ANNUAL REPORT AND
FINANCIAL STATEMENTS
for the year ended 31
December 2018
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 2018.
Financial Highlights
2018 2017
£’000 £’000
Recurring revenue 2,049 2,070
Non-recurring revenue* 925 460
Total revenue 2,974 2,530
Gross profit 2,659 2,424
Administrative expenses (3,547) (4,147)
Adjusted EBITDA** (888) (1,724)
Group operating loss (1,283) (1,755)
Loss before tax (1,902) (2,453)
• Total revenue increased by 18% to £2.97m (2017: £2.53m)
•• Recurring revenues remained largely unchanged at £2.05m (2017: £2.07m)
•• Non-recurring revenues* increased by 101% to £0.93m (2017: £0.46m)
• Gross profit increased by 10% to £2.66m (2017: £2.42m)
• Operating expenses before depreciation, amortisation, exceptional items and exchange
differences decreased by 14% to £3.55m (2017: £4.15m)
• Adjusted EBITDA** loss of £0.89m (2017: £1.72m)
• Group operating loss for the year decreased to £1.28m (2017: £1.76m)
• Loss after tax of £1.54m (2017: £1.60m)
• Basic loss per share of 0.47p (2017: 0.61p)
• Cash at bank of £0.35m (2017: £0.73m) with net debt of £8.07m (2017: £9.81m)
* Non-recurring revenues comprising installation fees, hardware, professional services
and capex license fees
** Earnings before interest, tax, depreciation, amortisation, exceptional items and
excluding exchange differences
Operating highlights
• Development of Bundled push-to-talk (“PTT”) sales solution successfully deployed in
volume resulting in significant license and handset sales improvement
• Sustained R&D investment in platform now delivering material operational cost benefit
• Technical improvements have widened addressable market, with numerous engagements
for the first time with high value Public Safety and Government Agency customers
• Total Cost of Ownership reductions increase accessibility for workforce efficiency
enterprise customers
• Expanding pipeline of reseller and Independent Solution Vendors (“ISV”) engagement
following improvement to third party integration solutions
Financial results and key performance indicators
Total revenue for the year ended 31 December 2018 increased by 18% to £2.97m (2017:
£2.53m). Recurring revenues remained largely unchanged at £2.05m (2017: £2.07m). Non-
recurring revenues, comprising installation fees, hardware, professional services and capex
license fees increased to £0.93m (2017: £0.46m). This was a target area for delivering growth
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Strategic report
during the financial year and the Board is pleased with the increase of 101%. As a result,
gross profit increased by 10% to £2.66m (2017: £2.42m).
Our operating expenses before depreciation, amortisation, exceptional items and exchange
differences in the year decreased by 14% to £3.55m (2017: £4.15m), reflecting the positive
impact those previous investments in the development and operating efficiencies of our
enhanced technical platform have delivered.
Due to the annual revaluation of certain financial liabilities on the balance sheet, the Group
reported a translation loss of £0.14m (2017: gain of £0.14m) arising from the depreciation of
sterling relative to other operating currencies as at 31 December 2018 versus the previous
year end. The Group recorded an income tax credit in respect of our qualifying investment in
R&D activities of £0.37m (2017: £0.85m).
The loss after tax for the year decreased to £1.54m (2017: loss of £1.60m) and a reduced
basic loss per share of 0.47p (2017: 0.61p).
The net cash outflow from operating activities was £1.85m (2017: £1.53m). At 31 December
2018, the Group had £0.35m cash at bank (31 December 2017: £0.73m) and net debt of
£8.07m (31 December 2017: £9.81m).
Results and dividends
The Directors do not recommend the payment of a dividend in respect of the year ended
31 December 2018 (year ended 31 December 2017: nil). The Company currently intends to
reinvest future earnings to finance the growth of the business over the near term.
Review of operations
2018 was the second full year under Avi Tooba’s tenure as CEO of the business. The significant
improvements made to the platform under his guidance in addition to and alongside the
strengthening of his team translated into real sales traction in 2018. As initially reported in
our half year report, and subsequent trading update, our sales improvements started to show
in the second half of the year and we are hugely encouraged by the transition we are now
witnessing in our financial performance.
A major contributing factor to this has been the development and successful deployment of a
Bundled PTT sales solution that combines a perpetual software license, handset and dispatch
console. This helped to deliver a non-recurring revenue increase of 101% over the period. We
made the strategic decision in consultation with our Israeli Mobile Network Operator (“MNO”)
partner in the early part of the year to develop this package that involved the sourcing of a
select number of dedicated PTT handset types.
From the Group’s perspective, a Bundled PTT solution has multiple commercial benefits; it
reduces the sales cycle considerably allowing for large numbers of the same PTT configured
handsets to be sold into large enterprises without significant intervention from our MNO
partner. It also allows us to capture additional sales margin on the handset itself, an entirely
new revenue stream, and which is highly cash-flow generative as both handset sales and
license revenue are received upfront. The initial uptake of our proposition has been
encouraging as we have seen large multinational enterprises, taxi companies, international
logistics businesses, government entities and municipalities amongst others select our
solutions over the competition. Migration has tended to be in batches of users, and so whilst
the initial numbers might appear small on a relative basis, we see significant intrinsic value in
the initial sales we have already made and we anticipate material upsizing in these
deployments, an expectation supported by the pipeline forecasts of our MNO partner.
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Strategic report
Having successfully launched this solution in Israel, we will selectively make the bundled
solution more widely available. We do not see it replacing our recurring license model, but we
see it as a complementary proposition, widening the addressable markets we can serve,
especially in business critical and workforce efficiency markets where lower cost cellular PTT
handsets are most relevant. Despite the considerable resource we put behind the launch of
the bundled solution, it was particularly pleasing to see that we were able to maintain our
levels of recurring revenues.
Mobile Network Operators (MNOs)
The strategy and focus around Mobile Tornado’s route to market for its products, regionally
and segmented by partner type, did not change substantially over the past 12 months. On the
MNO side, key markets for the business remain Africa, South America and Israel and we are
already partnered with the leading MNO in each market.
We have already highlighted the progress in Israel with our bundled solution, but I would
reiterate that we recognise the unique strategic opportunity to capture a large number of PTT
users on the back of the planned iDEN switch off now scheduled for the end of 2019. We have
already converted a number of high-quality customers and progress with both enterprise and
government agency prospects is very positive and we expect sales momentum will continue
to build.
In Africa, where we are also engaged with the leading operators, our strategic advantage is
the technical superiority we have. Cellular infrastructure on this continent is still largely 2G
and 3G, and we are currently the only cellular PTT carrier grade market solution that can
transition seamlessly across 2G, 3G, 4G and WiFi networks, delivering an uninterrupted
service to the user. We have made good progress with our partner in this territory and have
several trials running with public safety and government agency customers. South Africa is
also a major security market and we are pleased to have deployed our solution into several
multinational blue-chip security companies.
In South America, our partners have continued to support our direct to enterprise offering and
trials are being conducted with a number of large enterprise customers. We are also in the
process of implementing substantial platform upgrades with our MNO partners in Colombia
and Mexico, designed to cater for a material increase in new users. We anticipate that this
investment is a precursor to the increased deployment of our proposition in the region in the
medium term. The market dynamics of these markets, which are also iDEN influenced, are
similar to Israel in some respects so we are being patient.
Independent Solution Vendors (ISVs) and Software Integrators
We continue to see ever more integrated productivity solutions that connect the physical and
digital worlds to deliver new and impactful answers to enterprise business challenges. Instant
communication solutions are at the centre of this and we are engaged with numerous reseller
partners involved in supply chain efficiency across a broad spectrum of business sectors
including distribution, retail, remote operator, mining and resources, delivery services and
manufacturing. Under this model our solution forms part of a wider bespoke solution to that
workforce efficiency customer.
Key to our traction in this area has been the successful work we have completed to improve
and simplify our Software Development Kit (“SDK”) which now allows a third party system
integrator to implement our software solution into their own platform in a matter of minutes
under remote guidance from our technical team.
This market is a source of huge recurring revenue potential for the business and having
identified numerous sector specialists to partner with we anticipate third party reseller
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Strategic report
solutions will become an area of increasing focus for the business over the coming 12 month
period.
Investment and R&D
Moving onto the investment and operating expense side of the business, I would like to
highlight that the improvement in our financial performance was not driven entirely from our
sales successes. The multiple enhancements made to our technical platform following
sustained investment over the last two years has allowed us to operate our technical platform
more efficiently and was the primary reason for the £600k reduction in administrative
expenses during the year. This was achieved despite widening our sales channels with the
development of our Bundled PTT solution, and further increasing the overall functionality and
available features of our products.
The focus of our technical investment activity continues to centre on the robustness and
efficiency of our platform, and its complimentary feature set. The costs of deploying our
platform in terms of servers, devices and consoles continues to fall, widening our addressable
market at both the higher and lower end of the market.
At the higher end, which encompasses Public Safety and Government Agency customers, the
quality, relevance and efficiency of our technology solution cannot be ignored and there are
developments to be excited about in this regard. Meeting the needs of this market from a
technology perspective has not been easy but we have made four key improvements in this
area over the period.
First, is our user and channel capacity. Our dual redundant servers can now be deployed to
comfortably cater for up to 200,000 users, and our dispatch console solution can now
simultaneously handle 18 independent PTT channels. This is a key threshold for most
government agencies from a public safety perspective. Secondly, we have increased security
by introducing end-to-end encryption where we now have a different encryption key on every
transmission. Thirdly, we are about to launch our recording server that will enable customers
to record all private and group communications across the system to support any necessary
investigations. And finally, on the efficiency side, we have made significant improvements to
the server and application to materially improve battery consumption on the device. This is
particularly relevant to the public safety customers we are engaged with where operators can
be field based for long periods.
We recognise that the barriers to entry for cellular based PTT solution providers like Mobile
Tornado into the public safety markets are very high, in large part due to the control exerted
by the incumbent players offering radio-based solutions which operate on their own high cost
bespoke infrastructure and handsets. They will not give up their control of these markets
easily, but we believe that, with our constantly improving cellular based solution, we are well
placed to secure Public Safety contracts for the first time. These system improvements aimed
specifically at the Public Safety market ensure we are at the forefront of cellular PTT
communications technology and give us confidence that the trials and negotiations we are
engaged in will bring us success in due course.
At the lower end of the market, enterprise engagement is largely about the “Total Cost of
Ownership” and ensuring that we are widening the accessibility of our solutions to workforce
efficiency customers. We have already covered some aspects of this that surround the efforts
we made around our bundled PTT offering with lower cost handsets. Alongside this, we can
now make our server platform available for as little as $20k, which allows an enterprise to
deploy a bespoke system at a very reasonable price. A good example of the relevance of this
is the interest seen from certain mining groups in Africa who are interested to deploy
dedicated bespoke platforms within each of their mines.
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Strategic report
Principal risks and uncertainties
The management of the business and the nature of the Group’s strategy are subject to a
number of risks.
The Directors have set out below the principal risks facing the business. The Directors are of
the opinion that a thorough risk management process is adopted, which involves the formal
review of all the risks identified below. Where possible, processes are in place to monitor and
mitigate such risks.
Product obsolescence
Due to the nature of the market in which the Group operates, products are subject to
technological advances and as a result, obsolescence. The Directors are committed to the
research and development strategy in place and are confident that the Group is able to react
effectively to the developments within the market.
Indirect route to market
As described above, one of the Group’s primary channels to market are MNOs reselling our
services to their enterprise customers. Whilst MNOs are ideally positioned to forward sell our
services and are likely to possess material resources for doing so, there remains an inherent
uncertainty arising from the Group’s inability to exert full control over the sales and marketing
strategies of these customers.
Going concern and funding
The Financial Statements are prepared on a going concern basis.
When determining the adoption of this approach the Directors have considered a wide range
of information relating to present and future conditions, including the current state of the
Balance Sheet, future projections, cash flow forecasts, access to funding, ability to
successfully secure additional investment, available mitigating actions and the medium-term
strategy of the business.
As noted above, 2018 represented a significant year of delivery for the Group, both in terms
of financial performance and technical development and as we look ahead into 2019, the
Group expects to continue this upward trajectory across its three key geographical markets.
In common with many businesses at this stage of development, the Group is dependent on
its ability to meet its cash flow forecasts. Within those forecasts the Group has included a
number of significant payments and receipts based on its best estimate but, as with all
forecasts, there does exist some uncertainty as to the timing and size of those payments and
receipts. In particular the forecasts assume receipt of a significant outstanding customer debt,
the ongoing deferral and phased payment of some of the Group’s creditors, and the
continuation at the current level of both the recurring revenue and a significant increase in
the level of non-recurring revenues, including receipts from new services to existing
customers in the current quarter. In the event that some or all of these receipts are delayed,
deferred or reduced, or payments not deferred, management has considered the actions that
it would need to take to conserve cash. These actions would include significant cost savings
(principally payroll based) and/or seeking additional funding from its shareholders, for which
there is currently no shareholder commitment requested. These conditions, along with the
other matters explained in note 1 to the financial statements, indicate the existence of a
material uncertainty which may cast significant doubt about the Group’s ability to continue as
a going concern. The financial statements do not include the adjustments that would result if
the Group was unable to continue as a going concern.
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Strategic report
The Directors, while noting the existence of a material uncertainty and having considered the
possible management actions as noted above, are of the view that the Group is a going
concern and will be able to meet its debts as and when they fall due for a period of at least
12 months from the date of signing these accounts.
Outlook
This year has been a landmark year and one of substantial development for the Group. Our
improved operating efficiency following a long period of sustained investment is clearly paying
off and the successful launch of our Bundled PTT offering which delivers a complete solution
to end users has driven significantly improved financial performance.
We are seeing increasing interest in the Group’s products and solutions, and where we
encounter inevitable competition we are demonstrating that we can succeed against
established providers based on the superior quality, flexibility, robustness and features of our
technical platform. The improved functionality and flexibility we now have has also driven
down the total cost of ownership of our solutions widening our addressable market.
Under Avi Tooba’s leadership we have a strong team focused on consistent execution. We
expect that the rapidly improving operating performance of the business will now deliver
durable long term cash flows and we are confident this will start to drive meaningful returns
to our shareholders.
Approved by the Board of Directors and signed on behalf of the Board
Jeremy Fenn
Chairman
16 April 2019
Page 7
Directors’ report
The Directors present their annual report and audited financial statements of the Company
and the Group for the year ended 31 December 2018.
Share issues
The Company completed on 10 January 2018 a placing of 27.0m shares at 5p per share to
raise £1.35m to support the working capital requirements of the Company.
On 12 June 2018, the Company issued 50.8m new ordinary shares to Intechnology plc at 5p
per share as capitalisation of £2.54m indebtedness owed by the Company to Intechnology plc.
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 20 years' experience in financial services
across wealth and investment banking, private equity and commercial lending. He was a
Partner at Venn Partners LLP, the specialist private credit investment manager, from
2011-2015. He is currently CEO of Waveney Capital Management Ltd, a credit focussed
investment business he founded in 2016.
Page 8
Directors’ report
The Directors and their families have the following beneficial interests in the ordinary share
capital of the Company:
31 December 31 December
2018 2017
number % number %
Peter Wilkinson 38,146,141 10.9 34,146,141 12.6
Jeremy Fenn 12,184,752 3.5 11,434,752 4.2
Avi Tooba 4,000,000 1.1 3,000,000 1.1
Jonathan Freeland
(appointed 9 February 2018) 3,181,014 0.9 2,581,014 1.0
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 2017
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
Avi Tooba 108 – 39 147 151
Jonathan Freeland
(appointed 9 February 2018) – 17 – 17 –
Aggregate emoluments 114 203 40 357 352
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
2018 pence date date date 2017
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 3,000,000
Total 6,000,000 6,000,000
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 3,000,000
Total 7,000,000 7,000,000
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Directors’ report
Substantial shareholdings
Following the capitalisation transaction noted above, Intechnology plc held 177,509,135
shares (31 December 2017: 126,709,135) in the Company representing 50.8% 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
Since September 2018 all AIM Companies have been required to comply with a recognised
corporate governance code. Mobile Tornado Group plc has chosen the Quoted Companies
Alliance (QCA) Corporate Governance Code published in April 2018 for this purpose. High
standards of corporate governance are a priority for the Board and details of how Mobile
Tornado addresses key governance principles defined in the QCA code are set out below.
1.
Establish a strategy and business model which promote long-term value for
shareholders
The strategy and business operations of the Group are set out in the Strategic Report on
pages 2 to 7.
The Group’s strategy and business model and amendments thereto, are developed by the
Chief Executive Officer and his senior management team and approved by the Board. The
management team, led by the Chief Executive Officer, is responsible for implementing the
strategy and managing the business at an operational level.
The Group operates in an inherently high risk sector and this is reflected in the principal risks
and uncertainties set out on pages 6 and 14. In executing the Group’s strategy and
operational plans, management will typically confront a range of day-to-day challenges
associated with these key risks and uncertainties and will seek to deploy the identified
mitigation steps to manage these risks as they manifest themselves.
2.
Seek to understand and meet shareholder needs and expectations
The Group seeks to maintain a regular dialogue with both existing and potential new
shareholders in order to communicate the Group’s strategy and to progress and understand
the needs and expectations of shareholders.
Beyond the Annual General Meeting, the Chief Executive Officer and, where appropriate, other
members of the Board meet regularly with investors and analysts to provide them with
updates on the Group’s business and to obtain feedback regarding the market’s expectations
of the Group.
The Group’s investor relations activities encompass dialogue with both institutional and private
investors and which the Board considers have proved beneficial. The Company’s AGM provides
an opportunity for all shareholders to address their needs and expectations to the Board so
we encourage our shareholders to attend the AGM.
3.
Take into account wider stakeholder and social responsibilities and their
implications for long-term success
The Group is aware of its corporate social responsibilities and the need to maintain effective
working relationships across a range of stakeholder groups. These include the Group’s:
investors, employees, partners, suppliers and regulatory authorities. The Group’s operations
and working methodologies take account of the requirement to balance the needs of all these
stakeholder groups while maintaining focus on the Board’s primary responsibility to promote
the success of the Group for the benefit of its members as a whole. The Group endeavours to
take account of feedback received from stakeholders, making amendments to working
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Directors’ report
arrangements and operational plans where appropriate and where such amendments are
consistent with the Group’s longer term strategy.
The Group takes due account of any impact that its activities may have on the environment
and seeks to minimise this impact wherever possible. Through the various procedures and
systems it operates, the Group ensures full compliance with health and safety and
environmental legislation relevant to its activities.
4.
Embed effective risk management, considering both opportunities and threats,
throughout the organisation
The Board is responsible for the systems of risk management and internal control and for
reviewing their effectiveness. The internal controls are designed to manage rather than
eliminate risk and provide reasonable but not absolute assurance against material
misstatement or loss. The Audit Committee evaluates the effectiveness of these internal
controls on an annual basis or as required.
A summary of the principal risks and uncertainties facing the Group, as well as mitigating
actions, are set out on pages 6 and 14. A comprehensive budgeting process is completed by
the Finance Director once a year and is reviewed and approved by the Board. The Group’s
results, compared with the budget, are reported to the Board on a monthly basis.
The Group maintains appropriate insurance cover in respect of actions taken against the
Directors because of their roles, as well as against material loss or claims against the Group.
The insured values and type of cover are comprehensively reviewed by the Board on a periodic
basis.
The senior management team meet at least twice monthly to consider new risks and
opportunities presented to the Group, making recommendations to the Board and/or the Audit
Committee as appropriate.
5. Maintain the Board as a well-functioning, balanced team led by the Chair
Mobile Tornado’s Board currently comprises two Non-Executive Directors and two Executive
Directors. All of the Directors are subject to election by shareholders at the first Annual
General Meeting after their appointment to the Board and will continue to seek re-election at
least once every three years. Directors’ biographies are set out on page 8.
The Board is responsible to the shareholders for the proper management of the Group and
meets at least six times a year to set the overall direction and strategy of the Group, to review
operational and financial performance and to advise on management appointments. All key
operational and investment decisions are subject to Board approval.
The Board considers itself to be sufficiently independent. Whilst Jonathan Freeland is the only
one of the two Non-Executive Directors who sit on the Board of the Company regarded as
independent under the Code’s guidance for determining such independence, the Board
considers this to be appropriate for the Group’s current size. The Board will regularly review
the value to the Group and its stakeholders of making further appointments to the Board.
Non-Executive Directors receive their fees in the form of a basic cash fee. No equity-based fee
arrangements are currently in place. The current remuneration structure for the Board’s Non-
Executive Directors is deemed to be proportionate to the time they are required to commit to
their roles.
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Directors’ report
6.
Ensure that between them, the Directors have the necessary up-to-date
experience, skills and capabilities
The Board considers that all of the Non-Executive Directors are of sufficient competence and
calibre to add strength and objectivity to its activities and bring considerable experience in
operational and financial development of mobile applications services. Directors’ biographies
are set out on page 8.
The Board regularly reviews the composition of the Board to ensure that it has the necessary
breadth and depth of skills to support the ongoing development of the Group. The Chairman
ensures that the Directors’ knowledge is kept up to date on key issues and developments
pertaining to the Group, its operational environment and to the Directors’ responsibilities as
members of the Board. The Board also receives regular guidance from its legal advisers and
nominated adviser on key regulatory developments.
Directors’ service contracts or appointment letters make provision for a Director to seek
personal advice in furtherance of his or her duties and responsibilities. No external advisers
have been appointed to assist the Board or any of its committees in the past 12 months.
7.
Evaluate Board performance based on clear and relevant objectives, seeking
continuous improvement
Evaluation of the performance of the Board is implemented in an informal manner. On an
ongoing basis, Board members maintain a watching brief to identify relevant internal and
external candidates who may be suitable additions to, backup for or succession planning for
current Board members. Given the size of the business, the primary evaluation metric utilised
by the Board is the financial performance of the Company.
The Board does not consider that the Company requires a Nominations Committee, given the
size and nature of the business. As the Company progresses, the Board will consider the
implementation of a Nominations Committee and more formal internal and external Board
appraisal procedures.
8. Promote a corporate culture that is based on ethical values and behaviours
The Board seeks to maintain the highest standards of integrity and probity in the conduct of
the Group’s operations. These values are enshrined in the written policies and working
practices adopted by all employees in the Group. An open culture is encouraged within the
Group, with regular communications to staff regarding progress and staff feedback regularly
sought. The management team regularly monitors the Group’s cultural environment and seeks
to address any concerns that may arise, escalating these to Board level as necessary.
9. Maintain governance structures and processes that are fit for purpose and
support good decision-making by the Board
The Board has overall responsibility for promoting the success of the Group. The Executive
Directors have day-to-day responsibility for the operational management of the Group’s
activities. The Non-Executive Directors are responsible for bringing independent and objective
judgment to Board decisions.
There is a clear separation of the roles of Chief Executive Officer and Chairman. The Chairman
is responsible for overseeing the running of the Board, ensuring that no individual or group
dominates the Board’s decision-making and ensuring the Non-Executive Directors are properly
briefed on matters. The Chairman has overall responsibility for corporate governance matters
in the Group and chairs the Nomination Committee and the Corporate Governance Committee.
The Chief Executive Officer has the responsibility for implementing the strategy of the Board
and managing the day-to-day business activities of the Group.
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Directors’ report
The Board has established an Audit Committee and Remuneration Committee with formally
delegated duties and responsibilities.
The Audit Committee is chaired by Peter Wilkinson and its other member is Executive
Chairman, Jeremy Fenn and normally meets twice a year and has responsibility for, amongst
other things, planning and reviewing the annual report and accounts and interim statements
involving, where appropriate, the external auditors. The Committee also approves external
auditors’ fees and ensures the auditors’ independence as well as focusing on compliance with
legal requirements and accounting standards. It is also responsible for ensuring that an
effective system of internal control is maintained. The ultimate responsibility for reviewing and
approving the annual financial statements and interim statements remains with the Board.
The Remuneration Committee is chaired by Peter Wilkinson and its other member is Executive
Chairman, Jeremy Fenn and meets as required, but at least once a year, has responsibility for
making recommendations to the Board on the compensation of senior executives and
determining, within agreed terms of reference, the specific remuneration packages for each
of the Executive Directors. It also supervises the Company’s share incentive schemes and sets
performance conditions for share options granted under the schemes.
10. Communicate how the Group is governed and is performing by maintaining a
dialogue with shareholders and other relevant stakeholders
The Group places a high priority on regular communications with its various stakeholder
groups and aims to ensure that all communications concerning the Group’s activities are clear,
fair and accurate. The Group’s website is regularly updated with announcements or details of
presentations and events as well as the Group’s financial reports.
At the Company’s last AGM, all votes were passed by a significant majority. The Company will
provide details of any resolutions at the Company’s AGMs which receive significant votes
against and seek to understand from shareholders the reasons behind that vote result. All of
the Company’s AGM notices and annual reports and accounts for the past five years are
available to view in the Report and Accounts section of the website.
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 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
Page 13
Directors’ report
as trade receivables and trade payables, arising directly from its operations. The main purpose
of these financial instruments is to raise finance for the Group’s operations. The main risks
arising from the Group’s financial instruments are currency risk, interest risk, liquidity risk and
credit risk. The Board’s policies for managing these risks are summarised as follows:
Currency risk – the Group has no borrowings in foreign currency, and foreign currency
liabilities are matched wherever possible by corresponding foreign currency assets, however,
no formal hedging is performed. Foreign currency bank accounts are utilised where
appropriate. No foreign currency transactions of a speculative nature are undertaken.
Interest risk – the Group is exposed to interest rate risk as it has loans outstanding on variable
rate terms. Borrowing costs are minimised by ongoing review of the Group’s cashflow
requirements.
Liquidity risk – the Group seeks to ensure sufficient liquidity is available to meet its
foreseeable needs. The Board regularly reviews cash flow projections and the headroom
position to ensure the Group is adequately funded.
Credit risk – the Group’s exposure to credit risk is limited to the carrying amount of its
financial assets at 31 December. In respect of trade and other receivables, the Group is not
exposed to any significant credit risk exposure to any single counterparty or group of
counterparties having similar characteristics. The Group’s customers are generally Companies
with whom the Group has strong trading relationships with no recent history of default. The
Group continually monitors its trade receivables and incorporates this information into its
credit risk controls.
Going concern
In preparing the consolidated financial statements the Directors must satisfy themselves that
it is reasonable to adopt the going concern basis. Projections for the Group have been
prepared concerning its future financial performance, its cash flow forecasts and its liquidity
for a period of at least 12 months from the signing of these financial statements.
Within those cash flow forecasts, the Group has included a number of significant payments
and receipts based on its best estimate but, as with all forecasts, there does exist some
uncertainty as to the timing and size of those payments and receipts. In particular, the
forecasts assume receipt of a significant outstanding customer debt, the ongoing deferral and
phased payment of some of the Group’s creditors, and the continuation at the current level of
both the recurring revenue and a significant increase in the level of non-recurring revenue
including receipts from new services to existing customers in the current quarter. In the event
that some or all of these receipts are delayed, deferred or reduced, or payments not deferred,
management has considered the actions that it would need to take to conserve cash. These
actions would include significant cost savings (principally payroll based) and/or seeking
additional funding from its shareholders (for which there is currently no shareholder
commitment requested). These conditions, along with the other matters explained in note 1
to the financial statements, indicate the existence of a material uncertainty which may cast
significant doubt about the Group’s ability to continue as a going concern. The financial
statements do not include the adjustments that would result if the Group was unable to
continue as a going concern.
The Directors, while noting the existence of a material uncertainty and having considered the
possible management actions as noted above, are of the view that the Group is a going
concern and will be able to meet its debts as and when they fall due for a period of at least
12 months from the date of signing these accounts.
Page 14
Directors’ report
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 7.
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.
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 £1,161,000 (2017:
£1,479,000) 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.
Page 15
Directors’ report
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 also responsible for safeguarding the assets of the Group and Company and
hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for 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.
The Directors are responsible for the maintenance and integrity of the Company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors' confirmations
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 17 June 2019. Details of the business to be
proposed at the AGM are contained within the Notice of Meeting, which is set out on pages 63
to 69.
Page 16
Directors’ report
Independent auditors
PricewaterhouseCoopers LLP have indicated their willingness to continue in office and a
resolution proposing that they be reappointed as independent auditors and authorising the
Directors to fix their remuneration will be proposed at the Annual General Meeting.
On behalf of the Board
Jeremy Fenn
Chairman
16 April 2019
Page 17
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 2018 and of the Group’s loss and cash flows
for the year then ended;
• the Group financial statements have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union;
• the Company financial statements have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting Practice (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 Consolidated statement of financial
position and Company balance sheet as at 31 December 2018; the Consolidated income
statement and Consolidated statement of comprehensive income, the Consolidated statement
of cash flows, and the Consolidated 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.
Material uncertainty related to going concern – Group and Company
In forming our opinion on the Group and Company financial statements, which is not modified,
we have considered the adequacy of the disclosures made in the financial statements
concerning the Group’s ability to continue as a going concern. As described in note 1.2 to the
Group financial statements and note 3.2 to the Company financial statements, the Group and
Company are dependent on the Group’s ability to meet its cashflow forecasts, which include
a number of important assumptions over specific receipts, timing of payments and expected
growth in revenue. If these forecasts are not met then there may be a need for management
to take action to reduce costs, or to raise additional funds from the Group’s shareholders (for
which there is currently no commitment requested). These conditions, along with the other
matters explained in note 1.2 to the Group financial statements and note 3.2 to the Company
Page 18
Independent auditors’ report to the
members of Mobile Tornado Group plc
financial statements, indicate the existence of a material uncertainty which may cast
significant doubt about the Group’s and Company’s ability to continue as a going concern. The
Group and Company financial statements do not include the adjustments that would result if
the Group was unable to continue as a going concern.
In considering whether there is a material uncertainty in relation to going concern, we have:
obtained and reviewed the cashflow forecasts prepared by management; re-performed the
calculations included in those forecasts; considered the accuracy of managements’ previous
forecasts; assessed the risks around the timing and extent of the significant cash flows,
including the specific receipts from and payments to significant customers and creditors;
assessed the likelihood of achieving the projected revenues and operating expense plans; and
considered the level of headroom that exists on the Group’s currently available facilities. We
also obtained and reviewed the confirmation that the Group has received from its main
shareholder which allows the Group to defer repayment of its shareholder loans for at least
the next 12 months.
Our audit approach
Overview
•
•
•
Overall Group materiality: £125,000 (2017: £131,000), based on
5% of average losses before tax for the last three years.
Overall Company materiality: £112,500 (2017: £118,000), based
on 5% of average losses before tax for the last three years, capped
at 90% of Group materiality.
The Group consist of two components, the Company and its one
subsidiary. We as the Group engagement team, audited the UK
component covering 98.5% of the Group's external revenues and
99% of the Group's Loss before tax.
•
Goodwill in the Parent entity may be impaired.
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. In
addition to going concern, described in the material uncertainty related to going concern
Page 19
Independent auditors’ report to the
members of Mobile Tornado Group plc
section above, we determined the matter described below to be the key audit matter to be
communicated in our report. This is not a complete list of all risks identified by our audit.
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 was
accounted for as a hive up resulting in de-
recognition of an investment in a subsidiary
and recognition of 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
forecasts based on our discussion with
management, knowledge of the entity, its
business and
its Directors. Particular
attention has been given to assumptions that
are material to the forecasts, which includes
the viability of revenue growth rates, discount
rate and terminal growth rate assumptions.
We performed sensitivity analyses in order to
assess the potential impact of changes in the
inputs used on the recoverable amount. We
reviewed the analyst’s reports on the
Company and the market capitalisation of the
Company to evaluate its consistency with the
forecasts.
We believe that based on the work we have
performed, it is reasonable for management
to assess that the Company does not require
an impairment to goodwill in the year. We also
checked that the disclosures made in the
financial statements are adequate.
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 within the UK, and one
subsidiary, located in Israel. The Group is considered to have one significant component (the
UK Company). The UK Company 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 2% 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
Page 20
Independent auditors’ report to the
members of Mobile Tornado Group plc
the effect of misstatements, both individually and in aggregate on the financial statements as
a whole.
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 £125,000 (2017: £131,000). £112,500 (2017: £118,000).
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
performance,
a
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
performance,
a
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 £112,500.
We agreed with the Audit Committee that we would report to them misstatements identified
during our audit above £6,250 (Group audit) (2017: £6,550) and £5,625 (Company audit)
(2017: £5,900) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
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
Page 21
Independent auditors’ report to the
members of Mobile Tornado Group plc
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 2018 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 set out on page 16, 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,
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
Page 22
Independent auditors’ report to the
members of Mobile Tornado Group plc
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
16 April 2019
Page 23
Consolidated income statement
For the year ended 31 December 2018
2018 2017
Note £’000 £’000
Continuing operations
Revenue 2 2,974 2,530
Cost of sales (315) (106)
Gross profit 2,659 2,424
Operating expenses
Administrative expenses (3,547) (4,147)
Exchange differences 138 135
Exceptional items 3 (49) (54)
Depreciation and amortisation expense (208) (112)
Total operating expenses (3,942) (4,179)
Group operating loss before exchange differences,
exceptional items & depreciation & amortisation expense (888) (1,724)
Group operating loss 4 (1,283) (1,755)
Finance costs 5 (619) (698)
Loss before tax (1,902) (2,453)
Income tax credit 6 367 852
Loss for the year (1,535) (1,601)
Loss per share (pence)
Basic and diluted 7 (0.47) (0.61)
Consolidated statement of comprehensive income
For the year ended 31 December 2018
2018 2017
£’000 £’000
Loss for the year (1,535) (1,601)
Other comprehensive loss
Item that will subsequently be reclassified
to profit or loss:
Exchange differences on translation
of foreign operations (28) 41
Total comprehensive loss for the year (1,563) (1,560)
Attributable to:
Equity holders of the parent (1,563) (1,560)
The accompanying accounting policies and notes form an integral part of these financial
statements.
Page 24
Consolidated statement of financial position
As at 31 December 2018
2018 2017
Note £’000 £’000
Assets
Non-current assets
Property, plant and equipment 8 219 276
Intangible assets 9 88 125
307 401
Current assets
Trade and other receivables 10 1,705 1,721
Inventories 11 151 1
Cash and cash equivalents 12 354 732
2,210 2,454
Liabilities
Current liabilities
Trade and other payables 13 (4,555) (5,085)
Borrowings 14 (2,796) (10,545)
Net current liabilities (5,141) (13,176)
Non-current liabilities
Trade and other payables 13 (2,257) (2,241)
Borrowings 14 (5,624) –
(7,881) (2,241)
Net liabilities (12,715) (15,016)
Equity attributable to the owners of the parent
Share capital 15 6,985 5,427
Share premium 15 14,924 12,672
Reverse acquisition reserve (7,620) (7,620)
Merger reserve 10,938 10,938
Foreign currency translation reserve (2,241) (2,213)
Accumulated losses (35,701) (34,220)
Total equity (12,715) (15,016)
The financial statements on pages 24 to 51 were approved by the Board of Directors on
16 April 2019 and were signed on its behalf by:
Jeremy Fenn
Chairman
16 April 2019
Company Number: 5136300
Page 25
Consolidated statement of changes in equity
For the year ended 31 December 2018
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)
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 2018 5,427 12,672 (7,620) 10,938 (2,213) (34,220) (15,016)
Equity settled share-based payments – – – – – 54 54
Issue of share capital 1,558 2,252 – – – – 3,810
Transactions with owners 1,558 2,252 – – – 54 3,864
Loss for the year – – – – – (1,535) (1,535)
Exchange differences on translation
of foreign operations – – – – (28) – (28)
Total comprehensive loss for the year – – – – (28) (1,535) (1,563)
Balance at 31 December 2018 6,985 14,924 (7,620) 10,938 (2,241) (35,701) (12,715)
The accompanying accounting policies and notes form an integral part of these financial
statements.
Page 26
Consolidated statement of cash flows
For the year ended 31 December 2018
2018 2017
Note £’000 £’000
Operating activities
Cash used in operations 17 (1,849) (1,528)
Tax received 493 431
Net cash used in operating activities (1,356) (1,097)
Investing activities
Purchase of property, plant & equipment (101) (80)
Net cash used in investing activities (101) (80)
Financing activities
Issue of ordinary share capital 1,351 1,190
Share issue costs (81) (54)
(Repayment of)/Proceeds from borrowings 14 (200) 620
Net cash inflow from financing activities 1,070 1,756
Effects of exchange rates on cash
and cash equivalents 9 (12)
Net (decrease)/increase in cash and
cash equivalents in the year (378) 567
Cash and cash equivalents at beginning of year 732 165
Cash and cash equivalents at end of year 354 732
The accompanying accounting policies and notes form an integral part of these financial
statements.
Page 27
Notes to the financial statements
For the year ended 31 December 2018
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
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.
the market of mobile data services
in
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
In preparing the consolidated financial statements the Directors must satisfy
themselves that it is reasonable to adopt the going concern basis. Projections for the
Group have been prepared concerning its future financial performance, its cash flow
forecasts and its liquidity for a period of at least 12 months from the signing of these
financial statements.
Within those cash flow forecasts the Group has included a number of significant
payments and receipts based on its best estimate but, as with all forecasts, there does
exist some uncertainty as to the timing and size of those payments and receipts. In
particular the forecasts assume receipt of a significant outstanding customer debt, the
ongoing deferral and phased payment of some of the Group’s creditors, and
the continuation at the current level of both the recurring revenue and a significant
increase in the level of non-recurring revenue including receipts from new services to
existing customers in the current quarter. In the event that some or all of these receipts
are delayed, deferred or reduced, or payments not deferred, management has
considered the actions that it would need to take to conserve cash. These actions would
include significant cost savings (principally payroll based) and/or seeking additional
funding from its shareholders (for which there is currently no shareholder commitment
requested). These conditions, along with the other matters explained in note 1 to the
financial statements, indicate the existence of a material uncertainty which may cast
significant doubt about the Group’s ability to continue as a going concern. The financial
Page 28
Notes to the financial statements
For the year ended 31 December 2018
statements do not include the adjustments that would result if the Group was unable to
continue as a going concern.
The Directors, while noting the existence of a material uncertainty and having
considered the possible management actions as noted above, are of the view that the
Group is a going concern and will be able to meet its debts as and when they fall due
for a period of at least 12 months from the date of signing these accounts.
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:
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.
Satisfaction of performance obligations – The Group is required to assess each of its
contracts with customers to determine whether performance obligations are satisfied
over time or at a point in time in order to determine the appropriate method for
recognising revenue.
1.3 Basis of consolidation
The Group financial statements consolidate those of the Company and its subsidiary
undertakings at 31 December 2018. 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
Page 29
Notes to the financial statements
For the year ended 31 December 2018
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
The Group recognises revenue from contracts with customers based on a five-step
model as set out in IFRS 15:
Step 1. Identify contract(s) with a customer: A contract is defined as an agreement
between two or more parties that creates enforceable rights and obligations
and sets out the criteria for every contract that must be met.
Step 2. Identify performance obligations in the contract: A performance obligation is a
promise in a contract with a customer to transfer a good or service to the
customer.
Step 3. Determine the transaction price: The transaction price is the amount of
consideration to which the Group expects to be entitled in exchange for
transferring promised goods or services to a customer, excluding amounts
collected on behalf of third parties.
Step 4. Allocate the transaction price to the performance obligations in the contract:
For a contract that has more than one performance obligation, the Group
allocates the transaction price to each performance obligation in an amount
that depicts the amount of consideration to which the Group expects to be
entitled in exchange for satisfying each performance obligation.
Step 5. Recognise revenue when (or as) the Group satisfies a performance obligation.
Revenue comprises the fair value of consideration receivable for the sale of licenses,
services and goods, excluding inter-company sales and value-added taxes, and
represents net invoice value less estimated rebates, returns and settlement discounts.
Revenue is recognised to the extent it is probable that the economic benefits will flow
to the Group and the revenue and costs, if applicable, can be measured reliably.
License fee
License fees are recognised when the license is sold and activated by the customer.
Service fee
Service fees are recognised on a straight line basis over the contractual service period.
Hardware sales
Revenue from hardware sales is recognised when the goods have been received and
accepted by the customer.
1.6 Interest
Interest is recognised on an accruals basis using the effective interest method.
Page 30
Notes to the financial statements
For the year ended 31 December 2018
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 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.
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
Page 31
Notes to the financial statements
For the year ended 31 December 2018
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.
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
Page 32
Notes to the financial statements
For the year ended 31 December 2018
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
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.
Page 33
Notes to the financial statements
For the year ended 31 December 2018
▪
▪
▪
“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
Initial recognition and measurement
In accordance with IFRS9, ‘Financial Instruments’ the Group has classified its financial
assets as ‘Financial assets at amortised cost’. The Group determines the classification
of its financial assets at initial recognition.
All financial assets are recognised initially at fair value plus, in the case of assets not at
fair value through the Statement of Comprehensive Income, transaction costs that are
attributable to the acquisition of the financial asset.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as
described below:
Financial assets carried at amortised cost
This category applies to trade and other receivables due from customers in the normal
course of business. All amounts which are not interest bearing are stated at their
recoverable amount, being invoice value less provision for any expected credit losses.
These assets are held at amortised cost.
The group classifies its financial assets as at amortised cost only if both of the following
criteria are met:
(i)
(ii)
the asset is held within a business model with the objective of collecting the
contractual cash flows; and
the contractual terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal outstanding.
Page 34
Notes to the financial statements
For the year ended 31 December 2018
Financial assets at amortised cost comprise current trade and other receivables due
from customers in the normal course of business and cash and cash equivalents.
The Group does not hold any material financial assets at fair value through other
comprehensive income or at fair value through the Statement of Comprehensive
Income. The Group does not hold any derivatives and does not undertake any hedging
activities.
Trade receivables are initially recognised at their transaction price. The Group does not
expect to have any contracts where the period between the transfer of the promised
goods or services to the customer and payment by the customer exceeds one year. As
a consequence, the Group does not adjust any of the transaction prices for the time
value of money. Other financial assets are recognised initially at fair value plus
transaction costs that are directly attributable to the acquisition of the financial asset.
Trade and other receivables are measured at amortised cost less provision for expected
credit losses.
Impairment of financial assets
The Group assesses on a forward looking basis the expected credit losses associated
with its financial assets measured at amortised cost. The Group applies the simplified
approach to providing for expected credit losses prescribed by IFRS 9, which permits
the use of the lifetime expected loss provision for all trade receivables. To measure the
expected credit losses, trade receivables have been grouped based on shared credit risk
characteristics and the days past due. For other financial assets at amortised cost, the
Group determines whether there has been a significant increase in credit risk since
initial recognition. The Group recognises twelve month expected credit losses if there
has not been a significant increase in credit risk and lifetime expected credit losses if
there has been a significant increase in credit risk.
Expected credit losses incorporate forward looking information, take into account the
time value of money when there is a significant financing component and are based on
days past due; the external credit ratings of its customers; and significant changes in
the expected performance and behaviour of the borrower.
Financial assets are written off when there is no reasonable expectation of recovery.
Where receivables have been written off, the Group continues to engage in enforcement
activity to attempt to recover the receivable due. Where recoveries are made, these are
recognised in the Statement of Comprehensive Income.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of
similar financial assets) is derecognised when:
•
•
The rights to receive cash flows from the asset have expired, or
The Group has transferred its rights to receive cash flows from the asset or has
assumed an obligation to pay the received cash flows in full without material
delay to a third party under a ‘pass-through’ arrangement, and either (a) the
Group has transferred substantially all the risks and rewards of the asset, or
(b) the Group has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the assets.
Page 35
Notes to the financial statements
For the year ended 31 December 2018
1.20 Financial liabilities
Initial recognition and measurement
All financial liabilities are recognised initially at fair value net of directly attributable
transaction costs.
The Group’s financial liabilities include trade and other payables and previously included
loans and other borrowings including directors loans.
Subsequent measurement
After initial recognition, interest bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest rate method (EIR). Gains and
losses are recognised in the Statement of Comprehensive Income when the liabilities
are derecognised as well as through the (EIR) amortisation process.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation
is included in finance costs in the Statement of Comprehensive Income.
This category generally applies to interest-bearing loans and borrowings.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged
or cancelled or expires. When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a derecognition
of the original liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in the Statement of Comprehensive Income.
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 16 ‘Leases’ (for more detail see below)
IFRS 17 ‘Insurance contracts’
IFRIC 23 Uncertainty over Income Tax Treatments
Amendments to IAS 19 Plan Amendment, Curtailment or Settlement
Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures
Page 36
Notes to the financial statements
For the year ended 31 December 2018
•
•
•
Annual Improvements to IFRS Standards 2015-2017 cycle, including IFRS 3
Business Combinations, IFRS 11 Joint Arrangements, IAS 12 Income taxes and
IAS 23 Borrowing Costs
Amendments to References to the Conceptual Framework in IFRS Standards
Amendment to IFRS 3 Business Combinations, IAS 1 Presentation of Financial
Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors: Definition of material
IFRS 16 ‘Leases’ is a replacement for IAS 17 ‘Leases’ and will be effective for the period
ending 31 December 2019 onwards. IFRS 16 required lessees to recognise a lease
liability reflecting future lease payments and a right-of-use asset for lease contracts.
The impact of this will depend upon the facts and circumstances as at the time of
adoption and the transition choices adopted. The impact is expected to be an increase
in the assets and liabilities of the Group, in a similar quantum to the operating lease
commitments mentioned in note 20.
Apart from above, the impact of adoption of new standards and interpretations is
immaterial on the Group’s financial statements.
1.23 New standards and amendments
The following amendments to existing standards and IFRIC interpretations have been
issued, and are effective from 1 January 2018 or earlier, and do not have a material
impact on the Group’s financial statements:
•
•
•
•
•
•
•
IFRS 9; Financial Instruments
IFRS 15, Revenue from Contracts with Customers
IFRS 17, Insurance Contracts
Amendments to IFRS 2 Classification and Measurement of Share-based Payment
Transactions
Amendments to IAS 40 Transfers of Investment Property
IFRIC 22 Foreign Currency Transactions and Advance Consideration
Annual Improvements to IFRSs 2014-2016, including IFRS 1 First-time Adoption
of International Financial Reporting Standards, IFRS 12 Disclosure of Interests in
Other Entities and IAS 28 Investments in Associates.
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 2018 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
£54,000 (year ended 31 December 2017: £45,000).
Page 37
Notes to the financial statements
For the year ended 31 December 2018
Revenue by category
2018 2017
£’000 £’000
License fees 2,124 1,972
Hardware & software 307 38
Professional services 319 319
Other 224 201
Total 2,974 2,530
Revenue is reported by geographical location of customers. Non-current assets are reported
by geographical location of assets.
2018 2018 2017 2017
Non-current Non-current
Revenue assets Revenue assets
£’000 £’000 £’000 £’000
UK 31 10 33 15
Europe 352 – 437 –
North America 1,146 – 1,018 –
South America 421 17 367 28
Israel 695 269 274 358
Africa 329 11 401 –
Total 2,974 307 2,530 401
Our mobile network operator customer in Canada represents £1,050,000 (2017: £886,000) of
the total revenue of the Group.
3 Exceptional costs
These comprise:
•
•
Trade receivable provision of £49,000 (2017: £nil) representing an 8% discount to the
total debt of one particular customer and granted on the basis of a full and single
settlement of the total debt balance as at 31 December 2018.
Property costs of £nil (2017: £54,000) arising from our previous 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.
Page 38
Notes to the financial statements
For the year ended 31 December 2018
4 Group operating loss
2018 2017
£’000 £’000
Group operating loss before taxation is stated after charging:
Staff costs (note 18) 2,380 2,809
Depreciation of owned property, plant and equipment (note 8) 171 75
Amortisation of intangible assets (note 9) 37 37
Research and development expenditure 1,161 1,479
Other operating lease rentals 279 344
Net exchange loss/(gain) 138 (135)
Auditors’ remuneration
During the year the Group obtained the following services from the Group’s auditors as
detailed below:
2018 2017
£’000 £’000
Fees payable to the Company's auditors for the audit
of the Company's financial statements 37 26
5 Finance costs
2018 2017
£’000 £’000
Finance charge on preference shares (614) (698)
Other interest payable (5) –
Total finance costs (619) (698)
6 Income tax credit
(a) Analysis of credit for the year
2018 2017
£’000 £’000
United Kingdom current tax
Adjustment in respect of prior years (17) (431)
Current year research & development tax credit claimed (364) (476)
Overseas current tax in respect of prior years 14 55
Total credit for the year (367) (852)
Page 39
Notes to the financial statements
For the year ended 31 December 2018
(b) Factors affecting the tax credit for the year
Deferred tax:
At 31 December 2018 the Group had accumulated tax losses of £28,857,000 (31 December
2017: £28,857,000) 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.
2018 2017
£’000 £’000
Loss before tax (1,902) (2,453)
At standard rate of corporation tax of 19.00% (2017: 19.25%) (361) (472)
Effects of:
Expenses not deductible for tax purposes 118 140
Un-utilised tax losses 243 332
Current year research & development tax credit claimed (364) (476)
Prior year overseas current tax 14 55
Prior year research & development tax credit claimed (17) (431)
Total credit for the year (367) (852)
7 Loss per share
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of
£1,535,000 (2017: £1,601,000) by the weighted average number of ordinary shares in issue
during the year of 326,694,121 (2017: 263,398,121).
2017
Basic and diluted
Loss Loss Loss Loss
per share per share
£’000 pence £’000 pence
Loss attributable to
ordinary shareholders (1,535) (0.47) (1,601) (0.61)
Adjusted basic loss per share (1,535) (0.47) (1,601) (0.61)
2018
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.
Page 40
Notes to the financial statements
For the year ended 31 December 2018
8 Property, plant and equipment
Office Computer Leasehold
equipment equipment improvement Total
£’000 £’000 £’000 £’000
Cost
At 1 January 2017 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
Additions 6 31 65 102
Exchange adjustments 3 47 8 58
At 31 December 2018 86 1,320 206 1,613
Accumulated depreciation
At 1 January 2017 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
Charge for the year 7 154 11 172
Exchange adjustments 2 40 5 47
At 31 December 2018 62 1,238 94 1,394
Net book amount at 31 December 2018 24 82 112 219
Net book amount at 31 December 2017 24 198 55 276
9 Intangible assets
Software
£’000
At 1 January 2018 125
Amortisation for the year (37)
At 31 December 2018 88
These comprise third party services and internal staff costs in relation to a quality assurance
automation project.
10 Trade and other receivables
2018 2017
£’000 £’000
Trade receivables 1,082 891
Less: provision for impairment of trade receivables (72) (56)
Trade receivables – net 1,010 835
Other receivables 429 679
Prepayments and accrued income 266 207
1,705 1,721
Current portion 1,705 1,721
Page 41
Notes to the financial statements
For the year ended 31 December 2018
The age of the Group’s year end overdue receivables is as follows:
2018 2017
£’000 £’000
Impaired
Three to six months – –
Over six months 72 56
72 56
Not impaired
Less than three months 182 96
Three to six months 87 –
Over six months 513 478
782 574
Of the overdue receivables, £638,000 (2017: £480,000) relates to one particular customer
against which a provision of £49,000 (2017: £nil) has been made and which reflects a
repayment plan agreed since the year end. The Directors have maintained an open dialogue
with this customer throughout the year and since the year end as to their financial position.
In parallel, an assessment of this customer’s ability to pay has been made by reference to its
anticipated capital funding transaction, 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 further provision has been made.
The carrying amounts of the Group’s receivables are denominated in US dollar, Canadian dollar
and Euros.
The maximum exposure to credit risk at the reporting date is the carrying value of each class
of receivable mentioned above. The Group does not hold any collateral as security.
Movement on the Group’s provision for impairment of receivables is as follows:
2018 2017
£’000 £’000
At 1 January 56 330
Provision for receivables impairment 72 56
Receivables written off during the year
as uncollectable (56) (330)
72 56
11 Inventories
2018 2017
£’000 £’000
Hardware 151 1
The cost of inventories recognised as an expense and included within cost of sales amounted
to £200,000 (2017: £nil). Inventories put to internal use during the year and therefore
transferred to property, plant and equipment amounted to £nil (2017: £nil).
Page 42
Notes to the financial statements
For the year ended 31 December 2018
12 Cash and cash equivalents
2018 2017
£’000 £’000
Cash at bank and in hand:
Sterling 54 515
US Dollar 53 17
Canadian dollar 96 57
Euro 11 6
New israel shekel 140 137
354 732
13 Trade and other payables
2018 2017
£’000 £’000
Trade payables 787 876
Accruals 542 492
Social security and other taxes 91 91
Other payables 4 415
Deferred income 2,426 2,384
Contingent consideration 2,962 3,068
6,812 7,326
Less non-current portion: contingent consideration (2,257) (2,241)
Current portion 4,555 5,085
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 £2,135,000 (2017: £2,110,000) received
from Intechnology plc in respect of 12 month licenses that had not been brought into use at
the balance sheet date. The Group will recognise related income from the date of activation
of each license, or the expiration of its obligations if sooner.
14 Borrowings, other financial liabilities and other financial assets
2018 2017
£’000 £’000
Preference shares 6,330 8,255
Loans from related party undertakings 2,090 2,290
Total borrowings 8,420 10,545
Page 43
Notes to the financial statements
For the year ended 31 December 2018
Maturity analysis
2018 2017
£’000 £’000
In one year or less 2,796 10,545
Between two and five years 5,624 –
Total 8,420 10,545
Intechnology plc provided the Group with a £300,000 loan facility during the year which has
been fully drawn down subsequent to the year end (note 21).
Intechnology plc has agreed not to demand repayment of all amounts due for payment in one
year or less, for a period of at least 12 months from the date of signing of the financial
statements.
The Group do not have any derivative financial liabilities at 31 December 2018 or
31 December 2017.
Financial risks
The main financial risks faced by the Group include interest rate risk, liquidity risk, credit risk and
foreign currency risk. The Board reviews and agrees policies for managing each of these risks.
The Group’s financial instruments comprise cash, liquid resources and various items, such as
receivables and payables that arise directly from its operations. It is, and has been throughout
the year under review, the Group’s policy that no trading in financial instruments shall be
undertaken. The year end position reflects these policies and there have been no changes in
policies or risks since the year end.
Financial asset returns are maximised by ongoing review of the Group’s cash flow
requirements. Any funds surplus to short-term working capital requirements are placed on
interest bearing deposit.
Interest rate risk profile of financial assets
The interest rate risk profile of the financial assets of the Group comprise cash of £354,000
(2017: £732,000) as follows:
Floating rate
2018 2017
£’000 £’000
Currency
Sterling 54 515
US dollar 53 17
Canadian dollar 96 57
Euro 11 6
Israel shekel 140 137
Total 354 732
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 (2017: £nil).
Page 44
Notes to the financial statements
For the year ended 31 December 2018
Interest rate risk profile of financial liabilities
The interest rate profile of the financial liabilities of the Group is as follows:
2018 2017
£’000 £’000
Loans from related party undertakings 2,090 2,290
Total 2,090 2,290
Floating
Further details of which can be found in note 21.
Currency risk
The table below shows the extent to which the Company held monetary assets and liabilities
in currencies other than their local currency.
2018 2017
£’000 £’000
Functional currency of operation: Sterling
US Dollar (net liabilities) (1,889) (2,324)
Euro (net liabilities) (2,106) (2,049)
Canadian Dollar (net liabilities) (54) (57)
Total (4,049) (4,430)
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 £368,000 (2017: £583,000).
A 1% movement in interest rates would result in a charge or credit to profit and equity of
£7,000 (2017: £26,000).
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 45
Notes to the financial statements
For the year ended 31 December 2018
Summary of the Group’s financial assets and liabilities
2018 2017
£’000 £’000
Current assets – financial assets at amortised cost
Trade and other receivables 1,439 1,514
Cash and cash equivalents 354 732
1,793 2,246
Current liabilities – held at amortised cost
Trade and other payables (2,038) (2,610)
Preference shares (706) (8,255)
Loans (2,090) (2,290)
(4,834) (13,155)
Non-current liabilities – held at amortised cost
Trade and other payables (2,257) (2,241)
Preference shares (5,624) –
(7,881) (2,241)
Net financial assets and liabilities (10,922) (13,150)
The Directors consider that the fair value of financial assets and liabilities approximates to the
carrying value for both 2018 and 2017.
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 2018 271,353 5,427 12,672 18,099
Issue of shares 77,887 1,558 2,252 3,810
As at 31 December 2018 349,240 6,985 14,924 21,909
The total authorised number of ordinary shares is 475 million (2017: 475 million) with a par
value of 2p per share (2017: 2p per share).
Non-voting preference shares – included in financial liabilities
Number of Nominal
shares Value
’000 £’000
As at 31 December 2017 and 2018 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 2020, 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.
Page 46
Notes to the financial statements
For the year ended 31 December 2018
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
2018 2017 price exercise Vesting Expiry
Name of scheme ’000 ’000 pence date condition date
Israel scheme 1,082 1,169 2.0 02/02/09 – 31/12/19
Israel scheme 800 800 5.0 02/02/09 100,000
subscribers 31/12/19
UK scheme – 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 3,300 7.5 03/01/15 – 03/01/22
UK scheme 200 200 6.0 18/06/18 – 18/06/25
Israel scheme 1,500 1,500 6.0 07/09/18 – 31/12/23
Israel scheme 2,500 2,500 2.0 16/05/19 – 31/12/26
Israel scheme 3,500 4,250 4.0 04/11/19 – 31/12/26
Israel scheme 5,900 5,950 6.5 15/06/20 Group
reports
positive
annual
EBITDA 15/06/27
UK scheme 3,200 3,200 6.5 15/06/20 Group
reports
positive
annual
EBITDA 15/06/27
Total 22,482 23,569
Options were valued using the Black-Scholes option-pricing model.
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 47
Notes to the financial statements
For the year ended 31 December 2018
A reconciliation of option movements over the year to 31 December 2018 is shown below:
2018
Weighted Weighted
average average
exercise exercise
Number price Number price
’000 pence ’000 pence
2017
Outstanding at 1 January 23,569 5.4 15,869 4.8
Granted – – 9,350 6.5
Forfeited (800) 4.2 (1,650) 6.0
Exercised (87) 2.0 – –
Expired (200) – – –
Outstanding at 31 December 22,482 5.5 23,569 5.4
Exercisable at 31 December 5,682 6.5 5,969 6.0
The closing mid-market share price on 12 April 2019 was 5.1 pence.
The weighted average remaining contractual life of the share options outstanding at
31 December 2018 was 6.5 years at exercise prices ranging from 2.0 pence to 7.5 pence.
Those options exercisable at 31 December 2018 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 £54,000
(2017: £45,000), all of which related to equity-settled share-based payment transactions.
17 Cash used in operations
2018 2017
£’000 £’000
Loss before taxation (1,902) (2,453)
Adjustments for:
Depreciation and amortisation 208 112
Share-based payment charge 54 45
Interest expense 619 698
Changes in working capital:
Increase in inventories (149) (1)
Increase in trade and other receivables (200) (1)
(Decrease)/Increase in trade and other payables (479) 72
Net cash used in operations (1,849) (1,528)
Page 48
Notes to the financial statements
For the year ended 31 December 2018
Changes in liabilities arising from financing activities
For the year ended 31 December 2018
Non-cash changes
Cash Finance conversion Exchange
2017 flows charge to equity differences 2018
£’000 £’000 £’000 £’000 £’000 £’000
Preference shares 8,255 – 614 (2,539) – 6,330
Loans from related party
undertakings 2,290 (200) – – – 2,090
Total liabilities from
financing activities 10,545 (200) 614 (2,539) – 8,420
Cash and cash equivalents (732) 369 – – 9 (354)
Net debt 9,813 169 614 (2,539) 9 8,066
18 Employee information
The average monthly number of persons (including Executive Directors) employed by the
Group during the year was:
2018 2017
Number Number
Sales 4 3
Product development & operations 35 39
Finance & administration 6 6
Total 45 48
Included in the table above are 23 persons that are contractors (2017: 23). 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:
2018 2017
£’000 £’000
Wages and salaries 2,055 2,465
Social security costs 91 93
Other pension costs 76 90
Share-based payment charge 54 45
Other benefits 104 116
Total 2,380 2,809
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 2018 (2017: £nil).
Page 49
Notes to the financial statements
For the year ended 31 December 2018
20 Operating leases
Details of operating lease arrangements for the Group are as follows:
2018 2017
£’000 £’000
Lease payments under operating leases charged to
operating costs in the year 279 344
At the balance sheet date the Group had outstanding commitments for future minimum lease
payments under non-cancellable operating leases as follows:
2018 2017
£’000 £’000
Within one year 216 223
One to five years 447 754
Total 663 977
Operating lease payments represent rentals payable by the Group for vehicles and certain
properties.
Upon adoption of IFRS16, the net present value of future minimum lease payments will be
included in the balance sheet as both a right of use asset and a lease liability. The amount of
this balance sheet gross up will be c£0.6million.
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:
2018 2017
£’000 £’000
Salaries including bonuses 114 118
Other benefits 40 40
Total remuneration 154 158
Sums paid to third parties for services 203 194
Total short-term employee benefits 357 352
Directors’ remuneration and the remuneration of each Director is presented in the Directors’
Report on page 9.
Peter Wilkinson is a shareholder and Director of Intechnology plc. Mobile Tornado Group plc
has bought goods and services totalling £157,000 (year ended 31 December 2017; £174,000)
from Intechnology plc in the year to 31 December 2018. As at 31 December 2018, Mobile
Tornado Group plc owed Intechnology plc £850,000 (31 December 2017; £693,000).
Peter Wilkinson has provided loan finance of £nil to Mobile Tornado Group plc in the year
ended 31 December 2018 (year ended 31 December 2017; £100,000). As at 31 December
2018, Mobile Tornado Group plc owed Peter Wilkinson £nil (31 December 2017; £100,000).
Page 50
Notes to the financial statements
For the year ended 31 December 2018
Intechnology plc has provided loan finance of £nil to Mobile Tornado Group plc in the year
ended 31 December 2018 (year ended 31 December 2017; £420,000). As at 31 December
2018, Mobile Tornado Group plc owed Intechnology plc £2,090,000 (31 December 2017;
£2,090,000).
Intechnology plc has provided preference share finance of £nil to Mobile Tornado Group plc in
the year ended 31 December 2018 (year ended 31 December 2017; £nil). During the year,
the Company issued 50,800,000 new ordinary shares to Intechnology plc at 5p per share as
capitalisation of £2.54m preference share indebtedness owed by the Company to Intechnology
plc (year ended 31 December 2017; £nil). As at 31 December 2018, Mobile Tornado Group plc
had total preference share indebtedness to Intechnology plc of £6,330,000 (31 December
2017; £8,255,000).
On 26 September 2018, the Company entered into a revolving loan facility agreement with
Intechnology Plc. Pursuant to the facility agreement, which is for a period of two years from
date entered into, Intechnology has made available to the Company a revolving loan facility
of up to a maximum principal amount of £300,000. Any new amounts drawn down by the
Company pursuant to the facility agreement will be subject to a 2% facility fee and will bear
interest at a rate of 10% per annum. The facility agreement allows for monies to be drawn
down, repaid and redrawn again in any manner and any number of times by the Company
until the agreement expires, however, any monies repaid and subsequently redrawn will not
incur a further facility fee. At the expiration date of the facility agreement, all monies shall be
repayable by the Company to Intechnology together with any facility fee and accrued interest
thereon. As at 31 December 2018, Mobile Tornado Group plc owed Intechnology plc £nil in
respect of this agreement.
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 2018, Mobile
Tornado Group Plc owed £nil (31 December 2017: £4,000) to Jeremy Fenn.
Jeremy Fenn has provided loan finance of £nil to Mobile Tornado Group plc in the year ended
31 December 2018 (year ended 31 December 2017; £100,000). As at 31 December 2018,
Mobile Tornado Group plc owed Jeremy Fenn £nil (31 December 2017; £100,000).
The Group is controlled by Intechnology plc (incorporated in the UK), which owns 50.8% 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 2018 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 51
Company balance sheet
As at 31 December 2018
2018 2017
Note £’000 £’000
Fixed assets
Intangible assets 4 6,275 6,888
Tangible assets 5 47 42
6,322 6,930
Current assets
Debtors 7 2,288 2,020
Stock 22 –
Cash at bank and in hand 214 595
2,524 2,615
Creditors – amounts falling due within one year 8 (6,960) (15,164)
Net current liabilities (4,436) (12,549)
Total assets less current liabilities 1,886 (5,619)
Creditors – amounts falling due after more than one year 8 (7,959) (2,241)
Net liabilities (6,073) (7,860)
Capital and reserves
Called up share capital 9 6,985 5,427
Share premium account 14,924 12,672
Merger reserve 10,938 10,938
Share option reserve 225 171
Accumulated losses (39,145) (37,068)
Total shareholders’ deficit (6,073) (7,860)
The Company’s loss for the financial year was £2,077,000 (2017: £2,042,000 loss).
The financial statements on pages 52 to 62 were approved by the Board of Directors on
16 April 2019 and were signed on its behalf by:
Jeremy Fenn
Chairman
16 April 2019
Company Number: 5136300
The accompanying notes form an integral part of these financial statements.
Page 52
Company statement of changes in equity
for the year ended 31 December 2018
Called up Share Share Accumu- Share-
share premium Merger option lated holders’
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
financial year – – – – (2,042) (2,042)
Balance at
31 December 2017 5,427 12,672 10,938 171 (37,068) (7,860)
Called up Share Share Accumu- Share-
share premium Merger option lated holders’
capital account reserve reserve losses deficit
£’000 £’000 £’000 £’000 £’000 £’000
Balance at
1 January 2018 5,427 12,672 10,938 171 (37,068) (7,860)
Equity settled
share-based payments – – – 54 – 54
Issue of share capital 1,558 2,252 – – – 3,810
Loss for the
financial year – – – – (2,077) (2,077)
Balance at
31 December 2018 6,985 14,924 10,938 225 (39,145) (6,073)
Page 53
Notes to the Company financial statements
For the year ended 31 December 2018
1 General information
The principal activity of the Company is the provision of instant communication mobile
applications which serve the market of mobile data services in the mobile communication
industry. The Company is a public limited company which is listed on the Alternative
Investment Market and incorporated and domiciled in 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 Financial Statements are prepared on a going concern basis.
When determining the adoption of this approach the Directors have considered a wide range
of information relating to present and future conditions, including the current state of the
Balance Sheet, future projections, cash flow forecasts, access to funding, ability to
successfully secure additional investment, available mitigating actions and the medium-term
strategy of the business.
As noted earlier, 2018 represented a significant year of delivery for the Group, both in financial
performance and technical development and as we look ahead into 2019, the Company
expects to continue this upward trajectory across its three key geographical markets.
In common with many businesses at this stage of development, the Company is dependent
on its ability to meet its cash flow forecasts. Within those forecasts the Company has included
Page 54
Notes to the Company financial statements
For the year ended 31 December 2018
a number of significant payments and receipts based on its best estimate but, as with all
forecasts, there does exist some uncertainty as to the timing and size of those payments and
receipts. In particular the forecasts assume receipt of a significant outstanding customer debt,
the ongoing deferral and phased payment of some of the Company’s creditors, and the
continuation at the current level of both the recurring revenue and a significant increase in
the level of non-recurring revenues, including receipts from new services to existing
customers in the current quarter. In the event that some or all of these receipts are delayed,
deferred or reduced, or payments not deferred, management has considered the actions that
it would need to take to conserve cash. These actions would include significant cost savings
(principally payroll based) and/or seeking additional funding from its shareholders (for which
there is currently no shareholder commitment requested). These conditions, along with the
other matters explained in note 1 to the financial statements, indicate the existence of a
material uncertainty which may cast significant doubt about the Company’s ability to continue
as a going concern. The financial statements do not include the adjustments that would result
if the Company was unable to continue as a going concern.
The Directors, while noting the existence of a material uncertainty and having considered the
possible management actions as noted above, are of the view that the Company is a going
concern and will be able to meet its debts as and when they fall due for a period of at least
12 months from the date of signing these accounts.
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.
Valuation of goodwill – the carrying value of goodwill is reviewed for impairment at least
annually. In determining whether goodwill is impaired an estimation of the fair value and/or
the value in use of the cash generating unit (CGU) to which the goodwill has been allocated
is required. This calculation of value in use requires estimates to be made relating to the
timing and amount of future cash flows expected from the CGU, and suitable discount rates
based on the Company’s weighted average cost of capital adjusted to reflect the specific
economic environment of the relevant CGU. The calculation of fair value requires estimates of
the market value of the Company by reference to existing market data for the Company or for
similar entities.
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
Page 55
Notes to the Company financial statements
For the year ended 31 December 2018
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
3 years
The Directors review tangible fixed assets for impairment if events or changes in
circumstances indicate that the carrying value of 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 the remaining 10 years of this period.
After initial recognition, goodwill is measured at cost less amortisation and accumulated
impairment losses. At each year end date goodwill is reviewed for impairment using a
discounted cash flow method applied to business forecasts. If this review demonstrates that
impairment has occurred, this is expensed to the Company’s income statement. Goodwill is
allocated to cash generating units for the purpose of impairment testing.
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.
Page 56
Notes to the Company financial statements
For the year ended 31 December 2018
▪
▪
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 57
Notes to the Company financial statements
For the year ended 31 December 2018
4 Intangible assets
Goodwill Software Total
£’000 £’000 £’000
Cost
At 1 January 2018 12,758 187 12,945
Additions – – –
At 31 December 2018 12,758 187 12,945
Accumulated amortisation
At 1 January 2018 5,995 62 6,057
Charge for the year 576 37 613
At 31 December 2018 6,571 99 6,670
Net book amount at 31 December 2018 6,187 88 6,275
Net book amount at 31 December 2017 6,763 125 6,888
A 10% reduction in the revenue growth assumption will not result in an impairment of
goodwill.
5 Tangible assets
Computer
equipment Vehicles Total
£’000 £’000 £’000
Cost
At 1 January 2018 410 24 434
Additions 26 – 26
At 31 December 2018 436 24 460
Accumulated depreciation
At 1 January 2018 368 24 392
Charge for the year 21 – 21
At 31 December 2018 389 24 413
Net book amount at 31 December 2018 47 – 47
Net book amount at 31 December 2017 42 – 42
Page 58
Notes to the Company financial statements
For the year ended 31 December 2018
6 Fixed asset investments
Details of the investments at 31 December 2018 in which the Company holds more than 20%
of the nominal value of ordinary share capital are as follows:
Country of Group Company
incorporation Nature of proportion proportion
or registration business held held
M.T. Labs Limited Israel Sale of instant 100% 100%
communication services
With registered address:13 Amal street, Afek Industrial Park, Rosh Ha’ayin 4809249, Israel
On 31 October 2009 the trade and net assets of Mobile Tornado International Limited were
transferred to Mobile Tornado Group plc at book value, following which the net investment held
by Mobile Tornado Group plc in Mobile Tornado International Limited was £12,758,000.
Consequently, the value of the investment held in Mobile Tornado International Limited is not
supported by any net assets or future cash flows. As the transfer did not impair the future
profitability of the Company, £12,758,000 was transferred from investments to goodwill in the
Company balance sheet.
Mobile Tornado International Limited was subsequently dissolved.
7 Debtors
2018 2017
£’000 £’000
Trade receivables 1,003 835
Prepayments and accrued income 157 180
Other debtors 384 482
Amounts owed by Group undertakings 744 523
2,288 2,020
Trade receivables includes £nil (2017: £nil) falling due after more than one year. Trade
receivables are stated after provisions for impairment of £72,000 (2017: £56,000).
Amounts due from Group undertakings are unsecured, interest free and repayable on demand.
Page 59
Notes to the Company financial statements
For the year ended 31 December 2018
8 Creditors
2018 2017
£’000 £’000
Trade creditors 740 649
Accruals 268 249
Other taxation and social security 21 16
10% cumulative preference shares 6,408 8,334
Other creditors 4 415
Deferred income 2,426 2,384
Loans owed to related party undertakings 2,090 2,290
Contingent consideration 2,962 3,068
14,919 17,405
Less non-current portion:
Deferred consideration (2,257) (2,241)
10% cumulative preference shares (5,702) –
Amounts due within 1 year 6,960 15,164
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 £2,135,000 (2017: £2,110,000) 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.
9 Called up share capital
2018 2017
£’000 £’000
Allotted, called up and fully paid
349,240,236 (2017: 271,353,189) Ordinary shares of 2p each 6,985 5,427
Total 6,985 5,427
There is a single class of ordinary shares. There are no restrictions on the distributions.
Page 60
Notes to the Company financial statements
For the year ended 31 December 2018
Non-voting preference shares – classified as liability
Number of Nominal
shares Value
’000 £’000
As at 31 December 2017 and 2018 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:
2018 2017
£’000 £’000
One to five years 5 11
Total 5 11
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 £157,000 (year ended 31 December 2017; £174,000)
from Intechnology plc in the year to 31 December 2018. As at 31 December 2018, Mobile
Tornado Group plc owed Intechnology plc £850,000 (31 December 2017; £693,000).
Peter Wilkinson has provided loan finance of £nil to Mobile Tornado Group plc in the year
ended 31 December 2018 (year ended 31 December 2017; £100,000). As at 31 December
2018, Mobile Tornado Group plc owed Peter Wilkinson £nil (31 December 2017; £100,000).
Intechnology plc has provided loan finance of £nil to Mobile Tornado Group plc in the year
ended 31 December 2018 (year ended 31 December 2017; £420,000). As at 31 December
2018, Mobile Tornado Group plc owed Intechnology plc £2,090,000 (31 December 2017;
£2,090,000).
Intechnology plc has provided preference share finance of £nil to Mobile Tornado Group plc in
the year ended 31 December 2018 (year ended 31 December 2017; £nil). During the year,
the Company issued 50,800,000 new ordinary shares to Intechnology plc at 5p per share as
capitalisation of £2.54m preference share indebtedness owed by the Company to Intechnology
plc (year ended 31 December 2017; £nil). As at 31 December 2018, Mobile Tornado Group plc
had total preference share indebtedness to Intechnology plc of £6,330,000 (31 December
2017; £8,255,000).
On 26 September 2018, the Company entered into a revolving loan facility agreement with
Intechnology Plc. Pursuant to the facility agreement, which is for a period of two years from
Page 61
Notes to the Company financial statements
For the year ended 31 December 2018
date entered into, Intechnology has made available to the Company a revolving loan facility
of up to a maximum principal amount of £300,000. Any new amounts drawn down by the
Company pursuant to the facility agreement will be subject to a 2% facility fee and will bear
interest at a rate of 10% per annum. The facility agreement allows for monies to be drawn
down, repaid and redrawn again in any manner and any number of times by the Company
until the agreement expires, however, any monies repaid and subsequently redrawn will not
incur a further facility fee. At the expiration date of the facility agreement, all monies shall be
repayable by the Company to Intechnology together with any facility fee and accrued interest
thereon. As at 31 December 2018, Mobile Tornado Group plc owed Intechnology plc £nil in
respect of this agreement.
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 2018, Mobile
Tornado Group Plc owed £nil (31 December 2017: £4,000) to Jeremy Fenn.
Jeremy Fenn has provided loan finance of £nil to Mobile Tornado Group plc in the year ended
31 December 2018 (year ended 31 December 2017; £100,000). As at 31 December 2018,
Mobile Tornado Group plc owed Jeremy Fenn £nil (31 December 2017; £100,000).
The Group is controlled by Intechnology plc (incorporated in the UK), which owns 50.8% 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 2018 was £2,077,000 (year ended 31 December 2017:
£2,042,000 loss).
Page 62
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 17 June 2019 at
09.00 a.m. to transact the following business. Resolutions 1 to 5 (inclusive) will be proposed
as ordinary resolutions and resolution 6 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 2018 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 Jeremy Fenn, 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 Avi Tooba who retires in accordance with Article 38 of the Company’s
articles of association and who, being eligible, offers himself for re-appointment as a
Director.
5. THAT 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 at the date of this notice) 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) (whether in connection with the same offer
or issue as under (a) above or otherwise),
SPECIAL RESOLUTION
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;
Page 63
Notice of Annual General Meeting
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 £698,480.47 (approximately 10% of the
Company’s issued share capital at the date of this notice),
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.
By Order of the Board
Jeremy Fenn
Executive Chairman
3 May 2019
Registered office:
Cardale House
Cardale Court
Beckwith Head Road
Harrogate
HG3 1RY
Page 64
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 13 June 2019.
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).
Page 65
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 Capita Registrars 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
13 June 2019.
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
13 June 2019 (or if the Meeting is adjourned, close of business on the day two days prior to the date of the
adjourned Meeting) shall be entitled to attend and vote at the Meeting in respect of the number of shares
registered in their name at that time. Changes to the register of members after that date shall be disregarded in
determining the rights of any person to attend and vote at the Meeting.
Page 66
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 17 June 2019 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 2018.
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 13. 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. Jeremy Fenn and Avi Tooba are retiring and seek re-appointment at the
Annual General Meeting.
Having considered the performance of and contribution made by the Directors standing for
re-appointment, the Board remains satisfied that their performances continue to be effective
and to demonstrate commitment to the role and as such the Board recommends their
re-appointment. A biography of Jeremy Fenn and Avi Tooba appears on page 8 of the
Company’s Annual Report and Financial Statements and on the Company’s website at
https://www.mobiletornado.com/.
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
Page 67
Notice of Annual General Meeting
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.
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, 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 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
Resolution 6 is proposed as a special resolution. This resolution will be passed if not less than
75% of the votes are cast in favour.
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.
Page 68
Notice of Annual General Meeting
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
£698,480.47 (for general headroom).
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).
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.
Page 69
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 70
sterling 172621
www.mobiletornado.com