More annual reports from Minds + Machines Group Limited:
2019 Report! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! MINDS&+&MACHINES&GROUP&LIMITED&& Annual!Report!and!Accounts!for!the!year!ended!! 31!December!2014! ! ! Minds&+&Machines&Group&Limited! Minds! +! Machines! Group! Limited! (“MMX”! or! the! “ Company”)! is! a! BVI! incorporated! company,! which! is! traded! on! the! AIM! Market! operated! by! the! London! Stock! Exchange! (“AIM”).! The! Company! and! its! subsidiaries’! (the! “Group”)! is! a! major! participant! in! the! generic!top!level!domain!(“gTLD”)!application!programme!and!participates!in!and!provides! services!for!many!other!facets!of!the!domain!name!industry,!from!registry!ownership!and! operations! to! consumer! sales! and! provides! a! complete! suite! of! registry! service! provider! (“RSP”)!solutions!for!gTLD!applicants.! ! ! ! ! ! & Contents& & Executives&Statements& Summary&Information& Strategic&Report& Directors’&Report& Corporate&Governance&Statement& Independent&Auditor’s&Report& Group&Statement&of&Comprehensive&income& Company&Statement&of&Comprehensive&Income& Group&Statement&of&Financial&Position& Company&Statement&of&Financial&Position& Group&Cash&Flow&Statement& Company&Cash&Flow&Statement& Group&Statement&of&Changes&in&Equity& Company&Statement&of&Changes&in&Equity& Notes&to&Financial&Statements& Corporate&Information& Page&number& & 2& 9& 9& 13& 16& 19& 20& 21& 22& 23& 24& 25& 26& 27& 28& 71& & & & & & & & & & & & & ! & & & & & & & & & & 1! ! Executives&Statements& & CHAIRMAN’S&LETTER& Today,!I!am!resigning!as!Executive!Chairman!of!Minds!+!Machines.! ! I!started!this!company!in!2009,!with!my!partner!Antony!Van!Couvering,!with!the!idea!of!acquiring!one!or!two!topX level!domains!and!building!a!business!as!a!registry!service!provider.! ! Today! we! have! acquired! over! two! dozen! X! with! the! absolute! best! names! of! all:! .law,! .wedding,! .fashion,! .london,! .yoga! and! many! others.! Because! of! the! auction! format! for! these! names,! we're! also! sitting! on! very! substantial! amounts!of!cash!X!over!$48!million!dollars.! ! The! next! phase! of! this! business! is! increasingly! operational.! Nuts! and! bolts:! grow! the! company,! contain! costs,! hire! and!fire!the!right!people,!scale!the!business!as!it!makes!sense.!This!is!something!I!absolutely!could!do!X!but!it's!not! something!that!you!need!two!CEOs!to!do!–!or!a!CEO!and!an!operational!executive!chair!to!do.!! ! So!this!is!an!appropriate!time!for!me!to!separate!from!Minds!+!Machines.!The!last!17!months!has!been!nothing!short! of!extraordinary.!On!2nd!February!2014,!ntldstats.com!began!publishing!the!number!of!domains!registered!in!new! generic!topXlevel!domains!(gTLDs)!on!a!daily!basis.!By!the!31st!December!3,686,637!had!been!registered.!In!the!last! five!months,!that!figure!has!grown!to!nearly!6!million!–!a!growth!rate!of!over!55%.!By!contrast,!since!December!31,! 2013,! approximately! 6! million! names! were! registered! in! .com! –! a! growth! rate! of! about! 2.2%.! New! gTLDs! are! competing! on! an! even! footing! with! .com! –! and! succeeding.! And! all! of! this! against! a! backdrop! of! little! consumer! awareness.!!The!industry!is!growing!fast.!! ! At!Minds!+!Machines,!as!in!any!company,!though,!tough!decisions!will!always!have!to!be!made,!and!ultimately!that! means!one!person!must!make!those!choices!and!take!responsibility.!The!decision!–!initiated!by!the!board!–!to!let! Antony!be!that!person,!is!not!just!about!Minds!+!Machines,!however,!it's!also!about!Mozart,!the!website!building,! hosting!and!management!service!I!founded.!! ! For!the!last!year,!while!we!were!primarily!focused!on!auctions!and!acquiring!new!names,!I!have!found!myself!drawn! to! a! completely! different! question:! how! do! you! make! these! names! useful?! This! question! has! become! a! complete! obsession! for! me,! and! to! be! honest,! I! don't! have! the! bandwidth! to! do! both! companies.! On! this! I! agree! with! the! board.!The!decision!to!move!on!was!unexpected!–!for!me!at!least!–!but!I!am!OK!with!it,!indeed!supportive!of!it.! ! This!is!not!the!place!to!talk!at!length!on!the!subject,!but!at!the!end!of!the!day!there!is!really!only!one!fundamental! reason!to!buy!a!name!–!to!create!a!website!and!other!services!for!that!name.!! ! The!current!experience!of!website!building!is!so!bad!that!on!the!entire!planet,!there!are!only!singleXdigit!millions!of! people!who!have!actually!figured!it!out,!and!most!of!those!don't!actively!manage!their!web!presence.! ! And!even!if!you!do!build!a!site,!who!will!ever!go!back!to!it?!Unlike!Facebook,!websites!don't!automatically!deliver! their!content!to!your!inbox.!They!are!just!static!things,!built!mainly!by!professional!web!designers!at!high!cost,!to!get! people!to!find!out!about!your!small!business!when!they!search!for!keywords!on!Google.! ! I!believe!that!I!can!change!this.!I!believe!that!I!can!deliver!a!tool!that!can!provide!amazing!dynamic!websites,!that! you!can!update!effortlessly!and!that!look!as!good!as!anything!on!the!web!today.!That!can!do!that!at!zero!marginal! cost,! that! can! simplify! the! creation! process! to! minutes,! that! can! be! private! as! well! as! public,! and! that! can! feed! content!back!to!a!central!inbox,!just!like!Facebook.! ! That! tool! is! Mozart.! I! plan! to! give! Mozart! my! full! attention.! I’m! pleased! to! say! that! it! is! integrated! into! Minds! +! Machines.!It's!launching!at!the!end!of!this!week!for!all!customers!who!buy!a!name!at!mindsandmachines.com,!and! at!http://mozart.co!X!I!encourage!you!to!check!it!out.!! ! Mozart!is!backed!by!a!largely!different!set!of!investors!than!Minds!+!Machines.!It's!a!small,!private!startup,!with!a! different! culture,! and! a! different! purpose! in! life.! The! commercial! agreements! and! friendships! between! Minds! +! Machines!and!Mozart!will!remain!intact.! ! Minds!+!Machines!investors!will!want!to!know,!and!I!am!happy!to!confirm,!that!my!goal!is!to!keep!the!vast!majority! of!my!shares.!I'm!a!longXterm!believer.!I!don't!see!a!lot!of!shortXterm!risks!in!the!business.! ! ! ! ! ! ! 2! ! Keith!Teare,!whom!I!have!known!for!many!years!and!in!whom!I!have!complete!trust,!has!kindly!agreed!to!serve!as! nonXexecutive!Group!Chairman!for!the!immediate!future. ! ! ! ! Fred!Krueger! Executive!Chairman! 24!May!2015! ! ! & & & ! & 3! ! CHIEF&EXECUTIVE&OFFICER’S&BUSINESS&REVIEW& I!would!first!like!to!thank!Fred!Krueger!for!his!dedication,!passion,!energy,!and!friendship!in!the!six!years!since!we! founded!Minds!+!Machines,!and!to!wish!him!great!fortune!in!his!endeavors!with!Mozart.!We!are!lucky!to!have!Keith! Teare!as!nonXexecutive!Chairman!for!the!immediate!future.!As!the!owner!and!operator!of!a!substantial!portfolio!of! valuable!TLDs,!with!an!enviable!cash!position,!the!future!for!the!Company!is!bright,!but!I!take!seriously!the!necessity! of! containing! costs! even! as! we! grow.! Therefore,! as! CEO,! I! set! out! below! a! number! of! Key! Performance! Indicators! (KPIs)! that! we! will! use! to! measure! our! progress.!Even! as! we! look! forward! to! the! numerous! challenges! and! opportunities!that!our!nascent!and!burgeoning!industry!presents,!I!am!pleased!to!review!the!substantial!progress! the!Company!made!during!2014.! ! During!the!year!under!review!the!Group!successfully!transitioned!from!an!investment!company!into!a!fully!operating! business,!reXlisting!on!the!London!Stock!Exchange’s!AIM!market!under!the!Minds!+!Machines!banner!in!March!2014.! ! Today!we!have!three!distinct!business!lines:! 1. 2. 3. The!Registry,!which!whollyX!or!majorityXowns!topXlevel!domains,!and!which!wholesales!domain!names!to! registrars;!! The!Registry!Service!Provider,!which!provides!the!infrastructure!services!for!the!Company’s!and!its!clients’! top!level!domains;!and! The! Registrar,! which! sells! names! to! the! public! and,! importantly,! allows! the! Company! to! enable! and! provision!affiliates!and!resellers!that!reach!key!vertical!markets.! ! In!addition,!we!have!the!evolving!Premium!Names!product!line!which!sits!across!the!registry!and!registrar!and!which! we!anticipate!being!a!major!contributor!to!overall!revenues!over!the!coming!18!months.! ! Domain&Portfolio& Our!portfolio!of!topXlevel!domains!can!be!viewed!from!two!perspectives!–!by!ownership!and!by!type.! ! In!terms!of!ownership,!currently!we:! • whollyXown,!or!majority!own,!20!uncontested!generic!topXlevel!domains!of!which!14!have!been!launched! to!date;! own!and/or!operate!5!geoXdomains!where!we!share!revenues!with!the!relevant!government,!3!of!which! have!been!launched!to!date;!! partner!on!a!further!4!uncontested!topXlevel!domains!of!which!1!has!so!far!been!launched;!and! is!the!back!end!registry!service!provider!for!a!further!5!clients,!of!which!2!have!launched!to!date.! • • • ! In!addition,!the!Company!has!interests!in!11!contested!applications,!8!of!which!it!either!wholly!or!majority!owns.!! ! When!viewed!by!type,!our!portfolio!breaks!down!as!follows:!geographical!topXlevel!domains,!(e.g.,!.london);!those! targeted! at! open! vertical! markets! (e.g.,! .fashion);! those! targeted! at! restricted! vertical! markets! (e.g.,! .law);! and! generic!gTLDs,!which!are!less!specific!and!are!suited!to!a!broader!audience!(e.g.,!.work).!! ! Operational&Progress& During!the!year!under!review,!the!Company!was!primarily!engaged!in:! 1. building! out! our! portfolio! of! gTLDs! that! we! own! or! in! which! we! have! a! commercial! interest! –! a! 2. 3. 4. process!which!continues!into!the!current!financial!year;! launching!our!first!major!batch!of!gTLDs!in!September!2014;! analysing!the!first!phase!of!activity!and!subsequent!ongoing!launch!program!in!the!current!year;!and! implementing!required!adjustments!to!how!the!registry!sells!into!the!market!to!best!commercialise! the!assets!it!owns.! ! This!launch!activity!has!led!us!to!conclude!that,!as!a!registryXled!business,!our!primary!focus!should!initially!be!on:! • • high! revenue! gTLDs! –! in! particular,! geographic! gTLDs! and! those! targeting! specific! highXvalue! verticals! –! establishing!the!presence!and!correct!distribution!channels!into!those!markets;! Premium!domain!name!sales!through!our!sales!and!marketing!teams!–!activity!that!spans!our!registry!and! registrar! operations.! The! rationale! for! Premium! names! is! straightforward:! having! noted! that! previouslyX owned! .com! domains! have! fetched! oneXoff! reXsale! prices! above! US$10M,! the! Company! has! reserved! a! large! number! of! names! within! our! gTLD! portfolio,! set! them! at! significantly! higher! annual! prices! to! our! standard! name! prices! so! that! Premium! names! can! be! sold! accordingly.! Post! period! end! our! newly! appointed! and! growing! Premium! name! sales! team! are! seeing! promising! results,! with! sales! for! a! single! name!reaching!US$10,000!or!more!for!year!one!with!commensurate!annual!renewal!rates!applying.!! ! KPIs& Turning! to! the! managing! of! our! business! operations,! in! order! to! measure! and! report! on! our! business,! the! management! team! has! implemented! a! series! of! internal! key! performance! indicators! (“KPIs”)! and! KPI! targets! by! 4! ! ! which!the!drive!towards!profitable!operational!growth!can!be!measured.!Michael!Salazar!will!go!into!greater!details! on!the!targets!for!each!of!the!KPIs!listed!below.! & 1. Domains!under!management!–!an!industryXwide,!publiclyXavailable!measure!by!which!to!initially!track!growth;! 2. Premium!names!annual!sales!growth!–!to!measure!the!efforts!of!our!sales!team;! 3. 4. Average! life! per! domain! registration! –! to! understand! the! lifetime! value! of! a! customer! and! hence! the! costX Standard!names!annual!sales!growth!–!to!understand!the!underlying!popularity!of!our!gTLDs;! effectiveness!of!our!sales!&!marketing;!and! 5. Operating! Expenditures! –! to! determine! the! costs! of! managing! the! business! through! evaluating! overall! expenditures.! ! These!KPI’s!will!also!help!the!Board!assess!when!we!might!introduce!a!progressive!dividend!policy!or!consider!in!due! course!any!oneXoff!dividend!or!share!buyXback.! & Investment&into&operations& As!consumers!begin!to!realize!that!there!are!other,!more!descriptive!names!available!to!them!we!are!beginning!to! see!significant!growth!in!the!new!gTLD!space.!As!Fred!highlights,!topXlevel!domain!names!are!growing!at!a!55%!rate! year!to!date!in!2015!and!are!beginning!to!outpace!.com.!And!with!that!growth!come!the!opportunities!for!the!topX level! domains! that! we! own! which! represent! vertical! markets! X! such! as! the! law,! wedding,! fashion,! and! fitness! industries!X!and!more!narrowly!defined!geographic!regions!such!as!in!London!and!Bayern.! ! In! terms! of! monetizing! our! domains,! our! view! has! been! consistent.! To! significantly! penetrate! each! of! the! vertical! industries!and!geographic!regions!we!need!to!have!the!right!top!level!domains,!the!right!services,!infrastructure!and! teams! as! well! as! the! right! distribution! and! partner! networks! in! place.! 2014,! and! going! into! 2015,! has! been! about! investment! and! growth.! As! investors! will! see! in! our! financials,! we! have! made! significant! investments! in! our! gTLD! portfolio,!engineering!and!sales!&!marketing!teams!to!enable!us!to!take!advantage!of!opportunities!and!grow!our! business.! ! Over! the! past! several! months! those! investments! have! allowed! us! to! start! aligning! our! topXlevel! domains! with! recognized! brand! names! such! as! Quiksilver! for! .surf,! The! Arnold! Sports! Festival,! which! is! associated! with! Arnold! Schwarzenegger,!for!.fit,!Bauer!Media!for!.fishing,!and!so!on.!We!have!also!been!able!to!position!teams!to!work!with! wellXknown! operators! such! Lou! Andreozzi! and! his! team! on! .law.! Our! registrar! infrastructure! and! partnership! with! Lou!has!successfully!led!Minds!+!Machines!to!get!in!front!of!major!players!within!the!law!industry!such!as!the!Legal! Marketing!Association!which!reaches!the!US!and!15!other!countries!and!has!members!representing!more!than!80%! of!the!largest!250!US!law!firms.!And!more!opportunities!such!as!the!above!are!in!the!pipeline!across!a!number!of!our! topXlevel!domains.! ! As! part! of! this,! we! firmly! believe! that! our! investment! to! build! our! registry! and! registrar! capabilities! has! and! will! continue! to! provide! an! excellent! return! on! investment! for! our! shareholders! and! us.! However,! that! being! said,! we! also!are!continually!looking!at!ways!to!be!more!efficient!in!operations!and!manage!costs.!For!example,!the!market! insights!being!provided!via!our!registrar!are!allowing!the!group!to!drive!down!customer!acquisition!costs,!mobilise! our! premium! pricing! strategy,! and! put! into! operation! affiliate! programs! that! allow! us! to! make! deals! in! vertical! markets! such! as! with! .law.! Further,! we! have! created! this! registrar! not! to! replicate! or! compete! with! the! primary! distribution!channel!!X!the!mainstream!registrars!–!which!is!a!low!margin!and!typically!expensive!business,!but!rather! to!have!the!tools!to!open!up!new!distribution!channels!through!selected!affiliates!and!resellers.! ! Our!primary!focus!therefore!continues!to!be!as!a!leading!registryXfocused!business!and!where!necessary!using!our! reserves! to! increase! the! size! of! our! gTLD! portfolio! –! whether! through! the! private! auction! process! or! through! the! consolidation!activity!that!is!starting!to!occur!in!the!sector!–!and!to!make!available!products!and!services!to!grow! our!Company.! ! On! this! point! I! am! also! pleased! to! report! that! the! integration! of! the! Mozart! web! design! tool! into! our! registrar! operations!has!now!been!completed!with!a!soft!launch!scheduled!for!29!May.! ! Once!again,!we’ve!transitioned!from!an!investment!to!an!operating!company,!built!our!technical!infrastructure,!and! launched! many! of! our! TLDs.! 2014! was! a! very! good! year! and! I! look! forward! to! keeping! Minds! +! Machines! at! the! forefront!of!this!exciting!industry.! ! ! ! Antony!Van!Couvering! Chief!Executive!Officer! 24!May!2015! & ! & 5! ! CHIEF&FINANCIAL&OFFICER’S&FINANCIAL&REVIEW& 2014!has!been!a!year!of!investment!and!growth!for!the!Company.!We!successfully!launched!10!Top!Level!Domains! (TLDs)! during! the! year! including! blueXchip! TLDs! such! as! .london! and! .bayern.! To! date! we! have! over! 177,000! registrations!and!based!on!our!calculations,!we!are!confident!in!saying!that!.london!was!one!of!the!most!successful! launches!from!a!gross!revenue!perspective.!! ! We!have!also!been!able!to!effectively!grow!our!gTLD!portfolio!via!the!private!auction!process.!In!doing!so!we!have! secured!some!highly!valued!TLDs!such!as!.yoga!and!.fashion!while!making!a!handsome!profit!and!being!well!placed! with!cash!reserves!for!potential!future!investment!opportunities!including!those!via!the!auction!process.! ! We!have!invested!in!each!of!our!services!this!year:!! • • • the! registry! business! by! adding! new! gTLDs! to! our! portfolio! as! well! as! developing! our! Premium! name! product!X!which!we!view!as!a!core!component!of!future!revenue;!! the!registry!service!provider!business!by!improving!our!back!end!platform!and!adding!other!services!with!a! view!towards!building!this!revenue!stream!by!securing!the!back!end!services!for!other!registries;!and!! the!registrar,!which!helps!us!to!reach!certain!consumers!directly,!sell!premium!names,!manage!our!affiliate! program,!and!build!overall!awareness!of!our!TLDs!via!our!growing!list!of!well!known!pioneers.!! ! 2014&Financial&Highlights& ! ! Cash!revenue!(1)! Of!which!accounted!for!as!revenue!(4)! Administrative!expensesXfixed!and!variable! Royalties!and!Guaranteed!Revenue!Payments!(6)! Total!profit!(4)! Intangible!assets!(4)! Other!Long!Term!Assets!(4)! Cash!&!Cash!Equivalents!(4)! Net!Assets!(4)! Basic!earnings!per!share!(4)! Diluted!earnings!per!share!(4)! FY&2014(2)& FY&2013(3)& Percentage&change& $’000! 5,028! 1,922! (13,477)! (3,574)! 22,059! 40,597! 5,982! 45,796! 94,685! $’000! 56! 56! (5,189)! X! 1,214! 2,560! 14,350! 14,884! 39,294! 2.73!cents! 2.67!cents! 0.21!cents! 0.20!cents! ! 8,879%! 3,332%! !160%! N/a!! 1,717%! 1,486%! (58%)! 208%! 141%! 1,200%! 1,235%! ! (1)!Cash!sales!refer!to!total!sales!generated!during!the!year!(not!deferred!for!accounting!purposes).!! (2)!Year!ended!31!December!2014! (3)!Year!ended!31!December!2013! (4)!As!stated!in!the!financial!statements! (5)!The!Company’s!reporting!currency!has!been!changed!to!USD!and!2013!results!have!been!restated!accordingly! (6)!Includes!$3,297!prepaid!in!a!prior!period!and!previously!reflected!as!current!assets! ! In!2014!we!have!a!total!profit!of!$22.1!million,!which!is!a!significant!improvement!over!the!preceding!year!where! total! profit! was! $1.2! million.! The! total! profit! was! primarily! a! result! from! participating! in! private! auctions,! which! resulted!in!gross!receipts!of!$37.5!million.!As!a!result!of!adding!new!topXlevel!domains!to!our!portfolio!intangible! assets!increased!in!2014!to!$40.6!million.!! ! Cash!revenues!from!operations!(i.e.,!the!sale!of!domain!names)!increased!to!$5!million!in!2014!from!$56k!in!2013.!! Cash!revenues!from!operations!were!primarily!driven!from!the!registry!and!RSP!sales,!which!began!in!September! 2014.!!! ! Reflecting!the!transition!to!an!operating!business!X!including!the!launch!of!10!topXlevel!domains!and!investment!in! our! service! lines! in! total! X! administrative! expenses! increased! to! $13.5! million! in! 2014! (2013:! $5.2! million).! The! majority!of!this!increase!is!related!to!increased!staffing!and!marketing!expenses.!Operating!costs!and!marketing! are!constantly!being!evaluated!and!managed!so!as!to!evaluate!our!return!on!investment!with!a!view!to!breaking! even!on!a!monthXtoXmonth!basis!in!2016.!We!also!incurred!royalty!and!guaranteed!payments!of!$3.6!million!as!a! result! of! contractual! obligations! with! certain! geographic! TLDs.! $3.3! million! was! paid! in! a! prior! period! and! was! reflected!as!a!current!asset.! ! Cash!reserves!increased!to!$45.8!million!in!2014,!up!from!$14.9!million!in!2013.!Net!cash!outflow!from!operating! activities! amounted! to! $11.5! million! (2013:! $2.9! million).! The! change! in! cash! reserves! and! cash! fluctuations! throughout!the!year!primarily!relates!to!private!auction!participation!and!an!equity!raise!($34.8!million)!in!January! 2014.!In!2015!our!cash!reserves!have!increased!to!$48!million!as!at!30!April!2015!as!a!result!of!a!private!auction! proceeds!and!collections!of!registry!billings.!Our!current!cash!reserves!allow!us!to!participate!in!upcoming!auctions! 6! ! ! as!well!providing!us!with!the!opportunity!to!evaluate!future!potential!acquisitions!as!the!domain!industry!begins!to! consolidate,!which!we!have!already!seen!begin!this!year.! ! Key&Performance&Indicators& As! Antony! has! pointed! out,! we! track! several! Key! Performance! Indicators! (KPI)! against! set! KPI! targets! to! help! the! Board!and!management!evaluate!the!performance!of!our!overall!business!and!each!business!line.! ! Domains(Under(Management:(( This!is!widelyXavailable!public!information!and!is!one!component!that!helps!us!measure!the!success!of!our!portfolio! of!topXlevel!domains.!We!have!set!a!target!rate!of!3%!to!5%!of!total!new!gTLD!registration!over!the!next!2!years!(i.e.,! 2015!and!2016).! ! At!the!end!of!2014!our!Domains!Under!Management!was!108,000.!This!figure!is!net!of!registrar!domains!as!many!of! these! reflect! registrations! in! the! Company’s! domains! and! would! therefore! be! doubleXcounted.! Since! Q1! 2014! 5.7! million! domains! have! been! registered! in! new! gTLDs.! Since! September! 2014,! MMX’s! portfolio! has! 177,000! registrations,!which!accounts!for!3%!of!the!total!market.& ! Premium(Name(Sales(Growth:( We!have!invested!in!the!building!of!our!premium!name!portfolio!and!are!investing!in!building!a!dedicated!sales!team! to!sell!those!premium!names.!Beginning!this!year!we!will!evaluate!two!key!components!to!determine!the!success!of! our!Premium!names!with!KPI!targets!set!for!2015!and!2016:! • • Total!Premium!Names!sold!each!year!–!we!anticipate!a!1.75!to!2.5!times!target!growth!rate!in!2015!and! 2016.!!(2014:!6k).!! Average!Revenue!Per!Premium!Name!–!the!target!KPI!range!for!premium!annual!revenues!per!name!has! been!set!at!$200!to!$225.!(2014!average:!$184).! ! Standard(Name(Sales(Growth:( This!measures!the!underlying!popularity!of!each!individual!topXlevel!domain!and!the!success!of!our!registrar!channel! sales!team.!We!evaluate!two!key!components!with!KPI!targets!set!for!each!covering!the!next!2!years!(i.e.,!2015!and! 2016):! • Total!Standard!Names!sold!each!year!–!we!anticipate!a!1.5!to!2!times!target!growth!rate!each!year!for!the! next!2!years.!!(2014:!102k).! Average! Revenue! Per! Year! Per! Standard! Name! –! we! anticipate! an! average! range! of! $15! to! $22! per! standard!name!registration.!(2014:!$28).! • ! Average(Life(per(Domain(Name:( This! establishes! the! lifetime! value! of! a! registration! and! hence! the! effectiveness! of! our! operational! costs! including! sales!&!marketing!spend.!As!we!have!not!yet!entered!a!renewal!period!for!our!2014!registrations!we!do!not!have!a! number!to!report!at!this!time.!However,!based!on!industry!renewal!rates!a!KPI!target!range!for!average!registration! life!of!2.25!years!to!4!years!per!domain!name!has!been!set.!! ! Operating(Expenditures:( We!continually!evaluate!our!overall!investment!which!includes!our!operating!expenditures!by!ensuring!we!have!the! appropriate!mix!of!personnel,!systems,!and!processes!in!place!to!support!our!business!lines.!2014!numbers!reflect!a! full! year! of! operations! as! we! readied! for! the! launch! of! our! topXlevel! domains.! In! 2014! operating! expenditures! amounted!to!$13.5M.!Our!target!is!to!cover!operating!expenditures!from!cash!sales!on!a!monthly!basis!beginning!in! 2016!while!looking!to!keep!them!broadly!in!line!with!2014!numbers!in!2015.! ! Looking&Ahead& We! still! have! several! new! topXlevel! domains! to! launch! such! as! .law,! .abogado,! .miami! and! others! and! are! excited! about!the!potential!revenues!these!domains!will!bring!later!this!year.!Accordingly,!we!expect!to!see!our!revenues!to! continue!to!have!positive!growth!and!we!expect!a!majority!of!our!2015!revenue!to!come!in!the!second!half!of!2015! as!we:!launch!those!TLDs;!we!begin!to!see!renewal!registrations!from!our!topXlevel!domains!launched!late!in!2014;! and!our!sales!teams!ramp!up!and!begin!selling!premium!names.!We!also!expect!to!see!additional!revenue!from!oneX off!private!auctions!and!the!equivalent,!which!will!help!to!maintain!the!Group’s!overall!cash!position!for!2015.!!! ! The!results!of!these!activities!will!also!provide!the!Board!some!of!the!information!necessary!to!assess!our!longXterm! cash!needs!with!a!view!of!potentially!introducing!a!progressive!dividend!policy!or!consider!in!due!course!any!oneXoff! dividend! or! share! buyXback.! We! will! of! course! balance! this! view! with! potential! opportunities! to! build! our! gTLD! portfolio!and!rollout!revenue!producing!products!in!an!efficient!and!effective!manner.!! ! ! ! ! ! 7! ! ! ! The!Company’s!progress!in!2014!and!so!far!in!2015!has!placed!the!Group!in!a!financial!highly!secure!position!going! forward.! ! ! ! Michael!Salazar! Chief!Financial!Officer! 24!May!2015! ! ! 8! ! Summary&Information& ! About&Us& MMX!is!a!publicly!traded!company!on!the!AIM!market!of!the!London!Stock!Exchange!(ticker:!MMX).! MMX!is!a!major!owner!of!generic!topXlevel!domains!(“gTLDs”)!and!continues!to!be!involved!in!the!gTLD!application! process.!! The! Group! participates! in! and! provides! services! for! many! other! facets! of! the! domain! name! industry,! from! registry! ownerships! and! operations! to! consumer! sales! and! provides! a! complete! suite! of! registry! service! provider! (“RSP”)! services!for!gTLD!registries.! & Strategic&Report& & To&the&members&of&Minds&+&Machines&Group&Limited& & Cautionary&statement& This! Strategic! Report! has! been! prepared! solely! to! provide! additional! information! to! shareholders! to! assess! the! company’s!strategies!and!the!potential!for!those!strategies!to!succeed.! This! Strategic! Report! Contains! certain! forwardXlooking! statements.! These! statements! are! made! by! the! directors! in! good! faith! based! on! the! information! available! to! them! up! to! the! time! of! their! approval! of! this! report! and! such! statements!should!be!treated!with!caution!due!to!the!inherent!uncertainties,!including!both!economic!and!business! risk!factors,!underlying!any!such!forwardXlooking!information. & This!Strategic!Report!has!been!prepared!for!the!Group!as!a!whole!and!therefore!gives!greater!emphasis!to!those! matters,!which!are!significant!to!MMX!and!its!subsidiary!undertakings!when!viewed!as!a!whole.! ! Review&of&the&Group’s&Business& & The&Business&Model& The! Minds! +! Machines! Group! Limited! operates! in! the! domain! name! industry! and! provides! endXtoXend! domain! services!generating!revenues!across!multiple!business!lines.! ! The! Group! currently! has! an! interest! in! 34! uncontested! generic! topXlevel! domains! (gTLDs)! and! ! has! interest! in! applications!for!a!further!11!contested!gTLDs!(of!which!8!are!whollyX!or!majorityXowned).!!Of!the!34!uncontested! generic!topXlevel!domains!the!Group:! • WhollyXowns,!or!majority!owns,!20!uncontested!gTLDs!of!which!14!have!been!launched!to!date;! • Owns!and/or!operates!5!geographic!gTLDs!from!which!it!shares!revenues!with!the!relevant!government,! 3!of!which!have!been!launched!to!date;! Is!partnering!on!a!further!4!uncontested!gTLDs!of!which!1!has!so!far!been!launched;!and! Is!the!backXend!registry!service!provider!for!a!further!5!clients,!of!which!2!have!launched!to!date.! • • ! In!total,!20!of!the!34!uncontested!domains!in!which!the!Group!has!a!commercial!interest!have!entered!General! Availability!and!have!received!over!177,000!registrations.! ! Registry!Business! A! registry! is! the! authoritative! master! database! of! all! Domain! Names! registered! for! each! TLD! operated! by! a! Registry.! ! The! registry! allows! the! Domain! Name! System! to! route! Internet! traffic! to! and! from! connected! devices! anywhere!in!the!world.!!! ! The!registry!generates!revenue!by!selling!domain!names!to!registrars!on!a!recurring!subscription!basis.!!Registrars! in!turn!sell!domain!names!directly!to!consumers.!!Prices!from!the!registry!to!the!registrar!are!considered!wholesale! prices,!which!are!set!by!the!registry.!!Each!registration,!known!as!a!second!level!domain!(SLD),!has!a!registration! period!from!1!to!10!years.!!At!the!end!of!each!registration!period,!in!order!for!the!SLD!to!continue!working,!the! consumer!must!renew!it!by!paying!a!registration!renewal!fee.!!As!required!by!ICANN,!a!Registry!must!wholesale! SLDs!to!all!ICANNXaccredited!Registrars!on!the!same!pricing,!terms,!and!conditions.! ! The!Company!expects!that!the!average!wholesale!price!of!a!secondXlevel!domain!name!in!the!gTLDs!in!which!it!has! an!interest!will!typically!range!between!US$15!to!US$22!for!standard!domain!names!and!a!much!higher!range!for! premium!names.!Renewal!fees!are!typically!equal!to!initial!registration!fees,!depending!on!market!conditions.! ! 9! ! ! Pricing! for! each! SLD! is! based! on! the! Group’s! determination! of! whether! it! is! a! geographical! gTLD,! a! defined! and! restricted!market!(e.g.!.law),!a!niche!market!(e.g.!.yoga),!or!a!generic!market!(e.g.!.work).!Pricing!is!further!adjusted! by! other! factors! such! as! the! pricing! of! other! SLDs! in! other! new! gTLDs! that! endXusers! are! likely! to! view! as! being! comparable! (e.g.,! .site! vs.! .web! vs.! .website),! or! pricing! to! match! the! targeted! market! of! the! gTLD! (for! instance! .luxe!focuses!on!the!luxury!market!which!demands!premium!prices).!Further,!some!SLDs!are!considered!premium! names!(e.g.!hotel.TLD)!which!command!a!annual!higher!price.! ! All! premium! names! are! priced! in! one! of! eight! tiers,! which! range! from! Tier! 1! at! $50! to! Tier! 8,! which! is! “call! us”.!! These!tiers!reflect!annual!registration!rates!so!that!if!a!name!is!sold!in!Tier!1!($50)!it!will!renew!at!the!same!rate.!! The!registry!will!typically!take!80%!of!Tier!price!with!the!registrar!taking!the!remaining!20%!plus!their!respective! mark!up.! ! The!Group!shares!wholesale!revenues!from!its!geographic!gTLDs!and!retains!all!the!wholesale!revenue!for!its!nonX geographic,!whollyXowned!gTLD!applications.! ! Registry!Services!Provider! Registry! service! providers! (“RSP(s)”)! provide! the! technological! infrastructure! (e.g.,! software,! equipment! and! bandwidth)!and!services!required!to!operate!a!TLD!at!the!performance!and!security!levels!required!by!ICANN.!!Many! new!gTLD!applicants!have!chosen!to!outsource!the!technological!operations!of!their!gTLD!to!RSPs,!either!because! they!do!not!have!the!technological!knowXhow,!do!not!want!to!incur!the!costs!of!building!and!operating!their!own! registry,!believe!that!outsourcing!is!more!costXeffective,!or!for!a!combination!of!the!foregoing!reasons.!RSPs!typically! receive!a!yearly!perXdomainXname!fee!for!each!domain!name!sold!or!renewed!by!a!client!Registry,!with!the!yearly! perXname!fee!often!being!scaled!to!the!number!of!domain!names!the!client!Registry!sells.! ! The!Minds!+!Machines!Group!provides!RSP!services!to!its!external!new!gTLD!clients!as!well!as!for!its!own!new!gTLDs.! Minds!+!Machines!Group’s!RSP!thirdXparty!clients!typically!pay!the!greater!of!a!minimum!annual!fee!and/or!a!per! domain!name!fee!for!standard!registrations,!an!additional!fee!for!premium!names,!as!well!as!other!services.!!The! average! perXdomain! name! fee! for! RSP! services! varies! according! to! volume! but! typically! will! be! between! $.75! per! name!to!$5!per!name.! ! Registrar!Business! A!gTLD!Registrar,!which!sells!domain!names!to!consumers,!must!be!accredited!by!ICANN!and!enter!into!a!contract! with!a!Registry!to!be!able!to!add!(i.e.,!sell),!delete,!or!update!a!domain!name!in!a!Registry’s!database.!A!Registrar! pays!a!Registry!a!wholesale!priced!annual!fee,!set!by!the!Registry,!for!each!domain!name!sold!by!that!Registrar,!as! well!as!a!yearly!per!domain!name!administration!fee!to!ICANN.!Registrars!typically!compete!on!the!basis!of!price!and! additional!valueXadded!services,!such!as!email,!website!design,!eXcommerce!tools!and!web!hosting.! ! The!largest!Registrars!(e.g.!GoDaddy.com,!1&1,!and!HostEurope)!typically!sell!domain!names!and!services!to!a!wide! range!of!consumers.! ! The!Group’s!own!Registrar!provides!a!complementary!additional!distribution!channel!that!is!designed!primarily!to! support! the! Group’s! own! gTLD! portfolio! through! a! range! of! targeted! initiatives,! rather! than! replicate! the! sales! channel!provided!by!existing!Registrars.!In!particular,!Minds!+!Machines’!Registrar!is!currently:! • • • • Securing!pioneers!and!key!partners!able!to!generate!awareness!and!enable!penetration!into!key!vertical! markets!that!relate!to!Minds!+!Machines’!portfolio!of!gTLDs;!! Providing!online!affiliate!programmes!for!dedicated!marketing!partners!that!operate!in!given!sectors,!20!of! which!have!now!been!signed;!! Selling!premium!domain!names!to!targeted!audiences;!and!! Providing! additional! consumer! services! that! facilitate! consumer! adoption! and! usage! of! new! domain! addresses!bought!within!Minds!+!Machines’!portfolio!of!domains.!! ! The! Registrar! also! provides! the! Group! with! a! direct! billing! relationship! with! consumers,! which! enables! it! to! understand! consumer! buying! patterns,! test! and! refine! marketing! programs,! and! determine! additional! services! to! promote!the!adoption!and!renewal!of!domain!addresses!within!Minds!+!Machines’!portfolio!across!all!its!registrar! distribution!channels.!! ! The!Company!is!also!currently!undertaking!final!testing!of!a!website!building!tool!as!well!as!other!consumer!services! for!integration!into!its!Registrar!operations!–!including!email!and!privacy!tools.! ! The!Group’s!registrar!will!primarily!drive!revenue!for!its!own!gTLD!portfolio!and!will!have!average!mark!up!of!5%!to! 25%!of!the!wholesale!price!from!its!registry.! ! ! ! 10! ! Future&developments,&strategy&and&objectives& Please!see!the!Executive!Statements! Key&performance&indicators& The!performance!of!the!business!is!assessed!against!KPIs!that!are!aligned!to!the!strategic!and!operational!goals!of! the!business.!These!KPIs!are!monitored!on!a!continuous!basis!and!allow!us!to!prioritise!operational!objectives!and! measure! progress! against! the! business’s! strategy.! Please! refer! to! the! Chief! Financial! Officers! Statement! for! an! assessment!of!the!Group’s!KPIs.! Principal&risks&and&uncertainties& There!are!a!number!of!potential!risks!and!uncertainties,!which!could!have!a!material!impact!on!the!Group’s!longX term! performance! and! could! cause! actual! results! to! differ! materially! from! expected! and! historical! results.! ! The! Group’s!risk!management!policies!and!procedures!are!also!discussed!in!the!Corporate!Governance!Statement.! ! The&new&gTLD&launch&is&vulnerable&to&delays&or&amendment& The!regulation!of!the!Internet!and!therefore!the!timing!and!conditions!attached!to!the!delegation!and!launch!of! the! new! gTLDs! is! delegated! to! the! Internet! Corporation! for! Assigned! Names! and! Numbers,! a! nonXprofit! private! organisation! that! was! created! to! oversee! a! number! of! InternetXrelated! tasks! previously! performed! directly! on! behalf! of! the! US! government.! ICANN’s! decision! making! is! determined! in! a! consensual! manner! which! provides! different! commercial! and! technical! interest! groups,! as! well! as! government! representatives! through! the! Government!Advisory!Council,!the!opportunity!to!seek!to!amend!or!delay!the!rollXout!of!new!gTLDs.!There!can!be! no!guarantee!therefore!that!unforeseen!objections!raised!by!one!or!more!interest!groups!will!not!result!in!delaying! the!delegation!and!commercial!launch!by!gTLD!applicants!of!the!new!gTLDs.!In!such!circumstances!the!commercial! interests! of! the! Group! may! be! adversely! affected! and! some! or! all! gTLD! applications! or! supporting! technical! services!by!registry!operators!may!be!either!uneconomic!or!impractical.!Furthermore!the!launch!of!new!gTLDs!may! be!delayed!for!an!indeterminate!time!until!the!ICANN!community!resolves!any!such!disputes!in!a!way!than!enables! the!gTLD!programme!to!be!implemented.!Any!such!delay!is!likely!to!adversely!affect!the!timing!of!the!Company’s! revenues.! The!Group!spends!considerable!time!participating!in!ICANN’s!process!and!in!other!groups!that!influence!and!shape! the!gTLD!program!to!help!ensure!its!continued!progression!towards!rolling!out!new!gTLDs.! ! Requirement&to&finalise&documentation&in&respect&of&gTLDs&prior&to&formal&launch& The! Group! has! executed! binding! agreements! with! a! number! of! clients! and! partners,! including! for! example! the! relevant!Government!counterXparty!for!each!of!.London,!.NRW!and!.Bayern,!setting!out!the!terms!of!the!registry! services! to! be! provided! by! the! Company,! and! the! revenue! share! entitlements! of! the! respective! parties! as! appropriate.!The!Group!has!entered!into!a!number!of!further!agreements,!heads!of!terms!or!other!memoranda!of! understanding!with!a!number!of!partners!and!or!clients!which!may!necessitate!further!formal!documentation!prior! to! formal! launch! of! the! relevant! gTLD! and! delegation! into! the! Root! Zone.! If! for! any! reason! the! parties! cannot! conclude! any! such! further! binding! agreements! required! in! due! course,! the! Group’s! proposed! launch! of! these! further!gTLDs!could!be!adversely!affected.! The!Group!spends!considerable!resources!in!ensuring!the!satisfactory!conclusion!of!such!matters.! ! The&market&for&gTLDs&is&uncertain&and&the&Group&may&fail&to&attract&sufficient&new&customers& The! level! of! demand! for! new! second! level! domain! names! for! those! gTLDs! in! respect! of! which! the! Group! either! provides!registry!services!or!has!an!economic!interest!as!the!gTLD!applicant!may!be!less!than!expected!or!the!new! gTLDs!may!not!generate!the!levels!of!second!level!domain!name!sales!anticipated!by!the!Board!in!which!case!the! Group’s!revenues!and!profitability!may!be!adversely!affected.! The!Group!closely!monitors!the!industry!to!judge!the!level!of!interest!and!potential!revenue!and!acts!accordingly! to!ensure!that!it!retains!sufficient!capital!to!operate.! ! The&Group’s&depends&on&technology&and&advanced&information&systems,&which&may&fail&or&be&subject&to&disruption& As!a!registry,!the!Group!is!dependent!on!the!performance!of!its!Espresso!software!registry!system!and!underlying! databases,!together!with!its!backXup!systems!and!disaster!recovery!plans,!to!ensure!that!critical!registry!functions! are!available!to!end!users,!registrars!and!other!parties!that!must!have!access!to!those!functions!in!the!event!any! circumstance!arises!that!materially!impacts!the!operation!of!the!primary!registry!system.!The!integrity,!reliability! and! operational! performance! of! the! Group’s! IT! systems! are! therefore! critical! to! the! Group’s! operations.! The! Group’s! IT! systems! may! be! damaged! or! interrupted! by! increases! in! usage,! human! error,! unauthorised! access,! natural!hazards!or!disasters!or!similarly!disruptive!events.!Furthermore,!Group’s!current!systems!may!be!unable!to! support! a! significant! increase! in! online! traffic! or! increased! customer! numbers,! whether! as! a! result! of! organic! or! inorganic! growth! of! the! business.! Any! failure! of!the! Group’s! IT! infrastructure! or! the! telecommunications! and/or! other!third!party!infrastructure!on!which!such!infrastructure!relies!could!lead!to!significant!costs!and!disruptions! ! 11! ! that! could! reduce! revenue,! harm! the! Company’s! business! reputation! and! have! a! material! adverse! effect! on! the! operations,! financial! performance! and! prospects! of! the! Group.! The! Group! has! in! place! business! continuity! procedures,!disaster!recovery!systems!and!security!measures!to!protect!against!network!or!IT!failure!or!disruption.! However,! those! procedures! and! measures! may! not! be! effective! to! ensure! that! the! Group! is! able! to! carry! on! its! business! in! the! ordinary! course! if! they! fail! or! are! disrupted,! and! they! may! not! ensure! the! Group! can! anticipate,! prevent! or! mitigate! a! material! adverse! effect! on! the! Group’s! operations,! financial! performance! and! prospects! resulting!from!such!failure!or!disruption.!In!addition,! the!Group’s!controls!may!not!be!effective!in!detecting!any! intrusion!or!other!security!breaches,!or!safeguarding!against!sabotage,!hackers,!viruses!and!cybercrime.! The!Group!has!spent!and!continues!to!spend!in!ensuring!that!its!technology!and!advanced!information!systems!are! performing!as!expected!and!can!support!growth!of!the!business.! ! Dependence&on&key&personnel& The!Group!has!a!small!management!team!and!the!loss!of!any!key!individual!or!the!inability!to!attract!appropriate! personnel!could!adversely!impact!upon!the!Group’s!future!performance.! The!Group!offers!competitive!compensation!package’s!including!share!options!to!retain!and!attract!key!personnel.! ! The&Group&depends&on&a&number&of&third&parties&for&the&operation&of&its&business& The! Group! relies! on! hardware! purchased! or! leased! from! third! parties! suppliers! in! order! to! provide! its! registry,! registrar!and!RSP!services!which,!if!faulty!and!thereby!causes!errors!or!a!service!failure,!could!adversely!affect!the! Group’s!operating!results!or!harm!its!reputation.!Furthermore,!the!Group!has!key!contractual!relationships!with!a! number!of!third!parties!including!suppliers,!partners,!banks!and!payment!processors.!In!particular,!the!Group!relies! on!key!suppliers!in!order!to!carry!on!its!operations!including,!but!not!limited!to,!DNS!services,!coXlocation!facilities,! DDoS! migration! services,! security! vulnerability! assessment! services,! site! and! data! escrow.! The! failure! of! one! or! more! of! these! third! parties! may! have! an! adverse! impact! on! the! financial! and! operational! performance! of! the! Group.!Similarly,!the!failure!of!one!or!more!of!these!third!parties!to!fulfill!its!obligations!to!the!Group!for!any!other! reason! may! also! cause! significant! disruption! and! have! a! material! adverse! effect! on! its! operations,! financial! performance!and!prospects.! The!Group!puts!in!place!contracts!with!certain!key!clients!to!ensure!continued!business!relationships.!The!Group! also!meets!with!individual!management!from!our!strategic!partners!periodically!throughout!the!year!to!ensure!the! continued!alignment!of!business!goals!and!objectives.!! ! Going&concern&basis& The! Group’s! forecasts! and! projections,! taking! account! of! the! gTLD! program! being! managed! by! ICANN! (see! Chairman’s!statement),!show!that!the!Group!should!be!able!to!operate!within!the!level!of!its!current!funding.!At! the!yearXend,!the!Group!had!$45.8!million!held!as!cash!and!cash!equivalents!(excluding!letters!of!credits!required! by!ICANN).!! The!Group!will!use!these!resources!to!both!fund!operations!and!to!secure!additional!gTLD!assets.! The! directors! have! a! reasonable! expectation! that! the! Company! and! the! Group! have! adequate! resources! to! continue!operational!existence!for!the!foreseeable!future.!!Thus!they!continue!to!adopt!the!going!concern!basis!of! accounting!in!preparing!the!annual!financial!statements.! Approval& This!report!was!approved!by!the!board!of!directors!on!24!May!2015!and!signed!on!its!behalf!by:! ! ! ! Antony!Van!Couvering! Chief!Executive!Officer! Date:!24!May!2015! ! ! ! ! ! ! ! ! ! ! 12! ! Directors’&Report! ! The!directors!present!their!annual!report!on!the!affairs!of!the!group,!together!with!the!financial!statements!and! auditor’s!report,!for!the!year!ended!31!December!2014.!The!Corporate!Governance!Statement!set!out!on!pages!16! to!18!forms!part!of!this!report.! Details!of!significant!events!since!the!balance!sheet!date!are!contained!in!note!30!to!the!financial!statements.!An! indication!of!likely!future!developments!in!the!business!of!the!company!and!details!of!research!and!development! activities!are!included!in!the!Strategic!Report.! Information!about!the!use!of!financial!instruments!by!the!company!and!its!subsidiaries!is!given!in!note!25!to!the! financial!statements.! ! Dividends! The!Directors!do!not!recommend!payment!of!a!dividend!(2013:!nil).! ! Capital&Structure! Details!of!the!issued!share!capital,!together!with!details!of!the!movement!in!the!company’s!issued!share!capital! during!the!year!are!shown!in!note!23.!The!company!has!one!class!of!ordinary!shares,!which!carry!no!right!to!fixed! income.!Each!share!carries!the!right!to!one!vote!at!general!meetings!of!the!company.!! There!are!no!specific!restrictions!on!the!size!of!a!holding!nor!on!the!transfer!of!shares,!which!are!both!governed!by! the!general!provisions!of!the!Articles!of!Association!and!prevailing!legislation.!The!directors!are!not!aware!of!any! agreement!between!holders!of!the!company’s!shares!that!may!result!in!restrictions!on!the!transfer!of!securities!or! on!voting!rights.! Details!of!employee!share!schemes!are!set!out!in!note!24.!! No!person!has!any!special!rights!of!control!over!the!company’s!share!capital.!! With! regard! to! the! appointment! and! replacement! of! directors,! the! company! is! governed! by! its! Articles! of! Association,!the!BVI!Companies!Act!and!related!legislation.!! ! Directors! The!Directors!who!served!during!the!period!are!set!out!below:! ! Director& Date&of&Appointment& Date&of&Resignation& Executive&Directors& Frederick!Krueger!(Chairman)! Antony!Van!Couvering!(CEO)! Michael!Salazar!(CFO)! Caspar!Veltheim! ! Non_Executive&Directors& Guy!Elliot! Keith!Teare! Elliot!Noss! ! ! ! ! ! ! ! ! ! ! 4!March!2014! ! ! ! ! ! ! ! 4!March!2014! ! ! Directors’&Remuneration! The! Company! remunerates! the! Directors! at! a! level! commensurate! with! the! size! of! the! Company! and! the! experience!of!its!Directors.!The!Remuneration!Committee!has!reviewed!the!Directors’!remuneration!and!believes! it! upholds! the! objectives! of! the! Company! with! regard! to! this! issue.! Details! of! the! Director! emoluments! and! payments!made!for!professional!services!rendered!are!set!out!in!Note!8!to!the!financial!statements.! ! ! ! ! ! ! ! ! ! 13! ! Directors’&Interests! The!total!beneficial!interests!of!the!serving!Directors!in!the!shares!and!options!of!the!Company!during!the!period! to!31!December!2014!were!as!follows:! Director! ! 31&December&2014& 31&December&2013& Shares! Options*! Shares! Frederick!Krueger! 128,481,604! 5,000,000! 128,331,604! Antony!Van!Couvering! Michael!Salazar! Caspar!Veltheim! Guy!Elliott! Keith!Teare! Elliott!Noss! 898,674! 1,210,375( 854,613! N/A! X! X! 12,500,000! 1,250,000! 312,500! 160,375! 910,375! 504,613! N/A! 35,186,350! X! X! X! X! Options*! 10,000,000! 22,126,347! 1,250,000! 662,500! 3,000,000! 300,000! X! ! ! ! *!The!option!details!have!been!fully!disclosed!in!Note!24!to!the!financial!statements.! ! Directors’&Indemnities! The! company! has! made! qualifying! thirdXparty! indemnity! provisions! for! the! benefit! of! its! directors,! which! were! made!during!the!year!and!remain!in!force!at!the!date!of!this!report.! ! Corporate&Governance& A!statement!on!Corporate!Governance!is!set!out!on!pages!16!to!18.! ! Environmental&Responsibility! The!Company!is!aware!of!the!potential!impact!that!it!and!its!subsidiary!companies!may!have!on!the!environment.! The!Company!ensures!that!it,!and!its!subsidiaries!at!a!minimum!comply!with!the!local!regulatory!requirements!and! the!revised!Equator!Principles!with!regard!to!the!environment.! ! Employment&Policies! The! Group! is! committed! to! promoting! policies! which! ensure! that! highXcalibre! employees! are! attracted,! retained! and!motivated,!to!ensure!the!ongoing!success!for!the!business.!Employees!and!those!who!seek!to!work!within!the! Group!are!treated!equally!regardless!of!sex,!sexual!orientation,!marital!status,!creed,!colour,!race!or!ethnic!origin.! ! Health&and&Safety! The!Group’s!aim!is!to!achieve!and!maintain!a!high!standard!of!workplace!safety.!In!order!to!achieve!this!objective! the!Group!will!provide!training!and!support!to!employees!and!set!demanding!standards!for!workplace!safety.! ! Annual&General&Meeting&(“AGM”)! This!report!and!financial!statements!will!be!presented!to!shareholders!for!their!approval!at!the!AGM.!The!Notice!of! the!AGM!will!be!distributed!to!shareholders!together!with!the!Annual!Report.! ! Statement&of&disclosure&of&information&to&auditor! As!at!the!date!of!this!report!the!serving!directors!confirm!that:! • • So!far!as!each!director!is!aware,!there!is!no!relevant!audit!information!of!which!the!Company’s!auditor! is!unaware,!and! they! have! taken! all! the! steps! that! they! ought! to! have! taken! as! directors! in! order! to! make! themselves!aware! of! any! relevant! audit! information! and! to! establish! that! the! Company’s! auditor! are! aware!of!that!information.! ! Auditor! Mazars!LLP!have!expressed!their!willingness!to!continue!in!office!as!auditor!and!a!resolution!to!reappoint!them!will! be!proposed!at!the!forthcoming!Annual!General!Meeting.! ! ! ! 14! ! Statement&of&Directors’&Responsibilities! The!directors!are!responsible!for!preparing!the!Directors’!Report!and!the!financial!statements!in!accordance!with! applicable!law!and!regulations.! The!directors!are!required!to!prepare!financial!statements!for!each!financial!year.!The!directors!must!not!approve! the!financial!statements!unless!they!are!satisfied!that!they!give!a!true!and!fair!view!of!the!state!of!affairs!of!the! group!and!company!and!of!the!profit!or!loss!of!the!group!and!company!for!that!period.! In!preparing!these!financial!statements,!the!directors!are!required!to:!! • • • • • select!suitable!accounting!policies!and!then!apply!them!consistently;! make!judgments!and!accounting!estimates!that!are!reasonable!and!prudent;! state!whether!IFRS!has!been!followed,!subject!to!any!material!departures!disclosed!and!explained!in!the! financial!statements;! provide!additional!disclosures!when!compliance!with!specific!requirements!in!IFRS!is!insufficient!to!enable! users!to!understand!the!impact!of!particular!transactions,!and!other!events!and!conditions!on!the!Group! and!Company’s!financial!position!and!financial!performance;!and! prepare!the!financial!statements!on!the!going!concern!basis!unless!it!is!inappropriate!to!presume!that!the! company!will!continue!in!business! The!directors!are!responsible!for!keeping!adequate!accounting!records!that!are!sufficient!to!show!and!explain!the! company’s!transactions!and!disclose!with!reasonable!accuracy!at!any!time!the!financial!position!of!the!company! and!enable!them!to!ensure!that!the!financial!statements!comply!with!applicable!law.!!They!are!also!responsible!for! safeguarding!the!assets!of!the!company!and!hence!for!taking!reasonable!steps!for!the!prevention!and!detection!of! fraud!and!other!irregularities.! ! Electronic&communication! The! maintenance! and! integrity! of! the! Company’s! website! is! the! responsibility! of! the!directors.! The! work! carried! out! by! the! auditor! does! not! involve! consideration! of! these! matters! and,! accordingly,! the! auditor! accept! no! responsibility! for! any! changes! that! may! have! occurred! to! the! financial! statements! since! they! were! initially! presented!on!the!website.! The! Company’s! website! is! maintained! in! accordance! with! AIM! Rule! 26.! Legislation! in! the! British! Virgin! Islands! governing! the! preparation! and! dissemination! of! the! financial! statements! may! differ! from! legislation! in! other! jurisdictions.! ! By!order!of!Board:! ! ! ! ! Antony&Van&Couvering! Chief!Executive!Officer! Date:!24!May!2015! ! ! 15! ! Corporate&Governance&Statement& ! The!Board!is!committed!to!maintaining!high!standards!of!corporate!governance.!Whilst!the!company!is!not!required!to! adopt!the!UK!Corporate!Governance!Code,!the!Company’s!corporate!governance!procedures!take!due!regard!of!the! principles!of!Good!Governance!set!out!in!the!2014!UK!Corporate!Governance!Code!in!relation!to!the!size!and!the!stage! of!development!of!the!Company.! ! Board&of&Directors! The! Board! of! Directors! currently! comprises! four! Executive! Directors! one! of! whom! is! the! Chairman! and! two! NonX Executive! Directors.! The! Directors! are! of! the! opinion! that! the! Board! comprises! a! suitable! balance! and! that! the! recommendations! of! the! Combined! Code! have! been! implemented! to! an! appropriate! level.! The! Board,! through! the! Chairman! and! the! CEO! and! CFO! in! particular,! maintains! regular! contact! with! its! advisers! and! public! relations! consultants!in!order!to!ensure!that!the!Board!develops!an!understanding!of!the!views!of!major!shareholders!about!the! Company.! ! Board&Meetings! The!Board!meets!regularly!throughout!the!year.!For!the!year!ended!31!December!2014!the!Board!met!nine!times!in! relation! to! normal! operational! matters.! The! Board! is! responsible! for! formulating,! reviewing! and! approving! the! Company's! strategy,! financial! activities! and! operating! performance.! Day! to! day! management! is! devolved! to! the! Executive!Directors!who!are!charged!with!consulting!the!Board!on!all!significant!financial!and!operational!matters.! All!Directors!have!access!to!the!advice!of!the!Company’s!solicitors!and!other!professional!advisers,!as!necessary,!and! information! is! supplied! to! the! Directors! on! a! timely! basis! to! enable! them! to! discharge! their! duties! effectively.! All! Directors!have!access!to!independent!professional!advice,!at!the!Company's!expense,!as!and!when!required.! ! Board&Committees! The!Board!has!established!the!following!committees,!each!which!has!its!own!terms!of!reference:! ! Audit&Committee& The! Audit! Committee! considers! the! Group’s! financial! reporting! (including! accounting! policies)! and! internal! financial! controls.! The! Audit! Committee! comprises! one! Executive! Director! and! one! NonXExecutive! Director,! Frederick! Krueger! (Chairman!of!the!Audit!Committee)!and!Keith!Teare.!The!Audit!Committee!is!responsible!for!ensuring!that!the!financial! performance!of!the!Group!is!properly!monitored!and!reported!on.! ! Remuneration&Committee& The! Remuneration! Committee! is! responsible! for! making! recommendations! to! the! Board! on! Directors’! and! senior! executives’! remuneration.! It! comprises! one! Executive! Director! and! two! NonXExecutive! Directors,! Frederick! Krueger! (Chairman!of!the!Remuneration!Committee),!Keith!Teare!and!Elliot!Noss.!NonXExecutive!Directors’!remuneration!and! conditions! are! considered! and! agreed! by! the! Board.! Financial! packages! for! Executive! Directors! are! established! by! reference!to!those!prevailing!in!the!employment!market!for!executives!of!equivalent!status!both!in!terms!of!level!of! responsibility!of!the!position!and!their!achievement!of!recognised!job!qualifications!and!skills.!The!Committee!will!also! have!regard!to!the!terms,!which!may!be!required!to!attract!an!equivalent!experienced!executive!to!join!the!Board!from! another!company.! ! Internal&controls! The! Directors! acknowledge! their! responsibility! for! the! Group’s! systems! of! internal! controls! and! for! reviewing! their! effectiveness.!These!internal!controls!are!designed!to!safeguard!the!assets!of!the!Company!and!to!ensure!the!reliability! of! financial! information! for! both! internal! use! and! external! publication.! Whilst! they! are! aware! that! no! system! can! provide! absolute! assurance! against! material! misstatement! or! loss,! in! light! of! increased! activity! and! further! development! of! the! Company,! continuing! reviews! of! internal! controls! will! be! undertaken! to! ensure! that! they! are! adequate!and!effective.! ! Risk&Management! The! Board! considers! risk! assessment! to! be! important! in! achieving! its! strategic! objectives.! There! is! a! process! of! evaluation!of!performance!targets!through!regular!reviews!by!senior!management!to!forecasts.!Project!milestones!and! timelines!are!regularly!reviewed.! ! ! ! 16! ! Risks&and&uncertainties! The!principal!risks!facing!the!Company!are!set!out!below.!Risk!assessment!and!evaluation!is!an!essential!part!of!the! Group’s!planning!and!an!important!aspect!of!the!Group’s!internal!control!system.! Business&risk! The!new!gTLD!launches!are!vulnerable!to!delays!or!amendment;! The!market!for!gTLDs!is!uncertain!and!the!Group!may!fail!to!attach!significant!new!customers;! The! Group! depends! on! technology! and! advanced! information! systems,! which! may! fail! or! be! subject! to! disruption;! Dependence!on!key!personnel;!and! The!Group!depends!on!a!number!of!third!parties!for!the!operation!of!its!business.! • • • • • ! General&and&economic&risks! • Contractions!in!the!world’s!major!economies!or!increases!in!the!rate!of!inflation!resulting!from!international! conditions;! Movements!in!the!equity!and!share!markets!in!the!United!Kingdom!and!throughout!the!world;! • • Weakness! in! global! equity! and! share! markets! in! particular,! in! the! United! Kingdom,!and! adverse! changes! in! • • • market!sentiment!towards!the!internet!and!technologies!industry;! Currency! exchange! rate! fluctuations! and,! in! particular,! the! relative! prices! of! US! Dollar,! the! Euro,! and! the! UK!Pound;! Exposure!to!interest!rate!fluctuations;!and! Adverse!changes!in!factors!affecting!the!success!of!internet! and!development!operations,!such!as!increases! in!expenses,! to!delays! in!the! development!or!adoption! of! new!standards!and!protocols! to! handle!increased! levels!of!Internet!activity!or!due!to!increased!governmental!regulation.! ! Funding&risk! • The! Group! or! the! companies! in! which! it! has! invested! may! not! be! able! to! raise,! either! by! debt! or! further! equity,!sufficient!funds!to!enable!completion!of!planned!expansion,!investment!and/or!development!projects.! ! Content&risk! • The!Company!may!be!affected!by!the!regulatory!and!legal!environment!relating!to!the!content!control!and! access.! Regulation! both! current! and! future! could! cause! additional! expense! and! have! a! material! impact! on! the!Company’s!business,!the!extent!of!which!cannot!be!predicted.!Certain!jurisdictions!may!attempt!to!make! the!Company!responsible!for!the!content!which!it!facilitates!or!may!be!held!responsible!for!content.! ! Intellectual&property! • ! • Monitoring!and!defending!the!Company’s!intellectual!rights!can!entail!substantial!costs!with!no!certainty!of! outcome.! The! Company! relies! on! its! rights! in! intellectual! property! and! other! rights! such! as! confidentiality,! and! there! is! a! risk! of! their! infringement,! which! may! have! a! material! adverse! effect! on! the! Company’s! business,!operation! and/or! financial! condition.!The! Company’s! ability! to! ensure! adequate!protection! for!its! intellectual! property! rights! may! be! limited! and! it! is! possible! that! the! Company’s! competitors! may! independently!develop!similar!technology,!which!could!encroach!upon!the!Company’s!operations.! The! Company! may! also! become! subject! to! claims! from! third! parties! for! infringement! of! their! intellectual! property!rights.!Such!claims!(meritorious!or!otherwise)!may!be!costly!and!time!consuming,!and!if!any!action! against! the! Company! is! successful! it! may! result! in! the! Company! being! required! to! cease! certain! activities,! alter! its! technology,! or! enter! into! royalty! or! licensing! agreements,! which! may! or! may! not! be! available! on! terms!acceptable!to!the!Company! ! Market&risk! • The! ability! of! the! Group! (and! the! companies! it! invests! in)! to! continue! to! secure! sufficient! and! profitable! sales!contracts!to!support!its!operations!is!a!key!business!risk.! ! Key&personnel! • The! ability! of! the! Group! to!attract!and!retain!key!personnel.!! ! Treasury&Policy! The!Group!finances!its!operations!through!equity!and!holds!its!cash!as!a!liquid!resource!to!fund!the!obligations!of!the! Group.!The!Board!approves!decisions!regarding!the!management!of!these!assets.!Refer!Note!25.! ! ! ! 17! ! ! Securities&Trading! The!Board!has!adopted!a!Share!Dealing!Code!that!applies!to!Director,!senior!management!and!any!employee!who!is!in! possession!of!inside!information.!All!such!persons!are!prohibited!from!trading!in!the!Company’s!securities!if!they!are!in! possession!of!inside!information.!Subject!to!this!condition!and!trading!prohibitions!applying!to!certain!periods,!trading! can!occur!provided!the!relevant!individual!has!received!the!appropriate!prescribed!clearance.! ! Relations&with&Shareholders! The! Board! is! committed! to! providing! effective! communication! with! the! shareholders! of! the! Company.! Significant! developments! are! disseminated! through! stock! exchange! announcements! and! regular! updates! of! the! Company! website.! The! Board! views! the! AGM! as! a! forum! for! communication! between! the! Company! and! its! shareholders! and! encourages!their!participation!in!its!agenda.! ! & & & & & & & & & & & & & & & & & & & & & & ! & 18! lndependent Auditorrs Report to the Members of Minds + Machines Group Limited We have audited the financial statements of Minds + Machines Group Limited for the year ended 31 December 2014 which comprise the Group and Company Statements of Comprehensive lncome, Group and Company Statements of Financial Position, Group and Company Cash Flow Statements, the Group and Company Statements of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and lnternational Financial Reporting Standards (lFRSs). Respective responsibilities of directors and auditor As explained more fully in the Directors' Responsibilities Statement set out on page 15, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and lnternational Standards on Auditing (UK and lreland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. This report is made solely to the company's members, as a body. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor/s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body for our audit work, for this report, or for the opinions we have formed. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors and the overall presentation of the financial statements. ln addition, we read all the financial and non- financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements. lf we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on the financial statements ln our opinlon: . the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 3L December 2014 and of the group's and the parent company's profit for the year then ended; and . the financial statements have been properly prepared in accordance with lFRSs. Mou"t uul Mazars LLP Chartered Accountants and Statutory Auditor Tower Bridge House St Katharine's Way London E1W 1DD Date: zs Ml Lot{ t9 Group Statement of Comprehensive lncome for the year ended 31 December 2014 Year Ended 31 December 2014 S ooo's Notes (Restated) Year Ended 31 December 2013 5 ooo's Revenue Cost of sales Gross (loss) / profit Depreciation and amortisation charge Fixed administrative expenses Variable administrative expenses Foreign exchange (loss) / gain Profit on disposal of intangible assets Profit on gTLD auctions Loss on withdrawal of gTLD applications Group operating profit Finance revenue Finance costs Profit on disposal of subsidiaries Share of results ofjoint venture Profit before taxation lncome tax expense Retained profit for the period Other comprehensive income Items that may be reclassified subsequently to profit or loss: Currency translation differences Other comprehensive income for the period net of taxation Total comprehensive income for the period Retained prolit for the period attributable to: Eguity holders of the parent Non-controll ing interests Total comprehensive income for the period at$ibutable to: Equity holders ofthe parent Non-controlling interests Earnings per share {cents} Basic Diluted 2 3 16 4a 4b 6 15 19 19 2 9 10 18 11 13 13 1,922 {46se) 12,7371 {4e6) (8,584) (5,170) (1,4271 7,948 33,72L (2e6) 22,O59 62 {761 27 (s) 22,057 22,O57 543 s43 22,600 22,297 (230) 22,O57 22,795 {1es) 22,600 2.73 2.67 All operations are considered to be continuing. The notes set out on pages 28 to 70 form an integral part of these financial statements. 56 s6 {31) (2,684) (2,s0s) 333 6,440 {3ss) 1,21,4 19 (23) (6s) L,t41 I,I41 81 81 7,222 7,249 {108} 1,L47 1,337 {11s) 1,222 Company Sbtement of Comprehensive lncome for the year ended 31 December 2OL4 Year Ended 31 December 2014 S ooo's Notes {Restated) Year Ended 3L December 2013 S ooo's tt4 (e16) {802} (e) u,837) (1,854) (2,838) 7,O48 33,72t (2e6) 33,133 s7 (15) 33,174 T6 4a 4b 6 15 19 19 9 77 (1eo) (L,301) L79 6,440 (3ss) 4,733 19 4,752 Revenue Cost of sales Gross loss Depreciation charge Fixed administrative expenses Variable administrative expenses Foreign exchange (loss) / gain Profit on disposal of intangible assets Profit on gTLD auctions Loss on withdrawal of gTLD applications Company operating profit Finance revenue Loss on disposal of subsidiaries Profit before taxation lncome tax expense Retained profit for the period 33,!74 4,752 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Currency translation differences Other comprehensive income for the period net of taxation Total comprehensive income for the period 33,174 4,752 All operations are considered to be continuing, The notes set out on pages 28 to 7O form an integral part of these financial statements. Group Statement of Financial Position as at 31 December 2Ot4 Note 31 December 20t4 $ ooo's {Restated) 31 December 2013 S ooo's (Restated) 31 December 20\2 S ooo's 1.4 15 16 18 t9 20 2! 22 22 ASSETS Non-curfent assets Goodwill lntangible assets Fixtures & equipment lnterest in joint ventures Other-long term assets Total non-current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Obligations under finance lease Total current liabilities Non-current liabilities Obligations under finance lease Total non-current liabilities TOTAL TIABILITIES NET ASSETS EqUlTY Share capital Share premium Shares to be issued Foreign exchange reserve Retained earnings Non-controlling interests TOTAL EQUIW 2,a28 40,597 87t 833 5,982 51,111 4,4t4 45,796 50,230 LOL,34t (6,314) 1342) (6,6s5) t6,5s5l 94,685 82,866 707 L]-,46L 95,034 (34e) 94,695 2,983 2,550 831 842 14,350 21,566 4,!04 14,884 18,988 40,554 {68s) (328) (1,013) . (2471 (247]' (1,260) 49,481, 199 (7O,2321 39,448 (1s4) 39,294 2,943 184 55 700 16,774 20,656 3,909 3,t51 7,660 28,3L6 (4so) (4s0) (4s0) 27,866 37,790 2,177 r77 (t2,L73\ 27,905 (3e) 27,866 The notes set out on pages 28 to 70 form an integral part of these financial statements. These financial statements were approved by the Board of Directors on 24 May 2015 and signed on its behalf by: k:^tkr Director Michael Salazar Director Company Statement of Financial Position as at 31 December 2OL4 L5 77 18 19 20 ASSETS Non-current assets lntangible assets lnvestment in subsidiaries lnterest in joint ventures Other-long term assets Trade and other receivables Tota! non-current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets TOTAL ASSETS TIABILITIES Current liabilities Trade and other payables TOTAL LIABILITIES NET ASSETS EQUITY Share capital Share premium Shares to be issued Retained earnings TOTAT EQUITY 31 December 20L4 S ooo's (Restated) 31" December 2013 S ooo's (Restated) 31 December 2012 S ooo's 38,83s 3,548 911 5,982 49,276 39,384 26,952 66,335 '-LS,6t2 12,a0tl {2,201) 1t3,4tt 82,866 30,54; tl3,4tL 2,3t7 3,550 911 L4,350 2L,\28 L4,195 L2,245 26,480 47,608 (152) (162) 47,446 49,48t (2,03s; 47,446 128 3,547 742 t6,774 4,855 26,006 3,373 3,525 6,898 32,904 (416) {416) 32,488 37,790 2,r71 17,479| 32,488 The notes set out on pages 28 to 70 form an integral part of these financial statements. These financial statements were approved by the Board of Directors on 24 May 2015 and signed on its behalf by k:*" Director Michael Salazar Director 23 Group Cash Flow Statement for the year ended 31 December 2OL4 Cash flows from operating activities Operating profit Decrease in trade and other receivables including long term receivables Increase in trade and other payables Depreciation & amortisatlon charge Profit on the sale of intangible assets Profit on gTLD auctions Loss on withdrawal of gTLD applications Share options expensed Foreign exchange gain Net cash flow used in operating activities Cash flows from investing activities lnterest received lnterest paid Amounts transferred from restricted cash Payments to acquire intangible assets Receipts from the disposal of intangible assets Payments to acquire fixtures & equipment Amounts received in gTLD auctions lnvestment in interest in joint ventures Net cash flow from investing activities Cash flows from financing activities Repayments of obligations under finance lease lssue of ordinary shares Share issue costs Net cash flow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Exchange gain on cash and cash equivalents Cash and cash equivalents at end of period 23 23 23 Year ended 31 December 2014 (Restated) Year ended 31 December 2013 S ooo's S ooo's 22,O59 1,383 s,631 496 17,0481 (33,7211 296 612 (1,163) (11,4ss) 62 (75'l 4tt (4s,97s) L6,944 (3e8) 37,493- 8,46I (353) 35,578 12,2931 33,022 30,028 14,884 884 45,796 L,21,4 1,816 234 31 (6,4401 395 692 (7e41 (2,8s2) L9 259 (2,277) (8e) 6,919 (210) 4,62t (1s7) LA,1t2 (ss8) 9,357 t]^,126 3,751 7 74,884 The notes set out on pages 28 to 70 form an integral part of these financial statements. Company Cash Flow Statement for the year ended 31 December 2014 Note Year ended 31 December 2014 (Restated) Year ended 31 December 2013 S ooo's S 000's Cash flows from operating activities Operating profit lncrease in trade and other receivables including long term receivables lncrease / (decrease) in trade and other payables Depreciation charge Profit on the sale of intangible assets Profit on gTLD auctions Loss on withdrawal of gTLD applications Share options expensed Foreign exchange Sain / (loss) Net cash flow used in operating activities Cash flows from investing activities lnterest received Amounts transferred from restricted cash Payments to acquire intangible assets Receipts from the disposal of intangible assets Amounts received in gTLD auctions Acquisition of investment in joint venture Net cash flow from investing activities Cash flows from financing activities lssue of ordinary shares Share issue costs Net cash flow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Exchange gain on cash and cash equivalents Cash and cash equivalents at end of period 23 23 33,133 126,9451 2,O41 9 {7,048) (33,7211 296 6t2 2,330 lzs,2s7l 57 4LL 144,3261 16,944 37,493 10,579 35,578 (2,2931 33,385 14,667 t2,285 26,952 4,733 (3,877) (2s4) (6,440) 395 692 (80s) (s,ss6) 19 259 (2,188) 6,919 (210) 4,799 10,112 (ss8) 9,514 8,757 3,52s 3 12,285 The notes set out on pages 28 to 70 form an integral part of these financial statements. 25 Group Statement of Changes in Equity for the year ended 31 December 2OL4 Share capital Share premium resenre Foreign Shares currency to be translation issued reserve Retained earnings Total Non- controlling interest Restated Total eguity S oocrs s ooo's 5 000's S 000's 5 ooo's S oocrs 5 oods s ooo's 37,790 2,177 111 112,1731 27,905 (3e) 27,866 88 t,249 -88 1.,249 1,249 L,337 (108) (71 {11s) 12,1771 10,000 1,12 (se8) 692 692 1,t41. 81 L,222 L0,000 1,1,2 (se8) 692 199 lto,232) 39,448 (1s4) 39,294 22,287 22,287 508 508 (230) 22,Os7 35 543 22,247 22,795 {1es) 22,600 34,801 877 (2,2s31 11.4 11.4 {708) (708) 34,801 871 (2,2931 11,4 (708) 2,177 10,000 1t2 {ss8) 49,481 34,801 877 (2,2s31 82,866 707 1L,46t 95,O34 {349) 94,58s Group As at 1 January 2013 Profit for the period Currency translation differences Total comprehensive income Share capital to be issued Share capital issued Share options & warrants exercised Cost of share issue Share-based payments As at 31 December 2013 (Restated) Profit for the year Currency translation differences Total comprehensive income Share capital issued Share options & warrants exercised Cost of share issue Share based payments expense 5hare-based payments (repurchase of vested equity instruments) As at 31 December 2014 The notes set out on pages 28 to 70 form an integral part of these financial statements. 26 Company Statement of Changes in Equity for the year ended 31 December 2014 Company As at 1 January 2013 Profit for the period Total comprehensive income Share capital to be issued Share capital issued Share options & warrants exercised Cost of share issue Share-based payments As at 31 December 2013 {Restated) Profit for the year Total comprehensive income Share capital issued Share options & warrants exercised Cost of share issue Share-based payments expense Share based payments (repurchase of vested equity instruments) As at 31 December 2O14 Share capital Share premium lesente Shares to be Retained issued earnings Total S oogs S ooo's S ooo's S oods g oods 37,790 2,177 (7,4791 32,488 4,752 4,752 4,752 4,752 10,000 11.2 (ss8) 692 47,446 692 (2,035) 33,774 33,t74 877 {t2,293l. 34,80t - - - !14 (708) (708) 30,545 rt3,47L 114 2,r77 (2,r77) 10,000 112 {ss8} 49,48L 34,801 877 (2,2e31 82,865 The notes set out on pages 28 to 70 form an integral part ofthese financial statements. 27 ! Notes to Financial Statements for the year ended 31 December 2014 Summary&of&Significant&Accounting&Policies& General&information& 1 (a) & & Minds!+!Machines!Group!Limited!is!a! company! is! registered!in! the! British! Virgin!Islands!under! the! BVI! Business! Companies! Act! 2004! with! registered! number! 1412814.!The! Company's! ordinary!shares!are!traded!on!the!AIM!market!operated!by!the! London!Stock!Exchange.!The!nature!of!the!group’s!operations!and!its!principal!activities!are!set!out!in!note!2!and!in!the!Strategic! Report!on!page!9.! ! These!financial!statements!are!presented!in!US!Dollars!and!represent!a!change!from!the!previous!reporting!period!presented!in! Pounds!Sterling!(note!1k).!! ! Foreign!operations!are!included!in!accordance!with!the!policies!set!out!in!note!1k.! ! Statement&of&compliance&with&IFRS& The! Group’s! and! Company’s! financial! statements! have! been! prepared! in! accordance! with! International! Financial! Reporting!Standards! (IFRS)! as!issued!by!the!International!Accounting!Standards!Board!(IASB).! ! Adoption&of&new&and&revised&standards& & In!the!current!year,!the!following!new!and!revised!Standards!and!Interpretations!have!been!adopted.! (b)& ! ! Amendments!to! IFRS!10,!IFRS!12!and! IAS!27!Investment! Entities! ! Amendments!to!IAS! 32!Offsetting! Financial!Assets!and! Financial!Liabilities! The!Group!has!applied!the!amendments!to!IFRS!10,!IFRS!12!and!IAS!27!Investment!Entities!for! the! first! time! in! the! current! year.! The! amendments! to! IFRS! 10! define! an! investment! entity! and! require! a! reporting! entity! that! meets! the! definition! of! an! investment! entity! not! to! consolidate!its!subsidiaries!but!instead!to!measure!its!subsidiaries!at!fair!value!through!profit! or!loss!in!its!consolidated!and!separate!financial!statements.! ! To!qualify!as!an!investment!entity,!a!reporting!entity!is!required!to:! ! X X obtain! funds! from! one! or! more! investors! for! the! purpose! of! providing! them! with! investment!management!services;! commit! to! its! investor(s)! that! its! business! purpose! is! to! invest! funds! solely! for! returns!from!capital!appreciation,!investment!income,!or!both;!and! X measure!and!evaluate!performance!of!substantially!all!of!its!investments!on!a!fair! value!basis.! ! Consequential! amendments! have! been! made! to! IFRS! 12! and! IAS! 27! to! introduce! new! disclosure!requirements!for!investment!entities.! ! As!the!company!is!not!an!investment!entity!(assessed!based!on!the!criteria!set!out!in!IFRS!10! as! at! 1! January! 2014),! the! application! of! the! amendments! has! had! no! impact! on! the! disclosures!or!the!amounts!recognised!in!the!Group’s!consolidated!financial!statements.! ! The! Group! has! applied! the! amendments! to! IAS! 32! Offsetting! Financial! Assets! and! Financial! Liabilities! for! the! first! time! in! the! current! year.! The! amendments! to! IAS! 32! clarify! the! requirements!relating!to!the!offset!of!financial!assets!and!financial!liabilities.!Specifically,!the! amendments!clarify!the!meaning!of!‘currently!has!a!legally!enforceable!right!of!setXoff’!and! ‘simultaneously!realisation!and!settlement’.! ! The! amendments! have! been! applied! retrospectively.! As! the! Group! does! not! have! any! financial! assets! and! financial! liabilities! that! qualify! for! offset,! the! application! of! the! amendments! has! had! no! impact! on! the! disclosures! or! on! the! amounts! recognised! in! the! Group’s!consolidated!financial!statements.!! ! 28! ! Notes to Financial Statements for the year ended 31 December 2014 Amendments!to!IAS! 36!Recoverable! Amount!Disclosures! for!NonXFinancial! Assets! ! Amendments!to!IAS! 39!Novation!of! Derivatives!and! Continuation!of! Hedge!Accounting! ! IFRIC!21!! The!Group!has!applied!the!amendments!to!IAS!36!Recoverable!Amount!Disclosures!for!NonX Financial!Assets!for!the!first!time!in!the!current!year.!The!amendments!to!IAS!36!remove!the! requirement!to!disclosure!the!recoverable!amount!of!a!cashXgenerating!unit!(CGU)!to!which! goodwill!or!other!intangible!assets!indefinite!useful!lives!had!been!allocated!where!there!has! been! no! impairment! or! reversal! of! impairment! of! the! related! CGU.! Furthermore,! the! amendments! introduce! additional! disclosure! requirements! applicable! to! when! the! recoverable!amount!of!an!asset!or!a!CGU!is!measured!at!fair!value!less!cost!of!disposal.!These! new! disclosures! include! the! fair! value! hierarchy,! key! assumptions! and! valuation! techniques! used!which!are!in!line!with!the!disclosure!required!by!IFRS!13!Fair!Value!Measurement.! ! The!application!of!these!amendments!has!had!no!material!impact!on!the!disclosures!in!the! Group’s!consolidated!financial!statements.! ! The!Group!has!applied!the!amendments!to!IAS!39!Novation!of!Derivatives!and!Continuation! of!Hedge!Accounting!for!the!first!time!in!the!current!year.!The!amendments!to!IAS!39!provide! relief!from!the!requirements!to!discontinue!hedge!accounting!when!a!derivative!designated! as!a!hedging!instrument!is!novated!under!certain!circumstances.!The!amendments!also!clarify! that!any!change!to!the!fair!value!of!the!derivative!designated!as!a!hedging!instrument!arising! from! the! novation! should! be! included! in! the! assessment! and! measurement! of! hedge! effectiveness.!! ! The! amendments! have! been! applied! retrospectively.! As! the! Group! does! not! have! any! derivatives! that! are! subject! to! novation,! the! application! of! these! amendments! has! had! no! impact!on!the!disclosures!or!on!the!amounts!recognised!in!the!Group’s!consolidated!financial! statements.! ! The! Group! has! applied! IFRIC! 21! Levies! for! the! first! time! in! the! current! year.! IFRIC! 21! addresses!the!issue!as!to!when!to!recognise!a!liability!to!pay!a!levy!imposed!by!a!government.! The!interpretation!defines!a!levy,!and!specifies!that!the!obligating!event!that!gives!rise!to!the! liability!is!the!activity!that!triggers!the!payment!of!the!levy,!as!identified!by!legislation.!The! interpretation!provides!guidance!on!how!different!arrangements!should!be!accounted!for,!in! particular,! it! clarifies! that! neither! economic! compulsion! nor! the! going! concern! basis! of! financial!statements!preparation!implies!that!an!entity!has!a!present!obligation!to!pay!a!levy! that!will!be!triggered!by!operating!in!a!future!period.! ! IFRIC! 21! has! been! applied! retrospectively.! The! application! of! this! Interpretation! has! had! no! material!impact!on!the!disclosures!or!on!the!amounts!recognised!in!the!Group’s!consolidated! financial!statements.! & Future&changes&in&accounting&policies! ! ! At!the!date!of!authorization!of!these!financial!statements,!the!following!Standards!and!Interpretations!which!have!not!been! applied!in!these!financial!statements!were!in!issue!but!not!yet!effective:! ! IFRS!9! Financial!Instruments!(effective!for!period!beginning!1!January!2018)! IFRS!15! Amendments!to!IFRS!11! Amendments!to!IAS!16! and!IAS!38! Amendments!to!IAS!16! and!IAS!41! Amendments!to!IAS!19! Amendments!to!IAS!27! Amendments!to!IFRSs! Revenue!from!Contracts!with!Customers!(effective!for!periods!beginning!1!January!2017)!! Accounting!for!Acquisitions!of!Interests!in!Joint!Operations!(effective!for!periods!beginning!1! January!2016)! Clarification! of! Acceptable! Methods! of! Depreciation! and! Amortisation! (effective! for! periods! beginning!1!January!2016)! Agriculture:!Bearer!Plants!(effective!for!periods!beginning!1!January!2016)!! Defined!Benefit!Plans:!Employee!Contributions!(effective!for!periods!beginning!1!July!2014)! Separate! Financial! Statements:! Reinstating! the! equity! method! as! an! accounting! option! for! investments! in! subsidiaries,! joint! ventures! and! associates! in! an! entity’s! separate! financial! statements!(effective!for!periods!beginning!1!January!2016)! Annual!Improvements!to!IFRSs!2010!–!2012!Cycle!(effective!periods!beginning!1!July!2014)! Amendments!to!IFRSs! Annual!Improvements!to!IFRSs!2011!–!2013!Cycle!(effective!periods!beginning!1!July!2014)! Amendments!to!IFRSs! Annual!Improvements!to!IFRSs!2012!–!2014!Cycle!(effective!period!beginning!1!January!2016)! 29! ! Notes to Financial Statements for the year ended 31 December 2014 ! The!directors!do!not!expect!that!the!adoption!of!the!Standards!and!Interpretations!listed!above!will!have!a!material!impact! on! the! financial! statements! of! the! Group! in! future! periods,! except! that! IFRS! 9! will! impact! both! the! measurement! and! disclosure!of!Financial!Instruments.! Beyond!the!information!above,!it!is!not!practicable!to!provide!a!reasonable!estimate!of!the!effect!of!these!standards!until!a! detailed!review!has!been!completed! ! Basis&of&accounting& (c)&& The! consolidated! financial! statements! have! been! prepared! on! the! historical! cost! basis,!except!for!the!revaluation!of! certain!financial!instruments!that!are!measured!at!reXvalued!amounts!or!fair!value!at!the!end!of!each!reporting!period,!as! explained!in!the!accounting!policies.! ! Basis&of&consolidation&& !(d)&& ! The! consolidated! financial! information! incorporates! the! results! of! the! Company! and!entities!controlled!by!the!Company! (its! subsidiaries)! (the!“Group")!made!up!to!31!December!each!year.!Control!is!achieved!when!the!Company:! X X X has!the!power!over!the!investee;! is!exposed!or!has!rights,!to!variable!return!from!its!involvement!with!the!investee;!and! has!the!ability!to!use!its!power!to!affect!its!returns.! ! ! ! The!company!reassesses!whether!or!not!it!controls!an!investee!if!facts!and!circumstances!indicate!that!there!are!changes!to! one!or!more!of!the!three!elements!of!control!listed!above.! ! Consolidation!of!a!subsidiary!begins!when!the!Company!obtains!control!over!the!subsidiary!and!ceases!when!the!Company! losses!control!of!the!subsidiary.!Specifically,!the!results!of!subsidiaries!acquired!or!disposed!of!during!the!year!are!included!in! the! consolidated! income! statement! from! the! date! the! Company! gains! control! until! the! date! when! the! Company! ceases! to! control!the!subsidiary.! ! Profit!or!loss!and!each!component!of!other!comprehensive!income!are!attributed!to!the!owners!of!the!Company!and!to!the! nonXcontrolling!interests.!Total!comprehensive!income!of!the!subsidiaries!is!attributed!to!the!owners!of!the!Company!and!to! the!nonXcontrolling!interests!even!if!this!results!in!the!nonXcontrolling!interests!having!a!deficit!balance.! ! Where!necessary,!adjustments!are!made!to!the!financial!statements!of!subsidiaries!to!bring!the!accounting!policies!used!into! line!with!the!Group’s!accounting!policies.! ! All!intragroup!assets!and!liabilities,!equity,!income,!expenses!and!cash!flows!relating!to!transactions!between!the!members! of!the!Group!are!eliminated!on!consolidation.!! ! NonXcontrolling! interests! in! subsidiaries! are! identified! separately! from! the! Group’s! equity! therein.! Those! interests! of! nonX controlling!shareholders!that!are!present!ownership!interests!entitling!their!holders!to!a!proportionate!share!of!net!assets! upon! liquidation! may! initially! be! measured! at! fair! value! or! at! the! nonXcontrolling!interests’! proportionate! share! of! the! fair! value! of! the! acquiree’s! identifiable! net! assets.! The! choice! of! measurement! is! made! on! an! acquisitionXbyXacquisition! basis.! Other!nonXcontrolling!interests!are!initially!measured!at!fair!value.!Subsequent!to!acquisition,!the!carrying!amount!of!nonX controlling! interests! is! the! amount! of! those! interests! at! initial! recognition! plus! the! nonXcontrolling! interests’! share! of! subsequent! changes! in! equity.! Total! comprehensive! income! is! attributed! to! nonXcontrolling! interests! even!if! this! results! in! the!nonXcontrolling!interests!having!a!deficit!balance.!! ! Changes!in!the!Group’s!interests!in!subsidiaries!that!do!not!result!in!a!loss!of!control!are!accounted!for!as!equity!transactions.! The!carrying!amount!of!the!Group’s!interests!and!the!nonXcontrolling!interests!are!adjusted!to!reflect!the!changes!in!their! relative! interests! in! the! subsidiaries.! Any! difference! between! the! amounts! by! which! the! nonXcontrolling! interests! are! adjusted! and! the! fair! value! of! the! consideration! paid! or! received! is! recognised! directly! in! equity! and! attributable! to! the! owners!of!the!Company.!! ! 30! ! Notes to Financial Statements for the year ended 31 December 2014 ! When! a! Group! loses! control! of! a! subsidiary,! the! gain! or! loss! on! disposal! recognised! in! profit! or! loss! is! calculated! as! the! difference!between!the!aggregate!of!the!fair!value!of!the!consideration!received!and!the!fair!value!of!any!retained!interest! and!the!previous!carrying!amount!of!the!assets!(including!goodwill),!less!liabilities!of!the!subsidiary!and!any!nonXcontrolling! interests.!All!amounts!previously!recognised!in!other!comprehensive!income!in!relation!to!that!subsidiary!are!accounted!for! as!if!the!Group!had!directly!disposed!of!the!related!assets!or!liabilities!of!the!subsidiary!(i.e.!reclassified!to!profit!or!loss!or! transferred! to! another! category! of! equity! as! specified! /! permitted! by! applicable! IFRS).! The! fair! value! of! any! investment! retained! in! the! former! subsidiary! at! the! date! when! control! is! lost! is! regarded! as! the! fair! value! on! initial! recognition! for! subsequent!accounting!under!IAS!39!Financial!Instruments:!Recognition!and!Measurement!or,!when!applicable,!the!costs!on! initial!recognition!of!an!investment!in!an!associate!or!jointly!controlled!entity.! Going&concern&& ! The!directors!have,!at!the!time!of!approving!the!financial!statements,!a!reasonable!expectation!that!the!Company!and!the!Group! have!adequate!resources!to!continue!in!operational!existence!for!the!foreseeable!future.!Thus!they!continue!to!adopt!the!going! concern!basis!of!accounting!in!preparing!the!financial!statements.!Further!detail!is!contained!in!the!Strategic!Report!on!page!9.! ! Business&combinations&& & Acquisition!of!subsidiaries!and!business!are!accounted!for!using!the!acquisition!method.!The!consideration!transferred!in!a! business!combination!is!measured!at!fair!value,!which!is!calculated!as!the!sum!of!the!acquisitionXdate!fair!values!of!assets! transferred! by! the! Group,! liabilities! incurred! by! the! Group! to! the! former! owners! of! the! acquiree! and! the! equity! interest! issued! by! the! Group! in! exchange! for! control! of! the! acquire.! AcquisitionXrelated! costs! are! recognised! in! profit! or! loss! as! incurred.! ! At!the!acquisition!date,!the!identifiable!assets!acquired!and!the!liabilities!assumed!are!recognised!at!their!fair!value!at!the! acquisition!date,!except!that:! X deferred!tax!assets!of!liabilities!and!assets!or!liabilities!related!to!employee!benefits!arrangement!are!recognised!and! measured!in!accordance!with!IAS!12!Income!Taxes!and!IAS!19!Employee!Benefits!respectively;!and! X assets!(or!disposal!groups)!that!are!classified!as!held!for!sale!in!accordance!with!IFRS!5!NonXcurrent!Assets!Held!for!Sale! and!Discontinued!Operations!are!measured!in!accordance!with!that!Standard.! Goodwill!is!measured!as!the!excess!of!the!sum!of!the!consideration!transferred,!the!amount!of!any!nonXcontrolling!interests! in!the!acquiree,!and!the!fair!value!of!the!acquirer’s!previously!held!equity!interest!in!the!acquiree!(if!any)!over!the!net!of!the! acquisitionXdate!amounts!of!the!identifiable!assets!acquired!and!liabilities!assumed.!! Joint&Ventures&& & The! group! has! interests! in! joint! ventures,! which! are! jointly! controlled! entities,! whereby! the! ventures! have! a! contractual! arrangement! that! establishes! joint! control! over! the! economic! activities! of! the! entity.! The! contractual! agreement! requires! unanimous!agreement!for!financial!and!operating!decisions!among!ventures.!!! ! The!Group’s!interests!in!jointly!controlled!entities!are!accounted!for!by!using!the!equity!method.!Under!the!equity!method,! the!investment!in!the!joint!venture!is!carried!in!the!statement!of!financial!position!at!cost!plus!post!acquisition!changes!in!the! Group’s!share!of!net!assets!of!the!joint!venture.!!The!income!statement!reflects!the!share!of!the!results!of!operations!of!the! joint! venture.! The! financial! statements! of! the! joint! venture! are! prepared! for! the! same! reporting! period! as! the! Group.! Adjustments!are!made!where!necessary!to!bring!the!accounting!policies!in!line!with!those!of!the!Group.! ! Losses!on!transactions!are!recognised!immediately!if!the!loss!provides!evidence!of!a!reduction!in!the!net!realisable!value!of! current!assets!or!an!impairment!loss.!The!joint!venture!is!accounted!for!using!the!equity!method!until!the!date!on!which!the! Group!ceases!to!have!joint!control!over!the!joint!venture.! ! Upon! loss! of! joint! control! the! Group! measures! and! recognises! its! remaining! investment! at! its! fair! value.! Any! difference! between! the! carrying! amount! of! the! former! jointly! controlled! entity! upon! loss! of! joint! control! and! the! fair! value! of! the! remaining!investment!and!proceeds!on!disposal!are!recognised!in!profit!or!loss.!When!the!remaining!investment!constitutes! significant!influence,!it!is!accounted!for!as!investment!in!an!associate.! ! 31! ! (e)& ! (f)&& ! ! (g)&& ! ! ! Notes to Financial Statements for the year ended 31 December 2014 !(h)&& Goodwill& ! Goodwill!is!initially!recognised!and!measured!as!set!out!above.! ! Goodwill!is!not!amortised!but!is!reviewed!for!impairment!at!least!annually.!!For!the!purpose!of!impairment!testing,!goodwill! is!allocated!to!each!of!the!Group’s!cashXgenerating!units!expected!to!benefit!from!the!synergies!of!the!combination.!CashX generating!units!to!which!goodwill!has!been!allocated!are!tested!for!impairment!annually,!or!more!frequently!when!there!is! an!indication!that!the!unit!may!be!impaired.!If!the!recoverable!amount!of!the!cashXgenerating!unit!is!less!than!the!carrying! amount!of!the!unit,!the!impairment!loss!is!allocated!first!to!reduce!the!carrying!amount!of!any!goodwill!allocated!to!the!unit! and!then!to!other!assets!of!the!unit!proXrata!on!the!basis!of!the!carrying!amount!of!each!asset!in!the!unit.!An!impairment!loss! recognised!for!goodwill!is!not!reversed!in!a!subsequent!period.! On! disposal! of! a! subsidiary,! the! attributable! amount! of! goodwill! is! included! in! the! determination! of! the! profit! or! loss! on! disposal.! Leases&(the&group&as&a&lessee)& Leases! are! classified! as! finance! leases! whenever! the! terms! of! the! lease! transfer! substantially! all! the! risks! and! rewards! of! ownership!to!the!lessee.!All!other!leases!are!classified!as!operating!leases.! ! Assets!held!under!finance!leases!are!recognised!as!assets!of!the!group!at!their!fair!value!or,!if!lower,!at!the!present!value!of! the! minimum! lease! payments,! each! determined! at! the! inception! of! the! lease.! The! corresponding! liability! to! the! lessor! is! included!in!the!balance!sheet!as!a!finance!lease!obligation.! ! Lease!payments!are!apportioned!between!finance!expenses!and!reduction!of!the!lease!obligation!so!as!to!achieve!a!constant! rate!of!interest!on!the!remaining!balance!of!the!liability.!Finance!expenses!are!recognised!immediately!in!profit!or!loss.! ! Rentals! payable! under! operating! leases! are! charged! to! income! on! a! straightXline! basis! over! the! term! of! the! relevant! lease! except!where!another!more!systematic!basis!is!more!representative!of!the!time!pattern!in!which!economic!benefits!from!the! lease!assets!are!consumed.!Contingent!rentals!arising!under!operating!leases!are!recognised!as!an!expense!in!the!period!in! which!they!are!incurred.! ! In!the!event!that!lease!incentives!are!received!to!enter!into!operating!leases,!such!incentives!are!recognised!as!a!liability.!The! aggregate! benefit! of! incentives! is! recognised! as! a! reduction! of! rental! expense! on! a! straightXline! basis! over! the! lease! term,! except! where! another! systematic! basis! is! more! representative! of! the! time! pattern! in! which! economic! benefits! from! the! leased!assets!are!consumed.! Revenue&Recognition& & Revenue! is! measured! at! the! fair! value! of! the! consideration! received! or! receivable! and! represents! amounts! receivable! for! services!provided!in!the!normal!course!of!business,!net!of!discounts,!VAT!and!other!salesXrelated!taxes.!Revenue!is!reduced! for!estimated!customer!rebates!and!other!similar!allowances.! ! Registry!revenue! & Registry!revenues!primarily!arise!from!fixed!fees!charged!to!registrars!for!the!initial!registration!or!renewal!of!domain!names.! Revenues!from!the!initial!registration!or!renewal!are!deferred!and!recognised!over!the!registration!term!(generally!one!year! and!up!to!ten!years).!Fees!for!renewals!(including!early!renewals)!are!deferred!until!the!new!incremental!period!commences.! These!fees!are!then!recognised!over!the!renewal!term.!! & Rendering!of!services!(Registry!service!provider!(“RSP”)!revenue!and!consultancy!services)! Revenue!is!generated!by!providing!RSP!and!consultancy!services!over!a!period!of!time.!Fees!for!these!services!are!deferred! and/or!accrued!and!recognised!as!performance!occurs.!! ! Registrar!revenue! ! Registrar!revenue!primarily!arises!from!fixed!fees!charged!to!registrants!(endXusers)!for!the!initial!registration!or!renewal!of! domain!names!and!other!web!services.!!Revenue!from!the!initial!registration!or!renewal!and!other!web!services!are!deferred! and! recognised! over! the! registration! term! (generally! one! year! and! up! to! ten! years).! Fees! for! renewals! (including! early! renewals)!are!deferred!until!the!new!incremental!period!commences.!These!fees!are!then!recognised!over!the!renewal!term.! 32! ! ! (i)&& ! ! &(j)&& && & ! ! Notes to Financial Statements for the year ended 31 December 2014 (k)&& ! ! ! Foreign&Currencies& ! Change(in(accounting(policy( ! These!financial!statements!are!presented!in!US!Dollars!and!represent!a!change!from!the!previous!reporting!period!presented!in! Pounds! Sterling.! The! group! is! now! generating! revenue! through! its! operations.! The! results! of! these! operations! are! globally! reported!and!compared!in!US!Dollars!necessitating!the!change.!!! ! The!change!in!presentation!currency!represents!a!change!in!accounting!policy,!which!has!been!applied!retrospectively.!As!such,! a! ‘third’! balance! sheet! is! presented! showing! the! opening! position! of! the! 31! December! 2013! period.! As! the! change! in! presentation!currency!is!purely!applying!a!translation!method,!there!is!no!change!to!the!underlying!functional!currency!of!the! company!and!its!subsidiaries.!! ! All!assets!and!liabilities!are!translated!from!their!functional!currency!into!the!new!presentation!currency!at!the!beginning!of!the! comparative!period!using!the!opening!exchange!rate!and!reXtranslated!at!the!closing!rate.!Retained!earnings!and!other!reserves! are!expressed!in!US!Dollars!as!if!US!Dollars!had!always!been!the!presentation!currency.!! ! The!exchange!rates!used!for!this!conversation!are:! ! ! Pound!Sterling!:!US!Dollar!average!rate! Pound!Sterling!:!US!Dollar!year!end!rate! ! The!impact!on!Earnings!per!share!is!that!Earnings!per!share!is!disclosed!in!US!Dollar.! ! Earnings!per!share! 2013& 1.5630! 1.6389! 2012& 1.5693! 1.6168! 2013& As&reported&in&these& financial&statements& (cents)& & 2013& As&previously&reported& (pence)& Basic! Diluted! ! Functional!and!presentation!currency! 0.21! 0.20! 0.14! 0.13! The!individual!financial!statements!of!each!group!company!are!presented!in!the!currency!of!the!primary!economic!environment! in!which!it!operates!(its!functional!currency).!For!the!purpose!of!the!consolidated!financial!statements,!the!results!and!financial! position!of!each!group!company!are!expressed!in!US!Dollars,!which!is!the!presentation!currency!for!the!consolidated!financial! statements.!The!Company’s!functional!currency!is!US!Dollars.! ! Transactions!and!balances! ! In! preparing! the! financial! statements! of! the! individual! companies,! transactions! in! currencies! other! than! the! entity’s! functional!currency!(foreign!currencies)!are!recognised!at!the!rates!of!exchange!prevailing!on!the!dates!of!transactions.!!At! each!balance!sheet!date,!monetary!assets!and!liabilities!that!are!denominated!in!foreign!currencies!are!retranslated!at!the! rate! prevailing! at! that! date.! ! NonXmonetary! items! carried! at! fair! value! that! are! denominated! in! foreign! currencies! are! translated!at!the!rates!prevailing!at!the!date!when!the!fair!value!was!determined.!!NonXmonetary!items!that!are!measured!in! terms!of!historical!cost!in!foreign!currencies!are!not!retranslated.! ! Exchange!differences!are!recognised!in!profit!and!loss!in!the!period!in!which!they!arise.! For!the!purpose!of!presenting!consolidated!financial!statements,!the!assets!and!liabilities!of!the!group’s!foreign!operations! are! translated! at! exchange! rates! prevailing! on! the! balance! sheet! date.! Income! and! expense! items! are! translated! at! the! average! exchange! rates! for! the! period,! unless! exchange! rates! fluctuate! significantly! during! that! period,! in! which! case! the! exchange! rates! at! the! date! of! the! transactions! are! used.! Exchange! differences! arising,! if! any,! are! recognised! in! other! comprehensive!income!and!accumulated!in!equity!(attributed!to!nonXcontrolling!interests!as!appropriate).! ! On! the! disposal! of! a! foreign! operation! (i.e.! a! disposal! of! the! Group’s! entire! interest! in! a! foreign! operation,! or! a! disposal! involving! loss! of! control! over! a! subsidiary! that! includes! a! foreign! operation,! loss! of! joint! control! over! a! jointly! controlled! entity!that!includes!a!foreign!operation,!or!loss!of!significant!influence!over!an!associate!that!includes!a!foreign!operation),! all!of!the!accumulated!exchange!differences!in!respect!of!that!operation!attributable!to!the!Group!are!reclassified!to!profit! or!loss.! 33! ! Notes to Financial Statements for the year ended 31 December 2014 ! In!addition,!in!relation!to!a!partial!disposal!of!a!subsidiary!that!includes!a!foreign!operation!that!does!not!result!in!the!Group! losing!control!over!the!subsidiary,!the!proportionate!share!of!accumulated!exchange!differences!are!reXattributed!to!nonX controlling!interests!and!are!not!recognised!in!profit!or!loss.!For!all!other!partial!disposals!(i.e.!partial!disposals!of!associates! or!joint!arrangements!that!do!not!result!in!the!Group!losing!significant!influence!or!joint!control),!the!proportionate!share!of! the!accumulated!exchange!differences!is!reclassified!to!profit!or!loss.! & &(l)& & & ! Intangible&assets& Intangible!assets!acquired!separately! ! Intangible!assets!with!finite!useful!lives!that!are!acquired!separately!are!carried!at!cost!less!accumulated!amortisation!and! accumulated! impairment! losses.! Amortisation! is! recognised! on! a! straightXline! basis! over! their! estimated! useful! lives.! The! estimated! useful! life! and! amortisation! method! are! reviewed! at! the! end! of! each! reporting! period,! with! the! effect! of! any! changes! in! estimate! being! accounted! for! on! a! prospective! basis.! Intangible! assets! with! indefinite! useful! lives! that! are! acquired!separately!are!carried!at!cost!less!accumulated!impairment!loss.! ! Internally!generated!intangible!assets!–research!and!development!expenditure! ! Expenditure!on!research!activities!is!recognised!as!an!expense!in!the!period!in!which!it!is!incurred.! ! An! internally! generated! intangible! asset! arising! from! the! development! (or! from! the! development! phase! of! an! internal! project)!is!recognised!if,!and!only!if!all!of!the!following!conditions!have!been!demonstrated:! X X X X X the!technical!feasibility!if!completing!the!intangible!asset!so!that!it!will!be!available!for!use!or!sale;! the!intention!to!complete!the!intangible!asset!and!use!or!sell!it;! the!ability!to!use!or!sell!the!intangible!asset;! how!the!intangible!asset!will!generate!probable!future!economic!benefits;! the!availability!of!adequate!technical,!financial!and!other!resources!to!complete!the!development!and!to!use!or!sell!the! intangible!asset;!and! the!ability!to!measure!reliably!the!expenditure!attributable!to!the!intangible!asset!during!its!development.! X ! The! amount! initially! recognised! for! internally! generated! intangible! assets! is! the! sum! of! the! expenditure! incurred! from! the! date! when! the! intangible! asset! first! meets! the! recognition! criteria! listed! above.! Where! no! internally! generated! intangible! asset!can!be!recognised,!development!expenditure!is!recognised!in!profit!or!loss!in!the!period!in!which!it!is!incurred.! ! Subsequent!to!initial!recognition,!internally!generated!intangible!assets!are!reported!at!cost!less!accumulated!amortisation! and!accumulated!impairment!losses,!on!the!same!basis!are!intangible!assets!that!are!acquired!separately.! ! Useful!live!and!amortisation!Intangible!assets! ! Amortisation!is!recognised!so!as!to!write!off!the!cost!or!valuation!of!assets!less!their!residual!values!over!their!useful!lives,! using!the!straightXline!method,!on!the!following!basis.! Generic!Top!Level!Domains!–!indefinite!life!(not!amortised)! Contracts!–!over!the!life!of!the!contract!(currently!7!years)! Software!and!development!costs!–!over!3!years! ! X X X ! Derecognition&of&intangible&assets& An! intangible! asset! is! deXrecognised! on! disposal,! or! when! no! future! economic! benefits! are! expected! from! use! or! disposal.! Gains! and! losses! arising! from! derecognition! of! an! intangible! asset,! measured! as! the! difference! between! the! net! disposal! proceeds!and!the!carrying!amount!of!the!asset,!are!recognised!in!profit!or!loss!when!the!asset!is!derecognised.!! ! Fixtures&&&equipment& Fixtures! &! equipment! is! stated! at! cost! less! accumulated! depreciation! and! any! accumulated! impairment! losses.! Depreciation!is!recognised!so!as!to!write!off!the!cost!or!valuation!of!assets!less!their!residual!values!over!their!useful!lives,! using!the!straight!line!method,!on!the!following!basis.! ! X Fixtures!&!equipment!–!over!3!to!7!years!! ! 34! (m)& ! (n)& ! ! ! Notes to Financial Statements for the year ended 31 December 2014 ! (o)& Impairment&of&Fixtures&&&equipment&and&intangible&assets&excluding&goodwill! At!each!balance!sheet!date,!the!Group!reviews!the!carrying!amounts!of!its!tangible!and!intangible!assets!to!determine!whether! there! is! any! indication! that! those! assets! have! suffered! an! impairment! loss.! If! and! such! indication! exists,! the! recoverable! amount!of!the!asset!is!estimated!to!determine!the!extent!of!the!impairment!loss!(if!any).!Where!the!asset!does!not!generate! cash!flows!that!are!independent!from!other!assets,!the!group!estimates!the!recoverable!amount!of!the!cashXgenerating!unit!to! which! the! asset! belongs.! When! a! reasonable! and! consistent! basis! of! allocation! can! be! identified,! corporate! assets! are! also! allocated!to!individual!cashXgenerating!units,!or!otherwise!they!are!allocated!to!the!smallest!group!of!cashXgenerating!units!for! which!a!reasonable!and!consistent!allocation!basis!can!be!identified.! ! An! intangible! asset,! which! an! indefinite! useful! life! is! tested! for! impairment! at! least! annually! and! whenever! there! is! an! indication!that!the!asset!may!be!impaired.!! ! Recoverable!amount!is!the!higher!of!fair!value!less!cost!to!sell!and!value!in!use.!In!assessing!value!in!use,!the!estimated!future! cash!flows!are!discounted!to!their!present!value!using!a!preXtax!discount!rate!that!reflects!current!market!assessments!of!the! time!value!of!money!and!the!risks!specific!to!the!asset!for!which!estimates!of!future!cash!flows!have!not!been!adjusted.! ! If!the!recoverable!amount!of!an!asset!(or!cashXgenerating!unit)!is!estimated!to!be!less!that!its!carrying!amount,!the!carrying! amount! of! the! asset! (or! cashXgenerating! unit)! is! reduced! to! its! recoverable! amount.! An! impairment! loss! is! recognised! immediately!in!profit!or!loss,!unless!the!relevant!asset!is!carried!at!a!reXvalued!amount,!in!which!case!the!impairment!loss!is! treated!as!a!revaluation!decrease.! ! Where!an!impairment!loss!subsequently!reverses,!the!carrying!amount!of!the!asset!(or!cashXgenerating!unit)!is!increased!to!the! revised!estimate!of!its!recoverable!amount,!but!so!that!the!increased!carrying!amount!does!not!exceed!the!carrying!amount! that! would! have! been! determined! had! no! impairment! loss! been! recognised! for! the! asset! (or! cashXgenerating! unit)! in! prior! years.!A!reversal!of!an!impairment!loss!is!being!recognised!immediately!in!profit!or!loss,!unless!the!relevant!asset!is!carried!at!a! reXvalued!amount,!in!which!case!the!reversal!of!the!impairment!loss!is!treated!as!a!revaluation!increase.! ! Critical&accounting&judgements&and&key&sources&of&estimation&uncertainty& (p)& ! In!the!application!of!the!Group’s!accounting!policies,!described!in!this!note,!the!directors!are!required!to!make!judgements,! estimates! and! assumptions! about! the! carrying! amounts! of! assets! and! liabilities! that! are! not! readily! apparent! from! other! sources.!The!estimates!and!associated!assumption!are!based!on!historic!experience!and!other!factors!that!are!considered!to! be!relevant.!Actual!results!may!differ!from!these!estimates.! ! The! estimates! and! underlying! assumptions! are! reviewed! on! an! onXgoing! basis.! Revisions! to! accounting! estimates! are! recognised! in! the! period! in! which! the! estimate! is! revised! if! the! revision! affects! only! that! period,! or! in! the! period! of! the! revision!and!future!periods!if!the!revision!affects!both!current!and!future!periods.!!! ! Critical!judgements!in!applying!the!Group’s!accounting!policies! ! The!Group!does!not!have!any!critical!judgements,!apart!from!those!involving!estimations!(which!are!dealt!with!separately! below).! ! Key!sources!of!estimation!uncertainty! ! The!key!assumptions!concerning!the!future,!and!other!key!sources!of!estimation!uncertainly!at!the!balance!sheet!date,!that! have! a! significant! risk! of! causing! a! material! adjustment! to! the! carrying! amounts! of! assets! and! liabilities! within! the! next! financial!year,!are!discussed!below.! ! (i)!Impairment!of!goodwill!and!intangible!assets! ! Determining!whether!goodwill!is!impaired!requires!an!estimation!of!the!value!in!use!of!the!cashXgenerating!units!to!which! goodwill!and!intangible!assets!have!been!allocated.!The!value!in!use!calculation!requires!the!entity!to!estimate!the!future! cash!flows!expected!to!arise!from!the!cashXgenerating!unit!and!a!suitable!discount!rate!in!order!to!calculate!present!value.! Goodwill!and!intangible!assets!have!not!been!impaired.! ! Details!of!goodwill!and!intangible!assets!are!set!out!in!note!14!and!15!respectively.!! ! ! ! 35! ! Notes to Financial Statements for the year ended 31 December 2014 !(q)& & & (r)& ! ! ! ! ! & ! ! Finance&costs/revenue& Interest!expenses!are!recognised!on!an!effective!yield!basis.! ! Finance!revenue!is!recognised!as!interest!accrued!using!the!effective!interest!method.& Financial&instruments& ! Financial! assets! and! financial! liabilities! are! recognised! in! the! Group’s! balance! sheet! when! the! Group! becomes! party! to! the! contractual!provision!of!the!instrument.! ! Financial!assets!and!financial!liabilities!are!initially!measured!at!fair!value.!Transaction!costs!that!are!directly!attributable!to!the! acquisition! or! issue! of! financial! assets! and! financial! liabilities! (other! than! financial! assets! and! financial! liabilities! at! fair! value! through!profit!or!loss)!are!added!to!or!deducted!from!the!fair!value!of!the!financial!assets!or!liabilities,!as!appropriate,!on!initial! recognition.! Transaction! costs! directly! attributable! to! the! acquisition! of! financial! assets! or! financial! liabilities! at! fair! value! through!profit!of!loss!are!recognised!immediately!in!profit!or!loss.! ! Financial!assets! All!financial!assets!are!recognised!and!derecognised!on!a!trade!date!where!the!purchase!or!sale!of!a!financial!asset!is!under!a! contract!whose!terms!require!delivery!of!the!financial!assets!within!the!timeframe!established!by!the!market!concerned,!and! are!initially!measured!at!fair!value,!plus!transaction!costs,!except!for!those!financial!assets!classified!as!at!fair!value!through! profit!or!loss,!which!are!initially!measured!at!fair!value.! ! Financial! assets! are! classified! into! the! following! specified! categories:! ‘available! for! sale’! financial! assets! and! ‘loans! and! receivables’.!The!classification!depends!on!the!nature!and!purpose!of!the!financial!assets!and!is!determined!at!the!time!of! initial!recognition.! ! Effective!interest!method! ! The!effective!interest!method!is!a!method!of!calculating!the!amortised!cost!of!a!debt!instrument!and!of!allocating!interest! income!over!the!relevant!period.!The!effective!interest!rate!is!the!rate!that!exactly!discounts!estimates!future!cash!receipts! (including!all!fees!and!points!paid!or!received!that!form!an!integral!part!of!the!effective!interest!rate,!transaction!costs!and! other!premium!or!discounts)!through!the!expected!life!of!the!debt!instrument,!or,!where!appropriate,!a!shorter!period,!to! the!net!carrying!amount!on!initial!recognition.! ! Income!is!recognised!on!an!effective!interest!basis!for!debt!instrument.! ! Loans!and!other!receivables! Trade! receivables,! loans! and! other! receivables! that! have! fixed! or! determinable! payments! that! are! not! quoted! in! an! active! market! are! classified! as! ‘loans! and! receivables’.! Loans! and! receivables! are! measured! at! amortised! cost! using! the! effective! interest!method,!less!Impairment.!Interest!income!is!recognised!by!applying!the!effective!interest!rate,!except!for!shortXterm! receivables!when!recognition!of!interest!would!be!material.!! ! Loans!and!receivables!include!cash!and!cash!equivalents.!Cash!and!shortXterm!deposits!in!the!balance!sheet!comprise! cash! at! bank! and! in! hand! and! shortXterm!deposits! with! an! original! maturity! of! three! months! or! less.! For! the! purposes! of! the! Cash! Flow! Statement,! cash! and! cash! equivalents! consist! of! cash! and! cash! equivalents! as! defined! above,! net! of! outstanding!bank!overdrafts.! ! & Impairment!of!financial!asset! ! Financial!assets!are!assessed!for!indicators!of!impairment!at!each!balance!sheet!date.!Financial!assets!are!impaired!where! there!is!objective!evidence!that,!as!a!result!of!one!or!more!events!that!occurred!after!the!initial!recognition!of!the!financial! asset,!the!estimated!future!cash!flows!of!the!investment!have!been!affected.! ! For!all!other!financial!assets!objective!evidence!of!impairment!could!include:! X X X significant!financial!difficultly!of!the!issuer!or!counterparty;!or! default!of!delinquency!in!interest!or!principal!payments;!or! it!becoming!probable!that!the!borrower!will!enter!bankrupt!or!financial!reXorganisation.! ! 36! ! Notes to Financial Statements for the year ended 31 December 2014 For!Financial!assets!carried!at!amortised!cost,!the!amount!of!the!impairment!is!the!difference!between!the!asset’s!carrying! amount!and!the!present!value!of!estimated!future!cash!flows,!discounted!at!the!financial!asset’s!original!effective!rate.! ! The! carrying! amount! of! the! financial! asset! is! reduced! by! the! impairment! loss! directly! for! all! financial! assets! with! the! exception! of! trade! receivables,! where! the! carrying! amount! is! reduced! through! the! use! of! an! allowance! account.! When! a! trade!receivable!is!considered!uncollectible,!it!is!written!off!against!the!allowance!account.!Changes!in!the!carrying!amount! of!the!allowance!account!are!recognised!in!profit!and!loss.! ! With!the!exception!of!available!for!sale!equity!instruments,!if,!in!a!subsequent!period,!the!amount!of!the!impairment!loss! decreases! and! the! decrease! can! be! related! objectively! to! an! event! occurring! after! the! impairment! was! recognised,! the! previously! recognised! impairment! loss! is! reversed! through! profit! or! loss! to! the! extent! that! the! carrying! amount! of! the! investment! at! the! date! the! impairment! is! reversed! does! not! exceed! what! the! amortised! cost! would! have! been! had! the! impairment!not!been!recognised.! ! DeNrecognition!of!financial!assets! ! The!Group!derecognises!a!financial!asset!only!when!the!contractual!rights!to!the!cash!flows!from!the!asset!expire,!or!when! it!transfers!the!financial!asset!and!substantially!all!the!risks!and!rewards!of!ownership!of!the!asset!to!another!entity.!If!the! Group! neither! transfers! nor! retains! substantially! all! the! risks! and! rewards! of! ownership! and! continues! to! control! the! transferred!asset,!the!Group!recognises!its!retained!interest!in!the!asset!and!an!associated!liability!for!amounts!it!may!have! to!pay.!If!the!Group!retains!substantially!all!the!risks!and!rewards!of!ownership!of!a!transferred!financial!asset,!the!Group! continues!to!recognise!the!financial!asset!and!also!recognises!a!collateralised!borrowing!for!the!proceeds!received.! ! On!deXrecognition!of!a!financial!asset!in!its!entirety,!the!difference!between!the!asset’s!carrying!amount!and!the!sum!of!the! consideration! received! and! receivable! and! the! cumulative! gain! or! loss! that! had! been! recognised! in! other! comprehensive! income!and!accumulated!in!equity!is!recognised!in!profit!or!loss.!! ! Financial!liabilities!and!equity! ! Debt!and!equity!instruments!are!classified!as!either!financial!liabilities!or!as!equity!in!accordance!with!the!substance!of!the! contractual!arrangement.! ! (I)!Equity!instruments! ! An! equity! instrument! is! any! contract! that! evidences! a! residual! interest! in! the! assets! of! an! entity! after! deducting! all! of! its! liabilities.!Equity!instruments!issued!by!the!Group!are!recognised!at!the!proceeds!received!net!of!direct!issue!costs.! ! Financial!liabilities! ! Financial!liabilities!are!classified!as!other!financial!liabilities.!! ! (II)!Other!financial!liabilities! ! Other!financial!liabilities,!including!borrowings,!are!initially!measured!at!fair!value,!net!of!transaction!costs.! ! Other! financial! liabilities! are! subsequently! measured! at! amortised! costs! using! the! effective! interest! method,! with! interest! expense!recognised!on!a!effective!yield!basis.! ! The!effective!interest!method!is!a!method!of!calculating!the!amortised!costs!of!a!financial!liability!and!of!allocating!interest! expense!over!the!relevant!period.!The!effective!interest!rate!is!the!rate!that!exactly!discounts!estimated!future!cash!payments! through!the!expected!life!of!the!financial!liability,!or,!where!appropriate,!a!shorter!period,!to!the!net!carrying!amount!on!initial! recognition.! !! DeNrecognition!of!financial!liabilities! ! The!Group!deXrecognises!financial!liabilities!when,!and!only!when,!the!Group’s!obligations!are!discharged,!cancelled!or!they! expire.! 37! & ! ! Notes to Financial Statements for the year ended 31 December 2014 !(s)& ! ! ! ! ! (t)& Taxation& The!tax!expense!represents!the!sum!of!the!tax!currently!payable!and!deferred!tax.! ! Current!tax! ! The! tax! currently! payable! is! based! on! taxable! profit! for! the! year.! ! Taxable! profit! differs! from! net! profit! as! reported! in! the! income!statement!because!it!excludes!items!of!income!or!expense!that!are!taxable!or!deductible!in!other!years!and!it!further! excludes!items!that!are!never!taxable!or!deductible.!!The!Group’s!liability!for!the!current!year!is!calculated!using!jurisdictional! tax!rates!that!have!been!enacted!or!substantively!enacted!by!the!balance!sheet!date.! ! Deferred!tax! ! 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!tax!computations,! and! is! accounted! for! using! the! balance! sheet! liability! method.! Deferred! tax! liabilities! are! generally! 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.! ! Deferred!tax!is!calculated!at!the!tax!rates!that!are!expected!to!apply!in!the!period!when!the!liability!is!settled!or!the!asset!is! realised.! Deferred! tax! is! charged! or! credited! in! the! income! statement,! except! when! it! relates!to!items!charged!or!credited! directly!to!equity,!in!which!case!it!is!also!dealt!with!in!equity.! ! Current!and!deferred!tax!for!the!year! ! Current! and! deferred! tax! are! recognised! in! profit! of! loss,! except! when! they! relate! to! items! that! are! recognised! in! other! comprehensive! income! or! directly! in! equity,! in! which! case,! the! current! and! deferred! tax! are! also! recognised! on! other! comprehensive!income!or!directly!inequity!respectively.!! & Provisions! ! Provisions! are! recognised! when! the! Group! has! a! present!obligation! (legal! or!constructive)! as! a! result!of!a!past!event,!it!is! probable!that!an!outflow!of!resources!embodying!economic!benefits!will!be!required!to!settle!the!obligation!and!a!reliable! estimate!can!be!made!of!the!amount!of!the!obligation.! ! The!amount!recognised!as!a!provision!is!the!best!estimate!of!the!consideration!required!to!settle!the!present!obligation!at! the! balance! sheet! date,! taking! into! account! the! risks! and! uncertainties! surrounding! the! obligation.! Where! a! provision! is! measured!using!the!cash!flows!estimates!to!settle!the!present!obligation,!its!carrying!amount!is!the!present!value!of!those! cash!flows!(when!the!effect!of!the!time!value!of!money!is!material).! ! When!some!or!all!of!the!economic!benefits!required!to!settle!a!provision!are!expected!to!be!recovered!from!a!third!party,!a! receivable! is! recognised! as! an! asset! if! it! is! virtually! certain! that! reimbursement! will! be! received! and! the! amount! of! the! receivable!can!be!measured!reliably.! ! Share_based&payment&transactions& (u)& ! EquityXsettled! shareXbased! payments! to! employees! are! measured! at! the! fair! value! of! the! equity! instrument! at! the! grant! date.!!The!fair!value!excludes!the!effect!of!non!marketXbased!vesting!conditions.!!The!fair!value!is!determined!by!using!the! BlackXScholes!model.!!Details!regarding!the!determination!of!the!fair!value!of!equityXsettled!shareXbased!transactions!are! set!out!in!Note!24.! ! The! fair! value! determined! at! the! grant! date! of! the! equityXsettled! sharedXbased! payments! is! expensed! on! a! straightXline! basis!over!the!vesting!period,!based!on!the!Group’s!estimate!of!the!equity!instruments!that!will!eventually!vest.!!At!each! balance!sheet!date,!the!Group!revises!its!estimate!of!the!number!of!equity!instruments!expected!to!vest!as!a!result!of!the! effect!of!non!marketXbased!vesting!conditions.!!The!impact!or!the!revision!of!the!original!estimates,!if!any,!is!recognised!in! profit! or! loss! such! that! the! cumulative! expense! reflects! the! revised! estimate,! with! a! corresponding! adjustment! to! equity! reserves.! ! The!dilutive!effect,!if!any,!of!outstanding!options!is!reflected!as!additional!share!dilution!in!the!computation!of!earnings!per! share!(see!Note!13). ! 38! ! Notes to Financial Statements for the year ended 31 December 2014 &(v)& 2& ! Investment&in&subsidiary&undertakings& ! In!the!parent!company!financial!statements,!fixed!asset!investment!in!subsidiaries!and!joint!ventures!are!shown!at!cost!less! provision!for!impairment.! ! Operating&segments&–&Group&&! Information!reported!to!the!Group’s!management!and!internal!reporting!structure!(including!the!Group’s!Chief!Executive! Officer)!for!the!purpose!of!resources!allocation!and!assessment!of!segment!performance!is!focused!on!the!category!for! each!type!of!activity.!The!principal!categories!(and!the!Group’s!segments!under!IFRS!8)!are:! ! X Registry!ownership!(‘Registry’)!–!applicant!of!top!level!domain!name!from!ICANN!and!wholesaler!of!domain!names!of! those!top!level!domain!names! Registry!service!provider!(‘RSP’)!and!consulting!services!(segment!B)!–!back!end!service!provider!for!a!registry! Registrar!(‘Registrar’)!–!retailer!of!domain!names! X X & Segment&revenues&and&results& & Registry& $&000's& RSP& $&000's& Registrar& $&000’s& Elimination& $&000's& Total& $&000's& 2014& ! Revenue! External!sales! Total!Revenue! ! & & ! 298! 298! ! & ! 1,388! 3,728! ! & ! 236! 236! ! Operating!profit!/!(loss)!! 31,973*! (9,606)**! (418)! Finance!revenue! Finance!costs! Profit!on!disposal!of! subsidiaries! Share!of!loss!of!joint! venture! Profit!before!tax! Tax! Profit!after!tax! ! ! ! ! ! !! !! ! ! ! ! ! !! !! ! ! ! ! ! ! ! & ! X! (2,340)! ! 110! ! ! ! ! ! !! !! ! 1,922! 1,922! ! 22,059! 62! (76)! 21! (9)! 22,057! X! 22,057! & *Included! within! Operating! profit! is! Profit! on! disposal! of! intangible! assets! of! $7,048k! and! Profit! on! gTLD! auctions! of! $33,721k!allocated!to!the!Registry!segment.! ! **Marketing!expenses!and!Cost!of!Sales!for!certain!geographical!gTLDs!are!included!within!the!operating!loss!allocated!to! the!RSP!segment.! ! InterXsegment!sales!are!charged!at!prevailing!market!prices.! & ! 39! ! 2& & ! & ! Notes to Financial Statements for the year ended 31 December 2014 Operating&segments&–&Group&(continued)& & 2013! ! Revenue! External!sales! Total!Revenue! ! Operating!profit! ! Finance!revenue! Finance!costs! Share!of!loss!of!joint! venture! Loss!before!tax! Tax! Profit!after!tax! Registry! $!000's! RSP! $!000's! Registrar! $!000’s! Elimination! $!000's! Total! $!000's! & & & ! X! X! ! 4,661! ! ! ! ! ! !! !! ! 56! 56! ! (3,382)! ! ! ! ! ! !! !! & & ! X! X! ! (60)! ! ! ! ! ! !! !! ! 56! 56! ! 1,214! ! 19! (23)! (69)! 1,141! X! 1,141! ! X! X! ! (5)! ! ! ! ! ! ! ! Included!within!Operating!profit!is!Profit!on!disposal!of!intangible!assets!of!$6,440k!allocated!to!the!Registry!segment.! The! accounting! policies! of! the! reportable! segments! are! the! same! as! the! group! accounting! policies! described! in!Note! 1.!! Segment! results! represent! results! earned! by! each! segment! without! allocation! of! centralised! costs! and! income! tax! expenses.!This!is!the!measure!reported!to!the!Group’s!Chief!Executive!Officer!for!the!purpose!of!resource!allocation!and! assessment!of!segment!performance.! Other&segment&information& & & & Registry! RSP*! Registrar! Other! Total! ! ! ! ! ! ! ! ! ! Segment&assets& 2014& $&000’s& 75,939! 21,553! 3,016! 833! 101,341! & & ! ! ! ! ! ! ! ! 2013! $!000’s! 32,383! 6,901! 426! 844! 40,554!! & & & ! ! ! ! ! ! Depreciation( & & ! ! ! ! 2014& $&000’s& 9! 279! 208! X! ! 496! ! 2013! $!000’s! X! 31! X! X! 31! For! the! purpose! of! monitoring! segment! performance! and! allocating! resources! between! segments,! the! Group’s! Chief! ! Executive! Officer! monitors! the! tangible,! intangible! and! financial! assets! attributable! to! each! segment.! All! assets! are! allocated! to! reportable! segments! with! the! exception! of! interest! in! joint! ventures.! Goodwill! has! been! allocated! to! reportable!segments!as!described!in!note!14.! ! ! *RSP!assets!include!$14,897k!cash!balances!held!on!behalf!of!the!Registry.! ! 40! Notes to Financial Statements for the year ended 31 December 2014 Operating&segments&–&Group&(continued)& ! Geographical&information& The!Group’s!information!about!its!segment!assets!(nonXcurrent!assets!excluding!financial!instruments)!by!geographic! location!are!detailed!below.! & & & British!Virgin!Islands! Ireland! United!Kingdom! Germany! USA! Total! ! ! ! ! ! ! ! ! ! Revenue&from&external&customers& 2014& $&000’s& 104! 373! 1,136! 194! 115! 1,922! & & ! ! ! ! ! ! 2013! $!000’s! X! X! X! X! 57! 57! ! ! ! & & & ! ! ! ! ! ! ! Non_current&assets& 2014& $&000’s& 45,651! 1,800! 359! 370! 2,931! ! 51,111! & & ! ! ! ! ! ! 2013! $!000’s! 6,384! 521! 272! X! 39! 7,216! ! Included! in! revenues! arising! from! the! RSP! segment! are! revenues! of! $800k! (2013:! nil),! which! arose! from! sales! to! the! Group’s! largest! customer.! No! other! single! customer! contributed! 10%! or! more! to! the! Group’s! revenue! in! either! 2014!or! 2013.! ! ! ! ! Cost&of&sales& ! & & Domain!name!registration!fees! ICANN!registry!and!service!fees! Minimum!revenue!guarantee!fee*! Other! ! ! ! Group! ! ! ! Company& ! 2014& $&000's& 266! 932& 3,297! 164& 4,659! 2013! $!000's! X! X! X! X& X! ! ! ! ! ! ! 2014& $&000's& X! 916& X! X& 916! 2013! $!000's! X! X! X! X& X! ! 2& & 3& ! ! ! ! ! ! ! ! *The! Minimum! Revenue! Guarantee! was! prepaid! in! a! prior! period! and! was! previously! reflected! as! a! current! asset.! The! ! guarantee!is!related!to!certain!TLDs.! ! ! 41! ! Notes to Financial Statements for the year ended 31 December 2014 ! 4& & a)! ! ! ! ! ! ! ! ! ! ! ! ! b)! ! ! ! ! ! ! ! ! ! ! ! ! Administrative&expenses&& The! Directors’! consider! administrative! expenses! to! be! either! fixed! or! variable! in! nature! and! consider! separating! these!costs!to!reflect!underlying!business!costs.! ! ! ! ! ! Fixed&administrative&expense& ! & & Directors!emoluments!–!excluding! bonuses! Employee!wages!and!salaries! Advertising!&!marketing! Operating!lease!rentals! Insurance! Professional!services! Utilities! Other! ! ! Variable&administrative&expense! ! ! ! Directors’!bonuses! Employee!bonuses! Share!based!payment!expenses! Advertising!&!marketing! Professional!services*! Royalties**! Utilities! Other! ! Group! ! Company& 2014& $&000's& 1,128! 3,121& 3,320& 349! 117! 250! 165! 134! 2013! $!000's! 725! 1,342! 74& 279! 113! 78! 52! 21! 8,584! 2,684! ! ! Group( ! ! 2014& $&000's! 2013! $!000's! 163! 287! 611! 1,012! 1,481! 277! 251! 1,088& 5,170! X! 69! 693! 176! 534! X! 106! 927! 2,505! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 2014& $&000's& 91! 1,432& X& X! 34! 201! X! 79! 2013! $!000's! 70! X! X& 16! 26! 78! X! X! 1,837! 190! ! ! Company( ! ! 2014& $&000's! 2013! $!000's! X! X! 611! 328! 909! X! 6! X! X! X! 693! 175! 344! X! 4! 85! 1,854! 1,301! *!Professional!fees!includes!$451k!of!reXlisting!costs!incurred!in!2014!as!the!company!reXlisted!on!the!AIM!market!of!the!London! Stock!Exchange!from!an!investing!company!to!an!operating!company.! **!Royalties!relate!to!certain!geographic!TLDs.! ! ! 42! ! Notes to Financial Statements for the year ended 31 December 2014 ! 5& Operating&profit& ! ! ! ! Operating!profit!is!arrived!at!after!charging:! ! & & Auditors’!remuneration!–!current! year!auditors! Audit!of!these!financial!statements! Audit!of!the!financial!statements! of!subsidiaries!! Audit!of!prior!period!financial! statements! Fees!in!relation!to!reXlisting! Tax!compliance! Other!services! Directors’!emoluments!–!fees!and! salaries! Directors’!share!based!payments! Shared!based!payments!(excluding! Directors’!share!based!payments)! Depreciation!!&!amortisation! Operating!lease!rentals!! Foreign!exchange!(loss)!!/!gain! Foreign&exchange&(loss)&/&gain& & ! & ! & Foreign!exchange!gain!/!(loss)!on! trading!activities! Foreign!exchange!(loss)!/!gain!on! inter!company!balances! Total! Group! 2014& $&000's& 2013! $!000's! ! 74! 36! X! 51! 20! 41! 1,291! 567! 45! 496! 467! ! 64! 22! 25! 16! X! X! 725! 606! 87! 31! X! (1,427)! 333! ! & Group! 2014& $&000's& 1,188! (2,615)! (1,427)! 2013! $!000's! 261! 72! 333! ! ! Company& ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 2014& $&000's& 2013! $!000's! ! 74! X! X! 51! X! 38! 91! 567! 46! 9! X! ! 64! X! 25! 16! X! X! 71! 606! 87! X! X! (2,838)! 179! ! ! ! Company& 2014& $&000's& (183)! (2,655)! (2,838)! 2013! $!000's! 126! 53! 179! 43! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! & 6& ! ! ! ! ! & ! Notes to Financial Statements for the year ended 31 December 2014 Employee&information&(Excluding&Directors)! ! & Staff&costs&comprised& ! & Group! 2014& $&000's& 2013! $!000's! Wages!and!salaries! 3,408& 1,339& ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! Company& 2014& $&000's& 2013! $!000's! _& & & X! X! X! X! X! X& ! ! X! X! X! X! X! ! ! ! ! Company& 2014& $&000's& 2013! $!000's! ! ! ! 10! 3! 6! 17! 36! ! ! 2! 1! X! 6! 9! & Group& 2014& $&000's& ! ! 2013! $!000's! 1,857! 1,331! 658! 676! Group& Salaries&&& Fees& $&000's& Bonus& $&000's& Benefits& $&000s& Share_based& Payments& $&000's& ! ! ! ! 300! 300! 260! 138! ! 3! 52! 36! 50! 50! 18! 45! ! X! X! X! ! ! X( X( 38( X( ! X( X( X( 241! 309! 13! 1! ! X! 3! X! Total& $&000's& ! ! 591! 659! 329! 184! ! 3! 55! 36! 1,089! 163! 38( 567! 1,857! & & ! ! ! ! ! ! ! ! ! ! ! ! Average&number&of&employees& Administration! Finance! Sales!&!Marketing! Engineering! Total! ! 8& Directors’&emoluments&& ! & ! ! & & ! Directors’!remuneration! & 2014& ! Executive&Directors& Frederick!Krueger! Antony!Van!Couvering! Michael!Salazar! Caspar!Veltheim! Non_Executive&Directors& Guy!Elliott!(#)! Keith!Teare!! Elliot!Noss!(#)! ! ! (#):!These!Directors!were!not!employed!during!the!full!2014!financial!period.! No!pension!benefits!are!provided!for!any!Director.! Details!of!Directors!share!options!exercised!have!been!disclosed!in!note!24!to!the!accounts. 44! ! & 7& ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! Notes to Financial Statements for the year ended 31 December 2014 ! 8& Directors’&emoluments&(continued)& ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! & 2014& ! Executive&Directors& Frederick!Krueger! Antony!Van!Couvering! Michael!Salazar! Caspar!Veltheim! Non_Executive&Directors& Guy!Elliott!(#)! Keith!Teare!! Elliot!Noss!(#)! ! 2013& & ! Executive&Directors& Frederick!Krueger! Antony!Van!Couvering! Michael!Salazar! Caspar!Veltheim! Peter!Dengate!Thrush! Non_Executive&Directors& Guy!Elliott!(#)! Keith!Teare!! Michael!Mendelson! ! Company& Salaries&&& Fees& $&000's& Bonus& $&000's& Benefits& $&000’s& Share_based& Payments& $&000's& ! ! ! ! ! ! ! ! X! X! X! X! ! 3! 52! 36! 91! Salaries&&& Fees& $&000's& 175! 175! 169! 111! 19! ! 28! 14! 9! 700! & & ! ! ! ! ! ! ! ! ! ! ! & & ! ! ! ! ! ! ! ! ! ! ! ! ! ! X! X! X! X! ! X! X! X! X! ! ! X! X! X! X! ! X! X! X! X! Total& $&000's& ! ! 241! 309! 13! 1! ! 3! 55! 36! 241! 309! 13! 1! ! X! 3! X! 567! 658! Group& Bonus& $&000's& Benefits& $&000’s& Share_based& Payments& $&000's& Total& $&000's& ! ! 310! 587! 227! 117! 33! ! 28! 20! 9! ! ! X! X! 25! X! X! ! X! X! X! 135! 412! 33! 6! 14! ! X! 6! X! 25! 606! 1,331! ! ! X! X! X! X! X! ! X! X! X! X! 45! ! ! ! ! ! ! ! ! ! ! ! ! ! ! Notes to Financial Statements for the year ended 31 December 2014 8& Directors’&emoluments&(continued)& 2013& ! Executive&Directors& Frederick!Krueger( Antony!Van!Couvering( Michael!Salazar( Caspar!Veltheim( Peter!Dengate!Thrush( Non_Executive&Directors( Guy!Elliott!(#)( Keith!Teare!( Michael!Mendelson( & Company& Salaries&&& Fees& $&000's& Bonus& $&000's& Benefits& $&000’s& Share_based& Payments& $&000's& ! ! ! ! X( X( X( X( 19( ! 28( 14( 10( 70( X( X( X( X( X( ! X( X( X( X( ! ! X( X( X( X( X( ! X( X( X( X( ! ! & & & ! ! ! ! ! ! ! ! ! ! ! ! Total& $&000's& ! ! 135( 412( 33( 6( 33( ! 28( 20( 9( 135( 412( 33( 6( 14( ! X( 6( X( 606( 676( (*):!Peter!Dengate!Thrush!resigned!as!a!director!in!2012.!Amounts!paid!to!Peter!Dengate!Thrush!in!2013!are!in!relation!to! services!provided!in!the!2012!financial!period! No!pension!benefits!are!provided!for!any!Director.! Details!of!Directors’!share!options!exercised!have!been!disclosed!in!note!24!to!the!accounts.! Finance&revenue& & ! & & Bank!Interest! Other!interest!received! Total! ! ! & Group! ! ! ! 2014& $&000's& 2013! $!000's! 57! 5! 62! 19! X! 19! Finance!revenues!relate!to!assets!classified!as!loans!and!receivables.! Finance&costs& & ! & & Interest!on!obligations!under!finance! lease! ! ! & Group! 2014& $&000's& 2013! $!000's! ! ! Company& 2014& $&000's& 2013! $!000's! 57! X! 57! 19! X! 19! ! ! Company& 2014& $&000's& 2013! $!000's! ! ! ! ! ! ! ! ! ! 76! 23! X! X! 46! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 9& ! ! ! ! ! 10& ! ! ! Notes to Financial Statements for the year ended 31 December 2014 11& Income&tax&expense&_&Group& Current!tax! Deferred!tax! 2014& $&000's& 2013! $!000's! X! X! X! X! X! X! ! The!charge!for!the!current!year!can!be!reconciled!to!the!loss!per!the!Group!statement!of!comprehensive!income!as!follows:! ! Profit!before!tax!on!continuing!operations! Tax!at!the!BVI!tax!rate!of!0%! ! Income&tax&expense&_&Company& Current!tax! Deferred!tax! ! ! 2014& $&000's& 2013! $!000's! 25,196! 1,141! 2014& $&000's& X! X! X! X! X! 2013! $!000's! X! X! X!! X! X! The! charge! for! the! current! year! can! be! reconciled! to! the! loss! per! the! Company! statement! of! comprehensive! income! as! follows:! ! ! ! Profit!before!tax!on!continuing!operations! Tax!at!the!BVI!tax!rate!of!0%! 2014& $&000's& 2013! $!000's! & ! 33,176! X! X! 4,752! X! X! ! The! British! Virgin! Islands! under! the! IBC! imposes! no! corporate! taxes! or! capital! gains.! However,! the!Company! as! a! group! may! be! liable! for! taxes! in! the! jurisdictions! where! it! is!operating.! ! No! deferred! tax!asset! has! been! recognised! because! there!is! insufficient! evidence! of! the! timing! of! suitable!future!profits! against!which!they!can!be!recovered.!Tax!losses!carried!forward,!which!may!be!utilised!indefinitely!against!future!taxable! profits!amount!to!$5,314k!(2013:!$3,420k)!in!the!USA,!$1,852k!(2013:!$849k)!in!Germany,!$3,169!(2013:!1,677k)!in!Ireland! and!$6,331k!(2013:!$311k)!in!the!United!Kingdom.! ! ! Dividends! No!dividends!were!paid!or!proposed!by!the!Directors!(2013!$Nil).! ! 47! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 12& ! ! ! ! ! Notes to Financial Statements for the year ended 31 December 2014 Earnings&per&share! 13&& ! Earnings& 2014& $&000's& 2013! $!000's! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! Earnings!for!the!purpose!of!basic!earnings!per!share!being!net!profit!attributable! to!owners!of!the!Company! 22,287& 1,249! ! ! Number&of&shares& Weighted!average!number!of!ordinary!shares!for!the!purpose!of!basic!earnings! per!share! ! Effect!of!dilutive!potential!ordinary!shares:! Share!options!and!warrants! Weighted!average!number!of!ordinary!shares!for!the!purpose!of!diluted! earnings!per!share! ! ! Earnings&per&share& ! Basic! ! Diluted! ! 2014& million& 2013! million! 815.01& 591.71! & & ! ! 19.07& 22.56! 834.08& 614.27! 2014& cent& 2013! cent! & 2.73& & 2.67& ! 0.21! ! ! 0.20! 48! ! Notes to Financial Statements for the year ended 31 December 2014 ! 14& Goodwill& Cost! At!1!January!2013! Exchange!differences! As!at!31!December!2013! ! Exchange!differences! As&at&31&December&2014& Group& $&000's& 2,943! 40! 2,983! ! (155)! 2,828& & & ! Goodwill! acquired! in! a! business! combination! is! allocated,! at! acquisition,! to! the! cash! generating! units! that! are! expected! to! benefit!from!that!business!combination.!!Goodwill!has!been!allocated!to!the!‘Registry’!segment!(a!single!‘CGU’).!! ! ! Impairment&review& The!Group!tests!goodwill!annually!for!impairment,!or!more!frequently!if!there!are!indicators!that!goodwill!might!be!impaired.! At! 31! December! 2014,! the! Directors! have! carried! out! an! impairment! review! and! have! concluded! that! no! impairment! is! required.! ! The!recoverable!amount!of!the!CGU!is!determined!from!value!in!use!calculations.!The!key!assumptions!for!the!value!in!use! calculations! are! those! regarding! the! discount! rates,! growth! rates! and! expected! changes! to! selling! prices! and! direct! costs.! Management!estimate!discount!rates!using!preXtax!rates!that!reflect!current!market!assessments!of!the!time!value!of!money! and!the!risks!specific!to!the!CGU.!! The!Group!prepares!cash!flow!forecasts!derived!from!the!most!recent!financial!budgets!approved!by!management!for!the! next!three!years!and!extrapolates!cash!flows!into!perpetuity!based!on!an!estimated!growth!rate!of!3%!(2013:!3%).!The!rate! used!to!discount!the!forecast!cash!flows!is!9%!(2013:!9%).! ! 49! Notes to Financial Statements for the year ended 31 December 2014 ! ! 15& Intangible&assets& & Group& generic&Top& Level& Domains& $&000's& Software&&& development& costs& $&000's& Development&costs& (Assets&under& construction)& $&000’s& Other& $&000's& Total& $&000's& ! ! X! X! X! X! ! 148! X! X! X! 148& ! X! ! _& ! X! _& & & 148& & X! ! ! 184! 9! X! 193! ! 43! X! (74)! X! 162& ! X! ! _& ! X! _& & & 162& & 193! 184! 2,277! 99! 2,560! ! 44,632! 3,885! (9,971)! (310)! 40,796& X! ! _& ! (199)! (199)& & & 40,597& & 2,560! ! ! Cost& At!1!January!2013! Additions! Exchange!differences! At!31!December!2013! ! Additions! Transfer!from!other!long! terms!assets! Disposals! Exchange!differences! At&31&December&2014& ! ! ! ! X! 2,093! 93! 2,186! ! 42,889! 3,885! (9,897)! X! 39,063& Accumulated&amortization! ! & & ! At!1!January!2013! Charge!for!the!year! At!31!December!2013! ! Charge!for!the!year! At&31&December&2014& & Carrying&amount& At&31&December&2014& & At!31!December!2013! ! & & & & & & & & ! ! ! X! 175! 6! 181! ! 1,552! X! X! (310)! 1,423& X! ! _& ! (199)! (199)& & & X! ! _& ! X! _& & & 39,063& 1,224& & 2,186! & 181! 50! ! Notes to Financial Statements for the year ended 31 December 2014 15& Intangible&assets&(continued)& Company& ! ! Cost&and&carrying&amount( At!1!January!2013! Additions! Exchange!differences! At!31!December!2013! ! Additions! Transfers!from!other!long! term!assets! Disposals! At&31&December&2014& Accumulated&Amortization! At!1!January!2013! Charge!for!the!year! At!31!December!2013! ! Charge!for!the!year! At&31&December&2014& & Carrying&amount& At&31&December&2014& & At!31!December!2013! & & & & & ! generic&Top& Level& Domains&& $&000's& Software&&& development& costs& $&000’s& Other& $&000's& Total& $&000's& ! ! ! 128! 2! 1! 131! ! 43! X! (75)! 99& X! ! _& ! X! _& & & 99& & 131! 128! 2,189! X! 2,317! ! 42,983! 3,515! (9,971)! 38,844& ! X! ! _( ! (9)! (9)& & & 38,835& & 2,317! & ! ! ! X! 2,187! (1)! 2,186! ! 42,889! 3,515! (9,896)! 38,694& X! ! _& ! X! _& & & 38,694& & 2,186! ! ! X! X! X! X! ! 51! X! X! 51& ! ! X! ! _& ! (9)! (9)& & & 42& & X! 51! ! Notes to Financial Statements for the year ended 31 December 2014 15& Intangible&assets&(continued)& generic&Top&Level&Domains&& In!2012,!the!Group!applied!for!new!generic!Top!Level!Domains!to!the!Internet!Corporation!for!Assigned!Names!and!Numbers! (ICANN),! see! note! 19! for! further! details.! Successful! applications! are! transferred! from! other! longXterm! assets! to! Intangible! assets.! The! Group! capitalises! the! full! cost! incurred! to! pursue! the! rights! to! operate! generic! Top! Level! Domains! including! amounts!paid!at!auction!to!gain!this!right!where!there!are!more!than!one!applicant!to!ICANN!for!the!same!generic!Top!Level! Domain.! The!disposal!in!the!year!reflect!the!sale!of!a!future!revenue!stream!of!a!certain!generic!Top!Level!Domain!where!the!funds! from!the!sale!of!that!revenue!share!was!used!to!fund!its!acquisition.! This!class!of!intangible!assets!are!assessed!to!have!an!indefinite!life!as!it!is!deemed!that!the!application!fee!and!amounts!paid! at!auction!give!the!Group!indefinite!right!to!this!generic!Top!Level!Domain.! The! Group! tests! intangible! assets! with! an! indefinite! life! ! (generic! Top! Level! Domains)! annually! for! impairment,! or! more! frequently!if!there!are!indicators!that!the!asset!might!be!impaired.!! Impairment&review&of&intangible&assets& At! 31! December! 2014,! the! Directors! have! carried! out! an! impairment! review! and! have! concluded! that! no! impairment! is! required.! The! recoverable! amounts! of! the! individual! generic! Top! Level! Domains,! software,! contracts! and! other! intangible! assets! are! determined! from! value! in! use! calculations.! The! key! assumptions! for! the! value! in! use! calculations! are! those! regarding! the! discount! rates,! growth! rates! and! expected! changes! to! the! selling! process! and! direct! costs.! Management! estimate!discount!rates!using!preXtax!rates!that!reflect!current!market!assessments!of!the!time!value!of!money!and!the!risk! specific!to!the!asset.!! The! group! prepares! cash! flow! forecasts! derived! from! the! most! recent! financial! budgets! approved! by! management! for! the! next! five! years! and! extrapolates! cash! flows! into! perpetuity! based! on! an! estimated! growth! rate! of! 3%.! The! rate! used! to! discount!the!forecast!cash!flow!is!9%.! ! 52! ! Notes to Financial Statements for the year ended 31 December 2014 ! 16& Fixtures&&&equipment! Group& ! & Cost& At!1!January!2013! Additions! Exchange!differences! At!31!December!2013! ! Additions! Exchange!differences! At&31&December&2014& & Depreciation&& At!1!January!2013! Depreciation!charge!for!the!period! At!31!December!2013! ! Depreciation!charge!for!the!period! Exchange!differences! At&31&December&2014& ! Carrying&amount& At&31&December&2014& ! At!31!December!2013! Fixtures&&&equipment& ! $&000's& ! ! ! ! ! ! ! ! ! ! ! & ! ! ! ! ! ! ! ! & ! ! & ! ! ! 91! 777! 30! 898! ! 398! (100)! 1,196& ! ! (36)! (31)! (67)! ! (279)! 21! (325)& ! ! 871& ! 831! The!Group’s!obligations!under!finance!leases!(see!note!22)!are!secured!by!the!lessors’!title!to!the!leased!assets,!which!have!a! carrying!amount!of!$267k!(2013:!$674k).! 53! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! & ! ! ! ! & & & & & & & & & & & & ! Notes to Financial Statements for the year ended 31 December 2014 17& Investment&in&subsidiaries& Company& Shares&in&group&undertakings& Company& Cost& At!the!beginning!of!the!period! Disposals! Exchange!differences! At!31!December!! ! ! ! ! ! ! ! Details!of!the!company’s!subsidiaries!are!as!follows:! 2014& $&000's& ! ! 3,550& (2)& _& 2013& $!000's& ! ! 3,547! X! 3! 3,548& 3,550! Place&of& Incorporation&(or& registration&and& operation)& Principal&activity& Proportion&of& ownership& interest&(%)& Proportion&of& voting&power& (%)& Name& Minds!+!Machines!US,!Inc.!(DE)!(2)! Minds!+!Machines!LLC!(CA)! Minds!+!Machines!LLC!(FL)!(2)! Bayern!Connect!GmbH! Minds!and!Machines!GmbH!! ADT!(1)! AIC!(1)! US! US! US! Germany! Germany! US! US! Minds!+!Machines!Ltd!(Ireland)!! Ireland! Minds!and!Machines!Ltd!(UK)!! England!&!Wales! Top!Level!Domains!Registry!Pte!(1)! Singapore! Minds!+!Machines!Registrar!Ltd! (Ireland)!! Minds!and!Machines!Registrar!UK! Ltd! Emerald!Names!Limited!(2)! ! Ireland! England!and!Wales! Ireland! ! (1) Subsidiaries!dissolved!in!the!year! (2) Subsidiaries!incorporated!in!the!year! ! Notes:! Holding! company! Consultancy! services! Registry! Registry! Registry! Dormant!/! dissolved! Dormant!/! dissolved! Registry!service! provider! Registry!service! provider! Dormant!/! dissolved! Registrar! Registrar! Holding! company! ! 100! 100! 100! 80! 80! 100! 100! 100! 100! 100! 100! 100! 100! ! 100! 100! 100! 100! 100! 100! 100! 100! 100! 100! 100! 100! 100! ! X Minds!+!Machines!LLC!(CA),!Minds!+!Machines!LLC!(FL)!and!Dot!Law,!Inc.!are!direct!subsidiaries!of!Minds!+!Machines! US,!Inc!(DE)! X Minds!+!Machines!Registrar!Limited!(Ireland)!is!a!direct!subsidiary!of!Minds!+!Machines!Ltd!(Ireland).! 54! ! ! & & ! ! Notes to Financial Statements for the year ended 31 December 2014 18&& & Interest&in&joint&venture& & The!group!has!50%!interest!in!4!joint!ventures;!Rugby!Domains!Ltd,!Basketball!Domains!Ltd,!Entertainment!Names!Inc!and! Dot!Country!LLC.!!These!joint!ventures!were!formed!to!sell!secondXlevel!domain!names!to!registrars.!!The!following!amounts! represent!the!Group’s!50%!share!of!the!assets!and!liabilities!and!results!of!the!joint!venture.!!Interest!in!joint!ventures!are! accounted!for!using!the!equity!method.!!They!are!included!in!the!statement!of!financial!position!and!income!statement!as! follows:! ! ! ! ! ! Share&of&interest&in&assets&/&liabilities& Assets! X!NonXcurrent! X!Current! ! ! Liabilities! X!Current! & Share&of&interest&in&assets&/&liabilities& & X!Expenses! Loss&after&income&tax& Group& 2014& $&000's& 2013! $!000's& ! 379& 478& 857& & & (24)& & 833& & 9& 9& ! 393! 462! 855! ! ! (13)! ! 842! ! 69! 69! There!are!no!commitments!arising!in!the!joint!ventures.! There!are!no!contingent!liabilities!relating!the!Group’s!interest!in!the!joint!ventures,!and!no!contingent!liabilities!of!the!venture! itself.! Each!joint!venture!is!individually!immaterial.! The! principal! place! of! business! for! Rugby! Domains! Ltd,! Basketball! Domains! Ltd! and,! Entertainment! Names! Inc.! is! the! British! Virgin!Islands.!The!principal!place!of!business!for!Dot!Country!LLC!is!the!Cayman!Islands.! Company& Interests!in!joint!ventures!are!accounted!for!at!cost!of!$911k!(2013:!$864k)!in!the!Company!financial!statements.! ! ! 55! Notes to Financial Statements for the year ended 31 December 2014 19& Other&long_term&assets& & ! ! ! ! & Group&and&Company& Restricted!cash! Other!longXterm!receivables! Total!other!long!term!assets! ! & 2014( $&000’s( 2,837! 3,145! 5,982! ! ! ! ! ! ! ! 2013( $!000’s( 3,250! 11,100! 14,350! The!Group!capitalises!the!costs!incurred!to!pursue!the!rights!to!operate!certain!gTLD!strings!as!these!are!deemed!to!provide! probable!future!economic!benefit.!! ! During! the! application! process! capitalised! payments! for! gTLD! applications! are! included! in! Other! Long! Term! Assets.! While! there!is!no!assurance!that!MMX!will!be!awarded!any!gTLDs,!longXterm!receivables!payments!will!be!reclassified!as!intangible! assets!once!the!gTLD!strings!are!available!for!their!intended!use,!which!is!expected!to!occur!following!the!delegation!of!gTLD! strings!by!ICANN.!In!general,!MMX!does!not!expect!to!withdraw!any!of!its!applications!unless!the!application!has!not!passed! the!evaluation!process!and!there!is!no!further!recourse!or!there!is!an!agreement!to!sell!or!dispose!of!its!interest!in!certain! applications.! ! During!the!2012!financial!period,!the!Group!paid!US$13.5!million!in!application!fees!to!the!Internet!Corporation!for!assigned! Names!and!Numbers!(ICANN)!under!ICANN's!New!generic!Top!Level!Domain!(gTLD)!Program!and!deposited!US$3.6!million!to! fund!the!letters!of!credit!required!by!ICANN.!! ! In! 2013,! 11! such! applications! were! withdrawn! either! as! a! result! of! participation! in! auctions! or! management! decision.! A! further!application!was!transferred!to!a!joint!venture.!As!a!result,!application!fees!paid!to!ICANN!as!at!31!December!2013! amounts!to!$11,100k!and!deposits!to!fund!letters!of!credit!amounts!to!$3,248k.!! ! In!2014,!22!further!applications!were!withdrawn!either!as!a!result!of!participation!in!auctions!or!management!decisions.!As!a! result,! application! fees! pad! to! ICANN! as! at! 31! December! 2014! amounts! to! $3,145k.! Due! to! the! withdrawal! on! several! applications!deposits!to!fund!letters!of!credit!decreased!to!$2,837k.! ! Where! MMX! receives! a! partial! cash! refund! for! certain! gTLD! applications! and/or! to! the! extent! the! Group! elects! to! sell! or! dispose!of!its!interest!in!certain!gTLD!applications!throughout!the!process,!it!may!incur!gains!or!losses!on!amounts!invested.! In!such!cases!the!application!fee!will!be!reclassified!from!a!longXterm!asset.!Refunds!received!will!be!properly!recorded!when! received,!gains!on!the!sale!of!the!Group’s!interest!in!gTLD!applications!will!be!recognised!when!realised,!and!losses!will!be! recognised!when!deemed!probable.!Other!costs!incurred!by!MMX!as!part!of!its!gTLD!initiative!not!directly!attributable!to!the! acquisition!of!gTLD!operator!rights!are!expensed!as!incurred.! ! Of! the! applications! withdrawn,! 20! applications! were! withdrawn! as! a! result! of! participation! in! private! auction! where! the! Group! did! not! win! the! auction! but! received! a! portion! of! the! auction! proceeds.! Such! auction! proceeds,! less! amounts! not! recovered!from!the!Group’s!withdrawal!of!the!application!to!ICANN!are!accounted!for!on!the!profit!and!loss!account!as!Profit! on!participation!in!gTLD!auctions!and!amounted!to!$33,721k!(2013:!$6,445k).!2!applications!were!withdrawn!as!a!result!of! participation! in! ICANN! auctions! where! the! Group! did! not! win! the! auction! and! did! not! receive! a! portion! of! the! auction! proceeds.!Of!the!application!fee,!those!amounts!not!received!from!ICANN!as!a!result!of!such!withdrawals!are!accounted!for! on!the!profit!and!loss!account!as!Loss!in!withdrawal!of!gTLD!applications!and!amounted!to!$296k!(2013:!$396k).! ! Restricted!cash!is!interest!bearing!and!is!therefore!stated!at!fair!value.!!Other!longXterm!receivables!are!stated!at!amortised! cost.! 56! ! ! & ! Notes to Financial Statements for the year ended 31 December 2014 ! & 20& ! ! ! ! ! ! ! ! ! & ! ! ! Trade&and&other&receivables& & ! & ! Current&trade&and&other&receivables& Trade!receivables! Other!receivables! Prepayments! Balances!due!from!subsidiaries! Due!from!joint!ventures! Due!from!related!parties! ! & Group! ! ! ! 2014& $&000's& 2013! $!000's! 3,388! 3,384! 669! 328! X! 49! X! 401! 210! X! 48! 61! ! ! ! ! ! ! ! ! ! ! Company& 2014& $&000's& 2013! $!000's! X! 108! 28! X! 209! X! 39,199! 13,877! 49! X! 48! 61! Total! 4,434! 4,104! 39,384! 14,195! The!loans!due!from!subsidiaries!are!interest!free!and!have!no!fixed!repayment!date.!The!loans!have!been!classified!to!current! receivables!in!the!current!year!as!the!directors!assess!these!balances!to!be!recoverable!in!2015.!The!difference!between!the! carrying!value!and!the!fair!value!of!the!loan!at!the!reporting!date!is!deemed!to!be!immaterial.! Trade&receivables& ! Trade!receivables!disclosed!above!are!classified!as!loans!and!receivables!and!are!therefore!measured!at!amortised!cost.! ! Ageing!of!past!due!but!not!impaired!receivables:! ! 1!–!30!days! 31!–!60!days! 61X90!days! 91!days!and!over! Total! ! Movement!in!doubtful!debts:! ! Balance!at!the!beginning!of!the!period! Exchange!differences! Balance!at!the!end!of!the!period! 2014& $000& X! 28! 5! 103! 136! ! ! 2014& $& 53! X! 53! ! ! ! ! ! & ! ! ! ! ! ! ! 2013! $000! 10! 21! X! X! 31! ! ! 2013! $! 56! (3)! 53! Included!in!the!ageing!of!past!due!but!not!impaired!receivables!of!91!days!and!over!is!an!amount!of!$75k!receivable!from!a! single!customer!received!after!the!year!end.! ! 57! ! Notes to Financial Statements for the year ended 31 December 2014 Trade&and&other&payables& & ! & & Trade!payables! Due!to!joint!ventures! Taxation!liabilities! Other!liabilities! Deferred!revenue! Accruals! Total! 21& ! ! ! ! ! ! ! ! ! & ! ! & Group! ! ! ! ! ! Company& 2014& $&000's& 394! 101! 575! 1,534! 3,159! 551! 6,314! 2013! $!000's! 297! 123! 195! 30! X! 40! 685! ! ! ! ! ! ! ! ! 2014& $&000's& 111! 96! X! 1,492! 406! 96! 2,201! 2013! $!000's! 44! 118! X! X! X! X! 162! All!trade!and!other!payables!are!due!within!one!year!and!approximate!their!fair!value.! ! 22& Obligations&under&finance&leases& & Group& ! ! Amounts&payable&under&finance&lease& Within!one!year! In!the!second!to!fifth!year!inclusive! ! Less:!Future!finance!charges! Present!value!of!lease!obligation! Minimum&lease&payments& 2014& $&000's& 2013! $!000's! ! 363! X! 363! (21)! 342! ! 392! 250! 642! (60)! 575! ! 58! ! Notes to Financial Statements for the year ended 31 December 2014 & 22& ! ! ! ! Obligations&under&finance&leases&(continued)! Amounts&payable&under&finance&lease& Within!one!year! In!the!second!to!fifth!year!inclusive! Present!value!of!lease!obligation! Analysed&as:& Amounts!due!for!settlement!within!12!months!! Amounts!due!for!settlement!after!12!months! ! ! Present&value&of&minimum&lease& payments& 2014& $&000's& 2013! $!000's! ! ! 342! X! 342! 342! X! 342! ! 328! 247! 575! ! 328! 247! 575! The!average!lease!term!is!2!years.!For!the!year!ended!31!December!2014,!the!effective!borrowing!rate!was!13.76%!(2013:! 13.76%).!Interest!rates!are!fixed!at!the!contract!date.!All!leases!are!on!a!fixed!repayments!basis!and!no!arrangements!have! been!entered!into!for!contingent!rental!payments.! ! All!lease!obligations!are!denominated!in!Euros.! ! The!fair!value!of!the!group’s!lease!obligations!is!approximately!equal!to!their!carrying!amount.!The!group’s!obligations! under!finance!leases!are!secured!by!the!lessor’s!rights!over!the!leased!assets!disclosed!in!note!16.! ! ! 59! ! Notes to Financial Statements for the year ended 31 December 2014 23&& Share&capital&and&premium& Called&up,&allotted,&issued&and&fully&paid&ordinary& shares&of&no&par&value& Number&of&shares& & Price&per&share& (cents/pence)& Total& $&000& As!at!1!January!2013! & Shares!issued!(shares!to!be!issued)*! 25!February!2013!–!shares!to!be!issued! ! Shares!issued:! 30!June!2013! ! Options!and!warrants!exercised:! 13!June!2013!for!payment!of!services! 520,758,246! ! & & 17,620,000! 12.4/7.6! ! ! 110,375,276! ! ! 9.1/6! ! ! 120,000! 9.33/6! ! ! ! ! 9!July!2013!for!exercise!of!options! 1,700,000! 6/4! ! Cost!of!share!issue! ! ! ! ! ! ! ! As!at!31!December!2013! 650,573,522! & Shares!issued!(shares!to!be!issued)*& & & 30!January!2014!–!cash!on!issue!of!shares& 175,000,000& & Options!and!warrants!exercised:& & & 4!April!2014!for!cash!on!exercise!of!options& 3,000,000& 13!July!2014!for!cash!on!exercise!of!options& 14!July!2014!for!cash!on!exercise!of!options& 25!July!2014!for!cash!on!exercise!of!options& 12!September!2014!for!cash!on!exercise!of!options& 22!October!2014!for!cash!on!exercise!of!warrants( 14!November!2014!for!cash!on!exercise!of!options& ! Cost!of!share!issue! & As&at&31&December&2014& 738,299& 350,000& 350,000& 350,000& 1,622,664& 4,000,000& ! ! & 835,984,485& & !! ! ! 19.89/12! ! ! 6.7/4! 18.1/11! 15.4/9! 15.8/9! 15.4/9! 6.5/4! 6.8/4! ! ! ! !! ! 37,790! & & 2,177! ! ! 10,000! ! ! 11! 101! 112! (598)! ! 49,481! & & 34,801& & & 201& 134& 54& 55& 54& 106& 273& 877! (2,293)! & 82,866& & *! The! shares! to! be! issued! were! issued! to! the! former! shareholders! of! Minds! and! Machines! LLC! as! part! of! the! total! consideration!for!the!acquisition!the!company.!! ! 60! & ! ! Notes to Financial Statements for the year ended 31 December 2014 Share_based&payment& & Share_based&payment&expense&recognised& Equity!settled!share!based!payments! Expense!as!a!result!of!modification!of!equity!settled! share!based!payments! Total! Group&and&Company! 2013! $!000's! 2014& $&000's& & ! ! ! 114! 498! 612! ! ! ! ! ! 692! X! 692! The!Company!has!a!share!option!scheme!for!all!employees!of!the!Group.!The!share!option!scheme!combined!with!the! Company’s!longXterm!incentive!plan!represents!up!to!12.5%!of!the!total!outstanding!shares!of!the!Company!as!of!1!August! 2014.!!Details!of!the!share!options!are!as!follows:( 24& ! ! ! ! ! & & ! ! Outstanding!at!the!beginning!of! the!period! ! Granted!during!the!period! Forfeited!during!the!period! Exercised!during!the!period! Expired!during!the!period! Outstanding!at!the!end!of!the! period! ! Exercisable!at!the!end!of!the! period! ! 2014& &Number&of& share&options& Weighted& average& exercise&price& (in& cents/pence)& & & 43,138,847! 10.3/6.3! X! X! (400,000)! 15.3/9.8! (18,676,347)*! 9.6/6.2! (350,000)! 14/9! 23,712,500! 9.9/6.4! ! ! 19,007,178! 9.9/6.4! & & & ! ! ! ! ! ! ! ! 2013& Group& & Number&of& share&options& Weighted& average& exercise&price& (in& cents/pence)& & & 47,665,194! 10.6/6.1! 21,750,000! 10.6/6.7! (23,426,347)! 11.2/6.8! (1,700,000)! 6.6/4.7! (1,150,000)! 7.7/6.7! 43,138,847! 10.4/6.3! ! ! 33,629,267! 10.3/6.2! *Included!within!the!number!of!share!options!exercised!during!the!period!is!14,626,374!share!options!issued!to!Directors!that!were! settled!in!cash.!This!change!was!treated!as!a!modification!of!a!share!based!payment!from!equity!settled!to!cash!settled.!The!amount! payable!under!this!settlement!amounted!to!$1,206k,!of!which!$708k!had!already!been!recognised!as!a!share!based!expense!in!prior! years! and! therefore! reduced! from! equity! in! the! current! year! as! a! repurchase! of! equity! instrument.! The! balance! of! $498k! was! expensed.! ! The!weighted!average!contractual!life!of!outstanding!options!at!the!end!of!the!year!is!8.09!years!(2013:!5.33!years).!!There!were!no! options!granted!in!2014.!In!2013,!19,850,000!options!were!granted!on!13!February!2013,!1,150,000!options!were!granted!on!8!July! 2013! and! 750,000! options! were! granted! on! 15! October! 2013.! ! The! aggregate! of! the! estimated! fair! values! of! the! options! granted! during!2013!was!$704k.! ! The! general! terms! of! the! share! options,! under! the! company! share! options! scheme,! vest! over! 3! years! (quarterly! vesting,! 1/12th! of! options!vest!every!quarter)!and!are!exercisable!over!ten!years!from!the!date!of!grant!if!the!employee!remains!within!the!company.! The!exercise!price!is!determined!by!the!average!share!price!over!the!30!days!preceding!the!date!of!the!grant.!! ! ! ! 61! ! Notes to Financial Statements for the year ended 31 December 2014 24& Share_based&payment&(continued)! ! Weighted!average!share!price!(cents/pence)! ! Weighted!average!exercise!price!(£)! Expected!volatility! Expected!life! RiskXfree!rate! Expected!dividend!yield! & & 2014( 2013( ! ! ! ! ! ! ! ! ! ! ! ! N/A! N/A! N/A! N/A! N/A! N/A! 11.9/7.2! 10.6/6,4! 35%! 10!years! 5%! Nil! ! Expected!volatility!was!determined!by!calculating!the!historic!volatility!of!the!Group’s!share!price!over!the!previous!year.! Volatility!over!earlier!years!is!not!representative!and!has!therefore!not!been!used!to!calculated!volatility.!!The!expected!life! used!in!the!model!has!been!adjusted,!based!on!management’s!best!estimate.!!! ! The!market!price!of!the!ordinary!shares!at!31!December!2014!was!$0.14!/!£0.09!(2013:!$0.24!/!£0.14)!and!the!range!during! the!year!was!!$0.12!/!£0.07!to!$0.28!/!£!0.17!(2013:!$0.07!/!£0.044!to!$0.29!/!£0.19).! ! Directors’&share&options& & Details!of!options!for!Directors’!who!served!during!the!year!are!as!follows:! ! 1&Jan&2014& Granted& Exercised& Expired& 31&Dec&2014& ! Frederick!Krueger!(1)! Antony!Van!Couvering!(2)! Michael!Salazar!(3)! Caspar!Veltheim!(4)! Guy!Elliot! ! 10,000,000! 22,126,347! 1,250,000! 662,500! 3,000,000! 37,038,847( ! X! X! X! X! X! X( (5,000,000)*! (9,626,347)*! X! (350,000)! (3,000,000)! (17,976,347)( X! X! X! X! X! X( 5,000,000! 12,500,000! 1,250,000! 312,500! X! 19,062,500( *Represents!share!options!issued!to!Directors!that!were!settled!in!cash.!This!change!was!treated!as!a!modification!of!a!share!based! payment!from!equity!settled!to!cash!settled.!The!amount!payable!under!this!settlement!amounted!to!$1,206k,!of!which!$708k!had! already! been! recognised! as! a! share! based! expense! in! prior! years! and! therefore! reduced! from! equity! in! the! current! year! as! a! repurchase!of!equity!instrument.!The!balance!of!$498k!was!expensed.! (1) 5,000,000!options!–!exercise!price!–!£0.04,!exercisable!from!–!14!Nov!2007,!expires!on!–!13!Nov!2014.!2,750,130!options! –!exercisable!from!13!May!2013,!expires!on!13!February!2023!(quarterly!vesting!beginning!13!May!2013!of!1/12th!of! options).!2,249,780!options!–!exercisable!from!13!February!2013,!expires!on!13!February!2023,!expires!on!13!February! 2023! (2) 2,626,347!options!X!exercise!price!–!£0.04,!exercisable!from!–!27!May!2009,!expires!on!–!24!June!2014,!!7,000,000! options!exercise!price!X!£0.09,!exercisable!from!X!22!May!2010,!expires!on!–!24!June!2014.!3,025,143!options!–! exercisable!from!13!May!2013,!expires!on!13!February!2023!(quarterly!vesting!beginning!13!May!2013!of!1/12th!of! options).!9,474,857!options!–!exercisable!from!13!February!2013,!expires!on!13!February!2023.! (3) Exercise!price!–!£0.062,!exercisable!from!–!1!Jun!2013,!expires!on!–!30!Nov!2022!(quarterly!vesting!beginning!at!1!Jun! 2013!of!1/12th!of!options)! (4) 350,000!options!X!exercise!price!–!£0.09,!exercisable!from!–!22!Jul!2011,!expires!on!–!22!Jul!2021.!!312,500!options!–! exercise!price!–!£0.07,!exercisable!from!–!1!Aug!2012,!expires!on!31!Jul!2022!(quarterly!vesting!beginning!at!1!Nov!2012! of!1/12th!of!options)! (5) Exercise!price!–!£0.04,!exercisable!from!–!14!Nov!2007,!expires!on!–!13!Nov!2014! ! 62! ! Notes to Financial Statements for the year ended 31 December 2014 24& Share_based&payment&(continued)! ! ( ( ! ! ! ! There!have!been!no!variations!to!the!terms!and!conditions!or!performance!criteria!for!share!options!during!the!financial! year.! Total(warrants(outstanding! During!the!year!ended!31!December!2014,!the!company!granted!no!warrants!to!subscribe!for!ordinary!shares!(2013:!nil).!! As!at!31!December!2014!the!outstanding!unexercised!warrants!in!issue!were;! Exercise&Price& Expiry&Date& 10p! & !! 06!May!2019! & !! Number&of&warrants& 8,000,000! During!the!year!to!31!December!2014,!1,622,665!warrants!were!exercised!at!an!exercise!price!of!$0.07!/!£0.04.!No!warrants! were!exercised!in!2013.! ! At!31!December!2013,!the!outstanding!unexercised!warrants!outstanding!were:! Exercise&Price& 4p! 10p! ! & !! ! ! 25& ! Financial&instruments! Expiry&Date& 13!November!2014! 06!May!2019! & !! ! Number&of&warrants& 1,622,665! 8,000,000! ! Total& 9,662,665& Capital&risk&management& ! The!Group!and!Company!manages!its!capital!to!ensure!that!entities!in!the!Group!will!be!able!to!continue!as!going!concerns!while! maximising! the! return! to! stakeholders! through! the! optimization! of! the! debt! and! equity! balance.! ! The! Group! and! Company’s! overall!strategy!remains!unchanged!from!2013.! ! The!capital!structure!of!the!Group!and!Company!consists!cash!and!cash!equivalents!and!equity!attributable!to!equity!holders!of! the!parent,!comprising!issued!capital,!reserves,!and!retained!earnings.! ! The!Group!and!Company!is!not!subject!to!any!externally!imposed!capital!requirements.! ! The! Group! and! Company’s! strategy! is! to! ensure! availability! of! capital! and! match! the! profile! of! the! Group! and! Company’s! expenditures.!!To! date! the! Group! has! relied! upon! equity! funding! to! finance! operations.! The! Directors! are! confident! that! adequate! cash! resources! exist! to! finance! operations! to! commercial! exploitation,! but! controls! over! expenditure! are! carefully!managed.! ! The! Group! and! Company! has! a! policy! of! not! using! derivative! financial! instruments! for! hedging! purposes! and! therefore! is! exposed!to!changes!in!market!rates!in!respect!of!foreign!exchange!risk,!However,! it! does! review! its! currency! exposures! on! an! ad! hoc! basis.! Currency! exposures! relating! to! monetary! assets! held! by! foreign! operations! are! included! within! the! foreign!exchange!reserve!in!the!Group!Balance!Sheet.! ! Categories&of&financial&instruments& ! Group& Financial&assets& Cash!and!bank!balances!( Loans!and!receivables!(including!long!term!receivables)! Financial&liabilities& Other!financial!liabilities!at!amortised!cost! ! 63! 2014& $&000’s( 45,796! 9,732! ! 2,372! 2013! $!000’s( 14,884! 18,284! ! 1,095! ! Notes to Financial Statements for the year ended 31 December 2014 25& Financial&instruments&(continued)! ! Company& Financial&assets& Cash!and!bank!balances!( Loans!and!receivables!(including!long!term!receivables)! Financial&liabilities& Other!financial!liabilities!at!amortised!cost! 2014& $&000’s( 26,952! 3,001! ! 1,700! 2013! $!000’s( 12,285( 14,668( ! 159! There!are!no!material!differences!between!the!book!values!of!financial!instruments!and!their!market!values.! Financial&risk&management&objectives& The! Group! and! Company’s! Finance! function! provides! services! to! the! business,! coXordinates! access! to! domestic! and! international!financial!markets,!monitors!and!manages!financial!risks!related!to!the!operations!of!the!Group!and!Company! through!internal!risk!reports,!which!analyses!exposures!by!degree!and!magnitude!of!risks.!!These!risks!include!market!risk,! credit!risk,!liquidity!risk,!and!cash!flow!interest!rate!risk.! It!is,!and!has!been!throughout!2014!and!2013,!the!policy!of!both!the!Group!and!the!Company!that!no!trading!derivatives!are! contracted.! The!main!risks!arising!from!the!Group!and!the!Company’s!financial!instruments!are!foreign!currency!risk,!credit!risk,!liquidity! risk,!interest!rate!risk!and!capital!risk.!Management!reviews!and!agrees!policies!for!mitigating!each!of!these!risks,!which!are! summarised!below.! Market&risk& ! The!Group!and!Company’s!activities!expose!it!primarily!to!the!financial!risks!of!changes!in!foreign!currency!exchange!rates!and! interest! rates.! The! risk! is! managed! by! the! Group! and! Company! by! maintaining! an! appropriate! mix! of! cash! and! cash! equivalents! in! the! foreign! currencies! it! operates! in.! The! Group! and! Company’s! management! did! not! set! up! any! financial! instruments!policy!to!manage!its!exposure!to!interest!rates!and!foreign!currency!risk.! ! Foreign¤cy&risk& ! The! Group! and! Company! undertakes! transactions! denominated! in! foreign! currencies;! consequently! exposures! to! exchange! rate!fluctuations!arise.!!The!Group!and!Company!evaluates!exchange!rate!fluctuations!on!a!periodic!basis!to!take!advantage!of! favourable!rates!when!transferring!funds!between!accounts!denominated!in!different!currencies.! ! The!carrying!amount!of!the!Group!and!Company’s!foreign!currency!denominated!monetary!assets!and!monetary!liabilities!at! the!reporting!date!is!as!follows! ! Group& Liabilities& 2014& $&000's& 2013& $&000's& Assets& 2014& $&000's& 2013& $&000's& 3,267! 28,120! 1,781! 33,168! ! ! Sterling! USD! Euro! As!at!31!December!! ! & 268! ! 1,771! 333! ! 98! 264! 733! 2,372! 1,095! ! 5,738! 47,922! 1,868! 55,528! 64! ! ! & & ! ! Notes to Financial Statements for the year ended 31 December 2014 25& Financial&instruments&(continued)! Company& ! ! Sterling! USD! Euro! As!at!31!December! Liabilities& 2014& $&000's& ! X! 1,700! X! 1,700! 2013& $&000's& ! X! 159! X! 159! Assets& 2014& $&000's& ! 2,177! 27,769! 7! 29,953! 2013& $&000's& ! X! 26,953! X! 26,953! Foreign¤cy&sensitivity&analysis! The! following! table! details! the! Group! and! Company’s! sensitivity! to! a! 10%! increase! and! decrease! in! the! functional! currency! against! the!relevant! foreign! currencies.! 10%! represents! management’s! assessment! of! the!reasonably!possible! change!in!foreign!exchange!rates.! The! sensitivity! analysis! includes! only! outstanding! foreign! currency! denominated! financial! instruments! and! adjusts! their! translation! at! the! period! end! for! a! 10%! change! in! foreign! currency! rates.! The! following! table! sets! out! the! potential! exposure,! where! a! positive! number! below! indicates! an! increase! in! profit! or! loss! and! other! equity! where! the! US! Dollar! strengthens!10%!against!the!relevant!currency.!For!a!10%!weakening!of!the!US!Dollar!against!the!relevant!currency,!there! would!be!a!comparable!impact!on!the!profit!or!loss!and!other!equity,!and!the!balances!below!would!be!positive.!! Group& Pound&Sterling&impact& Euro&impact& 2014& $&000s& (550)! X! (550)! 2013& $!000s& (328)! X! (328)! 2014& $&000s& (154)! X! (154)! ! & Pound&Sterling&impact! ! & ! & Euro&impact! ! & 2014& $&000s& (218)! X! (218)! 2013& $!000s& X! X! X! 2014& $&000s& (1)! X! (1)! 2013& $!000s& (95)! X! (95)! 2013& $!000s& X! ! X! ! Profit!or!loss!(i)! Other!equity!(ii)! ! ! ! Company& ! Profit!or!loss!(i)! Other!equity! ! (i) (ii) ! The!main!attributable!to!the!exposure!outstanding!on!Pound!Sterling!and!Euro!is!receivables!and!payables!at!the! balance!sheet!date.! There! is! no! impact! on! other! equity,! as! the! Group! does! not! hold! derivative! instruments! designated! as! cash! flow! hedges!and!net!investments!hedges.! ! In!Management’s!opinion,!the!sensitivity!analysis!is!unrepresentative!of!the!inherent!foreign!exchange!risk!as!the!yearXend! exposure! does! not! reflect! the! exposure! during! the! year.! ! Whilst! the! group! operates! across! Europe! and! North! America,! operations!are!managed!in!US!dollar!and!these!financial!statements!are!presented!in!US!Dollars.! ! Interest&rate&risk& ! The! Group! and! Company’s! exposure! to! interest! rate! risk! is! limited! to! cash! and! cash! equivalents! held! in! interestXbearing! accounts.! 65! & & ! ! ! ! ! Notes to Financial Statements for the year ended 31 December 2014 25& Financial&instruments&(continued)! ! Interest&rate&sensitivity&analysis& ! The!impact!of!interest!rate!fluctuations!is!not!material!to!the!Group!and!Company!accounts.!! ! Credit&risk&management& ! Credit! risk! refers! to! the! risk! that! a! counterparty! will! default! on! its! contractual! obligations! resulting! in! financial! loss! to! the! Group!and!Company.!!The!Group!and!the!Company’s!financial!assets!comprise!of!receivables,!cash,!and!cash!equivalents,!and! other!longXterm!assets.!!! ! The!credit!risk!on!trade!and!other!receivables!is!limited!as!the!amount!represents!a!preXpayment!of!revenue!from!a!future! undertaking.!!The!preXpayment!has!certain!conditions!associated!with!it!that!require!the!counterparty!to!refund!the!amounts! paid!if!certain!criteria!are!not!met.! The!credit!risk!on!cash!and!cash!equivalents!is!limited!as!the!counterparties!are!banks!with!high!creditXratings!as!determined! by!international!creditXrating!agencies.! ! The!credit!risk!on!other!longXterm!assets!is!limited!as!the!total!amount!represents!two!components:!deposits!for!the!right!to! secure! a! revenueXgenerating! asset! and! restricted! cash.! The! deposits! for! the! right! to! secure! revenueXgenerating! assets! are! maintained!by!a!government!sponsored!global!organization!that!is!contractually!required!to!return!a!portion!of!these!deposits! if!requested.!Furthermore,!the!agency,!a!notXforXprofit!organization,!is!well!funded!by!its!member!organizations!and!is!not!a! risk!to!cease!operations.!!The!restricted!cash!is!deposited!with!banks!with!a!highXcredit!rating!as!determined!by!international! creditXrating!agencies.! ! The!exposure!of!the!Group!and!the!Company!to!credit!risk!arises!from!default!of!its!counterparty,!with!maximum!exposure! equal!to!the!carrying!amount!of!receivables!(excluding!prepaid!income),!cash!and!cash!equivalents,!and!other!long!term! assets!in!the!Group!and!Company!statements!of!financial!position.!! The!Group!and!Company!does!not!hold!any!collateral!as!security.! ! Liquidity&risk&management& ! Ultimate!responsibility!for!liquidity!risk!management!rests!with!the!Board!of!Directors,!which!has!established!an!appropriate! liquidity! risk! management! framework! for! the! management! of! the! Group! and! Company’s! short,! medium,! and! longXterm! funding!and!liquidity!management!requirements.!!The!Group!and!Company!manages!liquidity!risk!by!maintaining!adequate! reserves,!banking!facilities!and!reserve!borrowing!facilities,!by!continuously!monitoring!forecast!and!actual!cash!flows,!and!by! matching!the!maturity!profiles!of!financial!assets!and!liabilities.! ! Cash!forecasts!are!regularly!produced!to!identify!the!liquidity!requirement!for!the!Group!and!Company.!!To!date,!the!Group! has!relied!on!the!issuance!of!stock!warrants!and!shares!finance!its!operations.!The!Group!made!use!of!limited!borrowing! facilities!as!at!31!December!2014.! ! The!Group’s!and!Company’s!remaining!contractual!maturity!for!its!nonXderivate!financial!liabilities!with!agreed!repayment! periods!are:! ! Group& & Company& & 31&December&2014& NonXinterest!bearing:! Trade!and!other!payables! Fixed!interest!rate!instruments:! Obligations!under!finance!lease! & Weighted& average&effective& interest&rate& ! ! ! 13.76%! ! ! ! ! ! 66! Within&1& year& $&000s& ! 1&–&5& years& $&000s& ! & ! ! ! ! ! Within&1&year& $&000s& ! 1,700! ! X! 1,700! 1&–&5& years& $&000s& ! X! ! X! X! X! ! X! X! ! ! ! ! 2,605! ! 342! 2,947& ! ! ! ! Notes to Financial Statements for the year ended 31 December 2014 25& Financial&instruments&(continued)! ! & 31&December&2013& NonXinterest!bearing:! Trade!and!other!payables! Fixed!interest!rate!instruments:! & Weighted& average& effective& interest&rate& ! ! ! Obligations!under!finance!lease! 13.76%! ! ! Group& & Company& Within&1& year& $&000s& 1&–&5&years& $&000s& ! 685! ! 328! 1,013! ! X! ! 247! 247! & ! ! ! ! ! Within&1& year& $&000s& 1&–&5& years& $&000s& ! 159! ! X! 159! ! X! ! X! X! ! The!Group!and!Company’s!nonXderivate!financial!assets!mature!within!one!year.! ! The!Group!and!Company!had!no!derivative!financial!instruments!as!at!31!December!2014!and!at!31!December!2013.! ! 26& ! ! 27& & Material&non_cash&transactions! There!are!no!material!nonXcash!transactions.! Commitments& The&group&as&a&lessee& 2014& $&000’s& 2013! $!000’s! Lease!payments!recognised!under!operating!leases!recognised!as!an! expense!in!the!year! ! At!the!balance!sheet!date,!the!group!had!outstanding!commitments!for!future!minimum!lease!payments!under!nonX cancellable!operating!leases,!which!fall!due!as!follows:! 467! 38! ! & Within!one!year! In!the!second!to!fifth!years!inclusive! After!five!years! ! 2014& $&000’s& 2013! $!000’s! 436! 657! X! 3! X! X! 1,093! ! 3! ! ! Operating!lease!payments!represent!rentals!payable!by!the!group!for!its!office!properties!and!rental!space!for!its!IT! equipment.!Leases!are!negotiated!for!an!average!period!of!three!years!with!fixed!rentals!with!only!one!lease!having!the! option!to!extend!for!a!further!three!years!at!a!fixed!rental.! ! As!at!31!December!2014!and!31!December!2013,!the!Group!has!no!capital!commitments.! ! As!at!31!December!2014!and!31!December!2013,!the!Company!had!no!lease!or!capital!commitments.! ! 67! ! Notes to Financial Statements for the year ended 31 December 2014 Related&party&transactions&–&Group& 28& & Balances!and!transactions!between!the!company!and!its!subsidiaries,!which!are!related!parties,!have!been!eliminated!on! consolidation!and!are!not!disclosed!in!this!note.!Transactions!between!the!group!and!its!associates!are!disclosed!below.! Transactions!between!the!company!and!its!subsidiary!and!associates!are!disclosed!in!note!29.! ! Joint&ventures& During!the!year,!the!Group!entered!into!transactions!with!its!Joint!Venture!that!resulted!in!amounts!owed!to!or!due!from!the! Joint! Ventures.! The! balances! at! the! yearXend! were! due! to! financial! and! equity! requirements! across! the! joint! ventures.! The! balances!have!no!fixed!repayment!and!no!interest!is!received!or!charged!on!these!balances.! ! & Due!to!Rugby!Domains!Ltd! Due!to!Basketball!Domains!Ltd! Due!from!Entertainment!Names!Inc! Due!to!Dot!Country!LLC( ! Other& 2014& $&000’s( (4)! (34)! 44! (58)! 2013! $!000’s! (31)! (62)! 48! (25)! At!the!balance!sheet!date,!an!amount!of!$61k!(2013:!$61k)!was!due!from!Frederick!Krueger!in!relation!to!shares!previously! issued.!!! During!the!year,!$1,326k!(2013:!$180k)!was!paid!to!Needly!Inc.!for!services!provided!to!the!Group!for!development!of!the! registrar! platform.! Needly! Inc! is! related! by! virtue! of! common! directors.! There! was! no! balance! due! to! Needly! Inc! at! the! balance!sheet!date!(2013:!nil).! The!company!entered!into!an!agreement!with!Tucows,!Inc.!to!partner!in!anticipated!auctions!for!.store,!.tech!and!.group!topX level!domains.!MMX!had!no!previous!interest!in!.group!while!Tucows!has!no!previous!interest!in!.tech!and!.store.!As!part!of! the! agreement! MMX! would! acquire! an! initial! majority! interest! in! .group! and! Tucows! would! acquire! an! initial! minority! interest! in! .tech! and! .store,! if! it! were! successful! in! securing! the! uncontested! rights! to! the! gTLD! in! auction.! The! final! percentages!of!ownership!in!each!domain!would!be!determined!by!the!amounts!contributed!by!each!party!at!auctions.!In! the! year,! .group! was! lost! to! third! party! participants! under! private! auction! and! .tech! was! settled! via! ICANN! auction.! .store! remains!unresolved.!Tucows,!Inc.!is!related!by!virtue!of!common!directors.! The! Group! also! sells! second! level! domain! names! to! Tucows,! Inc.! and! receives! certain! registrar! back! end! services! from! Tucows,!Inc.!In!the!year,!the!Group!invoiced!$24k!to!Tucows,!Inc.!and!was!invoiced!$84k!by!Tucows.!Inc.!The!net!balance! receivable!from!Tucows.!Inc!at!the!year!end!is!$50k.! Remuneration&of&Key&Management&Personnel! The!remuneration!of!the!executive!directors,!who!are!the!key!management!personal!of!the!group,!is!set!out!in!note!8.! ! 68! ! ! ! ! ! Notes to Financial Statements for the year ended 31 December 2014 Related&party&transactions&–&Company& Transactions!between!the!Company!and!its!subsidiaries!and!associates!are!disclosed!below.!! 29& & ! Subsidiaries& ! During!the!year,!the!Company’s!subsidiaries!have!provided!certain!services!to!the!Company!(RSP!services)!and!recharged!certain! costs!to!the!Company.!Details!of!these!transactions!are!shown!below! ! Recharged&costs&from& Minds!and!Machines!LLC! Minds!+!Machines!Limited!(IE)! Minds!and!Machines!Limited!(UK)! ! Services&received&from& Minds!+!Machines!Limited!(IE)! 2014& $&000’s& 1,024! 325! 111! 2014& $&000’s& 625! 2013! $!000’s! X! X! X! 2013! $!000’s! X! ! In!addition,!during!the!year,!the!Company!has!provided!financing!to!its!subsidiaries.!The!net!balances!due!to!the!Company!are! detailed!below.!The!balances!have!no!fixed!repayment!terms!and!no!interest!is!charged!on!these!balances.! ! Company& Minds!and!Machines!LLC! Bayern!Connect!GmbH! Minds!and!Machines!GmbH! ADT!(1)! AIC!(1)! Minds!+!Machines!Limited!(IE)! Minds!+!Machines!Registrar!Limited!(IE)! Minds!and!Machines!Limited!(UK)! Minds!and!Machines!Registrar!UK!Limited! 2014& $&000’s& 6,984! 1,141! 741! n/a! n/a! 21,332! 2,002! 6,997! 1! 2013! $!000’s! 5,992! 505! 374! 744! 1,595! 3,586! 180! 3,283! 2! ! ! (1) & This!balance!has!been!impaired!in!prior!years!and!these!subsidiaries!were!dissolved!in!the!current!year.! Joint&ventures& During!the!year,!the!Group!entered!into!transactions!with!its!Joint!Ventures!that!resulted!in!amounts!owed!to!or!due!from!the! Joint! Ventures.! The! balances! at! the! yearXend! were! due! to! financial! and! equity! requirements! across! the! joint! ventures.! The! balances!have!no!fixed!repayment!and!no!interest!is!received!or!charged!on!these!balances.! ! & Due!to!Rugby!Domains!Ltd! Due!to!Basketball!Domains!Ltd! Due!from!Entertainment!Names!Inc! Due!to!Dot!Country!LLC! ! 2014& $&000’s( (4)! (34)! 44! (58)! 2013! $!000’s! (31)! (62)! 48! (25)! 69! ! Notes to Financial Statements for the year ended 31 December 2014 29& Related&party&transactions&–&Company&(continued)& ! Other& At!the!balance!sheet!date,!an!amount!of!$61k!(2013:!$61k)!was!due!from!Frederick!Krueger!in!relation!to!shares!previously! issued.!! The!company!entered!into!an!agreement!with!Tucows,!Inc.!to!partner!in!anticipated!auctions!for!.store,!.tech!and!.group!topX level!domains.!MMX!had!no!previous!interest!in!.group!while!Tucows!has!no!previous!interest!in!.tech!and!.store.!As!part!of! the! agreement! MMX! would! acquire! an! initial! majority! interest! in! .group! and! Tucows! would! acquire! an! initial! minority! interest! in! .tech! and! .store,! if! it! were! successful! in! securing! the! uncontested! rights! to! the! gTLD! in! auction.! The! final! percentages!of!ownership!in!each!domain!would!be!determined!by!the!amounts!contributed!by!each!party!at!auctions.!In! the! year,! .group! was! lost! to! third! party! participants! under! private! auction! and! .tech! was! settled! via! ICANN! auction.! .store! remains!unresolved.!Tucows,!Inc.!is!related!by!virtue!of!common!directors.! The!Company!also!sells!second!level!domain!names!to!Tucows,!Inc.!In!the!year,!the!Company!invoiced!$9k!to!Tucows,!Inc.! The!net!balance!receivable!from!Tucows.!Inc!at!the!year!end!is!$2k.! Remuneration&of&Key&Management&Personnel! The!remuneration!of!the!executive!directors,!who!are!the!key!management!personal!of!the!group,!is!set!out!in!note!7.! ! Post&Balance&Sheet&Events! On!13!February!2015,!the!company!announced!that!it!had!issued!16,500,000!restricted!stock!units!(RSU)!to!employees!under!the! terms!of!the!Company’s!longXterm!incentive!plan.!The!vesting!of!the!RSUs!granted!to!the!employees!is!quarterly!over!a!threeX year!period.!On!vesting,!each!RSU!will!entitle!the!RSU!holder!to!receive!at!a!nil!exercise!price!one!new!MMX!ordinary!share.!The! Company’s! longXterm! incentive! plan,! combined! with! its! Amended! 2012! Stock! Plan,! represents! no! more! than! 12.5%! of! the! Company’s!outstanding!shares!as!of!1!August!2014.! ! On!13!February!2015,!the!company!announced!that!private!auctions!for!.dds,!.blog!and!.store!were!concluded.!The!company! secured!the!uncontested!application!rights!for!.dds.! ! On!5!March!2015,!the!company!announced!that!private!and!ICANN!auctions!for!.app,!.soccer!and!.beauty!were!concluded.!The! company!did!not!secure!the!uncontested!application!rights!to!any!of!these!gTLDs.! ! On! 24! March! 2015,! the! company! announced! that! it! had! issued! 31,950,000! share! options! to! Directors! and! Officers! of! the! company.! The! option! grants! are! issued! under! the! Company’s! Amended! 2012! Stock! Plan! and! have! an! exercise! price! of! 8.49! pence.!The!Company’s!longXterm!incentive!plan,!combined!with!its!Amended!2012!Stock!Plan,!represents!no!more!than!12.5%!of! the!Company’s!outstanding!shares!as!of!1!August!2014.! ! ! ! ! 70! ! ! ! 30& ! ! ! ! ! ! Corporate&Information! ! Registered!number! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! Directors! ! Registered!Office! ! Website! ! Auditor! ! Solicitors! ! ! Nominated!Advisor! ! ! ! Broker! ! Registrars! ! Principal!Bankers! ! ! ! ! 1412814!registered!in!British!Virgin!Islands! ! Frederick!R.!Krueger!–!Executive!Chairman! Antony!Van!Couvering!X!Chief!Executive!Officer! Michael!Salazar!–!Chief!Finance!Officer! Caspar!Veltheim!–!Executive!Director! Keith!Teare!–!Non!Executive!Director! Elliot!Noss!–!Non!Executive!Director! ! Craigmuir!Chambers! Road!Town,!Tortola! British!Virgin!Islands!!VG!1110! ! Website:!www.mindsandmachines.com/about! ! Mazars!LLP! Tower!Bridge!House! St.!Katharine’s!Way! London!E1W!1DD! United!Kingdom! ! Kerman!&!Co!LLP! 7!Savoy!Court! Strand,!London!WC2R!0ER! United!Kingdom! ! ! Beaumont!Cornish!Limited! 2nd!Floor!Bowman!House! 29!Wilson!Street! London!EC2M!2SJ! United!Kingdom! ! ! N+1!Singer! One!Bartholomew!Lane! London!EC2N!2AX! United!Kingdom! ! ! Computershare!Investor!Services!(Channel!Islands)!Ltd! PO!Box!83! Ordnance!House,!31!Pier!Road! St!Helier!JE4!8PW! Channel!Islands! ! Bank!of!Ireland! 40!Mespil!Road! Dublin!4! Ireland! ! 71!
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