Minds + Machines Group Limited
Annual Report and Accounts for the year ended
31 December 2015
mmx.co
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
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 the owner and operator of a
world class portfolio of top-level domain assets (gTLDs). As a sales and marketing-led registry business, the Company is focused
on commercializing its portfolio in partnership with its expanding global network of distribution partners.
The MMX portfolio is currently focused around geographic domains (e.g. .london, .boston, .miami, .bayern), professional
occupations (e.g. .law, .abogado, and .dds), consumer interests (e.g. .fashion, .wedding, .vip), lifestyle (e.g. .fit, .surf, .yoga),
outdoor activities (e.g. .fishing, .garden, .horse) and generic names such as .work and .casa. As a business, the Company works
through its expanding international network of registrars and distribution partners to bring the benefits of affinity based domain
addresses to B2B and consumer audiences. For more information on MMX, please visit www.mmx.co.
Contents
Chairman’s and 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
2
11
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17
21
25
26
28
29
31
33
35
37
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Chairman’s Statement
As a co-founder of the business, I was pleased to be invited back onto the
Board in July 2015 and then subsequently appointed non-executive chairman in
January 2016.
Looking back on 2015, the year can be characterized as a period of protracted
rationalization of the Company – commencing with a first round of headcount
reduction in June 2015 which saw overall staffing levels reduced from its peak of 61
down to 43 at the year-end. Post year-end that number had further reductions with
an expectation that personnel will drop to below 25 on a like-for-like basis on
completion of the Nominet and Uniregistrar agreements announced in April 2016.
However, the area where this rationalisation was most visible was at the Board level.
A total of 6 people are no longer with the Board. The end result is that there is now a
tight and cohesive Board of four (including a representative from our largest
institutional shareholder) in place, which is fully aligned with the interests of our
Shareholders. Throughout this process, I wish to thank our institutional shareholders
for their support. A direct benefit of this Board restructuring, is that the run-rate for the
board of director costs is now $0.7 million compared to a total of $2 million in 2015
and a culture of over-compensation in a period of low revenues has been stopped.
More importantly, we now have the right-sized the board in line with our slimmed
down operations, and have appointed a CEO who is driving marketing and business
development. We now have a board and management team committed to achieving
the highest levels of operating efficiency in order to realize value for our shareholders.
Setting the foundations for growth
“We now have a board and
management team committed
to achieving the highest levels of
operating efficiency”
Cost cutting is a necessity, but alone is not a sufficient strategy. Growth requires a coherent strategy, executed with vigor. As
shareholders will have seen, following the announcement in February of Toby Hall as CEO and Michael Salazar as COO in
January, a clear strategy is being evidenced through a series of defining actions.
1. The effective closure of our registrar business which was not only loss-making but created unnecessary tensions in the
registrar channel – the primary channel through which we as a registry can sell our inventory;
2. The outsourcing of our registry operations to Nominet, a world-class operator and ICANN’s only active Emergency Back-
end Registry Operator;
3. The effective renegotiation of key contracts that negatively impacted our 2015 results;
4. The roll-out of a coherent launch strategy into China where revenue will not be sacrificed simply for market share;
5. A clear philosophy of partnership as a mechanism through which to drive growth in our underlying domains – the benefits
of which, we believe, will start to be evidenced in H2 2016;
6. The aligning of our resources to be a marketing led registry; and
7. The re-branding of the business.
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Chairman’s Statement
(continued)
For the above reasons, I and the Board have every confidence that business is now in a position where it can start to scale both in
terms of domains under management and, most importantly, in terms of revenue and profitability.
Share Buyback Programme
On 22 September 2015, the Company announced a share buy-back programme of up to £15 million ($23 million) over the following
twelve months. To date, £6.8 million has been spent repurchasing 79,523,368 ordinary shares, which have all been cancelled. The
Company will continue to repurchase ordinary shares when it sees value in doing so, up to a maximum of 15% of the ordinary
shares in issue on 22 September 2015 and is allowed to do so under the AIM rules.
To conclude, we have an excellent portfolio of assets; are operating in an industry that is beginning to see remarkable growth; are
migrating our back-end onto a rock-solid platform that will allow us to benefit from the large economies of scale already achieved
by our partner; and have an extremely strong debt-free balance-sheet.
We look forward to the coming quarters with renewed energy and confidence.
Guy Elliott
Non-executive chairman
Date: 26 April 2016
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
CEO’s Statement
We are operating in exciting times. At the time of this writing registrations
in new gTLDs have passed 16.9 million with China accounting for a significant
percentage of total growth.
We are seeing major brands readying themselves to launch significant initiatives
based around new gTLDs as well as new-start/SME businesses embracing in geo
TLDs.
We are also seeing the first signs of corporate activity as fellow portfolio players start
casting their eyes over independently owned TLDs that, for whatever reason, may not
have performed in line with the original applicant’s expectations.
And finally we are seeing the major registrars, a number of whom are now on public
exchanges, aggressively competing for sales and customers in the US and Europe
with gTLDs increasingly being marketed.
It creates a vibrant back-drop into which to be effectively re-launching MMX as a sales
and marketing-led registry.
Core to this strategy of being a pure-play registry is a philosophy of partnership: a
strategy of working with the best partners so as to reduce our central overheads and
achieve both marketing reach and operational scale at every point along the way.
Transitioning into a pure-play registry
“It creates a vibrant back-drop
into which to be effective re-
launching MMX as a sales and
marketing-led registry”
As shareholders will have noted, early this month we were pleased to announce the transformative agreements to outsource our
technical back-end to Nominet, operator of the .uk family of domains, and to transition the client-base of our registrar operations
onto Uniregistrar.
These two deals effectively allow us to transition from being a vertically integrated business that owns, operates, and retails
domains within our TLDs into a pure-play registry business.
The rationale for this is that we believe that we can return the greatest value to shareholders, both in the short and long-term, as an
owner of assets (registry) rather than additionally operating the technical back-end and then retailing names within our domains to
the public.
As a pure-play registry, it will allow MMX to be more clearly benchmarked against fellow pure-play registries at a time when we see
technical back-end providers increasingly having to operate in an ever-more price competitive, commoditized environment with the
inevitable downward pressure on margins.
In relation to our registrar, the registrar models that are winning are sophisticated capital intensive and require a focus and
specialization of their own; others are far better placed than ourselves to succeed in that market. More importantly, as an owner of
top-level domains, we want to be actively partnering with the retail channel (registrars) internationally – not creating the perception
that we are competing with them. By effectively closing our own loss-making registrar, we immediately remove a tension point as
well as achieving meaningful operational savings as we look to cross over-over into operational profitability.
On a like-for-like basis, through effectively outsourcing our technical back-end and closing down our registrar operation, we expect
to be able to deliver annualized operational savings of approximately $5.5 million from the highs of 2015. These savings, combined
with growing revenues and repurposing of resources, will provide us the necessary head-room to invest in registry sales and
marketing.
More importantly, by partnering with a world-class operator in Nominet, we can both compete aggressively on price, should we
choose, and scale – without compromising on quality.
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CEO’s Statement
(continued)
Developing domains under management and revenue growth
As of the end of February 22, 2016, the date of my appointment, our domains under management stood at 292,000, up 5 per cent
on the year-end, while domain billings for 2015 were $7.9 million. Both domains under management and revenues have to be
significantly grown in the current year.
The focus of management is therefore now on rapidly energizing the sales and marketing activity across our portfolio. Launching
our first marketing orientated corporate website, mmx, on 8 April 2016, was a clear external signal of this intent.
More meaningfully, I am pleased to report the following sales and marketing progress in key areas of our portfolio in our key
regions – Asia, US and UK/Europe.
China
On 17 May 2016, .vip will go into General Availability. Based on the enquiries received during Sunrise and feedback gained through
our two recent marketing trips to China, it is clear that there is genuine interest in the domain both within and outside of China. As
a result, we will not be using a year-one freemium approach to simply inflate year-one registrations. Instead, we intend to be keenly
priced to ensure margin to ourselves - and registrations – as well as protect the integrity of the domain. The volume we anticipate
to be generated through keen pricing will then support the sales of our premium names in this domain.
I would also like to take this opportunity, on behalf of the Board, to thank our China Special Advisor, David Weill, our Chairman,
Guy Elliott, and in-country partners Allegravita and ZDNS for their valuable support in the formulation and execution of the .vip
launch strategy in China.
US
The US remains a major, but in comparative terms, untapped market for new gTLDs. We are therefore encouraged by the
increasing activity by major registrar groups in the US to promote new gTLDs and their willingness to explore new business models
currently being developed by MMX to grow customer bases across our portfolio of domains.
We also believe our two geo domains in the US, .miami and .boston, significantly enhance our reputation and leverage in the local
market. We therefore look forward to the launch of .boston, expected in H2 following the completion of the ICANN requirements.
.law
Billings from .law sales to 31 December 2015 were $2.4 million. Based on Q1 sales of 2016 – it is evident there there is a need to
commit greater sales resources to the project to continue to drive standard registrations. To that end, I am pleased to report
additional sales resources for .law are now being deployed.
UK
Following the signing of the Nominet RSP agreement on 8 April, I am pleased to report we are already seeing additional scope for
marketing collaboration with Nominet across our portfolio given its extensive membership comprising over 2,800 registrars and
resellers in the UK. We are therefore hopeful to be able to see the first buds from such a collaboration in H2. It is also encouraging
to see an increasingly commercial and flexible approach from London & Partners, our Dot London partners, which bodes well for
the future development of this domain.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
CEO’s Statement
(continued)
Continental Europe
A characteristic of the local German market is the strength of regionally focused media groups – as well as businesses. The
opportunity in Germany is therefore to develop commercial relationships into these groups to develop awareness for .nrw and
.bayern so as to complement the year one registrations achieved to date.
Right-sizing our internal resources and office locations
It is evident that transitioning a technically-focused, vertically-integrated registry-to-registrar business to a sales and marketing led
registry company, will require our human resources to be prudently transitioned as sales & marketing initiatives and revenues grow.
We likewise need to recognize that our resources should be located to allow us to both operate in the most efficient manner so as
to best serve the needs of clients and distribution partners in our core markets in Asia, the US and Europe. To that end a full
operational review is already underway and will conclude in Q2.
Growing our portfolio
At the year-end our cash reserves stood at $34.7 million. We currently have 8 contested applications, a number of which we
anticipate will be resolved via private auction. We also continue to monitor the progress of TLDs already launched to identify
opportunities where we believe we have the ability to add value. Similarly, we will look to monetize assets via third parties assets
where the Board can see no strategic importance in these assets to the development of our portfolio.
Conclusion
We see partnership as the governing principle by which we, as a registry business, can engage with the appropriate audiences to
grow our domains under management and revenues. We are confident that the major steps we have taken over the last eight
weeks to transform our business provides us with an exceptional platform to exploit the true potential of our portfolio. It is a
privilege to have the full support of the Board and our investors as we embark on this journey.
Toby Hall
CEO
Date: 26 April 2016
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
COO’s / CFO’s Statement
As announced in the interims, the expectations for a significant revenue
increase in the operating part of our business in H2 2015, were broadly realized.
Total billings for the second half increased to $5.9 million, up from $2 million in the
first half of the year, buoyed by the annual renewals for a number of our top-level
domains (TLDs) in the period, including .london, as well as our successful launches
of .law and .miami.
However, billings of $7.9 million for the year were simply not of a sufficient scale to
cover the associated cost of sales ($6.2 million) and operating expenses ($12.2
million), which combined reached $18.4 million for 2015. Similarly, the $0.6 million
savings achieved in the period by the decisions mid-year to stream-line the existing
operational set-up were not of a magnitude to have any material impact in the year
under review. That said, forfeited cost of sales and operational expenses as a result
of the 2015 cost-cutting decisions will amount to $2.7 million in 2016 (see notes 3 &
4).
It is for these reasons that the newly constituted executive team has aggressively
moved forward, post year-end, with the restructuring of the business through the
Nominet and Uniregistrar agreements. We believe these two agreements will deliver
more than $2 million of savings in relation to the running of our technical operations
on a like-for-like basis when fully implemented. This will in turn provide us scope to
resource-up in the appropriate areas as revenues grow. However, we do not
anticipate the migrations onto the two new platforms to complete before Q4.
“The newly constituted executive
team has aggressively moved
forward, post-year end, with
restructuring of the business”
In 2015 we also settled 9 contested gTLDs, losing 6 private auctions and 1 ICANN auction, which resulted in a gain of $7.9 million
while growing our portfolio by adding .dds. We also lost an ICANN auction for .app, which sold for over $25 million to Google.
During the year we reached a cash peak of just over $49 million as a result of billings, private auction proceeds, and our cash
balances coming out of 2014.
The substantial cash balance has allowed the Board to implement a share buyback program while continuing to maintain enough
funds to possibly acquire additional TLDs via future private auctions or as other opportunities arise. In September 2015 the Board
earmarked $23 million (£15 million) to buyback shares in the open market over the following twelve months. By year end the
Company had spent $9.05 million (£6.05 million) to repurchase 68,864,800 shares. Post year-end, a further $1.17 million (£0.81
million) was spent repurchasing 10,658,568 shares lowering our issued share capital from 835,969,485 to 756,446,117 ordinary
shares. The Company will continue to repurchase ordinary shares when it sees value in doing so, up to a maximum of 15% of the
ordinary shares in issue on 22 September 2015.
Restructuring
The engineering investments made in 2014 carried over into 2015 as the Group continued at that time to focus on being a
vertically integrated company and building all of its systems in-house. As a result of this approach the group saw ongoing overall
costs increase significantly to an annualized peak rate in May of $11.7 million of which personnel costs alone accounted for $7.0
million.
Spurred by investors, the Board began the process of re-evaluating the Company’s overall strategy and defining its core business
post the board changes last May.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
COO’s / CFO’s Statement
(continued)
In June 2015, the first round of headcount reduction began as total personnel went from its peak of 61 personnel in May to 43
personnel at year-end. Post year-end, with outsourcing plans now being put in place, the Company has already begun to further
reduce systems & engineering/development overhead by removing additional personnel, removing equipment-leasing costs,
lowering rents, and consolidating third party software costs. Once the migration is complete the Company expects to have
reduced annualized costs by approximately $4.7 million on a like-for-like basis and by approximately $5.5 million from our May
peak.
As part of the above rationalization and subsequent restructuring, customer support processes, systems, and personnel have also
been re-evaluated resulting in the streamlining of certain processes ahead of the impending outsourcing of registry and registrar
customer service functions.
As indicated in the CEO’s statement, there are also clear areas of under resourcing - particularly in our registrar development and
marketing support teams - where investment will be required. Wherever relevant, we will be adopting a partnering model so that
we can access highly skilled third party resources as well as utilizing short term contracts to reduce long-term overhead/personnel
costs. This is already proving a successful formula as we are now seeing promising results with our Chinese partners as we grow
our presence in China.
Premium names
In H2 2015 the Company began to focus more heavily on sales of its substantial premium name inventory. In early H2 the
Company made a significant investment to staff up its sales teams growing personnel from 4 in May 2015 to just over 13
individuals during the year. However, as with any sales teams, clear sales objectives must be met and sales personnel held
accountable. Accordingly, since the year-end, the Executive team has removed a number of non-performers while retaining its
best performers to continue to stimulate sales. However, much of their focus is now on stimulating third party channels to drive
inbound enquiries rather than outbound selling. At the year-end, premium sales accounted for 38% of total billings ($2.6m), up
$1.3 million on 2014 – the majority of sales resulting from inbound enquiries rather than outbound sales activity. We expect to
grow the premium sales-team as sales goals are surpassed.
2015 Financial Highlights
Billings (1)
Cost of sales
Gross cash profit
Cash expenditure
Operating expenditure
Profit on gTLD auctions
Adjusted EBITDA (2)
FY 2015
FY 2014
$’000
7,922
(6,223)
1,699
(12,156)
7,943
(2,514)
Percentage
change
58%
34%
$’000
5,028
(4,659)
369
360%
(13,142)
33,721
20,948
(8%)
(76%)
(112%)
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
COO’s / CFO’s Statement
(continued)
As reported in the Group Statement of
Comprehensive Income
Operating EBITDA
Total (loss) / profit
FY 2015
FY 2014
$’000
(5,500)
(9,997k)
$’000
23,167
22,057
Basic (loss) / earnings per share
(1.20) cents
2.73 cents
Diluted (loss) / earnings per share
(1.20) cents
2.67 cents
As reported in the Group Statement of Financial
Position
Intangible assets
Other Long Term Assets
Cash & Cash Equivalents
Net Assets
FY 2015
FY 2014
$’000
41,291
3,448
34,651
79,027
$’000
40,597
5,982
45,796
94,685
Percentage
change
(124%)
(145%)
(144%)
(145%)
Percentage
change
2%
(42%)
(24%)
(17%)
(1) Billings refer to total sales generated during the year (not deferred for accounting purposes)
(2) Earnings before interest, tax, depreciation & amortisation and other non-cash charges where earnings are calculated on the
basis of billings as opposed to accounting revenue
In 2015, billings increased by 58% to $7.9 million from $5 million the previous year, which reflects new gTLD launches in the year
and a full year of operation for TLDs launched in 2014. Cost of sales, however, also increased as a result of increased activity
resulting in a gross cash profit of $1.7 million representing a 21% gross cash profit margin, an increase of 360% over 2015 (where
gross cash profit margin was 7%).
Meanwhile, operating expenditure decreased by 8% to $12.2 million, an effect of the initial round of restructuring within the year,
which will deliver a $2.7 million saving in the current year.
However, revenue from private auctions in the year fell to $7.9 million compared to $33.7 million in 2014 reflecting the reduced
number of our gTLD applications being resolved via the private auction process in the period.
The decline in adjusted EBITDA to a loss of $5.5 million is primarily as a result of the decrease in profit on gTLD auctions. Excluding
the auctions, EBITDA on operating activities effectively improved by $2.3 million to a loss of $10.5 million in 2015 compared to a
loss of $12.8 million in 2014.
On a consolidated basis, the total loss for the year is $10 million compared to a profit of $22.1 million in 2014.
Regarding the Group’s cash reserves, as a result of the share buyback and net outflow from operating activities, cash reserves as
at 31 December 2015 stood at $34.7 million compared to $45.8 million as at 31 December 2014. This reduction primarily reflects
the $9.1 million committed towards the share buy back programme in the period and net outflows of $10.7 million to cover
operating activities. In 2014, net outflows from operating activities were $0.8 million higher at $11.5 million. Cash inflows in the year
were boosted by $9.2 million as a result of our participation in six private auctions.
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COO’s/CFO’s Statement
(continued)
Looking Ahead
We still have an interest in 8 contested TLDs and would expect some of these to be resolved via private auction process in the
year. We likewise have several new top-level domains to launch such as .vip and .boston, and are confident about the contribution
new markets such as China can deliver in the near term. We also will be investing to build up our distribution partner and registrar
partner network so as to drive sales in H2 and throughout 2017. Most importantly, we look forward to the cost reductions coming
into play as a result of our focus on being a pure-play registry business. As a result, we believe we are now structurally well placed
to convert into a business with a low ongoing cost base, and a clear strategy for driving profitable growth across our key regional
markets.
Michael Salazar
COO / CFO
Date: 26 April 2016
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Summary Information
About Us
Minds + Machines Group Limited (“MMX” or the “Company”) is a BVI incorporated company, which is quoted on the AIM Market
of the London Stock Exchange (“AIM”). The Company and its subsidiaries (the “Group”) is the owner and operator of a world class
portfolio of top-level domain assets (gTLDs). As a sales and marketing-led registry business, the Company is focused on
commercializing its portfolio in partnership with its expanding global network of distribution partners.
The MMX portfolio is focused around geographic domains (e.g. .london, .boston, .miami, .bayern), professional occupations (e.g.
.law, .abogado, and .dds), consumer interests (e.g. .fashion, .cooking, .wedding), lifestyle (e.g. .fit, .surf, .yoga), outdoor activities
(e.g. .fishing, .garden, .horse) and generic names such as .work and .casa. As a business, the Company works through its
expanding international network of registrars and distribution partners to bring the benefits of affinity based domain addresses to
B2B and consumer audiences. For more information on MMX, please visit www.mmx.co.
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 forward-looking 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 forward-looking 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.
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Strategic Report
(continued)
Review of the Group’s Business
The Business Model
Minds + Machines Group Limited operates in the domain name industry and provides end-to-end domain services generating
revenues across multiple business lines.
In total, 23 of the 34 uncontested domains in which the Group has a commercial interest have entered General Availability,
resulting in the Group having over 279,000 domains under management at the year end.
The Group currently has an interest in 8 contested generic top-level domains (gTLDs). The Group:
• Wholly-owns, or majority owns, 7 contested gTLDs; and
•
Is in partnership for one gTLD.
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 ICANN-accredited Registrars on the same pricing, terms, and
conditions.
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 end-users 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 higher annual price.
The Group shares wholesale revenues from its geographic gTLDs and retains all the wholesale revenue for its non-geographic,
wholly-owned gTLDs.
Registry Service Provider
Registry service providers (“RSPs”) 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 know-how, do
not want to incur the costs of building and operating their own registry, believe that outsourcing is more cost-effective, or for a
combination of the foregoing reasons. RSPs typically receive a yearly per-domain-name fee for each domain name sold or
renewed by a client Registry, with the yearly per-name fee often being scaled to the number of domain names the client Registry
sells.
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Strategic Report
(continued)
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 third-party 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.
Post-year end, the subsidiary of the Group providing RSP services whilst still remaining the RSP of the group has entered into an
agreement to outsource its technical platform (software registry systems and underlying databases, together with its back-up
systems and disaster recovery plans) to Nominet under the Group’s on-going restructuring plan.
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 value-added services, such as email,
website design, e-commerce tools and web hosting.
The largest Registrars (e.g. GoDaddy, 1&1, and HostEurope) typically sell domain names and services to a wide range of
consumers.
As the Group transitions into a pure-play registry, post balance sheet, the Group has entered into an agreement with Uniregistrar
to transition the client-base of our registrar operations to theirs.
As part of the registrar business, the Group has also built its own platform as a ‘Reseller’ to sell .law and .abogado second level
domain names. The Group will continue to provide ‘Reseller’ services for .law and .abogado second level domain names, however
it will outsource the back-end platform to a third-party provider. The Company is currently in negotiations with a preferred
provider for its reseller business.
Future developments, strategy and objectives
Please see the Executive Statements.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Strategic Report
(continued)
Key performance indicators
We track several Key Performance Indicators (KPI) against set KPI targets to help the Board and management evaluate the
performance of our overall business.
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. We evaluate two key components to determine the success of our Premium names:
• Total Premium Names sold each year – we anticipate a 1.75 to 2.5 times target growth rate in 2016 and 2017. Growth in 2015
was 1.84 times (2014: N/A).
• Average Revenue Per Premium Name – the target KPI range for premium annual revenues per name has been set at $200 to
$225. (2015 average: $242, 2014 average: $184).
Standard Name Sales Growth:
This measures the underlying popularity of each individual top-level domain and the success of our registrar channel sales team.
We evaluate two key components with KPI targets set for each covering 2016 and 2017:
• Total Standard Names sold each year – we anticipate a 1.5 to 2 times target growth rate each year for the next 2 years.
Growth in 2015 was 2.74 times (2014: N/A).
Principal risks and uncertainties
There are a number of potential risks and uncertainties, which could have a material impact on the Group’s long-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 non-profit private organisation that was created to
oversee a number of Internet-related 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 roll-out 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.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Strategic Report
(continued)
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 counter-party for each of .boston and .budapest 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, 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 may fail to meet certain contractual obligations
The Group currently has certain contractual commitments for specific TLDs that provide for minimum revenue guarantees as well
as annual marketing commitments. If total revenues from those specific TLDs do not reach the minimum annual revenue targets
the Group must reallocate revenues from other areas of its portfolio to ensure appropriate payment of such commitments. Further,
the commitments may create a significant barrier to achieving overall profitability and could result in certain impairments to future
financial statements.
The Group is currently renegotiating its current contractual commitments with a view towards ensuring that their requirements are
reasonably met and the impact of such commitments to the Group’s overall profitability is minimized.
The Group 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 software registry system and underlying databases, together with its
back-up 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, whether in-house or
outsourced, 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 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.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Strategic Review
(continued)
The Group has invested and continues to invest in ensuring that its technology and advanced information systems, whether in-
house or outsourced, 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 cloud based services 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, co-location 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, show that the Group
should be able to operate within the level of its current funding. At the year-end, the Group had $34.7 million held as cash and
cash equivalents (excluding letters of credits required by ICANN).
The Group will use these resources to both fund operations, to secure additional gTLD assets and where appropriate return cash
to shareholders.
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 26 April 2016 and signed on its behalf by:
Michael Salazar
COO/CFO
Date: 26 April 2016
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
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 2015. The Corporate Governance Statement set out on pages 21 to 24 forms part of this report.
Details of significant events since the balance sheet date are contained in note 29 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 (2014: 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 and since year end are set out below:
Executive Directors
Date of Appointment
Date of Resignation
Toby Hall
26 April 2016
Frederick Krueger (Chairman)
Antony Van Couvering (CEO)
Michael Salazar (CFO)*
Caspar von Veltheim
*appointed COO on 2 February 2016
24 May 2015
19 February 2016
2 February 2016
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Directors’ Report
(continued)
Non-Executive Directors
Date of Appointment
Date of Resignation
Guy Elliott**
Keith Teare
Elliot Noss
16 July 2015
David de Jongh Weill
16 July 2015
Henry Turcan
2 February 2016
2 February 2016
2 February 2016
2 February 2016
**Promoted to non-executive Chairman on 2 February 2016
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.
Directors’ Interests
The total beneficial interests of the serving Directors at the year-end in the shares and options of the Company during the period to
31 December 2015 were as follows:
Director
Shares
Options*
Shares
Options*
31 December 2015
31 December 2014
Frederick Krueger
N/A
N/A
128,481,604
Antony Van Couvering
1,017,689
23,000,000
898,674
1,630,000
8,500,000
1,210,375
916,613
2,512,500
854,613
21,650,000
-
N/A
5,000,000
12,500,000
1,250,000
312,500
N/A
Michael Salazar
Caspar Veltheim
Guy Elliott
Keith Teare
Elliot Noss
David Weill
-
-
-
750,000
750,000
-
-
-
-
-
-
-
* Terms of the options have been disclosed in Note 24 to the financial statements.
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18
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Directors’ Report
(continued)
Directors’ Indemnities
The company has made qualifying third-party 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 21 to 24.
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 high-calibre 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.
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19
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Directors’ Report
(continued)
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.
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 accepts 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:
Michael Salazar
COO/CFO
Date: 26 April 2016
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Corporate Governance
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 two Executive Directors and two Non-Executive Directors, one of whom is the
Chairman. 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 CEO and COO / 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 2015, the Board met twenty-three 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 of two Non-Executive Directors, Henry Turcan (Chairman) and Guy Elliot. 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 of two Non-Executive Directors, Guy Elliott (Chairman of the Remuneration Committee), and Henry
Turcan. Non-Executive 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.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Corporate Governance
(continued)
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.
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 attract significant new customers;
• The Group may fail to meet certain contractual obligations;
• 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 Sterling;
• 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.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Corporate Governance
(continued)
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 to Note 25 for further information.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Corporate Governance
(continued)
Securities Trading
The Board has adopted a Share Dealing Code that applies to Directors, senior management and any employee or consultant 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 other 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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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Independent Auditor’s Report
Independent Auditor’s 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 2015 which
comprise the Group and Company Statements of Comprehensive Income, 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 International Financial Reporting
Standards (IFRSs).
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 20, 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 International
Standards on Auditing (UK and Ireland). 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 group’s and the parent company’s 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. In 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 and to identify any
information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the
course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the
implications for our report.
Opinion on the financial statements
In our opinion:
•
•
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 31
December 2015 and of the group’s and the parent company’s results for the year then ended; and
the financial statements have been properly prepared in accordance with IFRSs.
Mazars LLP
Chartered Accountants and Statutory Auditor
Tower Bridge House
St Katharine’s Way
London
E1W 1DD
Date
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25
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Group Statement of Comprehensive Income
for the year ended 31 December 2015
Revenue
Cost of sales
Gross profit / (loss)
Operating expense
Foreign exchange loss
Profit on disposal of intangible assets
Profit on gTLD auctions
Loss on withdrawal of gTLD applications
Operating (Loss) / Earnings before interest,
depreciation, taxation and amortisation
(Operating EBITDA)
Share based payment expense
Profit on disposal of subsidiaries
Loss on disposal of fixed assets
Share of results of joint venture
(Loss) / Earnings before interest,
depreciation, taxation and amortisation
(EBITDA)
Notes
2
3
4
6
15
19
19
2/5
24
18
Depreciation and amortisation charge
15/16
Finance revenue
Finance costs
(Loss) / profit before taxation
Income tax
Retained (loss) / profit
9
10
11
Year Ended
31 December 2015
$ 000's
Year Ended
31 December 2014
$ 000's
6,324
(6,223)
101
(12,156)
(1,240)
-
7,943
(148)
1,922
(4,659)
(2,737)
(13,142)
(1,427)
7,048
33,721
(296)
(5,500)
23,167
(3,235)
-
(161)
1
(8,895)
(1,218)
82
(18)
(10,049)
52
(9,997)
(612)
21
-
(9)
22,567
(496)
62
(76)
22,057
-
22,057
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Group Statement of Comprehensive Income
for the year ended 31 December 2015 (continued)
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss:
Currency translation differences
Other comprehensive income for the year net
of taxation
Total comprehensive (loss) / income for the
year
Retained (loss) / profit for the period
attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive (loss) / income for the
period attributable to:
Equity holders of the parent
Non-controlling interests
(Loss) / Earnings per share (cents)
Basic
Diluted
13
13
All operations are considered to be continuing.
The notes set out on pages 39 to 93 form an integral part of these financial statements
Year Ended
31 December 2015
$ 000's
Year Ended
31 December 2014
$ 000’s
732
732
543
543
(9,265)
22,600
(9,978)
(19)
(9,997)
(9,281)
16
(9,265)
(1.20)
(1.20)
22,287
(230)
22,057
22,795
(195)
22,600
2.73
2.67
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27
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Company Statement of Comprehensive Income
for the year ended 31 December 2015
Notes
Year ended
31 December 2015
$ 000’s
2,092
Year ended
31 December 2014
$ 000’s
114
Revenue
Cost of sales
Gross profit / (loss)
Operating expenses
Foreign exchange loss
Profit on disposal of intangible assets
Profit on gTLD auctions
Loss on withdrawal of gTLD applications
Operating earnings before interest,
depreciation, taxation and amortisation
(Operating EBITDA)
Share based payment expense
Loss on disposal of subsidiaries
Earnings before interest, depreciation,
taxation and amortisation (EBITDA)
Depreciation and amortisation charge
Finance revenue
Profit before taxation
Income tax
Retained profit for the period
6
15
19
19
24
17
15
9
11
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss:
Currency translation differences
Other comprehensive income for the year
net of taxation
Total comprehensive income for the year
All operations are considered to be continuing.
The notes set out on pages 39 to 93 form an integral part of these financial statements.
(1,987)
105
(2,747)
(2,781)
-
7,943
(148)
2,372
(2,017)
-
355
(61)
82
376
-
376
-
-
376
(916)
(802)
(3,079)
(2,838)
7,048
33,721
(296)
33,754
(612)
(16)
33,126
(9)
57
33,174
33,174
-
-
33,174
mmx.co
28
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Group Statement of Financial Position
as at 31 December 2015
Notes
31 December 2015
$ 000's
31 December 2014
$ 000's
ASSETS
Non-current assets
Goodwill
Intangible assets
Fixtures & equipment
Interest in joint ventures
Other-long term assets
Total non-current assets
14
15
16
18
19
Current assets
Trade and other receivables
20
Cash and cash equivalents
Total current assets
2,828
41,291
189
835
3,448
48,591
4,759
34,651
39,410
2,828
40,597
871
833
5,982
51,111
4,434
45,796
50,230
TOTAL ASSETS
88,001
101,341
LIABILITIES
Current liabilities
Trade and other payables
Obligations under finance
lease
Total current liabilities
21
22
(8,972)
(2)
(8,974)
(6,314)
(342)
(6,656)
NET ASSETS
79,027
94,685
mmx.co
29
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Group Statement of Financial Position
as at 31 December 2015 (continued)
Notes
23
23
EQUITY
Share capital
Share premium
Foreign exchange reserve
Retained earnings
Non-controlling interests
TOTAL EQUITY
31 December 2015
$ 000’s
31 December 2014
$ 000’s
-
73,816
1,403
4,140
79,359
(332)
79,027
-
82,866
707
11,461
95,034
(349)
94,685
The notes set out on pages 39 to 93 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 26 April 2016 and signed on its behalf by:
Toby Hall
Director
Michael Salazar
Director
mmx.co
30
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Company Statement of Financial Position
as at 31 December 2015
Notes
31 December 2015
$ 000's
31 December 2014
$ 000's
ASSETS
Non-current assets
Intangible assets
Investment in subsidiaries
Interest in joint ventures
Other-long term assets
Total non-current assets
15
17
18
19
Current assets
Trade and other receivables
20
Cash and cash equivalents
Total current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
39,463
4,189
911
3,448
48,011
39,245
23,990
63,235
38,835
3,548
911
5,982
49,276
39,384
26,952
66,336
111,246
115,612
Trade and other payables
21
Total current liabilities
(3,852)
(3,852)
(2,201)
(2,201)
NET ASSETS
107,394
113,411
mmx.co
31
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Company Statement of Financial Position
as at 31 December 2015 (continued)
EQUITY
Share capital
Share premium
Retained earnings
TOTAL EQUITY
Notes
23
23
31 December 2015
$ 000’s
31 December 2014
$ 000’s
-
73,816
33,578
107,394
-
82,866
30,545
113,411
The notes set out on pages 39 to 93 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 26 April 2016 and signed on its behalf by:
Toby Hall
Director
Michael Salazar
Director
mmx.co
32
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Group Cash Flow Statement
for the year ended 31 December 2015
Notes
Year ended
31 December 2015
$ 000's
Year ended
31 December 2014
$ 000's
Cash flows from operating activities
Operating EBITDA
Decrease in trade and other receivables including
long term receivables
Increase in trade and other payables
Profit on the sale of intangible assets
Profit on gTLD auctions
Loss on withdrawal of gTLD applications
Foreign exchange loss / (gain)
Net cash flow used in operating activities
Cash flows from investing activities
Interest received
Interest paid
9
10
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
Investment in interest in joint ventures
Net cash flow from investing activities
(5,500)
826
205
-
(7,943)
148
1,572
(10,692)
82
(18)
684
(1,139)
47
(108)
9,155
-
8,703
23,167
1,383
5,631
(7,048)
(33,721)
296
(1,163)
(11,455)
62
(76)
411
(45,975)
16,944
(398)
37,493
-
8,461
mmx.co
33
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Group Cash Flow Statement
for the year ended 31 December 2015 (continued)
Notes
Year ended
31 December 2015
$ 000's
Year ended
31 December 2014
$ 000's
Cash flows from financing activities
Repayments of obligations under finance lease
Issue of ordinary shares
Share issue costs
Purchase of own shares
Repurchase of vested equity instruments
Net cash flow from financing activities
23
23
23
24
Net (decrease) / 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
The notes set out on pages 39 to 93 form an integral part of these financial statements.
(360)
-
-
(9,050)
(577)
(9,987)
(11,976)
45,796
831
34,651
(363)
35,678
(2,293)
-
-
33,022
30,028
14,884
884
45,796
mmx.co
34
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Company Cash Flow Statement
for the year ended 31 December 2015
Notes
Year ended
31 December 2015
$ 000's
Year ended
31 December 2014
$ 000's
Cash flows from operating activities
Operating EBITDA
(Decrease) / Increase in trade and other receivables
including long term receivables
Increase / (decrease) in trade and other payables
Profit on the sale of intangible assets
Profit on gTLD auctions
Loss on withdrawal of gTLD applications
Foreign exchange loss
Net cash flow used in operating activities
Cash flows from investing activities
Interest received
9
Amounts transferred from restricted cash
Payments to acquire intangible assets
Receipts from the disposal of intangible assets
Amounts received in gTLD auctions
Net cash flow from investing activities
Cash flows from financing activities
Issue of ordinary shares
Share issue costs
Purchase of own shares
Net cash flow from financing activities
23
23
23
2,372
1,290
(169)
-
(7,943)
148
502
(3,800)
82
684
(500)
-
9,155
9,421
-
-
(9,050)
(9,050)
33,754
(26,949)
2,041
(7,048)
(33,721)
296
2,330
(29,297)
57
411
(44,326)
16,944
37,493
10,579
35,678
(2,293)
-
33,385
mmx.co
35
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Company Cash Flow Statement
for the year ended 31 December 2015 (continued)
Notes
Year ended
31 December 2015
$ 000's
Year ended
31 December 2014
$ 000's
Net (decrease) / 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
The notes set out on pages 39 to 93 form an integral part of these financial statements.
(3,429)
26,952
467
23,990
14,667
12,285
-
26,952
mmx.co
36
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Group Statement of Changes in Equity
for the year ended 31 December 2015
Share
capital
Share
premium
reserve
Shares
to be
issued
Foreign
currency
translation
reserve
Retained
earnings
Total
Non-
controlling
interest
Total
equity
$ 000’s
$ 000’s
$ 000’s
$ 000’s
$ 000’s
$ 000’s
$ 000’s
$ 000’s
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
49,481
-
-
-
34,801
877
(2,293)
-
-
82,866
-
-
-
(9,050)
-
-
73,816
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
199
(10,232)
39,448
(154)
39,294
-
22,287
22,287
(230)
22,057
508
-
508
35
543
508
22,287
22,795
(195)
22,600
-
-
-
-
-
-
-
-
34,801
-
34,801
877
-
877
(2,293)
-
(2,293)
114
114
-
114
(708)
(708)
-
(708)
707
11,461
95,034
(349)
94,685
-
(9,978)
(9,978)
(19)
(9,997)
696
-
696
36
732
696
(9,978)
(9,281)
16
(9,265)
-
-
-
-
(9,050)
3,223
3,223
(566)
(566)
-
-
-
(9,050)
3,223
(566)
1,403
4,140
79,359
(332)
79,027
At 1 January 2014
Profit for the year
Currency translation differences
Total comprehensive income /
(loss)
Share capital issued
Share options & warrants
exercised
Cost of share issue
Credit to equity for equity-settled
share based payments
Share-based payments
(repurchase of vested equity
instruments)
As at 31 December 2014
Loss for the year
Currency translation differences
Total comprehensive income / (loss)
Acquisition of own shares
Credit to equity for equity-settled
share based payments
Share based payments (repurchase
of vested equity instruments)
As at 31 December 2015
The notes set out on pages 39 to 93 form an integral part of these financial statements.
mmx.co
37
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Company Statement of Changes in Equity
for the year ended 31 December 2015
Share
capital
Share
premium
reserve
Shares
to be
issued
Retained
earnings
Total
$ 000’s
$ 000’s
$ 000’s
$ 000’s
$ 000’s
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
49,481
-
-
34,801
877
(2,293)
-
-
82,866
-
-
(9,050)
-
-
73,816
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,035)
47,446
33,174
33,174
33,174
33,174
-
-
-
34,801
877
(2,293)
114
114
(708)
(708)
30,545
113,411
376
376
376
376
-
-
(9,050)
3,223
3,223
(566)
(566)
33,578
107,394
At 1 January 2014
Profit for the year
Total comprehensive income
Share capital issued
Share options & warrants exercised
Cost of share issue
Credit to equity for equity-settled share based
payments
Share based payments (repurchase of vested equity
instruments)
As at 31 December 2014
Profit for the year
Total comprehensive income
Acquisition of own shares
Credit to equity for equity-settled share based
payments
Share based payments (repurchase of vested equity
instruments)
As at 31 December 2015
The notes set out on pages 39 to 93 form an integral part of these financial statements.
mmx.co
38
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
for the year ended 31 December 2015
1
Summary of Significant Accounting Policies
(a)
General information
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 pages 11 to 16.
These financial statements are presented in US Dollars and rounded to the nearest thousand.
Foreign operations are included in accordance with the policies set out in note 1(k).
(b)
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
The Group’s and Company’s financial statement have been prepared on the basis of accounting policies consistent with
those applied in the financial statement for the year ended 31 December 2014 except for the implementation of a number of
minor adjustments issued which applied for the first time in 2015. These new pronouncements do not have a significant
impact on the accounting policies, methods of computation or presentation applied by the Group and Company and
therefore prior-year financial statements have not been restated for these pronouncements.
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:
Mandatory for 2016
Amendments to IAS 1
Amendment to IAS 1 Presentation of Financial Statements – Disclosure Initiative. The
amendment provides clarification of guidance in IAS 1 on materiality and aggregation,
the presentation of subtotals, the structure of financial statements and the disclosure of
accounting policies
Amendments
16 and IAS 38
to
IAS
The amendment provides clarification of acceptable methods of depreciation and
amortisation
Annual improvements Annual improvement to IFRS 2012 – 2014 cycle
Amendments to IFRS
11
Amendments to IFRS 11 Joint Arrangements. The amendments deal with the
accounting for acquisition of interest in joint operations.
mmx.co
39
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
Mandatory for 2017
Amendments
12
to
IAS
Amendments to IAS 12 Recognition of Deferred Tax Asset for Unrealised Losses. These
amendments on the recognition of deferred tax assets for unrealised losses clarify how
to account for deferred tax assets related to debt instruments measured at fair value
IAS 7
IAS 7 Statement of Cash flows, Narrow-scope amendments. The amendments
introduce an additional disclosure that will enable users of financial statement to evaluate
changes in liabilities arising from financial activities
Mandatory for 2018
IFRS 15
IFRS 9
Mandatory for 2019
IFRS 15 Revenue from Contracts with Customers. The core principle of IFRS 15 is that
an entity recognises revenue to depict the transfer to promised goods or services when
control of the goods or services passes to customers. The amount of revenue
recognised should reflect the consideration to which the entity expects to be entitled in
exchange for those goods or services. A modified transitional approach is permitted
under which a transitional adjustment is recognised in retained earnings at the date of
implementation of the standard without adjustment of comparatives. The new standard
will only be applied to contracts that are not completed at that date.
IFRS 9 Financial Instruments. This standard includes a single approach for the
classification of financial assets, based on cash flow characteristics and the entity’s
business model, which requires expected losses to be recognised when financial
instruments are first recognised. The standard amends the rules on hedge accounting to
align the accounting treatment with the risk management practices of an entity.
IFRS 16 Leases. Under the new standard, a lessee is in essence required to:
a) Recognise all lease assets and liabilities (including those currently classed as
operating leases) on the balance sheet, initially measured at the present value
of unavoidable lease payments;
IFRS 16
b) Recognise amortisation of lease assets and interest on lease liabilities in the
income statement over the lease term; and
Separate the total amount of cash paid into a principal portion (presented within financial
activities) and interest (which companies can choose to present within operating or
financing activities consistent with presentation of any other interest paid) in the cash
flow statement.
mmx.co
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
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:
a)
IFRS 9 will impact both the measurement and disclosure of Financial Instruments; and
b)
IFRS 16 will impact on the recognition of those leases currently classified as operating leases. Information on the
undiscounted amount of the Group’s operating lease commitments under IAS 17, the current lease standard, is
disclosed in note 26. Under IFRS 16, the present value of these commitments would be shown as a liability on the
balance sheet together with an asset representing the right of use.
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
(c)
Basis of accounting
The consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of certain
financial instruments that are measured at re-valued amounts or fair value at the end of each reporting period, as explained in
the accounting policies.
(d)
Basis of consolidation
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:
• has the power over the investee;
•
• has the ability to use its power to affect its returns.
is exposed or has rights, to variable return from its involvement with the investee; and
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
non-controlling interests. Total comprehensive income of the subsidiaries is attributed to the owners of the Company and to
the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
mmx.co
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
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.
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests of non-
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 non-controlling interests’ proportionate share of the fair value
of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis. Other
non-controlling interests are initially measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling
interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes
in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling
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 non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiaries. Any difference between the amounts by which the non-controlling
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.
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 non-controlling
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.
(e)
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 16.
mmx.co
42
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
(f)
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 acquisition-date 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. Acquisition-related 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:
-
-
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
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current 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 non-controlling 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
acquisition-date amounts of the identifiable assets acquired and liabilities assumed.
(g)
Joint Ventures
A joint venture is an entity where the group has joint control and have rights to the net assets of the arrangement. 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.
mmx.co
43
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
(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 cash-generating units expected to benefit from the synergies of the combination. Cash-
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 cash-generating 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 pro-rata 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.
(i)
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 straight-line 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 straight-line 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.
mmx.co
44
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
(j)
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 sales-related 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 (end-users) 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.
(k)
Foreign Currencies
Functional and presentation currency
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. Non-monetary 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. Non-monetary items that are measured in terms of historical cost
in foreign currencies are not retranslated.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
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 non-controlling 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.
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 re-attributed to non-
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 straight-line 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:
the technical feasibility of 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.
•
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
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 as intangible assets that are acquired separately.
Useful live and amortisation
Amortisation 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.
• Generic Top Level Domains – indefinite life (not amortised)
• Contracts – over the life of the contract (currently 7 years)
• Software and development costs – over 3 or over its useful life (as below)
Software and development costs are amortised over their useful economic life. The amortisation period and the amortisation
method for an intangible asset with a finite useful life are reviewed when circumstances indicate a change to its useful life.
Changes in the expected useful life are accounted for by charging the amortisation period and treated as a change in
accounting estimate. As a consequence, certain software and development costs are amortised over eight months
(previously over 3 years).
(m)
Derecognition of intangible assets
An intangible asset is de-recognised 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.
(n)
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.
• Fixtures & equipment – over 3 to 7 years
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
(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 any 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 cash-
generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate
assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-
generating units for which a reasonable and consistent allocation basis can be identified.
An intangible asset, with 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 pre-tax 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 cash-generating unit) is estimated to be less that its carrying amount, the carrying
amount of the asset (or cash-generating 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 re-valued 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 cash-generating 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 cash-generating 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 re-valued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
(p)
Critical accounting judgements and key sources of estimation uncertainty
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 on-going 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).
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
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.
(q)
Impairment of goodwill and intangible assets
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating 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 cash-generating 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.
(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.
(s)
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.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
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 short-term
receivables when recognition of interest would be material.
Loans and receivables include cash and cash equivalents. Cash and short-term deposits in the balance sheet comprise cash
at bank and in hand and short-term 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:
• significant financial difficulty 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 re-organisation.
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.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
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.
De-recognition 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 de-recognition 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.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
De-recognition of financial liabilities
The Group de-recognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they
expire.
(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.
(u)
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).
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
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.
(v)
Share-based payment transactions
Equity-settled share-based 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 market-based vesting conditions. The fair value is determined by using the Black-
Scholes model. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in
Note 24.
The fair value determined at the grant date of the equity-settled shared-based payments is expensed on a straight-line 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
market-based 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)
(w)
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.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
2
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:
• 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
Segment revenues and results
2015
Revenue
External sales
Total Revenue
Registry
$ 000's
RSP
$ 000's
Registrar
$ 000’s
Elimination
$ 000's
Total
$ 000's
3,282
3,282
2,606
2,606
1,028
1,028
(592)
(592)
6,324
6,324
Operating EBITDA
3,292*
(8,118)**
(674)
-
(5,500)
Depreciation and amortisation
Finance revenue
Finance costs
Loss on disposal of tangible
assets
Share based payment expense
Share of loss of joint venture
Profit before tax
Income tax
Profit after tax
(1,218)
82
(18)
(161)
(3,235)
1
(10,049)
52
(9,997)
*Included within Operating EBITDA is Profit on gTLD auctions of $7,943k allocated to the Registry segment and loss on
withdrawl of gTLD applications $148k allocated to RSP.
**Marketing expenses and Cost of Sales for certain geographical gTLDs are included within the operating loss allocated to the
RSP segment.
Inter-segment sales are charged at prevailing market prices.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
2014
Revenue
External sales
Total Revenue
Registry
$ 000's
RSP
$ 000's
Registrar
$ 000’s
Elimination
$ 000's
Total
$ 000's
298
298
1,388
3,728
236
236
-
(2,340)
1,922
1,922
Operating profit / (loss)
32,595*
(9,327)
(210)
109
23,167
Depreciation and
amortisation
Finance revenue
Finance costs
Profit on disposal of
subsidiaries
Share based payment
expense
Share of loss of joint
venture
Profit before tax
Income tax
Profit after tax
(496)
62
(76)
21
(612)
(9)
22,057
-
22,057
*Included within Operating EBITDA is Profit on disposal of intangible assets of $7,048 and Profit on gTLD auctions of
$33,721k 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.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
Other segment information
Registry
RSP
Registrar
Other
Total
Segment assets
2015
$ 000’s
72,267
9,446
5,360
928
2014
$ 000’s
75,939
21,553
3,016
833
88,001
101,341
Depreciation and
amortisation
2015
2014
$ 000’s
$ 000’s
61
558
211
-
830
9
279
208
-
496
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.
Geographical information
The Group’s information about its segment assets by geographic location are detailed below.
Revenue from external
customers
Non-current assets
2015
$ 000’s
2,092
331
2,434
1,143
-
324
6,324
2014
$ 000’s
104
373
1,136
194
-
115
1,922
2015
$ 000’s
43,745
640
14
333
181
3,678
48,591
2014
$ 000’s
45,651
1,800
359
370
-
2,931
51,111
British Virgin Islands
Ireland
United Kingdom
Germany
Hungary
USA
Total
Included in revenues arising from the RSP segment are revenues of $589k (2014: $800k), 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 2015 or 2014.
Revenue for the Company is all derived from the Registry segment.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
3
Cost of sales
Cost of sales have been presented to reflect the costs associated with ‘on-going’ expenditure and ‘forfeited’ expenditure.
On-going ‘current’ employee costs reflect the cost associated with current employees defined as employees retained by the
group as at 31 December 2015. Other on-going cost represent costs incurred in 2015, whether contractual or not, for which
costs are expected to incur in 2016.
Forfeited ‘former’ employee costs reflect the costs associated with former employees defined as employees that were not
retained by the group as at 31 December 2015. Other forfeited cost of sales represent costs incurred in 2015, whether
contractual or not, for which costs are not expected to incur in 2016. Such forfeited costs are due to the Group’s
restructuring in the year.
Ongoing cost of sales
Current employees*
Other ongoing cost of sales
Forfeited cost of sales
Former employees*
Other forfeited cost of sales
2015
$ 000's
1,279
3,929
5,208
714
301
1,015
Group
2014
$ 000's
-
4,659
4,659
-
-
-
Total
6,223
4,659
*As of 31 December 2015
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
4
Operating expenses
Operating expenses have been presented to reflect the costs associated with ‘on-going’ expenditure and ‘forfeited’
expenditure.
On-going ‘current’ employee costs reflect the cost associated with current employees defined as employees retained by the
group as at 31 December 2015. Other on-going cost represent costs incurred in 2015, whether contractual or not, for which
costs are expected to incur in 2016.
Forfeited ‘former’ employee costs reflect the costs associated with former employees defined as employees that were not
retained by the group as at 31 December 2015. Other forfeited operating expenses represent costs incurred in 2015, whether
contractual or not, for which costs are not expected to incur in 2016. Such forfeited costs are due to the Group’s
restructuring in the year.
Ongoing operating expenses
Current employees*
Current directors*
Other ongoing operating expenses
Forfeited operating expenses
Former employees*
Former directors*
Other forfeited operating expenses
2015
$ 000's
2,637
1,743
6,123
Group
2014
$ 000's
3,408
1,290
8,444
10,503
13,142
951
428
274
1,653
-
-
-
-
Total
12,156
13,142
*As of 31 December 2015
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
5
Operating EBITDA
Operating EBITDA is arrived at after charging:
Group
2014
$ 000's
2015
$ 000's
Company
2015
$ 000's
2014
$ 000's
Auditors’ remuneration – current
year auditors
Audit of these financial
statements
Audit of the financial statements
of subsidiaries
Fees in relation to re-listing
Tax compliance
Other services
71
36
-
5
4
74
36
51
20
41
Directors’ emoluments – fees and
salaries
2,172
1,291
Operating lease rentals
770
467
69
-
-
-
-
226
-
74
-
51
-
38
91
-
Foreign exchange loss
(1,240)
(1,427)
(2,781)
(2,838)
6
Foreign exchange loss
Foreign exchange gain / (loss) on
trading activities
Foreign exchange loss on inter
company balances
2015
$ 000's
Group
2014
$ 000's
Company
2015
$ 000's
2014
$ 000's
1,233
1,188
(204)
(183)
(2,473)
(2,615)
(2,577)
(2,655)
Total
(1,240)
(1,427)
(2,781)
(2,838)
mmx.co
59
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
7
Employee information (Excluding Directors)
Staff costs comprised
Wages and salaries
Current*
Former*
Share based payments expense
Total
*As of 31 December 2015
Monthly average number of
employees
Administration
Finance
Sales & Marketing
Engineering
Total
Group
2014
$ 000's
3,408
-
44
3,452
2015
$ 000's
3,916
1,665
1,539
7,120
13
5
9
21
48
10
3
6
17
36
Company
2015
$ 000's
2014
$ 000's
-
-
-
-
-
-
-
-
-
-
-
44
44
-
-
-
-
-
mmx.co
60
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
8
Directors’ emoluments
2015
$ 000's
Group
2014
$ 000's
Company
2015
$ 000's
2014
$ 000's
Directors’ emoluments
2,172
1,290
1,597
567
3,769
1,857
226
96
322
Share based payments expense
(Note 24)
Total
2015
Executive Directors
Frederick Krueger (#)
Antony Van Couvering
Michael Salazar
Caspar Veltheim
Non-Executive Directors
Guy Elliott (#)
David Weill (#)
Keith Teare (#)
Elliot Noss
Total
91
567
658
Group
Total
$ 000's
428
726
532
260
21
21
92
92
Salaries & Fees
$ 000's
Bonus*
$ 000's
Benefits in
kind
$ 000s
149
373
330
152
21
21
92
92
260
325
152
88
-
-
-
-
19
28
50
20
-
-
-
-
1,230
825
117
2,172
(#): These Directors were not employed for the full 2015 financial period.
(*): Bonuses relate to 2014 performace.
mmx.co
61
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
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 (#)
Total
Salaries & Fees
$ 000's
Bonus
$ 000's
Benefits in
Kind
$ 000s
300
300
260
138
3
52
36
50
50
18
45
-
-
-
-
-
38
-
-
-
-
Group
Total
$ 000's
350
350
316
183
3
52
36
1,089
163
38
1,290
(#): These Directors were not employed for the full 2014 financial period.
No pension benefits were provided for any Director in 2015 or 2014.
Details of Directors’ share options exercised have been disclosed in note 24 to the accounts.
mmx.co
62
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
8
Directors’ emoluments (continued)
2015
Executive Directors
Frederick Krueger (#)
Antony Van Couvering
Michael Salazar
Keith Teare
Caspar Veltheim
Non-Executive Directors
Guy Elliott (#)
David Weill (#)
Keith Teare (#)
Elliot Noss
Total
Salaries & Fees
$ 000's
Bonus
$ 000's
Benefits in
kind
$ 000’s
Company
Total
$ 000's
-
-
-
-
-
21
21
92
92
226
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21
21
92
92
226
(#): These Directors were not employed for the full 2015 financial period.
2014
Executive Directors
Frederick Krueger
Antony Van Couvering
Michael Salazar
Caspar Veltheim
Non-Executive Directors
Guy Elliott (#)
Keith Teare
Elliot Noss (#)
Total
Salaries & Fees
$ 000's
Bonus
$ 000's
Benefits in
kind
$ 000’s
Company
Total
$ 000's
-
-
-
-
3
52
36
91
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
52
36
91
mmx.co
63
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
8
Directors’ emoluments (continued)
(#): These Directors were not employed for 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.
9
Finance revenue
Bank interest
Other interest received
Total
2015
$ 000's
82
-
82
Group
2014
$ 000's
57
5
62
Company
2015
$ 000's
2014
$ 000's
82
-
82
57
-
57
Finance revenues relate to assets classified as loans and receivables.
10
Finance costs
Interest on obligations under finance
lease
2015
$ 000's
Group
2014
$ 000's
Company
2015
$ 000's
2014
$ 000's
18
76
-
-
mmx.co
64
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
11
Income tax expense - Group
Current tax credit
Deferred tax
2015
$ 000's
2014
$ 000's
52
-
52
-
-
-
The charge for the current year can be reconciled to the loss per the Group statement of comprehensive income as follows:
(Loss) / Profit before tax on continuing operations
Tax at the BVI tax rate of 0%
Research and development tax credit
Income tax expense - Company
Current tax
Deferred tax
2015
$ 000's
2014
$ 000's
(10,049)
25,196
-
52
52
-
-
2015
$ 000's
2014
$ 000's
-
-
-
-
-
-
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%
2015
$ 000's
2014
$ 000's
376
33,176
-
-
-
-
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 $12,946k (2014: $5,314k) in the USA, $2,161k (2014: $1,852k) in Germany, $5,937k (2014: $3,169k) in
Ireland and $6,631k (2014: $6,331k) in the United Kingdom.
mmx.co
65
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
12
Dividends
No dividends were paid or proposed by the Directors (2014: $Nil).
13
(Loss) / Earnings per share
(Loss) / Earnings
(Loss) / Earnings for the purpose of basic (loss) / earnings per share being net
(loss) / profit attributable to owners of the Company
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
(Loss) / Earnings per share
Basic
Diluted
2015
$ 000's
2014
$ 000's
(9,978)
22,287
2015
million
2014
million
829.34
815.01
-
19.07
829.34
834.08
2015
cent
(1.20)
2014
cent
2.73
(1.20)
2.67
In 2015, all potential shares were anti-dilutive as the group was in a loss making position. As a result, diluted loss per share
for the year ended 31 December 2015 is disclosed at the same value as basic loss per share. Potential dilutive shares
comprise of share options as disclosed in note 24.
mmx.co
66
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
14
Goodwill
Cost
At 1 January 2014
Exchange differences
As at 31 December 2014
Exchange differences
As at 31 December 2015
Group
$ 000's
2,983
(155)
2,828
-
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 2015, 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 pre-tax 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 five years and extrapolates cash flows into perpetuity based on an estimated growth rate of 5% (2014: 3%). The growth
rate of 5% is appropriate to the new gTLD market that the Group operates in. The rate used to discount the forecast cash
flows is 9% (2014: 9%).
The Group has carried out sensitivity analysis on the growth rate and discount rate. A 2% change in either rate would not give
any indication of impairment.
mmx.co
67
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
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
Cost
At 1 January 2014
Additions
Transfer from other long
terms assets
Disposals
Exchange differences
At 31 December 2014
Additions
Transfer from other long
terms assets
Transfer from assets under
construction
Exchange differences
2,186
42,889
3,885
(9,897)
-
39,063
500
551
-
(36)
At 31 December 2015
40,078
Accumulated Amortization
At 1 January 2014
Charge for the year
At 31 December 2014
Charge for the year
Exchange differences
At 31 December 2015
Carrying amount
At 31 December 2015
At 31 December 2014
-
-
-
-
-
-
40,078
39,063
181
1,552
-
-
(310)
1,423
88
-
666
(107)
2,070
-
(199)
(199)
(677)
19
(857)
1,213
1,224
-
148
-
-
-
148
193
43
-
(74)
-
162
2,560
44,632
3,885
(9,971)
(310)
40,796
541
10
1,139
-
(666)
(23)
-
-
-
-
-
-
-
-
-
-
(1)
171
-
-
-
(171)
-
551
-
(167)
42,319
-
(199)
(199)
(848)
19
(171)
(1,028)
-
41,291
148
162
40,597
mmx.co
68
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
15
Intangible assets (continued)
Company
generic
Top Level
Domains
$ 000's
Software &
development
costs
$ 000’s
Other
$ 000's
Cost
At 1 January 2014
Additions
Transfers from other long term
assets
Disposals
At 31 December 2014
Additions
Transfers from other long term
assets
Exchange differences
2,186
42,889
3,515
(9,896)
38,694
500
185
-
At 31 December 2015
39,379
Accumulated Amortization
At 1 January 2014
Charge for the year
At 31 December 2014
Charge for the year
At 31 December 2015
Carrying amount
At 31 December 2015
At 31 December 2014
-
-
-
-
-
39,379
38,694
-
51
-
-
51
-
-
-
51
-
(9)
(9)
(15)
(24)
27
42
131
43
-
(75)
99
-
-
-
99
-
-
-
(42)
(42)
57
99
Total
$ 000's
2,317
42,983
3,515
(9,971)
38,844
500
185
-
39,529
-
(9)
(9)
(57)
(66)
39,463
38,835
mmx.co
69
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
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 long-term 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 is more than one applicant to ICANN for the same generic Top Level
Domain.
The disposal in 2014 reflects 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
The Directors carried out an impairment review as at 31 December 2015 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 pre-tax 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 5% (2014: 3%). The rate
used to discount the forecast cash flow is 9% (2014: 9%).
The group has carried out sensitivity analysis on the growth rate and discount rate. A 2% change in either rates would
indicate an impairment of:
• Growth rate decreased by 2% - $750k (2014: nil)
• Discount rate increased by 2% - $568k (2014: nil)
Software and development costs
The Group has reviewed the useful life of software and development costs as a result of the Group’s decision to outsource
certain back-end technical functions. As a result, the revised useful life of this asset is estimated at eight months commencing
November 2015 and has resulted in an additional amortisation charge of $388k in the current year. The additional expected
amortization charge in 2016 for these assets is expected to be $644k.
mmx.co
70
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
16
Fixtures & equipment
Group
Fixtures & equipment
$ 000's
Cost
At 1 January 2014
Additions
Exchange differences
At 31 December 2014
Additions
Disposal
Exchange differences
At 31 December 2015
Depreciation
At 1 January 2014
Depreciation charge for the period
Exchange differences
At 31 December 2014
Depreciation charge for the period
Disposal
Exchange differences
At 31 December 2015
Carrying amount
At 31 December 2015
At 31 December 2014
898
398
(100)
1,196
108
(855)
(61)
388
(67)
(279)
21
(325)
(367)
476
17
(199)
189
871
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 $nil (2014: $267k).
mmx.co
71
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
17
Investment in subsidiaries
Shares in group undertakings company
Cost
At the beginning of the year
Movement in the year
Disposals
At 31 December
Company
2015
$ 000's
2014
$ 000's
3,548
641*
-
3,550
(2)
4,189
3,548
*The movement in the year relates to the net share option expense attributable to subsidiaries.
Details of the Company’s subsidiaries are as follows:
Name
Place of Incorporation
(or registration and
operation)
Principal activity Proportion of
ownership
interest (%)
Proportion of
voting power (%)
Minds + Machines US, Inc. (DE)
US
Holding company
Minds + Machines LLC
Minds + Machines LLC (FL)
Bayern Connect GmbH
Minds and Machines GmbH
Minds + Machines Ltd (Ireland)
US
US
Germany
Germany
Ireland
Minds and Machines Ltd (UK)
England & Wales
Minds + Machines Registrar Ltd (IE)
Ireland
Minds and Machines Registrar UK Ltd
England and Wales
Emerald Names Limited
Dot Wedding Registry Limited
Minds + Machines Hungary (1)
Emerald Names Inc (1)
Boston TLD Management LLC (1)
Dot Law Inc (1)
(1) Subsidiaries incorporated in the year
Notes:
Ireland
Ireland
Hungary
US
US
US
Registrar
Registry
Registry
Registry
RSP
RSP
Registrar
Registrar
Dormant
Dormant
Registry
Registry
Registry
Registrar
100
100
100
80
80
100
100
100
100
100
100
100
100
99
100
100
100
100
100
100
100
100
100
100
100
100
100
100
99
100
• Minds + Machines LLC (CA), Minds + Machines LLC (FL) and Dot Law, Inc. are direct subsidiaries of Minds + Machines
US, Inc (DE)
• Minds + Machines Registrar Limited (Ireland) is a direct subsidiary of Minds + Machines Ltd (Ireland).
mmx.co
72
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
18
Interest in joint venture
The group has a 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 second-level 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
- Non-current
- Current
Liabilities
- Current
2015
$ 000's
379
470
849
Group
2014
$ 000's
379
478
857
(14)
(24)
Share of interest in assets / liabilities
835
833
- Revenue
- Cost of sales
- Expenses
Profit / (loss) after income tax
29
(25)
(3)
1
(9)
(9)
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 (2014: $911k) in the Company financial statements.
mmx.co
73
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
19 Other long-term assets
Restricted cash
Other long-term receivables
Total
Group and Company
2015
$ 000’s
2,153
1,295
3,448
2014
$ 000’s
2,837
3,145
5,982
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, long-term 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.
In 2015, 7 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 2015 amounts to $1,295k. Due to the withdrawal on several
applications deposits to fund letters of credit decreased to $2,153k.
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 long-term 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, 6 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 $7,943k (2014: $33,721k). One application was 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 $148k (2014: $296k).
Restricted cash is interest bearing and is therefore stated at fair value. Other long-term receivables are stated at amortised
cost.
mmx.co
74
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
20 Trade and other receivables
Current trade and other receivables
Trade receivables
Other receivables
Prepayments
Balances due from subsidiaries
Due from joint ventures
Group
Company
2015
$ 000's
2014
$ 000's
2015
$ 000's
2014
$ 000's
2,791
3,388
1,908
916
1,046
-
6
669
328
-
49
-
108
28
62
35
37,234
39,199
6
49
Total
4,759
4,434
39,245
39,384
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 2016. The difference between the
carrying value and the fair value of the loan at the reporting date is deemed to be immaterial.
Trade receivables - Group
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
61-90 days
91 days and over
Total
Movements in doubtful debts
Balance at the beginning of the period
Movement in the year
Exchange differences
Balance at the end of the period
2015
$ 000’s
-
210
514
951
1,675
53
(38)
-
15
2014
$ 000’s
-
28
5
103
136
53
-
-
53
Included in the ageing of past due but not impaired receivables of 91 days and over amounts of $254k and $244k receivable
from two customers were received after the year end.
mmx.co
75
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
Trade receivables - Company
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
61-90 days
91 days and over
Total
Movement in doubtful debts:
Balance at the beginning of the period
Movement in the year
Exchange differences
Balance at the end of the period
2015
$ 000’s
-
194
502
42
738
-
-
-
-
2014
$ 000’s
-
-
-
-
-
-
-
-
-
Included in the ageing of past due but not impaired receivables of 91 days and over an amounts of $244k receivable from
one customer was received after the year end.
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Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
21
Trade and other payables
Trade payables
Due to joint ventures
Taxation liabilities
Other liabilities
Deferred revenue
Accruals
Total
Group
2014
$ 000's
394
101
575
1,534
3,159
551
6,314
2015
$ 000's
211
18
206
2
5,613
2,922
8,972
Company
2015
$ 000's
2014
$ 000's
114
13
-
-
2,225
1,500
3,852
111
96
-
1,492
406
96
2,201
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
Less: Future finance charges
Present value of lease obligation
Minimum lease payments
2015
$ 000's
2014
$ 000's
2
2
-
2
363
363
(21)
342
The average lease term is 2 years. For the year ended 31 December 2015, the effective borrowing rate was 13.76% (2014:
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.
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77
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
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)
As at 1 January 2014
650,573,522
30 January 2014 – cash on issue of shares
175,000,000
19.89/12
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
Shares acquired by the company:
738,299
350,000
350,000
350,000
1,622,664
4,000,000
835,984,485
6.7/4
18.1/11
15.4/9
15.8/9
15.4/9
6.5/4
6.8/4
Share repurchase
(68,864,800)
13/8.6
As at 31 December 2015
767,119,685
Total
$ 000
49,481
34,801
201
134
54
55
54
106
273
877
(2,293)
82,866
(9,050)
73,816
*The company purchased 68,864,800 shares of which 42,864,800 were cancelled at the year end. The balance of
26,000,000 were temporarily held as treasury shares due to the time required to implement the cancellation and were
cancelled after the year end.
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78
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
24
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
2015
$ 000's
3,223
12
3,235
2014
$ 000's
114
498
612
The company has the following share option schemes in place:
a) Directors and Employees Share Option Scheme – this scheme was previously open to all directors and
employees of the scheme. Current employees are now enrolled under a new ‘Restricted Share Option’ (RSU)
scheme (see below) whilst this current scheme is only open to Directors and certain senior executives.
b) Restricted Share Option (‘RSU’) scheme – the group opened a new scheme for all employees of the group with
the exclusion of Directors and certain senior executives.
Directors and Employees Share Option Scheme
2015
2014
Number of
share options
Weighted average
exercise price
(cents / pence)
Number of share
options
Weighted average
exercise price (cents
/ pence)
Outstanding at the beginning of the year
23,712,500
9.5/6.4
43,138,847
10.3/6.3
Granted during the year
41,950,000
13.17/8.88
-
Forfeited during the year
(10,455,182)
12.06/8.14
(400,000)
Exercised during the year
Expired during the year
-
-
N/A
N/A
(18,676,347)*
(350,000)
Outstanding at the end of the year
55,207,318
11.78/7.95
23,712,500
-
15.3/9.8
9.6/6.2
14/9
9.9/6.4
Exercisable at the end of the year
34,353,056
10.69/7.21
19,007,178
9.9/6.4
*Included within the number of share options exercised during 2014 are 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 8.2 years (2014: 8.06 years). There
were 41,950,000 options granted in 2015. In 2014, there were no options granted. The aggregate of the estimated fair values
of the options granted under this scheme during 2015 is $3,311k.
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79
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
24
Share-based payment (continued)
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.
Directors and employee share option scheme – share options granted in the year:
Weighted average share price (cents/pence)
Weighted average exercise price
(cents/pence)
Expected volatility
Expected life
Risk-free rate
Expected dividend yield
2015
12.6/8.3
13.6/8.9
54.69%
10 years
2%
Nil
2014
N/A
N/A
N/A
N/A
N/A
N/A
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.
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80
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
24
Share-based payment (continued)
Restricted Share Option Scheme
2015
2014
Outstanding at the beginning of the
period
Granted during the period
Forfeited during the period
Number of
share options
-
16,500,000
(4,841,667)
Exercised during the period
(4,525,000)*
Expired during the period
-
Outstanding at the end of the period
7,133,333
Exercisable at the end of the period
770,833
Weighted
average
exercise price
(cents / pence)
Weighted
average
exercise price
(cents / pence)
Number of
share options
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*All share options exercised during under the Restricted Shared Option Scheme 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 $577k, of which $566k 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 $12k was expensed.
The weighted average contractual life of outstanding options at the end of the year is 1.68 years (2014: Nil). There were
16,500,000 options granted in 2015. In 2014, there were no options granted. The aggregate of the estimated fair values of
the share options granted under the RSU scheme during 2015 is $2,121k.
The general terms of the share options, under the RSU scheme, vest over 3 years (quarterly vesting, 1/12th of options vest
every quarter) and are exercisable over three years from the date of grant if the employee remains within the company, at a nil
exercise price.
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81
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
24
Share-based payment (continued)
Restricted Share Option Scheme – share options granted in the year:
Weighted average share price (cents/pence)
Weighted average exercise price (£)
Expected volatility
Expected life
Risk-free rate
Expected dividend yield
2015
2014
13.4/8.75
Nil
N/A
3 years
2%
Nil
N/A
N/A
N/A
N/A
N/A
N/A
The market price of the ordinary shares at 31 December 2015 was $0.12 / £0.08 (2014: $0.24 / £0.14) and the range during
the year was $0.11 / £0.07 to $0.16 / £ 0.11 (2014: $0.12 / £0.07 to $0.28 / £ 0.17).
Directors’ share options
Details of options for Directors’ who served during the year are as follows:
1 Jan 2015
Granted
Forfeited
Exercised
Expired 31 Dec 2015
Frederick Krueger (1)
5,000,000
10,500,000
(9,105,182)
Antony Van Couvering (2)
12,500,000
10,500,000
Michael Salazar (3)
1,250,000
7,250,000
Caspar Veltheim (4)
312,500
2,200,000
Guy Elliot
Keith Teare (5)
Elliott Noss (6)
David Weill
-
-
-
-
-
750,000
750,000
-
-
-
-
-
-
-
-
19,062,500
31,950,000
(9,105,182)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,394,818
23,000,000
8,500,000
2,512,500
-
750,000
750,000
-
41,907,318
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82
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
24
Share-based payment (continued)
(1) 5,000,000 options at the start of the year – exercise price – £0.04, exercisable from – 14 Nov 2007, expires on –
13 Nov 2014. 10,500,000 options granted in the year – exercise price for 2,130,000 options – £0.09, exercise
price for 8,370,000 options - £0.08, exercisable from 1 August 2014, expires on – 31 July 2024 (quarterly vesting
beginning 1 August 2014 of 1/12th of options). 2,625,000 share options outstanding at the end of the year relate to
share options that were granted in 2015.
(2) 2,626,347 options - exercise price – £0.04, exercisable from – 27 May 2009, expires on – 24 June 2014,
7,000,000 options exercise price - £0.09, exercisable from - 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.
10,500,000 options granted in the year – exercise price - £0.08, exercisable from 1 August 2014, expires on – 31
July 2024 (quarterly vesting beginning 1 August 2014 of 1/12th of options).
(3) 1,250,000 options -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). 7,250,000 options granted in the year – exercise price -
£0.08, exercisable from 1 August 2014, expires on – 31 July 2024 (quarterly vesting beginning 1 August 2014 of
1/12th of options).
(4) 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). 2,200,000 options granted in the year – exercise price -
£0.08, exercisable from 1 August 2014, expires on – 31 July 2024 (quarterly vesting beginning 1 August 2014 of
1/12th of options).
(5) 750,000 options granted in the year – exercise price - £0.08, exercisable from 1 August 2014, expires on – 31
July 2024 (quarterly vesting beginning 1 August 2014 of 1/12th of options).
(6) 750,000 options granted in the year – exercise price - £0.08, exercisable from 1 August 2014, expires on – 31
July 2024 (quarterly vesting beginning 1 August 2014 of 1/12th of options).
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 2015, the Company granted no warrants to subscribe for ordinary shares (2014: nil). As
at 31 December 2015 and 31 December 2014 the outstanding unexercised warrants in issue were;
Exercise Price
Expiry Date
Number of warrants
10p
6p
12p
15p
06 May 2019
3 June 2016
12 February 2026
19 March 2014
8,000,000
1,103,753
1,047,089
650,000
No warrants were exercised in the current year. During the year to 31 December 2014, 1,622,665 warrants were exercised at
an exercise price of $0.07 / £0.04.
mmx.co
83
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
25
Financial instruments
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 2014.
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
2015
$ 000’s
34,651
5,860
2014
$ 000’s
45,796
9,732
Other financial liabilities at amortised cost
213
2,372
Company
Financial assets
Cash and bank balances
Loans and receivables (including long term receivables)
Financial liabilities
2015
$ 000’s
23,990
41,357
2014
$ 000’s
26,952
3,001
Other financial liabilities at amortised cost
114
1,700
There are no material differences between the book values of financial instruments and their market values.
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84
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
25
Financial instruments (continued)
Financial risk management objectives
The Group and Company’s Finance function provides services to the business, co-ordinates 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 2015 and 2014, 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 currency 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
Assets
Sterling
USD
Euro
As at 31 December
2015
$ 000's
2014
$ 000's
159
35
19
213
268
1,771
333
2,372
2015
$ 000's
7,541
29,606
3,364
40,511
2014
$ 000's
5,738
47,922
1,868
55,528
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85
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
25
Financial instruments (continued)
Company
Liabilities
2015
$ 000's
2014
$ 000's
2015
$ 000's
Assets
2014
$ 000's
Sterling
USD
Euro
As at 31 December
-
114
-
114
-
1,700
-
1700
1,226
2,177
64,121
27,769
-
7
65,347
29,953
Foreign currency 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
Profit or loss (i)
Other equity (ii)
Pound Sterling impact
Euro impact
2015
$ 000s
(770)
-
(770)
2014
$ 000s
(550)
-
(550)
2015
$ 000s
(338)
2014
$ 000s
(154)
-
-
(338)
(154)
Company
Pound Sterling impact
Euro impact
Profit or loss (i)
Other equity
2015
$ 000s
(123)
(123)
2014
$ 000s
(218)
-
(218)
2015
$ 000s
-
-
2014
$ 000s
(1)
-
(1)
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86
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
25
Financial instruments (continued)
(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 year-end
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 interest-bearing
accounts.
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 long-term assets.
The credit risk on trade and other receivables is limited as the amount represents a pre-payment of revenue from a future
undertaking. The pre-payment 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 credit-ratings as determined
by international credit-rating agencies.
The credit risk on other long-term assets is limited as the total amount represents two components: deposits for the right to
secure a revenue-generating asset and restricted cash. The deposits for the right to secure revenue-generating 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 not-for-profit 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 high-credit rating as determined by international
credit-rating 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 do not hold any collateral as security.
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87
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
25
Financial instruments (continued)
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 long-term
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 2015.
The Group’s and Company’s remaining contractual maturity for its non-derivate financial liabilities with agreed repayment
periods are:
31 December 2015
Non-interest bearing:
Trade and other payables
Fixed interest rate
instruments:
Obligations under finance
lease
Weighted
average
effective
interest rate
Within 1 year
$ 000s
213
2
215
13.76%
Group
1 – 5
years
$ 000s
-
-
-
Company
Within 1 year
$ 000s
1 – 5
years
$ 000s
114
-
114
-
-
-
88
mmx.co
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
25
Financial instruments (continued)
31 December 2014
Non-interest bearing:
Trade and other payables
Fixed interest rate
instruments:
Obligations under finance
lease
Weighted
average
effective
interest rate
Within 1 year
$ 000s
Group
1 – 5
years
$ 000s
Company
Within 1 year
$ 000s
1 – 5
years
$ 000s
13.76%
2,605
342
2,947
-
-
-
1,700
-
1,700
-
-
-
The Group and Company’s non-derivitave financial assets mature within one year.
The Group and Company had no derivative financial instruments as at 31 December 2015 and at 31 December 2014
26
Commitments
The group as a lessee
Lease payments recognised under operating leases recognised as an
expense in the year
2015
$ 000’s
2014
$ 000’s
770
467
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89
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
26
Commitments (continued)
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-
cancellable operating leases, which fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
2015
$ 000’s
423
312
-
735
2014
$ 000’s
436
657
-
1,093
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 2015 and 31 December 2014, the Group has no capital commitments.
As at 31 December 2015 and 31 December 2014, the Company had no lease or capital commitments.
27
Related party transactions – Group
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 subsidiaries and associates are disclosed in note 28.
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 year-end 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
2015
$ 000’s
2014
$ 000’s
11
(14)
49
(58)
(4)
(34)
44
(58)
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90
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
27
Related party transactions – Group (continued)
Other
At the balance sheet date, an amount of $61k (2014: $61k) was due from Frederick Krueger in relation to shares previously
issued.
In 2014, the Group entered into an agreement with Tucows, Inc. to partner in anticipated auctions for .store, .tech and .group
top-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 2015, the Group invoiced nil (2014: $24k) to Tucows, Inc. and was invoiced $27k (2014: $84k) by Tucows.
The net receivable from Tucows at year end was $36k (2014: $50k).
Remuneration of Key Management Personnel
The remuneration of the Executive Directors, who are the key management personnel of the Group, is set out in note 8.
28
Related party transactions – Company
Transactions between the Company and its subsidiaries and associates are disclosed below.
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 and services from
Minds and Machines LLC
Minds + Machines Limited (IE)
Minds and Machines Limited (UK)
2015
$ 000’s
1,113
214
115
2014
$ 000’s
1,024
950
111
mmx.co
91
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
28
Related party transactions – Company (continued)
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
Minds + Machines Limited (IE)
Minds + Machines Registrar Limited (IE)
Minds and Machines Limited (UK)
Minds and Machines Registrar UK Limited
Emerald Names, Inc
Minds + Machines (FL)
Minds + Machines, Inc.
Minds + Machines Hungary
2015
$ 000’s
13,240
1,032
670
2014
$ 000’s
6,984
1,141
741
11,460
21,332
-
10,642
2,002
6,997
3
5
(40)
5
218
1
-
-
-
-
During the year the Company also sold second level domain names to its subsidiaries and had trade receivable balances
outstanding at the year end:
Company
Minds and Machines LLC
Minds + Machines Registrar Limited (IE)
Second level sale of
domains
2015
$ 000s
2014
$ 000s
1,184
151
-
56
Trade receivable
outstanding
2015
$ 000s
2014
$ 000s
1,169
-
-
51
mmx.co
92
Minds + Machines Group Limited | Minds + Machines Group Limited | 31 December 2015
Notes to Financial Statements
For the year ended 31 December 2015 (continued)
28
Related party transactions – Company (continued)
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 year-end 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
2015
$ 000’s
2014
$ 000’s
11
(14)
49
(58)
(4)
(34)
44
(58)
At the balance sheet date, an amount of $61k (2014: $61k) was due from Frederick Krueger in relation to shares previously
issued.
The Company also sells second level domain names to Tucows, Inc. In the year, the Company invoiced nil (2014: $9k) to
Tucows, Inc. The net balance receivable from Tucows. Inc at the year end is nil (2014: $2k).
Remuneration of Key Management Personnel
The remuneration of the Executive Directors, who are the key management personnel of the Group, is set out in note 7 and
share options issued set out in note 24.
29
Post Balance Sheet Events
Subsequent to the year end, to 26 April 2016 the Group, under its share buy back programme, has purchased a further
9,733,853 shares at a value of £730k ($1,053k).
In April 2016, MMX reached an agreement with Nominet UK to take over the technical back-end registry functions for the top
level domains within the Group’s portfolio, in addition MMX also signed an agreement with Uniregistrar Corp part of
‘Uniregistry’ to take over MMX’s registrar operation.
mmx.co
93
Corporate Information
Registered number
1412814 registered in British Virgin Islands
Directors
Registered Office
Website
Auditor
Solicitors
Nominated Advisor
and Broker
Registrars
Principal Bankers
Guy Elliott – Non Executive Chairman
Toby Hall – Chief Executive Officer
Michael Salazar – Chief Operating Officer and Chief Finance Officer
Henry Turcan – Non Executive Director
Craigmuir Chambers
Road Town, Tortola
British Virgin Islands VG 1110
www.mmx.co/about/overview
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
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
Silicon Valley Bank
15260 Ventura Blvd #1800
Sherman Oaks, CA 91403
United States of America
HSBC Bank plc
8 Canada Square
London
E14 5HQ
United Kingdom
94