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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.!
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Contents&
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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&
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1!
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Executives&Statements&
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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.!
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2!
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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!
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3!
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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!
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5!
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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.!
!
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&
&
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&
&
&
&
&
&
&
&
&
&
&
!
&
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!