Final Results

RNS Number : 6822N

Brainspark PLC

16 June 2010

 



                                                                        16 June 2010

Brainspark plc

("Brainspark" or the "Company")

FINAL RESULTS

For the Year Ended 31 December 2009

Brainspark plc (AIM: BSP), a fast growing international investment company, is pleased to announce its final results for the year ended 31 December 2009. The Company is pursuing a dynamic strategy to create a comprehensive portfolio of companies encompassing the interactive media, leisure, entertainment and financial services sectors mainly in Italy but also other European countries. The Company may be either a passive or active investor and its investment rationale ranges from acquiring minority positions with strategic influence through to larger controlling positions.

PERIOD HIGHLIGHTS

·     Revised investing strategy announced and approved by shareholders in December 2009

·     First two investments made in-line with the revised investing strategy

·     Capital reconstruction to divest certain small non-relevant assets, including Chinese interests and certain European holdings

·     Placing of £550,000 to fund initial investments

POST PEROD HIGHLIGHTS

·     A further nine investments completed, including three AIM listed companies

·     Increased stake in Mediapolis

·     Two further equity capital fundraisings completed totaling £2.95m

·     £10m convertible bond issue announced in May 2010: £4.06m raised to date

·     Appointment of new CEO, Alfredo Villa

Prof. Francesco Gardin, Chairman of Brainspark, commented, "2009 was a transformational year for Brainspark as we have seen the Company develop into a focused investment vehicle well on its way to fulfilling its strategy. Our focus for 2010 is to further our acquisition portfolio, increase our capitalisation to allow us to pursue larger investments, become involved in the development of a number of our assets and begin to provide returns to our shareholders.

"We remain confident of our continuing growth through further fund raisings including the completion of our £10 million convertible bond issue."

For further information please contact:

Brainspark plc	[phone]
Francesco Gardin, Chairman
Allenby Capital Limited	[phone]
Nick Athanas/James Reeve
Leander PR	[phone]
Christian Taylor-Wilkinson

CHAIRMAN'S STATEMENT

The 2009 financial year was a major transformational and transitional period for Brainspark. The new Board has worked tirelessly, since September 2009, to implement the revised investing strategy, creating the conditions for the significant growth which the group has experienced in the last nine months.

In recent months we have raised over £3.5m from new investors through the issue of new ordinary shares in Brainspark, issued a convertible bond to raise a further £10m and acquired stakes in nine companies; three with stock market listings in the UK, five private Italian companies and one company listed on the Italian Stock Exchange. Our focus is broad but all of our investments provide synergies with the rest of the portfolio, be they in media, leisure, finance or entertainment.

Our focus for 2010 is to further our acquisition portfolio, increase our capitalisation to allow us to pursue larger investments, become involved in the development of a number of our assets and begin to provide returns to our shareholders. One of our key investments was in Daniel Stewart Securities plc, an AIM listed financial services company and stockbroker. This move into the financial services sector was a long-term goal for Brainspark as it increases our placing power, gives us the know-how and expertise to facilitate future investments, while also allowing us to work closely with AIM Italia for evaluating the potential listing of some of our assets in that Country.

Our endeavour is to become a leading investment company in the UK, Italy and beyond, with the next 12 months being key to achieving this position. We believe that company valuations around the world remain low and there are many unique opportunities to obtain stakes in quality, undervalued companies. This, along with the Board's expertise in identifying, assessing and then managing an investment, will help us reach this goal.

Prof. Francesco Gardin

Executive Chairman

CEO'S REPORT

Financial Review

The consolidated net asset value at 31 December 2009 was £1.693 million, up from £1.244 million at 31 December 2008. At 31 December 2009 Brainspark's mid-market share price of 0.635p valued the Company at £3.75 million.

The group made a loss before tax in the year of £0.128 million, a significant decrease from the loss of £2.305 million for the year ended 31 December 2008.

Operational Review

2009 was a year of two halves. The first part was dedicated to developing a new investment strategy and preparing the group for this process. It also saw a change of nominated adviser and broker, a restoration to trading on AIM following a brief suspension, and a number of new Board appointments.

On 22 April 2009 a General Meeting was held to eliminate the share premium account and the deferred shares of 0.01 penny each. Subsequent to this, on 30 September 2009, an agreement with London Asia Capital Plc was terminated and the relationship passed to China IPO Group Limited, a wholly owned subsidiary of Brainspark until its demerger.

On 10 December 2009, the group concluded its Capital Reconstruction, where the group divested its Chinese operations, through China IPO (2009) Limited and some of its European holdings, through Infusion (2009) Limited. A dividend in kind of £1.327 million was declared whereby the shareholders of Brainspark received pro rata shares in each of these two companies while their allocation in Brainspark remained unaffected. Following the reconstruction, the group retained its holdings in Geosim, Polarizonics and Mediapolis. The reason for this action was to allow the group to focus on its new investing strategy.

The first of the new investments, on 19 November 2009, was to acquire a 10.87% stake (£425,987) in Mediapolis Investments SA, the controlling company of Mediapolis SpA, a proposed theme park development project in Northern Italy. Prior to this investment the group owned a small stake (0.47%) in Mediapolis SpA. On 31 March 2010, the group increased its holding in Mediapolis SpA to 1.79% and in Mediapolis Investments SA to 14.13%. The Company has also entered into an agreement, as announced on 31 March 2010, to acquire a further 7.42% equity interest in Mediapolis Investments SA to be settled through a cash payment of £875,000 by 1 July 2010 and acquired Mr Gianascio's rights to subscribe 4410 new shares (or 1.01%) of the November 2010 capital increase.

On 15 December 2009 the group entered into an option agreement with Filmmaster Television SRL, a Milan based TV studio and production company, to acquire 10% of the issued share capital for a cost of £1 (one pound) from Mr Giuliano Borsari, an investor in the company. The option was exercised on 23 December 2009, when Mr Borsari received £136,763 in cash, reinvested in Filmmaster, and 104,000,000 new ordinary shares in Brainspark for a total consideration of £503,000.

On 18 December 2009 the Company completed a placing of 110,000,000 new ordinary shares of 0.01 pence each at a price of 0.5 pence per share, representing approximately 22.6 per cent. of the enlarged issued share capital of the Company at the time and raising, before expenses, £550,000, which was used primarily to invest in Mediapolis Investments SA. On the same day, Professor Gardin agreed to convert a £213,250 convertible loan previously made by him to the Company into 46,358,695 new ordinary shares in Brainspark at the conversion price of 0.46 pence per share.

Post Year End Trading

Since 1 January 2010 the Company has announced seven further investments, including three AIM listed companies, completed two further equity raises and issued a bond to raise up to a further £10 million.  As at the date of this announcement, the Company has placed £4.06 million of the bond with investors.

On 3 March 2010 the group subscribed for 25,000,000 new ordinary shares in Daniel Stewart Securities plc, an AIM listed financial services company and stockbroker, for a consideration of £500,000, giving Brainspark a holding of 6.66 per cent. The group also acquired an option for £1 to purchase a further 75,000,000 shares, to be exercised at a price of 2 pence per share before 29 June 2010. The group's decision to enter into the financial services sector was a long-term goal to broaden their investments into the financial services industry and the Board believes it will provide Brainspark with the professional capabilities, expertise and placing power to facilitate its future investments.

The Company entered into an agreement on 18 March 2010 with Investor Unlimited SrL to acquire 36.6 per cent. of the Serie B football club, AC Ancona. The consideration paid by Brainspark was £1.48 million satisfied through the issue of 211,000,000 new ordinary shares in Brainspark, payable in two tranches; the first tranche of 100,000,000 shares was issued on 18 March 2010 and the second tranche of 111,000,000 shares was issued on 20 May 2010.  In May 2010 the Company invested a further €850,000 in AC Ancona as part of a capital raising exercise being undertaken by AC Ancona.  Brainspark currently owns 44.8% of the issued share capital of AC Ancona.

Part of the group's investment strategy is to consolidate its holdings in its chosen sectors and therefore it acquired, on 24 March, a 20% stake in TLT Tempo Libero e Turismo SpA (trading as Ondaland), Italy's largest water theme park for a consideration of £5.17 million. This investment was structured through a cash payment of £2.16 million and the issue of 400,000,000 new ordinary shares in Brainspark. Ondaland became the second investment for the group in the theme park sector.

On 26 March 2010 the group entered into an agreement with Digital Magics SpA to acquire a 50.2 per cent. holding in Bibop SpA, a leading Italian digital technology company which owns a revolutionary video community platform called MyCast. The total consideration was £2.385 million, satisfied through a cash payment of £135,000 and the issue of 198,000,000 new ordinary shares in Brainspark. In addition, Brainspark has invested an additional £135,000 and committed to invest a further £600,000 in Bibop to help it acquire certain assets from its parent, Digital Magics and also to develop its video community platform on an international level.

On 23 April 2010, the Company subscribed for 5,578,994 (29.9 per cent.) shares in the Indian Restaurant Group plc (IRG), an AIM listed chain of Indian themed restaurants. Brainspark paid £139,474.85 in cash for full settlement. IRG currently owns three restaurants in and around London, with the plan to open more in 2010.

On 14 May 2010, Brainspark announced it had entered into an agreement to acquire an 11.56 per cent interest in Vyke Communications plc for a consideration of £748,750.  The investment was made as part of a placing by Vyke which was announced by Vyke on 22 April 2010 and approved by shareholders of Vyke at a general meeting held on 10 May 2010. Vyke is an AIM quoted, leading mobile voice over internet protocol (VoIP) provider.

As mentioned above, Brainspark raised, via a placing, £2.45 million on 26 January 2010 and then a further £504,000 on 5 March 2010. On 4 May it launched an issue of up to £10 million, 7% convertible bonds which are due in 2014, through the Company's placing agent Twice SIM SpA. The nominal value of each bond is £1,000. To date the Company has placed £4.06 million with investors. The proceeds of the bond will be used to satisfy certain previously announced investments, as well as new investments in line with the group's investment strategy.

On 18 May 2010 Brainspark announced that it had invested £2.10 million in Cogeme SET S.p.A ("Cogeme") acquiring 6.12% of the total issued share capital of Cogeme. The consideration payable was satisfied from the Company's existing cash resources. The investment is a short term position taken by Brainspark to optimise its cash resources and to use the asset as leverage for other strategic investments. Cogeme is a leading Italian Tier 2 manufacturer of high precision components for the automotive sector. The company mainly produces turbochargers and fuel injection systems and focuses its activities on clear niches with high value added, strong barriers to entry and long lasting growth potential. Cogeme has established relationships with main Tier 1 suppliers in the automotive industry including Bosch, Honeywell, Delphi, Siemens and Magneti Marelli.

On 21 May 2010 the Company announced that they had convened a general meeting of the Company for 14 June 2010 at which, inter alia, the Company proposes to undertake a 1:250 share consolidation of its existing share capital and make certain amendments to the Company's investing strategy to include investments in the renewable energy sector as a whole and investments in theme parks to be made on a worldwide basis. All resolutions were passed at the general meeting held on 14 June 2010.

Board and Nomad Changes

On 27 August 2009 the Company announced that Dennis Bailey and David Meacher had resigned from the Board of Brainspark and that Alfredo Villa and Alessandro Malacart were proposed to join the Board as Non-Executive Directors. On 18 September 2009 the Company announced their appointments as Non-Executive Directors of the Company.

On 30 September 2009 Haresh Kanabar was appointed as a Non-Executive Director of the Company. On 22 January 2010, Alfredo Villa was appointed Chief Executive Officer.

On 27 August 2009 Beaumont Cornish resigned as nominated adviser and broker. On 18 September 2009, Allenby Capital Limited was appointed as the Company's nominated adviser and broker.

Current Investments Portfolio

Name	Stake	Division
Mediapolis	22.09%	Leisure
Ondaland	20.0%	Leisure
Indian Restaurant Group plc	29.9%	Leisure
Bibop	50.5%	New Media
Filmmaster TV	10.0%	New Media
Geosim	13%	New Media
Vyke Communications plc	11.56%	New Media
Ancona	44.8%	Entertainment
Daniel Stewart & Co plc	5.7% *	Finance
Cogeme SET SpA	6.12%	Finance

* Option to increase the holding to 19.6% to be exercised by 29th June 2010.

Outlook

While the Company will continue its aggressive investment strategy taking advantage of the lower market valuations created by the global recession, the main focus will be in the appreciation of its existing assets. Ultimately, it is the Board's desire that a number of its private assets will be considered for a stock market listing on the UK or Italian exchanges or, where the situation arises, will look to consolidate these assets with its portfolio companies which already have a stock market listing.

The Board remains confident of its continuing growth in line with its investing strategy.

Alfredo Villa

Chief Executive

16 June 2010

Consolidated Statement of Comprehensive Income for the year ended 31 December 2009

	Note	2009	2008
Investment revenue	7	6	13
Gain on disposal of investments		196	200
Finance charges	8	-	(15)
Other operating expenses		(404)	(299)
Impairment of investments	16, 17	-	(2,199)
Loss before tax	9	(202)	(2,300)
Tax	11	-	-
Loss for the year from continuing operations		(202)	(2,300)
Discontinued operations
Profit/(loss) for the year from discontinued operations	12	74	(5)
Loss for the year		(128)	(2,305)
Other comprehensive income
Net value gain on available for sale investments	17	851	-
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR		723	(2,305)
Loss attributable to:
Owners of the company		(128)	(2,305)
Total Comprehensive Income Attributable to:
Owners of the company		723	(2,305)
(Loss)/profit per share:	13
From continuing operations		(0.06)	-
From discontinued operations		0.02	-
Basic and diluted loss per 0.01p ordinary share from continuing and discontinued operations		(0.04p)	(0.70p)

Statement of Financial Position at 31 December 2009

	Notes	Group 2009 £'000	Group 2008 £'000	Company 2009 £'000	Company 2008 £'000
Non-current assets
Property, plant and equipment	14	-	7	-	-
Investments in subsidiaries	15	-	-	-	1,314
Investments in associates	16	-	-	-	-
Available for sale investments	17	1,814	438	-	-
Trade and other receivables	18	-	691	904	-
Total non-current assets		1,814	1,136	904	1,314
Current assets
Available for sale investments	17	-	103	-	-
Trade and other receivables	18	8	21	-	403
Cash and cash equivalents	20	11	310	-	-
Total current assets		19	434	-	403
Current liabilities
Trade and other payables	19	(140)	(100)	(63)	-
Total current liabilities		(140)	(100)	(63)	-
Net current (liabilities) / assets		(121)	334	(63)	403
Total assets less current liabilities		1,693	1,470	841	1,717
Non-current liabilities
Trade and other payables	19	-	(226)	-	(226)
Net assets		1,693	1,244	841	1,491
Equity
Share capital	21	59	1,936	59	1,936
Share premium account		1,059	29,186	1,059	29,186
Other reserves	22	6,813	6,813	-	-
Equity component of convertible instrument	19	-	32	-	32
Fair value adjustment to available for sale investments	22	851	-	-	-
Retained losses		(7,089)	(36,723)	(277)	(29,663)
Equity attributable to owners of the company		1,693	1,244	841	1,491

Statement of Changes in Equity

For the year ended 31 December 2009

Group	Share capital	Share Premium account	Other reserves	Equity component of convertible instrument	Fair value adjustment to available for sale investments	Retained losses	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2009	1,936	29,186	6,813	32	-	(36,723)	1,244
Loss for the year	-	-	-	-	-	(128)	(128)
Capital reorganisation	(1,903)	(29,186)	-	-	-	31,089	-
Issue and conversion of shares in the year	26	1,102	-	-	-	-	1,128
Cost of share issue	-	(43)	-	-	-	-	(43)
Dividend in kind	-	-	-	-	-	(1,327)	(1,327)
Conversion of loan note	-	-	-	(32)	-	-	(32)
Fair value adjustment	-	-	-	-	851	-	851
At 31 December 2009	59	1,059	6,813	-	851	(7,089)	1,693
Company
At 1 January 2009	1,936	29,186	-	32	-	(29,663)	1,491
Loss for the  year	-	-	-	-	-	(138)	(138)
Capital reorganisation	(1,903)	(29,186)	-	-	-	31,089	-
Issue and conversion of shares in the year	26	1,102	-	-	-	-	1,128
Cost of share issue	-	(43)	-	-	-	-	(43)
Dividend in kind	-	-	-	-	-	(1,565)	(1,565)-
Conversion of loan note	-	-	-	(32)	-	-	(32)
At 31 December 2009	59	1,059	-	-	-	(277)	841

Statement of Changes in Equity

For the year ended 31 December 2008

Group	Share capital	Share premium account	Other reserves	Equity component of convertible instrument	Fair value adjustment to available for sale investments	Retained losses	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2008	1,936	29,186	6,813	32	22	(34,418)	3,571
Loss for the year	-	-	-	-	-	(2,305)	(2,305)
Fair value adjustment	-	-	-	-	(22)	-	(22)
At 31 December 2008	1,936	29,186	6,813	32	-	(36,723)	1,244
Company
At 1 January 2008	1,936	29,186	-	32	-	(27,824)	3,330
Loss for the  year	-	-	-	-	-	(1,839)	(1,839)
At 31 December 2008	1,936	29,186	-	32	-	(29,663)	1,491

Statement of Cash Flows

For the year ended 31 December 2009

	Note	Group 2009 £'000	Group 2008 £'000		Company 2009 £'000	Company 2008 £'000
Net cash used in operating activities	23	(547)	(432)		(507)	-
Cash flows from investing activities
Interest received		6	13		-	-
Proceeds from sale of investments		300	250		-	-
Purchase of investments		(565)	(20)		-	-
Net cash (expended)/generated from investing activities		(259)	243		-	-
Cash flows from financing activities
Proceeds from issue of new ordinary shares (net of expenses)		507	-		507	-
Net cash generated from financing activities		507	-		507	-
Net Decrease in net cash for the year		(299)	(189)		-	-
Cash and cash equivalents at beginning of year		310	499		-	-
Cash and cash equivalents at end of year	20	11	310		-	-

Selected notes to the financial statements

These notes have been extracted from and should be read in conjunction with the Annual Report and Accounts which will be available shortly on the Company's website at www.brainspark.com.

1          General Information

Brainspark PLC is a company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded on AIM of the London Stock Exchange. The address of the registered office is given on the company information page. The nature of the group's operations and its principal activities are set out in the Chairman's statement and Chief Executive Officer's statement on pages 1 to 4.

These financial statements are presented in pounds 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.

Standards and amendments which became effective during the year have not had a material impact on the financial statements other than the implementation of IFRS 8 - which is shown in note 4 to these financial statements.

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective at 31 December 2009.

IFRS 1 - First time adoption of IFRS - amendments relating to oil and gas assets and determining whether an arrangement contains a lease; amendment in relation to the cost of an investment in a subsidiary, jointly controlled entity or associate

IFRS 2 - Share based payments - amendments relating to group cash-settled share-based payment   transaction

IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations -amendment

IFRS 8 - Operating Segments - amendments resulting from April 2009 Annual Improvements to IFRSs

IFRS 9 - Financial Instruments - amendments relating to classification and measurement

IAS 1 - Presentation of financial statements - amendments resulting from April 2009 Annual Improvements to IFRSs

IAS 7 - Statement of Cash Flows - amendments resulting from April 2009 Annual Improvements to IFRSs

IAS 17 - Leases - amendments resulting from April 2009 Annual Improvements to IFRSs

IAS 24 - Related Party Disclosures - revision definition of related parties

IAS 31 - Investment in joint ventures - consequential amendments arising from amendments to IFRS 3

IAS 32 - Financial instruments presentation - amendments relating to classification of rights issues

IAS 36 - Impairment of Assets - amendments resulting from April 2009 Annual Improvements to IFRSs

IAS 38 - Intangible Assets - amendments resulting from April 2009 Annual Improvements to IFRSs

IAS 39 - Financial instruments - amendments for eligible hedged items

IFRIC 2 - Members' shares co-operative entities and similar instruments - consequential amendments arising from amendment to IAS 32

IFRIC 12 - Service concession arrangements

IFRC 13 - Customer loyalty programs (endorsed)

IFRIC 14 - IAS 19 - the limit on a defined benefit asset, minimum funding requirements and their interaction (endorsed)

IFRIC 16 - Hedges of a net investment in a foreign operation

The directors anticipate that the future adoption of those standards, interpretations and amendments listed above will not have a material impact on the financial statements.

2   Accounting policies

The principal accounting policies are summarised below. They have all been applied consistently throughout the period covered by these consolidated financial statements.

Basis of preparation

The financial statements have been prepared in accordance with IFRS as adopted by the European Union applied in accordance with the provisions of the Companies Act 2006.

The financial statements have been prepared under the historical cost convention except for certain financial instruments that are stated at their fair values.

In view of the funds raised by the company post year end, as referred to in note 25. The directors are satisfied that the group has sufficient resources in order to meet its ongoing operating costs and investment funding obligations. As a consequence, these financial statements are prepared on a going concern basis and assume funds will be raised to satisfy contractual obligations entered into.

Share based payments

In determining the fair value of equity settled share based payments and related charge to the income statement, the Group makes assumptions about future events and market conditions. In particular, judgement must be made as to the likely number of shares that will vest, and the fair value of each award granted. The fair value is determined using a valuation model which is dependent on future estimates including the timing with which options will be exercised and the future volatility of the Group's shares. Such assumptions are based on publicly available information and reflect market expectations and advice taken from qualified personnel. Different assumptions about these factors could materially affect the reported value of share based payments.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain the benefits from its activities.

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

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

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

Business Combinations

The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for resale in accordance with IFRS 5 Non Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the income statement.

Investments in Associates

Associates are those enterprises in which the Group has significant influence but not control. Associates are accounted for in the consolidated financial statements using the equity method, whereby the investment is initially recorded at cost and adjusted thereafter for the post-acquisition change in the investor's share of net assets of the investee. The income statement reflects the investor's share of the results of operations of the investee. If the investor's share of losses exceeds the carrying amount of the investment, the carrying amount of the investment is reduced to nil and recognition of further losses are discontinued, unless the investor has incurred obligations to the investee or to satisfy obligations of the investee that the investor has guaranteed or otherwise committed, whether funded or not. To the extent that the investor has incurred such obligations, the investor continues to recognise its share of losses of the investee.

Any excess of the cost of acquisition over the Group's share of the fair values of the identifiable net assets of the associate at the date of acquisition is recognised as goodwill. Any deficiency of the cost of acquisition below the Group's share of the fair values of the identifiable net assets of the associate at the date of acquisition (i.e. discount on acquisition) is credited to the income statement in the period of acquisition.

Transactions between the Group and its associates are eliminated to the extent of the investor's interest in the entity. Unrealised losses are not eliminated to the extent that the transaction provides evidence of an impairment of the asset transferred.

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 Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value.

Group Reorganisation

The company applied the Companies Act merger relief provisions when it issued shares to acquire the entire share capital of Brainspark Associates Limited in previous years. Accordingly no share premium was recorded relating to the Company's issue of these shares.

Investments in subsidiaries

Investments in subsidiaries are stated at cost less any provision for impairment.

Foreign currency

The functional currency is pound sterling. Transactions in foreign currencies are translated into sterling at the rates of exchange ruling on the date on which transactions occur. At the balance sheet date, foreign currency monetary items are translated into sterling at the foreign exchange rate ruling at the balance sheet date. Foreign exchange differences arising on translation are recognised in the income statement in the period in which they arise. At the balance sheet date, non-monetary items which are carried in terms of historical cost denominated in foreign currency are reported using the exchange rate at the date of the transaction, and non-monetary items which are carried at fair value denominated in a foreign currency are reported using the exchange rates that existed at the date when the values were determined.

Property, plant and equipment

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

Depreciation is charged to the income statement on a straight-line basis to write off the carrying value of each asset to residual value over their estimated useful lives as follows:

Office furniture and equipment

33%

Taxation

The tax expense represents the sum of the tax currently payable and any deferred tax.

Current taxes are based on the results of the Group companies and are calculated according to local tax rules, using the tax rates that have been enacted or substantially enacted by the balance sheet date.

Deferred tax is provided in full using the balance sheet liability method for all taxable temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Deferred tax is measured using currently enacted or substantially enacted tax rates.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. 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 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 in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax assets are recognised to the extent the temporary difference will reverse in the foreseeable future and that it is probable that future taxable profit will be available against which the asset can be utilised. Deferred tax is recognised for all deductible temporary differences arising from investments in subsidiaries and associates, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

Revenue

Revenue, which excludes Value Added Tax, represents the value of services rendered. Consultancy fees are recognised as earned on unconditional supply of services.

Financial Instruments

Financial assets and financial liabilities are recognised on the balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Trade Receivables

Trade and other receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method. A provision is established when there is objective evidence that the Group will not be able to collect all amounts due. The amount of any provision is recognised in the income statement.

Investments

Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at cost, including transaction costs.

Investments classified as available for sale are measured at subsequent reporting dates at fair value.

Fair value is defined as the price at which an orderly transaction would take place between market participants at the reporting date and is therefore an estimate and as such requires the use of judgement.  Where possible fair value is based upon observable market prices, such as listed equity markets or reported merger and acquisition transactions. Alternative bases of valuation may include contracted proceeds or best estimate thereof, implied valuation from further investment and long-term cash flows discounted at a rate which is tested against market data. Gains and losses arising from changes in fair value are recognised directly in other comprehensive income, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in other comprehensive income is included in the net profit or loss for the period. Impairment losses recognised in the income statement for equity investments classified as available-for-sale are not subsequently reversed through the income statement.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Convertible loan notes

Convertible loan notes are regarded as compound instruments, consisting of a liability component and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt. The difference between the proceeds of issue of the convertible loan notes and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in equity.

Issue costs are apportioned between the liability and equity components of the convertible loan notes based on their relative carrying amounts at the date of issue. The portion relating to the equity component is charged directly against equity.

The interest expense on the liability component is calculated by applying the prevailing market interest rate for similar non-convertible debt to the liability component of the instrument. The difference between this amount and the interest paid is added to the carrying amount of the convertible loan note.

Trade payables

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

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

3          Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements in conformity with generally accepted accounting practice requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

In order to arrive at the fair value of associates and investments a significant amount of judgement and estimation has been adopted by the Directors as detailed in the investments accounting policy. Where these investments are un-listed and there is no readily available market for sale the carrying value is based upon future cash flows and current earnings multiples for which similar entities have been sold. In view of current market conditions impairment charges totalling £Nil (2008: £2,199,000) have been made against investments. The carrying value of investments at 31 December 2009 is £1,814,000 (2008: £541,000).

6          Directors' remuneration

	2009 £'000	2008 £'000
Aggregate emoluments	260	105
	260	105

There are no retirement benefits accruing to the Directors. Details of directors' remuneration are included in the Directors' Report.

9          Loss for the year

	2009 £'000	2008 £'000
Loss before tax is stated after charging:
Depreciation of owned property, plant and equipment	-	-
Auditors' remuneration:
Audit of parent	6	5
Audit of subsidiaries	5	5
Non audit services:
Tax services	16	-

 

12        Analysis of profit/(loss) for the year from discontinued operations

On 10 December, the group concluded its Capital Reconstruction, where the group divested its Chinese operations, through China IPO (2009) Limited and some of its European holdings, through Infusion (2009) Limited.

The combined results of the discontinued operations, Infusion 2002 Limited and China IPO Group Limited, included in the income statement are set out below. The comparative profit/ (loss) are set out below. The comparative profit/ (loss) from discontinued operations have been re-presented to include those operations classified as discontinued in the current period.

Profit/(loss) from discontinued operations	2009	2008
	£'000	£'000
Contract termination and consultancy income	301	-
Release of provision against investment	221	-
Exchange gain	-	181
Other operating expenses	(448)	(186)
Profit/(Loss) before tax	74	(5)
Tax	-	-
Profit/(loss) for the year from discontinued operation	74	(5)

 

13        Loss per share

The basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is computed using the same weighted average number of shares during the period adjusted for the dilutive effect of share options and convertible loans outstanding during the period.

The loss and weighted average number of shares used in the calculation are set out below:

	Loss £'000	2009 Weighted average no of shares 000's	Per share Amount pence	Loss £'000	2008 Weighted average no of shares 000's	Per share Amount pence
Earnings per share
Basic and Diluted	(128)	337,752	(0.04)	(2,305)	330,697	(0.70)

IAS 33 requires presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease earnings per share. Since it seems inappropriate that option holders would act irrationally, no adjustment has been made to diluted earnings per share for out-of-the money options. There are no other diluting share issues, in either financial period, consequently diluted earnings per share equals basic earnings per share. 

17        Available for sale investments

Group	2009 £'000	2008 £'000
Fair value
At 1 January	541	919
Demerged from group	(404)	-
Impairment charge	-	(356)
Additions	929	-
Fair value adjustment	851	(22)
Disposal	(103)	-
Carrying value at 31 December	1,814	541
Non-current assets	1,814	438
Current assets	-	103
	1,814	541

Available for sale investments are valued in accordance with IFRS 7 and level 3 of the fair value hierarchy. These comprise an aggregate 11.34% investment in the Mediapolis project via Mediapolis SpA and Mediapolis Investments SA which has been recorded at fair value resulting in an uplift of £851,000; a 1.96% investment in Polarizonics, a 10.0% investment in Filmmaster Television S.R.L and a 13.4% investment in GeoSim. The further investment in Mediapolis was satisfied by cash whereas the Filmmaster consideration was satisfied by the part payment of cash and issuance of shares in the company.

Metapack Limited, Advanced Computer Systems SpA and E.T. -China.com International Holdings Limited were demerged from the Group following the completion of the group reorganization.

The remaining 14.70% holding in Fortune Cookie Limited was disposed of at the beginning of the year resulting in a profit on disposal of £196,000.

 

21        Called up share capital

Group and Company	2009    Number	2008 Number	2009 £'000	2008 £'000
Authorised
Ordinary shares of 0.01p each	-	500,000,000	-	50
Deferred shares of 0.01p each	-	49,500,000,000	-	4,950
	-	50,000,000,000	-	5,000

		2009      Number	2008      Number	2009 £'000	2008 £'000
Allotted, called up and fully paid
Ordinary shares of 0.01p each	591,055,698		330,697,003	59	33
Deferred shares of 0.01p each	-		19,035,036,009	-	1,903
	591,055,698		19,365,733,012	59	1,936

Changes made by the Companies Act 2006 mean that, from 1 October 2009, there is no longer a need for a Company to have an authorised share capital.

Pursuant to an order of the Companies Court dated 10 June 2009, the Company has eliminated its Share Premium account and cancelled its Deferred Shares.

On 18 December 2009, Prof. Francesco Gardin converted his convertible loans to the Company into 46,358,695 ordinary shares.

On 23 December 2009, the Company issued 110,000,000 ordinary shares of 0.01p each at 0.05p by way of a placing.

Also on 23 December 2009, the Company issued 104,000,000 ordinary shares of 0.01p each at 0.035p in order to satisfy part of consideration payment for Filmmaster S.R.L.

On 1 March 2007 the Company issued options to the Directors under a new unapproved executive share option scheme. The following Directors had outstanding share options in the Company; these remain exercisable at various time intervals but before 31 March 2010, as follows:

	Granted On 1 March 2007	Lapsed in the year	31 December 2009	Exercisable 31 December 2009	Exercisable 31 December 2008
F. Gardin	12,000,000	-	12,000,000	8,000,000	4,000,000
A. M. Villa	5,000,000	-	5,000,000	3,333,333	1,666,666
D. B. Bailey	5,000,000	-	5,000,000	3,333,333	1,666,666
D. Meacher	5,000,000	-	5,000,000	3,333,333	1,666,666
E. Burman	5,000,000	-	5,000,000	3,333,333	1,666,666

The 32,000,000 options granted represent 5.41% of the current issued shared capital of the company. The directors may exercise up to 33% of any option shares granted after one year from the date of grant, up to a further 33% after two years from the day of grant and the balance of shares after three years from the date of grant. The strike price of 0.78p was set at a premium of 30% to the mid-market price of 0.60p of 26 February 2007. The company has assessed the likelihood of its outstanding share options vesting; using standard modelling techniques and certain assumptions. Given the volatility of the company's share price and expected future volatility this does not give rise to a material impact to the group's income statement. 

23        Cash used in operations

		Group 2009 £'000	Group 2008 £'000	Company 2009 £'000	Company 2008 £'000
Loss before tax		(128)	(2,305)	(138)	(1,839)
Exchange gain		-	(181)	-	-
Amounts written off investments		-	2,199	1,314	116
Investment revenue recognised in income statement		(6)	(13)	-	-
Gain on disposal of investment		(196)	(200)	-	-
Decrease in receivables		704	32	(501)	1,708
Increase/(Decrease) in payables		(186)	36	(163)	15
Other non-cash movements (Net of Dividend in kind and issue of shares for purchase of investment)		(735)	-	(1,019)	-
Cash used in operations		(547)	(432)	(507)	-

25     Post balance sheet events

On 26 January Brainspark raised, via a placing, £2.45 million and then a further £504,000 on 5 March 2010.

On 3 March the group subscribed for 25,000,000 new ordinary shares in Daniel Stewart Securities plc, an AIM listed financial services company and stockbroker, for a consideration of £500,000, giving Brainspark a holding of 6.66 per cent. The group also acquired an option for £1 to purchase a further 75,000,000 shares, to be exercised at a price of 2 pence per share before 29 June 2010.

On 18 March the group completed the investment with Investor Unlimited SrL to acquire 36.6 per cent. of the Serie B football club, AC Ancona. The consideration was £1.48 million satisfied through the issue of 211,000,000 new ordinary shares in Brainspark, payable in two tranches; the first of 100,000,000 was issued on 18 March and the second of 111,000,000 was settled on 20 May 2010. In May 2010 the Company invested a further €850,000 in AC Ancona as part of a capital raising exercise being undertaken by AC Ancona

On 24 March Brainspark purchased a 20% stake in TLT Tempo Libero e Turismo SpA (trading as Ondaland), Italy's largest water theme park for a consideration of £5.17 million. This was satisfied through a cash payment of £2.16 million and the issue of 400,000,000 new ordinary shares in Brainspark. The cash element was originally payable by 15 April. At today's date payments totaling £1,650,000 have been made and a further £750,000 is due to be paid.

On 26 March the group entered into an agreement with Digital Magics SpA to acquire a 50.2 per cent. holding in Bibop SpA, a leading Italian digital technology company; which owns a revolutionary video community platform called MyCast. The total consideration was £2.385 million, satisfied through a cash payment of £135,000 and the issue of 198,000,000 new ordinary Brainspark shares. In addition, Brainspark has invested an additional £135,000 and committed to invest a further £600,000 in Bibop to help it acquire certain assets from its parent, Digital Magics.

On 31 March 2010, the group increased its holding in Mediapolis SpA to 1.79% and in Mediapolis Investments SA to 14.13%, with a further proposed investment in Mediapolis Investments SA of 7.42% by 1 July 2010 at a cost of £875,000.

On 23 April, the group subscribed for 5,578,994 (29.9 per cent.) shares in the Indian Restaurant Group plc (IRG), an AIM listed chain of Indian themed restaurants. Brainspark paid £139,474.85 in cash for full settlement.

On 4 May it launched an issue of up to £10 million, 7% convertible bonds, which are due in 2014, through the placing agent, Twice SIM SpA. The nominal value of each bond is £1,000. To date the Company has placed £4.06 million with investors.

On 14 May, Brainspark entered into an investment agreement to acquire an 11.56 per cent interest in Vyke Communications plc for a consideration of £748,750.  The Investment is being made as part of a placing by Vyke which was announced by Vyke on 22 April 2010.

On 18 May Brainspark announced that it had invested £2.10 million in Cogeme SET S.p.A ("Cogeme") acquiring 6.12% of the total issued share capital of Cogeme. The consideration payable was satisfied from the Company's existing cash resources.

On 21 May 2010 the Company announced that they had convened a general meeting of the Company for 14 June 2010 at which, inter alia, the Company proposes to undertake a 1:250 share consolidation of its existing share capital and make certain amendments to the Company's investing strategy to include investments in the renewable energy sector as a whole and investments in theme parks to be made on a worldwide basis. All resolutions were passed at the general meeting held on 14 June 2010.

-ends-

 

END

 

 

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