ANNUAL REPORT AND
FINANCIAL STATEMENTS
for the year ended 31
December 2016
Mobile Tornado Group Plc
Company Registration Number: 5136300
Contents
Strategic report
Directors’ report
Independent auditors’ report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Company balance sheet
Company statement of changes in equity
Notes to the Company financial statements
Notice of Annual General Meeting
Corporate information
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2
7
12
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18
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39
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47
51
Page 1
Strategic report
Introduction
Mobile Tornado Group plc, the leading provider of instant communication mobile applications
to the enterprise market, announces its results for the year ended 31 December 2016.
Financial Highlights
• Revenue decreased by 10% to £2.02m (2015: £2.26m)
• Recurring revenues increased by 10% to £1.84m (2015: £1.68m)
• Professional service sales decreased to £0.16m (2015: £0.50m)
• Hardware and 3rd party software sales decreased to £0.02m (2015: £0.08m)
• Gross profit decreased by 9% to £1.92m (2015: £2.12m)
• Operating expenses increased by 15% to £3.89m (2015: £3.38m) – adversely impacted
by the depreciation of Sterling during the year
• Adjusted EBITDA* loss of £1.96m (2015: £1.26m)
• Group operating loss for the year increased to £3.09m (2015: £1.45m) – impacted by
further exchange differences of £0.64m (2015: £0.07m) and exceptional items of
£0.28m (2015: £nil) comprising property costs arising from our joint lease and salary
and redundancy costs arising from the transition of our R&D team during the year
• Loss after tax of £3.45m (2015: £1.66m)
• Basic loss per share of 1.39p (2015: 0.69p)
• Cash at bank of £0.17m (2015: £0.11m) with net debt of £9.06m (2015: £6.81m)
*Earnings before interest, tax, depreciation, amortisation, exceptional items and
excluding exchange differences
Operating highlights
• Appointment of Avi Tooba as Chief Executive, formerly a senior director with Motorola for
30 years
• Recruitment of a new senior management team with significant sector experience
• New R&D centre opened in Ukraine to support development of new functionality and
feature sets
• Enhanced technical platform delivering strong positive feedback from customers and
increasing commercial engagement
• Applications roadmap developed featuring SDK and Dispatcher applications –
development well advanced with launches anticipated this financial year
• Growing pipeline of high quality customer engagements driven by enhanced technical
platform and applications
Financial results and key performance indicators
Total revenue for the year ended 31 December 2016 reduced by 10% to £2.02m (2015:
£2.26m). Encouragingly, recurring revenue, a key performance indicator for the business,
continued to increase and was up by 10% to £1.84m (2015: £1.68m). Non-recurring revenue,
comprising installation fees, hardware and professional services, reduced to £0.19m (2015:
£0.58m) due to the smaller number and size of new installations during the period.
Gross profit decreased to £1.92m (2015: £2.12m) as a result of the growth in higher margin
recurring revenues being countered by lower professional services revenues in the year.
Operating expenses increased by 15% in the year to £3.89m (2015: £3.38m) resulting from
the enhancements made to our research and development staffing over the year.
Due to the annual revaluation of certain financial liabilities on the balance sheet, the Group
also reported a translational loss of £0.64m (2015: £0.07m) due to the depreciation of sterling
during the year. The Group received an income tax credit in respect of our qualifying
investment in R&D activities of £0.28m (2015: £0.37m).
Page 2
Strategic report
As a result of the above, the loss after tax for the year increased to £3.45m (2015: Loss
£1.66m) and an increased basic loss per share of 1.39p (2015: 0.69p).
The net cash outflow from operating activities was £1.72m (2015: £1.23m). At 31 December
2016, the Group had £0.17m cash at bank (2015: £0.11m) and net debt of £9.06m (2015:
£6.81m).
Results and dividends
The Directors do not recommend the payment of a dividend in respect of the year ended
31 December 2016 (year ended 31 December 2015: nil). The Company currently intends to
reinvest future earnings to finance the growth of the business over the near term.
Review of operations
The appointment of Avi Tooba during the period as Chief Executive has resulted in a significant
acceleration in the development of our technical platform. Having held senior positions at
Motorola Solutions for over 30 years, he brings enormous experience to our business. He has
moved fast to strengthen our engineering teams, opening up a technical centre in Ukraine to
capitalise on established talent pools that have deep experience of instant communications.
At the same time, we have recruited a highly experienced technical leadership team to drive
the development of the various projects.
Although operating expenses have increased to accommodate this investment in resources,
we have been prudent in our approach, and by rebalancing the teams across our different
geographical locations, have managed to restrict the cost increase compared to the prior year
to 15%. Of this, in excess of 50% was caused by the decline in the value of sterling over the
year since the majority of our overheads are denominated in foreign currency.
The primary focus of the technical team has been to ensure that our services can be deployed
more effectively to customers across the world. The server platform has been enhanced to
deliver more capacity for customers, creating a far better return on investment. A further
development has enabled customers to install our software onto virtual servers, eliminating
the need for expensive hardware investment within their own data centres. These
improvements have been well received by our existing customers.
The next cycle of development is to introduce certain new products to the market. During the
year, we commenced work on a new Software Development Kit (SDK), an application that
allows customers to integrate our instant communication solutions into their own products
quickly and easily. Given the huge industry that has developed around workforce
management, the market opportunity for our SDK is substantial. We have commenced trials
with a number of businesses that are interested to introduce instant communication
functionality to their existing workforce management applications.
We also committed to the development of a new Dispatch Console towards the end of last
year, and are expecting to make a full commercial launch in July 2017. This console will be a
significant step forward with major advances in functionality and feature sets, allowing
companies with large workforces to manage their operations more effectively. A number of
customers are currently running beta trials prior to a full commercial launch in the third
quarter of this financial year. We are confident that this product will open up new potential
markets and generate incremental revenue streams.
Page 3
Strategic report
Mobile network operators (‘MNOs’)
Although revenues overall were down year on year, it was pleasing to see recurring revenues
increase by 10% compared to the previous year. This increase was driven by our MNO
customers in the Americas, offset in part by a decline in South Africa caused by the
renegotiation of our exclusive agreement in the first half of the year. The exclusivity payments
have been reduced to facilitate investment in the launch of services with the three leading
MNOs in the territory. Whilst there have been some delays in the roll out of services, I’m
pleased to report that the two largest MNOs are in the process of launching full services during
the second quarter of this year.
South America continues to be the primary opportunity for growth over the coming years. Our
engagement with MNOs in Mexico, Brazil, Equador and Colombia has continued. Many of the
technical developments outlined above have been tailored to requirements in these markets,
and it is encouraging that we are beginning to see early signs that the market opportunity we
have been aware of for some time may be starting to gather momentum.
As we have previously highlighted, the iDEN Push To Talk (PTT) platform, which was widely
deployed in South America, has reached the end of its life. It’s anticipated that many of these
customers will look to switch their instant communication requirements to PTT over cellular.
We are working hard with our existing customers to ensure they are well placed to capitalise
on the opportunity. I am hopeful that as our solution gains traction in the market, providing
evidence that it represents a robust and high quality alternative to iDEN, then new customers
will also be attracted to our solution.
Our activities in mainland Europe remained stable during the period, with flat revenues
compared to the previous year. The technical developments and new product initiatives have
started to generate interest from MNOs in a number of countries and in response we are
seeking to strengthen our business development resource across this region during the
current year.
Activity in Israel accelerated during the period with our exclusive partner launching services
with one of the leading MNOs. A number of major corporate customers have been trialling the
service and I am pleased to see that these trials are turning into full commercial contracts.
We anticipate good momentum in this market during the current financial year.
Independent Solution Vendors (ISVs)
As detailed above, we have significantly enhanced our SDK, allowing ISVs and their customers
to incorporate PTT functionality into their applications. We are very confident that this channel
to market will become more important to the business as it allows us to deploy our solution
to the market with little or no incremental cost. The feedback from early trials of the SDK are
very promising and I look forward to developing this channel over the coming year.
Hardware manufacturers
It is essential that our solution operates across a wide selection of rugged handset and
accessories. We have certified a number of new 3G and 4G devices for operation on our
systems, enhancing our proposition to our partners and customers.
Public sector
We have continued to work on a number of significant projects within the public sector. As we
have highlighted in the past, the commercial nature of these deals is such that, rather than
payment of a regular monthly license fee, the customer pays an upfront capital sum for the
right to use our platform for a fixed period of time. Given that the size of these deals can be
significant, the trials and negotiations can take place over an extended period of time.
Page 4
Strategic report
This process can obviously take some time given the value and complexities of the
opportunities, but given the technical advances we have made over the last 12 months, and
the increasing number of tenders we are being asked to participate in, we hope to win our
first public sector deal in the short-medium term.
Principal risks and uncertainties
The management of the business and the nature of the Group’s strategy are subject to a
number of risks.
The Directors have set out below the principal risks facing the business. The Directors are of
the opinion that a thorough risk management process is adopted, which involves the formal
review of all the risks identified below. Where possible, processes are in place to monitor and
mitigate such risks.
Product obsolescence
Due to the nature of the market in which the Group operates, products are subject to
technological advances and as a result, obsolescence. The Directors are committed to the
research and development strategy in place, and are confident that the Group is able to react
effectively to the developments within the market.
Indirect route to market
As described above, one of the Group’s primary channels to market are MNOs reselling our
services to their enterprise customers. Whilst MNOs are ideally positioned to forward sell our
services and are likely to possess material resources for doing so, there remains an inherent
uncertainty arising from the Group’s inability to exert full control over the sales and marketing
strategies of these customers.
Going concern and funding
The Company expects to announce imminently the launch of a placing of up to 24.5m shares
at 5.0p to raise a total of approximately £1.2m. The Directors are subscribing for 12.0m
shares. The net proceeds of the placing will be used to fund the working capital requirements
of the Company.
The Directors are therefore satisfied that the Group and Company have adequate resources
to enable them to continue in business for the foreseeable future, which also takes into
consideration its contracted revenues, anticipated contracts as well as a written undertaking
from the Directors to meet any shortfall in those funds to be raised in the above placing.
Outlook
The appointment of Avi Tooba as our Chief Executive and his subsequent recruitment of an
experienced senior management team has put the business in a strong position to capitalise
on the huge opportunities that exist within the instant communication market. With the
emergence of 3G and now 4G, there is universal acceptance across both public and private
sectors that PTT over Cellular is now a genuine alternative to traditional radio platforms. Our
new executive management team, with their experience and background, are able to engage
at the highest levels with these organisations and bring unique perspective on the technical
requirements of customers as they transition to the new platforms.
Page 5
Strategic report
With a renewed sense of confidence around the quality of our platform and software
applications, it is our intention to deliver the fastest and most robust PTT over Cellular
proposition in the marketplace. Given our heritage, we are one of the only providers that is
able to provide a seamless interface across 2G, 3G and 4G. As the market for PTT over LTE
increases in coming years, we believe our ability to offer MNOs with legacy customers on the
old platforms a seamless service and transition to the new, will place us in a unique position.
The introduction of new products and services over coming months will further demonstrate
the strength we now have across the business.
Approved by the Board of Directors and signed on behalf of the Board
Jeremy Fenn
Chairman
27 April 2017
Page 6
Directors’ report
The Directors present their annual report and audited financial statements of the Company
and the Group for the year ended 31 December 2016.
Directors
The Directors of the Company who were in office during the year and up to the date of signing
the financial statements were:
• Peter Wilkinson became Non-Executive Director on 30 September 2016, having
previously served as Non-Executive Chairman since his appointment to the Board on
24 November 2006. Peter is currently Chief Executive of InTechnology plc. Peter was
formerly Chairman of Sports Internet Group plc which was sold to BSkyB plc for
£301 million in May 2000. He also founded the free ISP model Freeserve, the internet
access service which was launched by Dixons Group plc.
• Jeremy Fenn became Executive Chairman on 30 September 2016, having previously
served as Chief Executive Officer and acting Finance Director since his appointment to
the Board on 24 November 2006. Jeremy is a qualified chartered accountant and was
formerly Chief Executive of Sports Internet Group plc. Following the sale of that business
he remained as a Director of Skysports.com until December 2003. Prior to this he was
Managing Director of Leeds United Football Club from 1996 to 1999.
• Richard James was appointed as Director and Company Secretary on 24 November
2006. Richard qualified as a solicitor with Allen & Overy in 1986 and was a Partner at
Pinsent Curtis in 1991 before moving to Hammond Suddards as a Partner in 1996.
Richard is also a Director and Company Secretary of InTechnology plc.
• Avi Tooba was appointed as Chief Executive Officer on 30 September 2016. Avi was
previously the senior Director of engineering at Motorola Solutions overseeing
engineering and some 500 engineers at the Israel Design Centre. He managed the Public
Safety LTE subscriber devices, TETRA subscribers (European standards) and P25 devices
and infrastructure (US standards). Prior to that, he was Director of engineering at
Motorola Networks which was later sold to Nokia for an estimated US$1 billion.
The Directors and their families have the following beneficial interests in the ordinary share
capital of the Company:
31 December 31 December
2016 2015
number % number %
Peter Wilkinson 28,146,141 11.4 28,146,141 11.4
Jeremy Fenn 8,434,752 3.4 8,434,752 3.4
Richard James 2,959,870 1.2 2,959,870 1.2
Avi Tooba (appointed 30 September 2016) – – – –
Third party indemnity insurance is in place for the four Directors above. This was in force
during the year and at the date of this report.
Details of related party transactions involving Directors of the Company are given in note 21
to the Group financial statements.
Page 7
Directors’ report
Directors’ emoluments
The remuneration of the Directors of the Company was as follows:
Benefits 2015
Salary Fees in kind Total Total
£’000 £’000 £’000 £’000 £’000
Peter Wilkinson – 66 – 66 60
Jeremy Fenn 6 120 1 127 127
Richard James – 18 – 18 18
Avi Tooba (appointed
30 September 2016) 70 – 21 91 –
Aggregate emoluments 76 204 22 302 205
Interests in share options
Set out below are details of share options that have been granted to Directors:
No. of share Exercise Earliest Expiry No. of share
options price exercise date options
2016 pence date 2015
Jeremy Fenn 3,000,000 7.5 03/01/15 03/01/22 3,000,000
Avi Tooba 2,000,000 2.0 16/05/19 31/12/26 –
Avi Tooba 2,000,000 4.0 04/11/19 31/12/26 –
Substantial shareholdings
At 31 December 2016 InTechnology plc held 126,709,135 shares (31 December 2015:
126,709,135) in the Company representing 51.2% of the issued ordinary share capital and
71,276,735 non-convertible cumulative redeemable preference shares with aggregate
nominal value of £5.7m.
Corporate governance
The Company does not comply with the UK Corporate Governance Code. However, the Board
recognises the value of the Code and has regard to its requirements as far as it considers
practicable and appropriate for a Group of this size.
Audit Committee
The Audit Committee is chaired by Peter Wilkinson and its other member is Executive
Chairman, Jeremy Fenn. Meetings are also attended, by invitation, by the other two Executive
Directors. This committee normally meets twice during the financial year, around the time of
the preparation of the Group’s interim and final results.
The committee assists the Board in ensuring that appropriate accounting policies, internal
financial controls and compliance procedures are in place.
Internal control
The Directors acknowledge their responsibility for the Group’s systems of internal control. The
Group maintains systems of internal controls, including suitable monitoring procedures, in
order to provide reasonable, but not absolute, assurance of the maintenance of adequate
accounting records and the consequent reliability of the financial information used within the
business to identify and deal with any problems on a timely basis. The monitoring and control
procedures include the specification of defined lines of responsibility and authorisation limits,
Page 8
Directors’ report
the delegation of authority, the identification of risks and the continual process of the
preparation of, and reporting against, annual budgets, forecasts and strategic plans.
Financial risk management
The Group’s financial instruments comprise, principally, cash and short-term deposits and
preference shares from its principal shareholder – InTechnology plc, and various items, such
as trade receivables and trade payables, arising directly from its operations. The main purpose
of these financial instruments is to raise finance for the Group’s operations. The main risks
arising from the Group’s financial instruments are currency risk, interest risk, liquidity risk and
credit risk. The Board’s policies for managing these risks are summarised as follows:
Currency risk – the Group has no borrowings in foreign currency, and foreign currency
liabilities are matched wherever possible by corresponding foreign currency assets, however,
no formal hedging is performed. Foreign currency bank accounts are utilised where
appropriate. No foreign currency transactions of a speculative nature are undertaken.
Interest risk – the Group is exposed to interest rate risk as it has loans outstanding on variable
rate terms. Borrowing costs are minimised by ongoing review of the Group’s cashflow
requirements.
Liquidity risk – the Group seeks to ensure sufficient liquidity is available to meet its
foreseeable needs. The Board regularly reviews cash flow projections and the headroom
position to ensure the Group is adequately funded.
Credit risk – the Group’s exposure to credit risk is limited to the carrying amount of its
financial assets at 31 December. In respect of trade and other receivables, the Group is not
exposed to any significant credit risk exposure to any single counterparty or group of
counterparties having similar characteristics. The Group’s customers are generally companies
with whom the Group has strong trading relationships with no recent history of default. The
Group continually monitors its trade receivables and incorporates this information into its
credit risk controls.
Going concern
The Company expects to announce imminently the launch of a placing of up to 24.5m shares
at 5.0p to raise a total of approximately £1.2m. The Directors are subscribing for 12.0m
shares. The net proceeds of the placing will be used to fund the working capital requirements
of the Company.
The Directors are therefore satisfied that the Group and Company have adequate resources
to enable them to continue in business for the foreseeable future, which also takes into
consideration its contracted revenues, anticipated contracts as well as a written undertaking
from the Directors to meet any shortfall in those funds to be raised in the above placing.
Results, dividends & future outlook
Detailed commentary of the Group’s results, dividends and future outlook are provided in the
Strategic report on pages 2 to 6.
Employees
The Group places considerable value on the involvement of its employees and has continued
its practice of keeping them informed of matters affecting them as employees and the various
factors affecting the performance of the Group.
The Directors recognise that continued and sustained improvement in the performance of the
Group depends on its ability to attract, motivate and retain employees of the highest calibre.
Page 9
Directors’ report
Furthermore, the Directors believe that the Group’s ability to sustain a competitive advantage
over the long-term depends in a large part on ensuring that all employees contribute to the
maximum of their potential. The Group is committed to improving the performance of all
employees through development and training.
The Group is an equal opportunity employer. The Group’s policies seek to promote an
environment free from discrimination, harassment and victimisation and to ensure that no
employee or applicant is treated less favourably on the grounds of gender, marital status, age,
race, colour, nationality or national origin, disability or sexual orientation or is disadvantaged
by conditions or requirements which cannot objectively be justified. Entry into, and
progression within the Group, is solely determined on the basis of work criteria and individual
merit.
The Group continues to give full and fair consideration to applications for employment made
by disabled persons, having regard to their respective aptitudes and abilities. The policy
includes, where practicable, the continued employment of those who may become disabled
during their employment and the provision of training and career development and promotion,
where appropriate.
Share schemes
Share ownership is at the heart of the Group’s remuneration philosophy and the Directors
believe that the key to the Group’s future success lies in a motivated workforce holding a stake
in the Company. Details of share options granted are set out in note 16 to the financial
statements.
Pension costs
The Group does not operate a pension scheme but makes contributions to the personal
pension schemes of some of its employees. These contributions are charged against profits.
No pension contribution payments have been made to Directors during the year.
Research and development
The Group continues to undertake research and development of new products with the
objective of increasing future profitability. During the year, the Group undertook a defined
development project which met the criteria for capitalisation under IAS 38 and therefore an
amount of £80,000 (2015: £107,000) has been capitalised. The remaining cost to the Group
of £1,270,000 (2015: £727,000) is charged to the income statement as incurred after
consideration of the criteria for capitalisation under IAS 38.
Environment
The Group recognises the importance of environmental responsibility. The nature of its
activities has a minimal effect on the environment but where it does, the Group acts
responsibly and is aware of its obligations at all times.
Statement of Directors’ responsibilities in respect of the financial statements
The Directors are responsible for preparing the Annual Report and the financial statements in
accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each financial year.
Under that law the Directors have prepared the Group financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union and
Company financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The
Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable
Page 10
Directors’ report
law). 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 of the Group and
Company and of the profit or loss of the Group and Company for that period. In preparing the
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable IFRSs as adopted by the European Union have been followed for
the Group financial statements and United Kingdom Accounting Standards, comprising
FRS 102, have been followed for the Company financial statements, subject to any
material departures disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the Group and Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group and Company and enable them to
ensure that the financial statements comply with the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
The Directors are also responsible for safeguarding the assets of the Group and Company and
hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity of the Company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
In the case of each Director in office at the date the Directors’ Report is approved:
• so far as the Director is aware, there is no relevant audit information of which the Group
and Company’s auditors are unaware; and
• they have taken all the steps that they ought to have taken as a Director in order to make
themselves aware of any relevant audit information and to establish that the Group and
Company’s auditors are aware of that information.
Annual General Meeting
The next AGM of the Company will be held on 6 June 2017. Details of the business to be
proposed at the AGM are contained within the Notice of Meeting, which is set out on pages 47
to 50.
Independent auditor
PricewaterhouseCoopers LLP have indicated their willingness to continue in office and a
resolution proposing that they be reappointed as independent auditor and authorising the
Directors to fix their remuneration will be proposed at the Annual General Meeting.
On behalf of the Board
Jeremy Fenn
Chairman
27 April 2017
Page 11
Independent auditors’ report to the
members of Mobile Tornado Group plc
Report on the financial statements
Our opinion
In our opinion:
• Mobile Tornado Group plc’s Group financial statements and Company financial statements
(the “financial statements”) give a true and fair view of the state of the Group’s and of
the Company’s affairs as at 31 December 2016 and of the Group’s loss and cash flows
for the year then ended;
• the Group financial statements have been properly prepared in accordance with
International Financial Reporting Standards (“IFRSs”) as adopted by the European Union;
• the Company financial statements have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
What we have audited
The financial statements, included within the Annual Report and Financial Statements,
comprise:
• the Consolidated statement of financial position as at 31 December 2016;
• the Company balance sheet as at 31 December 2016;
• the Consolidated income statement and Consolidated statement of comprehensive
Income for the year then ended;
• the Consolidated statement of cash flows for the year then ended;
• the Consolidated statement of changes in equity for the year then ended;
• the Company statement of changes in equity for the year then ended; and
• the notes to the financial statements, which include a summary of significant accounting
policies and other explanatory information.
The financial reporting framework that has been applied in the preparation of the Group
financial statements is IFRSs as adopted by the European Union, and applicable law. The
financial reporting framework that has been applied in the preparation of the Company
financial statements is United Kingdom Accounting Standards, comprising FRS 102 “The
Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law
(United Kingdom Generally Accepted Accounting Practice).
In applying the financial reporting framework, the Directors have made a number of subjective
judgements, for example in respect of significant accounting estimates. In making such
estimates, they have made assumptions and considered future events.
Page 12
Independent auditors’ report to the
members of Mobile Tornado Group plc
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken 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 accordance with
applicable legal requirements.
In addition, in light of the knowledge and understanding of the Group, the Company and their
environment obtained in the course of the audit, we are required to report if we have identified
any material misstatements in the Strategic Report and the Directors’ Report. We have
nothing to report in this respect.
Other matters on which we are required to report by exception
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate
for our audit have not been received from branches not visited by us; or
• the Company financial statements are not in agreement with the accounting records and
returns.
We have no exceptions to report arising from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain
disclosures of Directors’ remuneration specified by law are not made. We have no exceptions
to report arising from this responsibility.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the Directors
As explained more fully in the Statement of the Directors’ Responsibilities set out on page 10,
the Directors are responsible for the preparation of the financial statements and for being
satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland) (“ISAs (UK &
Ireland)”). Those standards require us to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s
members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and
for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands
it may come save where expressly agreed by our prior consent in writing.
Page 13
Independent auditors’ report to the
members of Mobile Tornado Group plc
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining
evidence about the amounts and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to the Group’s and the Company’s
circumstances and have been consistently applied and adequately disclosed;
• the reasonableness of significant accounting estimates made by the Directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the Directors’ judgements against
available evidence, forming our own judgements, and evaluating the disclosures in the
financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent
we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain
audit evidence through testing the effectiveness of controls, substantive procedures or a
combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to
identify material inconsistencies with the audited financial statements and to identify any
information that is apparently materially incorrect based on, or materially inconsistent with,
the knowledge acquired by us in the course of performing the audit. If we become aware of
any apparent material misstatements or inconsistencies we consider the implications for our
report.
Randal Casson (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
27 April 2017
Page 14
Consolidated income statement
For the year ended 31 December 2016
2016 2015
Note £’000 £’000
Continuing operations
Revenue 2 2,024 2,259
Cost of sales (103) (137)
Gross profit 1,921 2,122
Operating expenses
Administrative expenses (3,885) (3,384)
Group operating loss before exchange differences,
exceptional items & depreciation and amortisation expense (1,964) (1,262)
Exchange differences (642) (68)
Exceptional items 3 (276) –
Depreciation and amortisation expense (203) (115)
Total operating expenses (5,006) (3,567)
Group operating loss 4 (3,085) (1,445)
Finance costs 5 (640) (586)
Loss before tax (3,725) (2,031)
Income tax credit 6 277 371
Loss for the year (3,448) (1,660)
Loss per share (pence)
Basic and diluted 7 (1.39) (0.69)
Consolidated statement of comprehensive income
For the year ended 31 December 2016
2016 2015
£'000 £'000
Loss for the year (3,448) (1,660)
Other comprehensive loss
Item that will subsequently be reclassified
to profit or loss:
Exchange differences on translation
of foreign operations (71) (19)
Total comprehensive loss for the year (3,519) (1,679)
Attributable to:
Equity holders of the parent (3,519) (1,679)
The accompanying accounting policies and notes form an integral part of these financial
statements.
Page 15
Consolidated statement of financial position
As at 31 December 2016
2016 2015
Note £’000 £’000
Assets
Non-current assets
Property, plant and equipment 8 294 315
Intangible assets 9 162 107
456 422
Current assets
Trade and other receivables 10 1,313 1,268
Inventories 11 – 28
Cash and cash equivalents 12 165 107
1,478 1,403
Liabilities
Current liabilities
Trade and other payables 13 (4,719) (3,535)
Borrowings 14 (3,667) (1,380)
Net current liabilities (6,908) (3,512)
Non-current liabilities
Trade and other payables 13 (2,625) (2,514)
Borrowings 14 (5,560) (5,537)
(8,185) (8,051)
Net liabilities (14,637) (11,141)
Equity attributable to the owners of the parent
Share capital 15 4,951 4,951
Share premium 15 12,012 12,012
Reverse acquisition reserve (7,620) (7,620)
Merger reserve 10,938 10,938
Foreign currency translation reserve (2,254) (2,183)
Accumulated losses (32,664) (29,239)
Total equity (14,637) (11,141)
The financial statements on pages 15 to 38 were approved by the Board of Directors on
27 April 2017 and were signed on its behalf by:
Jeremy Fenn
Chairman
27 April 2017
Company Number: 5136300
Page 16
Consolidated statement of changes in equity
For the year ended 31 December 2016
Foreign
Reverse currency
Share Share acquisition Merger translation Accumulated Total
capital premium reserve reserve reserve Losses equity
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance at 1 January 2015 4,501 11,225 (7,620) 10,938 (2,164) (27,592) (10,712)
Equity settled share-based payments – – – – – 13 13
Issue of share capital 450 787 – – – – 1,237
Transactions with owners 450 787 – – – 13 1,250
Loss for the year – – – – – (1,660) (1,660)
Exchange differences on translation
of foreign operations – – – – (19) – (19)
Total comprehensive loss for the year – – – – (19) (1,660) (1,679)
Balance at 31 December 2015 4,951 12,012 (7,620) 10,938 (2,183) (29,239) (11,141)
Foreign
Reverse currency
Share Share acquisition Merger translation Accumulated Total
capital premium reserve reserve reserve Losses equity
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance at 1 January 2016 4,951 12,012 (7,620) 10,938 (2,183) (29,239) (11,141)
Equity settled share-based payments – – – – – 23 23
Transactions with owners – – – – – 23 23
Loss for the year – – – – – (3,448) (3,448)
Exchange differences on translation
of foreign operations – – – – (71) – (71)
Total comprehensive loss for the year – – – – (71) (3,448) (3,519)
Balance at 31 December 2016 4,951 12,012 (7,620) 10,938 (2,254) (32,664) (14,637)
The accompanying accounting policies and notes form an integral part of these financial
statements.
Page 17
Consolidated statement of cash flows
For the year ended 31 December 2016
2016 2015
Note £’000 £’000
Operating activities
Cash used in operations 17 (1,721) (1,233)
Tax received 277 371
Net cash used in operating activities (1,444) (862)
Investing activities
Purchase of property, plant & equipment (108) (206)
Purchase of intangible assets (81) (107)
Net cash used in investing activities (189) (313)
Financing activities
Issue of ordinary share capital – 1,350
Share issue costs – (113)
Proceeds from borrowings 14 1,670 –
Net cash inflow from financing activities 1,670 1,237
Effects of exchange rates on cash
and cash equivalents 21 4
Net increase in cash and
cash equivalents in the year 58 66
Cash and cash equivalents at beginning of year 107 41
Cash and cash equivalents at end of year 165 107
The accompanying accounting policies and notes form an integral part of these financial
statements.
Page 18
Notes to the financial statements
For the year ended 31 December 2016
1 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial
statements are set out below. These policies have been consistently applied to all the years
presented, unless otherwise stated.
1.1 Nature of operations
The principal activity of the Group is the provision of instant communication mobile
applications which serve the market of mobile data services in the mobile
communication industry. The Company is a Public Limited Company which is listed on
the Alternative Investment Market and incorporated and domiciled in the UK. The
address of the registered office is Cardale House, Cardale Court, Beckwith Head Road,
Harrogate, HG3 1RY.
1.2 Basis of preparation
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), International Financial Reporting
Interpretations Committee (IFRS IC) interpretations endorsed by the European Union
and those parts of the Companies Act 2006 that remain applicable to companies
reporting under IFRS. The financial statements have been prepared on the historical
cost basis with the exception of certain items which are measured at fair value as
disclosed in the principal accounting policies set out below. These policies have been
consistently applied to both years presented unless otherwise stated.
The preparation of financial statements in conformity with IFRS requires the use of
estimates and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are based on
management’s best knowledge of the amount, event or actions, actual results
ultimately may differ from these estimates.
Going concern
The Company expects to announce imminently the launch of a placing of up to 24.5m
shares at 5.0p to raise a total of approximately £1.2m. The Directors are subscribing
for 12.0m shares. The net proceeds of the placing will be used to fund the working
capital requirements of the Company.
The Directors are therefore satisfied that the Group and Company have adequate
resources to enable them to continue in business for the foreseeable future, which also
takes into consideration its contracted revenues, anticipated contracts as well as a
written undertaking from the Directors to meet any shortfall in those funds to be raised
in the above placing.
Significant accounting estimates and judgements
The preparation of these financial statements requires management to make estimates
and judgements that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenue during the reporting
period. Actual results could differ from these estimates. The key sources of estimation
and judgement are:
Share options – share-based payments are dependent on estimates of the number of
shares which are expected to vest (note 16).
Page 19
Notes to the financial statements
For the year ended 31 December 2016
Contingent consideration – payments are dependent on estimates of future license sales
revenues (note 13).
Trade and other receivables – recognition of any impairment provisions in respect of
amounts recorded as trade and other receivables is dependent on judgements made on
the recoverability of such items (note 10).
Research and development – distinguishing the research and development phases of
the Group’s research and development expenditure and determining whether the
recognition requirements for the capitalisation of development costs are met requires
judgement.
1.3 Basis of consolidation
The Group financial statements consolidate those of the Company and its subsidiary
undertakings at 31 December 2016. A subsidiary is an entity controlled by the Group.
Control is achieved where the Group has the power over the investee; exposure, or
rights, to variable returns from its involvement with the investee; and the ability to use
its power over the investee to affect the amount of the investor’s returns. All
subsidiaries have a reporting date of 31 December. All transactions and balances
between Group companies are eliminated on consolidation including unrealised gains
and losses on transactions between Group companies.
1.4 Business combinations
Acquisitions of subsidiaries are dealt with using the acquisition method of accounting.
The acquisition method of accounting involves the recognition at fair value of all
identifiable assets and liabilities, including contingent liabilities, of the subsidiary at the
acquisition date regardless of whether or not they were recorded in the financial
statements of the subsidiary prior to acquisition. On initial recognition, the assets and
liabilities of the subsidiary are included in the consolidated statement of financial
position at their fair values, which are also used as the bases for subsequent
measurement in accordance with the Group’s accounting policies. Goodwill is stated
after separating out identifiable intangible assets. Any difference between the fair value
of assets acquired and the consideration paid is treated as goodwill in the consolidated
statement of financial position. The results of subsidiaries are included from the date
that control commences to the date that control ceases. Business combinations that
preceded the Group’s transition to IFRS on 1 July 2006 have not been restated.
1.5 Revenue recognition
Revenue comprises the fair value of consideration receivable for the sale of licenses,
services and goods, excluding inter-company sales and value-added taxes, and
represents net invoice value less estimated rebates, returns and settlement discounts.
License and service revenues are recognised on a straight line basis over the period to
which the license and services relate. Unrecognised license and service revenues are
included as deferred income in the statement of financial position.
The Group recognises revenue on perpetual license fees where the Group has no
remaining obligations to perform and hardware sales when the risks and rewards have
been transferred to the customer, this is when goods have been received and accepted
by the customer.
Page 20
Notes to the financial statements
For the year ended 31 December 2016
1.6 Interest
Interest is recognised on an accruals basis using the effective interest method.
1.7 Operating expenses
Operating expenses are recognised in the income statement upon utilisation of the
service or as incurred.
1.8 Exceptional items
Exceptional items are non-recurring material items which are outside the normal scope
of the Group’s ordinary activities such as liabilities and costs arising from a fundamental
restructuring of the Group’s operations. Such items are disclosed separately within the
financial statements.
1.9 Employee benefits
Pension obligations
The Group does not operate a pension scheme but makes contributions to the personal
schemes of some of its employees. These contributions are charged to the income
statement in the period to which the contributions relate.
Share-based payments
The Group operates equity-settled share-based remuneration plans for its employees.
Vesting conditions are non-market based.
The fair value of options granted is recognised as an employee expense with a
corresponding increase in equity. The fair value is measured at grant date and spread
over the period during which the employees become unconditionally entitled to the
options. The fair value of the options granted is measured using the Black-Scholes
pricing model, which takes into account the terms and conditions upon which the
options were granted. The amount recognised as an expense is adjusted to reflect the
actual number of share options that vest.
1.10 Foreign currency translation
The consolidated financial statements are presented in UK Sterling (GBP £000). Sterling
is also the functional currency of the Company.
Foreign currency transactions are translated into the functional currency of the
respective Group entity, using the exchange rates prevailing at the dates of the
transactions (spot exchange rate). Foreign exchange gains and losses resulting from the
settlement of such transactions and from the re-measurement of monetary items at
year-end exchange rates are recognised in profit or loss.
Non-monetary items measured at historical cost are translated using the exchange
rates at the date of the transaction (not retranslated).
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group
entities with a functional currency other than Sterling (the Group’s presentation
currency) are translated into Sterling upon consolidation. The functional currency of the
entities in the Group have remained unchanged during the reporting period.
Page 21
Notes to the financial statements
For the year ended 31 December 2016
On consolidation, assets and liabilities of foreign operations have been translated into
sterling at the closing rate at the reporting date. Income and expenses have been
translated into the Group’s presentation currency at the average rate over the reporting
period given that these rates do not fluctuate significantly over the year. Exchange
differences are charged/credited to other comprehensive income and recognised in the
currency translation reserve in equity. On disposal of a foreign operation, the cumulative
translation differences recognised in equity are reclassified to profit or loss and
recognised as part of the gain or loss on disposal.
1.11 Segmental reporting
The Group presents its results in accordance with internal management reporting
information to the chief operating decision maker (Board of Directors). The Group has
only one operating segment. At 31 December, the Board continue to monitor operating
results by category of revenue.
1.12 Taxation
Current tax
Current tax is provided at amounts expected to be paid (or recovered) using tax rates
and laws that have been enacted or substantively enacted at the statement of financial
position date. The tax currently payable is based on taxable profit for the year. Taxable
profit/(loss) differs from net profit/(loss) as reported in income statement because it
excludes items of income that are taxable or deductible in other years and it further
excludes items that are never tax deductible.
Deferred tax
The charge for taxation is based on the profits for the year and takes into account
taxation deferred because of temporary differences between the treatment of certain
items for taxation and for accounting purposes.
Temporary differences arise from the inclusion of profits and losses in the accounts in
different periods from which they are recognised in tax assessments and primarily arise
as a result of the difference between tax allowances on property, plant & equipment and
the corresponding depreciation charge. Full provision is made for the tax effects of these
differences using tax rates and laws enacted or substantively enacted at the balance
sheet date.
No provision is made for unremitted earnings of foreign subsidiaries where there is no
commitment to remit such earnings. Similarly, no provision is made for temporary
differences relating to investments in subsidiaries since realisation of such differences
can be controlled and is not probable in the foreseeable future. Deferred tax assets are
recognised to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
Page 22
Notes to the financial statements
For the year ended 31 December 2016
1.13 Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation. The Group’s
policy is to write off the difference between the cost of all property, plant and equipment
and their residual value on a straight line basis over their estimated useful lives as
follows:
Office equipment
3 years
Computer equipment
3 years
Leasehold improvement
10 years
Reviews are made annually of the estimated remaining lives and residual values of
individual productive assets, taking account of commercial and technological
obsolescence as well as normal wear and tear, and adjustments are made where
appropriate. All individual assets are reviewed for impairment when there are
indications that the carrying value may not be recoverable.
1.14 Operating leases
Where the Group is a lessee, payments on operating lease agreements are recognised
as an expense on a straight-line basis over the lease term. Associated costs, such as
maintenance and insurance, are expensed as incurred.
1.15 Inventories
Inventories are stated at the lower of historical cost and net realisable amount. Net
realisable amount is the estimated selling price in the ordinary course of business less
any applicable variable selling costs. Provision is made for obsolete, slow moving and
defective inventory where appropriate.
1.16 Intangible assets – research and development
Research expenditure, undertaken with the prospect of gaining new scientific or
technical knowledge and understanding, is charged to income in the year in which it is
incurred. Internal development expenditure, whereby research findings are applied to a
plan for the production of new or substantially improved products or processes, is
charged to income in the year in which it is incurred unless it meets the recognition
criteria of IAS 38 ’Intangible Assets’ which are;
• the development costs can be measured reliably;
• the project is technically and commercially feasible;
• the Group intends to and has sufficient resources to complete the project;
• the Group has the ability to use or sell the resulting technology; and
• the resulting technology will generate probable future economic benefits.
Measurement uncertainties over economic benefits generally mean that such criteria are
not met. Where, however, the recognition criteria are met, intangible assets are
capitalised and amortised over their useful economic lives from product launch.
Intangible assets relating to products in development are subject to impairment testing
Page 23
Notes to the financial statements
For the year ended 31 December 2016
at each balance sheet date or earlier upon indication of impairment. Any impairment
losses are written off immediately to the income statement in operating expenses.
1.17 Equity
Equity comprises the following:
• “Share capital” represents the nominal value of equity shares.
• “Share premium” represents the excess over nominal value of the fair value of
consideration received for equity shares, net of expenses of the share issue.
• “Reverse acquisition reserve” represents the difference between the required total
of the Group’s equity instruments and the reported equity of the legal parent.
• “Merger reserve” represents the difference between the nominal value of the share
capital issued by the Company and their fair value at 7 March 2006, the date of
the acquisition of Mobile Tornado International Ltd.
• “Foreign currency translation reserve” represents the differences arising from
translation of investments in overseas subsidiaries into Sterling.
• “Accumulated losses” represents retained losses.
All transactions with owners of the parent are recorded separately within equity.
Reverse acquisition and merger reserves were frozen at their previous GAAP values
from 1 July 2006, the date of transition to IFRS. The foreign currency translation reserve
was reset to zero at this date.
1.18 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with
other short-term, highly liquid investments that are readily convertible into known
amounts of cash with maturities of three months or less from inception and which are
subject to an insignificant risk of changes in value.
1.19 Financial assets – loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market.
Financial assets comprise trade and other receivables and cash and cash equivalents
which are classified as loans and receivables. Financial assets are recognised in the
Group’s consolidated statement of financial position when the Group becomes a party
to the contractual provisions of the instrument. Loans and receivables are measured at
initial recognition at fair value and are subsequently recorded at amortised cost using
the effective interest method. Appropriate allowances for estimated irrecoverable
amounts are recognised in the income statement when there is objective evidence that
the asset is impaired.
Financial assets are derecognised when the contractual rights to the cash flows from the
financial assets expire, or when all substantial risks and rewards are transferred.
Page 24
Notes to the financial statements
For the year ended 31 December 2016
1.20 Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and comprise
trade and other payables and borrowings. Financial liabilities are recognised in the
Group’s consolidated balance sheet when the Group becomes a party to the contractual
provisions of the instrument. Trade payables, accruals and other creditors are measured
at initial recognition at fair value plus translation cost and subsequently measured at
amortised cost using the effective interest rate method.
Borrowings are initially recorded at fair value and then subsequently recorded at
amortised cost using the effective interest method.
Instruments such as preference shares are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangement. At the date of
issue, the fair value of the liability component is estimated. This amount is recorded as
a liability on an amortised cost basis using the effective interest method until
extinguished upon conversion or at the instrument’s maturity date.
1.21 Contingent consideration
Contingent consideration arising on the acquisition of a business is held as a creditor in
the balance sheet until such time as those amounts are paid. Amounts arising on
business combinations before 1 July 2006, the date of transition to IFRS, were not
restated at this date.
1.22 Standards in issue not yet effective
At the date of authorisation of these financial statements, the following standards and
interpretations which have not been applied in these financial statements were in issue
but not yet effective:
• Amendment to IAS 7, ’Statement of cash flows on disclosure initiative’;
• Amendment to IAS 12, ’Income taxes’ on Recognition of deferred tax assets for
unrealised losses;
• Amendment to IAS 2, ’Share based payments’;
• IFRS 9, ’Financial instruments’;
• Amendments to IFRS 4, ’Insurance contracts’;
• Amendment to IAS 40, ’Investment property’;
• ’Annual improvements’ 2014-2016’;
• IFRS 15 ’Revenue from contracts with customers’;
• IFRIC 22, ’Foreign currency transactions and advance consideration’;
• Amendment to IFRS 15, ’Revenue from contracts with customers’;
• IFRS 16 ’Leases’.
Page 25
Notes to the financial statements
For the year ended 31 December 2016
2 Segmental analysis
The Group presents its results in accordance with internal management reporting information
to the chief operating decision maker (Board of Directors). At 31 December 2016 the Board
continued to monitor operating results by category of revenue within a single operating
segment, the provision of instant communication solutions. Under IFRS 8 the Group has only
one operating segment. Therefore the results presented in the income statement are the same
as those required under IFRS 8, save for the year end entry of IFRS 2 share option charge of
£23,000 (year ended 31 December 2015: £13,000).
Revenue by category
2016
£’000
2015
£’000
License fees 1,679 1,279
Hardware & software 22 81
Professional services 163 499
Other 160 400
Total 2,024 2,259
Revenue is reported by geographical location of customers. Non-current assets are reported
by geographical location of assets.
2016 2016 2015 2015
Non-current Non-current
Revenue assets Revenue assets
£’000 £’000 £’000 £’000
UK 62 11 125 11
Europe 418 – 476 –
North America 895 – 764 15
South America 261 – 271 –
Israel 76 445 105 396
Africa 312 – 483 –
Asia/Pacific – – 35 –
Total 2,024 456 2,259 422
Our mobile network operator customer in Canada represents £852,000 (2015: £729,000) of
the total revenue of the Group.
3 Exceptional costs
These comprise:
•
•
Property costs of £216,000 (2015: £nil) arising from our joint lessee – Alvarion
Technologies Ltd entering receivership during the year. Under the terms of the lease, MT
Labs Ltd, became liable for that proportion of the office previously utilised by Alvarion
Technologies Ltd.
Salary and redundancy costs of £60,000 (2015: £nil) arising from the transition of the
research and development management team during the year and as described further
in the strategic report on pages 2 and 3.
Page 26
Notes to the financial statements
For the year ended 31 December 2016
4 Group operating loss
2016 2015
£’000 £’000
Group operating loss before taxation is stated after charging:
Staff costs (note 18) 2,746 2,060
Depreciation of owned property, plant and equipment (note 8) 178 115
Amortisation of intangible assets 25 –
Research and development expenditure 1,350 834
Other operating lease rentals 409 261
Net exchange loss 642 68
Auditors’ remuneration
During the year the Group obtained the following services from the Group’s auditors as
detailed below:
2016 2015
£’000 £’000
Fees payable to the Company’s auditors for the audit of
the Company’s financial statements 24 23
5 Finance costs
2016 2015
£’000 £’000
Finance charge on preference shares (640) (586)
Total finance costs (640) (586)
6 Income tax credit
(a) Analysis of credit for the year
2016 2015
£’000 £’000
United Kingdom current tax
Adjustment in respect of prior years (277) (371)
Total credit for the year (277) (371)
Page 27
Notes to the financial statements
For the year ended 31 December 2016
(b) Factors affecting the tax credit for the year
Deferred tax:
At 31 December 2016 the Group had accumulated tax losses of £32,097,000 (31 December
2015: £27,353,000) which are available for offset against future trading profits of certain
Group operations, subject to agreement with the relevant tax authorities. No deferred tax
asset has been recognised in respect of these losses given the level of uncertainty over their
recoverability.
2016 2015
£’000 £’000
Loss before tax (3,725) (2,031)
At standard rate of corporation tax of 20% (2015: 20.25%) (745) (411)
Effects of:
Expenses not deductible for tax purposes 134 123
Un-utilised tax losses 611 288
Prior year research & development tax credit claimed (277) (371)
Total credit for the year (277) (371)
7 Loss per share
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of
£3,448,000 (2015: £1,660,000) by the weighted average number of ordinary shares in issue
during the year of 247,553,189 (2015: 240,710,723).
Loss attributable to
ordinary shareholders
Adjusted basic loss per share
2016
Basic and diluted
Loss
Loss
per share
pence
£’000
2015
Basic and diluted
Loss
Loss
per share
pence
£’000
(3,448)
(3,448)
(1.39)
(1.39)
(1,660)
(1,660)
(0.69)
(0.69)
The loss attributable to ordinary shareholders and the weighted average number of ordinary
shares for the purpose of calculating the diluted earnings per ordinary share are identical to
those used for basic earnings per ordinary share. This is because the exercise of share options
are anti-dilutive under the terms of IAS 33.
Page 28
Notes to the financial statements
For the year ended 31 December 2016
8 Property, plant and equipment
Office Computer Leasehold
equipment equipment improvement Total
£’000 £’000 £’000 £’000
Cost
At 1 January 2015 59 826 59 944
Additions 2 169 43 214
Exchange adjustments 2 26 4 32
At 31 December 2015 63 1,021 106 1,190
Additions 12 103 3 118
Exchange adjustments 7 129 21 157
At 31 December 2016 82 1,253 130 1,465
Accumulated depreciation
At 1 January 2015 21 692 18 731
Charge for the year 10 100 5 115
Exchange adjustments 3 23 3 29
At 31 December 2015 34 815 26 875
Charge for the year 12 129 50 191
Exchange adjustments 4 96 5 105
At 31 December 2016 50 1,040 81 1,171
Net book amount at 31 December 2016 32 213 49 294
Net book amount at 31 December 2015 29 206 80 315
9 Intangible assets
Total
£’000
At 1 January 2016 107
Additions 80
Amortisation for the year (25)
At 31 December 2016 162
Additions in the year comprise third party services and internal staff costs in relation to a
quality assurance automation project.
10 Trade and other receivables
2016 2015
£’000 £’000
Trade receivables 1,133 986
Less: provision for impairment of trade receivables (330) (260)
Trade receivables – net 803 726
Other receivables 256 233
Prepayments and accrued income 254 309
1,313 1,268
Current portion 1,313 1,268
Page 29
Notes to the financial statements
For the year ended 31 December 2016
The age of the Group’s year end overdue receivables is as follows:
2016 2015
£’000 £’000
Impaired
Three to six months – –
Over six months 330 260
330 260
Not impaired
Less than three months 79 272
Three to six months 101 202
Over six months 507 126
687 600
Of the overdue receivables against which no provision has been made, £547,000 (2015:
£418,000) relates to one particular customer. The Directors have maintained an open dialogue
with this customer throughout the year and since the year end as to their financial position
and a repayment plan has been agreed to clear this overdue debt. In parallel, an assessment
of this customer’s ability to pay has been made by reference to both its current and projected
operating cash flows as well as the level of cash payments received during the year, post year-
end from the customer and, on the basis of this, no provision has been made.
The carrying amounts of the Group’s receivables are denominated in US dollar, Canadian dollar
and Euros.
The maximum exposure to credit risk at the reporting date is the carrying value of each class
of receivable mentioned above. The Group does not hold any collateral as security.
Movement on the Group’s provision for impairment of receivables is as follows:
2016 2015
£’000 £’000
At 1 January 260 177
Provision for receivables impairment 89 83
Receivables written off during the year
as uncollectable (19) –
330 260
11 Inventories
2016 2015
£’000 £’000
Hardware – 28
The cost of inventories recognised as an expense and included within cost of sales amounted
to £nil (2015: £nil). Inventories put to internal use during the year and therefore transferred
to property, plant and equipment amounted to £28,000 (2015: £81,000).
Page 30
Notes to the financial statements
For the year ended 31 December 2016
12 Cash and cash equivalents
2016 2015
£’000 £’000
Cash at bank and in hand:
Sterling 6 8
US Dollar 56 24
Canadian dollar 19 1
Euro – 1
Israel Shekel 84 73
165 107
13 Trade and other payables
2016 2015
£’000 £’000
Trade payables 990 787
Accruals 570 382
Social security and other taxes 65 47
Other payables 51 36
Deferred income 2,314 1,924
Contingent consideration 3,354 2,873
7,344 6,049
Less non-current portion: contingent consideration (2,625) (2,514)
Current portion 4,719 3,535
The contingent consideration arose on the purchase of intellectual property from Tersync
Limited in 2001 and represents a royalty payable on future sales of Push to Talk related
products by Mobile Tornado, payable in part as consideration for the acquisition of the rights
to the technology underlying such product. The royalty is payable quarterly on any relevant
sales (on a cash receipts basis) as follows:
(i) 50% of the first US$200,000 relevant sales.
(ii) 15% of any additional relevant sales, subject to any related cumulative royalty payments
being capped at a maximum of US$5.3 million. Direct reseller and other third party costs
may be deducted in arriving at these royalty payments, subject to such costs not
exceeding 10% of the relevant sales. The deferred consideration is secured by a charge
over the intellectual property of the Mobile Tornado Group.
The deferred income balance includes an amount of £2,026,000 (2015: £1,751,000) received
from InTechnology plc in respect of 12 month licenses that had not been brought into use at
the balance sheet date. The Group will recognise related income from the date of activation
of each license, or the expiration of its obligations if sooner.
Page 31
Notes to the financial statements
For the year ended 31 December 2016
14 Borrowings, other financial liabilities and other financial assets
2016 2015
£’000 £’000
Preference shares 7,557 6,917
Loans from related party undertaking 1,670 –
Total borrowings 9,227 6,917
Maturity analysis
2016 2015
£’000 £’000
In one year or less 3,667 1,380
Between two and five years 5,560 5,537
Total 9,227 6,917
InTechnology plc has agreed not to demand immediate repayment of the unpaid accrued
interest on the 10% preference shares amounting to £1,997,000 (2015: £1,380,000)
The Group do not have any derivative financial liabilities at 31 December 2016 or
31 December 2015.
Financial risks
The main financial risks faced by the Group include interest rate risk, liquidity risk, credit risk
and foreign currency risk. The Board reviews and agrees policies for managing each of these
risks.
The Group’s financial instruments comprise cash, liquid resources and various items, such as
receivables and payables that arise directly from its operations. It is, and has been throughout
the year under review, the Group’s policy that no trading in financial instruments shall be
undertaken. The year end position reflects these policies and there have been no changes in
policies or risks since the year end.
Financial asset returns are maximised by ongoing review of the Group’s cash flow
requirements. Any funds surplus to short-term working capital requirements are placed on
interest bearing deposit.
Interest rate risk profile of financial assets
The interest rate risk profile of the financial assets of the Group comprise cash of £165,000
(2015: £107,000) as follows:
Floating rate
2016 2015
£’000 £’000
Currency
Sterling 6 8
US dollar 56 24
Canadian dollar 19 1
Euro – 1
Israel shekel 84 73
Total 165 107
Page 32
Notes to the financial statements
For the year ended 31 December 2016
The Sterling, US dollar and Euro financial assets relate to cash at bank and bear interest based
on GBP LIBOR, US dollar LIBOR and EURIBOR respectively. There are no fixed rate financial
assets (2015: £nil).
Interest rate risk profile of financial liabilities
The interest rate profile of the financial liabilities of the Group is as follows:
Fixed
2016 2015
£’000 £’000
Fixed rate 10% preference shares classified as debt 7,557 6,917
Total 7,557 6,917
Floating
2016 2015
£’000 £’000
Loans from related party undertaking 1,670 –
Total 1,670 –
Further details of which can be found in note 21 on page 38.
Currency risk
The table below shows the extent to which the Company held monetary assets and liabilities
in currencies other than their local currency.
2016 2015
£’000 £’000
Functional currency of operation: Sterling
US Dollar (net liabilities) (2,711) (2,329)
Euro (net liabilities) (1,876) (1,596)
Canadian Dollar (net liabilities) (89) (50)
Total (4,676) (3,975)
Sensitivity analysis
Financial assets and liabilities are sensitive to movements in interest rates and foreign
exchange rates.
A 10% movement in both Sterling to US dollar and Euro exchange rates would result in a
charge or credit to profit and equity of £425,000 (2015: £351,000).
A 1% movement in interest rates would result in a charge or credit to profit and equity of
£20,000 (2015: £14,000).
Page 33
Notes to the financial statements
For the year ended 31 December 2016
Capital management
Managed capital is cash to meet working capital needs.
The Group’s capital management objectives are:
• To ensure the Group’s ability to continue as a going concern; and
• To provide an adequate return to shareholders.
These objectives are maintained by pricing products and services commensurately with the
level of risk.
The Group’s goal in capital management is to maintain adequate cash balances with the
minimum necessary borrowing. There are no externally imposed capital requirements during
the year covered by the financial statements.
Summary of the Group’s financial assets and liabilities as defined in IAS 39
‘financial instruments: recognition and measurement’
2016 2015
£’000 £’000
Current assets – loans and receivables
Trade and other receivables 1,060 959
Cash and cash equivalents 165 107
1,225 1,066
Current liabilities – held at amortised cost
Trade and other payables (2,340) (1,565)
Preference shares (1,997) (1,380)
Loans (1,670) –
(6,007) (2,945)
Non-current liabilities – held at amortised cost
Trade and other payables (2,625) (2,514)
Preference shares (5,560) (5,537)
(8,185) (8,051)
Net financial assets and liabilities (12,967) (9,930)
The Directors consider that the fair value of financial assets and liabilities approximates to the
carrying value for both 2016 and 2015.
15 Share capital and share premium
Number of
issued and fully paid Share Share
shares capital premium Total
’000 £’000 £’000 £’000
At 1 January 2016 247,553 4,951 12,012 16,963
As at 31 December 2016 247,553 4,951 12,012 16,963
The total authorised number of ordinary shares is 475 million (2015: 475 million) with a par
value of 2p per share (2015: 2p per share).
Page 34
Notes to the financial statements
For the year ended 31 December 2016
Non-voting preference shares – included in financial liabilities
Number of Nominal
shares Value
’000 £’000
As at 31 December 2015 and 2016 71,277 5,702
All preference shares are non-voting, non-convertible cumulative redeemable preference
shares. They are redeemable at par value on 31 December 2018, or, at the Company’s
discretion, at any earlier date and will accrue interest at a fixed rate of 10 per cent. per
annum. Unpaid dividends accrue interest at 3% above Bank of England base rate until settled.
16 Share-based payments
The Group has a share option scheme for certain employees and Directors. Options are
exercisable at a price equal to the average market price of the Company’s shares on the date
of grant. The options are settled in equity.
The number of shares subject to options, the periods in which they were granted and the
dates on which they may be exercised are as follows:
Number of shares Exercise Earliest
2016 2015 price exercise Vesting Expiry
Name of scheme ’000 ’000 pence date condition date
Israel scheme 1,169 1,169 2.0 02/02/09 – 31/12/19
Israel scheme 1,250 1,250 5.0 02/02/09 100,000
subscribers 31/12/19
UK scheme 200 200 5.0 03/12/11 100,000
subscribers 03/12/18
UK scheme 100 100 5.0 07/07/13 100,000
subscribers 07/07/20
Israel scheme 400 400 7.5 03/01/15 – 31/12/19
UK scheme 3,500 3,500 7.5 03/01/15 – 03/01/22
UK scheme 200 450 6.0 18/06/18 – 18/06/25
Israel scheme 2,300 9,400 6.0 07/09/18 – 31/12/23
Israel scheme 2,500 – 2.0 16/05/19 – 31/12/26
Israel scheme 4,250 – 4.0 04/11/19 – 31/12/26
Total 15,869 16,469
Options were valued using the Black-Scholes option-pricing model:
Grant date 16/05/16 04/11/16
Shares under option (’000) 2,500 4,500
Share price at grant date (pence) 2.0 4.0
Exercise price (pence) 2.0 4.0
Vesting period (years) 3.0 3.0
Expected volatility 33% 36%
Expected life 3.0 3.0
The expected volatility is based on historical volatility over the last year. The expected life is
assumed as being equal to the earliest exercise date. The risk-free rate of return is taken as
the Bank of England base-rate at the date of grant.
Page 35
Notes to the financial statements
For the year ended 31 December 2016
A reconciliation of option movements over the year to 31 December 2016 is shown below:
2016 2015
Weighted Weighted
average average
exercise exercise
Number price Number price
’000 pence ’000 pence
Outstanding at 1 January 2016/2015 16,469 6.0 7,019 4.0
Granted 7,000 3.3 9,850 6.0
Forfeited (7,600) 5.9 (400) 5.3
Outstanding at 31 December 15,869 4.8 16,469 6.0
Exercisable at 31 December 2,169 3.4 2,169 3.4
The closing mid-market share price on 12 April 2017 was 5.5 pence.
The weighted average remaining contractual life of the share options outstanding at
31 December 2016 was 7.0 years at exercise prices ranging from 2.0 pence to 7.5 pence.
Those options exercisable at 31 December 2016 are at exercise prices of 2.0 pence and
5.0 pence.
The total charge for the year relating to employee share-based payment plans was £23,000
(2015: £13,000), all of which related to equity-settled share-based payment transactions.
17 Cash used in operations
2016 2015
£’000 £’000
Loss before taxation (3,725) (2,031)
Adjustments for:
Depreciation and amortisation 203 115
Share-based payment charge 23 13
Interest expense 640 586
Changes in working capital:
Decrease in inventories 31 84
Decrease in trade and other receivables 38 217
Increase/(Decrease) in trade and other payables 1,069 (217)
Net cash used in operations (1,721) (1,233)
Page 36
Notes to the financial statements
For the year ended 31 December 2016
18 Employee information
The average monthly number of persons (including Executive Directors) employed by the
Group during the year was:
2016 2015
Number Number
Sales 3 5
Product development & operations 37 33
Finance & administration 6 5
Total 46 43
Included in the table above are 17 persons that are contractors (2015: 16). These are included
as employees on the basis of their providing services to the Company on a material time basis
over the year.
Staff costs for the persons above were:
2016 2015
£’000 £’000
Wages and salaries 2,463 1,847
Social security costs 117 81
Other pension costs 92 49
Share-based payment charge 23 13
Other benefits 51 70
Total 2,746 2,060
Directors’ costs included within the above are as separately detailed in the Directors’ report
under the heading Directors’ emoluments.
19 Capital commitments
The Group had no capital commitments at 31 December 2016 (2015: £nil).
20 Operating leases
Details of operating lease arrangements for the Group are as follows:
2016 2015
£’000 £’000
Lease payments under operating leases charged to
operating costs in the year 409 261
At the balance sheet date the Group had outstanding commitments for future minimum lease
payments under non-cancellable operating leases as follows:
2016 2015
£’000 £’000
Within one year 189 174
One to five years 669 565
Total 858 739
Page 37
Notes to the financial statements
For the year ended 31 December 2016
Operating lease payments represent rentals payable by the Group for vehicles and certain
properties.
21 Related party transactions
For the purposes of IAS 24, key management of the Group are the same as those of the Board
of Directors. Share options issued to key management personnel during the year are detailed
in note 16 on page 35. Key management personnel remuneration includes the following
expenses:
2016 2015
£’000 £’000
Salaries including bonuses 76 6
Other benefits 22 1
Total remuneration 98 7
Sums paid to third parties for services 204 198
Total short-term employee benefits 302 205
Directors’ remuneration and the remuneration of each Director is presented in the Directors’
Report on page 8.
Peter Wilkinson is a shareholder and Director of InTechnology plc. Mobile Tornado Group plc
has bought goods and services totalling £158,000 (year ended 31 December 2015; £278,000)
from InTechnology plc in the year to 31 December 2016. As at 31 December 2016, Mobile
Tornado Group plc owed InTechnology plc £519,000 (31 December 2015; £361,000).
InTechnology plc has provided loan finance of £1,670,000 to Mobile Tornado Group plc in the
year ended 31 December 2016 (year ended 31 December 2015; £601,000). As at
31 December 2016, Mobile Tornado Group plc owed InTechnology plc £1,670,000
(31 December 2015; £nil).
Payments to a third party, Mainstream Capital Partners LLP, are made in respect of the
services provided by Jeremy Fenn, Executive Chairman. As at 31 December 2016, Mobile
Tornado Group Plc owed £nil (31 December 2015: £5,000) to Jeremy Fenn.
The Group is controlled by InTechnology plc (incorporated in the UK), which owns 51.2% of
the Company’s ordinary shares. The Group’s ultimate parent and controlling party is Peter
Wilkinson.
22 Investments
Details of the principal investments at 31 December 2016 in which the Company holds more
than 20% of the nominal value of ordinary share capital are as follows:
Country of Group Company
incorporation Nature of proportion proportion
or registration business held held
M.T. Labs Limited Israel Sale of instant 100% 100%
communication services
With registered address: 13 Amal street, Afek Industrial Park, Rosh Ha’ayin 4809249, Israel
Page 38
Company balance sheet
As at 31 December 2016
2016 2015
Note £’000 £’000
Fixed assets
Intangible assets 4 7,500 8,022
Tangible assets 5 11 55
7,511 8,077
Current assets
Debtors 7 1,395 1,364
Cash at bank and in hand 27 10
1,422 1,374
Creditors – amounts falling due within one year 8 (7,605) (4,270)
Net current liabilities (6,182) (2,896)
Total assets less current liabilities 1,328 5,181
Creditors – amounts falling due after more than one year 8 (8,327) (8,216)
Net liabilities (6,999) (3,035)
Capital and reserves
Called up share capital 9 4,951 4,951
Share premium account 12,012 12,012
Merger reserve 10,938 10,938
Share option reserve 126 103
Accumulated losses (35,026) (31,039)
Total shareholders’ deficit (6,999) (3,035)
The Company’s loss for the financial year was £3,987,000 (2015: £5,709,000).
The financial statements on pages 39 to 46 were approved by the Board of Directors on
27 April 2017 and were signed on its behalf by:
Jeremy Fenn
Chairman
27 April 2017
Company Number: 5136300
The accompanying notes form an integral part of these financial statements.
Page 39
Company statement of changes in equity
For the year ended 31 December 2016
Share-
Called up Share Share Accumu- holders’
share premium Merger option lated funds/
capital account reserve reserve losses (deficit)
£’000 £’000 £’000 £’000 £’000 £’000
Balance at
1 January 2015 4,501 11,225 10,938 90 (25,330) 1,424
Equity settled
share-based payments – – – 13 – 13
Issue of share capital 450 787 – – – 1,237
Loss for the year – – – – (5,709) (5,709)
Balance at
31 December 2015 4,951 12,012 10,938 103 (31,039) (3,035)
Share-
Called up Share Share Accumu- holders’
share premium Merger option lated funds/
capital account reserve reserve losses (deficit)
£’000 £’000 £’000 £’000 £’000 £’000
Balance at
1 January 2016 4,951 12,012 10,938 103 (31,039) (3,035)
Equity settled
share-based payments – – – 23 – 23
Loss for the year – – – – (3,987) (3,987)
Balance at
31 December 2016 4,951 12,012 10,938 126 (35,026) (6,999)
Page 40
Notes to the Company financial statements
For the year ended 31 December 2016
1. General information
The principal activity of the Company is the provision of instant communication mobile
applications which serve the market of mobile data services in the mobile communication
industry. The Company is a Public Limited Company which is listed on the Alternative
Investment Market and incorporated and domiciled in the UK. The address of the registered
office is Cardale House, Cardale Court, Beckwith Head Road, Harrogate, HG3 1RY.
2. Statement of compliance
The individual financial statements of Mobile Tornado Group plc have been prepared in
compliance with United Kingdom Accounting Standards, including Financial Reporting
Standard 102 “The Financial Reporting Standard applicable in the United Kingdom and the
Republic of Ireland” (“FRS 102”) and the Companies Act 2006.
3. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are
set out below. These policies have been consistently applied to all the years presented, unless
otherwise stated.
3.1 Basis of preparation
The financial statements are presented in sterling, rounded to the nearest thousand. They are
prepared on a going concern basis and under the historical cost convention. The preparation
of financial statements in conformity with FRS 102 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 areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed in Note 3.3.
3.2 Going concern
The Company expects to announce imminently the launch of a placing of up to 24.5m shares
at 5.0p to raise a total of approximately £1.2m. The Directors are subscribing for 12.0m
shares. The net proceeds of the placing will be used to fund the working capital requirements
of the Company.
The Directors are therefore satisfied that the Group and Company have adequate resources
to enable them to continue in business for the foreseeable future, which also takes into
consideration its contracted revenues, anticipated contracts as well as a written undertaking
from the Directors to meet any shortfall in those funds to be raised in the above placing.
3.3 Critical accounting estimates and judgements
The Company makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual results. The estimates
and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are addressed below:
Contingent consideration – payments are dependent on estimates of future license sales
revenues
Trade and other receivables – recognition of any impairment provisions in respect of amounts
recorded as trade and other receivables is dependent on judgements made on the
recoverability of such items
Page 41
Notes to the Company financial statements
For the year ended 31 December 2016
Research and development – distinguishing the research and development phases of the
Group’s research and development expenditure and determining whether the recognition
requirements for the capitalisation of development costs are met requires judgement.
3.4 Share options
The Company grants share options to employees and Directors on a discretionary basis.
The fair value of options granted is recognised as an employee expense with a corresponding
increase in equity. The fair value is measured at grant date and spread over the period during
which the employees become unconditionally entitled to the options. The fair value of the
options granted is measured using the Black-Scholes pricing model, which takes into account
the terms and conditions upon which the options were granted. The amount recognised as an
expense is adjusted to reflect the actual number of share options that vest.
3.5 Foreign currencies
Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of
the transaction. Monetary assets and liabilities denominated in foreign currencies are
translated to sterling at the exchange rates ruling at the balance sheet date.
All exchange differences are taken to the profit and loss account.
3.6 Tangible fixed assets
The cost of tangible fixed assets is their purchase cost. Depreciation is calculated so as to
write-off the cost of an asset, less its estimated residual value, over the useful economic life
of that asset as follows:
Computer & other equipment
Vehicles
3 years
3 years
The Directors review tangible fixed assets for impairment if events or changes in
circumstances indicate that the carrying value may not be recoverable.
3.7 Goodwill
The Directors continue to assess that the goodwill has a finite life of 20 years and therefore
will continue to amortise the goodwill over this period.
3.8 Intangible assets
Research expenditure, undertaken with the prospect of gaining new scientific or technical
knowledge and understanding, is charged to income in the year in which it is incurred. Internal
development expenditure, whereby research findings are applied to a plan for the production of
new or substantially improved products or processes, is charged to income in the year in which
it is incurred unless it meets the recognition criteria of IAS 38 ‘Intangible Assets’ which are;
• the development costs can be measured reliably;
• the project is technically and commercially feasible;
• the Group intends to and has sufficient resources to complete the project;
• the Group has the ability to use or sell the resulting technology; and
• the resulting technology will generate probable future economic benefits.
Page 42
Notes to the Company financial statements
For the year ended 31 December 2016
Measurement uncertainties over economic benefits generally mean that such criteria are not
met. Where, however, the recognition criteria are met, intangible assets are capitalised and
amortised over their useful economic lives from product launch. Intangible assets relating to
products in development are subject to impairment testing at each balance sheet date or
earlier upon indication of impairment. Any impairment losses are written off immediately to
income.
3.9 Investments
Investments are stated at cost less provision for any permanent impairment in value. The
carrying value of investments is reviewed annually to determine the need for any provision for
impairment. The investment has been fully impaired in previous periods.
3.10 Financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the
contractual arrangements entered into. An equity instrument is any contract that evidences a
residual interest in the assets of the entity after deducting all of its financial liabilities.
Where the contractual obligation of the financial instruments (including share capital) are
equivalent to a similar debt instrument, those financial instruments are classed as financial
liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and
gains and losses relating to financial liabilities are included in the profit and loss account.
Finance costs are calculated so as to produce a constant rate of return on the outstanding
liability.
Where the contractual terms of share capital do not have any terms meeting the definition of
a financial liability then this is classed as an equity instrument. Dividend and distributions
relating to equity instruments are debited direct to equity.
4 Intangible assets
Intangible
Goodwill assets Total
£’000 £’000 £’000
Cost
At 1 January 2016 12,758 107 12,865
Additions – 80 –
At 31 December 2016 12,758 187 12,865
Accumulated amortisation
At 1 January 2016 4,843 – 4,843
Charge for the year 577 25 602
At 31 December 2016 5,420 25 5,445
Net book amount at 31 December 2016 7,338 162 7,500
Net book amount at 31 December 2015 7,915 107 8,022
Page 43
Notes to the Company financial statements
For the year ended 31 December 2016
5 Tangible assets
Computer
equipment Vehicles Total
£’000 £’000 £’000
Cost
At 1 January 2016 363 24 387
At 31 December 2016 363 24 387
Accumulated depreciation
At 1 January 2016 319 13 332
Charge for the year 36 8 44
At 31 December 2016 355 21 376
Net book amount at 31 December 2016 8 3 11
Net book amount at 31 December 2015 44 11 55
6 Fixed asset investments
Details of the investments at 31 December 2016 in which the Company holds more than 20%
of the nominal value of ordinary share capital are as follows:
Country of Group Company
incorporation Nature of proportion proportion
or registration business held held
M.T. Labs Limited Israel Sale of instant 100% 100%
communication services
With registered address: 13 Amal street, Afek Industrial Park, Rosh Ha’ayin 4809249, Israel
On 31 October 2009 the trade and net assets of Mobile Tornado International Limited were
transferred to Mobile Tornado Group plc at book value, following which the net investment held
by Mobile Tornado Group plc in Mobile Tornado International Limited was £12,758,000.
Consequently, the value of the investment held in Mobile Tornado International Limited is not
supported by any net assets or future cash flows. As the transfer did not impair the future
profitability of the Company, £12,758,000 was transferred from investments to goodwill in the
Company balance sheet.
Mobile Tornado International Limited was subsequently dissolved.
7 Debtors
2016 2015
£’000 £’000
Trade receivables 803 727
Prepayments and accrued income 236 188
Other debtors 6 9
Amounts owed by Group undertakings 350 440
1,395 1,364
Trade receivables includes £nil (2015: £nil) falling due after more than one year. Trade
receivables are stated after provisions for impairment of £330,000 (2015: £260,000).
Amounts due from Group undertakings are unsecured, interest free and repayable on demand.
Page 44
Notes to the Company financial statements
For the year ended 31 December 2016
8 Creditors
2016 2015
£’000 £’000
Trade creditors 641 435
Accruals 234 148
Other taxation and social security 16 18
10% cumulative preference shares 7,699 7,082
Other creditors 4 6
Deferred income 2,314 1,924
Loans owed to related party undertaking 1,670 –
Contingent consideration 3,354 2,873
15,932 12,486
Less non-current portion:
Deferred consideration (2,625) (2,514)
10% cumulative preference shares (5,702) (5,702)
Amounts due within 1 year 7,605 4,270
9 Called up share capital
2016 2015
£’000 £’000
Allotted, called up and fully paid
247,553,189 (2015: 247,553,189) Ordinary shares of 2p each 4,951 4,951
Total 4,951 4,951
There is a single class of ordinary shares. There are no restrictions on the distributions.
Non-voting preference shares – classified as liability
Number of Nominal
shares Value
’000 £’000
As at 31 December 2015 and 2016 71,277 5,702
All preference shares are non-voting, non-convertible cumulative redeemable preference
shares. They are redeemable at par value on 31 December 2018, or, at the Company’s
discretion, at any earlier date and will accrue interest at a fixed rate of 10 per cent. per
annum. Unpaid dividends accrue interest at 3% above Bank of England base rate until settled.
10 Capital and other commitments
At the balance sheet date the Group had outstanding commitments for future minimum lease
payments under non-cancellable operating leases as follows:
2016 2015
£’000 £’000
Within one year 5 12
Total 5 12
Operating lease payments represent rentals payable by the Company for certain properties.
Page 45
Notes to the Company financial statements
For the year ended 31 December 2016
11 Related party transactions
The Company has taken advantage of the exemption available under FRS 102 ‘Related Party
Disclosures’ from disclosing transactions between the Company and its wholly owned
subsidiary undertaking as these have been eliminated on consolidation of these financial
statements.
Peter Wilkinson is a shareholder and Director of InTechnology plc. Mobile Tornado Group plc
has bought goods and services totalling £158,000 (year ended 31 December 2015; £278,000)
from InTechnology plc in the year to 31 December 2016. As at 31 December 2016, Mobile
Tornado Group plc owed InTechnology plc £519,000 (31 December 2015; £361,000).
InTechnology plc has provided loan finance of £1,670,000 to Mobile Tornado Group plc in the
year ended 31 December 2016 (year ended 31 December 2015; £601,000). As at
31 December 2016, Mobile Tornado Group plc owed InTechnology plc £1,670,000
(31 December 2015; £nil).
Payments to a third party, Mainstream Capital Partners LLP, are made in respect of the
services provided by Jeremy Fenn, Executive Chairman. As at 31 December 2016, Mobile
Tornado Group Plc owed £nil (31 December 2015: £5,000) to Jeremy Fenn.
The Group is controlled by InTechnology plc (incorporated in the UK), which owns 51.2% of
the Company’s ordinary shares. The Group’s ultimate parent and controlling party is Peter
Wilkinson.
12 Loss for the financial year
The Company has taken advantage of Section 408 of the Companies Act 2006 and has not
included its own profit and loss account in these financial statements. The Parent Company’s
loss for the year ended 31 December 2016 was £3,987,000 (year ended 31 December 2015:
£5,709,000 loss).
Page 46
Page 46
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that an Annual General Meeting of the Company will be held at
Cardale House, Cardale Court, Beckwith Head Road, Harrogate, HG3 1RY on 6 June 2017 at
09.00 a.m. to transact the following business. Resolutions 1 to 5 (inclusive) will be proposed
as ordinary resolutions and resolutions 6 and 7 will be proposed as special resolutions.
ORDINARY RESOLUTIONS
1. to receive and adopt the report of the Directors and the audited accounts of the Company
and its subsidiaries for the financial year ended 31 December 2016 together with the
report of the auditors thereon.
2. to re-appoint PricewaterhouseCoopers LLP as auditors of the Company to hold office until
the conclusion of the next general meeting at which accounts are laid before the
Company.
3. to authorise the Directors to determine the auditors’ remuneration.
4. to re-appoint Richard James, who retires in accordance with Article 38 of the Company’s
articles of association and who, being eligible, offers himself for re-appointment as a
Director.
5. THAT, in substitution for all existing and unexercised authorities, pursuant to section 551
of the Companies Act 2006 (the “Act”), as amended, the Directors of the Company be
and are hereby generally and unconditionally authorised to exercise all or any of the
powers of the Company to allot and grant equity securities (within the meaning of
section 560 of the Act) in the capital of the Company up to a maximum nominal amount
of £1,790,931 (being approximately 33 per cent of the Company’s issued share capital),
provided that this authority shall, unless previously revoked or varied by the Company in
general meeting, expire at the conclusion of the next Annual General Meeting of the
Company after the passing of this resolution, save that the Company may before the
expiry make an offer or agreement which would or might require equity securities to be
allotted or granted after such expiry and the Directors of the Company may allot or grant
equity securities in pursuance of such an offer or agreement as if the authority conferred
hereby had not expired.
SPECIAL RESOLUTIONS
6. THAT, subject to the passing of resolution 5, the Directors of the Company be and are
hereby empowered pursuant to section 570 and 573 of the Act to allot equity securities
(as defined in section 560 of the Act) for cash or otherwise pursuant to the authority
given by resolution 5 and/or to allot equity securities where such allotment constitutes
an allotment of securities by way of section 560(2)(b) of the Act, as if section 561(1) of
the Act did not apply to any such allotment, provided that this power shall be limited to
the allotment of equity securities in connection with the satisfaction of indebtedness
owed by the Company to InTechnology plc up to an aggregate nominal amount of
£1,200,000. The subscription price payable in respect of any such allotment shall not be
less than the average of the mid-market price for the Company’s shares for the 3 days
prior to such allotment;
provided that this authority shall expire on the conclusion of the next Annual General
Meeting of the Company or 15 months from the date of this resolution, whichever is
earlier and save that the Company may before such expiry make an offer, agreement or
other arrangement which would or might require equity securities to be allotted after
such expiry and the Directors of the Company may allot equity securities pursuant to any
such offer, agreement or other arrangement as if the authority hereby conferred had not
so expired.
Page 47
Notice of Annual General Meeting
7. THAT, subject to the passing of resolution 5, the Directors of the Company be and are
hereby empowered pursuant to section 570 and 573 of the Act to allot equity securities
(as defined in section 560 of the Act) for cash or otherwise pursuant to the authority
given by resolution 5 and/or to allot equity securities where such allotment constitutes
an allotment of securities by way of section 560(2)(b) of the Act, as if section 561(1) of
the Act did not apply to any such allotment, provided that this power shall be limited to
the allotment of equity securities:
(i) in connection with the grant of options under any share option scheme of the
Company;
(ii) in connection with or the subject of an offer or invitation, including a rights issue or
open or equivalent offer to holders of ordinary shares and such other equity
securities of the Company as the Directors may determine on the register on a fixed
record date, in proportion (as near as may be) to the respective holdings of such
shares, but subject to such exclusions or other arrangements as the Directors may
deem necessary or expedient in relation to fractional entitlements or any legal or
practical problems under the laws of, or the requirements of, any recognised
regulatory body or any stock exchange in any territory; and
(iii) otherwise than pursuant to sub-paragraphs (i) and (ii) above, up to an aggregate
nominal amount of £542,706 (being approximately 10 per cent of the Company’s
issued share capital);
provided that this authority shall expire on the conclusion of the next Annual General
Meeting of the Company or 15 months from the date of this resolution, whichever is
earlier and save that the Company may before such expiry make an offer, agreement or
other arrangement which would or might require equity securities to be allotted after
such expiry and the Directors of the Company may allot equity securities pursuant to any
such offer, agreement or other arrangement as if the authority hereby conferred had not
so expired.
By Order of the Board
Jeremy Fenn
Executive Chairman
28 April 2017
Registered office:
Cardale House
Cardale Court
Beckwith Head Road
Harrogate, HG3 1RY
Page 48
Notice of Annual General Meeting
Notes:
Appointment of proxies
1. As a member of the Company, you are entitled to appoint a proxy to exercise all or any of your rights to attend,
speak and vote at the Meeting and you should have received a proxy form with this notice of Meeting. You can
only appoint a proxy using the procedures set out in these notes and the notes to the proxy form.
2. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of
how to appoint the Chairman of the Meeting or another person as your proxy using the proxy form are set out in
the notes to the proxy form.
3. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different
shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more
than one proxy, please contact Capita Asset Services at PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU or
you may photocopy the enclosed proxy form.
4. If you do not give your proxy an indication of how to vote on any resolution, your proxy will vote or abstain from
voting at his or her discretion. Your proxy will vote or abstain from voting as he or she thinks fit in relation to any
other matter which is put before the Meeting.
Appointment of proxy using hard copy proxy form
5. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their
vote.
To appoint a proxy using the proxy form, the form must be:
• completed and signed;
• sent or delivered to Capita Asset Services at PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU; and
• received by Capita Asset Services by no later than 9.00 a.m. on 4 June 2017.
In the case of a member which is a company, the proxy form must be executed under its common seal or signed
on its behalf by an officer of the company or an attorney for the company stating their capacity (e.g. director,
secretary).
Any power of attorney or any other authority which the proxy form is signed (or a duly certified copy of such power
or attorney) must be included with the proxy form.
Appointment of proxy by CREST
6. If you are a CREST member and wish to appoint a proxy or proxies through the CREST electronic proxy
appointment service you may do so by using the procedures described in the CREST Manual (available via
www.euroclear.com/CREST). CREST personal members or other CREST sponsored members, and those CREST
members who have appointed a service provider(s), should refer to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST
message (a ”CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland
Limited’s specifications, and must contain the information required for such instruction, as described in the CREST
Manual, The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the
instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received
by Capita Registrars (ID: RA10) by the latest time for receipt of proxy appointments specified in this notice of
meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp
applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to
proxies appointed through CREST should be communicated to the appointee through other means.
If you are a CREST member or, where applicable, a CREST sponsor, or voting service provider, you should note
that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular
message. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST
personal member, or sponsored member, or has appointed a voting service provider(s), to procure that his CREST
sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is
transmitted by means of the CREST system by any particular time. In this connection, you and, where applicable,
your CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a)
of the Uncertificated Securities Regulations 2001.
Appointment of proxy by joint members
7. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the
appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which
the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the
first-named being the most senior).
Page 49
Notice of Annual General Meeting
Changing proxy instructions
8. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note
that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions;
any amended proxy appointment received cut-off time will be disregarded.
Where you have appointed a proxy using the hard-copy form and would like to change the instructions using
another hard-copy form, please contact Capita Asset Services at PXS, The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU.
If you submit more than one valid appointment, the appointment received last before the latest time for the receipt
of proxies will take precedence.
Termination of proxy appointments
9. In order to revoke a proxy instruction you will need to inform Capita Registrars by sending a hard copy notice
clearly stating your intention to revoke your proxy appointment to Capita Registrars at PXS, The Registry,
34 Beckenham Road, Beckenham, Kent BR3 4TU. In the case of a member which is a company, the revocation
notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney
for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a
duly certified copy of such power or authority) must be included with the revocation notice.
In either case, the revocation notice must be received by Capita Asset Services by no later than 9.00 a.m. on
4 June 2017.
If you attempt to revoke your proxy appointment but the revocation is received after the time specified then,
subject to the paragraph directly below, your proxy appointment will remain valid.
The return of the completed proxy form, other such instruments, or any CREST Proxy Instruction will not prevent
you from attending the Meeting and voting in person if you wish to do so. If you have appointed a proxy and attend
the Meeting in person, your proxy application will automatically be terminated.
Communication
10. Except as provided above, members who wish to communicate with the Company in relation to the Meeting should
write to the Company Secretary, Mobile Tornado Group plc, Cardale House, Cardale Court, Beckwith Head Road,
Harrogate, HG3 1RY.
No other methods of communication will be accepted.
Corporate representatives
11. If a corporation is a member of the Company, it may by resolution or other governing body authorise one or more
persons to act as its representative or representatives at the Meeting and any such representative or
representatives shall be entitled to exercise on behalf of the corporation all the powers that the corporation could
exercise if it were an individual member of the Company, provided that they do not do so in relation to the same
shares.
Corporate representatives should bring with them either an original or certified copy of the appropriate board
resolution or an original letter confirming the appointment, provided it is on the corporation’s letterhead and is
signed by an authorised signatory and accompanied by evidence of the signatory’s authority.
Uncertificated Securities Regulations
12. Pursuant to regulation 41(1) of the Uncertificated Securities Regulations 2001 (2001 No. 3755), the Company has
specified that only those members registered on the register of members of the Company at close of business on
4 June 2017 (or if the Meeting is adjourned, close of business on the day two days prior to the date of the
adjourned Meeting) shall be entitled to attend and vote at the Meeting in respect of the number of shares
registered in their name at that time. Changes to the register of members after that date shall be disregarded in
determining the rights of any person to attend and vote at the Meeting.
Page 50
Corporate information
Company Registration Number:
5136300
Registered Office:
Directors:
Nominated Advisor and Broker:
Bankers:
Solicitors:
Registrars:
Auditors:
Cardale House
Cardale Court
Beckwith Head Road
Harrogate
North Yorkshire
HG3 1RY
Peter Wilkinson
Jeremy Fenn
Avi Tooba
Richard James
(Non-Executive Director)
(Executive Chairman)
(Chief Executive Officer)
(Director & Company Secretary)
Investec Bank Plc
2 Gresham Street
London
EC2V 7QP
Barclays Bank Plc
Hanover Square
50 Pall Mall
London
SW1Y 5AX
Schofield Sweeney LLP
76 Wellington Street
Leeds
LS1 2AY
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
PricewaterhouseCoopers LLP
Central Square
29 Wellington Street
Leeds
LS1 4DL
Internet address:
www.mobiletornado.com
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sterling 169177
www.mobiletornado.com