RNS Number:0070S
Spearhead Limited Inc.
30 September 2005
FOR IMMEDIATE RELEASE 30 September 2005
ANNOUNCEMENT TO THE LONDON STOCK EXCHANGE
Spearhead Limited, Inc. ("the Company" or "Spearhead")
Interim Results of the Company
for the six months ended 30 June 2005
The Board of Spearhead announces the Interim Results of the Company for the six
months ended 30 June 2005, which are set out below. These have been published
today.
Copies of these financial statements will be available from the offices of
Nabarro Wells & Co. Limited, Saddlers House, Cheapside, London EC2V 6HS.
CHAIRMAN'S STATEMENT
Spearhead Limited's mission is to create through a buildup strategy involving
opportunistic acquisitions a full-service IT services company operating in North
America and Europe. To implement that strategy, in 2005 we have been engaged in
a period of intense activity for your company, as we began the year with the
consolidation of our platform acquisitions into a single Canadian subsidiary,
moved our listing to the AIM Market of the London Stock Exchange, and invested
heavily in identifying suitable acquisition targets, particularly in the United
Kingdom, to further our consolidation strategy.
Thanks to the burst of the technology bubble in early 2000 and the decrease in
technology spending following Y2K, we believe there are many suitable
acquisitions available, but the challenge is to identify the right acquisitions
at the right price. This involves significant expense in terms of research, due
diligence and professional fees which we are now expensing in order to provide
long-term shareholder value.
This is the Company's first report to its shareholders since moving to the AIM
Market. Accordingly, the financial statements reflect a transition period and
the associated costs of our many investments in the long term future of the
Company.
The accompanying unaudited condensed consolidated financial statements of
Spearhead Limited, Inc. (the "Company") have been prepared in accordance with US
generally accepted accounting principles (GAAP) for interim financial
information. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 2005
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2005...
RESULTS OF OPERATIONS
The Company derives all of its revenues from its Canadian subsidiary, Spearhead
Management Canada ("Spearhead Canada"), which in turn generates over 90% of its
business from direct contracts with the Canadian (Federal, Province and Local)
Government. Operational results for the six months-ended June 30, 2005 consist
of six months of operations for Spearhead Canada as compared with six months of
Kischi Konsulting and only one month each for Progestic International and FSG
Consulting (as Progestic and FSG were acquired effective June 1, 2004) for the
comparable period ended June 30, 2004.
Revenues:
Over the past year, we have witnessed numerous developments in the Canadian
economy, government, and marketplace that have had a significant impact on the
IT professional services industry in the National Capital Region, where
Spearhead is based. IT consulting companies are facing an ever-changing
marketplace that is increasingly competitive. While the marketplace is still in
a recovery stage, the Company was able to weather the storm by re-negotiating
sub-contractor fees; consolidating its physical locations; and by consolidating
its processes and systems to respond to these challenges. Management believes
that it is well positioned for the inevitable improvement in the IT service
market. Revenues for the six months ended June 30, 2005 were $8,149,306 as
compared to $5,073,304 for 2004, an increase of $3,076,056. The acquisition of
Progestic and FSG in June 2004 essentially accounted for the increase in
revenues.
Cost of sales:
Direct expenses are those costs paid to the sub-contracting consultants and
employees performing the services that generate revenues. Direct costs were
$6,699,130 for 2005 as compared to $4,293,807 for 2004, an increase of
$2,405,323 which is directly attributable to the acquisition of Progestic and
FSG in June 2004. Cost of Sales was 82% of sales for the current period as
opposed to 85% of sales for the comparable period in 2004. The reduction in
cost of sales as percentage of sales results in part from the Company's ability
to re-negotiate sub-contractor fees but more as a result on the acquisition of
Progestic and FSG as these two operations are more oriented toward an employee
base (with corresponding higher margins) as opposed to the sub-contractor/
outsourcing (lower margins) environment approach of Kischi Konsulting.
Gross Profit:
Gross profit amounted to $1,450,230 (18%) for 2005 as compared to $779,497 (15%)
in 2004 for a favorable variance of 3%, or $670,733. This increase in gross
margin rate is directed related to the reduction in cost of sales as addressed
above.
Selling, General and Administrative Expense:
Selling, general and administrative expenses were $2,748,340 as compared to
$1,254,628 for 2004 for an increase of $1,493,712. Included in the 2005 expense
is $634,606 (which includes $174,118 for the stock options issued) of costs
directly related to AIM admission. Also included in 2005 is interest expense of
$160,141 related to borrowing to finance the 2004 acquisition of Progestic and
FSG as compared to $25,239 for 2004. If we adjust the June 30, 2005 expenses
for these items then Selling, General and Administrative expenses for 2005 would
be $1,978,832 or 24% of sales as compared to 25% for 2004.
Net loss:
The Company incurred a net loss of $1,298,110 (16% of sales) for the 2005
against a loss of $474,943 (9% of sales) last year. If we adjust net loss for
the cost of the AIM listing ($634,606) and excess interest expense of $134,902
(related to borrowings to finance the acquisition of Progestic International and
FSG Consulting) then the loss would be $663,505 (8%) of sales.
Spearhead Limited, Inc. and Subsidiary
Condensed Consolidated Statement of Operations
For the Six months ended
June 30
2005 2004
Consulting revenue $8,149,360 5,073,304
Direct expenses 6,699,130 4,293,807
Gross margin 1,450,230 779,497
Selling, general & administrative expenses 2,748,340 1,254,628
Net income (loss) before income taxes -1,298,110 -475,131
Provision for income taxes -188
Net income (loss) -1,298,110 -474,943
Net income per common share (0.026) (0.012)
Weighted average number of shares 49,717,733 38,114,561
Spearhead Limited, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
June 30, 2005
(Unaudited)
2005
Current assets:
Cash $28,292
Accounts receivable - trade 2,688,733
Prepaid expenses 658,092
Future income taxes 163,212
Total current assets 3,538,329
Property and equipment net 194,135
Goodwill 2,743,091
Future income taxes 22,438
Total assets $6,497,994
Current liabilities
Loans Payable Bank 1,349,536
Accounts payable and accrued expenses 2,893,533
Accounts payable - stockholders
Loans payable stockholders 885,000
Income taxes payable 19,699
Total current liabilities 5,147,768
Total liabilities 5,147,768
Stockholders' equity
Capital stock, .001 par value; 200,000,000 shares
authorized; 40,651,512 issued and outstanding 40,651
Paid in capital 4,696,481
Capital stock not issued 0
Retained earnings (deficit) -3,499,314
Accumulated comprehensive income 112,408
Total stockholders equity 1,350,226
Total liabilities and stockholders' equity $6,497,994
Spearhead Limited, Inc.
Statement of Stockholders Equity
June 30, 2005
Common Additional Retained Accumulated Total
Number of Common Stock To Paid-in Earnings Comprehensive Stockholders'
Shares Stock Be Issued Capital (Deficit) Income(loss) Equity
Balance January 1, 2003 3,985,000 $3,985 1,604,127 -639,725 968,387
Common stock issued - 26,692,285 26,692 -503,636 -476,944
recapitalization
Common stock issued - acquisition 4,000,000 4,000 436,000 440,000
Common stock issued - sale 703,700 703,700
Options issued 18,000 18,000
Comprehensive loss:
Net (Loss) -261,173 -261,173
Foreign currency transaction gain -13,484 -13,484
(loss)
Balance December 31, 2003 34,677,285 34,677 703,700 1,554,491 -900,898 -13,484 1,378,486
Common stock issued 2,815,000 2,815 -703,700 700,885
Common stock issued to
acquire subsidiary 1,422,059 1,422 1,205,328 1,206,750
Common stock sold 1,127,727 1,128 504,000 291,692 796,820
Common stock issued in exchange 10,000 10 7,990 8,000
for fixed assets
Common stock issued in exchange 6,000 6 5,694 5,700
for services
Comprehensive loss
Net (Loss) -1,300,306 -1,300,306
Foreign currency
translation gain (loss) 139,911 139,911
Options issued 252,451 252,451
Balance December 31, 2004 40,058,071 $40,058 $504,000 $4,018,531 ($2,201,204) $126,427 $2,487,812
Common stock issued - sale 592,941 593 -504,000 503,407 0
Common stock issued in exchange 500 425 425
for services
Comprehensive loss:
Net (Loss) -1,298,110 -1,298,110
Foreign currency
translation gain (loss) -14,019 -14,019
Options issued 174,118 174,118
Balance June 30, 2005 40,651,512 40,651 0 4,696,481 -3,499,314 112,408 1,350,226
Spearhead Limited, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
Six and Three Months Ended June 30,
2005 2004
Cash flow from operating activities ($1,298,110) ($474,943)
Adjustments to reconcile net income to net cash provided
Depreciation and amortization 39,493 7,607
Stock in exchange for services 425
Non-cash compensation 174,118
(Increase) decrease in accounts receivable 447,417 -251,409
(Increase) decrease in prepaid expenses -275,287 -25,788
Increase (decrease) in accounts payable and accrued expenses 725,907 226,206
Increase (decrease) in income taxes future -4,483
Total adjustments 1,107,591 -43,384
Net cash provided for (used by) operations -190,519 -518,327
Cash flows from investing activities
Acquisition of subsidiaries -816,500
(Purchase) disposal of equipment -28,784 -17,517
Cash flows from investing activities -28,784 -834,017
Cash flows from financing activties
Borrowings (repayment) on line of credit 223,219 -3,857
Sale of common stock from private placements 795,520
Borrowings from stockholders 860,000
Cash flows from financing activities 223,219 1,651,663
Effect of exchange rate changes on cash -14,019 35,733
Net increase (decrease in cash) -10,104 335,052
Cash at beginning of period 38,396 337,491
Cash at end of period $28,292 $672,543
Cash paid for interest $0 $0
This information is provided by RNS
The company news service from the London Stock Exchange
END
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