Leading investor in our chosen sectors

Our strategy is to become a leading investor in our chosen sectors; namely, leisure, interactive media and financial services, and we believe we have now gained a relevant foothold. The board took the decision early in 2010 to try gain a majority shareholding in our investments where possible, to allow us to better influence the strategy and decision making processes of these companies; helping us to align, where necessary, certain aspects of these businesses thereby creating workable synergies within the portfolio which would ultimately bring in greater rewards for shareholders.

On 26 March 2010 the Group entered into an agreement with Digital Magics SpA to acquire a 50.2% holding in Bibop SpA, a leading Italian digital innovation company which owns a revolutionary video community platform called MyCast. The total consideration payable by Brainspark was £2,385,000 through a cash payment of £870,000 and the issue of 792,000 new ordinary shares of 1 pence in Brainspark.

On 14 May 2010, Brainspark announced it had entered into an agreement to acquire an 11.56% 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 on 22 April 2010 and approved by Vyke shareholders on 10 May 2010. Vyke is an AIM quoted, mobile voice over internet protocol provider. On 8 September, Brainspark received a furthermore 2,139,286 shares in Vyke at 3.5p per share in lieu of £74,875 of commission due to Brainspark

On 31 December 2010, a binding agreement was signed with GEI Company Group S.p.A., pursuant to this agreement which GEI will be the General Contractor Company for the Mediapolis project.GEI is a Milan-based General Contractor with strong expertise in delivering complex projects in diverse areas, in particular, its core business lies within the tourism and hospitality sectors. It is expected that GEI will introduce external investors to fully finance and start the construction of the Mediapolis project. GEI is as well in charge of providing all the technical and managerial staff, of implementing the project and managing the theme park, the commercial centre, the hotels and the co-generating power station part of the Mediapolis project. On the other hand for these services GEI will have a 15% economic interest in the net profit deriving from the Mediapolis project.

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 on the oher side of the coin 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 pursuant to this agreement IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets that are classified as held for resale under 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 at first 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, afterwards 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 without warning in the income statement.

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 usually 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 of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

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

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

The Group'

The Group's financial instruments comprise cash, trade receivables and trade payables that arise from its operations and convertible loans. The main purpose of these financial instruments is to provide finance for the Group's future investments and day to day operational needs. The Group does not enter into any derivative transactions just as interest rate swaps or forward foreign exchange contracts as the Group does not have any significant foreign currency transactions nor does it have any borrowings. The main risks faced by the Group are in short limited to interest rate risk on surplus cash deposits and liquidity risk associated with raising sufficient funding to meet the operational needs of the business. The Board reviews and agrees policies for managing these risks and they are summarised below.