1Spatial Holdings Regulatory News (SPA)

07.10.11

1Spatial Holdings plc

("1Spatial" or the "Company")

Final Results for the year ended 30 June 2011

1Spatial, provider of intelligent data quality and integration solutions, announces its final results for the year ended 30 June 2011.

Financial key points

·; Gross profit of £3.6m (2010: £3.8m)

·; Revenues of £7.3m (2010: £8m)

·; Loss before tax (includes loss on reverse takeover of £1.1m and other exceptional items totalling £1m) £2.1m (2010: profit before tax £380k)

·; Total assets at £6.3m (2010: £6.5m)

Operational Highlights

·; Won contract with Ordnance Survey Great Britain with an initial value of £595,000 and longer term estimated to be worth over a seven figure sum

·; Won a contract worth £1.67m with Ordnance Survey Ireland, however contract signing was subject to delay, reducing revenue for this financial year

·; Completed the acquisition of Lagen Spatial in Australia aimed at exploiting the growing demand for spatial data in the region

·; Consolidated software development operations, reducing future operating costs by £1m per annum

Commenting on the results, Nic Snape, CEO of 1Spatial, said:

"Delays in public spending during the governments first year in office, new procurement processes and the need for increased justification for spending has delayed procurements and attributed to reduced revenues.

"1Spatial's Board has been investigating opportunities to take our technology into the broader business market. Our Board level relationship with Avisen plc has facilitated these discussions and we are actively investigating opportunities to integrate spatial data and automated geoprocessing into the Business Intelligence marketplace"

-END-

For further information please contact:

Company1Spatial Holdings plc

Nic Snape +44 (0)1223 420 414

Nominated Advisor

Libertas Capital Corporate Finance Limited

Sandy Jamieson +44 (0)20 7569 9650

BrokerRivington Street Corporate Finance

Jon Levinson +44 (0)20 7562 3389

Financial PRBishopsgate Communications

Deepali Schneider / Natalie Quinn +44 (0)20 7562 3350

DIRECTORS' REPORT

FOR THE YEAR ENDED 30 JUNE 2011

The directors present their annual report on the affairs of the group together with the financial statements and auditors' report for the year ended 30 June 2011.

RESULTS AND DIVIDENDS

The group's loss for the year, after taxation and exceptional items, amounted to £2,654,630.

The directors do not recommend the payment of any dividend.

PRINCIPAL ACTIVITY

The group's principal activity continues to be the development and sale of innovative business solutions, which ensure the integrity of location information, so that it can be securely used in decision-making.

REVIEW OF THE BUSINESS

1Spatial Holdings Plc completed its first year as a public company in a strong position with cash at over £1 million. Sales activity has increased significantly since the start of the new government year and we have a strong order book. The new acquisition in Australia has been incorporated operationally and completed a strong first quarter. Fiscal restructuring was completed to account for the extra-ordinary costs associated with the reverse acquisition of IQ Holdings Plc. The company cost base has been realigned to accommodate prevailing market conditions. Revenues at £7.311m generated a break even position. The financial performance was not in line with management expectations at the start of the year. Delays in public spending during the governments first year in office, new procurement processes and the need for increased justification for spending has delayed procurements and attributed to reduced revenues.

Significant events for the year include:

- Winning a long-term, high value contract with Ordnance Survey Great Britain to support automation of their product generation. Although this was slower to ramp up than expected which contributed to reduced revenue for the financial year, it enhances revenue for FY 11/12.

- Achieved acceptance of the landmark data management solution for Ordnance Survey Great Britain. This success has resulted in a number of opportunities to resell our solution to National Mapping, Charting and Cadastral Agencies (NMCAs) worldwide.

- Winning a £1.67m data re-engineering contract with Ordnance Survey Ireland. Contract signing was subject to a 3 month delay thus reducing revenue recognized for this financial year, but increases revenue expectations for FY 11/12.

- Reduced government year-end trading with comparative numbers for the months February and March showing sales £465,560 lower in 2011 compared to 2010.

- Completed an acquisition in Australia to exploit the growing demand for high quality spatial data to support environmental management and economic development. . The acquisition provides a base for expansion into the economically strong Asia Pacific market place.

- Consolidated software development operations to the Cambridge headquarters and Cork,reducing future operating costs by £1m per annum.

Despite the difficult trading conditions, spatial data remains at the heart of the government's efficiency and transparency agenda.

Our core market of the world's national mapping and charting agencies is very active as there is a need to respond to the market expectations for location data content and quality. Our flagship GDMS project with OSGB has given us an increased profile in this market and we have active engagements with leading agencies across the world who require new solutions to respond to the need for more efficiency and flexibility in their operations. We have responded by offering a componentised, scalable and flexible solution for mapping and charting agencies, based on the proven solution at OSGB. This is branded as Imperium and will modernize the markets data management and production environments by introducing automation and rules-based data management.

The successful delivery of OSGB GDMS Project has also opened up discussions with the leading technology providers in the wider Geographic Information Systems marketplace. 1Spatial's rule engine provides a clear advantage for supporting data sharing and creating trusted data.

We have sold our flagship rule-based data integration product, Radius Studio, to a number of our traditional customers this year as they start the process of capturing business knowledge and introducing automation. Along with OSGB, Ordnance Survey Ireland, Land and Property Services Northern Ireland, RAF Aeronautical Information Unit, Land Information New Zealand and AdV Germany have all acquired Radius Studio in the last year. These sales present exciting opportunities for the coming financial year as our customers look to implement technology to enable them to get more from their existing systems and resources.

The planned expansion in Australia was advanced and an acquisition target was quickly identified, with the transaction completed by April 22nd 2011. Lagen Spatial will contribute revenues of £2m per year going forward and the increased capacity in Australia will support increased sales of 1Spatial's core IP, further growing revenues.

Performance of the new company in the period to the end of the financial year exceeded expectations and is indicative of the demand for 1Spatial's data management technology in Australia. The acquisition also provides the base from which to grow revenues in Asia Pacific and enables 1Spatial to geographically expand into this economically strong market place.

The Australian acquisition demonstrated the value of a business strategy that resold strategic third party products to a wide range of customers. Customer contact becomes easier, opening up opportunities to resell core 1Spatial IP to a captive market, as well as developing mutually beneficial strategic relationships with key players in the GIS market.

To further this element of our strategy, 1Spatial identified and secured a reseller agreement with a Canadian company called Latitude Geographics. We now sell a product called GeoCortex, an advanced application development environment that sits on top of the technology supplied by the biggest player in the GIS market, ESRI Inc. ESRI technology dominates the key sector for 1Spatial sales' growth in the UK as it is used by 80% of central government customers. Offering solutions that add value to the ESRI technology will enable us to develop a more collaborative working relationship with ESRI and remove a barrier to selling into this market.

Future developments

A key trend in the IT sector is offering Software as a Service, rather than customers buying and maintaining internal systems based on perpetual software licences. 1Spatial has completed extensive testing of the market, resulting in the decision to invest in offering services using our core technology via the Cloud. We have identified a specific opportunity to provide on demand data processing services. An Online Validation Service will be launched in quarter four of the current calendar year. This will significantly reduce the barriers to using our high performance technology and enable customers to improve the quality of their data. Customers will access a simple to use web service and generate reports on data quality resulting in improved data.

This service addresses the government economic constraints by providing a flexible pricing model, enabling customers to pay as they use or purchase a subscription. It also enables 1Spatial to address a market that has previously been unobtainable thus enhancing revenues with no impact on existing core business.

1Spatial's Board has also been investigating opportunities to take our technology into the broader business market. Our Board level relationship with Avisen plc has facilitated these discussions and we are actively investigating opportunities to integrate spatial data and automated geoprocessing into the Business Intelligence marketplace

Analysis based on KPI's

The board monitors the company's performance using a number of key performance indicators. These are as follows for the years 2011 and 2010 calculated as follows: Sales from both continuing and discontinued operations for 2011 and continuing operations only for 2010 to provide a like for like analysis. Turnover now includes third party products as, particularly going forward, this will become an integral part of the business.

Operating Profit for 2011 has been adjusted to exclude extra-ordinary, exceptional items and the costs specifically associated with operating as a Plc.

Development spend and employee numbers are not adjusted.

 £ 000's

2011  2010

Turnover (including 3rd party products) 7,313 8,008

Operating profit (continuing ops, excl. exceptional) (6) 406

Development spend 180 330

Employee number (group average) 86 105

RESEARCH AND DEVELOPMENT

The company spent £180,481 (2010 £330,387) on elective development of new and enhanced product for resale during the period.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties facing the company are related to the continued fluctuations in UK and European public spending. This is lessened by the company's current and continuing success in the Asia-Pacific region.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The company's activities expose it to a number of financial risks including foreign exchange risk, credit risk and liquidity risk.

Foreign exchange risk

The company's activities expose it to the financial risks of changes in foreign currency exchange rates. Wherever possible, customers are billed in the currency of the billing subsidiary, thus minimizing risk on the debtor book. Assets and liabilities are prone to exchange gains and losses on the consolidation of subsidiaries, but this has not proved material to date and the directors do not consider this any greater than a minimal risk.

Credit risk

The company's principal financial assets are bank balances, cash, trade and other receivables and investments.

The company's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables.

The company's record for bad debts is a good one, which is helped by the profile of the customer base, which is primarily made up of central and local government departments and agencies. With some exceptions, the commercial organisations dealt with tend to be blue chip in nature.

Liquidity Risk

In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the company uses short-term debt finance. Future plans include the raising of longer term finance through equity or long-term loan.

Environment

The company recognizes the importance of its environmental responsibilities, monitors its impact on the environment and actively designs and implements policies to reduce any damage that might be caused by the company's activities. Initiatives designed to minimize the company's net impact on the environment include safe disposal of waste, recycling and reducing energy consumption.

CREDITOR PAYMENT POLICY AND PRACTICE

It is the group's policy that payments to suppliers are made in accordance with those terms and conditions agreed between the group and its suppliers, provided that all trading terms and conditions have been complied with.

At 30 June 2011, the group had an average of 109 days purchases outstanding in trade creditors.

DIRECTORS

The directors set out in the table below have held office during the whole of the year from 1 July 2010 to the date of this report, unless otherwise stated.

P C Bullock (appointed - 19 October 2010)

Dr M S Sanderson (appointed - 19 October 2010)

N J Snape (appointed - 19 October 2010)

D J Guthrie (appointed - 19 October 2010)

S R Berry (appointed - 19 October 2010)

M N Hanke (appointed - 19 October 2010)

Directors Indemnities

The company has made qualifying third party indemnity provisions for the benefit of its directors, which remain in force at the date of this report.

DISABLED EMPLOYEES

The group gives full consideration to applications for employment from disabled persons where the requirements of the job can be fulfilled by a handicapped or disabled person.

Where existing employees become disabled, it is the group's policy wherever practicable to provide continuing employment under normal terms and conditions, and to provide training and career development and promotion to disabled employees wherever appropriate.

EMPLOYEE INVOLVEMENT

The company places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting the performance of the company.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

We, the directors are of the company who held office at the date of approval of these Financial Statements as set out above each confirm, so far as we are aware, that:

- there is no relevant audit information of which the group's auditors are unaware, and

- we have taken all the steps that we ought to have taken as directors in order to make ourselves aware of any relevant audit information and to establish that the group's auditors are aware of that information.

AUDITORS

Price Bailey LLP have signified their willingness to continue in office and a resolution to re-appoint them as auditor will be proposed at the Annual General Meeting.

Approved by the board on 6th October 2011 and signed on its behalf by

Nic Snape

CEO

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and have elected to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and the profit or loss of the company for that period.

In preparing these financial statements, the directors are required to:

- select suitable accounting policies and then apply them consistently;

- make judgements and accounting estimates that are reasonable and prudent;

- state whether applicable International Financial Reporting Standards as adopted by the European Union have been followed in the preparation of the Group financial statements, subject to any material departures disclosed and explained in the financial statements;

- state whether applicable UK Accounting Standards have been followed in the preparation of the Company financial statements, subject to any material departures disclosed and explained in the financial statements;

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the company's website and legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdiction.

The notes on pages 18 to 48 form part of these financial statements.

The notes on pages 18 to 48 form part of these financial statements.

The notes on pages 18 to 48 form part of these financial statements.

The notes on pages 18 to 48 form part of these financial statements.

1. AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS'S

The group's financial statements for the year were authorised for issue on 6 October 2011 and the consolidated statement of financial position signed on the board's behalf by P C Bullock. 1Spatial Holdings Plc is a public limited company incorporated and domiciled in England & Wales. The nature of the group's operations and its principal activities are set out in the Directors' Report.

These financial statements are presented in UK Sterling because that is the currency of the primary economic environment in which the group operates. Foreign operations are included in accordance with the policies set out in note 2.

The group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The principal accounting policies adopted by the group are set out in note 2.

New Standards and Interpretations adopted with no affect on the financial statements

The following new and revised standards and interpretations have been adopted in these financial statements. Their adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions or arrangements:

- IAS 1 Presentation of Financial Statements (amendments 2009) - amendments resulting from annual improvements to IFRSs

- IAS 7 Statement of Cash Flows (amendments 2009) - amendments resulting from annual improvements to IFRSs

- IAS 17 Leases (amendments 2009) - amendments resulting from annual improvements to IFRSs

- IAS 27 Consolidated and Separate Financial Statements (amendments 2010) - amendments resulting from annual improvements to IFRSs

- IAS 32 Financial Instruments: Presentation (amendments 2009) - amendments relating to classification of rights issues

- IAS 36 Impairment of Assets (amendments 2009) - amendments resulting from annual improvements to IFRSs

- IAS 39 Financial Instruments: Recognition and Measurement (amendments 2009) - amendments resulting from annual improvements to IFRSs

- IFRS 2 Share-based Payment (amendments 2009) - amendment relating to group cash-settled share-based payment transactions

- IFRS 3 Business Combinations (amendments 2010) - amendments resulting from annual improvements to IFRSs

- IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (amendments 2009) - amendments resulting from annual improvements to IFRSs

- IFRS 8 Operating Segments (amendments 2009) - amendments resulting from annual improvements to IFRSs

- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

1. AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS'S (continued)

New Standards and Interpretations not yet adopted

A number of new and revised standards and interpretations are not yet effective for the period commencing 1 July 2010 and have not been applied in preparing these financial statements:

- IAS 1 Presentation of Financial Statements (amendments 2010 and 2011)

- IAS 12 Income Taxes (amendment 2010)

- IAS 19 Employee Benefits (amended 2011)

- IAS 24 Related Party Disclosures (amendment 2009)

- IAS 27 Separate Financial Statements (as amended in 2011)

- IAS 28 Investments in Associates and Joint Ventures (as amended in 2011)

- IAS 34 Interim Financial Reporting (amendment 2010)

- IFRS 7 Financial Instruments: Disclosures (amendments May and October 2010)

- IFRS 9 Financial Instruments (issued 2009)

- IFRS 10 Consolidated Financial Statements (issued 2011)

- IFRS 11 Joint Arrangements (issued 2011)

- IFRS 12 Disclosure of Interests in Other Entities (issued 2011)

- IFRS 13 Fair Value Measurement (issued 2011)

- IFRIC 13 Customer Loyalty Programmes (amended 2010)

- IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (amended 2009)

The directors do not consider that the implementation of any of these new or revised standards will have a material impact upon reported income or reported net assets.

2. ACCOUNTING POLICIES

Reverse takeover

The acquisition of 1Spatial Group Limited and its subsidiaries by 1Spatial Holdings plc (formerly IQ Holdings plc) meets the definition of a reverse takeover involving a non-operating public shell and a private operating entity. As a result, in accordance with generally accepted accounting practice ("GAAP"), although the financial statements are issued under the name of the legal parent (1Spatial Holdings plc), the accounts presented are a continuation of the accounts of 1Spatial Group Limited and its subsidiaries ("the 1Spatial sub group") with one adjustment, which is to adjust the legal capital of 1Spatial Group Limited at the date of the reverse takeover to reflect the legal capital of 1Spatial Holdings Plc.

The assets and liabilities of the 1Spatial sub group have been recognised and measured at their pre-combination carrying amounts.

2. ACCOUNTING POLICIES (continued)

The retained earnings and other equity balances for the year ended 30 June 2010 represent the balances in respect of the 1Spatial sub group. The results for the period to 19 October 2010, the date of the reverse takeover, include solely the results of the 1Spatial sub group. On this date the assets and liabilities of the 1Spatial Holdings plc entity are, for the purposes of these consolidated financial statements, recorded as being acquired at their fair value. In this case, as the entity comprised principally cash and short term payables, fair value equates to book value.

The cost of the reverse takeover has been calculated using GAAP, being the notional cost to existing shareholders of 1Spatial Group Limited of issuing shares equivalent to the percentage of the 1Spatial sub group which have been disposed of, calculated as the excess of the fair value of the percentage disposed of, less the fair value of the net assets of the legal parent entity. In accordance with GAAP, this cost is accounted for as an expense in the income statement.

The consolidated financial statements incorporate the financial statements of the 1Spatial sub group made up to 30 June each year.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably measured. All such revenue is reported net of discounts and value added and other sales taxes.

Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably.

Sale of services

For the sale of services and contract income, revenue is recognised in accounting periods in which the service is rendered on a percentage of completion basis. Revenue from post-contract support is recognised over the period of performance. The excess of service fees and post-contract support invoiced over revenue recognised is recorded as deferred income.

Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Royalty income

Royalty income is recognised upon shipment of the royalty earning product by the licensee.

2. ACCOUNTING POLICIES (continued)

Dividend income

Revenue is recognised when the right to receive the payment is established.

Research and development

Expenditure on research activities is recognised as an expense in the period in which it is incurred. All internally-generated intangible assets arising from the group's development is recognised only if all of the following conditions are met:

- an asset is created that can be identified;

- it is probable that the asset created will generate future economic benefits; and

- the development cost of the asset can be measured reliably.

Internally-generated intangible assets are amortised on a straight-line basis over their expected useful lives. Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

Interest expense recognition

Expense is recognised as interest accrues, using the effective interest method, to the net carrying amount of the financial liability.

Effective interest method

The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability to that asset's or liability's net carrying amount.

Foreign currency exchange

The functional currency of the group is UK sterling.

Transactions in currencies other than the functional currency of the group are recorded at the rates of exchange prevailing on the dates of the transactions. At each statement of financial position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the statement of financial position date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in net profit or loss for the period.

On consolidation, the assets and liabilities of the group's overseas operations are translated at exchange rates prevailing on the statement of financial position date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. All exchange differences are included in the income statement.

2. ACCOUNTING POLICIES (continued)

Patents and trademarks

Expenditure on patents and trademarks is recognised as an expense in the period in which it is incurred.

Exceptional items

Exceptional items are presented in the financial statements where there are material items of income and expense which, because of their nature and the expected rarity of the circumstances which generate them, they should be presented separately to shareholders so as to enhance their judgement of the current year's financial performance and its comparability with prior years.

Income tax

Income tax expense represents the sum of the tax currently payable and deferred income tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it furthers excludes items that are never taxable or deductible. The group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date.

Property, plant and equipment

Items of property, plant and equipment are stated at cost of acquisition or production cost less accumulated depreciation and impairment losses.

Residual values are the estimated amount that the group would obtain from disposal of the asset, after deducting estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life, based on prices prevailing at the balance sheet date.

In general, residual values are zero or negligible, due to the technical and specialised nature of assets held.

Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight line method, on the following bases:

Motor vehicles- 5 years

Fixtures and fittings- 5 years

Computer equipment- 3 years

2. ACCOUNTING POLICIES (continued)

Impairment of tangible and intangible assets excluding goodwill

At the end of each reporting period, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Goodwill

Goodwill is recognised as an asset from the acquisition date as the excess of the cost of acquisition over the fair value of identifiable assets, liabilities and contingent liabilities of a subsidiary, associate or joint venture.

Goodwill is reviewed for impairment on an annual basis for events or changes in circumstances that indicate that the carrying value might be impaired and for subsequent changes in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Goodwill is stated at cost less accumulated impairment losses.

2. ACCOUNTING POLICIES (continued)

Intangible assets

Development costs

Expenditure on development costs, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes is capitalised. Research expenditure is recognised in the consolidated income statement as an expense as incurred. Capitalised development costs are stated at cost less accumulated amortisation and impairment losses.

Other non-internally generated intangible assets

Intangible assets acquired separately from a business are capitalised at cost. Intangible assets acquired as part of a business combination are capitalised separately from goodwill if the fair value can be measured reliably on initial recognition.

The carrying value of intangible assets are reviewed for impairment on an annual basis for events or changes in circumstances that indicate that the carrying value may not be recoverable.

Intangible assets are stated at cost or fair value on recognition less accumulated amortisation and any impairment in value.

Amortisation is calculated so as to write off the cost or valuation of intangible assets over their estimated useful lives, using the straight line method, on the following bases:

Software- 3 years

Intellectual property rights- 5 years

Development costs- 5 years

Contracts acquired- over the term of the contract

Customer lists- 3 - 5 years

Deferred tax

Deferred tax is provided in full, using the statement of financial position liability method, on temporary differences arising between the tax bases of assets and liabilities and the carrying amounts in the financial statements.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than as a business combination) or other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

2. ACCOUNTING POLICIES (continued)

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, and interest in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is charged or credited to the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax is determined using the tax rates that are expected to apply in the period when the asset is realised or the liability is settled.

The carrying amount of deferred tax assets is reviewed at each consolidated statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are offset when they relate to income taxed levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.

Financial risk management objectives and policies

The objective of the group's capital management is to ensure that it maintains strong credit ratings and capital ratios. This will ensure that the business is correctly supported and shareholder value is maximised.

The group manages its capital structure through adjustments that are dependant on economic conditions. In order to maintain or adjust the capital structure, the group may choose to change or amend dividend payments to shareholders or issue new share capital to shareholders. There were no changes to the objectives, policies or processed during the years ended 30 June 2011 and 30 June 2010.

Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition are determined on a first in first out basis and comprise purchase cost, cost of direct material and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Trade and other receivables

Trade and other receivables are recognised by the group and carried at original invoice amount less an allowance for any uncollectible or impaired amounts.

2. ACCOUNTING POLICIES (continued)

An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when they are identified as being bad.

Other receivables are recognised at fair value.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short term deposits. Short term deposits are defined as deposits with an initial maturity of three months or less.

Bank overdrafts that are repayable on demand and form an integral part of the group's cash management are included as a component of cash and cash equivalents for the purposes of the consolidated statement of cash flows.

Trade and other payables

Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Retirement benefits

Defined contribution scheme

Contributions to money purchase pension plans are charged to the profit and loss account as they become payable.

Share based payments

The group issues equity-settled Share based payments to certain employees including directors.

Equity-settled Share based payments are measured at fair value at the date of grant.

Fair value is measured using an appropriate options pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The fair value determined at the grant date of the equity-settled Share based payments is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity, based upon the group's estimate of the shares that will eventually vest.

Where the terms of an equity-settled transaction are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in value of the transaction as a result of the modification, as measured at the date of the modification.

2. ACCOUNTING POLICIES (continued)

Where an equity-settled transaction is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the transaction is recognised immediately. However, if a new transaction is substituted for the cancelled transaction, and designated as a replacement transaction on the date that it is granted, the cancelled and new transactions are treated as if they were a modification of the original transaction, as described in the previous paragraph.

Operating lease commitments

Rentals payable under operating leases are charged to the income statement on a straight line basis over the term of the relevant lease.

Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term.

Business combinations

The acquisition of subsidiaries is accounted for using the purchase method. Control is achieved where the group has the power to govern the financial and operating policies to obtain benefits from its activities.

On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets (i.e. discount on acquisition) is credited to the income statement in the period of acquisition.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in subsidiaries are identified separately from the group's equity therein. The interests of non-controlling shareholders may be initially measured either at fair value or at the non-controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

2. ACCOUNTING POLICIES (continued)

Changes in the group's interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the group.

When the group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.

Critical accounting judgements and key sources of estimation uncertainty

In the application of the group's accounting policies, which are described above, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated asumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects both current and future periods.

2. ACCOUNTING POLICIES (continued)

Critical judgements in applying the group's accounting policies

Revenue recognition

The management make an estimate of the stage of completion of projects based on total costs incurred compared to the total cost estimate for the project in order to determine the proportion of revenue to be recognised in the financial period.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit an a suitable discount rate in order to calculate present value.

Bad debt / credit note provision

The directors have to make a judgement to consider whether a trade receivable is recoverable or not and whether to make a provision against that amount. This is based on a number of factors including past history of the client.

3. SEGMENT INFORMATION

The primary reporting format is by business segment and the second reporting format is by geographical area.

Business segments

For management purposes, the group is organised into business units based on their products and services, and has five reportable segments as follows:

- The licences segment relates to revenue from licences sold for software packages developed by the group.

- The services segment relates to short term projects usually involving the installation of software, enhancement of systems and user training.

- The development segment relates to longer term contracts to develop, install and implement bespoke packages for clients.

- The maintenance segment mostly relates to annual support and maintenance contracts for software and systems developed by 1Spatial.

- The third party products and other sales segment relates mostly to additional software and services sold as part of larger development projects.

No operating segments have been aggregated to form the above reportable operating segments.

3. SEGMENT INFORMATION (continued)

Management monitors the results of its business units separately for the purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on gross profit for each segment. The management of 1Spatial Group Limited do not believe it to be relevant or practical to allocate administrative expenses, investment revenue, finance costs or taxation between segments. This information is not produced on a group basis for internal management reporting and is therefore not included in these financial statements.

All revenue relates to external customers.

Discontinued operations are shown separately in the income statement as a one-line 'Profit/(Loss) after tax for the year from discontinued operation'. The figures included for segment information therefore exclude discontinued operations.

Management do not internally report assets and liabilities across operating segments and therefore this information is not disclosed in the financial statements.

3. SEGMENT INFORMATION (continued)

Geographical segments

The following table provides an analysis of the Group's sales by geographic market (based on the location of the customer), irrespective of the origin of the goods/services.

Major customer

There was no one major customer during the current year, revenue from one customer during 2010 amounted to £770,254 arising from the licences and development segments.

4. OPERATING PROFIT

Operating profit is stated after charging/(crediting) the following:

4. OPERATING PROFIT (continued)

5. EXCEPTIONAL ITEMS

The 1Spatial Holdings Plc costs are the cost of expense items and advisor fees purely related to plc status (not applicable in prior year and removed for comparison purposes).

6. EMPLOYEE EXPENSES

6. EMPLOYEE EXPENSES (continued)

The average monthly number of employees during the year was made up as follows:

7. DIRECTORS' REMUNERATION

The remuneration of directors disclosed above include the following in respect of the highest paid director

8. FINANCE COSTS

9. INCOME FROM INVESTMENTS

10. INCOME TAX

Components of income tax expense

10. INCOME TAX (continued)

Reconciliation of income tax charge to accounting profit

11. DISCONTINUED OPERATIONS

The group discontinued the operations of 1Spatial AS during the year (2010 - 1Spatial Group Limited disposed of two subsidiaries, Laser-Scan Engineering Limited and Laser-Scan International Incorporated and was in the process of liquidating one further subsidiary, 1Spatial Belgium NV). The results of these businesses are treated as discontinued operations, their net results have been included in the Consolidated Statement of comprehensive income as the profit on discontinued operations after taxation and the comparatives have been restated on a consistent basis.

Results

The results of discontinued operations for the year are presented below:

11. DISCONTINUED OPERATIONS (continued)

Cash flows

The net cash flows of discontinued operations are as follows:

Earnings per share

12. EARNINGS PER SHARE

Basic Earnings per share are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted Earnings per share amounts are calculated by dividing the net profit attributable to ordinary shareholders after adjustments for instruments that dilute basic earnings by the weighted average of ordinary shares outstanding during the year (adjusted for the effects of dilutive instruments).

In accordance with IFRS 3 the weighted average number of shares reflects the legal subsidiary's weighted average pre-combination shares multiplied by the exchange ratio established in the reverse takeover, and the weighted average total actual shares of the legal parent in issue after the date of reverse takeover.

The following reflects the income and share data used in the total operations basic and diluted earnings computations:

13. DIVIDENDS

14. PROPERTY, PLANT AND EQUIPMENT