ANNUAL REPORT AND
FINANCIAL STATEMENTS
for the year ended 31
December 2017
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 – prepared under FRS102
Company statement of changes in equity
Notes to the Company financial statements – prepared under FRS102
Notice of Annual General Meeting
Corporate information
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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 2017.
Financial Highlights
• Total revenue increased by 25% to £2.53m (2016: £2.02m)
• Recurring revenues increased by 13% to £2.07m (2016: £1.84m)
• Non-recurring revenues, comprising installation fees, hardware and professional services
and perpetual license fees increased to £0.46m (2016: £0.19m)
• Gross profit increased by 26% to £2.42m (2016: £1.92m)
• Operating expenses increased by 7% to £4.15m (2016: £3.89m) – adversely impacted
by the depreciation of sterling comparative to the previous period
• Adjusted EBITDA* loss of £1.72m (2016: £1.96m)
• Group operating loss for the year decreased to £1.76m (2016: £3.09m) – impacted by
further exchange differences of £0.14m gain (2016: £0.64m loss)
• Loss after tax of £1.60m (2016: £3.45m)
• Basic loss per share of 0.61p (2016: 1.39p)
• Cash at bank of £0.73m (2016: £0.17m) with net debt of £9.81m (2016: £9.06m)
*Earnings before interest, tax, depreciation, amortisation, exceptional items and
excluding exchange differences
Operating highlights
• Contract wins with two major Mobile Network Operators (“MNO”) in Israel – now well
positioned to capitalise on significant opportunities in the Israeli market
• Contract renewal with our Tier 1 network operator in Canada, currently our largest
customer by license count and revenues
• Full commercial launches with two MNO customers in South Africa
• Completed the development of new Instant Communication platform, with significantly
higher capacity and additional user features
• Software Development Kit (“SDK”) upgraded and released to market
• Development of the new Dispatch Console (MDC2000) completed and released to market
Financial results and key performance indicators
Total revenue for the year ended 31 December 2017 increased by 25% to £2.53m
(2016: £2.02m). Recurring revenues, a key performance indicator for the business, continued
to increase and were up by 13% to £2.07m (2016: £1.84m). Non-recurring revenues,
comprising installation fees, hardware, professional services and perpetual license fees
increased to £0.46m (2016: £0.19m) supported by the increased number and size of new
installations during the period. As a result, gross profit increased by 26% to £2.42m
(2016: £1.92m).
The majority of our operating expenses are denominated in New Israeli Shekels and whilst our
underlying operating cost-base remained largely unchanged over the comparative period on a
like-for-like basis, our reported operating expenses increased by 7% to £4.15m
(2016: £3.89m) due primarily to the depreciation of Sterling comparative to the first half of
the previous period.
Due to the annual revaluation of certain financial liabilities on the balance sheet, the Group
reported a translational gain of £0.14m (2016: £0.64m loss) arising from the recovery of
Sterling during the year. The Group recorded an income tax credit in respect of our qualifying
investment in R&D activities of £0.85m (2016: £0.28m).
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Strategic report
As a result of the above, the loss after tax for the year decreased to £1.60m (2016: Loss
£3.45m) and a reduced basic loss per share of 0.61p (2016: 1.39p).
The net cash outflow from operating activities was £1.53m (2016: £1.72m). At 31 December
2017, the Group had £0.73m cash at bank (2016: £0.17m) and net debt of £9.81m
(2016: £9.06m).
Results and dividends
The Directors do not recommend the payment of a dividend in respect of the year ended
31 December 2017 (year ended 31 December 2016: nil). The Company currently intends to
reinvest future earnings to finance the growth of the business over the near term.
Review of operations
I am very pleased to report the positive financial performance set out above. The numbers in
isolation are encouraging but they provide only a partial insight into what has been a period
of significant progression and exciting development for the business.
At the end of last year I reported that, under the stewardship of our CEO Avi Tooba, we started
to make significant investment into our technical engineering resources to allow us to expand
our product capabilities in certain key areas as well as to ensure improved cost effectiveness
in the deployment of our technology by our clients. I am pleased to report a range of exciting
product improvements developed by our R&D team over the course of the year.
First of all we made an important improvement to the functionality and user experience of our
dispatch console. This is a key workforce efficiency tool that pinpoints the location of Push to
Talk (“PTT”) users on an interactive map, allowing managers to monitor and dispatch workers
from a central location. There are many valuable applications for this tool and we see
significant appetite for it in the market. Our latest version, the MDC2000, has been recently
launched and as anticipated it is receiving excellent feedback from potential customers.
Another area of focus on the development side has been to maintain our drive to reduce the
minimum system cost and accessibility of our private PTT systems. Whilst we believe our
carrier class product to be competitively priced to Tier 1 MNO’s we are committed to making
our instant communication solutions available at even lower costs and with much reduced
integration times. This is particularly relevant for the clients of our Independent Solution
Vendors, who serve large corporates and clients in the Public sector, where end user numbers
can typically be less than 10,000. Following the excellent work in this area we are now able
to deploy our solution at considerably reduced costs.
Related to this was the completion of our work in developing our SDK allowing an external
engineer to integrate a full suite of our PTT functionality into third party work-force
management applications within a few weeks. These are developments that expand the
relevance and application of the Mobile Tornado product, allowing us to capture a wider market
share, and enable more efficient use of our own technical resources.
A third area of our development work has been focussed on expanding the number of available
devices that are integrated with the Mobile Tornado PTT solution. A number of these have been
ruggedised devices. We already have a wide range of third party devices from multiple
handset vendors on which our solution can operate, but we have increased this significantly
to ensure our customers have the device choice they need. This is in response to the
continued convergence of device usage for workers in industrial enterprises and field services
who have previously relied on multiple devices and who can now elect for a single ruggedised
smartphone device on which PTT and all applications can operate.
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Strategic report
These continued improvements to our technical platform allow us to deliver, in our opinion,
the most superior in-network PTT solution to our customers. Before moving on to our sales
progress I wanted to set out how our customers prioritise their technical needs, whether MNO,
global enterprise or public sector body, from a PTT perspective to demonstrate how we are
able to differentiate our offering and to help bring our sales progress into context.
The technical needs of our clients can be simplified into three priority areas: Platform
Robustness; User Efficiency; and Features
Platform Robustness is determined by the availability, capacity and scalability of the platform.
The Mobile Tornado PTT system availability is 99.999%, which is equivalent to 5 minutes total
downtime per year, and represents the gold standard of cellular network operation. Few if any
of our competitors outside of the Mission Critical market can offer this level of performance
and it is better than most land mobile radio (“LMR”) and digital mobile radio (“DMR”) network
availability.
In capacity terms we can offer great flexibility, with high capacity systems for 200,000 users
enabling large organizations and enterprises to be set up on one system, and low capacity
systems that can be deployed with less than 10,000 registered users. In the context of
scalability and group size our server database can allow for the creation of thousands of
different groups for any given server with individual PTT group sizes up to 350 members.
The second element is User Efficiency and this is determined by the data usage, latency and
speed of the service to the user. Some available applications in the market use a high bit rate.
This could mean the customer may require up to 4GB of data per month per PTT user if large
user groups are planned. A more problematic issue of higher bit rate systems is message
delivery failure that becomes a greater issue in congested areas or during events where there
is high data usage. Our technology selects the bit rate based on the system topology (2G, 3G,
4G or Wi-Fi) and selects a lower bit rate where the signal is weak. All these actions allow a
user to consume a far lower data usage.
In terms of speed and latency, measured from PTT button press to the receipt of audio on the
other side, our service is under one second, and about 0.5 second on 4G and Wi-Fi networks.
This is irrespective of whether the group is 2 or 350 members.
The third key element of our platform is the number of features and level of functionality that
the platform delivers. I have highlighted above some of the most important developments,
such as the SDK, enhanced Dispatch console, and low cost private platforms and although we
sit outside the Mission Critical public safety market, we strongly believe we can offer a
technical solution and service that is very close to it in quality terms at a fraction of the price.
The Board believes that this makes for a very compelling proposition to our customers.
In operational cost terms, we have been able to make the technical progress detailed above
on broadly the same levels of spending as last year, as we sustained our R&D spending
commitment. We have built excellent engineering capabilities across our three centres in
Ukraine, Israel and India, and will continue to invest at similar levels as we seek to maintain
our position in the market.
Mobile network operators (‘MNOs’)
We have seen some significant activity in our MNO engagement over the past year. Total
revenues were up 25% year on year and it was pleasing to see the sustained momentum in
our recurring revenue numbers in H2 2017, following the increase we saw during H1 2017.
In North America we were pleased to renew the contract we have with our Tier 1 MNO
customer. A key factor in this renewal was the enhanced robustness of our platform and our
ability to offer the customer the ultimate level of platform availability at 99.999% which I
touched on earlier.
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Strategic report
We have maintained for some time that South America is a primary target region for the
business and we continue our close level of engagement with the largest MNO’s in Mexico,
Brazil, Ecuador and Colombia. Despite the delay in translating our engagement level into
significant user license numbers which has been disappointing, we are finally beginning to see
real traction being achieved by our MNO partners with their end customers, particularly in
Colombia where we have recently had some important customer wins. We expect ramp up in
these new customers to flow through into our financial performance in 2018. We are convinced
by the market dynamics for PTT over Cellular (“PTToC”) in the region given the high
deployment of iDEN but we are yet to see the full consequences of its redundancy phase and
the anticipated migration to PTToC in substantial numbers yet. Despite this we saw that
revenues attributed to the region increased 41% from the previous year from a low number
in absolute terms.
We are beginning to make encouraging progress in Africa, commencing commercial roll-out
with the two largest South African MNOs in the later stages of the financial year. Discussions
have also commenced with one of these MNOs around launching and deploying our proposition
in the wider African market. I look forward to updating you in due course on this opportunity.
In Israel we recently announced the signing of two major MNO deals. The Israeli market is
currently witnessing an intense period of competition by MNOs for business customers looking
to replace LMR systems with PTToC offerings. We are delighted to have been selected by two
major MNO’s which positions us well into a market where we expect to see significant license
sales potential during this financial year.
Hardware
Towards the end of the last financial year, we commenced a project that looked at the
opportunities in the handset market, whilst still recognising that we are a technology led
software provider. Since PTT is the primary application needed on the device for many of our
customers, including MNOs looking to sell to their business customers, we concluded that
there is a bundled sales opportunity for us to offer a device with a perpetual PTT license,
where we effectively play the role as reseller of the device.
The increasing number of handset manufacturers producing ruggedised devices, targeted at
the PTToC market, is a leading indicator on the momentum that has started to build. We have
now engaged with a number of these to embed our application at manufacture, thereby
enabling us to sell a bundled solution to customers. This is especially attractive to MNOs where
there are large numbers of end users migrating to a PTToC solution from LMR, where the
customers are familiar with paying for an integrated hardware/software solution.
The revenue economics to the business, albeit different from our recurring revenue license
model, would be highly attractive as we would be able to capture both a margin in the sale of
the device as well as from the sale of our license. We will keep you updated on progress.
Independent Solution Vendors (ISV’s) and software integrators
Our offering to ISV’s and our ability to service them as a sales channel has been greatly
enhanced by both the roll out of our SDK solution, as well as the work we have done in
bringing down the cost of a private system built around our technology. Having this capability
means we now have a healthy pipeline of enterprise opportunities via ISV’s and Software
Integrators.
Principal risks and uncertainties
The management of the business and the nature of the Group’s strategy are subject to a
number of risks.
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Strategic report
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 Directors have reviewed the available cash reserves which are supported by the recent
placing of new shares completed on 10 January 2018 raising £1.35m, together with continued
support from our principal shareholder – Intechnology plc, who have confirmed that they will
not call on existing loans and borrowings and will provide working capital support under
specific scenarios, as well as cash projections for the foreseeable future and in particular for
the next twelve months from the date of signing these financial statements. The review
modelled a range of sensitivities concerning both the size and timing of projected revenues
from both current as well as new customers. On the basis of this review, they have reasonable
expectation that the Group will be able to meet its liabilities as they fall due and continue to
trade for the foreseeable future. They therefore have concluded that the financial statements
are appropriately prepared on a going concern basis.
Outlook
The market continues to move in a favourable direction and supports the investment we have
made in our technical platform. There is an increasing appetite for Companies and public
agencies to explore PTToC as an alternative to their traditional radio systems. The lower cost
of ownership, and enhanced functionality, are providing very compelling reasons for switching.
The Board believes the Company is very well positioned to take advantage of these market
dynamics. We believe we now have the leading offering within the business-critical market and
are uniquely placed to capture non-mission-critical enterprise customers seeking a lower cost
solution with the superior functionality benefits that PTToC offers.
Our focus for the coming year will firmly shift towards the development of our sales channels
and the monetisation of the platform. We have some excellent customers already on the
platform and we are working closely with them to ensure they reach their full potential.
Approved by the Board of Directors and signed on behalf of the Board
Jeremy Fenn
Chairman
1 May 2018
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 2017.
Share issues
The Company completed on 28 April 2017 a placing of 23.8 million shares at 5p per share to
raise a total of £1.19m, and subsequently on 10 January 2018, a placing of 27.0m shares at
5p per share to raise a further £1.35m to support the working capital requirements of the
Company.
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.
• 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.
• Jonathan Freeland was appointed to the Board as an independent Non-Executive
Director on 9 February 2018. Jonathan has over 17 years’ experience in financial services
across wealth and investment banking, private equity and commercial lending. Most
recently he was a Partner at Venn Partners LLP, the specialist private credit investment
manager, from 2011-2015. He is currently advisor to a number of non-bank financing
businesses operating in a range of sectors.
Richard James stepped down from the Board as Director and Company Secretary on
6 June 2017.
Page 7
Directors’ report
The Directors and their families have the following beneficial interests in the ordinary share
capital of the Company:
1 February 31 December 31 December
2018 2017 2016
number % number % number %
Peter Wilkinson 38,146,141 12.8 34,146,141 12.6 28,146,141 11.4
Jeremy Fenn 12,184,752 4.1 11,434,752 4.2 8,434,752 3.4
Avi Tooba 4,000,000 1.3 3,000,000 1.1 – –
Richard James
(resigned 6 June 2017) 2,959,870 1.0 2,959,870 1.1 2,959,870 1.2
Jonathan Freeland
(appointed 9 February 2018) 3,181,014 1.1 2,581,014 1.0 2,181,014 0.9
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.
Directors’ emoluments
The remuneration of the Directors of the Company was as follows:
Benefits 2016
Salary Fees in kind Total Total
£’000 £’000 £’000 £’000 £’000
Peter Wilkinson – 66 – 66 66
Jeremy Fenn 6 120 1 127 127
Richard James – 8 – 8 18
Avi Tooba (appointed
30 September 2016) 112 – 39 151 91
Aggregate emoluments 118 194 40 352 302
Interests in share options
Set out below are details of share options that have been granted to Directors:
No. of share Exercise Earliest No. of share
options price Grant exercise Expiry options
2017 pence date date date 2016
Jeremy Fenn 3,000,000 7.5 03/01/12 03/01/15 03/01/22 3,000,000
Jeremy Fenn 3,000,000 6.5 15/06/17 15/06/20 15/06/27 –
Total 6,000,000 3,000,000
Avi Tooba 2,000,000 2.0 16/05/16 16/05/19 31/12/26 2,000,000
Avi Tooba 2,000,000 4.0 04/11/16 04/11/19 31/12/26 2,000,000
Avi Tooba 3,000,000 6.5 15/06/17 15/06/20 15/06/27 –
Total 7,000,000 4,000,000
Substantial shareholdings
Following the placing of new shares on 10 January 2018, InTechnology plc held
126,709,135 shares (31 December 2017; 126,709,135; 31 December 2016; 126,709,135) in
Page 8
Directors’ report
the Company representing 42.5% 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
recognizes 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,
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
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Directors’ report
Group continually monitors its trade receivables and incorporates this information into its
credit risk controls.
Going concern
The Directors have reviewed the available cash reserves which are supported by the recent
placing of new shares completed on 10 January 2018 raising £1.35m, together with continued
support from our principal shareholder – Intechnology plc, who have confirmed that they will
not call on existing loans and borrowings and will provide working capital support under
specific scenarios, as well as cash projections for the foreseeable future and in particular for
the next twelve months from the date of signing these financial statements. The review
modelled a range of sensitivities concerning both the size and timing of projected revenues
from both current as well as new customers. On the basis of this review, they have reasonable
expectation that the Group will be able to meet its liabilities as they fall due and continue to
trade for the foreseeable future. They therefore have concluded that the financial statements
are appropriately prepared on a going concern basis.
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.
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.
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Directors’ report
Pension costs
The Group operates a pension scheme and makes contributions to its employees in adherence
with its auto-enrolment obligations. 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. The cost to the Group of £1,427,000 (2016:
£1,270,000) 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
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.
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Directors’ report
The Directors of the ultimate parent company are responsible for the maintenance and
integrity of the of the ultimate parent company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced
and understandable and provides the information necessary for shareholders to assess the
Group and Company’s performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the Directors’ report confirm
that, to the best of their knowledge:
• the Company financial statements, which have been prepared 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 law), give a true and fair view of the assets, liabilities, financial
position and loss of the Company;
• the Group financial statements, which have been prepared in accordance with IFRSs as
adopted by the European Union, give a true and fair view of the assets, liabilities,
financial position and loss of the Group; and
• the Directors’ Report includes a fair review of the development and performance of the
business and the position of the Group and Company, together with a description of the
principal risks and uncertainties that it faces.
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 12 June 2018. Details of the business to be
proposed at the AGM are contained within the Notice of Meeting, which is set out on pages 55
to 61.
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
1 May 2018
Page 12
Independent auditors’ report to the
members of Mobile Tornado Group plc
Report on the audit of 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 2017 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 IFRSs as
adopted by the European Union;
• the Company financial statements have been properly prepared 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 law); and
• the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial
Statements (the “Annual Report”), which comprise: the Group statement of financial position
and Company balance sheet as at 31 December 2017; the Group income statement and
statement of comprehensive income, the Group statement of cash flows, and the Group and
Company statements of changes in equity for the year then ended; and the notes to the
financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
Our audit approach
Materiality
• Overall Group materiality: £131,000 (2016: £148,000), based on 5% of average losses
before tax for the last three years.
• Overall Company materiality: £118,000 (2016: £132,000), based on 5% of average
losses before tax for the last three years, capped at 90% of Group materiality.
Audit scope
• The Group consist of two components, the Company and its one subsidiary. We as the
Group engagement team, audited the UK – covering 99% of the Group’s external
revenues and 99% of the Group’s Loss before tax.
Page 13
Independent auditors’ report to the
members of Mobile Tornado Group plc
Key audit matters
• The risk that the Group will be unable to continue as a going concern (Group and parent).
• Goodwill may be impaired (Parent).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements. In particular, we looked at where the Directors made
subjective judgements, for example in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently uncertain.
As in all of our audits we also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the Directors that represented a
risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of
most significance in the audit of the financial statements of the current period and include the
most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters. This
is not a complete list of all risks identified by our audit.
Key audit matter
The risk that the Group (and Parent) will
be unable to continue as a going
concern.
The Group has been in a loss making position
for a number of years due to it being in its
development phase. The Group is also in a
net liability position.
The Group is mainly financed through a
combination of various borrowings but the
main creditor
is the parent company,
InTechnology plc, which holds a combination
of loans, preference shares and other
payables. If these loans were called on
demand or at the point of maturity, the Group
would not be in a position currently to repay
these borrowings.
The Group has not been in a position to
create positive cash flows from operating
activities and has been funded in the current
year and prior year from funds received from
the placing of new shares on the open
market.
How our audit addressed the key
audit matter
We have reviewed management’s forecasts
and challenged assumptions within them.
We have evaluated the adequacy of support
for significant assumptions underlying the
prospective financial information based on
our knowledge of the entity, its business, and
its Directors. Particular attention has been
made to assumptions that are material to the
prospective
information, which
includes the viability of revenue growth
assumptions, the likelihood of receiving cash
from material research and development tax
credits, and other one off events expected to
give rise to positive cash flows.
financial
We have considered historical assumptions
and Directors’ previous representations on
the ability to continue to operate and raise
new funding.
Page 14
Independent auditors’ report to the
members of Mobile Tornado Group plc
How our audit addressed the key
audit matter
The Group has obtained written confirmation
of support from InTechncology plc, who are
the main creditor, and who have confirmed
that they will continue to support the Group
for the foreseeable future through not calling
on existing loans and borrowings and by
providing working capital support under
specific scenarios.
We have also obtained specific written
representation from the Directors regarding
future plans in relation to its going concern
assessment.
We believe that the work we have performed,
and the disclosures made in the financial
statements are consistent and it is reasonable
for the management to assess that the Group
will continue as a going concern for the
foreseeable future.
Key audit matter
The Directors believe that the Group holds
technology which will
replace current
technology and the material value of which is
not reflected on the Group balance sheet. The
Directors believe that once the Company is
fully established it will be in a position to
repay borrowings and create positive cash
flows in the future. The Directors believe that
they have demonstrated this belief by
subscribing to new shares with their own
capital during the most recent round of
funding in January 2018 which raised £1.35
million of additional capital, in addition to
£1.1 million which was raised during 2017.
these
The Directors have assessed the cash
projections for the foreseeable future and in
particular for the next twelve months from
the date of
financial
signing
statements. The review modelled a range of
sensitivities concerning both the size and
timing of projected revenues from both
current as well as new customers. On the
basis of this review, they have a reasonable
expectation that the Group will be able to
meet its liabilities as they fall due and
continue to trade for the foreseeable future.
They have therefore concluded that the
financial
statements are appropriately
prepared on a going concern basis.
It is noted that this assessment includes the
assumption that InTechnology plc will not call
on its loans and borrowings to be repaid
during the next twelve months.
is
funding
required during
In addition the Directors are confident that if
new
the
foreseeable future to fund day to day
activities (not to repay existing borrowings),
there is sufficient appetite in the market to
support a further round of funding through a
new issue of shares.
Page 15
Independent auditors’ report to the
members of Mobile Tornado Group plc
Key audit matter
How our audit addressed the key
audit matter
Goodwill in the Parent entity may be
impaired
We have reviewed management’s forecasts
and challenged assumptions within them.
On 31 October 2009 the trade and assets of a
wholly owned subsidiary were transferred to
Mobile Tornado Group plc at book value. The
transfer of the trade and assets were
accounted for as a hive up resulting in de-
recognition of an investment in a subsidiary
and recognition of material goodwill.
Given that the Company is loss making and is
in a net liabilities position impairment
indicators are present.
We have evaluated the adequacy of support
for significant assumptions underlying the
prospective financial information based on
our knowledge of the entity, its business, and
its Directors. Particular attention has been
made to assumptions that are material to the
prospective
information, which
includes the viability of revenue growth
assumptions.
financial
We believe that the work we have performed,
and the disclosures made in the financial
statements are consistent and it is reasonable
for the management to assess that the
Company does not require an impairment to
goodwill in the year.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to
give an opinion on the financial statements as a whole, taking into account the structure of
the group and the company, the accounting processes and controls, and the industry in which
they operate.
The Group consists of the Company, incorporated and operating out of the UK, and one
subsidiary, located in Israel. The Group is considered to have one significant component. The
UK is considered to require a full scope audit for the Group audit engagement, as it is
considered a significant component due to its financial significance (UK contributes 99% of
both Group revenue and losses before tax). Israel is not considered a significant component
as it contributes less than 1% of the Group’s revenues and losses before tax. Specified
procedures are performed over specific balances, where the balance contributes 15% or more
of the total balance for the Group. Both components are audited by the Group engagement
team based in the UK.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain
quantitative thresholds for materiality. These, together with qualitative considerations, helped
us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on the financial statements as
a whole.
Page 16
Independent auditors’ report to the
members of Mobile Tornado Group plc
Based on our professional judgement, we determined materiality for the financial statements
as a whole as follows:
Company financial
Group financial statements statements
Overall materiality £131,000 (2016: £148,000).
£118,000 (2016: £132,000).
How we determined it
5% of average losses before
tax for the last three years.
5% of average losses before
tax for the last three years,
capped at 90% of Group
materiality.
Rationale for
benchmark applied
by
Based on the benchmarks used
in the annual report, loss
before tax is the primary
measure
the
used
shareholders in assessing the
a
performance,
generally accepted auditing
benchmark. It is considered
appropriate to use the average
loss over the last three years
whilst the Group is in the initial
stages of its life cycle.
and
is
Based on the benchmarks used
in the annual report, loss
is the primary
before tax
measure
the
by
used
shareholders in assessing the
a
performance,
generally accepted auditing
benchmark. It is considered
appropriate to use the average
loss over the last three years
whilst the Company is in the
initial stages of its life cycle.
and
is
For each component in the scope of our Group audit, we allocated a materiality that is less
than our overall Group materiality. The range of materiality allocated across components was
between £100,000 and £118,000.
We agreed with the Audit Committee that we would report to them misstatements identified
during our audit above £6,550 (Group audit) (2016: £6,600) and £5,900 (Company audit)
(2016: £6,600) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK)
require us to report to you when:
• the Directors’ use of the going concern basis of accounting in the preparation of the
financial statements is not appropriate; or
• the Directors have not disclosed in the financial statements any identified material
uncertainties that may cast significant doubt about the Group’s and Company’s ability to
continue to adopt the going concern basis of accounting for a period of at least twelve
months from the date when the financial statements are authorised for issue.
However, because not all future events or conditions can be predicted, this statement is not a
guarantee as to the Group’s and Company’s ability to continue as a going concern.
Page 17
Independent auditors’ report to the
members of Mobile Tornado Group plc
Reporting on other information
The other information comprises all of the information in the Annual Report other than the
financial statements and our auditors’ report thereon. The Directors are responsible for the
other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material
misstatement of the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the
disclosures required by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the
audit, ISAs (UK) require us also to report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given
in the Strategic Report and Directors’ Report for the year ended 31 December 2017 is
consistent with the financial statements and has been prepared in accordance with applicable
legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment
obtained in the course of the audit, we did not identify any material misstatements in the
Strategic Report and Directors’ Report.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities Statement in respect of
the financial statements set out on page 11, the Directors are responsible for the preparation
of the financial statements in accordance with the applicable framework and for being satisfied
that they give a true and fair view. The Directors are also responsible for such internal control
as they determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s
and the Company’s ability to continue as a going concern, disclosing as applicable, matters
related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Company or to cease operations, or have no
realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
Page 18
Independent auditors’ report to the
members of Mobile Tornado Group plc
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located
on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part
of our auditors’ report.
Use of this report
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.
Other required reporting
Companies Act 2006 exception reporting
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
• certain disclosures of Directors’ remuneration specified by law are not made; 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.
Randal Casson (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
1 May 2018
Page 19
Consolidated income statement
For the year ended 31 December 2017
2017 2016
Note £’000 £’000
Continuing operations
Revenue 2 2,530 2,024
Cost of sales (106) (103)
Gross profit 2,424 1,921
Operating expenses
Administrative expenses (4,148) (3,885)
Exchange differences 135 (642)
Exceptional items 3 (54) (276)
Depreciation and amortisation expense (112) (203)
Total operating expenses (4,179) (5,006)
Group operating loss before exchange differences,
exceptional items & depreciation & amortisation expense (1,724) (1,964)
Group operating loss 4 (1,755) (3,085)
Finance costs 5 (698) (640)
Loss before tax (2,453) (3,725)
Income tax credit 6 852 277
Loss for the year (1,601) (3,448)
Consolidated statement of comprehensive income
For the year ended 31 December 2017
2017 2016
£’000 £’000
Loss for the year (1,601) (3,448)
Other comprehensive loss
Item that will subsequently be reclassified
to profit or loss:
Exchange differences on translation
of foreign operations 41 (71)
Total comprehensive loss for the year (1,560) (3,519)
Attributable to:
Equity holders of the parent (1,560) (3,519)
The accompanying accounting policies and notes form an integral part of these financial
statements.
Page 20
Consolidated statement of financial position
As at 31 December 2017
2017 2016
Note £’000 £’000
Assets
Non-current assets
Property, plant and equipment 8 276 294
Intangible assets 9 125 162
401 456
Current assets
Trade and other receivables 10 1,721 1,313
Inventories 11 1 –
Cash and cash equivalents 12 732 165
2,454 1,478
Liabilities
Current liabilities
Trade and other payables 13 (5,085) (4,719)
Borrowings 14 (10,545) (3,667)
Net current liabilities (13,176) (6,908)
Non-current liabilities
Trade and other payables 13 (2,241) (2,625)
Borrowings 14 – (5,560)
(2,241) (8,185)
Net liabilities (15,016) (14,637)
Equity attributable to the owners of the parent
Share capital 15 5,427 4,951
Share premium 15 12,672 12,012
Reverse acquisition reserve (7,620) (7,620)
Merger reserve 10,938 10,938
Foreign currency translation reserve (2,213) (2,254)
Accumulated losses (34,220) (32,664)
Total equity (15,016) (14,637)
The financial statements on pages 20 to 45 were approved by the Board of Directors on 1 May
2018 and were signed on its behalf by:
Jeremy Fenn
Chairman
1 May 2018
Company Number: 5136300
Page 21
Consolidated statement of changes in equity
For the year ended 31 December 2017
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)
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 2017 4,951 12,012 (7,620) 10,938 (2,254) (32,664) (14,637)
Equity settled share-based payments – – – – – 45 45
Issue of share capital 476 660 – – – – 1,136
Transactions with owners 476 660 – – – 45 1,181
Loss for the year – – – – – (1,601) (1,601)
Exchange differences on translation
of foreign operations – – – – 41 – 41
Total comprehensive loss for the year – – – – 41 (1,601) (1,560)
Balance at 31 December 2017 5,427 12,672 (7,620) 10,938 (2,213) (34,220) (15,016)
The accompanying accounting policies and notes form an integral part of these financial
statements.
Page 22
Consolidated statement of cash flows
For the year ended 31 December 2017
2017 2016
Note £’000 £’000
Operating activities
Cash used in operations 17 (1,528) (1,721)
Tax received 431 277
Net cash used in operating activities (1,097) (1,444)
Investing activities
Purchase of property, plant & equipment (80) (108)
Purchase of intangible assets – (81)
Net cash used in investing activities (80) (189)
Financing activities
Issue of ordinary share capital 1,190 –
Share issue costs (54) –
Proceeds from borrowings 14 620 1,670
Net cash inflow from financing activities 1,756 1,670
Effects of exchange rates on cash
and cash equivalents (12) 21
Net increase in cash and
cash equivalents in the year 567 58
Cash and cash equivalents at beginning of year 165 107
Cash and cash equivalents at end of year 732 165
The accompanying accounting policies and notes form an integral part of these financial
statements.
Changes in liabilities arising from financing activities
For the year ended 31 December 2017
Non-cash changes
Cash Finance Exchange
2016 flows charge differences 2017
£’000 £’000 £’000 £’000 £’000
Preference shares 7,557 – 698 – 8,255
Loans from related party undertakings 1,670 620 – – 2,290
Total liabilities from financing activities 9,227 620 698 – 10,545
Cash and cash equivalents (165) (555) – (12) (732)
Net debt 9,062 65 698 (12) 9,813
Page 23
Notes to the financial statements
For the year ended 31 December 2017
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 England within 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 Directors have reviewed the available cash reserves which are supported by the
recent placing of new shares completed on 10 January 2018 raising £1.35m, together
with continued support from our principal shareholder – Intechnology plc, who have
confirmed that they will not call on existing loans and borrowings and will provide
working capital support under specific scenarios, as well as cash projections for the
foreseeable future and in particular for the next twelve months from the date of signing
these financial statements. The review modelled a range of sensitivities concerning both
the size and timing of projected revenues from both current as well as new customers.
On the basis of this review, they have reasonable expectation that the Group will be
able to meet its liabilities as they fall due and continue to trade for the foreseeable
future. They therefore have concluded that the financial statements are appropriately
prepared on a going concern basis.
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:
Page 24
Notes to the financial statements
For the year ended 31 December 2017
Share options – Share-based payments are dependent on estimates of the number of
shares which are expected to vest (note 16).
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 2017. 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 licences,
services and goods, excluding inter-company sales and value-added taxes, and
represents net invoice value less estimated rebates, returns and settlement discounts.
Licence and service revenues are recognised on a straight line basis over the period to
which the licence 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 licence 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 25
Notes to the financial statements
For the year ended 31 December 2017
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 26
Notes to the financial statements
For the year ended 31 December 2017
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
loss differs from net 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 27
Notes to the financial statements
For the year ended 31 December 2017
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 28
Notes to the financial statements
For the year ended 31 December 2017
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 29
Notes to the financial statements
For the year ended 31 December 2017
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:
•
•
•
•
•
•
•
•
•
•
IFRS 9 ‘Financial instruments’ (for more detail see below);
IFRS 15 ‘Revenue from contracts with customers (and the related clarifications)’
(for more details see below);
IFRS 16 ‘Leases’ (for more detail see below);
IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’;
Amendments to IFRS 4, ‘Insurance contracts’;
Amendments to IAS 40 ‘Transfers of investment property’;
Amendments to IAS 28, ‘Investments in associates and joint ventures’;
IFRS 17, ‘Insurance contracts’;
Amendment to IFRS 2 ‘Classification and Measurement of Share-based Payment
Transactions’; and
IFRIC 23 ‘Uncertainty over Income Tax Treatments’.
IFRS 9 and IFRS 15 are expected to be effective for the year ended 31 December 2018,
with IFRS 16 expected to be effective for the year ended 31 December 2019.
Page 30
Notes to the financial statements
For the year ended 31 December 2017
The impact of IFRS 9 is being assessed by management, with the main impact arising
from the expected credit loss model. The financial effect will depend on the financial
instruments held by the Group during 2018 as well as economic conditions and
judgements made as at the year end. The Group has performed a preliminary
assessment of the potential impact of adopting IFRS 9 based on the financial
instruments as at the date of initial application of IFRS 9 and believe it will have no
impact on the financial statements.
The impact of IFRS 15 has begun to be assessed by management and is ongoing,
however it has not progressed to a state where the impact can be quantified.
The impact of IFRS 16 has not yet been assessed.
1.23 New standards and amendments
The following amendments to standards are mandatory for the first time for the
financial year beginning 1 January 2017 but do not have any impact on the Group:
•
•
•
Amendments to IAS 12 ‘Recognition of deferred tax assets for unrealised losses’;
Annual Improvements to IFRSs: 2014-2016 cycle; and
Amendments to IAS 7 ‘Disclosure initiative’.
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 2017 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
£45,000 (year ended 31 December 2016: £23,000).
Revenue by category
2017 2016
£’000 £’000
License fees 1,972 1,679
Hardware & software 38 22
Professional services 319 163
Other 201 160
Total 2,530 2,024
Page 31
Notes to the financial statements
For the year ended 31 December 2017
Revenue is reported by geographical location of customers. Non-current assets are reported
by geographical location of assets.
2017 2017 2016 2016
Non-current Non-current
Revenue assets Revenue assets
£’000 £’000 £’000 £’000
UK 33 15 62 11
Europe 437 – 418 –
North America 1,018 – 895 –
South America 367 28 261 –
Israel 274 358 76 445
Africa 401 – 312 –
Total 2,530 401 2,024 456
Our mobile network operator customer in Canada represents £886,000 (2016: £852,000) of
the total revenue of the Group.
3 Exceptional costs
These comprise:
• Property costs of £54,000 during the period January to April 2017 (2016: £216,000)
arising from our joint lessee – Alvarion Technologies Ltd entering receivership. Under the
terms of the lease, MT Labs Ltd, became liable for that proportion of the office previously
utilised by Alvarion Technologies Ltd. Effective 1 May 2017, our property lease was
re-signed on improved terms and removed this onerous expense.
• Salary and redundancy costs of £nil (2016: £60,000) arising from the transition of the
research and development management team.
4 Group operating loss
2017 2016
£’000 £’000
Group operating loss before taxation is stated after charging:
Staff costs (note 18) 2,809 2,746
Depreciation of owned property, plant and equipment (note 8) 75 178
Amortisation of intangible assets (note 9) 37 25
Research and development expenditure 1,427 1,350
Other operating lease rentals 344 409
Net exchange (gain)/loss (135) 642
Page 32
Notes to the financial statements
For the year ended 31 December 2017
Auditors’ remuneration
During the year the Group obtained the following services from the Group’s auditors as
detailed below:
2017 2016
£’000 £’000
Fees payable to the Company’s auditors for the audit
of the Company’s financial statements 24 24
5 Finance costs
2017 2016
£’000 £’000
Finance charge on preference shares (698) (640)
Total finance costs (698) (640)
6 Income tax credit
(a) Analysis of credit for the year
2017 2016
£’000 £’000
United Kingdom current tax
Adjustment in respect of prior years (431) (277)
Current year research & development tax credit claimed (476) –
Overseas current tax in respect of prior years 55 –
Total credit for the year (852) (277)
(b) Factors affecting the tax credit for the year
Deferred tax:
At 31 December 2017 the Group had accumulated tax losses of £28,867,000 (31 December
2016: £28,493,000) 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.
2017 2016
£’000 £’000
Loss before tax (2,453) (3,725)
At standard rate of corporation tax of 19.25% (2016: 20%) (472) (745)
Effects of:
Expenses not deductible for tax purposes 140 134
Un-utilised tax losses 332 611
Current year research & development tax credit claimed (476) –
Prior year overseas current tax 55 –
Prior year research & development tax credit claimed (431) (277)
Total credit for the year (852) (277)
Page 33
Notes to the financial statements
For the year ended 31 December 2017
7 Loss per share
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of
£1,601,000 (2016: £3,448,000) by the weighted average number of ordinary shares in issue
during the year of 263,398,121 (2016: 247,553,189).
2016
Basic and diluted
Loss Loss Loss Loss
per share per share
£’000 pence £’000 pence
Loss attributable to
ordinary shareholders (1,601) (0.61) (3,448) (1.39)
Adjusted basic loss per share (1,601) (0.61) (3,448) (1.39)
2017
Basic and diluted
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.
8 Property, plant and equipment
Office Computer Leasehold
equipment equipment improvement Total
£’000 £’000 £’000 £’000
Cost
At 1 January 2016 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
Additions – 66 13 79
Exchange adjustments (5) (77) (11) (93)
At 31 December 2017 77 1,242 133 1,451
Accumulated depreciation
At 1 January 2016 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
Charge for the year 5 63 4 72
Exchange adjustments (2) (59) (7) (68)
At 31 December 2017 53 1,044 78 1,175
Net book amount at 31 December 2017 24 198 55 276
Net book amount at 31 December 2016 29 206 80 294
Page 34
Notes to the financial statements
For the year ended 31 December 2017
9 Intangible assets
Software
£’000
At 1 January 2017 162
Amortisation for the year (37)
At 31 December 2017 125
These comprise third party services and internal staff costs in relation to a quality assurance
automation project.
10 Trade and other receivables
2017 2016
£’000 £’000
Trade receivables 891 1,133
Less: provision for impairment of trade receivables (56) (330)
Trade receivables – net 835 803
Other receivables 679 256
Prepayments and accrued income 207 254
1,721 1,313
Current portion 1,721 1,313
The age of the Group’s year end overdue receivables is as follows:
2017 2016
£’000 £’000
Impaired
Three to six months – –
Over six months 56 330
56 330
Not impaired
Less than three months 96 79
Three to six months – 101
Over six months 478 507
574 687
Of the overdue receivables against which no provision has been made, £480,000
(2016: £547,000) 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.
Page 35
Notes to the financial statements
For the year ended 31 December 2017
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:
2017 2016
£’000 £’000
At 1 January 330 260
Provision for receivables impairment 56 89
Receivables written off during the year
as uncollectable (330) (19)
56 330
11 Inventories
2017 2016
£’000 £’000
Hardware 1 –
The cost of inventories recognised as an expense and included within cost of sales amounted
to £nil (2016: £nil). Inventories put to internal use during the year and therefore transferred
to property, plant and equipment amounted to £nil (2016: £28,000).
12 Cash and cash equivalents
2017 2016
£’000 £’000
Cash at bank and in hand:
Sterling 515 6
US Dollar 17 56
Canadian dollar 57 19
Euro 6 –
New Israel Shekel 137 84
732 165
13 Trade and other payables
2017 2016
£’000 £’000
Trade payables 876 990
Accruals 492 570
Social security and other taxes 91 65
Other payables 415 51
Deferred income 2,384 2,314
Contingent consideration 3,068 3,354
7,326 7,344
Less non-current portion: contingent consideration (2,241) (2,625)
Current portion 5,085 4,719
Page 36
Notes to the financial statements
For the year ended 31 December 2017
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 income balance includes an amount of £2,110,000 (2016: £2,026,000) 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 licence, or the expiration of its obligations if sooner.
14 Borrowings, other financial liabilities and other financial assets
2017 2016
£’000 £’000
Preference shares 8,255 7,557
Loans from related party undertakings 2,290 1,670
Total borrowings 10,545 9,227
Maturity analysis
2017 2016
£’000 £’000
In one year or less 10,545 3,667
Between two and five years – 5,560
Total 10,545 9,227
InTechnology plc has agreed not to demand immediate repayment of the unpaid accrued
interest on the 10% preference shares amounting to £2,632,000 (2016: £1,997,000) and
have agreed to extend the redemption date on these preference shares until 31 December
2020. This will be put to shareholders for approval at the forthcoming AGM on 12 June 2018.
The Group do not have any derivative financial liabilities at 31 December 2017 or
31 December 2016.
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.
Page 37
Notes to the financial statements
For the year ended 31 December 2017
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 £732,000
(2016: £165,000) as follows:
Floating rate
2017 2016
£’000 £’000
Currency
Sterling 515 6
US dollar 17 56
Canadian dollar 57 19
Euro 6 –
New Israel shekel 137 84
Total 732 165
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 (2016: £nil).
Interest rate risk profile of financial liabilities
The interest rate profile of the financial liabilities of the Group is as follows:
2017 2016
£’000 £’000
Fixed rate 10% preference shares classified as debt 8,255 7,557
Total 8,255 7,557
Fixed
2017 2016
£’000 £’000
Loans from related party undertakings 2,290 1,670
Total 2,290 1,670
Floating
Further details of which can be found in note 21.
Page 38
Notes to the financial statements
For the year ended 31 December 2017
Currency risk
The table below shows the extent to which the Company held monetary assets and liabilities
in currencies other than their local currency.
2017 2016
£’000 £’000
Functional currency of operation: Sterling
US Dollar (net liabilities) (2,324) (2,711)
Euro (net liabilities) (2,049) (1,876)
Canadian Dollar (net liabilities) (57) (89)
Total (4,430) (4,676)
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 £583,000 (2016: £425,000).
A 1% movement in interest rates would result in a charge or credit to profit and equity of
£26,000 (2016: £20,000).
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.
Page 39
Notes to the financial statements
For the year ended 31 December 2017
Summary of the Group’s financial assets and liabilities as defined in IAS 39
‘financial instruments: recognition and measurement’
2017 2016
£’000 £’000
Current assets – loans and receivables
Trade and other receivables 1,514 1,060
Cash and cash equivalents 732 165
2,246 1,225
Current liabilities – held at amortised cost
Trade and other payables (2,610) (2,340)
Preference shares (8,255) (1,997)
Loans (2,290) (1,670)
(13,155) (6,007)
Non-current liabilities – held at amortised cost
Trade and other payables (2,241) (2,625)
Preference shares – (5,560)
(2,241) (8,185)
Net financial assets and liabilities (13,150) (12,967)
The Directors consider that the fair value of financial assets and liabilities approximates to the
carrying value for both 2017 and 2016.
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 2017 247,553 4,951 12,012 16,963
Issue of shares 23,800 476 660 1,136
As at 31 December 2017 271,353 5,427 12,672 18,099
The total authorised number of ordinary shares is 475 million (2016: 475 million) with a par
value of 2p per share (2016: 2p per share).
Non-voting preference shares – included in financial liabilities
Number of Nominal
shares Value
’000 £’000
As at 31 December 2016 and 2017 71,277 5,702
All preference shares are non-voting, non-convertible cumulative redeemable preference
shares. They are currently 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. The Company has, however, agreed with Intechnology plc to extend the
redemption date on these preference shares until 31 December 2020 and that this will be put
to shareholders for approval at the forthcoming AGM on 12 June 2018. Unpaid dividends
accrue interest at 3% above Bank of England base rate until settled.
Page 40
Notes to the financial statements
For the year ended 31 December 2017
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
2017 2016 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 800 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 3,300 3,500 7.5 03/01/15 – 03/01/22
UK scheme 200 200 6.0 18/06/18 – 18/06/25
Israel scheme 1,500 2,300 6.0 07/09/18 – 31/12/23
Israel scheme 2,500 2,500 2.0 16/05/19 – 31/12/26
Israel scheme 4,250 4,250 4.0 04/11/19 – 31/12/26
Israel scheme 5,950 – 6.5 15/06/20 Group
reports
positive
annual
EBITDA 15/06/27
Israel scheme 3,200 – 6.5 15/06/20 Group
reports
positive
annual
EBITDA 15/06/27
Total 23,569 15,869
Options were valued using the Black-Scholes option-pricing model.
Grant date 15/06/17
Shares under option (’000) 9,350
Share price at grant date (pence) 6.5
Exercise price (pence) 6.5
Vesting period (years) 3.0
Expected volatility 32%
Expected life 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 41
Notes to the financial statements
For the year ended 31 December 2017
A reconciliation of option movements over the year to 31 December 2017 is shown below:
2017
Weighted Weighted
average average
exercise exercise
Number price Number price
’000 pence ’000 pence
2016
Outstanding at 1 January 2017/2016 15,869 4.8 16,469 6.0
Granted 9,350 6.5 7,000 3.3
Forfeited (1,650) 6.0 (7,600) 5.9
Outstanding at 31 December 23,569 5.4 15,869 4.8
Exercisable at 31 December 5,969 6.0 2,169 3.4
The closing mid-market share price on 27 April 2018 was 6.0 pence.
The weighted average remaining contractual life of the share options outstanding at
31 December 2017 was 7.5 years at exercise prices ranging from 2.0 pence to 7.5 pence.
Those options exercisable at 31 December 2017 are at exercise prices of 2.0 pence, 5.0 pence
and 7.5 pence.
The total charge for the year relating to employee share-based payment plans was £45,000
(2016: £23,000), all of which related to equity-settled share-based payment transactions.
17 Cash used in operations
2017 2016
£’000 £’000
Loss before taxation (2,453) (3,725)
Adjustments for:
Depreciation and amortisation 112 203
Share-based payment charge 45 23
Interest expense 698 640
Changes in working capital:
(Increase)/Decrease in inventories (1) 31
(Increase)/Decrease in trade and other receivables (1) 38
Increase in trade and other payables 72 1,069
Net cash used in operations (1,528) (1,721)
Page 42
Notes to the financial statements
For the year ended 31 December 2017
18 Employee information
The average monthly number of persons (including Executive Directors) employed by the
Group during the year was:
2017 2016
Number Number
Sales 3 3
Product development & operations 39 37
Finance & administration 6 6
Total 48 46
Included in the table above are 23 persons that are contractors (2016: 17). 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:
2017 2016
£’000 £’000
Wages and salaries 2,465 2,463
Social security costs 93 117
Other pension costs 90 92
Share-based payment charge 45 23
Other benefits 116 51
Total 2,809 2,746
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 2017 (2016: £nil).
20 Operating leases
Details of operating lease arrangements for the Group are as follows:
2017 2016
£’000 £’000
Lease payments under operating leases charged to
operating costs in the year 344 409
Page 43
Notes to the financial statements
For the year ended 31 December 2017
At the balance sheet date the Group had outstanding commitments for future minimum lease
payments under non-cancellable operating leases as follows:
2017 2016
£’000 £’000
Within one year 223 189
One to five years 754 669
Total 977 858
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. There were no share options issued to key management personnel during the
year. Key management personnel remuneration includes the following expenses:
2017 2016
£’000 £’000
Salaries including bonuses 118 76
Other benefits 40 22
Total remuneration 158 98
Sums paid to third parties for services 194 204
Total short-term employee benefits 352 302
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 £174,000 (year ended 31 December 2016; £158,000)
from InTechnology plc in the year to 31 December 2017. As at 31 December 2017, Mobile
Tornado Group plc owed InTechnology plc £693,000 (31 December 2016; £519,000).
InTechnology plc has provided loan finance of £420,000 to Mobile Tornado Group plc in the
year ended 31 December 2017 (year ended 31 December 2016; £1,670,000). As at
31 December 2017, Mobile Tornado Group plc owed InTechnology plc £2,090,000
(31 December 2016; £1,670,000).
Peter Wilkinson has provided loan finance of £100,000 to Mobile Tornado Group plc in the year
ended 31 December 2017 (year ended 31 December 2016; £nil). As at 31 December 2017,
Mobile Tornado Group plc owed Peter Wilkinson £100,000 (31 December 2016; £nil). These
loan monies were repaid in full on 10 January 2018.
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 2017, Mobile
Tornado Group plc owed £4,000 (31 December 2016; £nil) to Mainstream Capital Partners LLP.
Jeremy Fenn has provided loan finance of £100,000 to Mobile Tornado Group plc in the year
ended 31 December 2017 (year ended 31 December 2016; £nil). As at 31 December 2017,
Page 44
Notes to the financial statements
For the year ended 31 December 2017
Mobile Tornado Group plc owed Jeremy Fenn £100,000 (31 December 2016; £nil). These loan
monies were repaid in full on 12 January 2018.
The Group is controlled by InTechnology plc (incorporated in the UK), which owns 42.5% 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 2017 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 45
Company balance sheet
As at 31 December 2017
2017 2016
Note £’000 £’000
Fixed assets
Intangible assets 4 6,888 7,500
Tangible assets 5 42 11
6,930 7,511
Current assets
Debtors 7 2,020 1,395
Cash at bank and in hand 595 27
2,615 1,422
Creditors – amounts falling due within one year 8 (15,164) (7,605)
Net current liabilities (12,549) (6,182)
Total assets less current liabilities (5,619) 1,328
Creditors – amounts falling due after more than one year 8 (2,241) (8,327)
Net liabilities (7,860) (6,999)
Capital and reserves
Called up share capital 9 5,427 4,951
Share premium account 12,672 12,012
Merger reserve 10,938 10,938
Share option reserve 171 126
Accumulated losses (37,068) (35,026)
Total shareholders’ deficit (7,860) (6,999)
The Company’s loss for the financial year was £2,042,000 (2016: £3,987,000).
The financial statements on pages 46 to 54 were approved by the Board of Directors on 1 May
2018 and were signed on its behalf by:
Jeremy Fenn
Chairman
1 May 2018
Company Number: 5136300
The accompanying notes form an integral part of these financial statements.
Page 46
Company statement of changes in equity
For the year ended 31 December 2017
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)
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 2017 4,951 12,012 10,938 126 (35,026) (6,999)
Equity settled
share-based payments – – – 45 – 45
Issue of share capital 476 660 – – – 1,136
Loss for the year – – – – (2,042) (2,042)
Balance at
31 December 2017 5,427 12,672 10,938 171 (37,068) (7,860)
Page 47
Notes to the Company financial statements
For the year ended 31 December 2017
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 England within 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.
The Company has taken advantage of the following exemptions in its individual financial
statements:
•
•
•
From preparing a statement of cashflows;
Disclosure of related party transactions with and between wholly-owned subsidiaries;
Disclosures relating to financial instruments.
3.2 Going concern
The Directors have reviewed the available cash reserves which are supported by the recent
placing of new shares completed on 10 January 2018 raising £1.35m, together with continued
support from our principal shareholder – Intechnology plc, who have confirmed that they will
not call on existing loans and borrowings and will provide working capital support under
specific scenarios, as well as cash projections for the foreseeable future and in particular for
the next twelve months from the date of signing these financial statements. The review
modelled a range of sensitivities concerning both the size and timing of projected revenues
from both current as well as new customers. On the basis of this review, they have reasonable
expectation that the Group will be able to meet its liabilities as they fall due and continue to
trade for the foreseeable future. They therefore have concluded that the financial statements
are appropriately prepared on a going concern basis.
Page 48
Notes to the Company financial statements
For the year ended 31 December 2017
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
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.
Page 49
Notes to the Company financial statements
For the year ended 31 December 2017
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 FRS102 Section 18 ‘Intangible
Assets which, other than for goodwill’, are;
▪
▪
▪
▪
▪
▪
The technical feasibility of completing the intangible asset so that it will be available for
use or sale.
Its intention to complete the intangible asset and use or sell it.
Its ability to use or sell the intangible asset
How the intangible asset will generate probable future economic benefits. Among other
things, the entity can demonstrate the existence of a market for the output of the
intangible asset or the intangible asset itself or, if it is to be used internally, the
usefulness of the intangible asset.
The availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset.
Its ability to measure reliably the expenditure attributable to the intangible asset during
its development.
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.
Page 50
Notes to the Company financial statements
For the year ended 31 December 2017
4 Intangible assets
Goodwill Software Total
£’000 £’000 £’000
Cost
At 1 January 2017 12,758 187 12,945
Additions – – –
At 31 December 2017 12,758 187 12,945
Accumulated amortisation
At 1 January 2017 5,420 25 5,445
Charge for the year 575 37 612
At 31 December 2017 5,995 62 6,057
Net book amount at 31 December 2017 6,763 125 6,888
Net book amount at 31 December 2016 7,338 162 7,500
5 Tangible assets
Computer
equipment Vehicles Total
£’000 £’000 £’000
Cost
At 1 January 2017 363 24 387
Additions 47 – 47
At 31 December 2017 410 24 434
Accumulated depreciation
At 1 January 2017 355 21 376
Charge for the year 13 3 16
At 31 December 2017 368 24 392
Net book amount at 31 December 2017 42 – 42
Net book amount at 31 December 2016 8 3 11
6 Fixed asset investments
Details of the investments at 31 December 2017 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
Page 51
Notes to the Company financial statements
For the year ended 31 December 2017
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
2017 2016
£’000 £’000
Trade receivables 835 803
Prepayments and accrued income 180 236
Other debtors 482 6
Amounts owed by Group undertakings 523 350
2,020 1,395
Trade receivables includes £nil (2016: £nil) falling due after more than one year. Trade
receivables are stated after provisions for impairment of £56,000 (2016: £330,000).
Amounts due from Group undertakings are unsecured, interest free and repayable on demand.
8 Creditors
2017 2016
£’000 £’000
Trade creditors 649 641
Accruals 249 234
Other taxation and social security 16 16
10% cumulative preference shares 8,334 7,699
Other creditors 415 4
Deferred income 2,384 2,314
Loans owed to related party undertakings 2,290 1,670
Contingent consideration 3,068 3,354
17,405 15,932
Less non-current portion:
Deferred consideration (2,241) (2,625)
10% cumulative preference shares – (5,702)
Amounts due within 1 year 15,164 7,605
9 Called up share capital
2017 2016
£’000 £’000
Allotted, called up and fully paid
271,353,189 (2016: 247,553,189) Ordinary shares of 2p each 5,427 4,951
Total 5,427 4,951
There is a single class of ordinary shares. There are no restrictions on the distributions.
Page 52
Notes to the Company financial statements
For the year ended 31 December 2017
Non-voting preference shares – classified as liability
Number of Nominal
shares Value
’000 £’000
As at 31 December 2016 and 2017 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 Company had outstanding commitments for future minimum
lease payments under non-cancellable operating leases as follows:
2017 2016
£’000 £’000
Within one year – 5
One to five years 11 –
Total 11 5
Operating lease payments represent rentals payable by the Company for certain properties.
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 £174,000 (year ended 31 December 2016; £158,000)
from InTechnology plc in the year to 31 December 2017. As at 31 December 2017, Mobile
Tornado Group plc owed InTechnology plc £693,000 (31 December 2016; £519,000).
InTechnology plc has provided loan finance of £420,000 to Mobile Tornado Group plc in the
year ended 31 December 2017 (year ended 31 December 2016; £1,670,000). As at
31 December 2017, Mobile Tornado Group plc owed InTechnology plc £2,090,000
(31 December 2016; £1,670,000).
Peter Wilkinson has provided loan finance of £100,000 to Mobile Tornado Group plc in the year
ended 31 December 2017 (year ended 31 December 2016; £nil). As at 31 December 2017,
Mobile Tornado Group plc owed Peter Wilkinson £100,000 (31 December 2016; £nil). These
loan monies were repaid in full on 10 January 2018.
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 2017, Mobile
Tornado Group plc owed £4,000 (31 December 2016: £nil) to Mainstream Capital Partners LLP.
Page 53
Notes to the Company financial statements
For the year ended 31 December 2017
Jeremy Fenn has provided loan finance of £100,000 to Mobile Tornado Group plc in the year
ended 31 December 2017 (year ended 31 December 2016; £nil). As at 31 December 2017,
Mobile Tornado Group plc owed Jeremy Fenn £100,000 (31 December 2016; £nil). These loan
monies were repaid in full on 12 January 2018.
The Group is controlled by InTechnology plc (incorporated in the UK), which owns 42.5% 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 2017 was £2,042,000 (year ended 31 December 2016:
£3,987,000 loss).
Page 54
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 12 June 2018 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 2017 together with the
report of the auditors thereon.
2. to re-appoint PricewaterhouseCoopers LLP as auditors of the Company to hold office from
the conclusion of this meeting until the conclusion of the next annual general meeting of
the Company at which accounts are laid, and to authorise the Directors to fix their
remuneration.
3. to re-appoint Peter Wilkinson, 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.
4. to re-appoint Jonathan Freeland who has been appointed by the Board since the last
annual general meeting as a Director of the Company.
5. THAT pursuant to section 551 of the Companies Act 2006 (the “Act”) the Directors be
generally and unconditionally authorised to exercise all powers of the Company to allot
shares and grant rights to subscribe for or to convert any security into shares up to an
aggregate nominal amount of £4,651,879.94 comprising of:
a. an aggregate nominal amount of £2,325,939.97 (being approximately 33 per cent
of the Company’s issued share capital as enlarged following the issue and allotment
of shares in connection with the Capitalisation referred to in the explanatory note to
resolution 6) in the form of equity securities (as defined in section 560 of the Act)
in connection with an offer or issue by way of rights, open for acceptance for a
period fixed by the Directors, to holders of ordinary shares (other than the
Company) on the register on any record date fixed by the Directors in proportion
(as nearly as may be) to the respective number of ordinary shares deemed to be
held by them, subject to such exclusions or other arrangements as the Directors
may deem necessary or expedient in relation to fractional entitlements, legal or
practical problems arising in any overseas territory, the requirements of any
regulatory body or stock exchange or any other matter whatsoever; and
b. an aggregate nominal amount of £2,325,939.97 (being approximately 33 per cent
of the Company’s issued share capital as enlarged following the issue and allotment
of shares in connection with the Capitalisation referred to in the explanatory note to
resolution 6) (whether in connection with the same offer or issue as under (a) above
or otherwise),
This authority shall expire (unless previously varied as to duration, revoked or renewed
by the Company in general meeting) at the conclusion of the next annual general
meeting of the Company after the passing of this resolution or on the date falling
15 months after the date on which this resolution is passed (whichever is the earlier),
except that the Company may before such expiry make any offer or agreement which
would or might require shares to be allotted or such rights to be granted after such expiry
and the Directors may allot shares or grant such rights in pursuance of such offer or
agreement as if the authority conferred by this resolution had not expired, and this
authority shall be in substitution for all existing authorities to allot to the extent unused.
Page 55
Notice of Annual General Meeting
SPECIAL RESOLUTIONS
6. THAT, subject to the passing of resolution 5, pursuant to section 570 of the Act, the
Directors be and are hereby generally empowered 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 sell ordinary shares held by the Company as treasury shares for cash as if
section 561 of the Act did not apply to any such allotment or sale, provided that this
authority shall be limited to:
a. any such allotment and/or sale of equity securities in connection with the grant of
options under any share option scheme of the Company;
b. any such allotment and/or sale of equity securities in connection with an offer or
issue by way of rights or other pre-emptive offer or issue, open for acceptance for
a period fixed by the Directors, to holders of Ordinary shares (other than the
Company) on the register on any record date fixed by the Directors in proportion
(as nearly as may be) to the respective number of Ordinary shares deemed to be
held by them, subject to such exclusions or other arrangements as the Directors
may deem necessary or expedient in relation to fractional entitlements, legal or
practical problems arising in any overseas territory, the requirements of any
regulatory body or stock exchange or any other matter whatsoever;
c. any such allotment and/or sale, otherwise than pursuant to paragraph (a) above, up
to an aggregate nominal amount of £1,714,480.47,
provided that this authority (unless previously revoked, varied or renewed) shall expire
at the conclusion of the next annual general meeting of the Company after the passing
of this resolution or on the date falling 15 months after the date on which this resolution
is passed (whichever is the earlier), save that the Company may make an offer or
agreement before the expiry of this power which would or might require equity securities
to be allotted for cash or sold after such expiry and the Directors may allot for cash or
sell equity securities pursuant to any such offer or agreement as if the power conferred
by this resolution had not expired.
7. THAT, article 5.6.1 of the articles of association of the Company be replaced with the
following:
5.6.1 Subject to the Companies Acts and the provisions of these Articles, the Preference
Shares shall be redeemed at the price set out in Article 5.6.6 in the numbers and on the
dates set out below:
Number of Preference Shares to be redeemed
Date of Redemption
71,276,735
31 December 2020
By Order of the Board
Jeremy Fenn
Executive Chairman
14 May 2018
Registered office:
Cardale House
Cardale Court
Beckwith Head Road
Harrogate
HG3 1RY
Page 56
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 Link 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 Link Asset Services at PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU; and
• received by Link Asset Services by no later than 9.00 a.m. on 8 June 2018.
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 Link Asset Services (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).
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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 Link 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 Link Asset Services by sending a hard copy notice
clearly stating your intention to revoke your proxy appointment to Link Asset Services 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 Link Asset Services by no later than 9.00 a.m. on 8 June
2018.
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
8 June 2018 (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.
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Notice of Annual General Meeting
Explanatory notes to the resolutions to be proposed at the Annual General Meeting
of the Company
The resolutions to be proposed at the Annual General Meeting to be held on 12 June 2018 at
09.00 a.m. are set out in the Notice of Annual General Meeting. The following notes provide
brief explanations of the resolutions being put to shareholders.
Ordinary resolutions
Resolutions 1 to 5 are proposed as ordinary resolutions. These resolutions will be passed if
more than 50% of the votes are cast in favour of them.
Resolution 1 – Laying of financial statements
The Directors are required to present to shareholders at the Annual General Meeting the
audited financial statements of the Company and the reports of the Directors and auditors for
the financial year ended 31 December 2017.
Resolution 2 – Appointment of auditors and fixing the remuneration of the auditors
laid
The Companies Act 2006 requires that auditors be appointed at each general meeting at which
financial statements are
the next such meeting.
PricewaterhouseCoopers LLP have indicated their willingness to stand for re-appointment as
auditors of the Company until the conclusion of the next Annual General Meeting. The
Company’s Audit Committee keeps under review the independence and objectivity of the
external auditors and further information can be found in the Annual Report and Financial
Statements on page 9. After considering the relevant information, the Audit Committee has
recommended to the Board that PricewaterhouseCoopers LLP be appointed auditors.
to hold office until
It is normal practice for shareholders to resolve at the Annual General Meeting that the
Directors decide on the level of remuneration of the auditors for the audit work to be carried
out by them in the next financial year. The amount of the remuneration paid to the auditors
for the next financial year will be disclosed in the next audited financial statements of the
Company.
Resolution 3 and Resolution 4 – Re-appointment of Directors
The Company’s Articles of Association require one third of the Directors or, if their number is
not a multiple of three, then the number nearest to but not less than one third, to retire from
office each year. Peter Wilkinson is retiring and seeks re-appointment at the Annual General
Meeting.
Having considered the performance of and contribution made by the Director standing for
re-appointment, the Board remains satisfied that his performance continues to be effective
and to demonstrate commitment to the role and as such the Board recommends his
re-appointment. A biography of Peter Wilkinson appears on page 7 of the Company’s
Annual Report and Financial Statements and on
the Company’s website at
https://www.mobiletornado.com/.
The Company’s Articles of Association provide that a Director appointed by the Board since
the date of the last Annual General Meeting should retire and be proposed for reappointment
by shareholders at the next Annual General Meeting. Jonathan Freeland was appointed as a
Non-Executive director of the Company on 9 February 2018. A biography of Jonathan Freeland
appears on page 7 of the Company’s Annual Report and Financial Statements and on the
Company’s website at https://www.mobiletornado.com/.
Page 59
Notice of Annual General Meeting
Resolution 5 – Authority to allot shares
The Directors may only allot shares or grant rights over shares if authorised to do so by
shareholders. The authority granted at the last Annual General Meeting to allot shares or grant
rights to subscribe for, or convert any security into, shares is due to expire at the conclusion
of this year’s Annual General Meeting.
The Investment Association (IA) guidelines on authority to allot shares state that IA members
will permit, and treat as routine, resolutions seeking authority to allot shares representing up
to one-third of a company’s issued share capital. In addition they will treat as routine a
request for authority to allot shares representing an additional one third of the Company’s
issued share capital provided that it is only used to allot shares for the purpose of a fully pre-
emptive rights issue.
Accordingly, resolution 5, if passed, would authorise the Directors under Section 551 of the
Companies Act 2006 to allot new shares or grant rights to subscribe for, or convert any
security into, new shares (subject to shareholders’ pre-emption rights) up to a maximum
nominal amount of £4,651,879.94, representing the IA guideline limit of approximately 66%
of the Company’s issued share capital (as enlarged following the issue and allotment of shares
in connection with the Capitalisation - see explanatory note to resolution 6 below).
Resolution 5(a) would give the Directors authority to allot new shares or grant rights to
subscribe for, or convert any security into, new shares up to an aggregate nominal value of
£2,325,939.97, representing approximately one third of the Company’s existing issued share
capital (as enlarged following the issue and allotment of shares in connection with the
Capitalisation - see explanatory note to resolution 6 below), in connection with a rights issue
in favour of Ordinary shareholders.
Resolution 5(b), if passed, would give the Directors general authority to allot new shares or
grant rights to subscribe for, or convert any security into, new shares up to an aggregate
nominal value of £2,325,939.97, representing approximately one third of the Company’s
existing issued share capital (as enlarged following the issue and allotment of shares in
connection with the Capitalisation - see explanatory note to resolution 6 below). As resolution
5(b) imposes no restrictions on the way the authority may be exercised, it could be used in
conjunction with resolution 5(a) so as to enable the whole two-thirds to be used in connection
with a rights issue. Where the usage of this authority exceeds one-third of the issued share
capital, the Directors intend to follow best practice as regards its use (including as to the
requirement for all Directors to stand for re-election at the next Annual General Meeting of
the Company).
The authority will expire at the earlier of the conclusion of the next Annual General Meeting
of the Company and close of business on the date falling 15 months after the passing of this
resolution 5.
Passing this resolution 5 will ensure that the Directors continue to have the flexibility to act in
the best interests of shareholders, when opportunities arise, by issuing new shares.
The Company does not at present hold any shares in treasury.
Special resolutions
Resolutions 6 and 7 are proposed as special resolutions. These resolutions will be passed if
not less than 75% of the votes are cast in favour.
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Notice of Annual General Meeting
Resolution 6 – Disapplication of pre-emption rights
The Companies Act 2006 requires that if the Company issues new shares or grants rights to
subscribe for or to convert any security into shares for cash, it must first offer them to existing
shareholders in proportion to their current holdings. In certain circumstances, it may be in the
best interests of the Company to allot shares (or to grant rights over shares) for cash without
first offering them proportionately to existing shareholders. This cannot be done under the
Companies Act 2006 unless the shareholders have first waived their pre-emption rights. In
accordance with investor guidelines, therefore, approval is sought by the Directors to issue a
limited number of Ordinary shares for cash without first offering them to existing
shareholders.
Resolution 6 seeks to renew the Directors’ authority to issue equity securities of the Company
for cash without application of pre-emption rights pursuant to Section 561 of the Companies
Act 2006. Other than in connection with the grant of options under any share option scheme
of the Company, a rights or other pre-emptive issue, scrip dividend or other similar issue, the
authority contained in this resolution would be limited to a maximum nominal amount of
£1,714,480.47 (comprising £1,016,000 for the Capitalisation and £698,480.47 for general
headroom).
In the placing announced on 10 January 2018, the Directors referenced their intention to
capitalise up to £2.54 million of indebtedness owed by the Company to InTechnology plc
(InTechnology), the Directors now intend to utilise the authorities sought by resolutions 4
(Authority to allot shares) and 5 (Disapplication of pre-emption rights) to allot and issue
50,800,000 ordinary shares of 2 pence each in the Company’s share capital at a price of 5.00
pence per share in settlement of £2,540,000 indebtedness (comprising unpaid coupon and
related interest on the Preference Shares held by InTechnology owed by the Company to
InTechnology (Capitalisation). The Directors believe that it is in the best interests of the
Company to take this opportunity to strengthen its balance sheet.
Resolution 6 seeks a disapplication of the pre-emption rights on a rights issue or other pre-
emptive offer so as to allow the Directors to make exclusions or such other arrangements as
may be appropriate to resolve legal or practical problems which might arise, for example, with
overseas shareholders. If passed, this authority will expire at the same time as the authority
to allot shares given pursuant to resolution 5 (Authority to allot shares).
Save for the Capitalisation and share issues in respect of employee share schemes and any
share dividend alternatives, the Directors have no other plans to utilise either of the
authorities sought by resolutions 5 (Authority to allot shares) and 6 (Disapplication of
pre-emption rights), although they consider their renewal appropriate in order to retain
maximum flexibility to take advantage of business opportunities as they arise.
Resolution 7 – Amendment to the Company’s Articles of Association
The Companies Act 2006 requires a special resolution of shareholders to amend a Company’s
articles of association.
The Company and the holder of the Preference Shares in the capital of the Company have
agreed that the date of redemption of the Preference Shares be extended from 31 December
2018 to 31 December 2020.
Page 61
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
Jonathan Freeland
(Non-Executive Director)
(Executive Chairman)
(Chief Executive Officer)
(Non-Executive Director)
Allenby Capital Ltd
5 St Helen’s Place
London
EC3A 6AB
Barclays Bank Plc
Hanover Square
50 Pall Mall
London
SW1Y 5AX
Schofield Sweeney LLP
76 Wellington Street
Leeds
LS1 2AY
Link 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
Page 62
sterling 170967
www.mobiletornado.com