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Greenchip Investment (XEN)

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Thursday 24 May, 2001

Greenchip Investment

Preliminary results

Greenchip Investments  PLC
24 May 2001


                            For Immediate Release
                             Thursday 24 May 2001

                          Greenchip Investments Plc
      Preliminary results for the eighteen months ended 31 December 2000

Greenchip Investments Plc has today announced its preliminary results for the
18 month period ended 31st December 2000.

For further information please contact:

Malcolm Burne  020 7518 9180
(Chief Executive)


 Copies of the preliminary announcement will be available from the offices of
 Grant Thornton, Grant Thornton House, Melton Street, Euston Square, London,
                           for a period of 21 days.



CHIEF EXECUTIVE'S REVIEW

Introduction

I write to report on a period that saw demand for technology shares rise to an
unsustainable level and then fall away substantially, such that share prices,
particularly of smaller companies such as Greenchip, have suffered badly. The
rapid fall in share prices of technology companies, combined with volatile
stockmarket conditions, has severely limited opportunities for financing
either your Company or funding its licence based projects. Indeed, discussions
regarding a very significant fundraising for Greenchip were advancing in early
2000 but had to be withdrawn following the dramatic falls in the stockmarket
from Spring of that year. This lack of funding has inhibited the development
of the original Greenchip business model and thus limited the progress of the
Company.



Faced with deteriorating stockmarket conditions, one of the Board's objectives
has been to limit the risks of reducing the Company's liquidity position to an
unsustainable level, whilst continuing, judiciously, to pursue a number of
separate initiatives to restore value for shareholders. More details of these
are set out below. In terms of managing liquidity, your company had £1.5 m in
cash as at the Balance Sheet date and has taken (see below) firm steps to
reduce overheads.



Licence Agreements

During 1999 and at the beginning of 2000, Greenchip signed several agreements
regarding licences with a variety of technology based companies, mostly from
North America. Greenchip's strategy was to seek outside financing in order to
grow these businesses in the UK and Europe. Greenchip also considered a number
of unquoted minority investment proposals both within the licence portfolio
and outside. The anticipated financing has, at least since March 2000, not
been available. However we have rarely committed our limited cash resources
and thus have not faced (save in the specific circumstances set out below,
which relates primarily to a non cash item) the inevitable write downs and, in
particular, the difficulties associated with second round funding combined
with pressures on liquidity both at Greenchip and the investee company. During
2000 the portfolio of licence agreements was carefully reviewed and several
detailed studies undertaken in house with a view to determining the
feasibility of funding and then launching European businesses as and when the
financing opportunities returned. Alongside this steps were taken to widen our
network both nationally and internationally, to improve both the quality and
quantity of investment proposals received, standardise and improve the
Greenchip review process and upgrade the Company's legal agreements with
licensor counterparties. However, as stated above market conditions have not
been conducive to progressing the original business model.


Results for 18 months to 31 December 2000

Pre-tax losses for the eighteen months amounted to £3,090,101 (18 months to 30
June 1999 : pre tax loss of £195,847) and the loss per share was 12.15 pence
(18 months to 30 June 1999 : loss of 3.70p). Net assets as at 31 December 2000
were £1.6m, including £1.5m cash.



In August 2000 our 3.77% stake in Arlington Group, which had arisen as a
result of a share swap with our shares (priced at 70 pence) was sold,
realizing cash proceeds of £735,000. Whilst ongoing liquidity to the Company
was provided, a book loss of £1,365,000 was triggered by the sale.



Additional write-downs on investments amounted to £130,159. Administrative
expenses were higher reflecting the additional costs of taking on new staff
and premises as well as marketing the Company and its services in the UK and
North America.



Exceptional items relate to write-downs of intangible assets, the costs of
moving onto AIM and the write off of strategic alliance costs.



Also, in April 2000 your company took a conditional lease through to 30 June
2003 upon premises in London by means of an allotment of Greenchip ordinary
shares to the landlord at an effective issue price of 75 pence per share. This
has provided a base from which to conduct our operations and was intended to
provide office space for start up licensee companies.



Although the rental cost does not involve a cash outflow, costs are incurred
in maintaining the premises. Accordingly, the Board is currently reviewing
ways to reduce these costs.



AIM

In October our shares were admitted to trading on the Alternative Investment
Market in order to broaden their appeal both to investors and potential
counterparties.



Strategy and Cost Base

In anticipation of being able to secure a significant equity fundraising for
Greenchip in early 2000, the Company hired three experienced executives with
the objective of deploying financial resources to develop Greenchip's
licence-based projects. However, the dramatic slide in the market for
technology stocks meant that the Company's fundraising plans had to be
withdrawn. By the Summer of 2000, as the market for early stage funding
proposals remained depressed, your Board approached a number of broadly
similar investment based companies with a view to a merger or takeover in
order, in particular, to improve the funding and spread the overhead more
efficiently. Notwithstanding being able to advance to detailed discussions on
two occasions it proved impossible against the background of each of the
counterparties' optimistic views on valuations to conclude terms that were
both satisfactory to the other party and recommendable to our shareholders.



The Directors are closely aware of the impact declining technology valuations
have had upon the Company's share price and continue to review actively and
pursue all practical methods of increasing shareholder value. Starting in the
autumn of last year systematic initiatives were taken to seek to identify and
secure for Greenchip a value enhancing acquisition of 100% of the share
capital of an unquoted company in exchange for a substantial issue of shares
in the Company.



In the light of the matters set out above and following our most recent
appraisal of the Greenchip licence portfolio and the continued limited
opportunities to fund investments in early stage technology businesses, the
Board decided to fundamentally address the Company's strategy and
significantly reduce its cost base.



Regarding strategy, Greenchip will seek to maintain the relationships
developed overseas whilst at the same time minimizing any further investment
within the portfolio. Greenchip has been active in looking for suitable
opportunities and has secured early interest from a handful of companies with
a view to their acquisition in exchange for a substantial issue of shares in
the Company.



Regarding the cost base, since 31 March neither the Chairman nor the Managing
Director has drawn a salary. The combined effect of these undertakings and
other initiatives will be to reduce significantly the 'overhead' in due
course.



Directors

As previously announced Andrew Page will resign as a Director on 10 June 2001
to take up an executive appointment elsewhere. Following the Company's change
of strategy, Gavin Simonds and Ian Wallis will also be standing down at the
Annual General Meeting.


Conclusion

It has been an extremely poor period for technology, media and telecoms stocks
in general and small incubators in particular, including some well publicised
bankruptcies. Greenchip has been far from immune from this and we have had to
revisit and revise our strategy. Nonetheless with only very limited exceptions
we resisted opportunities to take minority investments during the boom period,
sought to preserve cash and we move forward with approximately £1.2m in cash,
and a cost base set to decline very rapidly. Your Board continues, as I write,
to seek and examine energetically opportunities with a view to restoring value
for Greenchip's shareholders.


M A Burne
Chief Executive Officer
23 May 2001


CONSOLIDATED PROFIT AND LOSS ACCOUNT
Eighteen months ended 31 December 2000
                                                       18 months      18 months
                                                           ended          ended 
                                                      31/12/2000      30/6/1999
                                    Note
                                                               £              £


Turnover - continuing operations                           2,902          2,394
Cost of sales                                            (13,032)       (29,361)
                                                            -----         -----
Gross (loss)                                             (10,130)      (26,967)
                                                            -----         -----
Distribution costs                                        (5,940)      (16,462)
Administrative expenses                               (1,666,186)     (150,398)
                                                            -----         -----
                                                      (1,672,126)     (166,860)
Continuing business:
Operating loss before administrative                  (1,109,027)     (193,827)
expenses - exceptional items

European distribution rights                            (262,500)             -
AIM admission costs                                     (110,729)             -
Strategic alliance costs                                (200,000)             -
                                                            -----         -----
Operating loss - continuing operations      4         (1,682,256)     (193,827)
Loss on disposal of investment                        (1,365,000)             -
Provision against investments                           (130,159)             -
Interest receivable                                        90,022           241
Interest payable on hire purchase                         (2,708)       (2,261)
contracts
                                                            -----         -----
Loss for the financial period before                  (3,090,101)     (195,847)
and after taxation
                                                       ==========    ==========
Loss per ordinary share - basic             5            (12.15p)       (3.70p)
                                                       ==========    ==========

There were no recognised gains or losses other than the loss for the current
and previous period.


                     STATEMENTS OF MOVEMENTS ON RESERVES
                    Eighteen months ended 31 December 2000


                                 Share Premium       Profit and loss      Total
                                       account               account
                                             £                     £          £
THE GROUP
Balance at 1 July 1999                 132,024             (447,318)  (315,294)
Loss for the financial                       -           (3,090,101) (3,090,101)
period
Share premium on issue of
new share capital                    4,222,891                     -  4,222,891

Deferred shares written                      -               470,900    470,900
off
                                         -----                 -----      -----
Balance at 31 December              £4,354,915          £(3,066,519) £1,288,396
2000
                                    ==========            ========== ==========



          RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
                    Eighteen months ended 31 December 2000


                                                                    Group
                                                                        £
Opening shareholders' funds                                       207,929
Loss for the financial period                                 (3,090,101)
Issue of shares                                                 4,460,884
                                                               ----------
Closing shareholders' funds                                    £1,578,712
                                                               ==========





                   CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2000

                                                   31/12/00        30/06/99

                                                     £        £      £        £
FIXED ASSETS
Intangible assets                                             -         295,717
Tangible assets                                          54,164           8,869
Investments                                              81,245           1,000
                                                          -----           -----
                                                        135,409         305,586
CURRENT ASSETS
Stocks                                            12,530          25,233
Debtors                                          105,437             959
Cash at bank and in hand                       1,510,486             875
                                               ---------        --------
                                               1,628,453          27,067
CREDITORS: Amounts falling                      (157,435)        (61,247)
due within one year
                                               ---------        --------
NET CURRENT ASSETS/(LIABILITIES)                       1,471,018        (34,180)
                                                       ---------       ---------
TOTAL ASSETS LESS CURRENT LIABILITIES                  1,606,427         271,406
CREDITORS: Amounts falling due after                    (27,715)        (63,477)
more than one year
                                                       ---------       ---------
                                                      £1,578,712        £207,929
                                                       
                                                       =========       =========
                                                         
CAPITAL AND RESERVES
Called up share capital                                  290,316         523,223
Share premium account                                  4,354,915         132,024
Profit and loss account                               (3,066,519)       
(447,318)
                                                       ---------       ---------
EQUITY SHAREHOLDERS' FUNDS                            £1,578,712        £207,929
                                                       
                                                       ========        ========



CONSOLIDATED CASH FLOW STATEMENT
Eighteen months ended 31 December 2000

                                           Note   31/12/00     30/06/99


                                                  £     £      £     £


Net cash (outflow) from operating             1       (919,716)       (20,285)
activities
Returns on investments and servicing of
finance
Interest receivable                             90,022          241
Interest payable on hire purchase               (2,708)        (2,261)
contracts
                                                -----        -----
Net cash inflow/(outflow) from returns on             87,314           (2,020)
investment and servicing of finance
Capital expenditure and financial
investment
Payments to acquire intangible fixed                -        (16,507)
assets
Payments to acquire tangible fixed assets       (34,376)      (2,370)
Payments to acquire investments                 (210,404)         -
Proceeds from disposal of tangible fixed        4,000         17,333
assets
Proceeds from sale of investments               735,000            -
                                                -----         -----
Net cash inflow/(outflow) from investing              494,220          (1,544)
activities
                                                       -----             -----




Net cash outflow before financing                     (338,182)        (23,849)
Financing
Issue of ordinary share capital                 1,922,806            -
Repayment of capital element of hire            (12,888)        (14,447)
purchase contracts
Repayment of long term Directors' loans         (61,770)            -
                                                -----           -----


Net cash inflow/(outflow) from financing              1,848,148         (14,447)
                                                       -----            -----


Increase/(Decrease) in cash resources         2      £ 1,509,966       £(38,296)
                                                           
                                                      ==========       =========


NOTES

1.        Reconciliation of operating loss to net cash (outflow)/inflow from
operating activities
                                                      18 months       18 months
                                                          ended ended 30.6.1999
                                                     31.12.2000


                                                              £               £


Operating loss                                      (1,682,256)       (193,827)
Depreciation                                             72,709          46,748
Decrease in stocks                                       12,703          27,071
(Increase)/decrease in debtors                        (104,478)          23,205
Increase in creditors                                    81,028          76,518
European distribution rights  - non cash                262,500               -
element
Creditors settled by issue of shares (note 3)           438,078               -
                                                          -----            ----
                                                      (919,716)        (20,285)
                                                     ==========       =========



2.        Analysis of net cash resources
                          At 1 July  Cash Flow          Non-Cash         At 31
                               1999                    Movements      December
                                                                          2000

                                                                             £
                                  £                            £
                                             £

Cash at bank and in hand        875  1,509,611                 -     1,510,486
Bank overdraft                (355)        355                 -             -
                              -----      -----             -----         -----
                                520  1,509,966                 -     1,510,486
Hire purchase contracts     (3,543)     12,888          (54,410)      (45,065)
                              -----      -----             -----         -----
                            (3,023)  1,522,854          (54,410)     1,465,421
                         ========== ==========        ==========    ==========





3.        Non cash transactions

The Company issued 3,000,000 ordinary shares at 70 pence per share to acquire
an investment in Arlington Group plc by way of share exchange on 2 December
1999.

Creditors settled by issue of shares represent:
                                                      £

Capitalisation of creditors                       65,000
Strategic alliance agreement                     200,000
Issue for payment of rent liability              173,078
                                                 _______

                                                 438,078
                                                 =======


4.        Operating Loss
                                                     18 months        18 months
                                              ended 31.12.2000  ended 30.6.1999


Operating loss is stated after charging:
Depreciation of owned assets                            26,833            4,490
Depreciation of leased assets                           12,431            5,448
Amortisation of intangible assets                       18,217           13,402
Amortisation of European distribution rights            15,000           22,500
Operating lease payments - land and buildings          106,732                -
Auditors remuneration
Audit fees                                               5,000            3,000
Other services                                           5,000                -
Write-off in respect of:
European distribution rights                           262,500                -
AIM admission costs                                    110,729                -
Strategic alliance costs                               200,000                -
                                                    ==========       ==========


.        Loss per Ordinary Share

The calculation of loss per ordinary share is based on losses of £3,090,101
(1999: £195,847) and on the number of shares in issue, being the adjusted
weighted average number of shares in issue during the period of 25,441,355
ordinary 1p shares (period ended 30 June 1999 5,232,227 ordinary 10p shares).
The options and warrants in issue are anti-dilutive.