk. (d) Cash flow and fair value interest rate risksCash flow is managed by means of ensuring sufficient cash and cash equivalentsare held to support the trading activities of the Group. The cash and cashequivalents are invested such that the maximum available interest rate isachieved with minimal risk. The Group currently has no financial liabilities with floating interest rates. 12 Acquisitions On 29 March 2007 the Company acquired the entire issued share capital of MacroConsulting Pty Ltd for a consideration comprising an initial tranche of 1million ordinary shares of 0.25p together with up to a further 3 million sharesdependent upon the post acquisition results of the acquired business. Costs ofthe acquisition amounted to US$24,000. The difference between the directorscurrent estimate of the total consideration payable of US$514,000 and the netassets acquired of US$60,000 (US$454,000) has provisionally been classified asgoodwill until the directors can fully assess the fair value of any otherintangible assets acquired. This information is provided by RNS The company news service from the London Stock Exchange