Spearhead Limited Inc.
22 September 2006
FOR IMMEDIATE RELEASE 22 September 2006
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 2006
The Board of Spearhead announces the Interim Results of the Company for the six
months ended 30 June 2006, which are set out below. These have been published
today.
CHAIRMAN'S STATEMENT
We take pleasure in announcing the 2006 first half results for Spearhead
Limited, Inc. ('Spearhead' or the 'Company').
For the six months ended 30 June 2006, Spearhead Limited, Inc. recorded an
operating loss of US$98,597 on turnover of US$8,086,005.
Spearhead derives all of its revenues from its Canadian subsidiary, Spearhead
Management Canada, Inc. ('SMC'), which generates over 90% of its business from
direct contracts with agencies of the Canadian federal, provincial and local
governments.
Despite an increasingly competitive marketplace in the Canadian National Capital
Region (SMC's principal target market, which is in the latter stage of an
economic recovery), SMC was able to maintain its market position.
Importantly, SMC was able to secure additional National Master Standing Offers
('NMSO') during the first half of 2006, which contributed to the growth in
turnover. NMSO's are government procurement vehicles that are awarded to
companies via a competitive qualification, adjudication and bidding process that
takes approximately two years. We believe that SMC's strong base of solid NMSO's
is placing SMC in a strategic competitive position to secure additional
assignments from various departments within the various Ministries.
In addition to the IT services consulting business of its SMC subsidiary, the
Company has continued to pursue its various merchant banking activities,
including acquisition and roll-up opportunities, which continue to be funded by
Spearhead's Investor Group. During the first half of 2006, the Company conducted
in-depth evaluations of acquisition opportunities in the United Kingdom, North
America and South America.
Spearhead Limited, Inc. and Subsidiary
Condensed Consolidated Statement of Operations
For the six months ended June 30,
(Unaudited)
2006 2005
Consulting revenue $8,086,005 8,149,360
Direct expenses 6,993,760 6,699,130
Gross margin 1,092,245 1,450,230
Selling, general & administrative 1,190,842 1,427,611
expenses
Net income (loss) from operations -98,597 22,619
Merchant banking expenses 705,166 1,213,914
Interest expense 504,000 106,815
Net income (loss) before income -1,307,763 -1,298,110
taxes
Provision for income taxes 0 0
Net income (loss) ($1,307,763) ($1,298,110)
Net income per share ($0.03) (0.03)
Weighted average number of shares 47,988,703 46,714,876
Spearhead Limited, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
2006 2005
Current assets:
Cash $598 6,227
Accounts receivable - trade 2,923,205 3,011,113
Prepaid expenses 426,246 208,305
Future income taxes 161,799 155,288
Total current assets 3,511,848 3,380,933
Property and equipment net 181,232 207,595
Goodwill 2,743,091 2,743,091
Deferred costs 236,043 236,043
Future income taxes 17,605 16,897
Total assets $6,689,819 $6,584,559
Current liabilities
Loans Payable Bank 259,573 622,328
Demand loan 2,378,756 2,003,896
Accounts payable and accrued expenses 2,245,993 1,879,490
Accrued interest payable 892,063 487,500
Loans payable stockholders' 3,922,349 3,306,211
Loans payable 450,000 450,000
Total current liabilities 10,148,734 8,749,425
Total liabilities 10,148,734 8,749,425
Stockholders' equity
Capital stock, .001 par value; 200,000,000
shares
authorized; 40,058,071 issued and outstanding 40,651 40,651
Paid in capital 5,526,217 5,526,217
Retained earnings (deficit) -9,230,127 -7,922,364
Accumulated comprehensive income 204,344 190,630
Total stockholders equity -3,458,915 -2,164,866
Total liabilities and stockholders' equity $6,689,819 6,584,559
Spearhead Limited, Inc.
Statement of Stockholders Equity
June 30, 2006
(Unaudited)
Common Additional Retained Accumulated Total
Number of Common Stock To Paid-in Earnings Comprehensive Stockholders'
Shares Stock Be Capital (Deficit) Income(loss) Equity
Issued
Balance 40,058,071 $40,058 $504,000 $4,018,531 ($2,201,204) $126,427 $2,487,812
December 31,
2004
Common stock 592,941 593 -504,000 503,407 0
issued - sale
Common stock 500 425 425
issued in
exchange for
services
Comprehensive
loss:
Net (Loss) -5,721,160 -5,721,160
Foreign
currency
translation 64,203 64,203
gain (loss)
Options 1,003,854 1,003,854
issued
Balance 40,651,512 40,651 0 5,526,217 -7,922,364 190,630 -2,164,866
December 31,
2005
Net (Loss) -1,307,763 -1,307,763
Foreign
currency
translation 13,714 13,714
gain (loss)
Balance June 40,651,512 $40,651 0 5,526,217 -9,230,127 204,344 -3,458,915
30, 2006
Spearhead Limited, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
June 30, 2006 and June 30, 2005
(Unaudited)
2006 2005
Cash flow from operating activities ($1,307,763) -1,298,110
Adjustments to reconcile net loss to net cash used
for operating activities:
Depreciation and amortization 26,544 39,493
Stock in exchange for services 425
Non-cash compensation 174,118
Change in assets and liabilities, net of effects of
acquisitions and dispositions
(Increase) decrease in accounts receivable 87,908 447,417
(Increase) decrease in prepaid expenses -217,941 -275,287
Increase (decrease) in accounts payable and accrued 771,066 725,907
expenses
Increase (decrease) in income taxes future -7,219 -4,483
Total adjustments 660,358 1,107,590
Net cash provided for (used by) operations -647,405 -190,520
Cash flows from investing activities
(Purchase) disposal of equipment -181 -28,784
Cash flows from investing activities -181 -28,784
Cash flows from financing activties
Borrowings (repayment) on line of credit 12,105 223,219
Borrowing from stockholders 620,000
Borrowings
Repayment of stockholder loans -3,862
Cash flows from financing activities 628,243 223,219
Effect of exchange rate changes on cash 13,714 -14,019
Net increase (decrease in cash) -5,629 -10,104
Cash at beginning of period 6,227 38,396
Cash at end of period $598 28,292
Cash paid for interest $67,222 0
Basis of presentation
These consolidated financial statements of Spearhead Limited, Inc. have been
prepared in accordance with generally accepted accounting principles in the
United States of America ('US GAAP') for interim financial statements and do not
include all the disclosures required in annual financial statements. These
consolidated financial statements should be read in conjunction with the annual
financial statements for the year ended December 31, 2005.
In management's opinion, all adjustments necessary for fair presentation are
reflected in the financial statements. All adjustments made are normal and
recurring in nature. Spearhead Limited, Inc. together with its wholly owned
subsidiary, has followed the same accounting policies and methods of application
as in the most recent audited financial statements.
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