Interim Results

Brainspark PLC 28 September 2007 FOR IMMEDIATE RELEASE 28 SEPTEMBER 2007 BRAINSPARK Plc ('Brainspark' or 'the Company') UNAUDITED INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2007 CHAIRMAN'S STATEMENT In the six months ended 30 June 2007, the Company incurred a profit before taxation of Â£4k, compared to a loss of the comparative period last year of Â£72k. Brainspark has finally entered the expansion cycle and launched its first new project with the incorporation of China IPO Group Limited, an investment company focusing on opportunities in China. Meanwhile Brainspark management continue to realise value from existing assets. Financial Summary The consolidated net asset value at 30 June 2007 was Â£3,515k up from Â£3,511k at 31 December 2006..At 30 June 2007, Brainspark's mid-market share price of 0.65p valued the at Â£2,149k against a consolidated net asset value of Â£3,515k. First Half 2007 Events. On 12 March Brainspark incorporated China IPO Group Limited., a Jersey company, managed in Jersey that will make investments in China, both on 6-12 months returns, in pre-IPO situations, and in 3-5 year return with high growth small- to medium- sized technology companies. China IPO Group Limited, has entered into first refusal relationships with some of the most significant Chinese Science Parks and Incubators in China. The Directors of China IPO Group Limited are the Rt. Hon. Earl of Cromer, Non-Executive Chairman, Professor F. Gardin, Executive CEO Director, Mr. E. Burman, Executive Director, and as Non-Executive Directors: Mr. Dennis Bryan Bailey, Professor Liu Man Hong and Mr. Patrick Go. Bedell Trust in Jersey act as company secretary. Allen & Overy in Beijing has been retained as the law firm. Successful private placement of China IPO shares could ultimately secure Brainspark approximately a 25% share in a company. On 2 April 2007 China IPO Group made its first pre-IPO investment in ET-China Holdings Ltd ('ET-China'), a travel company with its main operations in Guangzhou (Guangdong Province). China IPO Group has invested $200k (Â£100k) as part of a $7,000k (Â£3,500k) unsecured convertible loan note for pre-IPO funding. On 26 June the Company has agreed with Professor. F. Gardin to extend the terms of the interest-free convertible loan of Â£213,000 for a period of two years such that it is now repayable on 31 December 2009, with the right on either party to demand conversion into Ordinary Shares at the price of 0.46 p per share at any time. The Loan Stock will remain interest free. Portfolio Review At of 30 June 2007 Brainspark had holdings in 8 companies, 3 in the UK, 1 in Jersey, 2 in Italy, 1 in Israel and 1 in the United States. Its stakes range from nearly 2% to 100% in these companies. The portfolio covers a wide range of business sectors, including web services, application service providers, advanced IT solutions and an investment company. On 22 February, Cotterford, a UK investment company subscribed Â£400k for an issue of new Metapack (www.metapack.co.uk) shares representing 17.78 % of the enlarged issued share capital. Following the dilution Brainspark holds 8.23% of the enlarged capital (10.58% pre-investment). On 2 May Geosim (www.geosim.co.il), the 3D city technology and modelling producer, in which Brainspark (www.brainspark.com) holds 44.11%, raised additional finance for working capital and development. Private investors in the United States have subscribed US$980k (Â£490k)to complete the second round of financing at a pre-money valuation of $20,000k (Â£10,000k)The first round of financing was undertaken at pre-money valuation of US$10,000k (Â£5,000k)was closed in September 2006. After these additional subscriptions Brainspark has a 39.53% interest in Geosim Further progress for the second half of 2007 During the second half of 2007 Brainspark continued the positive trend of the first six months, here are some of the main events. In July 2007 China IPO Group Limited entered in two further exclusive contracts with Tianjin TEDA International Business Incubator (which has more than 180 companies currently being incubated) and the Tianjin TIDI Technology Incubation Centre (which has more than 100 companies being incubated). TEDA is part of the Tianjin Economic Development Zone. Tianjin is one of China's largest ports, and a key centre for Electronics, Bio-chemicals, Automobiles, Manufacturing and Logistics. On 3 August 2007 Et-China.com International Holdings ('ET-China') went public on AIM and China IPO Group Limited converted the option awarded to holders of unsecured convertible loan notes in ET-China China IPO Group has converted its $200k (Â£9100k) loan notes into 153,639 ET-China shares, which at listing rice of 127p a share were worth Â£200k. On listing China IPO realized approximately Â£15k from sale of part of the shares at 127p a share. As from 17 August Brainspark website (www.brainspark.com) contains all the information required to be disclosed pursuant to AIM Rule 26. On 24 September Brainspark announced that Geosim (www.geosim.co.il), had entered into a new agreement with CRASH Ventures LLC, under which Crash LLC will act as an exclusive consultant. Under this new agreement the exclusivity period has been extended from 31 May 2008 to 31 May 2010. Crash LLC will assist Geosim in raising a total of US$3,000k (Â£1,500k) of which private investors in the United States have already subscribed US$200k (Â£100k), at a pre-money valuation of US$22,000k (Â£11,000k). This alone is equivalent to 1.30p per share. The carrying value of Geosim in our books is Â£1.83million, or 0.55p per share. The new Philadelphia 3D online website is due for launch before year-end. On 26 September Mediapolis SpA, the amusement park in North of Italy were Brainsaprk has a small investment, was given the final green light to start the implementation phase of the project, which is expected to begin in Spring 2008. Brainspark management remains committed to continue the positive trend of the Company during the final part of the year. Prof. Francesco Gardin Chairman 27 September 2007 FINANCIAL STATEMENTS CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 30 JUNE 2007 Note Six months to 30 Six months to 30 Year ended June 2007 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) Â£'000 Â£'000 Â£'000 Continuing operations Investment revenue 9 7 9 Gain on disposal of investments 75 - 300 Share of profits of associates - - 92 Finance charges - - (31) Other operating expenses (80) (79) (196) Impairment of available for sale investments - - (156) Profit/(loss) before tax 4 (72) 18 Tax - - - Profit/(loss) for the period from continuing 4 (72) 18 operations Attributable to: Equity holders of the parent 4 (72) 18 Earnings per share Basic and diluted earnings per 0.01p ordinary 3 0.001p (0.02p) 0.005p share CONSOLIDATED BALANCE SHEET FOR THE PERIOD ENDED 30 JUNE 2007 Notes Six months to Six months to Year Ended 30 June 2007 30 June 2006 31 December (Unaudited) (Unaudited) 2006 (Audited) Â£'000 Â£'000 Â£'000 Non-current assets Investments in associates 4 2,023 2,010 2,023 Available for sale investments 5 818 1,222 718 Total non-current assets 2,841 3,232 2,741 Current assets Trade and other receivables 626 270 626 Cash and cash equivalents 305 257 410 Total current assets 931 527 1,036 Current liabilities Trade and other payables (257) (370) (266) Total current liabilities (257) (370) (266) Net current assets 674 157 770 Net assets 3,515 3,389 3,511 Equity Share capital 1,936 1,936 1,936 Share premium account 29,186 29,186 29,186 Other reserves 6,813 6,813 6,813 Equity component of convertible instrument 32 - 32 Retained losses (34,452) (34,546) (34,456) Equity attributable to equity holders of the 3,515 3,389 3,511 parent STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE 2007 Six months to 30 Six months to 30 Year ended June 2007 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) Â£'000 Â£'000 Â£'000 Profit /(Loss) for the period 4 (72) 18 Net addition/(reduction) in equity 4 (72) 18 Opening equity attributable to equity holders 3,511 3,461 3,493 of the parent Closing equity equity attributable to equity 3,515 3,389 3,511 holders of the parent CONSOLIDATED CASHFLOW STATEMENT FOR THE PERIOD ENDED 30 JUNE 2007 Six months to 30 June Six months to 30 Year ended 2007 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) Â£'000 Â£'000 Â£'000 Net cash used in operating activities (89) (104) (183) Cash flows from investing activities Interest received 9 7 9 Proceeds from sale of investments in associates 75 - 230 Purchase of investments (100) (92) (92) Net cash generated from investing activities (16) (85) 147 Decrease in net cash for the period (105) (189) (36) Cash and cash equivalents at beginning of period 410 446 446 Cash and cash equivalents at end of the period 305 257 410 NOTES TO THE FINANCIAL STATEMENTS 1 Accounting policies Basis of preparation The interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting. The financial information contained in this interim statement is unaudited and does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. Significant accounting policies The interim financial statements have been prepared under the historical cost convention, except for the revaluation of certain properties and financial instruments. The same accounting policies, presentation and methods of computation are followed in these interim financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2006. 2 Segment reporting The Group carries on its business in five geographical locations, namely the UK, Italy, Israel, United States and China. Its principal activity is the investment in technology start up businesses. Based on risks and returns, the Directors consider that the Group had only one business segment during the period ended 30 June 2007, that of investing in technology start up companies. Therefore the disclosure for the primary segment has already been given in these financial statements. The secondary reporting would be as shown below. Six month to Six month to Year ended 30 June 2007 30 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) Segment assets Segment assets Segment assets Â£'000 Â£'000 Â£'000 United Kingdom 834 816 938 Continental Europe 688 688 688 Middle East 1,830 1,830 1,830 China 105 - - United States 58 55 55 3,515 3,389 3,511 3 Earnings per share The basic earnings / (loss) per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is computed using the same weighted average number of shares during the period adjusted for the dilutive effect of share warrants and convertible loans outstanding during the period. The profit/ (loss) and weighted average number of shares used in the calculation are set out below: Six months to 30 Six months to Year ended June 2007 30 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) Â£'000 Â£'000 Â£'000 Profit/(loss) attributable to ordinary 4 (72) 18 shareholders Adjusted loss 4 (72) 18 Weighted average number of ordinary shares 330,697 330,697 330,697 Adjusted weighted average number of ordinary 330,697 330,697 330,697 shares Basic profit/ (loss) per share 0.001p (0.02p) 0.005p Diluted profit /(loss) per share 0.001p (0.02p) 0.005p IAS 33 requires presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease earnings per share or increase net loss per share. For a loss making company with outstanding share options and warrants, net loss per share would only be increased by the exercise of out-of-the money options and warrants. Since it seems inappropriate that option holders would act irrationally, no adjustment has been made to diluted earnings per share for out-of-the money options and warrants in the comparatives. There are no other diluting share issues, in either financial period, consequently diluted earnings per share equals basic earnings per share. 4 Investments in associates Six months to Six months to Year ended 30 June 2007 30 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) Â£'000 Â£'000 Â£'000 Share of assets At beginning of period 145 15 132 Share of profit for the period - - 92 Disposal - (79) At period end 145 15 145 Goodwill At beginning of period 1,878 1,638 1,521 Capitalisation of loans - - 357 At period end 1,878 1,638 1,878 Loans At beginning of period - 357 357 Capitalisation of loans - - (357) At period end - 357 - Carrying value at period end 2,023 2,010 2,023 5 Available for sale investments Six months to 30 Six months to 30 Year ended June 2007 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) Â£'000 Â£'000 Â£'000 At beginning of period 718 1,130 1,130 Additions 100 92 122 Disposal - - (378) Impairment charge - - (156) At period end 818 1,222 718 6 Transition to IFRS Brainspark Plc reported under IFRS in its previously published financial statements for the year ended 31 December 2006. The analysis below shows a reconciliation of net assets and profit reported under UK GAAP as at 30 June 2006 to the revised net assets and profit under IFRS as reported in these financial statements. Reconciliation of equity at 30 June 2006 Previous GAAP Effect of IFRS transition to 2006 IFRS Â£'000 Â£'000 Â£'000 Non-current assets Investments in associates 545 1,465 2,010 Available for sale investments 1,222 - 1,222 Total non-current assets 1,767 1,465 3,232 Current assets Trade and other receivables 270 - 270 Cash and cash equivalents 257 - 257 Total current assets 527 - 527 Current Liabilities Trade and other payables (370) - (370) Total current liabilities (370) - (370) Net current assets 157 - 157 Net assets 1,924 1,465 3,389 Equity Share capital 1,936 - 1936 Share premium account 29,186 - 29,186 Other reserves 6,813 - 6,813 Retained losses (36,011) 1,465 (34,546) Equity attributable to equity holders of the parent 1,924 1,465 3,389 Reconciliation of equity for the six months ended 30 June 2006 There has been a net improvement in equity of Â£1,465,000. IFRS do not permit goodwill amortisation. Goodwill amortisation of Â£1,004,000 has been reversed and the carrying value of goodwill has been reviewed for impairment in accordance with IAS 36. Furthermore under IAS 28 any losses incurred by the associate are only recognised to the point the investor's interest is reduced to nil. This has resulted in a reversal of Â£461,000. Reconciliation of loss for the six months ended 30 June 2006 Previous GAAP Effect of transition IFRS to IFRS Â£'000 Â£'000 Â£'000 Continuing operations Investment revenue 7 - 7 Other operating expenses (79) - (79) Share of profits /(losses) of associates (478) 478 - Loss before tax (550) 478 (72) Tax - - - Loss for the year from continuing operations (550) 478 (72) Attributable to: Equity holders of the parent (550) 478 (72) IFRS do not permit goodwill amortisation, as a consequence goodwill amortisation has been reversed and the carrying value of goodwill has been reviewed for impairment. In addition, GeoSim's losses for the six moths to 30 June 2006 of Â£136,000 have been written back in order to adjust the carrying amount of the investment to nil. Explanation of material adjustments to the cash flow statement for the six moths ended 30 June 2006 There are no other material differences between the cash flow statement presented under IFRSs and the cash flow statement presented under previous UK GAAP. 7 Related party transactions Prof. Francesco Gardin and 'S.I.C.I. sas di F. Gardin' are paid Â£80,000 per annum for the provision of services. Financial Fun Limited, of which Mr. Bailey is Chairman, is paid Â£20,000 per annum for the provision of Mr. Bailey's services. 8 Board Approval The Interim Statement was approved by the Board on 27 September 2007. 9 Availability of Interim Results Copies of the Interim Results will be available from the offices of the Company, Lightwell, 12-16 Laystall Street, London, EC1R 4PF and from the Company's website www.brainspark.com. For further information, please contact: Francesco Gardin, Brainspark plc, telephone: 00 39 335 296573 Roland Cornish, Beaumont Cornish Limited, telephone: 020 7628 3396 This information is provided by RNS The company news service from the London Stock Exchange

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