One Media iP Group plc
Annual Report 2016

Plain-text annual report

Company Information Directors Michael Antony Infante JP Scott Cohen Roman Poplawski Philip Miles Secretary Steven Gunning Registered Office Nomads Brokers Solicitors Bankers Registrars Auditors Pinewood Studios 623 East Props Building Pinewood Road Iver Heath Buckinghamshire SL0 0NH Cairn Financial Advisers LLP 61 Cheapside London EC2V 6AX Panmure Gordon (UK) Limited One New Change London EC4M 9AF Marriott Harrison Staple Court 11 Staple Inn Buildings London WC1V 7QH Coutts & Co 440 Strand London WC2R 0QS Barclays Bank Plc Level 27, 1 Churchill Place London E14 5HP Share Registrars Ltd 9 Lion and Lamb Yard Farnham Surrey GU9 7LL James Cowper Kreston Reading Bridge House George Street Reading, Berkshire Berkshire RG1 8LS Contents Executive Chairman's Statement Report of the Directors Corporate Governance Operating and Financial Review Independent Auditors' Report Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated and Company Cash Flow Statement Principal Accounting Policies Notes to the Consolidated Financial Statements Page 1 - 5 6 - 8 9 - 10 11 - 14 15 - 16 17 18 19 20 21 22 - 28 29 - 41 Executive Chairman’s Statement For the year ended 31 October 2016 If I am in danger of beginning to sound like a worn out record that is being played at 45 rpm to 33 rpm then I fully admit maybe I am. No CEO & Chairman can take pleasure in reporting negative growth and receding profit especially one so invested. This is a storm. And not one for the faint-hearted investor that wants instant results. But continue to invest I do. My time, money and my enthusiasm. So why the drop? I have spoken in my previous statements about the ‘long term’. Who is in charge of the ‘long term’ and how can I speed up the change and what do I mean by ‘long term’. The definition of ‘long-term’ according to an online dictionary is “evolving, maturing after, or being in effect for a long term” it does not state a period of time. A long-term mortgage can be greater than 25 years, a long-term marriage can suffer an ‘itch’ after 7 years! I am pleased to say that my long-term plans reflect neither of these two time scales. The drop was expected and predicted and indeed outlined by a Panmure Gordon’s ‘brokers note’ at the beginning of the year under review. Unfortunately, currency issues and Brexit have added to our pain, as we do after all pay royalties on a US Dollar basis. Currency is a big part of our world as dealing in over 120 territories globally everything ends up getting converted to US dollars and then back to British Sterling, even our UK sales. Our royalty Advance-recouping process (monies received in US dollars from our US based distributor) has contributed largely to us incurring a foreign exchange loss of £59,081. In addition, we have made cautious provisions for some non-material bad debts and carried the expense of employee change with the associated costs. At the end of calendar year 2016 the music industry proudly announced that it was on the mend. Global figures stated by the British Phonographic Industry (BPI) saw a rise to $15bn in global sales. Let’s not forget that back in 2002 (pre digital monetisation) this was $42bn. Of course this figure was entirely based on the physical medium of CD and cassettes being manufactured and distributed for every track of music sold. Now digital sales are outselling physical for the first time with 55% of UK sales in digital format. Physical sales have been given a boost by the occasional flash back to nostalgic vinyl LPs in which you are being led to believe is a ‘new musical coming’. I will believe that when I see a record player in every new Tesla sold. My market overview below will provide a greater in-depth look at the state of the global music market. Our acquisition program has definitely slowed by design. We have signed several new deals and renewed certain exclusive licenses that have come up for review. We are renewing deals in line with digital store policy to meet the ever-increasing quality assurance store guidelines as laid down by our primary retail partners. The Group is well equipped to meet the meticulous ‘meta-data’ requirements carried out by our team of Creative Technicians with whom the Group trains in all the best practices of digital ingestion. We maintain our corporate YouTube partner accreditation for which our team participate in an annual exam to remain current and accredited. On YouTube, our content has exceeded 2 billion minutes of all time viewing. This (ad-funded) business model continues to grow for the Group. Our Creative Technicians are all trained in YouTube best practices to grow this emerging content exploitation and monetisation. Being based at Pinewood Studios we continue to focus on exploiting our music on both TV and film. In the year under review our music has featured in TV shows such as ‘Mozart of the Jungle’, ‘Agents of Shield’, ‘Sleepy Hollow’, ‘The Discovery’, ‘Code Black’, ‘Nashville’, ‘Pure Genius’, ‘Falling Water’ and ‘Westworld’ to name just a few. During the year under review TCAT (Technical Copyright Analysis Tool) has seen us continue investment in developing the ‘Software as a Service’ (SAAS) tool. It has been presented to a careful selection of major record labels and trials continue. The evolution of this software is gradual and the Group is now dedicating further financial resource and personnel to its continued development. We have identified initial client requirements during the last year, working with and testing TCAT with a few chosen major labels. We have made significant advances in TCATs ability to ‘crawl’ music sites and handle millions of lines of data, which is expanding its role as a tool for the music industry. We have produced a trade video for the purpose of demonstration, which outlines the many facets that TCAT can offer. The TCAT service is we believe, both unique and a first. Copyright control on legitimate digital stores has been widely overlooked by the industry 1 Executive Chairman’s Statement For the year ended 31 October 2016 with all eyes on global piracy, which is an ever-moving target. We have chosen to create a tool that focuses on content policing and auditing on the most popular legitimate stores such as iTunes, Apple Music and Spotify. During 2017 & 2018 the Group will continue with its chosen major label partners to test TCAT’s services. I will keep you informed as to further developments as the Group pioneers ground breaking data research to further TCAT’s future as a copyright control and audio exploitation analysis tool. Full details of this service can be found at www.tcat.media. Review of Activities Financial Overview This has been, as predicted, a difficult year for us and as a consequence we have seen our revenue fall with a final reported figure of £2,045,652, a decrease of 18.8% on the £2,519,330 from last year, but in line with market expectation. Despite the decline in revenue we have been able to hold our gross margins at 44.3%, 7.0% behind 2015. Operating profit before tax is reported at £28,959, compared to the equivalent 2015 figure of £445,312. Aware of the fall in revenue we have kept strict control of our overheads, reporting at £876,742 and achieving a minimal increase of £29,925 on the £846,817 reported for 2015. This was achieved despite incurring a foreign exchange loss of £59,081 down £36,527 on the 2015 figure of £95,608. This demonstrates the operational leverage within our business whilst maintaining tight control of administrative costs. A profit after tax attributable to equity shareholders of £62,871 is reported for the financial year. Down from the £356,738 in 2015 and due to the combined effects of the revenue fall and reduced margin. The corporation tax credit of £32,852 in the period (2015: charge of £92,031) is mainly as a result of the Research and Development allowances available to the Group (£38,812 prior year and £43,200 current year) and fixed asset timing differences, meaning a deferred tax liability of £5,960 has been recognised. EBITDA, calculated on profit from continuing activities before interest, tax, depreciation and amortisation is £242,326 (2015: £670,804). At the end of the year our cash position is reported at £335,664 (2015: £816,249). Due to the uncertainties in our business, mentioned elsewhere in this report, we have been careful over the investment in content and rights with this year showing a spend of only £280,176, reduced from the £325,568 for 2015. However, we maintained our dividend policy with total dividends virtually unchanged at £100,896 (2015: £100,647). We continue to operate a steady, considered approach with our acquisition programme. We will broaden our search for IP content and technical development, considering forums, avenues and methods of exploitation outside of the traditional music platforms. Content Update and Rights Acquisition We continue to make content acquisitions and strategic distribution deals. As we have in the audio business we look to acquire legacy content in the video market. This is a ‘fit’ with our growing YouTube channel initiative. On the 15 March 2016 we entered an exclusive digital exploitation agreement with the "Associated Rediffusion Television, Archive footage of 1954 to 1968” controlled by Archbuild Ltd. The distribution agreement includes thousands of hours of television footage, broadcast by Rediffusion from the 1950s through to the 1960s. Many of the programs have not been seen for over 50 years but will prove to be of great historical importance as this archive reflects the development of independent television which revolutionised TV broadcast as we know it today. Programs include TV classics such as: The Frost Program, This Week (over 500 hours of international current affairs from the era covering the post war changes across the world), Various Popular TV Quiz Shows from the period, Children's of Other Lands, Half Hour Story, Intertel, The Levin Interviews, Man of our Times, Peace Keepers, No Hiding Place (crime dramas), Play of the Week, Something to Say (interviews with the great leaders and celebrities of the time) Do Not Adjust your set, At last the 1948 Show, World of Crime series and over a hundred of 'one-off' documentaries from 2 Executive Chairman’s Statement For the year ended 31 October 2016 Review of Activities – continued the time period including, the Ideal Home, The Queens Speech, Harrods a Shopping Guide, The Harlem Globetrotters, British Communism, The Derby in the 60's, The Budget 1962 and the British Academy Awards to name just a few selected titles. It is a vast historic collection of TV history memorabilia. The library is archived with the British Film Institute (BFI) and we have been in active discussions as to how we best digitally transpose this most historical collection from their original format into a digital format for distribution. On the 28 June 2016 we entered an exclusive long-term digital exploitation license agreement with HiBrow Production's TV & music catalogue for an Advance of £21,000 ($26,000 USD) recoupable against future royalties. The film director Don Boyd founded Hibrow Productions in 2008. It gathered a wide eclectic range of prestigious professionals from within the international arts industries (the Hibrow 'Curators') in order to create high quality arts content. The company's experienced film-making teams have produced over 200 hours of original 'high-definition' broadcast quality digital videos featuring numerous internationally acclaimed artists, authors, Hollywood actors, dancers, choreographers, conductors, musicians, directors and designers. It has enjoyed successful associations and partnerships with broadcasters including the BBC and Sky Arts where its content was regularly broadcast. One Media will further exploit the Hibrow content primarily via its digital audio and video routes to market such as YouTube, Amazon and its 600 digital stores such as iTunes, Spotify, Deezer and Google Play. On the 24 August 2016 we acquired the exclusive rights and ownership to the Owl Music Catalogue on a complete buy-out basis for €21,000 (twenty one thousand Euros). The Owl catalogue comprises of over 1,100 original Irish folk and Celtic music recordings. The tracks have been marketed by One Media since 2008 on a royalty sharing basis. Owl Records, was established in 1997. It developed a diverse catalogue of over 90 albums, mainly in the Celtic folk, traditional and new age genres. Original percussive arrangements of best-loved classical compositions are also included in the catalogue. There is additionally a varied range of Christmas albums. Unique to the catalogue is the 'Counties of Ireland' series, a 350 strong collection of songs drawn from the 32 counties of Ireland. Dagda's four Celtic new age albums spent over 100 weeks in the American New Age radio charts and provided the trailer sound track for an Oscar winning film. Their only dance album is 'Raverdance Celtic Clubland'. Rob Strong, father of Commitments star Andrew Strong has two albums in the catalogue which also includes some childrens' story collections. Each of Owl's six Mystical Ireland albums reached gold or platinum status in Ireland. Artists include Owl's founder and director Reg Keating, who is also the man behind Dagda, soul singer Rob Strong, popular Irish crooner Sonny Knowles, New Ireland Orchestra and balladeer/troubadour Tom Donovan. All Owl recordings were produced in its own studio in Ireland. Synchronisation, the placing of music in films, TV shows and video, has seen an increasing number of ‘tune placings’ over the last year. We have been successful in placing music from our own library, and that of our strategic partners, in some high profile broadcast opportunities, including adverts for BMW and Toyota. From the world of TV and Film, we have had placings in the Minions Movie, a track in the American series ‘Nashville’, ‘The Messengers’, ‘The Originals’, ‘Flash’, ‘Stereotypically You’, ‘Anitra's Dance’, ‘Looking’ and a show on Fox/FX Networks called ‘Wayward Pines’ among many others. Monetising music through Film & TV is a strong way to get our content noticed and it assists in our digital exploitation opportunities via music stores, especially if the tracks are relatively unknown. The Men and Motors TV content that we acquired from Granada/ITV has continued to be exploited via YouTube and some minor third party licensing. During the year under review the Group invested a further £25,000 in the preparation of a new TV format trailer. In October 2016, we attended the Mip Com exhibition to present our newly formatted vision for a new Men & Motors TV show to broadcasters. Continued interest is expressed and any deals will be announced as they occur. Additionally we continue to offer the 3,400 archived shows to potential broadcast partners running legacy channels. Men & Motors now has over 70,000 subscribers and receives circa 500,000 views a week on its dedicated YouTube channel operated by the Group and is monetised via ad-funded revenues. We remain positive that the brand has value and will suit broadcast in the future. 3 Executive Chairman’s Statement For the year ended 31 October 2016 Review of Activities – continued Market Overview The British Phonographic Industry (BPI) stated that underlining the growing ascendancy of streams as the format of choice for many fans, December 2016 witnessed the key milestone of one billion UK based audio streams taking place for the first time in a single week. To set this growth in context, weekly streams totalled less than 200 million at the start of 2014. As a result of this dramatic increase, audio streaming now accounts for well over a third (36.4 per cent) of all UK music consumption. Downloaded albums and singles continued their downward trend as streaming takes over as the main digital platform, now accounting for just over a fifth (22.6 per cent) of music consumption volume in the UK. The International Federation of the Phonographic Industry (IFPI) reported that digital sales now contribute 45 per cent of the global industry revenue, this has overtaken physical's 39 per cent market share. Streaming revenues globally are up 45.2 per cent, helping to drive 3.2 per cent global growth. The global music market achieved a key milestone in 2015 when digital became the primary revenue stream for recorded music, overtaking sales of physical formats for the first time. This growth of 3.2 percent led to the industry's first significant year-on-year growth in nearly two decades, taking revenue to US$ 15.0 billion. Digital revenues now account for more than half the recorded music consumed in 19 markets. However, The IFPI reports that there is a fundamental weakness underlying this recovery. Music is being consumed at record levels, but this explosion in consumption is not returning a fair remuneration to artists and record labels at this time. This is because of a market distortion resulting in a "value gap" which is depriving artists and labels of a fair return for their work. Streaming remains the industry's fastest-growing revenue source. Helped by the spread of smartphones, increased availability of high-quality subscription services and connected fans migrating onto licensed music services, streaming has grown to represent 19 per cent of global industry revenues, up from 14 per cent in 2014. Streaming now accounts for 43 per cent of digital revenues and is close to overtaking downloads (45 per cent) to become the industry's primary digital revenue stream. Premium subscription services have seen a dramatic expansion in recent years with an estimated 68 million people now paying a music subscription where available. This figure is up from 41 million in 2014 and just eight million when data was first compiled in 2010. So when I talk of the long-term, we are amidst the change that will see a return to value moving forward as the market continues to shift to streaming. This is a global market with currently over 3.2 billion people now using the Internet via all routes of connection whether mobile or static according to the United Nations agency that oversees international communications. Employees Our headcount as of the 31 October 2016 was 13 including all executive and non-executive directors (Group and Subsidiaries) and one technical consultant. The Group would like to thank all the directors and staff for their hard work during the year under review. The board will be undertaking a strategic review to ensure that the correct skill sets are in place in line with the changing trends of the market. Litigation In May 2015 the Group announced it had filed proceedings in the USA pursuant to its belief that its music rights had been exploited without authorisation. The Nashville Court ruled in the Group’s favour with regard to the actions by HHO Licensing Ltd, Henry Hadaway Organisation Ltd and Henry Hadaway personally. One Media announced that this litigation was concluded. On 17 September 2015 the Federal Court in Nashville Tennessee issued a judgment in the sum of $781,846 USD against Henry Hadaway, HHO Licensing Ltd and Henry Hadaway Organisation Ltd (which includes costs of $9,929 USD) for the wilful infringement of 1,466 recordings from the Point Classics catalogue owned exclusively by One Media. On the 7 February 2017 after an application from the Hadaway defendants the Group was informed that the Nashville Court had retracted its jurisdiction over the Hadaway defendants and vacated its judgement. The Group has therefore decided to return the monies received to date from the original Nashville judgement to HHO Licensing Ltd, Henry Hadaway Organisation Ltd and Henry Hadaway pending an appeal. The Group will consider its position and issue a statement once it has further reviewed the situation. 4 Executive Chairman’s Statement For the year ended 31 October 2016 Review of Activities – continued Outlook We have a continued period of change ahead of us as the remodelling from downloading to streaming revenues fully matures. I look forward to us developing our new technical initiatives and monetising them. In addition, I believe that the market will begin to perceive us as more than just an audio distribution content business. Our video, brands and technical creativeness will be playing a greater role for the Group in the future. They say you have to move with the times, our challenge is to move ahead of the times. This we can do. We will be strengthening, investing and marketing certain Group activities during 2017. This is to align us with the changing landscape and to make the Group better understood within the space that we occupy. My team of directors and I remain committed to delivering value and will continue to meet the challenges that our industry faces. Thank you for your continued support. Michael Infante JP Chairman and CEO 22 March 2017 5 Report of the Directors For the year ended 31 October 2016 The Directors present their annual report together with the audited Consolidated financial statements of the Group for the year ended 31 October 2016. Principal activities The principal activities of the Group throughout the year were the acquisition and exploitation of mixed media intellectual property rights including music, video, spoken word and digital books for distribution through the digital medium and to a lesser extent through traditional media outlets. The Group also licenses its music content for use in TV and film, advertising, video games and corporate websites. The Group is a B2B and B2C content supplier. The Group continues to believe that the creation of its own dedicated consumer website is not yet of interest as that is the primary activity of its major customers. The Group outsources the supply of its digital content to this market primarily through The Orchard, its strategic partner for digital music and spoken-word services, and for video product via YouTube and other emerging visual market places. Directors The following Directors held office during the year: Michael Antony Infante JP Scott Cohen Nigel Smethers (resigned 1 May 2016) Roman Poplawski Philip Miles (appointed 22 March 2016) Directors and their interests The Directors' interests (including family interests) in the shares of the Company were as follows: Ordinary shares of 0.5p each At 31 October 2015 At 31 October 2016 Michael Antony Infante JP Scott Cohen Roman Poplawski Philip Miles Michael Antony Infante JP Scott Cohen Roman Poplawski Philip Miles Nos Nos 25,577,862 500,000 3,793,377 438,340 25,577,862 500,000 3,793,377 438,340 Share Options in Ordinary shares of 0.5p each At 31 October 2015 At 31 October 2016 at 2.75p each Nos at 2.75p each Nos 500,000 500,000 500,000 - 500,000 500,000 500,000 - The options are exercisable at 2.75p per share on or by 6 March 2018. 6 Report of the Directors For the year ended 31 October 2016 – continued Directors and their interests continued Michael Antony Infante JP Scott Cohen Roman Poplawski Philip Miles Options in Ordinary shares of 0.5p each At 31 October 2015 At 31 October 2016 at 9p each Nos 500,000 500,000 500,000 500,000 at 9p each Nos 500,000 500,000 500,000 500,000 The options are exercisable at 9p per share on or by 20 April 2022. Options in Ordinary shares of 0.5p each At 31 October 2015 At 31 October 2016 at 14.5p each Nos at 14.5p each Nos Philip Miles 100,000 100,000 The options are exercisable at 14.5p per share on or by 4 June 2021. Future Developments Likely future developments in the company's business have been included within the Executive Chairman's Statement on pages 1 to 5. Statement of Directors' Responsibilities The Directors are responsible for preparing the Report of the Directors and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union. 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 Company and the Group and of the Profit or Loss of the Group for that period. In preparing these financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; • • make judgments and estimates that are reasonable and prudent; • state whether IFRS as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and Group will continue in business. • The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s and the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 7 Report of the Directors For the year ended 31 October 2016 - continued Disclosure of information to auditors Each of the persons who are directors at the time when this Directors' Report is approved has confirmed that: So far as that director is aware, there is no relevant audit information of which the company and the group’s auditors are unaware, and that director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the company and the group’s auditors are aware of that information. Auditors James Cowper Kreston have expressed their willingness to continue in office. A resolution to re-appoint James Cowper Kreston in accordance with section 489 of the Companies Act 2006 will be proposed at the Annual General Meeting. On behalf of the Board Michael Antony Infante JP Director 22 March 2017 8 Corporate Governance Report For the year ended 31 October 2016 Directors The Group supports the concept of an effective Board leading and controlling the Group, supported by a Management Team responsible for the operating subsidiaries. The Group Board is responsible for approving Group policy and strategy. It meets formally, at least quarterly, with regular face to face weekly contact maintained between most members as well as the dissemination of information using the most up to date electronic communication methods. All Directors have access to independent professional advice at the Group's expense. Relation with shareholders The Group values the views of its shareholders and recognises their interest in the Group's performance and strategy. Regular updates on performance and significant events are provided through the AIM Market platform, using the medium of the RNS, and through specially arranged investor updates with institutions and representative shareholder groups. The Annual General Meeting is used to communicate with private investors who are encouraged to participate. The Directors are available to answer questions. Separate resolutions will be proposed on each issue so that they can be given proper consideration and there will be a resolution to approve the annual report and accounts. Internal control The Board is responsible for maintaining a strong system of internal control for safeguarding shareholders' investment and the Group's assets and for reviewing effectiveness. The system of internal financial control is designed to provide reasonable, but not absolute assurance against material misstatement or loss. In addition to the traditional financial internal controls the Group seeks to protect our licenses by a well structured and controlled process of drafting, reviewing, approving and then subsequently monitoring. This process applies to both the purchase of our music rights and the distribution of our products to all our customers. The Audit Committee is chaired by Roman Poplawski supported by Scott Cohen, both of whom are Non- Executive Directors. The Committee is responsible for ensuring that the financial performance of the Group is properly monitored and reported on. The Audit Committee meets with the auditors at the audit planning stage and for the final audit meeting prior to Board approval of the accounts. 9 Corporate Governance Report For the year ended 31 October 2016 continued Report on Remuneration Directors' remuneration The Board recognises that Directors' remuneration is of legitimate concern to shareholders. The Group operates within a competitive environment where performance depends on the individual contributions of the Directors and employees and the Group believes in rewarding vision and innovation. Policy on Executive Directors' remuneration The Remuneration Committee is chaired by Scott Cohen supported by Roman Poplawski, both of whom are Non-Executive Directors. The Remuneration Committee met with the Executive Chairman at the beginning of the financial year to discuss, and subsequently agreed, his recommendations for Executive Directors remuneration for the year. Remuneration of the Directors for the year ended 31 October 2016 is as follows: Michael Antony Infante JP Philip Miles Roman Poplawski Nigel Smethers Scott Cohen Fees and emoluments Year ended 31 October 2016 Fees and emoluments Year ended 31 October 2015 £ 109,253 60,258 51,141 35,541 20,521 276,714 £ 119,359 - 63,045 68,000 22,720 273,124 Bonuses and Performance Conditions Included in the Fees and Emoluments for Michael Anthony Infante JP are taxable benefits in respect of Health Insurance of £4,082 (2015: £3,494), taxable benefit for a company car of £6,720 (2015: £5,025), attributable share option cost of £4,271 (2015: £2,720) and pension contributions of £3,180 (2015: £2,120). Michael Infante did not receive a bonus in the year (2015: £nil). Fees and Emoluments for Nigel Smethers include attributable share option cost of £4,271 (2015: £2,720) and pension contributions of £1,770 (2015 £1,280). Nigel Smethers did not receive a bonus in the year (2015: £nil). Fees and Emoluments for Philip Miles include attributable share option cost of £2,523 (2015: £nil) and pension contributions of £nil (2015 £nil). Philip Miles did not receive a bonus in the year (2015: £nil). R Poplawski Fees includes £16,250 (2015: £20,000) for his role as Non-executive Director and £30,620 (2015: £40,325), in respect of his role as Business Affairs Adviser providing advice on legal and contractual matters, and £4,271 (2015: £2,720) attributable share option costs. S Cohen received £16,250 (2015: £20,000) for his role as non-executive director and £4,271 (2015: £2,720) attributable to share option costs. Directors’ contracts do not include any specific performance criteria but implicit within their terms of their engagements is that at all times they will seek to enhance shareholder value. Apart from share options granted there are no other specific long term incentive plans for any of the Directors. The Company received qualifying services from 5 (2015: 4) Directors under long term incentive qualifying schemes. Notice periods The Directors have contracts which are terminable on twelve months’ notice on either side for Michael Infante and three months on either side for all the other Directors. 10 Operating and Financial Review For the year ended 31 October 2016 Business review and future developments The results of the Group are shown within the financial statements and a detailed review of the business for the year and future developments is given in the Executive Chairman's statement on pages 1 to 5. Whilst the Group focus is primarily on the digital market place, traditional routes to market are not being ignored. Changes in the retail sector continue to accelerate and there are still both national and global economic problems. The Directors consider, however, that there are substantial opportunities and potential whilst recognising that risks exist. The Group has continued to enter into representative deals with independent record labels and content owners to market their rights in the digital arena and to invest in copyrights and intellectual property that are considered to attract a suitable and sustainable rate of return. A dividend of £100,896 (2015: £100,647) was paid in the year. The key financial and non-financial performance indicators the Directors use to monitor the performance of the Group are as follows: Financial and non-financial key performance indicators Cost of catalogue acquisition and number of tracks "ingested" Management are continually searching to acquire additional music, video, spoken word and digital book catalogues to exploit through the digital medium and other routes to market. The costs of catalogue acquisition “ingestion” are constantly monitored to ensure that a safe and adequate return on investment is made. During the year £121,422 (2015: £325,568) was spent on catalogue and intangible asset additions. Rate of commercialisation of licences and intellectual property Measured by the growth in value and volume of digital revenues, license deals and sales contracts signed. During the year revenue fell to £2,045,652 (2015: £2,519,330) a 18.8% year on year decrease. Progress assessment includes regular updates on key partners, distribution outlets and market segments. Overhead growth Management closely monitors the growth in overheads, carefully balancing the need to reward people properly based on both performance and external market factors, and other overhead expenditure. Where a step change in overheads is predicted this must be justified in both financial and strategic terms. During the year overheads increased to £876,742 (2015: £846,817) a 3.5% increase. Share price movements and changes in shareholders are constantly monitored as a major contributor to long term planning The Board constantly review share price movements both for the impact of Regulated News Service announcements and trading in shares on the AIM Market. This indicator is a major contributor to medium and long term decisions. Share price as at 31 October 2016 was 3.50p (2015: 6.63p). Management of capital The Group has no external financing and is not therefore currently subject to any external constraints on its management of working capital. Dividend policy is determined by the availability of profit and reserves from which to pay dividends, the Group’s policy and cost of acquiring additional music catalogues and the desire to reward shareholders for their investment in the Group. Financial reporting Financial reporting is monitored monthly against budgets and forecasts, by both the main Board and the Board of the principal operating subsidiary. Profit and Loss and Cash Flow projections are updated as significant changes to performance and operating conditions occur. 11 Operating and Financial Review For the year ended 31 October 2016 - continued Business risks Reliance on key personnel The Group is dependent on the knowledge, expertise and experience of its key personnel. In total, the Group employs fewer than 15 people. In the event that a key member of the team was to leave the employment of the Group this could lead to significant disruption and could have a material impact on the future profitability of the Group. Reliance on The Orchard – concentration of distribution risk In the financial year ending 31 October 2016 approximately 68% (2015: 70%) of the Group’s turnover was channeled via The Orchard, the distribution aggregator that the Group uses to sell its content to end-user download and streaming sites such as iTunes and Spotify. In the event that The Orchard agreement was terminated or that The Orchard ceased to operate, this could have a material impact on the Group’s operations and profitability, whilst the Group changed its systems to work either with a new aggregator or trade directly with the end-user distribution sites. Rights acquired may not be wholly exclusive The Group has acquired a large number of catalogues of music, video and spoken word since its formation. It is not uncommon for rights attached to such catalogues to have been previously transferred prior to the Group’s acquisition of such rights. A risk exists that the title to such rights may be challenged in which event, the Group may have to forego potential revenue and/or incur legal costs whilst securing exclusive title. Sales of digital content Digital stores may at their discretion delist or remove tracks, albums or content from their store, without any prior notice to the Group. If this was to occur it could have a detrimental effect on the Group’s revenue growth. Piracy Piracy or the illegal download of content from the internet could have a detrimental impact on the Group’s growth plans. Currency – revenues received in US$ In the financial year to 31 October 2016 approximately 80% (2015: 81%) of the Group’s revenue was generated in US dollars, whilst the majority of the Group’s costs are denominated in Sterling. The Group is therefore exposed to the US$/£ exchange rate and so any material adverse movement in this exchange rate can have a material financial impact on the Group. Market dominance of Big 3 The Group operates in a market dominated by established traditional companies such as Universal, Warner and Sony (the “Big 3”). The Big 3 own or have the rights to a vast amount of content, a large amount of which may be similar to that owned or exploited by the Group. There is a risk that the Big 3 could exploit their recognised brands and use their marketing budgets to compete with the Group’s targeted market, the consequence of which could lead to reduced sales and profitability for the Group. Digital retailers’ terms of business The Group is dependent upon digital retailers such as iTunes and Spotify in order to sell its products in the digital market place. Changes in their terms of business and type of content they will distribute, as defined in their “style guides”, can affect the performance of the Group. Bad Debts The traditional risk associated with customer insolvency, and inability or unwillingness to pay debts continues to be a threat which the Group constantly monitors. 12 Operating and Financial Review For the year ended 31 October 2016 - continued Digital route to market The digital market place has its own challenges with a reliance on consumers becoming internet literate and homes achieving a decent broadband connection. OMiP is a B2B and B2C supplier. We have no digital site of our own but supply over 200 legitimate digital stores worldwide through our key business partner. We are not dependent on any one store’s marketing strengths as we supply our content to all. Financial risk management objectives and policies The Group's principal financial instruments comprise cash and cash equivalents. The Group has various other financial instruments such as trade receivables and trade payables, which arise from its operations. The Group is exposed to a variety of financial risks which result from its operating activities. The Directors are responsible for co-ordinating the Group's risk management and focus on actively securing the Group's short and medium term cash flows. Long term financial investments are managed to generate lasting returns. The Group does not actively engage in the trading of financial assets and has no financial derivatives. The most significant risks to which the Group is exposed are described below: Currency risk The Group is exposed to foreign exchange risk in connection with its digital business where the revenue is transacted largely in US$ and the settlement of royalty and other liabilities arising from this revenue is partly denominated in US$. Credit risk The Group's credit risk is primarily attributable to its trade receivables and other debtors. The amounts presented in the Consolidated Statement of Financial Position are net of any allowances for doubtful receivables. The Group has a significant concentration of credit risk associated with its distributor of digital income. Liquidity risk The Group seeks to manage risks to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash and assets safely and profitably. Short term flexibility is achieved by the use of money markets to deposit excess cash which is not required in the short term. The Directors prepare cash flow forecasts on a regular basis to identify at an early stage any short term funding difficulties. Significant shareholding Apart from the Directors’ shareholdings above the Company has been notified that there are three holdings in excess of 3% of the issued share capital of the Company at 22 March 2017. Helium Special Situations Fund is holding 8.7 % (6,150,000 ordinary shares of 0.5p each), Livingbridge VC LLP 6.93% (4,925,000 ordinary shares of 0.5p each) and Hargreave Hale Limited 10.01% (7,112,500 ordinary shares of 0.5p each). Employee involvement The Group has continued its practice of keeping employees informed of matters affecting them as employees and the financial and economic factors affecting the performance of the Group. This is achieved through regular formal and informal updates and open access between all employees of the Group. Disabled employees Applications for employment by disabled persons are given full and fair consideration for all vacancies in accordance with their aptitudes and abilities. In the event of an employee becoming disabled, every effort will be made to retain them in order that their employment within the Group may continue. It is the policy of the Group that training, career development and promotion opportunities are available to all employees. Technology The Group takes a progressive view on the impact of technological developments. Changes to technology and related systems are openly embraced with the aim of giving the Group the most up to date platforms to work on and exploit its assets. 13 Operating and Financial Review For the year ended 31 October 2016 - continued Research and development The Group, in developing its internal technology based systems, undertakes Research and Development work the outcome of which may be uncertain. Work proven to have an on-going value is capitalised all other costs are expensed to the Profit and Loss account. Key accounting policies Principal accounting policies are included on pages 22 to 28, including critical accounting estimates and judgements on page 26. Cash flows Full details of cash flows generated by the business are disclosed within the Consolidated Cash Flow Statement on page 21. The group generates sufficient cash flows through its ordinary operations, in combination with funds generated by company's listing on AIM, to achieve its objectives set out in the Executive Chairman's Report on pages 1 to 5. Compliance This statement has been prepared in accordance with ASB's 2006 Reporting Statement. On behalf of the Board Michael Antony Infante JP Director 22 March 2017 14 Independent Auditors' Report to the Shareholders of One Media iP Group Plc We have audited the Consolidated financial statements of One Media iP Group Plc for the year ended 31 October 2016, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated and Parent Company Statement of Financial Position, the Consolidated and Parent Company Statement of Cash Flows and the related notes set out on pages 17 to 41. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted for use in the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors’ Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the Directors and Auditors As explained more fully in the Statement of Directors' Responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Auditing Practices Board's website at www.frc.org.uk/auditscopeukprivate. Unqualified opinion on financial statements In our opinion the financial statements: • • • the financial statements give a true and fair view of the state of the Consolidated and of the Parent Company's affairs as at 31 October 2016 and of the Consolidated profit for the year then ended; the financial statements have been properly prepared in accordance with IFRS adopted for use in the European Union; and the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Executive Chairman's Statement, Operating and Financial Review, Corporate Governance Report and Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements. 15 Independent Auditors' Report to the Shareholders of One Media iP Group Plc Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • • adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the parent Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of Directors' remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Alan Poole BA (Hons) FCA (Senior Statutory Auditor) for and on behalf of James Cowper Kreston Chartered Accountants and Statutory Auditor Reading Bridge House George Street Reading, Berkshire RG1 8LS 22 March 2017 16 Registered Number: 05799897 Consolidated Statement of Comprehensive Income For the year ended 31 October 2016 Revenue Cost of sales Gross profit Administration expenses Operating profit Finance income Profit on ordinary activities before taxation Tax credit / (expense) Profit for period attributable to equity shareholders and total comprehensive income for the year Basic earnings per share Diluted earnings per share Note Year ended 31 October 2016 Year ended 31 October 2015 £ £ 2,045,652 2,519,330 (1,139,951) (1,227,201) 905,701 1,292,129 (876,742) (846,817) 28,959 445,312 1,060 3,457 30,019 32,852 448,769 (92,031) 62,871 356,738 0.09p 0.08p 0.50p 0.47p 1 2 3 4 7 7 The Consolidated Statement of Comprehensive Income has been prepared on the basis that all operations are continuing activities. The notes on pages 22 to 41 form part of these financial statements. 17 Registered Number: 05799897 Consolidated Statement of Changes in Equity For the year ended 31 October 2016 Share Capital Share redemption reserve Share premium £ £ £ Share based payment reserve £ Retained earnings Total equity £ £ At 1 November 2014 353,518 239,546 1,452,895 21,215 1,091,911 3,159,085 Proceeds from the issue of new shares 1,750 Share based payment charge Profit for the year Dividends - - - - - - - 4,750 - - - - 22,282 - - - - 6,500 22,282 356,738 356,738 (100,647) (100,647) At 1 November 2015 355,268 239,546 1,457,645 43,497 1,348,002 3,443,958 Share based payment charge Profit for the year Dividends - - - - - - - - - 30,943 - 30,943 - - 62,871 62,871 (100,896) (100,896) At 31 October 2016 355,268 239,546 1,457,645 74,440 1,309,977 3,436,876 The notes on pages 22 to 41 form part of these financial statements. As detailed in note 15 Share capital the following transactions were undertaken: For the year ending 31 October 2015: • On 12 May 2015 one employee exercised 100,000 options at 2.75p a share over ordinary shares of 0.5p each with a total of £2,750 raised as a result of this exercise. • On 27 July 2015 one employee exercised their right to convert 250,000 1.5p warrants in ordinary shares of 0.5p each with a total of £3,750 raised as a result of this exercise. 18  Registered Number: 05799897 Consolidated Statement of Financial Position at 31 October 2016 Note 8 9 11 12 13 14 15 Assets Non-current assets Intangible assets Property, plant and equipment Current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Liabilities Current liabilities Trade and other payables Deferred tax Total liabilities Equity Called up share capital Share redemption reserve Share premium account Share based payment reserve Retained earnings Total equity At 31 October 2016 At 31 October 2015 £ £ 3,394,134 6,452 3,323,323 8,017 3,400,586 3,331,340 463,574 335,664 440,252 816,249 799,238 1,256,501 4,199,824 4,587,841 756,988 5,960 1,143,883 - 762,948 1,143,883 355,268 239,546 1,457,645 74,440 1,309,977 355,268 239,546 1,457,645 43,497 1,348,002 3,436,876 3,443,958 Total equity and liabilities 4,199,824 4,587,841 The notes on pages 22 to 41 form part of these financial statements. The Consolidated Financial Statements were approved by the Directors on 22 March 2017 and signed on their behalf by: Michael Antony Infante JP Director 19 Registered Number: 05799897 Company Statement of Financial Position at 31 October 2016 Assets Non-current assets Investments Current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Liabilities Current liabilities Trade and other payables Total liabilities Equity Called up share capital Share redemption reserve Share premium account Share based payment reserve Retained earnings Total equity Note 10 11 12 13 15 16 16 16 16 At 31 October 2016 At 31 October 2015 £ £ 493,817 493,817 2,724,346 31,483 2,447,603 110,771 2,755,829 2,558,374 3,249,646 3,052,191 25,835 25,835 21,325 21,325 355,268 239,546 1,457,645 74,440 1,096,912 355,268 239,546 1,457,645 43,497 934,910 3,223,811 3,030,866 Total equity and liabilities 3,249,646 3,052,191 The notes on pages 29 to 41 form part of these financial statements. The Company Financial Statements were approved by the Directors on 22 March 2017 and signed on their behalf by: Michael Antony Infante JP Director 20 Registered Number: 05799897 Consolidated and Company Cash Flow Statement For the year ended at 31 October 2016 Year ended 31 October 2016 Group Year ended 31 October 2015 Group Year ended 31 October 2016 Company Year ended 31 October 2015 Company £ £ £ £ 30,019 209,365 4,002 30,943 (1,060) (23,320) (290,186) (57,900) 448,769 216,989 8,503 22,282 (3,457) 77,003 (734,154) (17,686) 262,899 - - 30,943 (174) (276,743) 4,509 - 280,657 - - 22,282 (765) (362,391) (4,575) - (98,137) 18,249 21,434 (64,792) (280,176) (325,568) (2,436) 1,060 (5,208) 3,457 (281,552) (327,319) - - 174 174 - - 765 765 - - (100,896) 6,500 - (100,647) - - (100,896) 6,500 - (100,647) (100,896) (94,147) (100,896) (94,147) (480,585) (403,217) (79,288) (158,174) 816,249 1,219,466 110,771 268,945 Cash flows from operating activities Operating profit before tax Amortisation Depreciation Share based payments Finance income (Increase) in receivables Increase/(decrease) in payables Corporation tax paid Net cash inflow (outflow) from operating activities Cash flows from investing activities Investment in intellectual property rights Investment in property, plant and equipment Finance income Net cash used in investing activities Cash flows from financing activities Proceeds from the issue of new shares Share issue costs Dividends paid Net cash inflow (outflow) from financing activities Net change in cash and cash equivalents Cash at the beginning of the year Cash at the end of the year 335,664 816,249 31,483 110,771 21 Principal Accounting Policies For the year ended 31 October 2016 Basis of preparation The Company is a public limited company incorporated and domiciled in England under the Companies Act 2006. The Board has adopted and complied with International Financial Reporting Standards (IFRS) as adopted by the European Union. The Company's shares were admitted for trading on the AIM market of the London Stock Exchange on 18 April 2013. Basis of consolidation The Group financial statements consolidate those of the Company and all its subsidiary undertakings drawn up to the balance sheet date. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from their activities. The Group obtains and exercises control through voting rights. Unrealised gains or losses on transactions between the Group and its subsidiaries are eliminated. Amounts reported in the financial statements of subsidiaries are adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Acquisitions of subsidiaries are dealt with by the equity method. The equity method involves the recognition of the 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 balance sheet at fair values, which are also used as the basis for subsequent measurement in accordance with the Group accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Revenue The Group follows the principles of IAS18 "Revenue" in determining the appropriate revenue recognition policies. In principle therefore, revenue is recognised to the extent that the Group has obtained the right to consideration through its performance. Revenue, excluding VAT, represents the value of digital income, licences and goods delivered or title passed. In the case of digital income revenue is recognised when reported to the Group and where reasonable estimates can be made of digital stores income still to be reported at any point of time. In line with normal accounting practice revenue is reported gross received and receivable. Commercial advances To the extent that commercial advances are un-recouped at the year end any outstanding amounts are included in Other payables. The outstanding balances are calculated in line with underlying contractual obligations. 22 Principal Accounting Policies For the year ended 31 October 2016 Taxation Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable result for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the income statement. Deferred income taxes are calculated using the liability method of temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. However deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable the reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. Intangible assets Licences and other intangible assets Licences and other intangible assets, including labour capitalised under IAS38 Intangible Assets, are valued at cost less accumulated amortisation. Capitalised labour represents costs incurred in "ingesting" products and the compilation of existing content into new and revised albums. Amortisation is calculated to write off the cost in equal amounts over the life of the licences and other intangible assets (between 24 months and 25 years). Licences and intangible assets are subject to annual impairment reviews. Assets acquired as part of a business combination In accordance with IFRS 3 revised “Business Combinations", an intangible asset acquired in a business combination is deemed to have a cost to the Group of its fair value at the acquisition date. The fair value of the intangible asset reflects market expectations about the probability that the future economic benefits embodied in the asset will flow to the Group. The fair value is then amortised over the economic life of the assets. Where an intangible asset might be separable, but only together with a related tangible or intangible asset, the Group of assets is recognised as a single asset separable from goodwill where the individual fair values of the assets in the Group are not reliably measurable. Where the individual fair value of the complimentary assets are not reliably measurable, the Group recognises them as a single asset provided the individual assets have similar useful lives. Impairment of intangible assets, property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Individual assets or cash-generating units, other than intangible assets with an identifiable useful life, and those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recovered. 23 Principal Accounting Policies For the year ended 31 October 2016 Impairment of intangible assets, property, plant and equipment – continued An impairment loss is recognised in the income statement for the amount by which the asset's or cash- generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units are charged to the assets in the cash generating unit. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if there has been a favourable change in the estimates used to determine the assets recoverable amount and only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined net of amortisation, if no impairment had been recognised. Financial assets The Group's financial assets include cash and other receivables. All financial assets are recognised when the Group becomes party to the contractual provisions of the investment. All financial assets are initially recognised at fair value, plus transaction costs. Non-compounding interest and other cash flows resulting from holding financial assets are recognised in the income statement when received, regardless of how the related carrying amount of financial assets is measured. Available for sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in other categories of financial assets. Available for sale assets are measured subsequently at fair value with changes in value recognised in equity through the statement of changes in equity. Where fair value cannot be measured reliably such financial assets are held at cost. Gain or losses arising from investments classified as available for sale are recognised in the income statement when they are sold or when the investment is impaired. Trade and other receivables are subsequently measured at amortised cost. Trade and other receivables are provided against when objective evidence is received that the Group will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated cash flows. Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank deposits, together with short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value with original maturities of three months or less from the date of acquisition. Equity The share capital is determined using the nominal value of shares that have been issued. The share premium account represents premiums received on the initial issuing of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits. Retained earnings include all current and prior period results as disclosed in the income statement. 24 Principal Accounting Policies For the year ended 31 October 2016 Financial liabilities The Group's financial liabilities include trade and other payables. Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes party to the contractual provisions of the instrument. All financial liabilities are recognised initially at fair value, net of direct issue costs, and are subsequently recorded at amortised cost using the effective interest method with interest charges recognised as an expense in the income statement. Dividend distributions to shareholders are included in "other short term financial liabilities" when dividends are approved by the shareholders' before the year end. Provisions, contingent liabilities and contingent assets Provisions are recognised when present obligations will probably lead to an outflow of economic resources from the Group and they can be estimated reasonably. Timing or the amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events. For example, legal disputes or onerous contracts. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the balance sheet date, including the risks and uncertainties associated with the present obligation. Any reimbursement expected to be received in the course of the settlement of the present obligation is recognised, if virtually certain as a separate asset, not exceeding the amount of the related provision. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. In addition, long term provisions are discounted to present values, where the time value of money is material. All provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. In those cases where the possible outflow of economic resource as a result of the present obligation is considered improbable or remote, or the amount to be provided cannot be measured reliably, no liability is recognised in the balance sheet. Probable inflows of economic benefits to the Group that do not yet meet the recognition criteria are considered contingent assets. Property, plant and equipment Measurement basis Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to the working condition and location for its intended use. In the case of new internally generated software creation and improvements this includes capitalised labour. Subsequent expenditure relating to property, plant and equipment is added to the carrying amount of the assets only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other costs, such as repairs and maintenance are charged to the income statement during the period in which they are incurred. When assets are sold any gain or loss resulting from their disposal, being the difference between the net disposal proceeds and the carrying amount of the assets is included in the income statement. 25 Principal Accounting Policies For the year ended 31 October 2016 Property, plant and equipment - continued Depreciation Depreciation is calculated so as to write off the cost of property, plant and equipment, less its estimated residual value, which is revised annually, over its useful economic life as follows: Furniture and fixtures - 33.33% straight line Office equipment - 33.33% straight line Investment in subsidiary Investment in subsidiary undertakings is shown at cost, less any provision for impairment. Foreign currency The Consolidated Financial Statements are presented in UK Sterling which is also the functional currency of the parent Company. Monetary assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are taken into account in arriving at the Income Statement. Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair value are translated using the exchange rates at the date when the fair value was determined. Operating segments A segment is a distinguishable component of the Group that is engaged either in a particular business (business segment) or conducting business in a particular geographic area (geographic segment), which is subject to risks and rewards that are different from other segments. The Group operates in one significant business segment which is the digital “net-label” market, the results of which are seen in the Consolidated Statement of Comprehensive Income. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions about the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next accounting year are discussed below. Business combinations On initial recognition, the assets and liabilities of the acquired business are included in the Consolidated Statement of Financial Position at their fair values. In measuring fair value management use estimates about future cash flows and discount rates. 26 Principal Accounting Policies For the year ended 31 October 2016 Impairment of assets The Group conducts impairment reviews of assets when events or changes in circumstances indicate that the carrying amounts may not be recoverable annually, or in accordance with the relevant accounting standards. An impairment loss is recognised when the carrying amount of an asset is higher than the greater of its net selling price or the value in use. In determining the value in use, management assesses the present value of the estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Estimates and judgements are made in respect of the potential impairment of goodwill, intellectual property, licences and other intangible assets. Internally generated intangible assets and software systems The Group capitalises labour in respect of intangible assets and internally generated software. Significant judgement is required in estimating the time and cost involved in these activities and distinguishing the research from the development phase. Development costs are recognised as an asset whereas research costs are expensed as incurred. Share option and warrant policy The Group has applied the requirements of IFRS 2 Share-Based Payment. The Group operates both approved and unapproved share option and warrant schemes for the Directors, senior management and certain employees. Where share options and warrants are awarded, the fair value of the instruments at the date of grant is charged to the Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that ultimately the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted, as long as other vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition. Where the terms and conditions of the instruments are modified before they vest, any increase in fair value of these instruments, measured immediately before and after the modification is also charged to the Statement of Comprehensive Income over the remaining vesting period. Fair value is measured using the Black-Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral conditions. Adoption of new or amended IFRS The Group has adopted the following revisions and amendments to IFRS issued by the International Accounting Standards Board, which are relevant to and effective for the Group's financial statements for the period beginning 1 November 2015. • • • • • • • IFRS 2 Share-based Payment - Definitions of vesting conditions IFRS 3 Business Combinations - Accounting for contingent consideration in a business Combination IFRS 8 Operating Segments - Aggregation of operating segments IFRS 8 Operating Segments - Reconciliation of the total of the reportable segments’ assets to the entity's assets IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets - Revaluation method - proportionate restatement of accumulated depreciation/amortisation IAS 24 Related Party Disclosures – Key management personnel 27 Principal Accounting Policies For the year ended 31 October 2016 Adoption of new or amended IFRS – continued The Directors have assessed that the adoption of these revisions and amendments did not have an impact on the financial position or performance of the Group. 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: Effective date – periods beginning on or after 1 January 2016 IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint • • Venture - Amendments to IFRS 10 and IAS 28 • IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception – Amendments to IFRS 10, IFRS 12 and IAS 28 IFRS 11 Accounting for Acquisitions of Interests in Joint Operations - Amendments to IFRS 11 IFRS 14 Regulatory Deferral Accounts IAS 1 Disclosure Initiative - Amendments to IAS 1 IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and IAS 38 IAS 16 and IAS 41 Agriculture - Bearer Plants - Amendments to IAS 16 and IAS 41 IAS 27 - Equity Method in Separate Financial Statements - Amendments to IAS 27 IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - Changes in methods of disposal IFRS 7 Financial Instruments: Disclosures – Servicing contracts IFRS 7 Financial Instruments: Disclosures - Applicability of the offsetting disclosures to condensed interim financial statements IAS 34 Interim Financial Reporting - Disclosure of information 'elsewhere in the interim financial report' IAS 19 Employee Benefits - Discount rate: regional market issue • • • • • • • • • • • • • Effective date –periods beginning on or after 1 January 2017 • • IAS 7 Disclosure Initiatives – Amendments to IAS 7 IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12 Effective date – periods beginning on or after 1 January 2018 • • IFRS 15 Revenue from Contracts with Customers IFRS 9 Financial Instruments Effective date – periods beginning on or after 1 January 2018 • IFRS 16 Leases The Directors do not consider that the implementation of any of these new standards will have a material impact upon reported income or reported net assets. 28 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 1. Revenue Revenue is the amount attributable to the Group's principal activity undertaken in the United Kingdom. The geographic split of Group revenue is as follows: United Kingdom North America and Canada Europe Year ended 31 October 2016 Year ended 31 October 2015 £ £ 138,108 1,622,522 285,022 169,056 2,015,270 335,004 2,045,652 2,519,330 The Group considers it has one business segment with all its Profit ultimately earned from its sole activity in the United Kingdom as shown in the Consolidated Statement of Comprehensive Income shown on page 17. Included in revenues for the year ended 31 October 2016 it is estimated that £519,000 (2015: £588,000) from its largest ultimate customer and £346,000 from its second largest ultimate customer (2015: £392,000). Together these represent 41.2% (2015: 38.9%) of the total Group revenue for the year. 2. Operating profit Operating profit is stated after charging: Group Directors' remuneration Amortisation of licences and other intangible assets Depreciation of plant, property and equipment Operating leases Auditors' remuneration - audit fees Auditors' remuneration - taxation Bad debts Difference on foreign exchange Year ended 31 October 2016 Year ended 31 October 2015 £ £ 276,714 209,365 4,002 51,442 11,600 3,400 15,064 59,081 273,124 216,989 8,503 48,557 11,500 3,400 - 95,608 Included in audit fees above is £5,000 (2015: £5,000) for the audit of the parent Company. 29 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 3. Finance cost and finance income Interest receivable 4. Taxation Analysis of the charge for the year Adjustments to tax charge in respect of prior years UK corporation tax charge Deferred tax Year ended 31 October 2016 Year ended 31 October 2015 £ 1,060 £ 3,457 Year ended 31 October 2016 Year ended 31 October 2015 £ £ (38,812) - 5,960 (32,852) (5,801) 97,832 - 92,031 The standard rate of tax for the year, based on the UK standard rate of corporation tax is 20% (2015: 20%). The actual tax charge for the periods is different than the standard rate for the reasons set out in the following reconciliation: Reconciliation of current tax charge Year ended 31 October 2016 Year ended 31 October 2015 £ £ Profit on ordinary activities before tax 30,019 448,769 Tax on profit on ordinary activities at 20% (2015: 20%) Effects of: Non-deductible expenses Adjustments to tax charge in respect of previous periods Fixed asset timing differences Depreciation in excess of capital allowances Share scheme deduction Research and development Total tax (credit) / charge 6,004 8,942 (38,812) 34,499 (285) - (43,200) (32,852) 89,754 8,954 (5,801) - 3,174 (4,050) - 92,031 At the reporting date the tax rates substantially enacted are 20% from 1 April 2016, 19% from 1 April 2017 and 17% from 1 April 2020. Deferred tax has been measured using the average rate expected to apply in the period in which the timing differences will reverse using these substantively enacted rates. 30 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 5. Employee information Directors' emoluments - excluding applicable share option charge Fees paid to directors Share option charge Wages and salaries Social security costs Year ended 31 October 2016 Year ended 31 October 2015 £ £ 193,986 63,120 30,943 310,392 43,009 178,519 80,325 22,282 330,882 49,202 641,450 661,210 Included within fees paid to Directors is £30,620 (2015: £40,325) in respect of legal services provided by Mr R Poplawski in his role as Business Affairs Adviser to One Media iP Limited. Included within wages and salaries is £4,380 paid to Mr C Miles, Mr P Miles son, in respect of IT consultancy. The average monthly number of Group employees (excluding non-executive directors) during the year was as follows: Year ended 31 October 2016 Year ended 31 October 2015 Office and management 11 12 6. Parent Company Profit and Loss Account The profit for the year to 31 October 2016 dealt within in the financial statements of the parent Company was £238,344 (2015: £280,657). As permitted by section 408 of the Companies Act 2006, no separate profit and loss account is prepared for the parent Company. 7. Earnings per share The weighted average number of shares in issue for the basic earnings per share calculations is 71,053,698 (2015: 70,817,534) and for the diluted earnings per share assuming the exercise of all warrants and share options is 77,035,890 (2015: 75,595,068). The calculation of basic earnings per share is based on the profit for the period of £62,871 (2015: £356,738). Based on the weighted average number of shares in issue during the year of 71,053,698 (2015: 70,817,534) the basic earnings per share is 0.09p (2015: 0.50p). The diluted earnings per share is based on 77,035,890 shares (2015: 75,595,068) and is 0.08p (2015: 0.47p). 31 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 8. Intangible assets - Group Cost At 1 November 2014 Additions Disposals At 31 October 2015 Additions Disposals At 31 October 2016 Amortisation At 1 November 2014 Charge for the year Disposals At 31 October 2015 Charge for the year Disposals At 31 October 2016 Net book value At 31 October 2016 At 31 October 2015 Licences and other intangible assets £ 3,844,804 325,568 (63,160) Total £ 3,844,804 325,568 (63,160) 4,107,212 4,107,212 280,176 - 280,176 - 4,387,388 4,387,388 630,060 216,989 (63,160) 783,889 209,365 - 993,254 630,060 216,989 (63,160) 783,889 209,365 - 993,254 3,394,134 3,394,134 3,323,323 3,323,323 All amortisation is included in Cost of sales in the Consolidated Statement of Comprehensive Income. 32 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 9. Property, plant and equipment - Group Office equipment Fixtures and fittings £ £ Cost At 1 November 2014 Additions Disposals At 31 October 2015 Additions Disposals At 31 October 2016 Depreciation At 1 November 2014 Charge for the year Disposals At 31 October 2015 Charge for the year Disposals At 31 October 2016 Net book value At 31 October 2016 At 31 October 2015 42,977 5,208 (2,900) 45,285 2,437 - 47,722 35,186 6,103 (2,900) 38,389 3,471 - 41,860 5,862 6,896 Total £ 53,620 5,208 (2,900) 55,928 2,437 - 10,643 - - 10,643 - - 10,643 58,365 7,122 2,400 - 9,522 531 - 42,308 8,503 (2,900) 47,911 4,002 - 10,053 51,913 590 1,121 6,452 8,017 All depreciation is included in administrative expenses in the Consolidated Statement of Comprehensive Income. 33 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 10. Investment in subsidiary undertakings At 1 November 2015 and 31 October 2016 The Company holds interests in the following subsidiary undertakings. Total £ 493,817 Company Country of incorporation Nature of business Class of shares Share held % Status One Media iP Limited Company number 05536271 England and Wales Collecting Records LLP Company number OC307927 England and Wales One Media Intellectual Property Limited Company number 08224199 England and Wales One Media Publishing Limited Company Number 082123128 England and Wales Audio-visual content Audio-visual content Audio-visual content Audio-visual content Ordinary 100% Operating Partnership 99% Dormant Ordinary 100% Dormant Ordinary 100% Dormant The Company's investment at the balance sheet date is 100% of the share capital of the unlisted companies One Media iP Limited, One Media Intellectual Property Limited and One Media Publishing Limited. One Media iP Group Plc owns 99% of the Limited Liability Partnership Collecting Records LLP with the other 1% of the Limited Liability Partnership Collecting Records LLP held by One Media iP Limited. All the above activities are included in the consolidated financial statements. 11. Receivables Year ended 31 October 2016 Group Year ended 31 October 2015 Group Year ended 31 October 2016 Company Year ended 31 October 2015 Company £ £ £ £ - 120,425 315,919 27,230 - 93,780 320,881 25,591 2,706,637 - 3,677 14,032 2,432,496 - 3,754 11,353 463,574 440,252 2,724,346 2,447,603 Amounts owed by group undertakings Trade receivables Other receivables Prepayments Trade and other receivables are usually due within 30 to 90 days and do not bear any effective interest. A provision of £12,823 was made for doubtful debts at 31 October 2016. (2015: £nil). The movement in the provision for impairment during the year is as follows: 34 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 11. Receivables - continued At 1 November 2014 Decrease in the provision for impairment At 31 October 2015 Provision for impairment At 31 October 2016 12. Cash and cash equivalents Total £ 10,080 (10,080) - 12,823 12,823 An analysis of cash and cash equivalent balances by currency is shown below: Year ended 31 October 2016 Group Year ended 31 October 2015 Group Year ended 31 October 2016 Company Year ended 31 October 2015 Company £ £ £ £ 198,749 121,710 15,205 531,746 277,474 7,029 31,483 - - 110,771 - - 335,664 816,249 31,483 110,771 Year ended 31 October 2016 Group Year ended 31 October 2015 Group Year ended 31 October 2016 Company Year ended 31 October 2015 Company £ £ £ £ 78,035 19,368 - 409,004 250,581 47,150 21,928 96,712 735,598 242,495 756,988 1,143,883 19,835 - - 6,000 - 25,835 15,325 - - 6,000 - 21,325 GB£ US$ Euro 13. Trade and other payables Current Trade payables Social security and other taxes Corporation tax Accruals & deferred Income Other payables The fair value of trade and other payables has not been disclosed as, due to their short duration, management considers the carrying amounts recognised in the balance sheet to be a reasonable approximation of their fair value. 35 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 14. Deferred tax (asset) / liability Opening balance Fixed asset timing differences Losses carried forward Total deferred tax liability Year ended 31 October 2016 Year ended 31 October 2015 £ - 34,499 (28,539) 5,960 £ - - - - The Group has estimated trading losses of £142,694 (2015: £nil) available for carry forward against future trading profits. 15. Share capital Group and Company Authorised: 2016 £ 2015 £ 200,000,000 ordinary shares of 0.5p each 1,000,000 1,000,000 Issued: 71,053,698 (2015: 71,053,698) ordinary shares of 0.5p each 355,268 355,268 The movement in the issued share capital over the last two years has been as follows: For the year ending 31 October 2015: • On 12 May 2015 one employee exercised options on 100,000 ordinary shares of 0.5p each at 2.75p per share. The difference between the total consideration received of £2,750 and the nominal value of the shares issued of £500 has been transferred to the share premium account. • On 27 July 2015 an employee exercised their right to convert 250,000 1.5p warrants in ordinary shares of 0.5p each. The difference between the amount raised of £3,750 and the nominal value of the shares issued of £1,250 has been transferred to the share premium account. 36 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 15. Share capital - continued The movement in warrants has been as follows: Date of grant Number of warrants Par Value Exercise price Period of subscription 31 October 2014 Exercised in year 27 July 2015 Warrants outstanding at 31 October 2015 Movement in year Warrants outstanding at 31 October 2016 250,000 0.5p (250,000) 0.5p 1.5p 1.5p 3 years 3 years - - - No Directors held warrants at 31 October 2016 (2015: nil). The outstanding warrants held at 31 October 2014 were held by one senior member of staff. The fair value of the outstanding warrants at 31 October 2014, based on the Black-Scholes model was 1.5p per share based on a risk free interest rate of 1% and a volatility of 30%. A share based payment charge of £nil was made for the year ended 31 October 2016 (2015: £237). All amounts due from the Executive Directors and employee in respect of PAYE & NI resulting from the exercise of the warrants on 27 July 2015 has been paid to the Group. At 31 October 2016 2,300,000 (2015: 2,300,000) share options of 2.75p, granted on 7 March 2011, were outstanding. The number of Directors holding share options at 31 October 2016 was 3 (2014: 4) and senior staff and employees 2 (2015: 2). The options are exercisable on or before 6 March 2018. On 5 June 2014 a further 700,000 share options of 14.5p were issued to 1 director and 6 members of staff and remain outstanding at 31 October 2016 (2015: 700,000). These options are exercisable on or before 4 June 2021. On 21 April 2015 a further 2,900,000 share options of 9p were issued to 4 directors and 4 members of staff and remain outstanding at 31 October 2016. These options are exercisable on or before 20 April 2022. On 2 September 2016 a further 500,000 share options of 5p were issued to 1 member of staff and remain outstanding at 31 October 2016. These options are exercisable on or before 1 September 2023. All share options issues were made to underpin key Directors and senior staff service conditions. The share based payment charge in relation to these share options is spread over the period of subscription. The share price of the options granted on 7 March 2011 was 2.75p per share. The Fair Value of these options, based on the Black Scholes model, was 4.15p per share based on a risk free interest rate of 5% and a volatility of 40%. A share option charge of £4,591 has been made for the year ended 31 October 2016 (2015: £4,691). The share price of the options granted on 5 June 2014 was 14.5p per share. The Fair Value of these options, based on the Black Scholes model, was 21.87p per share based on a risk free interest rate of 5% and a volatility of 40%. A share option charge of £7,368 has been made for the year ended 31 October 2016 (2015: £7,368). 37 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 15 Share capital - continued The share price of the options granted on 21 April 2015 was 9p per share. The Fair Value of these options, based on the Black Scholes model, was 13.57p per share based on a risk free interest rate of 5% and a volatility of 40%. A share option charge of £18,984 has been made for the year ended 31 October 2016 (2015: £9,986). The share price of the options granted on 2 September 2016 was 5p per share. The Fair Value of these options, based on the Black Scholes model, was 7.54p per share based on a risk free interest rate of 5% and a volatility of 40%. A share option charge of £nil has been made for the year ended 31 October 2016. 16. Company reserves Share redemption reserve Share premium £ £ Share based payment reserve £ Retained earnings Total £ £ At 1 November 2014 239,546 1,452,895 21,215 754,900 2,468,556 Proceeds from the issue of new shares Share based payment charge Release from share based payment reserve Profit for the year Dividends - - - - - 4,750 - - - - - 22,282 - - - - - - 4,750 22,282 - 280,657 280,657 (100,647) (100,647) At 1 November 2015 239,546 1,457,645 43,497 934,910 2,675,598 Proceeds from the issue of new shares Share based payment charge Profit/(loss) for the year Dividends - - - - - - - - - 30,943 - - - - - 30,943 262,898 262,898 (100,896) (100,896) At 31 October 2016 239,546 1,457,645 74,440 1,096,912 2,868,543 The Consolidated Statement of Changes in Equity is shown on page 18. 17. Dividends per share The total dividend paid in the year ended 31 October 2016 was £100,896 (2015: £100,647). The dividend was paid in two installments. On 20 November 2015 at 0.071p per share and on 22 July 2016 a further dividend of 0.071p per share was paid. 38 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 18. Contingent liabilities Due to the nature of the business, from time to time, claims will be made against the Group. During the period, One Media iP Group Plc filed an appeal with the 6th Circuit Court Appeals via its Attorneys in the USA against the ruling vacating the Middle District of Tennessee’s judgement against the Hadaway defendants. The Group was informed on 15 March 2017 that the Hadaway defendant’s (HHO Licensing Ltd, Henry Hadaway Organisation Ltd and Henry Hadaway personally) would be seeking remedy for repayment against the Group in the UK regarding the monies seized by the United States Marshals pursuant to an order of the Southern District of New York as part of the original (now vacated) Tennessee District Court judgment. The Group has taken the view, having instigated an appeal against the latest ruling, that it would return the monies received to date from the original Nashville judgement and in accordance with the Nashville court’s ruling on a reversal of its original decision of jurisdiction over the defendants HHO Licensing Ltd, Henry Hadaway Organisation Ltd and Henry Hadaway. The repayment of these monies is fully reflected in these current accounts. At this time, the directors do not expect any material liability to arise, however it is not possible to predict the potential financial impact on the Group of any future adverse decisions. The Group will consider its position further and issue a statement once the appeal process has concluded. 19. Capital commitments There were no capital commitments at 31 October 2016 or at 31 October 2015. 20. Operating lease commitments Within one year £ 1 to 5 years £ 2016 Total £ Within one year £ 1 to 5 years £ 2015 Total £ Rent Vehicles 53,263 13,356 41,111 2,071 94,374 15,427 51,252 12,057 102,503 6,982 153,755 19,039 66,619 43,182 109,801 63,309 109,485 172,794 The lease for rent is due to expire on 31 July 2018 and for the vehicles leases during 2017 and 2018. The Company has no operating lease commitments. 39 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 21. Financial instruments The Group uses financial instruments comprising cash and cash equivalents, other loans and various other short-term instruments such as trade receivables and trade payables which arise from its operations. The main purpose of these financial instruments is to fund the Group's business strategy and the short-term working capital requirements of the business. Financial assets by category Categories of financial asset included in the Consolidated Statement of Financial Position are as follows: Loans and receivables £ Non financial assets £ 2016 Total Loans and receivables £ £ Non financial assets £ 2015 Total £ Licenses and other intangible assets Property, plant and equipment Trade receivables Other receivables Prepayments Cash and cash equivalents - 3,394,134 3,394,134 - 3,323,323 3,323,323 - 120,425 315,919 27,230 335,664 6,452 - - - 6,452 120,425 315,919 27,230 - 93,780 320,881 25,591 8,017 - - - 8,017 93,780 320,881 25,591 - 335,664 816,249 - 816,249 799,238 3,400,586 4,199,824 1,256,501 3,331,340 4,587,841 Included within loan and receivables above are cash and cash equivalents of £31,483 (2015: £110,771), and trade and other receivables of £17,710 (2015: £15,107) excluding amounts owed by group undertakings in relation to the company. Trade Debtors at 31 October 2016 of £131,492 (2015: £93,780) include £76,055 (2015:£61,682) payable in $USD and £2,534 (2015: £2,147) payable in Euro. Financial liabilities by category Categories of financial liabilities included in the Consolidated Statement of Financial Position are as follows: Other financial liabilities at amortised cost £ 78,035 19,368 - 5,960 Liabilities within the scope of IAS 39 £ - - - - 2016 Total £ Other financial liabilities at amortised cost £ 78,035 47,150 19,368 - 5,960 21,928 96,712 - Liabilities within the scope of IAS 39 £ - - - - 2015 Total £ 47,150 21,928 96,712 - - 250,581 409,004 - 409,004 250,581 - 242,495 735,598 - 735,598 242,495 353,944 409,004 762,948 408,285 735,598 1,143,883 Trade payables Social security and other taxes Corporation tax Deferred tax Accruals and deferred income Other payables 40 Notes to the Consolidated Financial Statements For the year ended 31 October 2016 21. Financial instruments - continued Included within other financial liabilities are trade payables of £19,834 (2015: £15,325) and other payables of £6,000 (2015: £6,000) in relation to the company. The Group is exposed to a variety of financial risks which result from its operating activities. The Board is responsible for co-ordinating the Group's risk management and focuses on actively securing the Group's short to medium term cash flows. Long term investments are managed to generate lasting returns. The Group does not actively engage in the trading of financial assets and has no financial derivatives. The most significant risks to which the Group is exposed are described below: Credit risk The Group's credit risk is primarily attributable to its trade receivables, other receivables and cash and cash equivalents. The amounts presented in the Consolidated Statement of Financial Position are net of any allowances for doubtful receivables. The Group has a significant concentration of credit risk associated with its distributor of digital content, The Orchard. Cash at bank is all held with highly rated banks or deposit takers, the suitability of which is constantly reviewed. The maximum credit to which the Group is exposed, including Cash at bank of £335,664 is £799,238 (2015: £1,256,501). Liquidity risk The Group seeks to manage risks to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash and assets safely and profitably. Short term flexibility is achieved by the use of money markets to deposit excess cash which is not required in the short term. The directors prepare cash flow forecasts on a regular basis to identify at an early stage any short term funding difficulties. All the financial liabilities noted above, with the exception of the liability to deferred tax of £5,960 (2015: £nil), are expected to result in cash outflow within six months of the year end. At 31 October 2016, £347,984 (2015: £311,573) of the financial liabilities were expected to result in cash outflow within six months of the year end. Currency risk The Group is exposed to foreign exchange risk in connection with its digital downloading and streaming business where the revenue is largely transacted in US$ and the settlement of royalty and other liabilities arising from this revenue is largely denominated in US$. Included in Cash and cash equivalents, Trade receivables and Other receivables is USD$553,720 (2015: USD$920,776) equivalent to £453,869 (2015: £597,707) and Euro 20,755 (2015: Euro 12,847) equivalent to £17,740 (2015: £9,176) payable in Euro. If the foreign exchange rate was 10% different from the rate used at the year end there would be an under/over statement of assets of £52,401 (2015: £67,454). Included in Accruals & deferred income and Other payables is USD$452,628 (2015: USD$1,045,921) equivalent to £371,007 (2015: £719,169) payable in USD$. If the foreign exchange rate was 10% different from the rate used at the year end there would be an under/overstatement of liabilities of £41,223 (2015: £79,708). 22. Related party transactions There were no related party transactions in the year under review or in the year ended 31 October 2016 nor 31 October 2015, other than transactions with the directors as disclosed in the Directors' Report and note 5 to the financial statements. At 31 October 2016 the principal operating subsidiary One Media iP Limited owed the Company £2,706,637 (2015: £2,432,496). No formal inter-company loan agreement is in existence between the Company and its subsidiaries. During the year the Company made a management charge of £222,851 (2015: £300,000) against One Media iP Limited and received a dividend of £300,000 (2015: £300,000). 41 

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