Interim Results
Upstream Marketing and Comms Inc.
20 December 2006
Upstream Marketing and Communications Inc.
('Upstream' or 'the Company')
Second Interim Results
For the six month period ended 30 September 2006
Interim Statement
20 December 2006, Upstream Marketing and Communications Inc. (AIM: UPS)
announces its second interim results for the six month period ended 30 September
2006. The requirement to report a second interim is due to the change of the
Company's accounting reference date from 30 September to 31 December. The
results for the full accounting period the 15 month period ending 31 December
2006 will be announced in 2007.
On 16 October 2006 the reverse acquisition of AIM-listed Raven Capital Inc was
completed and the Company changed its name to Upstream Marketing and
Communications Inc. The numbers contained in this report predate this
transaction and for the six month period ended 30 September 2006 the Company
incurred a loss before tax of £94,000.
Trading Update since the Reverse Takeover
Since the acquisition was completed the Company has been executing the business
plan outlined in the Chairman's letter of the AIM Admission Document sent to
shareholders on 19 September 2006. The management team at Upstream is
continuing to build further consulting capabilities in Greater China, develop
new business, and identify potential strategic acquisitions.
• Greater China Expansion:
• Ms Hua Foley, a seasoned and respected communications and public
affairs executive in China, has joined the Company as Managing Director,
China, Beijing.
• Ms Hester Chan, a senior public relations executive with a 20 year
proven track record in Hong Kong, has joined Upstream Hong Kong as
Managing Director.
• The Company has signed an agreement with an affiliate which will
expand the range of services offered to clients in Guangzhou, China.
• Business development and client activity:
• The Company has pursued renewal of existing retainer based contracts
to be extended through 2007, and has won a number of new retainer-based
and client assignments.
• Work for existing clients continues, with solid organic growth arising
from current relationships.
• Acquisition strategy:
• The Company is currently sourcing and evaluating a number of
prospective acquisitions in strategic sectors including digital
marketing, travel and consumer, corporate and financial, and technology
marketing.
Commenting, David Ketchum, Chief Executive of Upstream Marketing and
Communications Inc. said:
'We are now laying the groundwork for dramatic growth in 2007 both organically,
and via carefully considered strategic investments and acquisitions. We have
continued to invest in senior people, our most important asset as a consulting
and communications group, and the enlarged, experienced and well-connected
management group is set to grow the business in line with the strategy that was
sent to shareholders at the time of the acquisition.
'Trading conditions in Greater China and in the corporate and marketing
communications sector remain buoyant. The combination of our investments for
growth, the market opportunities and our ability to execute against our business
plan are the foundations for delivering value to our shareholders.'
Enquiries: John Bick tel: 020 7451 9800 or m: 07917 649362
www.aboutupstream.com
Upstream Marketing & Communications Inc.
Income Statement
For the six months ended 30 September 2006
Period from 19
Six month November
period ended Year ended 2004 to
30 September 30 September 30 September
2006 2006 2005
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Continuing operations
Administrative expenses (94) (163) (362)
Operating loss (94) (163) (362)
Finance income 5 - 3 4
Loss for the period before taxation (94) (160) (358)
Tax income 7 - - -
Net loss for the period (94) (160) (358)
Loss per ordinary share
- Basic 8 (0.21p) (0.40p) (1.20p)
Upstream Marketing & Communications Inc.
Income Statement of Changes in Equity
Six months ended 30 September 2006
Share Share Profit and Total
premium based loss
Share payment account
capital reserve
£'000 £'000 £'000 £'000 £'000
At 19 November 2004 - - - - -
Issue of new shares 78 399 - - 477
Cost of issue of new shares - (166) - - (166)
Net loss for the period - - - (358) (358)
Share based payment - - 20 - 20
At 30 September 2005 78 233 20 (358) (27)
Issue of new shares 33 117 - - 150
Net loss for the period - - - (66) (66)
At 31 March 2006 111 350 20 (424) 57
Net loss for the period - - - (94) (94)
At 30 September 2006 111 350 20 (518) (37)
Upstream Marketing & Communications Inc.
Balance Sheet
As at 30 September 2006
30 September 30 September
2006 2005
Unaudited Unaudited
Note £'000 £'000
Assets
Current
Trade and other receivables 9 73 4
Cash and cash equivalents 51 43
Total assets 124 47
Liabilities
Current
Trade and other payables 10 161 74
Total liabilities 161 74
Equity
Share capital 12 111 78
Share premium 350 233
Share based payment reserve 20 20
Profit and loss account (518) (358)
Total equity (37) (27)
Total equity and liabilities 124 47
Upstream Marketing & Communications Inc.
Cash Flow Statement
For the six months ended 30 September 2006
Period from 19
Six month November
period ended Year ended 2004 to
30 September 30 September 30 September
2006 2006 2005
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Operating activities
Operating loss (94) (163) (362)
Interest received - 3 4
Change in trade and other receivables (71) (69) (4)
Change in trade and other payables 80 87 74
Net cash outflow from operating activities (85) (142) (288)
Financing activities
Issue of shares - 150 477
Share issue costs - - (146)
Net cash inflow from financing activities - 150 331
Net increase in cash and cash equivalents (85) 8 43
Cash and cash equivalents at beginning of period 136 43 -
Cash and cash equivalents at end of period 51 51 43
Upstream Marketing & Communications Inc.
Notes to the Interim Report
For the six months ended 30 September 2006
1 GENERAL INFORMATION
The information for the period ended 30 September 2006 does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. The
figures for the period ended 30 September 2005 have been extracted from the 2005
statutory financial statements prepared under UK GAAP and adjusted where
necessary in order to comply with International Financial Reporting Standards
(IFRS) as shown in note 3. The auditors' report on those accounts was
unqualified and did not contain a statement under section 237(2) of the
Companies Act 1985.
2 ACCOUNTING POLICIES
Basis of preparation
The Company was incorporated as a Corporation in the Cayman Islands which does
not prescribe the adoption of any particular accounting framework. The Board
had previously resolved that the Company would follow UK Accounting Standards
and apply the Companies Act 1985 when preparing its annual financial statements.
The Board have now resolved that Upstream Inc. will adopt IFRS for the first
time in its financial statements for the period ending 31 December 2006. This
second interim financial report has therefore been prepared under the historical
cost convention and in accordance with International Accounting Standard 34
'Interim Financial Reporting' and the requirements of International Financial
Reporting Standard 1 'First Time Adoption of International Reporting Standards'
relevant to interim reports.
The transition to IFRS reporting has resulted in a number of changes in the
reported financial statements, notes thereto and accounting principals compared
to the previous annual report. Note 3 provides further details on the transition
from UK GAAP to IFRS.
The principal accounting policies of the Company are set out below.
Taxation
Current income tax assets and/or liabilities comprise those obligations to, or
claims from, fiscal authorities relating to the current or prior reporting
period, that are unpaid at the balance sheet date. They are calculated according
to the tax rates and tax laws applicable to the fiscal periods to which they
relate, based on the taxable result for the year. All changes to current tax
assets or liabilities are recognised as a component of tax expense in the income
statement.
Deferred income taxes are calculated using the liability method on temporary
differences. This involves the comparison of the carrying amounts of assets and
liabilities in the consolidated financial statements with their respective tax
bases. In addition, tax losses available to be carried forward as well as other
income tax credits to the Company are assessed for recognition as deferred tax
assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets
are recognised to the extent that it is probable that they will be able to be
offset against future taxable income. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to apply to
their respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date.
Most changes in deferred tax assets or liabilities are recognised as a component
of tax expense in the income statement. Only changes in deferred tax assets or
liabilities that relate to a change in value of assets or liabilities that is
charged directly to equity are charged or credited directly to equity.
Financial assets
The Company's financial assets include cash and trade and other receivables.
All financial assets are recognised on their settlement date. All financial
assets are initially recognised at fair value, plus transaction costs.
Non-compounding interest and other cash flows resulting from holding financial
assets are recognised in profit or loss when received, regardless of how the
related carrying amount of financial assets is measured.
Trade and other receivables are provided against when objective evidence is
received that the Company will not be able to collect all amounts due to it in
accordance with the original terms of the receivables. The amount of the
write-down is determined as the difference between the asset's carrying amount
and the present value of estimated future cash flows.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.
Equity
Share capital is determined using the nominal value of shares that have been
issued.
The share premium account represents premiums received on the initial issuing of
the share capital. Any transaction costs associated with the issuing of shares
are deducted from share premium, net of any related income tax benefits.
Retained earnings include all current and prior period results as disclosed in
the income statement.
Share based payments
All share-based payment arrangements are recognised in the financial statements.
The Company does not currently operate equity-settled share-based remuneration
plans for remuneration of its employees but has issued a share warrant.
All services received in exchange for the grant of any share-based remuneration
are measured at their fair values. These are indirectly determined by reference
to the fair value of the share options/warrants awarded. Their value is
appraised at the grant date and excludes the impact of any non-market vesting
conditions (for example, profitability and sales growth targets).
Share-based payments are ultimately recognised as an expense in profit or loss
or included as part of the cost of share issues with a corresponding credit to
the share based payment reserve, net of deferred tax where applicable. If
vesting periods or other vesting conditions apply, the expense is allocated over
the vesting period, based on the best available estimate of the number of share
options/warrants expected to vest. Non-market vesting conditions are included in
assumptions about the number of options that are expected to become exercisable.
Estimates are subsequently revised, if there is any indication that the number
of share options/warrants expected to vest differs from previous estimates. No
adjustment is made to the expense or share issue cost recognised in prior
periods if fewer share options/warrants ultimately are exercised than originally
estimated.
Upon exercise of share options/warrants, the proceeds received net of any
directly attributable transaction costs up to the nominal value of the shares
issued are allocated to share capital with any excess being recorded as share
premium.
Financial liabilities
The Company's financial liabilities include trade and other payables.
Financial liabilities are recognised when the Company becomes a party to the
contractual agreements of the instrument. All interest related charges are
recognised as an expense in 'finance cost' in the income statement.
Trade payables are recognised initially at their nominal value and subsequently
measured at amortised cost less settlement payments.
Dividend distributions to shareholders are included in 'other short term
financial liabilities' when the dividends are approved by the shareholders'
meeting.
Other provisions, contingent liabilities and contingent assets
Other provisions are recognised when present obligations will probably lead to
an outflow of economic resources from the Company and they can be estimated
reliably. Timing or amount of the outflow may still be uncertain. A present
obligation arises from the presence of a legal or constructive commitment that
has resulted from past events, for example, legal disputes or onerous contracts.
Provisions are measured at the estimated expenditure required to settle the
present obligation, based on the most reliable evidence available at the balance
sheet date, including the risks and uncertainties associated with the present
obligation. Any reimbursement expected to be received in the course of
settlement of the present obligation is recognised, if virtually certain as a
separate asset, not exceeding the amount of the related provision. Where there
are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as
a whole. In addition, long term provisions are discounted to their present
values, where time value of money is material.
All provisions are reviewed at each balance sheet date and adjusted to reflect
the current best estimate.
In those cases where the possible outflow of economic resource as a result of
present obligations is considered improbable or remote, or the amount to be
provided for cannot be measured reliably, no liability is recognised in the
balance sheet.
Probable inflows of economic benefits to the Company that do not yet meet the
recognition criteria of an asset are considered contingent assets.
3 TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
The transition from previous UK GAAP to IFRS has been made in accordance with
IFRS 1, 'First-time Adoption of International Financial Reporting Standards'.
The Company's financial information for the six months ended 30 September 2006,
for the year ended 30 September 2006 and the comparatives presented for the
period ended 30 September 2005 comply with all presentation recognition and
measurement requirements of IFRS applicable for accounting periods commencing on
or after 1 January 2005.
The following reconciliations and explanatory notes thereto describe the effects
of the transition for the financial period 2005. All explanations should be read
in conjunction with the IFRS accounting policies of Upstream Marketing &
Communications Inc.
TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (CONTINUED)
Since Upstream Marketing & Communications Inc. was incorporated on 19 November
2004 that is the transition date to IFRS. As that was the date of incorporation
of the Company no reconciliation of equity is required at that date.
The re-measurement of balance sheet items as at 30 September 2005 may be
summarised as follows:
Reconciliation as at 30 September 2005 Effect of
UK GAAP transition IFRS
£'000 £'000 £'000
Share premium 253 (20) 233
Share based payment reserve - 20 20
Total adjustment to assets and equity 253 - 253
There is no difference between the profit and loss reported under UK GAAP for
the period ended 30 September 2005 and the profit and loss as reported under
IFRS.
The Company has modified its former balance sheet and income statement structure
on transition to IFRS. The only change is to recognise the share based payment
in connection with the warrants issued to the Company's Nominated Advisor as
part of their fee for services provided in connection with the Admission of the
Company to the AIM market in December 2004.
4 SEGMENTAL REPORTING
(a) By business segment (primary segment):
As defined under International Accounting Standard 14 (IAS14), the only material
business segment the Company has is that of an investment company.
(b) By geographical segment (secondary segment):
Under the definitions contained in IAS 14, the only material geographic segment
that the Company operates in is currently Switzerland.
5 FINANCE INCOME
Period from 19
Six month November
period ended Year ended 2004 to
30 September 30 September 30 September
2006 2006 2005
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Interest on bank deposits - 3 4
6 EMPLOYEES REMUNERATION
Employee benefits expense
Expense recognised for employee benefits is analysed below:
Period from 19
Six month November
period ended Year ended 2004 to
30 September 30 September 30 September
2006 2006 2005
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Directors fees 13 25 25
The average number of persons (including directors)
employed by the Company during the period was: 3 3 3
7 TAX INCOME
There is no tax charge for any period. The Company does not operate in the
United Kingdom and there is no tax arising on its operations. The relationship
between the expected tax expense at 30% and the tax expense actually recognised
in the income statement can be reconciled as follows:
Period from 19
Six month November
period ended Year ended 2004 to
30 September 30 September 30 September
2006 2006 2005
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Loss for the period before taxation (94) (160) (358)
Tax rate 30% 30% 30%
Expected tax expense (28) (48) (107)
Losses not recognised as deferred tax asset 28 48 107
Actual tax income - - -
8 LOSS PER SHARE
The calculation of the basic loss per share is based on the net loss for the
period of £94,000 (12 months ended 30 September 2006 : £160,000, period ended 30
September 2005 : £358,000) divided by the weighted average number of shares in
issue during the period of 44,366,668 (12 months ended 30 September 2006 :
39,738,997, period ended 30 September 2005 : 29,941,589).
The impact of the warrants on the loss per share is anti-dilutive.
9 TRADE AND OTHER RECEIVABLES
30 September 30 September
2006 2005
Unaudited Unaudited
£'000 £'000
Trade and other receivables, gross 73 4
Impairment of trade and other receivables - -
Trade and other receivables, net 73 4
Trade and other receivables are usually due within 30 - 60 days and do not bear
any effective interest rate.
The fair value of these short term financial assets is not individually
determined as the carrying amount is a reasonable approximation of fair value.
10 TRADE AND OTHER PAYABLES
30 September 30 September
2006 2005
Unaudited Unaudited
£'000 £'000
Trade and other payables 161 74
The fair value of trade and other payables has not been disclosed as, due to
their short duration, management considers the carrying amounts recognised in
the balance sheet to be a reasonable approximation of their fair value.
11 DEFERRED TAX ASSETS AND LIABILITIES
There are no deferred taxes arising from temporary differences at 30 September
2006 or 30 September 2005.
12 SHARE CAPITAL
30 September 30 September
2006 2005
Unaudited Unaudited
£'000 £'000
Authorised
4,000,000,000 ordinary shares of 0.25p 10,000 10,000
Allotted, issued and fully paid
44,366,668 (31,066,668) ordinary shares of 0.25p 111 78
Allotments during the period
On 4 February 2006 the Company issued 13,300,000 new ordinary shares of 0.25p at
11.3p per share in order to provide funds for the Company to allow it to
continue to fund the search for a suitable investment opportunity. The
difference between the total nominal value of the shares issued of £33,250 and
the total consideration received of £150,000 has been credited to the share
premium account (£116,750).
SHARE CAPITAL (CONTINUED)
Warrants
On 25 November 2004 a warrant was issued to Strand Partners Limited, the
Company's Nominated Advisor, in connection with their role in the admission of
the Company to the AIM market. The warrant entitles Strand Partners Limited to
subscribe, at a price of 10p per share, for such number of ordinary shares as
are equivalent (on a fully diluted basis) to one per cent. of the issued
ordinary share capital of the Company at that time. The issued warrant may be
exercised at any time during the period from 15 December 2004 to 14 December
2009.
The fair value of warrants granted was determined using the Black-Scholes
valuation 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 premium
account as a cost of the admission to AIM which gave rise to share based payment
reserve. No liabilities were recognised due to share based payment
transactions.
13 RELATED PARTY TRANSACTIONS
In the period ended 31 March 2006 Corvus Capital Inc., a shareholder in the
Company, settled expenses on behalf of the Company amounting to £10,000 (period
ended 30 September 2005 : £40,000).
14 RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company is exposed to a variety of financial risks which result from both
its operating and investing activities. The Company's risk management is
closely monitored by the board of directors, and focuses on actively securing
the Company's short to medium term cash flows by minimising the exposure to
financial markets.
Upstream Marketing & Communications Inc. does not actively engage in the trading
of financial assets for speculative purposes nor does it write options. The
most significant financial risks to which the Company is exposed to are
described below:
Credit risk
Generally, the maximum credit risk exposure of financial assets is the carrying
amount of the financial assets as shown on the face of the balance sheet (or in
the detailed analysis provided in the notes to the financial statements).
Credit risk, therefore, is only disclosed in circumstances where the maximum
potential loss differs significantly from the financial asset's carrying amount.
The Company's trade and other receivables are actively monitored to avoid
significant concentrations of credit risk.
Cash flow risk
The Company seeks to manage financial risks to ensure sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably. Short term flexibility is achieved by the raising of equity and the
use of current accounts.
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