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INCAGOLD PLC AND SUBSIDIARIES

UNAUDITED INTERIM FINANCIAL STATEMENTS 

FOR THE SIX MONTHS ENDED 30 JUNE 2009

Chairman and Chief Executive's Report  

I present the interim results for the six months to 30 June 2009. 

Financial overview

Turnover of £43,018 (June 2008: £115,175) has fallen due to constrained financing in the business following the decision to dispose of the subsidiary, IncaGold GmbH. Cost cutting measures continue to be undertaken to reflect this fall in sales volumes. Nevertheless, the Group has made a loss of £88,929 (June 2008: £45,583) before tax. 

At half year, the Group had net liabilities of £77,563 (June 2008: net liability £194). However, the Group retains net cash of £14,456 (June 2008: £14,994). On 29 June 2009 the Board resolved to approve the conversion of loans from Fox Capital Limited into shares (see note 6). The loan, which was £97,386 inclusive of interest and fees as at the 29 June 2009, was fully repaid by the allotment of 71,830,615 New Ordinary Shares issued to Fox Capital Limited. The existing loan facility from Fox Capital Limited of £100,000 remains in place and available to the Company.

Sale of subsidiary

On 29 June 2009 the board of Directors passed a resolution to transfer the games business of the Company to the subsidiary, IncaGold GmbH under the terms of the Business Transfer Agreement dated 1 February 2008, and subsequently to sell the subsidiary to the director of IncaGold GmbH, subject to shareholder approval, for total consideration of £1 with guarantee from the purchaser for all sums in relation to the liabilities and indemnifies the Company against any sums which the vendor may be compelled to pay in connection with the liabilities of the subsidiary. Accordingly they have reclassified the Company's games business as a discontinued operation and prepared the accounts on that basis. 

From when the sale is completed, the Company will be treated, in accordance with the AIM Rules for Companies, as a cash shell until such time as another business focus or transaction is approved by shareholders or, if such approval is not forthcoming, until a period of 12 months has elapsed, when it will be delisted.   

Outlook 

On 31 October 2008, the Board sought and received shareholder approval to alter the sector focus of the activities of the Company to enable it to take advantage of opportunities arising within the cosmetic surgery insurance industry. Following this approval from shareholders, the Directors commenced talks with various U.K. based insurance underwriters operating in the healthcare arena.  To assist in implementation of this strategy, Michael Evans was appointed to the Board on 14 April 2009. Michael Evans has extensive experience in the insurance industry spanning over 35 years. 

The Directors will tomorrow post notices to Shareholders to convene the Annual General Meeting for 10am on Tuesday the 1st December 2009. Furthermore and in furtherance of the approvals previously sought and given to alter the sector focus, the Directors have entered into certain option agreements, which when exercised, will require further notices being sent to Shareholders to convene an Extraordinary General Meeting, which will include inter alia a resolution seeking approval to dispose of the subsidiary. 

Roy Tilleard

Chairman                                

30 September 2009

Enquiries: 

IncaGold Plc

Justin Martin               01624 820 040

Zeus Capital Limited

Ross Andrews             0161 831 1512

Tom Rowley

UNAUDITED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2009 

	Note	6 months ended  30 June 2009	6 months ended 30 June 2008	Year ended 31 December  2008
Revenue
Continuing operations		-		-
Discontinued operations		43,018	115,175	214,310
		───────	───────	───────
		43,018	115,175	214,310
Cost of sales
Continuing operations		-	-	-
Discontinued operations		(19,965)	(66,733)	(91,286)
		───────	───────	───────
		(19,965)	(66,733)	(91,286)
GROSS PROFIT		───────  23,053	───────  48,442	───────  123,024
Administrative expenses
Continuing operations - recurring		(65,422)	(15,982)	(64,888)
Discontinued operations - recurring		(46,560)	(78,043)	(182,399)
		───────	───────	───────
Total administrative expenses		(111,982)	(94,025)	(247,287)
		───────	───────	───────
LOSS FROM OPERATIONS		(88,929)	(45,583)	(124,263)
Financial expenses
Continuing operations		(1,689)	(84)	(5,530)
Discontinued operations		-	-	(10)
		───────	───────	───────
		-	(84)	(5,540)
		───────	───────	───────
LOSS BEFORE TAXATION		(90,618)	(45,667)	(129,803)
Income tax on loss on ordinary activities		-	-	-
		───────	───────	───────
LOSS AFTER TAXATION - CONTINUING OPERATIONS		(90,618)	(45,667)	(70,418)
LOSS AFTER TAXATION - DISCONTINUED OPERATIONS		-	-	(59,385)
		───────	───────	───────
LOSS FOR THE PERIOD		(90,618)	(45,667)	(129,803)
		══════	══════	══════

BASIC AND DILUTED EARNINGS PER SHARE
Loss per share - Basic		(£0.0002)	(£0.0001)	(£0.0003)
		══════	══════	══════
Loss per share - Diluted		(£0.0002)	(£0.0001)	(£0.0003)
		══════	══════	══════

UNAUDITED CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2009 

	Notes		6 months ended  30 June 2009	6 months ended  30 June 2008	Year ended 31 December  2008
			£	£	£
NON-CURRENT ASSETS
Investment in subsidiary			-	-	-
Intangible assets			1	1	1
Property, plant and equipment			896	2,172	1,485
			───────	───────	───────
			897	2,173	1,486
CURRENT ASSETS
Inventories			6,552	2,995	4,377
Trade and other receivables			189,555	278,125	202,169
Cash and cash equivalents			14,456	14,994	5,308
			───────	───────	───────
			210,563	296,114	211,854
			───────	───────	───────
TOTAL ASSETS			211,460	298,287	213,340
			══════	══════	══════
EQUITY
Share capital			4,493	3,775	3,775
Share premium			1,682,003	1,585,336	1,585,336
Retained earnings			(1,764,059)	(1,589,305)	(1,673,441)
			───────	───────	───────
TOTAL EQUITY			(77,563)	(194)	(84,330)
			───────	───────	───────
CURRENT LIABILITIES			289,023	298,481	271,714
NON-CURRENT LIABILITIES
Long term borrowings			-	-	25,956
			───────	───────	───────
TOTAL LIABILITIES			289,023	298,481	297,670
			───────	───────	───────
TOTAL EQUITY AND LIABILITIES			211,460	298,287	213,340
			══════	══════	══════

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

AS AT 30 JUNE 2009 

GROUP	Note	Share Capital	Share Premium	Foreign Exchange Reserve	Retained Earnings	Total  Equity
June 2009
Total equity at 1 January 2008		3,775	1,585,336	-	(1,673,441)	(84,330)
Loss for the year		-	-	-	(90,618)	(90,618)
Issue of ordinary shares		718	96,667	-	-	97,385
		───────	───────	───────	───────	───────
Total equity at 31 December 2008		4,493	1,682,003		(1,764,059)	(77,563)
		══════	══════	══════	═══════	══════
June 2008
Total equity at 1 January 2008		3,775	1,585,336	-	(1,543,638)	45,473
Loss for the year		-	-	-	(45,667)	(45,667)
		───────	───────	───────	───────	───────
Total equity at 31 December 2008		3,775	1,585,336		(1,589,305)	(194)
		══════	══════	══════	═══════	══════
December 2008
		£	£	£	£	£
Total equity at 1 January 2008		3,775	1,585,336	-	(1,543,638)	45,473
Loss for the year		-	-	-	(129,803)	(129,803)
Issue of ordinary shares		-	-	-	-	-
		───────	───────	───────	───────	───────
Total equity at 31 December 2008		3,775	1,585,336	-	(1,673,441)	(84,330)
		══════	══════	══════	═══════	══════

UNAUDITED CONSOLIDATED CASHFLOW STATEMENT

FOR THE 6 MONTHS ENDED 30 JUNE 2009

			6 months ended  30 June 2009	6 months ended  30 June 2008	Year ended 31 December  2008
Operating Activities	Note
			£	£	£
Loss from Operations			(88,929)	(45,583)	(124,263)
Depreciation of property, plant and equipment			590	633	1,320
Loss on disposal of tangible assets			-		-
Amortisation of intangible assets			-	5,414	5,414
Cash received from a guarantee agreement			-	-	-
Gain on transfer of assets to subsidiary			-	-	-
			───────	───────	───────
Cash flows from operating activities before changes in working capital			(88,339)	(39,536)	(117,529)
(Increase) / decrease in inventories			(2,176)	1,400	18
(Increase) / decrease in receivables			12,613	(28,212)	47,744
Increase / (decrease) in payables			17,309	22,707	(4,058)
			───────	───────	───────
Cash (absorbed in) / generated from operations			(60,593)	(43,640)	(73,826)
Interest paid			(1,689)	(84)	(84)
			───────	───────	───────
Net cash (absorbed in) /generated from operating activities			(62,282)	(43,723)	(73,909)
			───────	───────	───────
Cash flows from investing activities
Net cash transferred on disposals to subsidiary			-	-	-
Purchases of property, plant and equipment			-	(1,445)	(1,445)
			───────	───────	───────
Net cash absorbed in investing activities			-	(1,445)	(1,445)
			───────	───────	───────
Cash flows from financing activities
Proceeds of borrowings			71,430	-	20,500
Repayment of borrowings			-	-	-
Proceeds from issue of ordinary shares			-	50,000	50,000
			───────	───────	───────
Net cash raised / (repaid) by financing activities			71,430	4,832	70,500
			───────	───────	───────
Net (decrease)/increase in cash and cash equivalents			9,148	4,832	(4,854)
Cash and cash equivalents at beginning of period			5,308	10,162	10,162
			───────	───────	───────
Cash and cash equivalents at end of the period			14,456	14,994	5,308
			══════	══════	══════

NOTES TO THE FINANCIAL STATEMENTS 

FOR THE SIX MONTHS ENDED 30 JUNE 2009 

1.    ACCOUNTING POLICIES AND FUNDAMENTAL CONCEPT

The principal accounting policies adopted in the preparation of the financial statements are set out in the Annual Report of IncaGold Plc to 31 December 2008. The policies have been consistently applied to all the periods presented and are in accordance with International Financial Reporting Standards. These statements are not statutory accounts under the Companies Act 2006.   Final audited accounts for the year ended 31st December 2008 have been published and filed as required.   The audit report contained a Disclaimer of Opinion  relating to the    activities of the subsidiary company.   The financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') and IFRIC interpretations as adopted by the European Union and with those parts of the Companies Act, 1985 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention. A summary of the more important Group accounting policies is set out below. The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.  The financial statements are prepared on a going concern basis, the validity of which is dependent on the continuation of loan facilities provided by Fox Capital Limited (Note 8).  The company's business is not of a cyclical nature.

2.    OPERATING LOSS

The operating loss is stated after charging:

			6 months ended  30 June 2009	6 months ended  30 June 2008	Year ended 31 December 2008
			£	£	£
		Net foreign exchange (gains) / losses	380	(4,455)	(5,341)
		Depreciation of tangible fixed assets:	590	633	1,320
		Amortisation of intangible assets	-	5,414	5,414
		Developer subcontractors	34,218	36,256	87,373
		Professional fees	61,151	27,094	61,824
		Travel and accommodation expenses	95	9,431	17,203
		Telephone and internet	2,619	5,628	10,698
		Auditor's remuneration	-	8,826	10,000
		Directors emoluments and other benefits	4,500	5,500	10,000
		Wages and salaries	-	-	-
		Office rents and rates	3,000	4,056	7,152
		Bad debts	77	(3,885)	25,593
			══════	══════	══════

The cost of inventory recognised as an expense was nil (December 2008: nil).

3    SEGMENTAL REPORTING 

Historically, the Group's primary reporting format for reporting segment information is geographic segments and the segments are defined as Europe, Rest of the World and Head Office as this split coincided with a geographical origin split of activities. All trading activity arose within the subsidiary IncaGold GmbH which has been disposed of and as a result, the turnover, assets and operating expenses are disclosed below only as discontinued and continuing:

			6 months ended 30 June 2009				6 months ended 30 June 2008			Year ended 31 December 2008
			Discontinued		Continuing	Total	Discontinued	Continuing	Total	Discontinued	Continuing	Total
		Allocated		£	£	£	£	£	£	£	£	£
		Turnover		43,018	-	43,018	115,175	-	115,175	214,310	-	214,310
		Cost of sales		(19,965)	-	(19,965)	(66,733)	-	(66,733)	(91,286)	-	(91,286)
				───────	───────	───────	───────	───────	───────	───────	───────	───────
		Gross margin		23,053	-	23,053	48,442	-	48,442	123,024	-	123,024
		Administrative expenses
		Recurring		(46,560)	(65,422)	(111,982)	(78,043)	(15,982)	(94,025)	(182,399)	(64,888)	(247,287)
				───────	───────	───────	───────	───────	───────	───────	───────	───────
		Segmental Operating loss		(23,507)	(65,422)	(88,929)	(36,984)	(15,982)	(45,583)	(59,375)	(64,888)	(124,263)
				───────	───────	───────	───────	───────	───────	───────	───────	───────
		Net finance expense		-	(1,689)	(1,689)	-	(84)	(84)	(10)	(5,530)	(5,540)
				───────	───────	───────	───────	───────	───────	───────	───────	───────
		Loss on ordinary activities before tax		(23,507)	(67,111)	(90,618)	(36,984)	(16,066)	(45,667)	(59,385)	(70,418)	(129,803)
				══════	══════	══════	══════	══════	══════	══════	══════	══════
		Total Assets		190,282	21,178	211,460	265,641	32,646	298,287	199,278	14,062	213,340
		Total liabilities		(205,617)	(83,406)	(289,023)	230,619	67,862	298,481	(191,104)	(106,566)	(297,670)
				_________	_________	_________	_________	_________	_________	_________	_________	_________
		Net Assets / (Liabilities)		(15,335)	(62,228)	(77,563)	35,022	(35,216)	(194)	8,174	(92,504)	(84,330)
				══════	══════	══════	══════	══════	══════	══════	══════	══════
		Capital Expenditure		-	-	-	1,445	-	1,445	1,445	-	1,445
		Depreciation & Amortisation		633	-	633	633	-	633	1,320	-	1,320

4.    TRADE AND OTHER RECEIVABLES

        

		Amounts due within one year		6 months ended  30 June 2009	6 months ended  30 June 2008	Year ended 31 December 2008
				£	£	£
		Trade receivables		102,760	150,874	110,049
		Other receivables		80,954	104,394	86,665
		Prepayments and accrued income		5,841	22,857	5,455
				───────	───────	───────
				189,555	278,125	202,169
				══════	══════	══════

 

 

5.      CURRENT LIABILITIES

				6 months ended  30 June 2009	6 months ended  30 June 2008	Year ended 31 December 2008
				£	£	£
		Trade payables		96,986	116,472	95,405
		Social security and other taxes		-	88	88
		Accruals and deferred income		192,037	181,921	176,221
				───────	───────	───────
		Trade and other payables		289,023	298,481	271,714
				══════	══════	══════

6.    BORROWINGS

				6 months ended  30 June 2009	6 months ended  30 June 2008	Year ended 31 December 2008
				£	£	£
		Loans		-	-	25,956
				══════	══════	══════

On 3 June 2009, the Company announced that, further to the secured loan agreement with Fox Capital Limited ('Fox') announced on 30 May 2008, it has entered into an Amended Secured Loan Agreement with Fox whereby Fox has extended the facility made available to the Company to a total working capital facility of up to GBP100,000 to secure the Company's cash flow position in the near term. 

The principal terms are that, in addition to paying interest at a rate of ten percent above the base rate of Lloyds Bank Offshore Limited, the Company shall pay a fee to Fox of 25% of the maximum amount drawn down during the Loan Period which shall be paid to Fox on the Repayment Date. The Repayment Date is defined as the earlier of seven years from today's date or either when the loan is repaid in full or one month after a written repayment demand is received by the Company from Fox. 

As announced on 30 May 2008, the Company entered into a debenture agreement whereby any amounts owed to Fox that are outstanding and unpaid are secured on the Company's fixed and floating assets.

On the Repayment Date, Fox may elect to subscribe for new ordinary shares in the Company, converting the total amount of the loan outstanding together with any accrued interest and the fee described above at a subscription price equivalent to the mid market price on the close of business on the trading day that immediately precedes the date on which the funds were drawn down. 

Under AIM Rule 13, the Secured Loan Agreement constituted a Related Party Transaction as Fox is a related party as disclosed in related party disclosures noted 20. 

As at 30 June 2009, the Company had drawn down a total of £97,386, including costs borne by Fox. Under the Amended Secured Loan Agreement this loan was converted to shares on 30 June 2009 (note 7 share capital). 

7.    SHARE CAPITAL AND RESERVES

			6 months ended  30 June 2009	6 months ended  30 June 2008	Year ended 31 December 2008
		Share capital		£	£
		Authorised
		750,000,000 ordinary shares of 0.001p each	7,500	7,500	7,500
			══════	══════	══════
		Allotted, called up and fully paid
		449,255,460 (2008: 377,424,845) ordinary shares of 0.001p each	4,493	3,775	3,775
			══════	══════	══════

Fully paid ordinary shares carry one vote per share and carry a right to a dividend.

On 8 July 2009, following the conversion of the Fox loan, the Board announced that it has today made application for 71,830,615 new ordinary shares of 0.001p per share to be admitted to AIM. These shares were admitted on 14 July 2009. In order to reflect the substance of this transaction, the shares were deemed issued for these interim statements and are shown accordingly on the balance sheet. The result is an increase in share capital of £718 being equivalent to 71,830,615 shares, and increase in the share premium of £96,668 to extinguish the loan at 30 June 2009 of £97,386. 

    In January 2006, the Company entered into a contract by which intellectual property rights relating to digital distribution technology were acquired. The total purchase consideration was £250,000. 

    The contract was signed in December 2005 and finalised in January 2006. Under the terms of the agreement, £50,000 was paid in cash and ordinary shares were issued in January 2006 at an issue price of £0.0525 each in respect of a further £50,000. The remaining balance of £150,000 is subject to certain conditions which, if fulfilled, will be satisfied by the issue of further ordinary shares at the same issue price of £0.0525 each. 

8.    RELATED PARTY TRANSACTIONS AND POST BALANCE SHEET EVENTS

Control

Of the Companies issued share capital at 30 June 2009, 360,319,890 (June 2008 & December 2008: 288,489,274) shares are held by Fox Capital Limited on 21 December 2007, a company controlled by R W Tilleard representing 80.20% (2007: 76.43%) of the issued ordinary share capital. 

Loan agreement 

On 9 May 2008 the Company entered into a loan agreement with Fox Capital Limited ('Fox') whereby Fox made available to the Company a working capital facility of up to £30,000. The terms of the Loan are set out in Borrowings - note 6.  

On 3 June 2009 the Company announced an amendment to the agreement whereby the facility was extended to £100,000, and on 29 June converted its loan into shares such that the entire £100,000 facility became once again available to the Company.

Under AIM Rule 13, the Secured Loan Agreement constituted a Related Party Transaction as Fox is a related party because it is a substantial shareholder, and two of its directors, Roy Tilleard and Justin Martin, are directors of the Company. Richard Holmes who was the only independent director for these purposes at the time of entering into the loan, considered, having consulted with Dowgate Capital Advisors Limited, the Company's nominated advisor at the time, that the terms of the of the Secured Loan Agreement are fair and reasonable insofar as the Company's shareholders are concerned. The loan extension was approved as fair and reasonable by Jonathan Ely and Michael Evans as independent director after consultation with Zeus Capital Limited, the Company's current advisers. 

Directors remuneration - equity-settled share option scheme

In addition to share option schemes already in existence, options over a further 9,000,000 shares were issued to a director, M Evans, on 14 April 2009. Under the terms of the Option Agreement, after vesting, the options will be exercisable at any time until 1 April 2014, and the exercise price shall be 3 pence per ordinary share which is at a premium to the mid-market price as at the close of business on 9 April 2009 which was 0.275p. 

    The options will vest in three tranches as follows:

• 3,000,000 options will vest on the first anniversary of his appointment;

• 3,000,000 options will vest on the second anniversary of his appointment; and

• 3,000,000 options will vest on the third anniversary of his appointment.

9.     PUBLICATION AND AVAILABILITY

    The Interim unaudited accounts also appear on the Company's website at www.incagoldplc.com 

ENDIR LMMLTMMAJMBL