Mode Global Holdings PLC
Annual Report 2020

Plain-text annual report

2020 Annual Report Mode (LSE:MODE) 02 Introduction Introduction 03 Contents 01 02 03 04 05 06 07 08 09 10 Company Information Strategic Report Business Review Financial Review Strategy in 2021 Approach to Risk Corporate Governance Directors’ Report Directors’ Remuneration Report Independent Auditor’s Report To The Members Of Mode Global Holdings PLC Group Financial Statements Notes to the Group Financial Statements Company Financial Statements Notes to the Company Financial Statements 05 06 06 20 22 27 33 40 45 47 56 62 85 87 Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.04 Introduction Introduction 05 We are a digitally-native com- pany, on a quest to create the world’s most disruptive ecosys- tem, where exchanging value and creating wealth is seamless for all. To accomplish this, today we are embracing the power of game-changing technologies, Bitcoin and Open Banking. - From every employee, Executive and Board Member at Mode. Company Information Company Information Directors: Jonathan Rowland - (Chairman) Richard Morecroft Rita Liu Gary Wilkinson Ryan Moore Registered office: Finsgate, 5-7 Cranwood Street, London, EC1V 9EE Corporate Brokers: Peterhouse Capital 3rd Floor, 80 Cheapside, London, EC2V 6EE Registrar: Neville Registrars Neville House, Steelpark Road, Halesowen, B62 8HD Bankers: Auditors: Jeffreys Henry LLP Finsgate 5-7 Cranwood Street London, EC1V 9EE Solicitors: Locke Lord (UK) LLP Second Floor, 201 Bishopsgate, London, EC2M 3AB Company Secretary: Nathalie Hoon 5-7 Cranwood Street London, EC1V 9EE Company Number: 12794676 Website: https://www.modeplc.com/ National Westminster bank Plc 250 Bishopsgate, London, EC2M 4AA For all enquiries, please contact: info@modeplc.com Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Annual Report. For the year ended in XX MONTH XXX.06 Strategic Report Strategic Report 07 Business Review Our Mission Mode is a Fintech Group listed on the London Stock Exchange (LSE) Main Market. Born in London in 2019 by a group of entre- preneurs and financial professionals, Mode was set up to “challenge the challengers” and build a disruptive, digitally-native financial ecosystem, where exchanging value and creating wealth can be truly seamless and easy for all. • Over the last decade there have been nu- merous advancements in Fintech that have aimed to transform the way we use finan- cial products today. However, it is clear that the core infrastructure and technology that powers these systems is still reliant on inefficient financial intermediaries that create friction and take a cut out of trans- actions, increasing the cost for consumers. These inefficiencies have paved the way for the development of technological pro- tocols promoting efficiency, transparency and democratisation in financial services – Bitcoin and Open Banking. We believe that Bitcoin and Open Banking have the ability to truly transform financial services, as they: • Offer access to a decentralised finan- cial system whose store of value tech- nology, Bitcoin, is digitally codified and whose supply cannot be manipulated. Bitcoin’s characteristics are unique in today’s world, and it is enabling people to move away from traditional, opaque investment products offering all-time- low returns to transparent, technolo- gy-powered, global investments with Business Review The Team Directors Jonathan Rowland Ryan Moore Richard Morecroft Chairman Director Director Rita Liu Director Gary Wilkinson Director Executive Team high rewards, which will become the store of value asset within our digital- ly-native economy. Facilitate a cheaper, safer and smart- er way to exchange value between people and businesses. Thanks to Open Banking, we are able to transition from slow, fragmented and expensive pay- ments networks to real-time, data-en- riched and cheaper bank-to-bank payments with instant authorisation and settlement. As a result, we can eliminate the need for card networks and card payments once and for all, and enable seamless transactions, in traditional and digital currency. At Mode, our mission is to spearhead these developments and help accelerate the world’s transition to a truly digitally-native world, where exchanging value and creat- ing wealth become seamless for all. We are embracing the power of Bitcoin and Open Banking to build products and services that deliver value and efficiency to all par- ticipants in the financial system. Ryan Moore Rita Liu Richard Morecroft Jonathan Conway Chief Executive Officer Commercial Operations Technology Janis Legler Ariane Murphy Nathalie Hoon Richard Stones Shelley Schachter-Cahm Product Investor Relations Legal Finance Compliance Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.08 Strategic Report Strategic Report 09 2020 Highlights in a Snapshot / January / July / October / December Launch of Mode App Minimum Viable Product (MVP) Launch of free and in- stant Open Banking top- ups feature Mode IPO (£7.5m raised) – London Stock Exchange Main Market listing Adoption of Bitcoin as treasury reserve asset Mode no #2 in the App Store 1,500% surge in Mode App trading volumes (vs. August 2020) / April / August Introduction of Bitcoin Jar (5% APY on Bitcoin) Appointment of Rita Liu as CCO Launch of free and in- stant Bitcoin transfers / November Purchase of remain- ing stake in payments subsidiary 950% increase in Mode App trading volumes (vs. August 2020) Mode Global Holdings Annual Report. For the year ended in XX MONTH XXX.Mode Global Holdings Annual Report. For the year ended in XX MONTH XXX.10 Strategic Report Strategic Report 11 2020 Highlights Explained Covid-19 caused unprecedented disruption to people and businesses around the world in 2020. Within the UK financial services sector, we saw an acceleration in the ap- petite for alternative investment products generating above-average returns such as Bitcoin, which offers scarcity and resist- ance to inflation in times of unprecedented quantitative easing. At Mode, we were able to take advantage of this opportunity and prove that our business model will have a strong future in the post-Covid-19 world. It also became clear that with the extraor- dinary shift to digital in every aspect of business, including advertising, loyalty and payments, our upcoming payments solu- tion was more relevant than ever, and will have the potential to reach high levels of adoption, as businesses look for new ways to boost their e-commerce engagement efforts in our new digital-first world. Additionally, our capacity to quickly adapt to the changes brought about by the pandemic and our use of smart modern technology enabled us to embrace remote working and ensured business continuity as well as business growth. We were able to successfully execute our plans for 2020 and reached the following key milestones: January – Launch of Mode App MVP In January 2020, we officially launched the iOS Minimum Viable Product (MVP) of our Mode app on the App Store, which was in a testing phase until the end of the summer of 2020. The launch marked the beginning of our journey to become the go-to finan- cial app for growing wealth and spending smarter, reaching our first 1,000 downloads one month after launch. April – Introduction of the Bitcoin Jar At the start of Q2, we rolled out our new interest-generating product for Bitcoin within the app – the Bitcoin Jar. Through the Bitcoin Jar, customers were able to earn a reward rate on their Bitcoin holdings and receive their payments weekly. July – Launch of Open Banking top- ups Looking for new ways to improve the cus- tomer experience and reduce money trans- fer friction, in July we became one of the first companies in the cryptocurrency space to introduce Open Banking top-ups, allow- ing Mode customers to top up their account instantly and seamlessly from high-street banking apps without leaving the Mode app or having to enter any details. August – Appointment of ex-Alipay executive Rita Liu as Chief Commer- cial Officer and introduction of in- stant Bitcoin transfers In August, we announced the appointment of ex-Alipay UK CEO Rita Liu as Mode’s Chief Commercial Officer, serving as a Director on the board. This was an excit- ing addition to the team as Rita played an instrumental role in building Alipay’s oper- ations in Europe, essential for the expan- sion of our business-focused arm, Mode for Business. To help us turn Mode into a one-stop shop for easily managing, buying, selling and transferring Bitcoin without cost, in August we also introduced free and instant Bitcoin transfers for Mode customers. This ena- bles Mode customers to send and receive Bitcoin to and from other customers, any- time, anywhere, for free (without paying for Bitcoin blockchain fees). demonstrate our commitment to underpin the business’ future strategy and support our long-term mission of seamlessly con- necting consumers and businesses. November - 950% increase in app trading volumes Bitcoin’s price rallied month on month from August to November, gaining as much as 75%, which resulted in record breaking trad- ing volumes and assets under custody for Mode. Mode app customers traded 950% more Bitcoin in November compared to August and assets under custody increased by 210%. December – Ranked no #2 in the App Store and hit record trading volume In December, our numbers grew further allowing us to hit our yearly trading volumes record, 1,500% surge compared to August’s numbers. We also reached a record high for active app customers, leading us to No2 in the UK App Store’s finance category and being ranked above all high-street banks in the UK. Bitcoin breaking its 2020 all time high record of $20,000 attracted many first-time Bitcoin investors looking for a safe and easy way to get involved in crypto assets. October – Mode’s IPO October marked a historical moment for Mode as we became one of the world’s first companies with a consumer-facing Bitcoin offering to become publicly listed. By conducting an IPO on the London Stock Exchange Main Market – one of the most reputable stock exchanges in the world – we sent a strong message of longevity and credibility to the world. That same month, we announced that we adopted Bitcoin as a treasury reserve asset, allocating up to 10% of our cash reserves to purchase Bitcoin. We made this decision to demonstrate our endorsement of the po- tential of Bitcoin as a modern, reliable store of value, and to diversify risk for our inves- tors at a time when extraordinary monetary and fiscal measures could impact the value of country-backed currencies. November - Purchase of remaining stake in payments subsidiary In November, Mode officially announced that it had bought-out the 45% minority interest in one of its operating subsidiaries - JGOO Limited (operating as part of Mode for Business) - from Pure NZ Gateway Ltd. The purchase provided us with complete ownership of the technology and rights associated with the business, as well as a direct relationship with our preferred part- ners, technology giants Tencent and Alipay. By securing this technology and taking full control of the business, we were able to Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 12 Strategic Report Strategic Report 13 Mode App: Key Performance Metrics The Key Performance Indicators (KPIs) displayed below were used to monitor the performance of our Mode App in 2020. 130% Average month on month trading volume growth £3,555 Average Bitcoin balance per customer with pos- itive BTC balances (in GBP)* £2,735 72% Average trading volume per trading customer (in GBP)* Of trading customers are repeat buyers (traded more than once) 5 Stars 76% of our reviews on Trustpilot were 5 stars/ Excellent. *Exchange rate as of 31 December 2020 (1 BTC = ~£21,198) Please note that these metrics will likely change in the next Annual Report as new products and services are added to the Mode app. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Annual Report. For the year ended in XX MONTH XXX.14 Strategic Report Strategic Report 15 Bitcoin: Trends & Adoption 2020 was the strongest year on record for Bitcoin as it hit historical records and secured adoption by major banks and institutions. Over two years ago, we chose to embrace Bitcoin as a vehicle for financial empower- ment for our consumers and investors. To- day, our confidence in its long-term value is stronger than ever as a result of the chal- lenges of Covid-19 and global economic uncertainties. In 2020, Bitcoin became significantly de- risked as an asset class as incumbent finan- cial services players including traditional U.S. banks and payments giants launched cryp- tocurrency-related services including cus- tody, investment and compliance solutions. Advanced regulatory frameworks were put in place by major regulators around the world, including banking charters for crypto com- panies. All of these developments resulted in reduced regulatory and technology risk, and thus contributed to Bitcoin’s de-risking as an asset class. Significant quantitative easing by central banks has also highlighted the need for infla- tion-resistant assets. Over the last decade, many nations have experienced systemic banking crises such as Venezuela (2010), Greece (2013) and Cyprus (2010). This has increased demand for assets whose supply is limited and cannot be manipulated, such as Bitcoin. In terms of demand, Bitcoin has seen its adoption rate grow faster than mobile phones, the internet and virtual banking. In just 12 years, Bitcoin has transformed from a concept on a whitepaper to a dominant digital asset worth circa $750 billion (as of the time of this report) in market capitalisation, with a large and growing retail and institu- tional following. We believe that this growth trend will continue to accelerate, and that Bitcoin is just at the beginning of the adop- tion curve. At Mode, we intend to take advantage of this structural shift by offering a robust and con- venient platform for investors to buy and hold Bitcoin and access it 24/7 using their smart- phones. We will continue to leverage our position as a pioneer in the cryptocurrency space and our compliance-first approach to capture the growing demand for the emerg- ing asset class. We also plan to launch new products to make Bitcoin more accessible and bring it to a wider consumer audience. Impact of Mode’s IPO In 2020, Mode became one of the first UK companies to list on the London Stock Exchange with a consumer-facing Bitcoin offering, in a move to bring credibility to the crypto space. Listing on the LSE in October 2020 marked an important step towards cementing our position as a pioneer as well as promoter of transparency and accountability in the UK financial services sector. As a business offering Bitcoin services, it was important to demonstrate our ability to comply with regulatory requirements and heightened scrutiny from the Finan- cial Conduct Authority (FCA) in order to build trust and credibility in the market. Many stakeholders including regulators, politicians and investors have criticised cryptocurrencies, making it ever more vital to provide a regulated vehicle that custom- ers could trust when buying and holding Bitcoin. Through the IPO, retail investors were able to gain access to an early stage fintech build- ing innovative and disruptive financial prod- ucts. In the UK, Mode is currently the only publicly listed fintech with a Bitcoin consum- er-facing offering. Today, Mode is a trustworthy and credible player who has successfully attracted cus- tomers who believe in our product today and where it is headed. We are seeing a growing number of retail investors buying into our business and ready to follow us through every stage of growth. Official Virtual IPO Ring Bell Moment on Zoom Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 16 Strategic Report Strategic Report 17 Partner Network In 2020, Mode established key stra- tegic partnerships with best-in-class providers to deliver high-quality products with quicker time-to-mar- ket. Since inception, our approach at Mode has been to enter strategic partnerships with specialised vendors when appropriate. This has allowed us to launch high-quality prod- ucts with quick time-to-market and build an infrastructure that satisfies the security, compliance and scalability standards of our stakeholders. Various failed crypto ventures and the collapse of German payments company Wirecard have proven the importance of having strong and carefully vetted partners for an emerging fintech business. We have a rigid partner selection and due diligence process to ensure our partners provide the best outcome for our customers and oth- er stakeholders, including our regulators, whilst having our own commercial interests in mind. We are confident that we are utilising industry-leading Software-as-a-Service (SaaS) providers for core business functions such as digital asset custody and liquidity provision, core banking, and compliance. This way, we can focus on building core competencies that seek to achieve com- petitive advantages in the market and to provide added value internally, particularly within our marketing, business intelligence and operations functions. Once certain business objectives have been achieved, we aim to build out core functionalities while developing value-add- ed differentiator services and bespoke proprietary systems that further add value to the technology stack and customers. Our strategic partners are industry-leading in three key aspects: Technology Our products and internal platforms are designed to be cloud native, extremely scalable and utilise Zero Trust design for security. The third-party providers that we integrate with have modern Application Programming Interfaces (APIs) with best-in- class capabilities that offer differentiating and greater potential over legacy finan- cial services players. This cloud native and modular architectural approach allows us to remain flexible while ensuring the highest degree of stability and scalability. Security In dealing with customer funds and corpo- rate treasury, we provide the highest level of security through our partners who offer as- set custody, both for e-money and crypto. On the e-money side, we have entered a strategic partnership with UK-based E-Money Institution (EMI) Modulr, who provide a regulatory umbrella for e-money accounts, access to Faster Payments and hold funds directly with the Bank of Eng- land. Modulr is well-funded and allows us to offer a highly scalable payments infrastruc- ture through their industry-leading, API-first technology stack. With regards to crypto custody and liquidity provision, we have established key partner- ships with leading global companies. For custody, BitGo provides highly secure custody for crypto assets and insurance coverage up to $100m is provided by Lloyds of London for assets held in cold storage. We have integrated BitGo’s technology stack in a way that enables instant Bitcoin deposits and withdrawals for customers, with a neo-bank-like experience. Compliance At Mode, we aim to be at the forefront of compliance in everything we do. In order to com- ply with UK regulatory requirements, we have integrated market-leading SaaS providers into our technology infrastructure for onboarding, account verification and transaction monitoring. We utilise providers that are powered by state-of-the-art technology and ar- tificial intelligence to ensure the highest level of convenience, mitigate risk and operational overhead, whilst providing the best customer experience for customers. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.18 Strategic Report Strategic Report 19 Bitcoin Investment Strategy historically been followed by bull markets as demand overwhelmed the reduced supply (2013, 2017). The latest halving event hap- pened in May 2020. If the demand for Bitcoin continues to rise, Bitcoin’s price is expected to increase in the coming years, making it a rewarding use of the firm’s treasury funds. We have reasons to assume that demand will continue to increase as: • Institutions have been increasingly announcing that they are entering the cryptocurrency space; • Many family offices and endowments have been building positions; • Digital wallets and retail investment platforms are adding cryptocurrency services to their offering; • Publicly listed and private companies have been adding Bitcoin to their bal- ance sheets. Mode was the first UK public com- pany to officially announce the adoption of Bitcoin as a treasury reserve asset. At the core of Mode’s business strategy lies protecting shareholders’ assets and max- imising their value. Rather than allocating all of its reserves into near-zero and even negative yielding, common treasury assets such as cash, savings or bonds, we chose to execute an innovative investment strate- gy and adopt Bitcoin as a treasury reserve asset. In October 2020, we announced the de- cision to allocate up to ten percent (10%) of our cash reserves to purchase Bitcoin, making us the first publicly listed company in the UK to officially announce a significant purchase of Bitcoin as part of its treasury investment strategy. We have always recognised the potential of Bitcoin as a reliable store of value and a highly attractive investment opportuni- ty for companies. Bitcoin was significantly de-risked in 2020, due to a series of events that reduced its regulatory and technolo- gy risk (as stated earlier in this report), and provides an asymmetric return profile due to its inherent characteristics of being the only financial asset available whose supply is truly scarce and finite. Bitcoin’s limited supply is fixed by code, cannot be altered and has been historically characterised by its halving cycles. Bitcoin’s protocol is programmed to reduce mining rewards by 50% every four years which have Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Annual Report. For the year ended in XX MONTH XXX.20 Strategic Report Strategic Report 21 Finance Costs fell slightly to £284k (2019: £312k) due to the shorter effective interest period as the convertible loan note passed a trigger event from the IPO on 5th Oc- tober 2020, converting both the principal and interest into equity. Cash Balances ended the year at £5.4m (2019: £2.6m). The increase reflects the £7.5m gross funds raised from the listing, further bolstered by the additional equity placing in February 2021 for £6m (see post balance sheet events). Lastly, Other Comprehensive Income reflects the £455k increase in our Bitcoin investment, an increase of 120%. This was the result of our Bitcoin Investment Strate- gy to allocate up to 10% of the funds raised at IPO to invest in Bitcoin. Some of the Key Performance Indicators used to monitor the success of our business are set out on page 12 and 13. These will likely change in the next Annual Report as new products and services are added to the Mode App. Financial Review Performance of the business dur- ing the period and the position at year end. Revenue for the year increased significantly from £2k to £450k, with a limited marketing spend of £188k. This was attributable to the launch of our Bitcoin trading functionality, as well as the Global Services payments platform, which saw a significant increase in both payments and marketing activity, as UK merchants took advantage of the online ecommerce payment platform to connect with the sizable Chinese consumer base via WeChat and Alipay. Trading conditions were strongest in the last quarter of the year as we benefited from Bitcoin’s increase in retail and institu- tional following, the publicity from the IPO in October, as well as from adding Bitcoin to our balance sheet at a similar time to when other large financial institutions were announcing their involvement in cryptocur- rencies. Administrative expenses were £3.7m (2019: £2.3m) increasing by £1.4m (63%) during the period. This was driven by higher people costs (£0.8m), a share option expense of £0.3m and £0.3m of additional fees from the IPO. The unwinding of the Convertible Loan note and the expected discounted paya- ble interest for the loan note having re- duced, resulted in Investment Revenue of £360k. 👠 Mode Global Holdings Annual Report. For the year ended in XX MONTH XXX.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 22 Strategic Report Strategic Report 23 Strategy in 2021 Our strategy for 2021 is focused on con- tinuing to build the products and services that form the Mode Ecosystem, as well as accelerating early customer and merchant growth. Launch the Mode Ecosystem At Mode, we are on a mission to build an all-encompassing ecosystem that offers people a one stop shop for growing wealth and spending smarter. For businesses, the ecosystem promises a cheaper, safer and smarter way of accepting payments and boosting loyalty amongst customers. The key features we are launching in 2021 include: E-commerce payments By leveraging the power of Open Banking and the rapid adoption of QR codes as a result of Covid-19, our new e-commerce payments solution facili- tates direct and seamless transactions in GBP between businesses and Mode customers that are cheaper and safer, and deliver instant authorisation and settlement. By building our own payment rail, we are able to bypass the Card Schemes and work with merchants directly, ena- bling the building of a frictionless eco- system where the relationship between customers and merchants is facilitated end to end by Mode. This new solution gives us an edge over the competition, as today most fin- techs launch payment cards, a deci- sion that ties them to the interchange fees and limitations imposed by the Card Schemes. Bitcoin rewards Our Bitcoin Rewards offering will see customers receive rewards, in the form of Satoshis (the smallest unit of a Bitcoin), for performing certain actions in-app and making online purchases via Mode merchants, enabling us, as Mode, and our businesses to reward customers for their loyalty. The amount of Bitcoin Rewards cus- tomers receive will vary depending on the action performed and the mer- chant’s industry. We will earn an af- filiate fee for each eligible merchant transaction, in line with our strategy to monetise our merchant base going forward. Loyalty & targeted offers We will build a loyalty and rewards engine that leverages transactional as well as behavioural insights from cus- tomers, giving merchants the ability to drive engagement through targeted loyalty and discount offers to existing and new customers. Mode Global Holdings Annual Report. For the year ended in XX MONTH XXX.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 24 Strategic Report Strategic Report 25 Strategy in 2021 Accelerate user and merchant growth We have invested in minimal marketing since the launch of the Mode App, yet have achieved 52,000+ new app customers and 100+ ‘Global Services’ merchants onboard- ed as of 04 June 2021. Customer Bitcoin trading volumes reached £19.8m January - May 2021. In 2021, particularly in the second half, after the payments and rewards features have launched, we will accelerate customer and merchant growth by ramping up our marketing spend and widening our target market to digitally-native millennials and gen-Z, not just Bitcoin investors. We will aim to target app customers through adver- tising and community building, as well as investing in co-marketing partnerships with merchants. We will target e-commerce businesses through a robust sales and marketing ap- proach, focusing on large influential mer- chants to drive scale, network effects and brand recognition, and SMEs to accelerate market penetration. To ensure the highest degree of compatibility with SMEs, we will develop integrations with e-commerce platforms such as Shopify, Woocommerce and Magento, ensuring that the service de- livery is as easy as possible, and that add- ing it to a store’s check-out page will only be a few clicks after signing up with Mode. Large merchants usually have their own systems so the integration will be bespoke in most cases. Our growth strategy will focus on intelli- gently targeting customers and merchants who can bring value to the ecosystem and can contribute to generating revenue, from a Bitcoin trading as well as payments and rewards perspective, from early on in their journey with Mode. Build market share in key verticals Initially, we will focus on building our pres- ence in key e-commerce verticals, including fashion apparel, food, consumer electron- ics, cosmetics/beauty, jewellery, home apparel, education, sportswear, game/e- sports and travel verticals. Offline and brick-and-mortar verticals, such as high-street retail, supermarkets, restau- rants, stadiums, etc. will become a target once in-store payments are launched. Equally, once the recurring payments fea- ture is available, we will aim to build market share in subscription verticals such as gyms, SaaS providers and entertainment sub- scriptions. Diversify revenue streams In 2020, we generated revenue from Bitcoin trading, the Bitcoin Jar and from Mode’s Global Services payments and marketing services (through WeChat and Alipay). With our new payments and loyalty solution, we will operate a diversified revenue model which will bring income from the following additional sources: Payment transactions - We will charge businesses a percentage fee for every transaction between a customer and a merchant. We will control the entire value chain and therefore will achieve higher profit margins as we do not need to pass any fees onto the Card Schemes. Bitcoin rewards – We will operate Bit- coin rewards as a revenue share/affili- ate marketing programme. This means that we will charge businesses a com- mission (in percentage terms) for every sale where cashback is offered. Beyond 2021, we will look to further diversify our revenue streams and bring income from a wider range of other high-value, stable sources, including: From consumers: • Consumer credit/lending • Premium subscriptions - access to lower trading fees, higher reward rates and offers etc. From businesses: • Payments (in-store payments) • Business lending • Ongoing membership fee (basic and premium) - varying access to insights and targeting, customer support and technical assistance. Increase Global Services sales Through our partnerships with Tencent and Alipay, we are able to connect UK busi- nesses with a growing consumer base from China through the payment methods they are most familiar with - WeChat Pay and Alipay. In 2021, we will focus on growing our Mode Global services merchant base through direct sales and partnerships. We will also leverage the merchant base of the Mode app, expected to grow at a faster pace, to cross-sell our global payments and marketing services. With the expected economic recovery and rebound of tour- ism during 2021, we anticipate an increase in our payments and marketing revenue in 2021. Attract international investors Beyond product development and sales, our goal is to increase brand visibility for the Mode brand internationally, to help boost liquidity and build a strong and diversified shareholder register supporting the growth of the business. We aim to join the OTCQB Venture Mar- ket in the US in order for our shares to be cross-traded publicly and become more widely accessible to US investors. The listing will allow us to capture the growing ap- petite from US investors to invest in public fintech companies with a cryptocurrency offering. We will aim to upgrade to OTCQX Best Market in due course in order to cap- italise on wider PR and marketing oppor- tunities, as well as list on other exchanges around the world. Secure FCA licences and registra- tions It is our goal to provide regulated products for our customers and merchants so that they can feel safe using our services. We are currently in the process of applying for both an Electronic Money Institution (EMI) licence (for e-money purposes), as well as a registration under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, as amended (MLRs), (compulsory for crypto asset businesses conducting activities in the UK within the scope of the MLRs), from the Financial Conduct Authority (FCA). We are in advanced stages of our applications and in continual conversations with the FCA to ensure our business remains compliant. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 26 Strategic Report Strategic Report 27 Approach to Risk In 2020, we focused on improving our approach to risk manage- ment and how we track and miti- gate risk. within from operations, taking appro- priate actions to address and mitigate them; • challenging our strategic planning from a risk and control perspective. The Board oversees and reviews our ap- proach to risk and control, with responsibil- ity for risk management sitting at all levels across Mode – including the Board, the Executive Committee and all members of the teams. During 2021, we will continue to improve our management of risk at Mode with the development of an enhanced risk management framework and improvements in action plans. Types of risk Our approach covers different types of risk, including: • Business strategy risk • Product risk • Regulatory risk • Operational risk • Technological risk Additionally, we track emerging risks which while not seen as impacting the business yet are changing rapidly. We implemented measures to reduce tech- nology and information security risk and growing the technology team to prepare for the growth expected in 2021. Covid-19 has seen an unprecedented impact on how our business operates and we have adapt- ed well to working 100% from home. This global situation has brought about greater focus on ensuring we plan and manage for business continuity and we have continued to develop our risk management frame- work through the Risk Register which is continually updated and managed by the Executive team. This is facilitated through a regular cadence of meetings and deci- sion points to ensure management remains informed and has all the information they require to make decisions quickly. Risk focused approach - Embedding in our culture The day-to-day focus on risk is already embedded in our approach and culture. However, our objective is to enhance our understanding and management of risk and control across the business by: • recording risk, mitigations and actions plans in the Risk Register; • embedding risk and control in all our thinking and in decisions; identifying the most significant risks • Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Annual Report. For the year ended in XX MONTH XXX.28 Strategic Report Strategic Report 29 Approach to Risk Type of Risk Details Type of Risk Details Business strategy risk Mode’s business strategy risk can be summarised as the poten- tial impact of strategic decisions (which can include providing new products and services) or a defective or inappropriate strategy, including a lack of response to a situation. At Mode, we take a proactive and agile approach to strategic risk management. Using risk prioritisation processes allows us to direct our resources toward the risks with the biggest po- tential impacts. Through continual research and iterative pro- cesses, we ensure decisions are made that allow the business to adjust and respond to changes as necessary. This includes changes in the legal or regulatory landscape, market adoption and competition. This approach means we can be flexible and responsive whilst continuing to deliver our business aims and objectives. Product risk Launching any product or service creates the potential for losses, born from a variety of issues including poor planning and non-adherence to regulations or standards. We deal with product risk through a combination of research, effective planning, consultation with experts, e.g. legal opinions, and an incremental and feature-led roll out. Through extensive engagement with relevant experts and customer groups, we have developed a product roadmap and delivery schedule that is informed, measured, and flexible. This allows us to mini- mise the risk of any losses, from inception to live, whilst allowing the business to quickly respond to opportunity, adapt to market conditions and quickly rectify issues. Our products and services reflect our desire to treat customers fairly and are developed under the FCA’s Treating Customers Fairly (TCF) principles to ensure we provide positive customer outcomes and minimise the risks of breaching regulations and standards. Regulatory risk Operational risk Regulatory risk is the effect of failure to comply with laws and regulations and any changes therein. The UK regulation under the FCA is mature and well understood. The FCA’s recent steps to mandate the registration of cryptoasset businesses under Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, as amended (MLRs) show a pro- active approach, providing greater clarity to Mode. As previously mentioned, we are active in having conversations with the regu- lator and continue dialogue to ensure our business remains com- pliant. Our partnership with Modulr allows us to work together to anticipate changes, adapting the business as required to mini- mise impacts. Operational risk covers the uncertainties and difficulties we face on a day-to-day basis. We have created an efficient govern- ance and management structure to ensure we can systematically monitor, manage and control factors affecting our operation. This structure is agile and responsive to new challenges with decisions made quickly to minimise disruption and ensure business conti- nuity. As the business grows, our operational structure and gov- ernance are adapting to increased demand and new challenges. We employ experienced people to anticipate these changes, preparing through scenario planning and practice, ensuring resil- ience is in place. We actively manage the risk that our operations adversely impact customers or our competitive position to ensure positive outcomes for our customers and the business. We are always learning and therefore improving our approach in ensuring we have a robust and efficient operation. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 30 Strategic Report Strategic Report 31 Approach to Risk Type of Risk Details Technological risk Technology risk is the potential for any technology failure or cyber incident to disrupt the business. At Mode, technology is at the core of our operations, so we manage technology risks proactively and appropriately. Our approach focuses on de-risking several areas including: • internal system failures • external third-party failures • security breaches • malicious attacks We take a proactive and continual approach to mitigate these risks through cutting-edge and intelligent design, systems redun- dancy, continual security/penetration testing and activity mon- itoring. This continual approach is adapted to respond to new products, scale and new threats. As a holder of digital assets, we have developed strong security procedures and protocols to minimise the chances of breaches. As previously mentioned, we partner with best-in-class digital asset custodians who are insured for loss of assets in cold stor- age. Our operational and financial governance processes ensure minimal exposure to losses through an unlikely breach, whether that be external or internal. Our staff are trained to combat social engineering bases attacks, and our customer-facing technology requires multi-layer authentication in order to combat fraud. Responsibility for preparing the Annual Report and Accounts from the Directors about their responsibility for preparing the financial statements is on page 43 in the Statement of Directors’ Re- sponsibilities. The Company’s external audi- tors explain their responsibilities on pages 51 and 52. On Behalf of the Board Jonathan Rowland Chairman Under section 172 of the Companies Act 2006, the Board is required to consider the interests of stakeholders across the business in our decision making. The requirements of section 172 are for the Directors to: • Consider the likely consequences of any decision in the long term, • Act fairly between the members of the Company, • Maintain a reputation for high standards of business conduct, • Consider the interests of the Company’s • employees, Foster the Company’s relationships with suppliers, customers and others, and • Consider the impact of the Company’s operations on the community and the environment The Board has demonstrated our com- mitment to the ongoing consideration for stakeholder interests through this report including on the pages 36 and 37 and in the Corporate Governance and Stakeholder sections. The Board is responsible for main- taining adequate accounting records and seeks to ensure compliance with statutory and regulatory obligations. An explanation Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 32 Strategic Report Corporate Governance 33 Corporate Governance Corporate governance statement Our Board has a collective objective of promoting the long-term success of Mode for its shareholders and provides dedicated leadership in the development and promo- tion of the business’ strategy, and the mon- itoring of its implementation, on an ongoing basis. A key part of our Board’s role is ensur- ing that we have the appropriate people, financial and other resources to achieve our aims. As a company with a Standard Listing, we are not required to comply with the pro- visions of the UK Corporate Governance Code. The directors have decided, so far as is practicable given our size and nature, to voluntarily adopt and comply with the QCA Corporate Governance Code. Our Board maintains governance structures that are fit for purpose and support good decision making. Board activity Our Board’s meeting schedule for 2021 has been approved and our Board will meet formally at least four times during the year with additional ad hoc meetings called as and when appropriate, as was the case in 2020. Our Board’s activities throughout the year are underpinned by our external re- porting calendar and our internal business planning processes. A rolling annual agen- da ensures that all important topics receive sufficient attention. Standing agenda items provide an anchor to the strategy and provide our Board with a consistent view of progress during the year. At each Board meeting the standing agen- da includes: • quorum; • approval of minutes (circulated to all directors in advance for comment) and review of outstanding actions; • corporate governance and Committee • reports; reports from the Chairman, including key business developments; • and financial and operational review. The agendas and accompanying papers are distributed to Board members in ad- vance of each Board meeting. These in- clude reports from Executive Directors, and other members of the Executive team, as appropriate. All directors have direct ac- cess to the Executive team and other senior management should they require addi- tional information on any of the items to be discussed. Expertise and experience of the di- rectors Our Board is satisfied that the directors, both individually and collectively, have the range of strategic and commercial expe- rience, knowledge, diversity of experience and dedication necessary, to lead Mode. Our Board is responsible for the appoint- ment, removal and re-election of directors and when such a decision is required it will take account of our need for a balance of market, operational and financial experi- ence. Appointment of directors Mode’s Articles of Association contain de- tailed rules for the appointment and retire- ment of directors. There is a formal proce- dure in place to select and appoint new directors to our Board. These directors are Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Annual Report. For the year ended in XX MONTH XXX.34 Corporate Governance Corporate Governance 35 Corporate Governance required to retire at the next Annual Gener- al Meeting (AGM), but can offer themselves for re-election by shareholders. Under the Articles, all directors are required to submit themselves for re-election at intervals not exceeding three years. All of the directors shall retire and, being eligible, each offers themself for reappoint- ment by the shareholders at the AGM. Independence of the Non-Executive Directors As at the date of this report, our Board comprised the Chairman, the Executive Directors and the Non-Executive Directors. We have not appointed a senior independ- ent director. These appointments are reflec- tive of our size and nature as a company, and the size and composition of our Board. We are looking to appoint independent Non-Executive Directors in the future. Circumstances likely to impair, or which could appear to impair, a director’s in- dependence include whether a director participates in our share option scheme. As an early stage company, we have granted options to Non-Executive Directors under Mode’s share option scheme. Our Board does not consider that the granting of options to Non-Executive Directors, or the continued vesting of options already grant- ed, impairs the independence of those directors concerned. Committees and Policies Our Board has delegated certain respon- sibilities to members of the Executive team which can be exercised through commit- tees, approved policies and guidance for certain functions of the business, including: • Audit Committee • Disclosure Committee • Remuneration Policy • Share Dealing Policy • Internal Policies - Anti Bribery and Corruption (ABC), Whistleblowing, An- ti-Fraud, Know Your Customer (KYC) and Anti Money Laundering (AML) • Diversity and Inclusion Guidance The matters reserved for the Board and its Committees include: • Group strategy, which is reviewed by the Board and management regularly during the year; • Group’s Budget approval; • risk management approach and risk mitigation; • direct shareholder communications; • Board membership and other appoint- ments; • Corporate governance matters; and • Remuneration of directors and the Ex- ecutive team. The Board as a whole will review the Board’s size, structure and composition and scale and structure of the directors’ fees, taking into account the interest of shareholders and our performance as a company. Audit Committee The Audit Committee, which comprises Gary Wilkinson and Rita Liu, are responsible, amongst other things, for monitoring Mode’s financial reporting, external and internal audits and controls, including reviewing and monitoring the integrity of our annual and half yearly financial statements, reviewing and monitoring the extent of non-audit work undertaken by external auditors, ad- vising on the appointment of external audi- tors, overseeing our relationship with exter- nal auditors, reviewing the effectiveness of the external audit process and reviewing the effectiveness of our internal control re- view function. The ultimate responsibility for reviewing and approving the annual report and accounts and the half-yearly reports remains with the Board. The Audit Com- mittee gives due consideration to laws and regulations, the applicable provisions of the UK Corporate Governance Code and the requirements of the FCA’s Listing Rules. Disclosure Committee Our Board has delegated to the Disclosure Committee responsibility for overseeing the disclosure of information by the Company to meet its obligations under the Market Abuse Regulation, the FCA’s Listing Rules and the Disclosure and Transparency Rules. The Disclosure Committee is chaired by the Company Secretary or the Chairman and comprises the Chairman, the Compa- ny Secretary/General Counsel (Nathalie Hoon), the Chief Operations Officer (Richard Morecroft) and the Chief Investor Relations Officer (Ariane Murphy). Remuneration Policy Refer to the Directors’ Remuneration Report on page 45. Share Dealing Policy We have adopted a share dealing policy which sets out the requirements and proce- dures for dealings in any of our listed securi- ties. The share dealing policy applies widely to all directors of Mode and our subsidiar- ies, certain employees’ and persons closely associated with them. The policy complies with the Market Abuse Regulations, which came into effect on 10 July 2016 and was transposed into UK law on 31 December 2020. Internal Policies We have an Employee handbook in place which details our expectations of employ- ees and promotes an open culture. This is supported by policies covering Anti Brib- ery and Corruption (ABC), Whistleblowing, Anti-Fraud, Know Your Customer (KYC) and Anti Money Laundering (AML). Training and testing is undertaken to ensure the team are aware and compliant with these poli- cies. Diversity and Inclusion Guidance Specifically in terms of Diversity & Inclu- sion, we believe in building accessibility, transparency and credibility around digital assets, and we’ve made it our mission to propel an unprecedented wave of democ- ratisation and inclusion. We strongly believe that creating a diverse team and a culture of inclusion is absolutely essential to our business success. We simply cannot build a product that is accessible for all without ensuring that our team is both representative of our customers and the general population as a whole, and that everyone at Mode feels comfortable speaking up, contributing to the discussion, and bringing their whole, authentic selves to work. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 36 Corporate Governance Corporate Governance 37 Corporate Governance We are, and always have been, committed to baking inclusion into our processes and ways of working, and promoting equality of opportunity in everything we do. Whilst we recognise that we’ve made strong progress in some areas (for example, our gender split across the business is slightly ahead of our sector average, and our gender split within the Executive team sits well above aver- age), we know that we still have work to do. It goes without saying that we do not ac- cept discrimination, harassment or bullying of any kind. Risk management and control The Board is responsible for promoting our company’s long-term success for the benefit of shareholders, as well as taking account of other stakeholders including employees and customers. This includes ensuring that an appropriate approach to risk is embedded throughout the Group, taking into account both opportunities and threats. To discharge this responsibility, the Board has established processes for risk management and internal control and re- serves for itself the setting of our risk appe- tite as a business. The Board retains ultimate responsibility for our approach to risk and control, but has delegated in-depth monitoring of the es- tablishment and operation of prudent and effective controls to the Chief Operations Officer. Members of the Executive team are respon- sible for the application of internal control and risk management, for implementing and monitoring the operation of the sys- tems of internal control and for providing assurance to the Chief Operations Officer and the Board. Our people Stakeholders The Board believes that maintaining strong stakeholder relationships is essential to our long-term, sustainable success, and is committed to effective engagement with all stakeholders within Mode. Our shareholders We are committed to establishing a strat- egy and business model which promotes long-term value for shareholders. The Board also aims to be transparent and have open engagement with our share- holders. This enables the Board to clearly communicate its strategy, provide updates on business performance and receive reg- ular feedback. It also gives the opportunity to respond to questions and suggestions. At Mode, we provide regular updates via RNS and RNS Reach, as well as social me- dia publications. The Chief Investor Rela- tions Officer provides regular reports to the Board on shareholder interactions. Share- holder communications, such as our trading results, half-year results, Annual Reports, notices of general meetings and other information, are provided on our investor website at www.modeplc.com. Sharehold- ers can sign up via our website to receive automated email alerts when news and updates are published. Our team consists of a talented group of individuals who have strong alignment with our mission and share the same drive and passion as our customers. The Board regu- larly receives reports on HR-related matters and the individual directors spend time with employees across all departments. We recognise that our people are a key driver of our success, and therefore our HR and People focus for 2020 has been to estab- lish strong HR foundations for the future of Mode, whilst also responding to the chal- lenges that Covid-19 presented. During 2020, and continuing, we have: • • looked to support our people with their wellbeing during the Covid-19 pan- demic and lockdowns, including hold- ing twice-weekly company meetings, virtual team events, creating the Mode internal newsletter, and introducing a Social Committee to help combat lone- liness and isolation; launched our Mode Employee Hand- book to document how we work, our expectations and to set out what it means to be part of the Mode Team. formalised our approach to HR, People and Culture; introduced enhanced background checking measures for all new joiners and conducted retrospective back- ground checking for our existing team, to help to build trust and demonstrate our commitment to security and compli- ance. We have also introduced a clear escalation and risk assessment process and review for any failed checks; • worked to improve candidate expe- • • rience during the recruitment process including introducing training to better support our hiring managers. Looking forward, we will: • • • increase focus on performance man- agement and development, making sure that everyone in the business un- derstands their roles and responsibilities and what success looks like, and gets regular feedback on their performance; launch our Company Values which will act as the architecture and frame- work for steering behaviour and deci- sion-making within Mode, enabling us to better screen for cultural alignment during recruitment and helping us main- tain our culture as we grow; improve the mechanisms by which we listen to, and seek feedback from our people through pulse surveys, to better inform our People and HR planning, and so we can continue to improve our peo- ple’s experience at Mode. Our customers Providing attractive products to our cus- tomers remains a key part of the Board’s strategy. The Board is committed to main- taining an open dialogue with our customer base, including obtaining its feedback on our products and ensuring we treat cus- tomers fairly and provide effective customer service as well as support. The results of engagement with our customers are fed back to the directors to inform their strate- gic review and decision making. We provide information and support to customers in an accessible format, includ- ing, for instance, through blog posts, email, FAQs, push notifications and in-app Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 38 Corporate Governance Corporate Governance 39 Financial Conduct Authority (FCA) When considering proposed changes to our product offerings in the UK, the Board and Executive Committee carefully considered the views of the FCA, in addition to custom- er feedback, to ensure any new features or products fall within all applicable reg- ulations, as well as being beneficial to our customers. The Board ensures it is kept apprised of key legal and regulatory changes affecting the business to inform its strategy and decision making. Corporate Governance messages. We very actively engage with customers as well as the wider communi- ty. We facilitate performance reporting to customers so that they may monitor their investments. Our business partners We work with a number of “best in class” business partners, which support us with a variety of specialist services. We seek to maintain a good business relationship with these partners, who are well-respected experts in their field. Our business partners are critical to the success of Mode so we maintain good relationships with them all, built on mutu- al interest and trust, ensuring both parties continue to benefit from our success. The selection of partners is done in a fair and transparent manner, the process driven by the need to ensure that we receive the services requested under a fair and com- petitive commercial agreement. Where possible, we engage multiple potential partners in our selection process, with both commercial and technical evaluation un- dertaken. Importantly, our business partners must share our values and ambitions, supporting our missions and goals. Mode Global Holdings Annual Report. For the year ended in XX MONTH XXX.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.40 Director's Report Director's Report 41 Directors’ Report The Directors present their report and the audited financial statements for Mode Global Holdings PLC for the year ended 31 December 2020. The preparation of these financial state- ments is in compliance with International Financial Reporting Standards (IFRS) as adopted by the EU and that apply to finan- cial years commencing on or after 1 Janu- ary 2020. The Group financial statements consolidate the financial statements of the Company and its subsidiaries. The Parent Company financial statements present in- formation about the Company as a sepa- rate entity and not about its Group. Principal Activities Mode Global Holdings PLC (MGH) is a hold- ing company. It is the parent company of Mode Global Limited, a UK based company which was formed on 9th September 2015, JGOO limited, which was formed on 26th July 2016, and Fibermode Limited which was incorporated on 28th November 2018. MGH’s principal activity is being the parent company of a group of technology start- ups, including cryptocurrency and digital wallet (Mode), electronic payments, Grey- foxx (Mode for Business), and JGOO (Mode Global Services). Business review and future develop- ments The review of the period’s operations, future developments and key risks is contained in the Strategic Report. The directors do not recommend a final ordinary dividend for the period (2019: £nil). Directors and directors’ interests Directors’ interests The directors who held office during the period and subsequently were as follows: The directors held the following beneficial interests in the shares of Mode Global Holdings PLC at 31st December 2020: • Jonathan Rowland (appointed 5th August 2020) • Ryan Moore (appointed 25th September 2020) • Richard Morecroft (appointed 5th August 2020) • Gary Wilkinson (appointed 25th September 2020) • Rita Liu (appointed 25th September 2020) With regard to the appointment and re- placement of directors, the Company is governed by its articles of association, the Companies Act and related legislation. The articles themselves may be amended by special resolution of the shareholders. Jonathan Rowland (1) Ryan Moore (2) Ordinary shares of 0.01p each Issued share capital % 18,973,559 6,506,094 23.6% 8.1% (1) As at 09 April 2021, Jonathan Rowland transferred his shares to JR Spac 1 Limited, a company wholly owned by Jonathan Rowland. (2) Ryan Moore is a beneficial shareholder of Mode Global Holdings as a shareholder in both Keve Family Ltd Partnership and Tulham LLC. The remuneration of the directors in Mode Global Holdings PLC who held office during the year to 31 December 2020 was as follows: 2020 Executive Directors Salaries (£) Long-Term Incentives (1) Fees (£) Total Jonathan Rowland £25,321 £28,301 £53,622 Richard Morecroft £25,000 £100,000 £84,902 £209,902 2020 Non-Executive Directors Gary Wilkinson Ryan Moore Rita Liu (2) Remuner- ation (£) Long-Term Incentives (1) Fees (£) Total £27,372 £7,075 £34,447 £13,333 £7,075 £20,408 £95,538 £64,625 £160,163 (1) The Directors listed above were awarded unapproved share options as part of the Long-Term Incentives strategy. These were granted shortly after listing in October 2020. The values shown above are calculated based on their fair market value on grant of £0.18. (2) Rita Liu is employed and paid by JGOO Limited. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 42 Director's Report Director's Report 43 Directors’ Report Events after the reporting date Events after the reporting period are described in note 21 to the financial statements. Financial risk management Details of financial risk manage- ment are provided in note 3 to the financial statements. Carbon emissions The Group is mindful of carbon emissions and looks to obtain clean energy sources wherever possible. A low staff headcount and staff cur- rently working from home allow the Group to maintain low emissions of less than 40,000kWH of energy consumed. Political and charitable contributions The Group made a £5,000 donation to regis- tered charity, Imperial Health. Substantial shareholdings The Company has been advised of the follow- ing interests in more than 3% of its ordinary share capital as at 31st December 2020: Jonathan Rowland Ruskin Capital Ltd Roy Nominees Ltd Bonderman Family LP Tulham LLC Goldman Sachs Securities Nominees LTD Keve Family Ltd Partnership Yvonne Kelsey Pershing Nominees Ltd % 23.6% 13.9% 13.0% 4.4% 4.4% 4.1% 3.7% 3.3% 3.0% 73.4% Statement of Directors’ Responsibil- ities The directors are responsible for prepar- ing the Annual Report and the financial statements in accordance with company law, which requires the directors to prepare group and parent company financial state- ments for each financial year. Under that law the directors have elected to prepare the Group consolidated financial state- ments in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs) and have elected to prepare the parent company financial statements under United Kingdom Generally Accepted Accounting Practice. Under company law 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 and of the profit or loss of the Group and the parent company for that period. In preparing each of the Group and parent company financial statements, the directors are required to: • Select suitable accounting policies and then apply them consistently; • Make judgments and estimates that are reasonable and prudent; • State whether they have been prepared in accordance with IFRSs as adopted by the EU, or whether UK Accounting Standards have been followed, subject to any material departures disclosed and explained; and • Prepare the financial statements on the going concern basis unless it is inap- propriate to presume that the Group and the parent company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the finan- cial position of the parent company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also gen- erally responsible for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The directors are responsible for the main- tenance and integrity of the corporate and financial information included on the Company’s website. Information published on the website is accessible in many coun- tries and legislation in the United Kingdom governing the preparation and dissemina- tion of financial statements may differ from legislation in other jurisdictions. The directors consider that the annual re- port and accounts, taken as a whole, is fair, balanced and understandable and pro- vides the information necessary for share- holders to assess the Group’s position and performance, business model and strategy. Each of the directors confirms that, to the best of their knowledge: The Group financial statements, which have been prepared in accordance with IF- RSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and the Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.44 Director's Report Director’s Remuneration Report 45 Directors’ Report Directors’ Remuneration Report Statement of Disclosure to the Audi- tors All of the current directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Company’s auditors for the purposes of their audit and to establish that the auditors are aware of that information. The directors are not aware of any relevant audit information of which the auditors are unaware. This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006. Auditors’ appointment Jeffreys Henry LLP has expressed its willing- ness to continue in office and a resolution to re-appoint them will be proposed at the annual general meeting. Subsequent events The events after the reporting date can be found in note 22. The information included in this report is not subject to audit other than where specifi- cally indicated. and takes into account the strategic objectives, purpose and values of the Company. Remuneration policy Directors’ interests Signed by order of the Board Jonathan Rowland Chairman The directors’ interests in the share capital of the Company are set out in the Directors’ report. Directors’ emoluments The directors’ salaries, fees and long-term incentive plans are also set out in the Direc- tors’ report. Shareholder approval At the next annual general meeting of the Company, a resolution approving this report is to be proposed as an ordinary resolution. Mode has implemented a Remuneration policy to steer the board of directors in determining and providing oversight of the remuneration of the Company’s Board, directors, and employees, ensuring that the Company is able to attract, retain and motivate suitably skilled personnel. The Remuneration policy aims to ensure that remuneration across the Company is competitive, fair, aligned to the Company values and rewards the right behaviours that deliver value to the business. The Remuneration policy covers the follow- ing aspects • the determination of board members and (where appropriate) other senior management remuneration, ensuring that such remuneration promotes long- term success, is aligned with Company purpose and values; is compliant with all legal and regulatory requirements and is aligned to the company risk policies and appetites • within the terms of the policy, and in consultation with the Chairman as appropriate, help determine the total in- dividual remuneration package of each board member; • the design of all long-term incentive plans within the Company; and • determining the Company’s overall philosophy and approach to remunera- tion for all staff, ensuring that it supports Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 46 Independent Auditor’s Report Independent Auditor’s Report 47 Independent Auditor’s Report To The Members Of Mode Global Holdings PLC Opinion We have audited the financial statements of Mode Global Holdings Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the period ended 31 December 2020 which comprise the consolidated state- ment of comprehensive income, consolidat- ed statement of financial position, con- solidated statement of changes in equity, consolidated statement of cash flows, com- pany statement of financial position, com- pany statement of changes in equity, and notes to the financial statements, including a summary of significant accounting pol- icies. The financial reporting framework that has been applied in the preparation of the group financial statements is ap- plicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial re- porting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, in- cluding FRS 101 Reduced Disclosure Frame- work (United Kingdom Generally Accepted Accounting Practice). 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 2020 and of the group’s loss for the year then ended; the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial state- ments have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Prac- tice; and • the financial statements have been pre- pared in accordance with the require- ments of the Companies Act 2006; and, as regards the group financial state- ment, Article 4 of the IAS Regulation. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our re- sponsibilities under those standards are fur- ther described in the Auditor’s responsibili- ties for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical respon- sibilities in accordance with these require- ments. We believe that the audit evidence we have obtained is sufficient and appro- priate to provide a basis for our opinion. Conclusions relating to going con- cern In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the di- rectors’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting included reviews of expect- ed cash flows for a period of 12 months, to determine expected cash burn, which was Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Annual Report. For the year ended in XX MONTH XXX.48 Independent Auditor’s Report Independent Auditor’s Report 49 Independent Auditor’s Report To The Members Of Mode Global Holdings PLC compared to the liquid assets held in the entity. Based on the work we have performed, we have not identified any material uncertain- ties relating to events or conditions that, individually or collectively, may cast signif- icant doubt on the group’s ability to con- tinue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going con- cern are described in the relevant sections of this report. Our approach to the audit As part of designing our audit, we deter- mined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judg- ments, for example in respect of significant accounting estimates that involved mak- ing assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal con- trols, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud. How we tailored the audit scope We tailored the scope of our audit to en- sure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the Compa- ny, the accounting processes and controls, and the industry in which they operate. The Group financial statements are a con- solidation of five reporting units, compris- ing the Group’s operating businesses and holding companies. We performed audits of the complete financial information of Mode Global Holdings Plc, Mode Global Limited, JGOO Limited, Fibermode Limited and Greyfoxx Limited reporting units, which were individ- ually financially significant and accounted for 100% of the Group’s revenue and 100% of the Group’s absolute profit before tax (i.e. the sum of the numerical values without re- gard to whether they were profits or losses for the relevant reporting units). The Group engagement team performed all audit procedures. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and in- clude the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the over- all audit strategy, the allocation of resourc- es in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. Key audit matter Carrying value of investments and recov- erability of group receivables – Company Risk The amount owed to the Company at the year end by the subsidiary Mode Global Limited was £6,339k. How our audit addressed the key audit matter We carried out a review of the investments held in the subsidiaries. Management’s impairment workings were reviewed and the underlying assumptions audited. The carrying values of investments in group companies was £27,490k. We reviewed management’s basis for im- pairment across the Company and agree with their approach. Treatment of cryptocurrency balances (treasury & customer) As part of the review of management’s forecasts, consideration was given to the capability of the subsidiary to repay the amount within a 12-month period. The rights of the entity to direct the use of the asset have been reviewed to confirm the treatment is appropriate. The Group has several holdings of Crypto- currency, for which the appropriate ac- counting treatment and presentation will be reviewed. Fair values were agreed to open market valuations and movements recognised through OCI vouched. Customer balances are recognised on the balance sheet where an entity has the ability to direct the use of the asset. Disclosures have been reviewed for suffi- ciency. As the assets are not held for trade they are held as intangible assets under the revaluation model. Our application of materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for ma- teriality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.50 Independent Auditor’s Report Independent Auditor’s Report 51 Based on our professional judgment, we determined materiality for the financial state- ments as a whole as follows: Overall materiality Group financial state- ments Company financial state- ments £178,000 (2019: £106,000) £114,000 (2019: NA first year) How we determined it 5% of net loss (2019: 5% net loss) 1% of gross assets (2019: NA first year) Rationale for benchmark ap- plied We believe that net loss is a primary meas- ure used by sharehold- ers in assessing the performance of the Group, whilst the sub- sidiaries are in varied states of development and trading. We believe that gross assets are a primary measure used by shareholders in assess- ing the performance of the Company, given that it is largely a holding company for the trading subsidiaries. For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group mate- riality. The range of materiality allocated across components was between £1,000 and £114,000. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £8,900 for the Group (2019: £5,300) and £5,700 for the Parent (2019: NA) as well as misstatements below those amounts that, in our view, war- ranted reporting for qualitative reasons. Other information The directors are responsible for the other information. The other information compris- es the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opin- ion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our respon- sibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other infor- mation. If, based on the work we have per- formed, we conclude that there is a mate- rial misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. ments and the part of the directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or Opinions on other matters pre- scribed by the Companies Act 2006 • certain disclosures of directors’ remuner- ation specified by law are not made; or In our opinion, based on the work undertak- en in the course of the audit: • • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accord- ance with applicable legal require- ments. Matters on which we are required to report by exception In the light of the knowledge and under- standing of the group and parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial state- • we have not received all the informa- tion and explanations we require for our audit. Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page 43, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going con- cern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the au- dit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from mate- Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.52 Independent Auditor’s Report Independent Auditor’s Report 53 Independent Auditor’s Report To The Members Of Mode Global Holdings PLC rial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assur- ance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always de- tect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic de- cisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regula- tions. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregu- larities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. The extent to which the audit was considered capable of detecting irregularities including fraud Our approach to identifying and assessing the risks of material misstatement in re- spect of irregularities, including fraud and non-compliance with laws and regulations, was as follows: • the senior statutory auditor ensured the engagement team collectively had the appropriate competence, capabil- ities and skills to identify or recognise non-compliance with applicable laws and regulations; • we focused on specific laws and regu- lations which we considered may have a direct material effect on the financial statements or the operations of the company; • we assessed the extent of compliance with the laws and regulations identi- fied above through making enquiries of management and inspecting legal correspondence; and • identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit. We assessed the susceptibility of the com- pany’s financial statements to material mis- statement, including obtaining an under- standing of how fraud might occur, by: • making enquiries of management as to where they considered there was sus- ceptibility to fraud, their knowledge of actual, suspected and alleged fraud; • considering the internal controls in place to mitigate risks of fraud and non-com- pliance with laws and regulations. To address the risk of fraud through man- agement bias and override of controls, we: • performed analytical procedures to identify any unusual or unexpected relationships; • tested journal entries to identify unusual transactions; • assessed whether judgements and assumptions made in determining the accounting estimates set out in Note 1 were indicative of potential bias; • investigated the rationale behind signif- icant or unusual transactions. for the audit of the financial statements is located on the Financial Reporting Coun- cil’s website at: www.frc.org.uk/auditorsre- sponsibilities. This description forms part of our auditor’s report. In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to: • agreeing financial statement disclosures to underlying supporting documenta- tion; • reading the minutes of meetings of those charged with governance; • enquiring of management as to actual and potential litigation and claims; • Obtaining confirmation of compliance from the company’s legal advisors. There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compli- ance. Auditing standards also limit the audit procedures required to identify non-com- pliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion. A further description of our responsibilities Other matters which we are required to address We were reappointed as auditors by the company at a General Meeting on 03 Sep- tember 2020 to audit the financial state- ments for the period ending 31 December 2020. Our total uninterrupted period of en- gagement is 5 years, covering the periods ending 31 December 2016 to 31 December 2020. The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain independent of the group and the parent company in conducting our audit. In addition to the audit, the firm acted as reporting accountant to Mode Global Holdings Plc for the transaction. Tax com- pliance services were provided in the period before the listing, and terminated as re- quired by the Ethical Standards. Our audit opinion is consistent with the ad- ditional report to the audit committee. Use of this report This report is made solely to the company’s members, as a body, in accordance with Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.54 Independent Auditor’s Report Independent Auditor’s Report 55 Independent Auditor’s Report To The Members Of Mode Global Holdings PLC Chapter 3 of Part 16 of the Companies Act 2006. 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 per- mitted 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. Sanjay Parmar (Senior Statutory Auditor) For and on behalf of Jeffreys Henry LLP, Statutory Auditor Finsgate 5-7 Cranwood Street London EC1V 9EE 16 June 2021 Mode Global Holdings Annual Report. For the year ended in XX MONTH XXX.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.56 Group Financial Statements Group Financial Statements 57 Group Financial Statements Consolidated Statement of Income Continuing operations Revenue Cost of sales Gross profit Administrative expenses Operating Loss Investment Revenue Finance costs Loss before taxation Taxation Loss for the period Attributable to: Non- Controlling interest Equity shareholders of the parent Notes 2020 £’000 2019 £’000 4 5 6 6 8 450 (507) (57) 2 (39) (37) (3,731) (2,258) (3,788) (2,295) (3,712) (2,607) 156 - (3,556) (2,607) (338) (322) (3,218) (2,285) (3,556) (2,607) Basic and diluted loss per share (pence) 9 (6) (4) All amounts relate to continuing activities. Consolidated Statement of Comprehensive Income Loss for the period Other Comprehensive Income: 2020 £’000 (3,556) Reclassified to profit or loss when specific conditions are met Revaluation Reserve 455 2019 £’000 - - Total Comprehensive Loss for the year (3,101) (2,607) 360 (284) (312) Non- Controlling interest Attributable to: Equity shareholders of the parent Total Comprehensive Loss for the year (338) (322) (2,763) (2,285) (3,101) (2,607) The notes on pages 62 to 84 form an integral part of this consolidated financial informa- tion (with front end section in). Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 58 Group Financial Statements Group Financial Statements 59 Group Financial Statements Consolidated Statement of Financial Position Assets Non-current Assets Property, plant and equipment Intangible Non-Current Assets Software Intangible Current Assets Treasury BTC Customer BTC Current Assets Trade and other receivables Cash and cash equivalents Total Assets Equity and Liabilities Equity attributable to equity holders of the Group Share Capital - Ordinary shares Share Premium account Profit and Loss Account Group Reorganisation Reserve Revaluation Reserve Share Option Reserve Non-Controlling interest Convertible loan note Total Equity Notes 2020 £’000 2019 £’000 11 10 10 12 13 15 15 16 14 75 832 4,336 302 5,365 10,924 806 11,090 (6,878) 454 455 315 - - 6,242 8 8 - - 231 2,077 2,324 - 1,004 (2,987) - - - (260) 533 (1,710) Table continues on the next page Non-current Liabilities Non-current convertible loans note Intangible Liabilities Customer BTC Current Liabilities Current trade and other payables Current convertible loan notes Total Liabilities Total Equity and Liabilities Notes 2020 £’000 2019 £’000 - 3,510 4,336 346 - 14 - 357 167 4,682 4,034 10,924 2,324 These financial statements were approved and authorised for issue by the Board of Direc- tors on 16 June 2021 and were signed on its behalf by: Jonathan Rowland Chairman Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.60 Group Financial Statements Group Financial Statements 61 Group Financial Statements Consolidated Statement of Changes in Equity Notes Share capital Share premium Accumulated deficit Non- Controlling Interest Other Reserves Convertible loan note Total equity MGL as at 1 January 2019 Loss for the year Issue of convertible loan note As at 31 December 2019 MGH Plc as at 1 January 2020 Mode Global Limited bal- ances brought forward Share for Share exchange Shares issued (incl Placing) Share Option Reserve CLN Conversion Acquisition of NCI Total Comprehensive Loss for the year - - - - - - 1,004 - - (702) (2,285) - 62 (322) - 1,004 (2,987) (260) - - - 1,004 (2,987) (260) 15 15 16 15 19 550 (1,004) 150 - 106 - - 6,973 - 4,117 - - - - - - - - - - (673) 598 (3,218) (338) 455 - - - - - - 454 - 315 - - - 364 - (2,607) 533 533 533 (1,710) - - 533 (1,710) - - - - 7,123 315 (533) 3,690 - - - (75) (3,101) 6,242 As at 31 December 2020 806 11,090 (6,878) - 1,224 The accompanying notes are an integral part of these financial statements. Consolidated Statement of Cashflows Cash flows from operating activities Operating loss Increase in receivables (Decrease)/increase in payables Adjustment for: Depreciation and amortisation Exchange rate movement on Convertible Loan Notes Share based payment Net cash generated from operations Cash flows from investing activities Purchase of Property, plant & equipment Purchase of BTC Treasury Purchase of Non-Controlling Interest in JGOO Purchase of intangible assets Net cash outflow from financing activities Cash flows from financing activities Tax Issue of shares Issue of convertible loan note Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of period 2020 £’000 2019 £’000 (3,788) (2,295) (71) (11) 11 73 315 (105) 191 2 - - (3,471) (2,207) (9) (377) (75) (75) (536) 156 7,123 - 7,279 3,272 2,077 16 5,365 (9) - - (9) (18) - - 3,921 3921 1696 404 (23) 2,077 Represented by: Bank balances and cash 5,365 2,077 The accompanying notes are an integral part of these financial statements. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.62 Notes to the Group Financial Statements Notes to the Group Financial Statements 63 Notes to the Group Financial Statements for the year ended 31 December 2020 1. General information Mode Global Holdings is the holding com- pany for a group of companies that trade under the name ‘Mode Global’. Mode Glob- al Holdings was incorporated on 5 August 2020 under the laws of England with a reg- istered number of 12794676. Mode Global Holdings is in the financial services business. Its business address is Finsgate, 5-7 Cran- wood Street, London, United Kingdom, EC1V 9EE. Mode Global Holdings wholly owns Mode Global Limited (“Mode Global”), which in turn owns 100% of JGOO Limited (“JGOO®”) and 100% of Greyfoxx Limited (“Greyfoxx”). Greyfoxx wholly owns Fibermode Limited (“MODE®”). Mode Global Holdings, together with its subsidiaries, are referred to herein as the “Group”. All the limited companies are incorporated and domiciled in England. The registered company numbers of these com- panies are 09768854 (Mode Global Limited) 10805100 (JGOO Limited), 12123111 (Greyfoxx Limited) and 11085143 (Fibermode Limited). Name Country of incorporation Holding Ownership Nature of Business Mode Global Limited JGOO Limited Fibermode Limited Greyfoxx Limited Fibere Limited United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom Direct 100% Holding Company Indirect 100% Indirect 100% Global Payments Platform Mode Digital Wallet (including Cryptocurrency) Indirect 100% Mode for Business Indirect 100% Dormant MODE provides customers the ability to manage their traditional (fiat) money and their digital assets (cryptocurrency) us- ing the same mobile (or web) application. Through MODE’s mobile interface, custom- ers have an all-encompassing view of their traditional fiat and cryptocurrency balanc- es and will be able to initiate various trans- actions in both. JGOO is a payment processing, marketing and advertising company. It aims to pro- vide the next generation of a social media and mobile payments platform, enabling consumers, merchants, and brands to make and receive payments without the need for card platforms, using their mobile phones to make and accept payments. JGOO’s initial focus has been on enabling British brands to engage with Chinese shoppers, both face-to face and online, but will widen its markets in the future. Fibere Limited is dormant as at 31 Decem- ber 2020. The Group’s principal activity is to invest in fintech companies. Its core platform, ‘Mode’, is a financial services ecosystem which aims to become a fully regulated, UK-based in- stitution, providing the full scope of banking and financial services to the holders of both traditional and crypto-assets. Greyfoxx is shortly expecting to become a Financial Conduct Authority (FCA) author- ised electronic money institution, subject to meeting various conditions set out by the FCA. Once operational, Greyfoxx will be able to provide e-money services to both JGOO and MODE. The consolidated financial statements comprised of the Company and its subsid- iaries (together referred to as “the Group”) as at 31 December 2020 and for the period to 31 December 2020. 2. Accounting policies The principal accounting policies applied in the preparation of the consolidated finan- cial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stat- ed. Basis of preparation This financial information has been pre- pared in accordance with IFRS, including IFRS Interpretations Committee (IFRIC) interpretations issued by the Internation- al Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Act 2006 ap- plicable to companies reporting under IFRS. The financial information has been pre- pared under the historical cost convention. The principal accounting policies adopted are set out below and these policies have been consistently applied. The preparation of financial statements, in compliance with adopted IFRSs, requires the use of certain critical accounting es- timates. It also requires the Group’s man- agement to exercise judgment in applying the Group’s accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed below. Basis of consolidation The consolidated financial statements include the results of the Group as if they Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.64 Notes to the Group Financial Statements Notes to the Group Financial Statements 65 formed a single entity for the full period or, in the case of acquisitions, from the date control is transferred to the Group. The Company controls an entity when the Company has the power, either directly or indirectly, to govern the financial and oper- ating policies of another entity or business so as to obtain benefits from its activities, whereby it is classified as a subsidiary. Intercompany transactions and balances between Group companies are therefore eliminated in full. The existence and effect of potential vot- ing rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases. Subsidiaries are all entities over which Mode Global Holdings plc has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. All subsidiaries have a reporting date of 31 December. The Company acquired its 100 per cent interest in Mode Global Limited in 2020 by way of a share for share exchange on 10th September 2020. This is a business combination involving entities under com- mon control and the consolidated finan- cial statements are issued in the name of the Group. The share for share exchange between Mode Global Holdings and Mode Global Limited and its subsidiaries resulted in the elimination of the parent’s investment in the subsidiaries, and the recognition of a group reorganisation reserve. Prior year represents a continuation of Mode Global Limited with the addition of Mode Global Holdings. Changes in accounting policies and disclosures The Group has applied any applicable new standards, amendments to standards, and interpretations that are mandatory, for the financial year beginning on or after 1 Janu- ary 2020. Standards, amendments and interpreta- tions that are not yet effective and have not been early adopted are as follows: Standard Impact on initial application Effective date IFRS 10 and 28 (Amendments) Sale or Contribution of Assets between Investor or its Associate or Joint Venture Postponed IFRS 17 Insurance Contracts including Amendments to IFRS 17: Insurance Contracts 1 January 2023 Amendments to IFRS 3 Business combinations – Reference to Concep- tual Framework 1 January 2022 IFRS 16 (Amendments) IAS 37 (Amendments) * Subject to endorsement Property, plant and equipment 1 January 2022 Provisions, contingent liabilities and contingent assets *1 January 2022 There are no other IFRS or IFRIC interpreta- tions that are effective for the first time in this financial year that would be expected to have a material impact on the Group. ed at the rates ruling at the statement of financial position date. Exchange differenc- es arising on the re-translation of outstand- ing monetary assets and liabilities are also recognised in the income statement. Going concern The consolidated financial statements are prepared on the going concern basis. As expected for any start-up, the Group has incurred significant operating losses and negative cashflows. With the listing to the main market on Oc- tober 5th 2020 raising £7.5m in funds and a subsequent market placing on 26th Febru- ary 2021 for £6m, the Directors are confident that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements. The financial state- ments do not include any adjustments that would result from the going concern basis of preparation being inappropriate. The directors are aware of the risks and uncertainties facing the business, but the assumptions used are the directors’ best estimates of the future development of the business. Foreign currency The functional currency of the Group is Sterling Pound (£) and its subsidiary is also in £. The presentational currency of the Company is £ because a significant amount of its transactions is in £. Transactions entered by the Group’s entities in a currency other than the reporting cur- rency are recorded at the rates ruling when the transaction occurs. Foreign currency monetary assets and liabilities are translat- Share capital For the recent listing to the main market on the London Stock Exchange on October 5th 2020, the following transactions occurred: • On the 5th of August the Company issued two ordinary shares of £0.0001 at par. • On the18th August 2020 the Company issued 198 ordinary shares of £0.0001 at par. • On the 1st September 2020 the Ordinary shares of £0.0001 were consolidated into £0.01 shares. • On the 10th September 2020 54,979,579 ordinary shares of £0.01 were issued as a share-for-share exchange to acquire 100% of the share capital of Mode Glob- al Limited, valued at £27.5m, accounted for in a Merger Relief Reserve. • On the 25th September 2020 the Com- pany assumed ownership of the CLNs, converting to 10,557,424 Ordinary Shares of £0.01 on Listing. • On Listing on the 5th October 2020, a further 15,000,000 ordinary shares of £0.01 were issued at £0.50. Furthermore, on 27th October 2020 and 5th November 2020, 10,265,000 share options were granted, to be vested across the peri- od to 5th October 2024. The ordinary shares have attached to them full voting, dividend and capital distribution (including on winding up) rights. The costs directly associated with the issue Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.66 Notes to the Group Financial Statements Notes to the Group Financial Statements 67 of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. Revenue recognition Digital Wallet - Fibermode Revenue is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business. VAT is not charged on Fibermode’s invoices. Revenue represents commission on custom- er trading activities and includes interest received on Bitcoin holdings lent out to a third-party Network. Commission is recog- nised on the day the trade completes. Global Services - JGOO Revenue is recognised in according with the requirements of IFRS 15 ‘Revenue from Contracts with Customers’. The Company recognises revenue to depict the transfer of services to customers in an amount that reflects the consideration to which the en- tity expects to be entitled, in exchange for those services. This core principle is deliv- ered in a five-step model framework: 1. Identify the contract(s) with the cus- tomer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the con- tract; and 5. Recognise revenue when (or as) the entity satisfies a performance obliga- tion. Revenue is recognised on service contracts at the point at which the service has been completed, or for contracts covering a period of time, monthly over the period of the contract. Revenues exclude intra-group sales and value added taxes and repre- sent funds received on a gross basis, as the transaction revenue is received by JGOO as the principal in respect of complet- ing the payment transaction. We control the service of completing payments on our payments platform and bear primary responsibility for the fulfilment of the pay- ment service. JGOO has full discretion in determining fees charged to UK merchants, which is independent of the revenue we receive from Alipay and WeChat Pay. We therefore bear the risk when completing transactions and report these items as sep- arate transactions. Employee benefits (i) Short-term benefits Wages, salaries, paid annual leave and sick leave and non-monetary benefits are accrued in the period in which the associated services are rendered by em- ployees of the Company. (ii) Defined contribution plan As at year ended 31 December 2020, the Company had a defined contri- bution pension scheme for employees with Scottish Widows. For this defined contribution plan, the Company pays contributions to a privately administered pension insurance plan on a mandatory basis. The contributions are recognised as an employee benefit expense when they are due. Operating leases tax balances are not discounted. The Group has elected not to recognise right-of-use assets and lease liabilities for its leases, all of which qualify as short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Deferred taxation Deferred tax assets and liabilities are rec- ognised where the carrying amount of an asset or liability in the statement of financial position differs from its tax base, except for differences arising on: • • • the initial recognition of goodwill; the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither account- ing or taxable profit; and investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is prob- able that the difference will not reverse in the foreseeable future. Recognition of deferred tax assets is re- stricted to those instances where it is prob- able that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is de- termined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the deferred tax liabilities or assets are settled or recovered. Deferred Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabil- ities. The Group is entitled to a tax deduction on the exercise of certain employee share options. A share-based payment expense is recorded in the income statement over the period from the grant date to the vesting date of the relevant options. As there is a temporary difference between the accounting and tax bases, a deferred tax asset may be recorded. The deferred tax asset arising on share option awards is calculated as the estimated amount of tax deduction to be obtained in the fu- ture (based on the Group’s share price at the balance sheet date) pro-rated to the extent that the services of the employee have been rendered over the vesting peri- od. If this amount exceeds the cumulative amount of the remuneration expense at the statutory rate, the excess is recorded directly in equity, against retained earnings. Similarly, current tax relief in excess of the cumulative amount of the Share-based payments expense at the statutory rate is also recorded in retained earnings. Cash and cash equivalents Cash and cash equivalents include cash in hand and deposits held on call, together with other short term highly liquid invest- ments which are not subject to significant changes in value and have original maturi- ties of less than three months. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.68 Notes to the Group Financial Statements Notes to the Group Financial Statements 69 Equity June 17th 2021). Intangible Liabilities Please see note 18 below to review the composition of and relevant narrative for each section of Total Equity. The latest date that the options can be ex- ercised is the tenth anniversary of the Grant Date, and if not exercised before then the options would automatically lapse. Equity instruments Ordinary shares are classified as equity. In- cremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds. Dividends on ordinary shares are recognised as liabilities when approved for distribution. Share-based payments The Company operates an unapproved share-based compensation plan, under which the company receives services from employees as consideration for equity in- struments (options) of Mode Global Hold- ings plc. The awards were granted, on two separate dates being October 27th 2020 and 4th November 2020, by Mode Glob- al Holdings plc, and the fair value of the employee services received in exchange for the grant of the options is recognised as an expense under IFRS 2. Credit is recognised directly in equity (Share Option Reserve). The total amount to be expensed was determined by reference to the fair value of the total options granted using the Black Scholes model – see note 15. No options were able to be exercised prior to April 2021, however given that we are still within a closed period, the first exercise date will be June 17th 2021 (subject to the financial statements being published on Intangible assets Intangible assets are reported separate- ly between Bitcoin assets (both Customer holdings and Treasury holdings) and ac- quired software and websites. Software Software has a finite life and is therefore carried at cost less accumulated amor- tisation. Amortisation is calculated using a straight-line method to allocate the cost of software and websites over their estimated useful lives of three years. Cryptocurrency assets The bitcoin cryptocurrency assets (un- der IAS 38) for Treasury are recorded as Intangible assets and can be measured at either cost or revaluation. The Group has elected to measure them at reval- uation, as there is now an active mar- ket for these assets across many digital exchanges (Coinbase, Kraken etc), and under IFRS 13 recognises the bitcoin assets at Fair Value, reflected in both the revaluation reserve and in Other Com- prehensive Income. The assets are held for investment purposes and therefore cannot be recognised as inventory as they are not being held for sale in the ordinary course of business. Intangible liabilities are made up of cus- tomer cryptocurrency assets and are held at Fair value. Property, plant and equipment Property, plant and equipment are stated at historical cost less subsequent accu- mulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attrib- utable to the acquisition of the assets. Subsequent costs are included in the as- set’s carrying amount, or recognised as a separate asset, as appropriate, only when it is probable that future economic ben- efits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Depreciation on property, plant and equip- ment is calculated using the straight-line method to write off their cost over their es- timated useful lives at the following annual rates: Computer equipment: 33% straight-line Plant and machinery: 33% straight-line Financial assets and liabilities Recognition and initial measurement The Group initially recognises loans and advances, trade and other receivables/ payables, and borrowings plus or minus transactions costs, when and only when the Group becomes party to the contractual provisions of the instruments.. Financial assets at amortised cost The Group’s financial assets at amortised cost comprise trade and other receivables. These represent debt instruments with fixed or determinable payments that represent principal or interest and where the intention is to hold to collect these contractual cash flows. They are initially recognised at fair value, included in current and non-current assets, depending on the nature of the transaction, and are subsequently meas- ured at amortised cost using the effec- tive interest method, less any provision for impairment. Financial liabilities at amortised cost Financial liabilities at amortised cost com- prise trade and other payables. They are classified as current and non-current liabil- ities depending on the nature of the trans- action, and are subsequently measured at amortised cost using the effective interest method. Financial assets The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial as- set are transferred, or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 70 Notes to the Group Financial Statements Notes to the Group Financial Statements 71 On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration re- ceived (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been rec- ognised in OCI is recognised in profit or loss. Financial liabilities The Group derecognises a financial liability when its contractual obligations are dis- charged, cancelled, or expire. their liability and equity components. The amount initially attributed to the debt com- ponent equals the discounted cash flows using a market rate of interest that would be payable on a similar debt instrument that does not include an option to con- vert. Subsequently, the debt component is accounted for as a financial liability meas- ured at amortised cost, until extinguished on conversion or maturity of the bond. The remainder of the proceeds are allocated to the conversion option and are recognised in the “Convertible debt reserve” within share- holders’ equity, net of income tax effects. Government grants The Group has received government as- sistance income in the period as a result of the Covid-19 pandemic. Government grants are recognised where there is reasonable assurance that the grant will be received and that the Group will comply with the conditions attached to them. Government grants that compensate the Group for expenses incurred are recognised in the income statement, as a deduction against the related expense, over the periods necessary to match them with the related costs. During 2020 the Group received govern- ment grants totalling £49,338 for furloughed staff as a result of the Coronavirus Job Retention Scheme. This was offset against staff costs within administrative expenses. Convertible debt The proceeds received on the issue of the Group’s convertible debt are allocated into Summary of critical accounting esti- mates and judgements The preparation of financial information, in conformity with IFRS, requires the use of certain critical accounting estimates. It also requires the directors to exercise their judgement in the process of applying the accounting policies which are detailed above. These judgements are continually evaluated by the directors and manage- ment, and are based on historical experi- ence and other factors, including expecta- tions of future events that are believed to be reasonable under the circumstances. The key estimates and underlying assump- tions concerning the future, and other key estimated uncertainties at the date of the financial statements, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabil- ities within the next financial period, are reviewed on an ongoing 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. The estimates and judgements which have a significant risk of causing a material ad- justment to the carrying amount of assets and liabilities within the next financial year are discussed below: The estimates and judgements which have a significant risk of causing a material ad- justment to the carrying amount of assets and liabilities within the next financial year are discussed below: Accounting for cryptocurrencies The Group’s cryptocurrencies are ac- counted for as Intangible Assets using the revaluation model. The valuation of cryptocurrencies is a key source of estimation due to the volatility of prices in the market. However, the risk here is mitigated by a corresponding liability to the customer. Treasury assets held are marked at Fair Value using the closing market price at 31 December 2020. The gain is shown under the Revaluation Reserve and subsequently within Other Comprehensive Income. Share-based payments The basis for the share-based payments expense for 2020 has been set out in note 15. In accounting for the fair value of options and warrants, the Compa- ny makes assumptions regarding share price volatility, risk free rate, and expect- ed life, in order to determine the amount of associated expense to recognise. 3. Financial risk management Financial instruments Financial assets Cash and cash equivalents Treasury BTC Trade receivables – net of provision Other receivables Financial assets 31-Dec-20 £’000 31-Dec-19 £’000 5,365 2,077 832 234 14 - 231 8 6,445 2,316 Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.72 Notes to the Group Financial Statements Notes to the Group Financial Statements 73 Financial liabilities Trade payables Other Payables Accruals Trade and other payables Loans and borrowings Loan Loans and borrowings Financial liabilities Fair value hierarchy All the financial assets and financial liabili- ties recognised in the financial statements which are short-term in nature are shown at the carrying value, which also approximates the fair values for short-term financial instruments. Therefore, no separate disclo- sure for fair value hierarchy is required. The disclosure on fair value hierarchy does not apply to the financial leases. The Group’s activities expose it to a variety of financial risks, mainly credit risk, liquidity risk and interest rate risk. Credit risk Credit risk refers to the risk that a counter- party will default on its contractual obliga- 31-Dec-20 £ 31-Dec-19 £ 89 106 151 346 - - - 229 35 93 357 - 3,677 3,677 346 4,034 tions resulting in financial loss to the Group. In order to minimise this risk, the Group endeavours only to deal with companies which are demonstrably creditworthy. The aggregate financial exposure is con- tinuously monitored. The maximum expo- sure to credit risk is the value of the Group’s outstanding bank balances. The Group’s exposure to credit risk on cash and cash equivalents is considered to be low as the bank accounts are with banks with high credit ratings. Liquidity risk The Group currently holds cash balances to provide funding for normal trading activity and is managed centrally. Trade and other payables are monitored as part of normal management operations. The convertible loan note principal and interest was con- verted to Equity upon the listing on the October 5th 2020. The below, for 2020, is predominantly made up of accrued costs and tax liabilities relat- ing to payroll: 2020 Trade and other payables Total 2019 Trade and other payables Convertible loan note Total Market risk - interest rate risk The Group carries no interest rate risk at the respective year ends. Capital risk management The Group’s capital management objec- tives are to ensure that the Group continues to operate as a going concern, and pro- vide an adequate return to shareholders by pricing products and services commensu- rate with the level of risk. Within 1 year £’000 1-2 years £’000 2-5 years £’000 346 346 - - - - Within 1 year £’000 1-2 years £’000 2-5 years £’000 357 167 524 - - 195 195 3,315 3,315 To meet these objectives, the Company re- views the budgets and forecasts on a regu- lar basis to ensure there is sufficient capital to meet the needs of the Company through to profitability, and achieve a positive cash flow. All working capital requirements are fi- nanced from existing cash resources. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.74 Notes to the Group Financial Statements Notes to the Group Financial Statements 75 4. Segment information 5. Loss from operations The Group’s Revenue is made up of the trading and interest commission on cryp- tocurrency assets (Fibermode), as well as bespoke payment and marketing solutions on its Global Services platform (JGOO). The Group currently only operates in the UK and so for now the presentation of a geographi- cal split is not applicable. Revenue Cost of sales Gross Profit / (Loss) Administrative expenses Operating Profit/(Loss) Assets Liabilities Equity Total Liabilities & Equity Revenue Cost of sales Gross Profit / (Loss) Administrative expenses Operating Profit/(Loss) Assets Liabilities Equity Total Liabilities & Equity 31-Dec-20 Global Services £’000 Cryptocurrency Assets £’000 Other £’000 (2,115) 4,540 31-Dec-19 Total £’000 (450) 507 (57) (97) 182 (85) - - - 1,319 1,477 3,731 (1,404) (1,477) (3,788) 4,540 6,232 10,924 6,655 (3,656) 9,889 4,682 6,242 6,232 10,924 Other £’000 Total £’000 - - - (2) 39 (37) 792 2,258 - 39 (39) 761 (800) (792) (2,295) 75 890 (815) 75 2,133 2,399 (266) 2,133 2,324 4,034 (1,710) 2,324 (353) 325 28 934 (907) 152 1,684 (1,532) 152 (2) - 2 706 (704) 116 745 (629) 116 Global Services £’000 Cryptocurrency Assets £’000 Year to 31 December 2020 £’000 Year to 31 December 2019 £’000 259 393 23 300 188 361 50 2,157 3,731 323 321 153 156 137 400 10 759 2,258 Operating loss is stated after charging: Directors Fees Consulting and advisory fees Premises Software costs Advertising Legal and professional fees Audit fees* Other administrative expenses Total administrative expenses * Fees paid to auditors for non-audit services not disclosed. 6. Convertible Loan Note The amounts shown for both Investment Revenue and Finance Costs relate to the Convertible Loan Note issued in 2019 and converted to equity in 2020. The Investment Revenue is the gain on early settlement of the outstanding debt. The Finance Costs relate to the effective interest charges on the Loan Notes up until the trigger event of the Initial Public Offering – See also Note 17. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.76 Notes to the Group Financial Statements Notes to the Group Financial Statements 77 7. Employment costs & directors 8. Taxation The average number of employees (including directors) during the period was made up as follows: Directors (including non-executive directors) Administrative Total Year ended 31-Dec-20 Number Year ended 31-Dec-19 Number 5 26 31 6 11 17 The cost of employees (including directors) during the period includes the effect of govern- ment grants and was made up as follows: Salaries and wages (including directors) Social security costs Pension Costs Share Based Remuneration Staff costs Year ended 31-Dec-20 £’000 Year ended 31-Dec-19 £’000 1,281 137 19 315 1,752 524 52 0 0 576 The compensation of key management personnel, principally directors of Mode Global Holdings PLC, for the period were as follows: Salaries/fees Social security costs Share Based Remuneration Total Year ended 31-Dec-20 £’000 Year ended 31-Dec-19 £’000 308 19 192 519 316 7 - 323 The above remuneration (including share- based payments) of directors includes the following amounts paid to the highest paid Director: Salaries/fees Year ended 31-Dec-20 £ 209,902 Year ended 31-Dec-19 £ 105,834 Total current tax (relief for R&D) Year ended 31-Dec-20 £’000 (156) Year ended 31-Dec-19 £’000 - Factors affecting the tax charge for the period Loss on ordinary activities before taxation (3,712) (2,607) Loss on ordinary activities before taxation multi- plied by standard rate of UK corporation tax of 19% (2019: 19%) (705) (495) Effects of: Non-deductible expenses Depreciation Research & Development tax credits Tax credit carried forward Current tax credit for the period Changes in tax rates The UK small company’s corporation tax rate has been maintained at 19% for the two periods. Accordingly, the deferred tax asset has been calculated based on the rate of 19% at the balance sheet date. Future enacted tax rates of 19% will apply from 1 April 2020 and 25% from 1 April 2021. No liability to UK corporation tax arose on ordinary activities for the current period. 103 2 (156) 600 (156) 36 - - 459 - The Group has estimated tax losses of £5,874,000 (2019: £2,716,000) available for carry forward against future trading profits. The tax losses have resulted in a deferred tax asset of approximately £1,116,000 (2019: £516,000) which has not been recognised in the financial statements due to the uncer- tainty of the recoverability of the amount. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.78 Notes to the Group Financial Statements Notes to the Group Financial Statements 79 9. Earnings per share (EPS) 12. Trade and other receivables Basic and diluted Loss for the period and earnings used in basic & diluted EPS (£) Weighted average number of shares used in basic and diluted EPS Loss per share (p) Year ended 31-Dec-20 Year ended 31-Dec-19 (3,556,780) (2,284,956) 61,071,349 54,979,579 (6) (4) Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company by the number of ordinary shares in issue at the end of the period. The weighted average number of shares for 2019 has been restated to be comparable to 2020 due to the listing of Mode Global Holdings on the London Stock Exchange on October 5th 2020. 10. Intangible assets At period start (1 January) Additions Revaluation Amortisation At period end (31 December) 2020 £’000 8 452 455 (7) 908 2019 £’000 - 9 - (1) 8 The intangible asset additions comprise of Bitcoin (£377k) and Software (£75k). The revaluation relates solely to the Bitcoin pur- chases revalued to the relevant exchange price as at 31st December 2020. Trade payables Other payables Accruals 11. Tangible assets At period start (1 January) Additions Revaluation Amortisation At period end (31 December) Tangible Assets are comprised of computer equipment. 2020 £’000 2019 £’000 8 9 - (3) 14 - 9 - (1) 8 Trade receivables Other receivables VAT Receivable Prepayments 31-Dec-20 £’000 31-Dec-19 £’000 1 211 68 22 302 1 117 113 - 231 13. Cash and cash equivalents Where cash at bank earns interest, the interest accrues at floating rates based on daily bank deposit rates. The fair value of the cash and cash equivalents is as dis- closed below. For the purpose of the cash flow statement, cash and cash equivalents comprise of the amounts shown below. Cash at bank and in hand 14. Trade and other payables 31-Dec-20 £’000 5,365 31-Dec-19 £’000 2,077 31-Dec-20 £’000 31-Dec-19 £’000 89 106 151 346 229 35 93 357 Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.80 Notes to the Group Financial Statements Notes to the Group Financial Statements 81 15. Share capital Ordinary shares Number Nominal value/share £ Share capital £ Share premium £ Total consideration £ No options were exercisable at the end of the period. No share-based payments were settled during the period and therefore the method of settlement is not applicable. options scheme were £0.18 per option using the Black Scholes model. The significant inputs into the model are as follows: At 31 December 2019 1,190,364 0.0001 119.04 1,004,112 1,004,231 Consolidation of Shares to 1p nominal 11,904 0.01 119 - - The weighted average fair values of the options granted under the unapproved Share for Share exchange allocates 4620 shares in MGH Plc for every 1 share in Mode Global Limited 54,979,579 0.01 549,796 (1,004,112) (454,316) CLN Conversion Shares 10,557,424 0.01 105,574 4,117,400 4,222,974 Ordinary Shares issued pursuant to Placing 15,000,000 0.01 150,000 6,973,118 7,123,118 At 31 December 2020 80,537,003 0.01 805,370 11,090,518 11,896,007 All shares of the Company rank pari passu in all respects. 16. Share-based remuneration The parent operates an unapproved share option plan for all employees of the Group. In accordance with standard vesting terms, the full award will vest four years after the start of the vesting date (5th October 2021), with 20% vesting on the initial IPO date and a further 5% of the options vested on each three-month anniversary. If the options remain unexercised after a period of ten years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest. The details of the movements in the share scheme are as follows: Granted during the period Exercised during the period Forfeited during the period Outstanding as at 31 December 2020 Unapproved Options Number 9,213,434 - - £ 0.5 - - 9,213,434 0.5 Current Price (£) on date issued Option Exercise Price (£) Expected Life of Options in years Volatility Dividend Yield Risk free interest rate Adjustment for sub-optimal exercise factor £ 0.5 0.5 4 59% - 0.72% 20% The expected volatility was determined us- ing the trading prices for MGH plc from the period it listed until February 16th 2021 to allow for sufficient time to provide enough scope. The reason for only considering MGH is that there were no other similar compa- nies listed in the UK with comparable oper- ations to MGH. 17. Convertible debt The company issued 197 5% convertible loan notes for $4,925,000 on 20th February 2019 and 26 5% convertible loan notes for $260,000 on 4th April 2019, both having a term of three years. The notes convert au- tomatically in the event of an IPO, change of control, or a relevant fundraising (being not less than $1,000,000 before expenses). During 2020 the trigger event in regard to the IPO occurred on 5th October 2020 at which point the principal and interest con- verted to Equity and therefore no debt was outstanding at the year end. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020. 82 Notes to the Group Financial Statements Notes to the Group Financial Statements 83 Up to 1 year Between 1 and 2 years Between 2 & 5 years Total - - - - - - - - - - - - 166,908 195,359 3,314,186 3,676,453 - - - - 166,908 195,359 3,314,186 3,676,453 At 31 December 2020 Convertible debt Unsecured loans At 31 December 2019 Convertible debt 18. Reserves The following describes the nature and purpose of each reserve within equity: Share premium Retained earnings Revaluation Reserve Group Reorganisation Reserve Share Based Payment Reserve Amount subscribed for share capital in ex- cess of nominal value. Retained earnings represent all other net gains and losses and transactions with shareholders (example dividends) not rec- ognised elsewhere. Revaluation Reserve is the excess over nominal value for the purchased Intangible Bitcoin Assets The consolidation of Mode Global Limited and its subsidiaries resulted in the elimina- tion of the parent’s investment in the sub- sidiaries, and the recognition of a group reorganisation reserve Cumulative estimated expense amount based on the price of MGH’s share options Convertible loan note Equity component of the convertible loan. The Other Reserves noted on the State- ment of Changes in Equity are comprised of the Group Reorganisation Reserve, Share Based Payments Reserve and the Revalua- tion Reserve. 19. Acquisition on Non-Controlling Interest On 31st October 2020, Mode Global Limited acquired Pure NZ Gateway Limited’s 45% interest in the share capital of JGOO Lim- ited, which subsequently became a whol- ly-owned subsidiary of Mode Global Limit- ed. The consideration of £75,000 was paid and is shown in the statement of changes in equity as an equity transaction and does not impact the income statement. 20. Capital commitments The Company has no capital commitments at the years ended 31 December 2020 and 31 December 2019. 21. Related Party Transactions During the period the Company entered into the following transactions with related par- ties: Director Company Transactions 31-Dec-20 £’000 31-Dec-19 £’000 Richard Morecroft Digital Works Consulting Director Fees 100 106 Jonathan Rowland Ruskin Capital Ltd Share Purchase Consultancy Fees - Tulham LLC CLN converted Keve Limited Partnership Share Purchase 1,500 750 508 19 - - - Ryan Moore Ryan Moore Ruskin Capital Limited is owned by David Rowland, the father of Jonathan Rowland. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.84 Notes to the Group Financial Statements Company Financial Statements 85 22. Events after the reporting date Fund raise Additional Bitcoin purchases A successful £6,000,000 capital raising was completed by way of a placement of 10,909,091 new ordinary shares at a price of £0.55p each (the “Placing Price”). Mode continues to add Bitcoin Assets to its Balance Sheet as a treasury reserve asset and will continue to account for this under the revaluation method. The Placing Price represents a premium of 10 per cent over Mode’s October 2020 IPO price of £0.50p and a discount of 12% to the closing mid-price of the Company’s shares on 25th February 2021 (being the latest practicable date prior to the publication of the announcement). Personnel update As announced on the issued RNS dat- ed 12th May 2021, Ryan Moore (previously Non-Executive Director) has been ap- pointed as the Company’s Chief Executive Officer (CEO) effective immediately. Founder Jonathan Rowland remains as Chairman, working closely with Ryan to shape Mode’s growth trajectory for the years ahead. 23. Ultimate controlling party There is no ultimate controlling party of the Company. Company Financial Statements Company Statement of Financial Position Notes 2020 £’000 Assets Non-current Assets Net amounts due from subsidiaries Investment in group companies Current Assets Trade and other receivables Cash and cash equivalents Total Assets Equity and Liabilities Equity attributable to equity holders of the Group Share Capital - Ordinary shares Share Premium account Profit and Loss Account Merger Relief Reserve Share Option Reserve Total Equity Current Liabilities Current trade and other payables Total Liabilities Total Equity and Liabilities 3.3 3.6 3.4 3.4 3.7 3.8 6,339 27,490 1 5,054 38,884 806 11,091 (278) 26,940 315 38,874 10 10 38,884 The Company profit and loss account has been approved by the directors, and the use of the exemption under s408 of the Companies Act has been applied to publish an individual profit & loss statement. These financial statements were approved and authorised for issue by the board of directors on 16 June 2021 and were signed on its behalf by: Jonathan Rowland Chairman Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.86 Company Financial Statements Notes to the Company Financial Statements 87 Consolidated Statement of Changes in Equity Share capital £’000 Merger Relief Reserve £’000 Share premium £’000 Accumulated deficit £’000 SBP Reserve £’000 Total equity £’000 Notes Incorporation on 5 August 2020 Share for Share exchange Shares issued (including placing) Share Option Reserve CLN Conversion Loss for Year - 3.4 3.4 3.8 3.4 - - 550 150 - 106 - - 26,940 - - - - - - 6,974 - 4,117 - As at 31 December 2020 806 26,940 11,091 - - - - - (278) (278) - - - - 27,490 7,124 315 315 - - 4,223 (278) 315 38,874 Share capital is the amount subscribed for shares at nominal value. The accompanying notes are an integral part of these financial statements. Merger relief reserve is the excess over the nominal value for shares issued as part of a share-for-share exchange. Notes to the Company Financial Statements for the year ended 31 December 2020 1. General information Mode Global Holdings Plc is an investment company incorporated in the United King- dom. The address of the registered office is Finsgate, 5-7 Cranwood Street, London, United Kingdom, EC1V 9EE. The Company was incorporated and registered in England and Wales on 5th August 2020 as a public limited company. 2. Accounting policies As at 31 December 2020 the Company had shareholdings in five entities, a direct hold- ing in Mode Global Limited, and indirect holdings in JGOO Limited 100%, Greyfoxx Limited 100%, Fibermode Limited (100%) & Fibere Limited. Basis of preparation cial Statements; The financial statements of the parent company have bene prepared in accord- ance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (“FRS101”) and the requirements of the Companies Act 2006 in accordance with applicable ac- counting standards. These policies have been consistently ap- plied. The company has taken advantage of the following disclosure exemptions under FRS 101: • • • the requirements of IFRS 7 Financial In- struments: Disclosures; the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement; the requirements of paragraphs 10(d), 10(f), 16, 38A to 38D, 40A to 40D, 111 and 134 to 136 of IAS 1 Presentation of Finan- • • • • • the requirements of IAS 7 Statement of Cash Flows; the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors; the requirements of paragraphs 17 and 18A of IAS 24 Related Party Disclosures; the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member ;member; and the requirements of paragraphs 130(f) (ii), 130(f)(iii), 134(d) to 134(f), and 135(c) to 135(e) of IAS 36 Impairment of Assets. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.88 Notes to the Company Financial Statements Notes to the Company Financial Statements 89 The Company has also taken advantage of the exemption under Section 408 of the Companies Act 2006 from presenting its own profit and loss account. The preparation of financial statements, in conformity with FRS101, requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The are- as involving a higher degree of judgment or complexity, or areas where assump- tions and estimates are significant to the financial statements, are disclosed in the Company statement of financial position. Although these estimates are based on management’s experience and knowledge of current events and actions, actual results may ultimately differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revi- sions to accounting estimates are recog- nised in the period in which the estimates are 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. Changes in accounting policies and disclosures (a) New, amended standards, interpreta- tions not adopted by the Company Standard Impact on initial application Effective date IFRS 10 and 28 (Amendments) Sale or Contribution of Assets between Investor or its Associate or Joint Venture Postponed IFRS 17 Insurance Contracts including Amendments to IFRS 17: Insurance Contracts 1 January 2023 Amendments to IFRS 3 Business combinations – Reference to Concep- tual Framework 1 January 2022 IFRS 16 (Amendments) IAS 37 (Amendments) * Subject to endorsement Property, plant and equipment 1 January 2022 Provisions, contingent liabilities and contingent assets *1 January 2022 Management has not yet fully assessed the impact of this standard, but does not believe it will have a material impact on the financial statements. Financial instruments Equity instruments Financial assets and financial liabilities are recognised in the statement of finan- cial position when the Company becomes party to the contractual provisions of the instrument. Financial assets are derecog- nised when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those as- sets are transferred. Financial liabilities are derecognised when the obligation speci- fied in the contract is discharged, cancelled or expired. Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Ap- propriate provisions for estimated irrecover- able amounts are recognised in the state- ment of comprehensive income using the expected credit loss method. The carrying amount of these assets approximates their fair value. Cash and cash equivalents Cash and cash equivalents comprise cash in hand, demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignifi- cant risk of changes in value. The carrying amount of these assets approximates their fair value. 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 Company are recorded at the proceeds received, net of direct issue costs. Trade and other payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are recognised initially at their fair value and are subse- quently measured at their amortised cost using the effective interest rate method. Due to the short-term nature of these bal- ances, the carrying amount of trade paya- bles approximates to their fair value. Impairment The Company assesses, on a forward-look- ing basis, the expected credit losses asso- ciated with any debt instruments carried at amortised cost. The impairment method- ology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Company applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised against the initial recogni- tion of the receivables. Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.90 Notes to the Company Financial Statements Notes to the Company Financial Statements 91 Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. Investments in subsidiaries The Company’s investment in its subsidiar- ies is carried at cost less provision for any impairment. Investments denominated in foreign currency are recorded using the rate of exchange at the date of acquisition. The carrying value is tested for impairment when there is an indication that the value of the investment might be impaired. When carrying out impairment tests these would be based upon future cash flow forecasts, and these forecasts would be based upon management judgement. Critical accounting estimates and judgments The Company makes certain judgements and estimates which affect the reported amount of assets and liabilities. Critical judgements and the assumptions used in calculating estimates are continually eval- uated and are based on historical experi- ence and other factors, including expecta- tions of future events that are believed to be reasonable under the circumstances. In the process of applying the Company’s accounting policies, which are described above, the directors do not believe that they have had to make any assumptions or judgements that would have a material effect on the amounts recognised in the financial information. Financial risk management The Company’s activities may expose it to some financial risks. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s financial perfor- mance. Capital risk The Company takes great care to protect its capital investments. Significant due diligence is undertaken prior to making any investment. Investments are closely moni- tored. Impairment In the Company’s accounts, intragroup receivables are carried at cost. An impair- ment review is conducted annually and the directors do not believe any impairment has occurred in 2020. The directors believe that these amounts are recoverable as the future revenue streams of the subsidiaries will be of sufficient value and are therefore not impaired. 3. Notes to the financial statements 3.1 Personnel There was no benefits, emoluments, or remuneration payable during the period for key management personnel, excluding the non-executive director listed below in note 3.5. 3.2 Capital risk management The directors’ objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. At the date of this financial information, the Company had been financed by the introduction of capi- tal. In the future, the capital structure of the Company is to consist of borrowings and equity attributable to equity holders of the Company, comprising issued share capital and reserves. 3.3 Investments in subsidiary under- takings On 10th September 2020 the Company acquired 100% of the share capital of Mode Global Limited in a share-for-share ex- change. Details can be found below under share capital. The principal undertakings in which the Company has an interest at the period-end is as follows: Name Country of incorporation Holding Ownership Mode Global Limited United Kingdom Direct 100% JGOO Limited United Kingdom Indirect 100% Fibermode Limited United Kingdom Indirect 100% Nature of Business Holding Company Global Payments Platform Mode Digital Wallet (including Cryptocurrency) Greyfoxx Limited United Kingdom Indirect Fibere Limited United Kingdom Indirect 100% 100% Mode for Business Dormant Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.92 Notes to the Company Financial Statements Notes to the Company Financial Statements 93 3.5 Related party transactions 3.8 Share-based payment reserve During the year ended 31 December 2020, the following related party transactions occurred: - On 31st October 2020, Mode Global Limited acquired an additional 45% interest in the share capital of JGOO Limited, which be- came the wholly-owned subsidiary of Mode Global Limited (See note 17 in the consoli- dated financial statements’ notes). 3.4 Share capital For details of the share capital see note 15 of the consolidated financial statements. The Company operates a non-approved share-based compensation plan, under which the Company receives services from employees as consideration for equity in- struments (options) of Mode Global Hold- ings plc. The awards were granted on two separate dates, being October 27th 2020 and 4th November 2020, by Mode Glob- al Holdings plc, and the fair value of the employee services received in exchange for the grant of the options is recognised as an expense under IFRS 2. A credit is recognised directly in equity (Share Option Reserve). The total amount to be expensed was determined by reference to the fair value of the total options granted using the Black Scholes model. No options can be exercised prior to April 2021, however given that this was within a closed period, the first exercise date will be 17th June 2021 (subject to accounts being published on June 17th 2021). The maximum date that the options can be exercised is the tenth anniversary of the Grant Date, and if not exercised before then the options would automatically lapse. 3.9 Contingent liabilities The Company has no contingent liabilities in respect of legal claims arising from the ordinary course of business. 3.10 Capital commitments There was no capital expenditure contract- ed for at the end of the reporting period but not yet incurred. 3.11 Ultimate controlling party There is no ultimate controlling party of the Company. Director Ryan Moore (3.72%) Company Transactions 2020 Keve Family Ltd Partnership Share Purchase £3,000,000 2020 Fees Ryan Moore Directors Fees £13,333 3.6 Cash and cash equivalents Cash at the bank and in hand 31 December 2020 £’000 5,054 3.7 Merger relief reserve exchange with the previous shareholders of Mode Global Limited. The merger relief reserve was created to recognise the excess over par value of the shares issued as part of the share-for-share Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.Mode Global Holdings Plc Annual Report. For the year ended 31 December 2020.

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