The Mosaic Company
Annual Report 2014

Plain-text annual report

MOBILE STREAMS PLC FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Company registration number: 03696108 MOBILE STREAMS PLC Financial Statements for the 12 months ended 30 June 2014 Company registration number: 03696108 Registered office: Directors: Abacus House 33 Gutter Lane London, EC2V 8AR E Benasso S D Buckingham M Carleton T Maunder R G Parry P Tomlinson Chairman: R G Parry Secretary: Pennsec Limited Bankers: Auditor: National Westminster Bank plc PO Box 13 30 Market Place Newbury RG14 1AS Grant Thornton UK LLP Chartered Accountants and Statutory Auditor Grant Thornton House Melton Street Euston Square London NW1 2EP Nominated Adviser & Broker N Plus 1 Singer Advisory LLP One Bartholomew Lane London EC2N 2AX Corporate web site: www.mobilestreams.com MOBILE STREAMS PLC Financial Statements for the 18 month ended 30 June 2014 Contents PAGE Chairman‟s statement Strategic Report Directors‟ report Report of independent auditor Accounting policies Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated cash flow statement Notes to the consolidated financial statements Report of independent auditor Company accounting policies Company balance sheet Notes to the Company financial statements 2 3 9 13 15 23 24 25 26 27 28 48 50 52 53 Page 1 MOBILE STREAMS PLC Financial Statements for the 18 month ended 30 June 2014 Chairman’s Statement: The Board of Mobile Streams plc presents its audited accounts for the financial year ended 30 June 2014. The past 12 months has seen Mobile Streams plc (the "Group" or the "Company") continue with its strategy to develop a content offering across a wide range of mobile devices in a number of markets direct to consumers. This is in addition to our original business of providing content to mobile network operators and other business partners. The operating performance of the business reflects our substantial positioning in Argentina and Latin America. It also reflects the cost of working with Argentinean exchange control rules and the sudden and significant devaluation of the Argentinean peso in January 2014. Group revenue for the year ended 30 June 2014 was £48.6m (2013: £53.9m). Trading EBITDA* was £0.7m for year (2013: £5.2m). Profit before tax was £0.2m (2013 £4.8m). Much of the reduction in revenues and profits are attributable to the devaluation of the Argentinean peso. Revenue in Argentina (which equates to 83% of our revenue) on a constant currency basis increased by 16% from AR$380m to AR$440m. Our operations outside Europe represent more than 99% of the overall revenues for the period. Latin America represents 98% (see note 22) of the total revenues for the year. Of this some 83% was in Argentina. During 2012, Argentina modified its regulations regarding international transfer of funds which restricted the Group‟s ability to transfer cash out of the country. As of 30 June 2013, more than 73% of the Group's cash was in Argentina. Following a strategic decision to mitigate capital risk and diversify our sources of cash generation (principally to states with more appropriate capital controls such as Mexico and Colombia), Mobile Streams has reduced the proportion of its capital reserves within Argentina to 16% as of 30 June 2014. Mobile Streams enters the new financial year with a clear focus on continuing to expand its operating base in Latin America and in open mobile Internet services including Appitalism for apps and games in new developing markets including in Africa. The Directors do not propose a payment of a dividend (2013: £Nil). In the new financial year, revenue is once again expected to be largely generated in Latin America. Despite the challenges in Argentina, the Board believes that the Company is well positioned to deliver growth in shareholder returns with established products and strong trading relationships, complemented by broader market growth in developing markets, which represent our key targets for future growth. We are long established experts in mobile content. Roger Parry Chairman *Calculated as profit before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets. Page 2 MOBILE STREAMS PLC Financial Statements for the 18 month ended 30 June 2014 STRATEGIC REPORT Mobile Streams PLC (AIM: MOS), the global mobile media company, is pleased to provide an update to its shareholders on its performance for the 12 months ended 30 June 2014. BUSINESS REVIEW Operating Review Mobile Streams‟ performance during the financial year ended 30 June 2014 was driven primarily from Mobile Internet sales in Latin America. Group revenue for the year ended 30 June 2014 was £48.6m. The gross profit was £14.2m and decreased by 19% during the year (year ended 30 June 2013: £17.6m). The gross profit margin decreased from 33% to 29% due to increased marketing (Direct to Consumer) costs related to Mobile Internet. Selling, marketing and administrative expenses were £14.2m, an 11% increase on the year ended 30 June 2013. Revenues are generated from two principal business activities: the sale of mobile content through mobile operators (Mobile Operator Sales) and the sale of mobile content over the internet (Mobile Internet Sales). Additionally, the Group is engaged in the provision of consulting and technical services (Other Service Fees). During the period, both the Group's Mobile Internet revenues and its Mobile Operator revenues decreased. As consumers steadily update their phones from legacy feature and flip phone models to smartphones, they have generally used the operator content portals less. Consumers generally use independent portals, as well as the open mobile internet, more actively. The Argentine peso suffered a big devaluation against the British Pound during the year (23% during January 2014 and 67.6% for the 12 months ended on June 30 2014). The financial results and balances of all group entities that have a functional currency different from the presentation currency, are translated into the presentation currency, and these exchange differences are recognised in the income statement or as a separate component of equity (cumulative translation reserve), which will be converted to results in the future. Mobile Internet Sales The Group anticipated the shift to the open Mobile Internet business model several years ago and added new products at new price points in new markets. As a result, the Group experienced rapid growth and a stabilization in 2013-2014 in Mobile Internet sales as consumers used their mobile devices to purchase mobile content subscriptions. The decrease in revenue is due to the big devaluation effect of the Argentine peso compared to the British pound. Latin America, primarily Argentina, accounted for the majority of revenues. Mobile Streams continued to show solid revenues for the most recent financial year, driven primarily by Argentina, Mexico and Colombia. Whilst Latin America has remained stable, we are pleased that we have also successfully leveraged our Appitalism (http://www.appitalism.com) expertise and market positioning and won new apps business in Asia Pacific, with the announcement of Optus App Store deal. Page 3 MOBILE STREAMS PLC Financial Statements for the 18 month ended 30 June 2014 STRATEGIC REPORT Mobile Operator Sales The Group has several contracts with mobile operators that allow the distribution of content through their mobile portals, although the revenue has been reduced by more than 50% year on year partially due to the devaluation of the Argentinian peso in January 2014. There was a reduction in the number of consumer visitors to these portals, which has been a continuing trend for the past couple of years. Our teams share and implement the best retailing practices in order to increase the conversion of visitors into customers to mitigate the natural decline in this revenue stream as the market changes. Mobile Streams maintains direct operator relationships in several markets around the world including Australia, Singapore, Argentina, Mexico and Colombia, as well as partnerships with well-known telecoms companies around the world. Financial Review Group revenue for the year ended 30 June 2014 was £48.6m, a 9.8% decrease on the previous year (2013: £53.9m). Gross profit was £14.2m, a decrease of 19% during the year (2013: £17.6m). The gross profit margin decreased from 33% to 29% due to increased marketing (Direct to Consumer) costs related to Mobile Internet. Selling, marketing and administrative expenses were £14.2m, an 11% increase on the year ended 30 June 2013 (2013: £12.8m). The Group recorded a loss after tax of £0.6m for the year ended 30 June 2014 (2013: profit £2.6m). Basic earnings per share decreased to a loss of 1.52 pence per share (2013: profit of 7.1 pence per share). Adjusted earnings per share (excluding interest, depreciation, amortisation, impairments and share compensation expense) decreased to 0.499 pence per share .(2013: 8.1 pence per share). The Group had cash of £3.0m at 30 June 2014, with no debt (£2.9m of cash with no debt as at 30 June 2013). Financial performance * Calculated as profit before tax, interest, amortization, depreciation, share compensation expense and impairment of assets. Page 4 Year to 30 June 2014Year to 30 June 2013Year to 30 June 2012£000's£000's£000'sRevenue 48,573 53,936 22,047 Gross profit 14,229 17,586 8,835 Selling and Marketing Costs (7,872) (7,843) (3,668) Administrative Expenses (5,617) (4,565) (3,153) Trading EBITDA* 740 5,178 2,014 Depreciation and Amortisation (36) (25) (209) Impairments (380) (334) (169) Share Based Compensation (328) (18) - Operating profit (4) 4,801 1,636 Finance Income 170 - 2 Finance Expense (13) (13) (2) Profit before tax 153 4,788 1,636 MOBILE STREAMS PLC Financial Statements for the 18 month ended 30 June 2014 STRATEGIC REPORT Key performance indicators (“KPI’s”) The KPIs used by the Group are trading EBITDA*, growth in revenue and gross profit. Management review these on a regular basis, largely by reference to budgets and reforecasts. Trading EBITDA was £0.7m for the year ended on June 2014, and it was £5.2m for the year ended in June 2013. Earnings before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets (Trading EBITDA*) is a non-GAAP metric that is measured exactly as stated. All tax, interest, amortisation, depreciation, share compensation expense and impairment of assets entries in the income statement are added back to profit after tax in calculating this measure. Growth in revenue is a measure of how we are building our business. Our goal is to achieve year-on-year growth. Although revenue decreased 10% during the year, like for like revenue on a constant currency basis actually increased by 16%. Revenues measured in local currency terms have increased, while measured in British pounds have decreased, due to the local currencies devaluation to the British pound. Gross profit as a percentage of revenue is a measure of our profitability. Gross profit was £14.2m for the period ended in June 2014, a decrease from the £17.6m booked in 2013. Strategy Our business model is generating revenues though relationships with mobile operators and content aggregators and retailing directly to the consumer. Mobile Streams have developed expertise in selling content to consumers in developing markets. We enjoyed great success in gaining market share in Argentina but out results have suffered from the currency issues described. We now plan to seek new market opportunities in Latin America and in Africa which will enable us to use our existing content assets, or technical expertise and our relationships with mobile operators to develop new, profitable streams of revenues. Principal risks and uncertainties The nature of the Group's business and strategy makes it subject to a number of risks. The Directors have set out below the principal risks facing the business. Contracts with Mobile Network Operators (MNOs) While Mobile Streams maintains relationships with numerous MNOs in the various territories, a small number of operators account for a high portion of the Group‟s business. As the Group grows, management are using geographic and product diversity to counter this risk. Contracts with rights holders The majority of content provided by Mobile Streams is licensed from rights holders. While Mobile Streams is not dependent on any single rights holder for its entertainment content, termination, non-renewal or significant renegotiation of a contract could result in lower revenue. The Group continues to enter into new content licensing arrangements to mitigate these risks. Competition Competition from alternative providers could adversely affect operating results through either price pressures, or lost custom. Products and pricing of competitors are continuously monitored to ensure the Group is able to react quickly to changes in the market. * Calculated as profit before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets. Page 5 MOBILE STREAMS PLC Financial Statements for the 18 month ended 30 June 2014 STRATEGIC REPORT Fluctuations in currency exchange rates Approximately 99% of the Group‟s revenue relates to operations outside the UK. The Group is therefore exposed to foreign currency fluctuations and the financial condition of the Group may be adversely impacted by foreign currency fluctuations. See note on page 6 - 8 “Financial risk management objectives and policies”. The Group has operations in Europe, Asia Pacific, North America and Latin America. As a result, it faces both translation and transaction currency risks. Currency exposure is not currently hedged, though the Board is taking steps to review its foreign currency risk exposure and potential means of combating this risk. Dependencies on key executives and personnel The success of the business is substantially dependent on the Executive Directors and senior management team. The Group has incentivised all key and senior personnel with share options and has taken out a Key Man insurance policy on its Chief Executive Officer, Simon Buckingham. Intellectual property rights The protracted and costly nature of litigation, particularly in North America, may make it difficult to take a swift or decisive action to prevent infringement of the Group‟s intellectual property rights. Although the Directors believe that the Group‟s content and technology platform and other intellectual property rights do not infringe the IP rights of others, third-parties may assert claims of infringement which could be expensive to defend or settle. The Group holds suitable insurance to reduce the risk and extent of financial loss. Technology risk A significant portion of the future revenues are dependent on the Group‟s technology platforms. Instability or interruption of availability for an extended period could have an adverse impact on the Group‟s financial position. Mobile Streams has invested in resilient hardware architecture and continues to maintain software control processes to minimise this risk. Management controls and reporting procedures and execution The ability of the Group to implement its strategy in a competitive market requires effective planning and management control systems. The Group‟s future growth will depend upon its ability to expand whilst improving exposure to operational, financial and management risk. Page 6 MOBILE STREAMS PLC Financial Statements for the 18 month ended 30 June 2014 STRATEGIC REPORT Going concern risk The current uncertain economic climate and changing market place may impact the Group‟s cash flows and thereby its ability to pay its creditors as they fall due. A principal responsibility of management is to manage liquidity risk, as detailed in Note 26 to the financial statements. The Group uses annual budgeting, forecasting and regular performance reviews to assess the longer term profitability of the Group and make strategic and commercial changes as required ensuring cash resources are maintained. Argentina's Government imposed currency controls at the beginning of 2012 which continue to inhibit the repatriation of funds to the parent company. Management made the appropriate actions to mitigate this risk and has moved its finance operations to Argentina to help ensure stability and continuity. Financial risk management objectives and policies The Group uses various financial instruments. These include cash and various items, such as trade receivables and trade payables that arise directly from its operations. The numerical disclosures relating to these policies are set out in notes to the financial statements. The existence of these financial instruments exposes the Group to a number of financial risks, which are described in more detail below. The Group does not currently use derivative products to manage foreign currency or interest rate risks. The main risks arising from the Group's financial instruments are market risk, currency risk, liquidity risk and credit risk. The Directors review and agree policies for managing each of these risks and they are summarised below. These policies have remained unchanged from previous periods. Market risk Market risk encompasses three types of risk, being currency risk, fair value interest rate risk and price risk. In this review interest rate and price risk have been ignored as they are not considered material risks to the business. The Group's policies for currency risk are set out below. Liquidity risk The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The aforementioned capital flow restrictions imposed by the Argentinian government severely restrict the Argentina subsidiary from transferring funds to the Group´s parent company for the payment of dividends or for services rendered. This risk is being mitigated by the launch of similar businesses to Argentina in Colombia and Mexico where the cross border transfer of funds is not restricted. Vendor related payments can be made from Argentina on behalf of other subsidiaries. The Group currently has no borrowing arrangements in place and prepares cash flow forecasts which are reviewed at Board meetings to monitor liquidity. Credit risk The Group's principal financial assets are bank deposits, cash and trade receivables. The credit risk associated with the bank deposits and cash is limited as the counterparties have high credit ratings assigned by international credit-rating agencies. The principal credit risk arises therefore from the Group's trade receivables. Most of the Group‟s trade receivables are large mobile network operators or media groups. Whilst historically credit risk has been low management continuously monitors its financial assets and performs credit checks on prospective partners. Page 7 MOBILE STREAMS PLC Financial Statements for the 18 month ended 30 June 2014 Argentina Division 12 months to 30 June 2014 2013 AR$'000 AR$'000 2014 £'000 2013 £'000 Revenue 440,435 379,511 40,500 49,077 The Argentina Division delivered a solid revenue performance in line with expectations. The division represented 83% of the revenues of the Group. Argentina revenue rose 16% in Argentine Pesos terms; from AR$379 Million to AR$440 Million; but the reported British Pound figures show a 17% decrease in revenue; from £49M to £40.5M. The actual increase in underlying AR$ revenues reflects the revenue growth measured in local currency. The decrease in British pounds is due to the big devaluation of the argentine peso through the Sterling Pound (67% in a year). Future Developments The Company is continuing to further develop its mobile content and mobile Internet services in the markets that it has launched in such as Brazil and Mexico. The Company is also exploring the launch of its services in new emerging markets, focusing in particular on Asia, Africa and India. The Strategic Report, encompassing pages 2 to 7, was approved by the Board and signed on its behalf by: Enrique Benasso Chief Financial Officer 8 October 2014 Page 8 Financial Statements for the year ended 30 June 2014 DIRECTORS‟ REPORT The principal activity of the Group is the sale of content for distribution on mobile devices. The Company is registered in England and Wales under company number 03696108. Results and dividends The trading results and the Group's financial position for the year ended 30 June 2014 are shown in the attached financial statements, and are discussed further in the Strategic Report. The Directors have not proposed a dividend for this year (2013: £nil). Directors and their interests The present membership of the Directors of the Company (the “Board” or the “Directors”), together with their beneficial interests in the ordinary shares of the Group, is set out below. Except where indicated, all Directors served on the Board throughout the year. Shares held or controlled by Directors S D Buckingham M Carleton P Tomlinson R G Parry T Maunder E Benasso Ordinary shares of £0.002 each 30 June 2014 Ordinary shares of £0.002 each 30 June 2013 10,382,500 - 40,000 181,183 5,000 - 17,012,500 - 40,000 181,183 5,000 - Page 9 Financial Statements for the year ended 30 June 2014 DIRECTORS‟ REPORT Options The table below summarises the exercise terms of the various options over ordinary shares of £0.002 (year ended 30 June 2013: £0.002) which have been granted and were still outstanding at 30 June 2014. The remuneration of each of the Directors for the period ended 30 June 2014 is set out below: Fees £'000 Benefits £'000 - - 14 20 - - 34 5 - - - - - 5 Year to 30 June 2014 Total £'000 Year to 30 June 2013 Total £'000 188 302 20 30 20 44 5 17 28 17 13 - 307 377 Salary £'000 183 20 16 - 44 5 268 S D Buckingham T Maunder R G Parry P Tomlinson G Cerf E Benasso Total Benefits comprise medical health insurance. Post balance sheet events There have been no significant post balance sheet events. Page 10 Options Held at Options Held at Latest expiry 1 July 201330 June 2014dateNumberNumberNumberNumber£R G Parry689,655 --689,655 0.870 15-feb-0714-feb-16R G Parry250,000 --250,000 0.343 23-mar-1222-mar-21E Benasso-250,000 - 250,000 0.198 13-jun-1512-jun-24Options Granted During the periodOptions exercised During the periodExercise priceEarliest date from which exercisable Financial Statements for the year ended 30 June 2014 DIRECTORS‟ REPORT Going Concern The Group had cash balances of £3.0m at the year end (2013:£2.9m) and no borrowings. Having reviewed cash flow forecasts and budgets for the year ahead the Directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future. During the year ended 30 June 2012, Argentina modified its laws on the cross border intercompany transfer of funds. Management have made the proper changes to mitigate this risk and have moved the finance operations to Argentina to help ensure stability and continuity. The risk is also mitigated by the launch of similar businesses in markets such as Colombia and Mexico where the cross border transfer of funds is not restricted. For these reasons, the Board consider Mobile Streams to be a going concern. No material uncertainties or events that may cast significant doubt about the ability of the Group to continue as a going concern have been identified by the Directors. Directors’ Responsibilities Statement The Directors are responsible for preparing the Strategic Report, the Directors‟ Report 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 prepared the group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs) and have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK GAAP). Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to:  select suitable accounting policies and then apply them consistently;  make judgements and accounting estimates that are reasonable and prudent;  state whether applicable International Financial Reporting Standards / UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.  The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group‟s transactions and disclose with reasonable accuracy at any time the financial position of 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 Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors confirm that:   in so far as each Director is aware, there is no relevant audit information of which the Company‟s auditor is unaware; and each Director has taken all steps that he ought to have taken to make himself aware of any relevant audit information and to establish that the auditor is aware of that information. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company‟s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Auditors Grant Thornton UK LLP has indicated their willingness to continue in office, and a resolution that they be re- appointed will be proposed at the annual general meeting. On behalf of the Board Page 11 Financial Statements for the year ended 30 June 2014 Enrique Benasso Chief Financial Officer 8 October 2014 Page 12 REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF MOBILE STREAMS PLC We have audited the consolidated financial statements of Mobile Streams Plc for the year ended 30 June 2014 which comprise the accounting policies, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 auditor‟s 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 Directors and auditor As explained more fully in the Directors‟ Responsibilities Statement set out on page 10, the Directors are responsible for the preparation of the consolidated financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the consolidated 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 (APB‟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 APB's website at www.frc.org.uk/apb/scope/private.cfm. Opinion on financial statements In our opinion the consolidated financial statements:    give a true and fair view of the state of the group's affairs as at 30 June 2014 and of its loss for the year then ended; have been properly prepared in accordance with IFRSs as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors' Report for the financial period for which the group financial statements are prepared is consistent with the group financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion:   certain disclosures of Directors‟ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Page 13 REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF MOBILE STREAMS PLC Other matter We have reported separately on the parent company financial statements of Mobile Streams Plc for the year ended 30 June 2014. Christopher Smith Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants London 8 October 2014 Page 14 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of preparation The Group financial statements consolidate those of the parent company and all of its subsidiary undertakings drawn up to 30 June 2014. They have been prepared in accordance with applicable International Financial Reporting Standards as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. All references to IFRS in these statements refer to IFRS as adopted by the EU. The historical cost convention has been applied as set out in the accounting policies. Consolidation Subsidiaries are all entities over which the Group has the power to govern the operating and financial policies generally accompanying a shareholding of more than half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control is lost. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated in full. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Subsidiaries' accounting policies have been changed where necessary to ensure consistency with the policies adopted by the Group. The separate financial statements and notes of the Company are presented on pages 48-53, which are prepared in accordance with UK GAAP. Foreign currency translation (a) Presentational currency The consolidated and parent company financial statements are presented in British pounds. The functional currency of the parent entity is also British pounds. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date the transaction occurs. Any exchange gains or losses resulting from these transactions and from the translation of monetary assets and liabilities at the balance sheet date are recognised in the income statement. Foreign currency balances are translated at the year-end using exchange rates prevailing at the year-end. Page 15 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 ACCOUNTING POLICIES (c) Group companies The financial results and position of all group entities that have a functional currency different from the presentation currency of the Group are translated into the presentation currency as follows: i ii iii assets and liabilities for each balance sheet are translated at the closing exchange rate at the date of the balance sheet income and expenses for each income statement are translated at average exchange rates (unless it is not a reasonable approximation to the exchange rate at the date of transaction) all resulting exchange differences are recognised as a separate component of equity (cumulative translation reserve) Property, plant and equipment All property, plant and equipment (PPE) is stated at cost, less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the purchase of the items. Depreciation is calculated to write off the cost of property, plant and equipment less estimated residual value on a straight line basis over its estimated useful life. The following rates and methods have been applied: Plant and equipment Office furniture 33% straight line Between 10% and 33% straight line Each asset's residual value and useful life is reviewed, and adjusted if required, at each balance sheet date. The carrying amount of an asset is written down immediately to its recoverable amount if the carrying amount is greater than its estimated recoverable amount. Gains/losses on disposal of assets are determined by comparing proceeds received to the carrying amount. Any gain/loss is recognised in the income statement. Page 16 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 ACCOUNTING POLICIES Going Concern The Group had cash balances of £3.0m at the year ended (2013: £2.9m) and no borrowings (2013: no borrowings). Having reviewed cash flow forecasts and budgets for the year ahead the Directors have a reasonable expectation that the Group has sufficient resources to continue its operations for the foreseeable future. During the year ended 30 June 2012 Argentina modified its laws on the cross border intercompany transfer of funds. Management have made changes to mitigate this risk including the launch of similar businesses in Colombia and Mexico where cross border transfers of funds are not restricted. For these reasons, the Board consider Mobile Streams to be a going concern. No material uncertainties or events that may cast significant doubt about the ability of the Group to continue as a going concern have been identified by the Directors. Intangible assets (a) Goodwill Goodwill represents the excess of the cost of a business combination over the fair value of net identifiable assets of the acquired entity at the date of acquisition. This goodwill for subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units for impairment testing. (b) Assets acquired through business combinations These consist of customer relationships, technology based assets and non-compete agreements acquired through business combinations. To meet this definition, the intangibles must be identifiable either by being separable, or by arising from contractual or other legal rights. Intangibles acquired through business combinations are recognised at fair value. Where a reliable estimate of useful life of the intangible can be obtained, the intangible asset is to be amortised using the straight line basis, over the useful life. Where there is an indication of impairment of intangibles, the intangible will be tested for impairment. The estimated useful lives of these assets are: Customer relationships Technology based assets Non-compete agreements 3 years 3 years 3.5 years (c) Media content and Media platform development Media content and Media platform development represent intangible assets that have been acquired from third parties and also that are internally generated, including capitalised direct staff costs. Content and platform expenditure is charged against income in the year in which it is incurred unless it meets the recognition criteria of IAS 38 Intangible Assets. To meet the criteria of an intangible asset the Group must demonstrate the following criteria: - - - - - - the technical feasibility of completing the asset so that it will be available for use, its intention to complete the intangible (or sell it), its ability to use or sell the intangible, that the intangible will generate future economic benefit, that adequate resources are available to complete the intangible, and the expenditure can be reliably measured. Intangible assets, if capitalised, are amortised on a straight-line basis over the period of the expected benefit. Amortization commences when the asset is ready for use. Page 17 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 ACCOUNTING POLICIES (d) Appitalism Appitalism development represents intangible assets that have been internally generated, including capitalised direct staff costs. To meet the intangible asset criteria the group must demonstrate the technical feasibility of completing the asset so that it will be available for use, its intention to complete the intangible (or sell it), its ability to use or sell the intangible, that the intangible will generate future economic benefit, adequate resources to complete the intangible and the expenditure can be reliably measured. Intangible assets, if capitalised, are amortised on a straight line basis, and renewed annually for indicators of impairment. (e) Software Software represents assets that have been acquired from third parties. To meet the criteria for recognition the intangible asset must be both identifiable and either separable, or arise from contractual or other legal rights. Intangible assets acquired from third parties are stated at cost less accumulated amortisation and impairment losses. Where a reliable estimate of useful life of the intangible can be obtained, the intangible asset is to be amortised using the straight line basis, over the useful life. Where there is an indication of impairment of intangible assets with a definite life, the intangible will be tested for impairment. The estimated useful life of acquired software is 2 years. Amortisation is included in “Administrative expenses” in the income statement. Impairment of assets Assets that have an indefinite useful life, such as goodwill, are not subject to amortisation, but are instead tested annually for impairment and also tested whenever an event or change in situation indicates that the carrying amount may not be recoverable. Assets that are subject to amortisation are also tested for impairment whenever an event or change in situation indicates that the carrying amount may not be recoverable. An impairment loss is recognised in the income statement as the amount by which the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is determined by the higher of the fair value of an asset less costs to sell and the value in use. In order to assess impairment, assets are grouped at the lowest levels for which separate cash flows can be identified (cash-generating units). Impairment charges are included in the “Administrative expenses” in the income statement. Taxation Current tax is the tax currently payable based on taxable profit for the year. Deferred income tax is provided, using the liability method, on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the consolidated financial statements. 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 that reversal will not occur in the foreseeable future. Deferred income tax is determined using tax rates known by the balance sheet date and that are expected to apply when the deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax liabilities are provided in full, with no discounting of assets or liabilities. Changes in deferred tax assets or liabilities are recognised as a component of the tax expense in the income statements, except where they relate to items that are charged or credited directly to equity or other comprehensive income, in which case the related deferred tax is also charged or credited directly to equity or other comprehensive income. Page 18 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 ACCOUNTING POLICIES Provisions Provisions, including those for legal claims, are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of economic benefits will be required to settle the obligation and the amount can be reliably estimated. Provisions are measured at the present value of management‟s best estimate of the expenditure required to settle the present obligation at the balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. Financial Assets a) Cash and cash equivalents Cash and cash equivalents include cash on hand, demand deposits held with financial institutions and other short- term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. b) Trade and other receivables Trade receivables are included in trade and other receivables in the balance sheet. Trade receivables are recognised initially at fair value and later measured at amortised cost using the effective interest method, less any provision for impairment. An impairment provision for trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the terms of the receivables. The provision is calculated as the difference between the receivable's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Subsequent recoveries of amounts previously written off are credited in the income statement Financial Liabilities Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. All financial liabilities are recorded initially at fair value, net of direct issue costs. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires. The Group's financial liabilities consist of trade and other payables, which are measured subsequent to initial recognition at amortised cost using the effective interest rate method. All interest-related charges are reported in the income statement as finance costs. Revenue recognition As at 30 June 2014, the Group is organised into four geographical segments: Europe, North America, Latin America, and Asia Pacific. Revenues are from external customers only and are generated from three principal business activities: the sale of mobile content through Mobile Operator Services (Mobile Operator Sales), the sale of mobile content over the internet (Mobile Internet Sales) and the provision of consulting and technical services (Other Service Fees). Page 19 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 ACCOUNTING POLICIES Revenue includes the fair value of sale of goods and services, net of value added tax, rebates and discounts and after eliminating intercompany sales within the Group. Revenue is recognised as follows: a) Mobile Operator Sales & Mobile Internet Sales Revenue from the sale of goods is recognised when a Group entity has delivered media content to the end consumer, who has accepted the product and collectability of the related receivable is reasonably assured from the customer. b) Other Service Fees Revenue is recognised in the accounting period in which the services are rendered, by reference to the stage of completion of the specific transaction, on the basis of the actual service provided as a proportion of the total services to be provided. c) Interest Income Interest receivable is recognised in the income statement using the effective interest method. If the collection of interest is considered doubtful, it is deferred and excluded from interest income in the income statement. d) Deferred Income Revenue that has been collected from customers but where the above conditions are not met is recorded in the Statement of Financial Position under accruals and deferred income and released to the income statement when the conditions are met. Share based payments Employees (including Directors) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares („equity-settled transactions‟). The Group has applied the requirements of IFRS 2 (Amended) Share-based Payments to all grants of equity instruments. The cost of equity settled transactions with employees is measured by reference to the fair value at the grant date of the equity instruments granted. The fair value is determined by using the Black-Scholes model. The cost of equity-settled transactions is recognised in the income statement, together with a corresponding increase in retained earnings, over the periods in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award („vesting date‟). At each balance sheet date before vesting the cumulative expense is calculated, representing the extent to which the vesting period has expired and management‟s best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately vest. Market conditions are taken into account in determining the fair value of the options granted, at grant date, and are subsequently not adjusted for. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity. No expense or increase in equity is recognised for awards that do not ultimately vest. Awards where vesting is conditional upon a market condition are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are charged to the share premium account. Page 20 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 ACCOUNTING POLICIES Leased assets In accordance with IAS 17, all the Group‟s leases are determined to be operating leases and the payments made under them are charged to the income statement on a straight line basis over the lease term. Lease incentives are spread over the term of the lease. Operating leases are leases in which the risks and rewards of ownership are not transferred to the lessee. Equity balances a) Called up share capital Called up share capital represents the aggregate nominal value of ordinary shares in issue. b) Share premium The share premium account represents the incremental paid up capital above the nominal value of ordinary shares issued. c) Translation Reserve The translation reserve represents the cumulative translation adjustments on translation of foreign operations. d) Merger Reserve The merger reserve represents the excess over nominal value of the fair value of consideration received for equity shares issued directly to acquire another entity meeting the specific requirements of section 612 of the Companies Act 2006. Standards and interpretations not yet applied The following new Standards and Interpretations, which have been adopted by the European Union and were yet to become mandatory, have not been applied in the 2014 group financial statements. IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS 12 Disclosure of Involvement with Other Entities Amendments to IFRS 10, IFRS 11 and IFRS 12 Transition Guidance Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities IAS 27 (Revised) Separate Financial Statements IAS 28 (Revised) Investments in Associates and Joint Ventures Mandatory for periods starting on or after 1 January 2014 1 January 2014 1 January 2014 1 January 2014 1 January 2014 1 January 2014 1 January 2014 IAS 32 (Amendments) Offsetting Financial Assets and Financial Liabilities 1 January 2014 IAS 36 (Amendments) Recoverable Amount Disclosure for Non-Financial Assets 1 January 2014 Page 21 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 ACCOUNTING POLICIES IAS 39 (Amendments) Novation of Derivatives and Continuation of Hedge Accounting 1 January 2014 IFRIC 21 Levies 1 January 2014 Page 22 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 CONSOLIDATED INCOME STATEMENT Revenue Cost of sales Gross profit Selling and marketing costs Administrative expenses * Operating Profit (Loss) Finance income Finance expense Profit before tax Tax expense Year ended 30 June 2014 £000’s Year ended 30 June 2013 £000’s 22 22 22 22 22 5 6 48,573 53,936 (34,344) (36,350) 14,229 17,586 (7,872) (7,843) (6,361) (4,942) (4) 4,801 170 - (13) (13) 153 4,788 10 (713) (2,177) Profit (Loss) for the period (560) 2,611 Attributable to: Attributable to equity shareholders of Mobile Streams plc (560) 2,611 Earnings/ (loss) per share Basic earnings per share Diluted earnings per share Pence per share Pence per share 9 9 (1.517) (1.517) 7.128 6.832 * Administrative expenses include Depreciation, Amortization and Impairment £0.41 m (2013: £0.36m); Share Based Compensation £ 328k (2013: £13k). Page 23 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Total comprehensive (loss) / income for the period Year ended 30 June 2014 £000’s Year ended 30 June 2013 £000’s (Loss) Profit for the period (560) 2,611 Amounts which may be reclassified to profit & loss: Exchange differences on translating foreign operations (1,347) (385) Total comprehensive (loss) income for the period (1,907) 2,226 Total comprehensive (loss) for the period attributable to: Equity shareholders of Mobile Streams plc (1,907) 2,226 Page 24 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Assets Non- Current Goodwill Intangible assets Property, plant and equipment Deferred tax asset Current Trade and other receivables Cash and cash equivalents 2014 £000’s 2013 £000’s 13 13 12 17 - - 107 260 367 380 - 30 194 604 14 15 6,494 2,964 9,458 8,420 2,851 11,271 Total assets 9,825 11,875 Equity Equity attributable to equity holders of Mobile Streams plc Called up share capital Share premium Translation reserve Merger reserve Retained earnings Total equity Current Trade and other payables Current tax liabilities Provisions 18 20 74 10,579 (2,041) - (6,135) 2,477 73 10,357 (695) 153 (6,055) 3,833 16 24 5,340 1,668 340 7,348 5,390 2,532 120 8,042 Total liabilities 7,348 8,042 Total equity and liabilities 9,825 11,875 The financial statements were authorised by the Board of Directors and were signed on its behalf by: Enrique Benasso Chief Financial Officer 8 October 2014 Company number: 03696108 Page 25 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Equity attributable to equity holders of Mobile Streams Plc Called up share capital Share premium Translation reserve Retained earnings Merger reserve Total Equity £000‟s £000‟s £000‟s £000‟s £000‟s £000’s 73 10,317 (310) (8,679) 153 1,554 - 40 - - - - - - - - 40 13 53 2,611 (385) 2,226 - - 223 328 Balance at 1 July 2012 Exercise of share options Credit for share based payments - - - 13 Transactions with owners - 40 - 13 Profit for the year ended 30 June 2013 - - - 2,611 Exchange differences on translating foreign operations - - (385) - Total comprehensive income for the period - - (385) 2,611 Balance at 30 June 2013 Balance at 1 July 2013 Exercise of share options 73 10,357 (695) (6,055) 153 3,833 73 10,357 (695) (6,055) 153 3,833 1 222 - - Credit for share based payments - - - 328 Disposal of subsidiary - - - 153 (153) - Transactions with owners 1 222 - 481 (153) 551 Disposal of subsidiary - - 1 (1) Loss for the 12 months ended 30 June 2014 - - - (560) Exchange differences on translating foreign operations - - (1,347) - Total comprehensive income for the period - - (1,346) (561) - - - - - (560) (1,347) (1,907) Balance at 30 June 2014 74 10,579 (2,041) (6,135) - 2,477 Page 26 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2014 CONSOLIDATED CASH FLOW STATEMENT Operating activities Profit before taxation Adjustments: Share based payments Depreciation Amortisation Impairments Interest received Changes in trade and other receivables Changes in trade and other payables Disposal of subsidiary Tax paid Total cash generated in operating activities Investing activities Additions to property, plant and equipment Interest received Net Cash used in investing activities Financing activities Issue of share capital (net of expenses paid) Net Cash used in investing activities Year ended 30 June 2014 £000’s Year ended 30 June 2013 £000’s 153 4,788 327 18 36 - 25 - 334 380 - (170) 1,926 (4,578) 4 4 5 1,616 (50) - (15) (493) (1,017) 2,094 1,186 12 5 (118) (11) 170 - 52 (11) 110 110 - - Net change in cash and cash equivalents 2,257 1,175 Cash and cash equivalents at beginning of period Exchange gains/(losses) on cash and cash equivalents Cash and cash equivalents, end of period 2,851 1,763 (2,144) (87) 2,964 2,851 15 Page 27 1. GENERAL INFORMATION Mobile Streams Plc (the Company) and its subsidiaries (together 'the Group') sell digital content, primarily for distribution on wireless devices. The Group has subsidiaries in Europe, Asia, North America and Latin America. The Group has made various strategic acquisitions to build its market share in these regions. The Company is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is Abacus House, 33 Gutter Lane, London, EC2V 8AR. The Company is listed on the London Stock Exchange's Alternative Investment Market. In the current year, the Germany subsidiary was dissolved, so it is no longer included in the consolidated financial statement, with effect from the date of liquidation. These consolidated financial statements have been approved for issue by the Board of Directors on October 8, 2014. 2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are evaluated on a regular basis and are based on historical experience and other factors, such as expectations of future events that are believed to be reasonable under the circumstances. 2.1 CRITICAL ACCOUNTING ESTIMATES, JUDGEMENTS AND ASSUMPTIONS The Group makes estimates and assumptions concerning the future. These estimates, by definition, will rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Estimates (a) Goodwill The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy. The recoverable amount of cash-generating units has been determined based on value-in-use calculations. These calculations require estimates to be made. Refer to note 13. (b) Accrued revenue and accrued content costs Estimation is required by management to determine the value of accrued revenue and accrued content cost liability which is based on the content delivery to its customers. Due to the timing of confirmation of delivery of content to its customers from the service providers, management estimation is applied to determine the level of accrued revenue and accrued content liability to be recognised within the financial statements until confirmation is received. Judgement (c) Risk of currency As mentioned before, the Argentinian government has imposed restrictions on certain cross border transactions, including the remitting of cash back to the Group‟s parent company in the UK. While the Argentinian subsidiary is currently unable to freely transfer cash back to its parent company, there are mechanisms by which cash can be transferred indirectly, albeit at a discount on the official exchange rate. Restrictions on currency controls haven‟t changed along the year, although the Government has allowed some derivative transactions that can be used to remit cash out of the country. The results and financial position of the Argentinian subsidiary are translated into Sterling at official exchange rates for inclusion in the Group‟s consolidated financial statements. The directors have considered whether dual exchange rates might exist, with a second „effective‟ exchange rate arising from the mechanism through which cash can be remitted, and whether the results and position of the Argentinian subsidiary should be translated at this second rate on consolidation. The directors are of the opinion that using the official exchange rate is most appropriate because: • the Group has no requirement to transfer cash from Argentina to the UK and is not projected to have any such requirement for the foreseeable future; Page 28 • the directors do not expect the currency restrictions to remain in place indefinitely and it is unlikely that the Group would remit cash to its parent unless this could be achieved at the official exchange rate; and • the Group is currently able to utilise the cash held in Argentina to support the trading activities of certain other companies within the Group without restriction. (d) Income taxes The Group is subject to income taxes in various jurisdictions. Judgement is required in determining the worldwide provision for income taxes. There are many transactions/calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome is different to what is initially recorded, such differences will impact the income tax and deferred tax provisions. e) Deferred taxation Judgement is required by management in determining whether the Group should recognise a deferred tax asset. Management consider whether there is sufficient certainty its tax losses available to carry forward will ultimately be offset against future earnings, this judgement impacts on the degrees to which deferred tax assets are recognised (see note 17). 3. SERVICES PROVIDED BY THE GROUP'S AUDITOR AND NETWORK FIRMS During the year ended 30 June 2014 the Group (including its overseas subsidiaries) obtained the following services from the Group's auditor and network firms: Fees payable to the Company‟s auditor and its associates for the audit of the parent company and consolidated accounts Non-Audit services: Fees payable to the Company's auditor and its associates for other services: Interim statement review Tax compliance and advisory services 4. DEPRECIATION, AMORTISATION AND IMPAIRMENT Year ended 2014 Year ended 2013 £000's £000's 53 68 10 9 72 8 11 87 Depreciation Impairment Year ended 2014 Year ended 2013 Notes £000's £000's 12 13 36 380 25 334 416 359 Page 29 5. FINANCE INCOME Year ended 2014 Year ended 2013 £000's £000's Interest receivable 170 - 6. FINANCE EXPENSE Year ended 2014 Year ended 2013 £000's £000's Interest expense (13) (13) 7. DIRECTORS’ AND OFFICERS’ REMUNERATION The Directors are regarded as the key management personnel of Mobile Streams Plc. Charges in relation to remuneration received by key management personnel for services in all capacities during the Year ended 30 June 2014 are as follows: Short- term employee benefits - benefits - salaries/remuneration 2014 £000’s 2013 £000’s 5 2 302 375 307 377 Page 30 8. DIRECTORS AND EMPLOYEES Staff costs during the year were as follows: Wages and salaries Social security costs The average number of employees during the year to June 2014 was as follows: Management Administration Year ended 2014 £000's Year ended 2013 £000's 2,363 1,948 249 166 2,612 2,114 Year ended 2014 Year ended 2013 Number Number 7 48 55 7 47 54 Page 31 9. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the (loss) or profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period. Year ended 2014 Pence per share Year ended 2013 Pence per share Basic earnings per share (1.517) Diluted earnings per share (1.517) 7.128 6.832 Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. (Loss) /Profit for the period (560) 2,611 For adjusted earnings per share £000's £000's (Loss) /Profit for the period (560) 2,611 Add back: share compensation expense Add back: depreciation and amortisation Add back: impairment Adjusted profit for the period Weighted average number of shares For basic earnings per share Exercisable share options For diluted earnings per share Adjusted earnings per share Adjusted diluted earnings per share 328 36 380 18 25 334 184 2,988 Number of shares Number of shares 36,908,888 36,632,292 1,502,963 1,587,421 38,411,851 38,219,713 Pence per share Pence per share 0.499 0.479 8.157 7.818 The adjusted EPS has been calculated to reflect the underlying profitability of the business by excluding non-cash charges for depreciation, amortisation, impairments and share compensation charges. Page 32 10. INCOME TAX EXPENSE The tax charge is based on the loss for the year and represents: Foreign tax on profits of the period Total current tax Deferred tax: Origination & reversal of temporary differences: (Deferred tax charge/(credit) (note 16) Tax on profit on ordinary activities Factors affecting the tax charge for the period Profit on ordinary activities before tax Profit multiplied by standard rate of corporation tax in the United Kingdom of 24%/28% Effects of: Adjustment for tax-rate differences Expenses not deductible for tax purposes in current year Expenses not deductible others subsidiaries Tax losses utilised Prior year tax adjustments Other Total tax charge for the period Comprising Current tax expense Deferred tax (expense), income, resulting from the origination and reversal of temporary differences Provision for deferred tax (Deferred tax asset) Provision brought forward Current Year Deferred tax asset carried forward Relating to Expenses deducted in Argentina on a paid basis Other Deferred Tax asset Unprovided Deferred tax Losses 11. DIVIDENDS No dividends were paid or proposed during the current year or prior year. 2014 £'000 779 779 2013 £'000 1,917 1,917 (66) 260 713 2,177 153 4,788 37 1,149 172 325 175 - - 4 713 579 229 - (76) 290 6 2,177 779 1,917 (66) 713 260 2,177 194 66 260 454 (260) 194 260 - 260 194 - 194 0 0 Page 33 12. PROPERTY, PLANT AND EQUIPMENT Cost At 1 July 2013 Additions Translation adjustments At 30 June 2014 Depreciation At 1 July 2013 Provided in the year Translation adjustments At 30 June 2014 Net book value at 30 June 2014 Cost At 1 July 2012 Additions Translation adjustments At 30 June 2013 Depreciation At 1 July 2012 Provided in the year Translation adjustments At 30 June 2013 Net book value at 30 June 2013 Office furniture, plant and equipment £000’s 439 118 (40) 517 409 36 (35) 410 107 Office furniture, plant and equipment £000’s 433 11 (5) 439 387 25 (3) 409 30 Page 34 13. GOODWILL AND INTANGIBLE ASSETS The Group has impaired in full the remaining value of goodwill attributable to Mobile Streams (Hong Kong) Limited and its subsidiaries in Singapore and Australia which make up the Asia Pacific operating segment. Following an impairment review at the balance sheet date the recoverable amount of this cash generating unit was found to be negligible so an impairment of ₤380k has been charged. The current business projection cannot support the value of the goodwill recorded. The recoverable amount was determined based on value-in-use calculations, based on budgets for the next seven years prepared by senior management. These budgets are for longer than the standard five year period suggested by IFRS because new contracts have been signed by existing customers extending over this period. These budgets have been extrapolated over a ten year forecast using a growth rate of 2.5%. A discount rate of 13.7% (2013: 13.7%), based on WACC of the group, is used in the valuation of cash-generating units. There was no change in the method of estimation during the year. Media platform development and software Media content Appitalism £000’s £000's £000's Other intangibles £000’s Subtotal Goodwill £000's £000's Total £000's Cost At 1 July 2013 Translation adjustments 2,348 332 337 2,364 5,381 2,670 8,051 - - - - - - - At 30 June 2014 2,348 332 337 2,364 5,381 2,670 8,051 Accumulated amortisation and impairment At 1 July 2013 Impairment Translation adjustments 2,348 332 337 2,364 5,381 2,290 7,671 - - 380 - - 380 - - - - - - - - At 30 June 2014 2,348 332 337 2,364 5,381 2,670 8,051 Net book value at 30 June 2014 - - - - - - - Page 35 Media platform development and software Media content Appitalism £000‟s £000's £000's Other intangibles £000‟s Subtotal Goodwill £000's £000's Total £000's 2,348 332 337 2,364 5,381 2,670 8,051 - - - - - - - - - - - - - - Cost At 1 January 2012 Additions - externally acquired Translation adjustments At 30 June 2013 2,348 332 337 2,364 5,381 2,670 8,051 Accumulated amortisation and impairment At 1 January 2012 2,348 332 337 2,364 5,381 1,956 7,337 Impairment - - - - - 334 334 At 30 June 2013 2,348 332 337 2,364 5,381 2,290 7,671 Net book value at 30 June 2013 - - - - - 380 380 Other intangible assets Mobile Streams‟ other intangible assets comprised acquired customer relationships, technology based assets and non- compete agreements. These assets are fully amortised. 14. TRADE AND OTHER RECEIVABLES Trade receivables Accrued receivables Prepayments 2014 £000's 2013 £000's 4,341 4,574 1,223 3,242 930 604 6,494 8,420 The carrying value of trade receivables is considered a reasonable approximation of fair value. Trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables, on the basis of age and collectability, were found to be impaired and a provision for doubtful debts of £177,000 (year ended 30 June 2013: £136,000) has been recorded. In addition, some of the unimpaired trade receivables are past due as at the reporting date. The profile of financial assets past due but not impaired is as follows: Page 36 On Due Not more than 30 days Overdue Not more than 3 months More than 3 months but not more than 6 months More than 6 months but not more than 1 year Provision for doubtful debts Provision for doubtful debts reconciliation Opening provision for doubtful debts Change in provision during the year Closing provision for doubtful debts 2014 £000’s 2013 £000’s 3824 714 668 3 23 3,926 12 58 (177) (136) 4,341 4,574 2014 £000’s 2013 £000’s 136 41 177 91 45 136 Trade and other receivables that are not past due or impaired are considered to be collectible within the Group‟s normal payment terms. 15. CASH AND CASH EQUIVALENTS Cash and cash equivalents include the following components: Cash at bank and in hand* 2014 £000’s 2013 £000’s 2,964 2,851 *See note 2.1(c) for details of restrictions. The amount restricted is £453k (2013: £2,084k) 16. TRADE AND OTHER PAYABLES Trade payables Other payables Accruals and deferred income 2014 £000’s 2013 £000’s 2,059 452 991 396 2,829 5,340 4,003 5,390 All amounts are current. The carrying values are considered to be a reasonable approximation of fair value. Page 37 17. DEFERRED TAX ASSETS AND LIABILITIES Balance 1 July 2012 £000’s Recognised in income statement £000’s Balance 30 Jun 2013 £000’s Recognised in income statement £000’s Traslation Adjustment Balance 30 June 2014 £000’s £000’s Deferred tax asset: - Expenses accrued 369 (148) 221 (81) (89) - Royalties - Bonus provisions - Others 22 7 56 6 (7) (111) Deferred tax asset 454 (260) 28 - (55) 194 59 - 166 144 51 76 (11) - - 22 (78) 133 260 Deferred tax liability: - On intangible assets - - - - - - 18. SHARE CAPITAL The Company only has one class of share. The total number of shares in issue as at 30 June 2014 is 37,075,083 (30 June 2013: 36,632,292) with a par value of £0.002 per share. All issued shares are fully paid. The Group‟s main source of capital is the parent company‟s equity shares. The policy which is met by the Group is to retain sufficient authorised share capital so as to be able to issue further shares to fund acquisitions, settle share based transactions and raise new funds. Share based payments relate to employee share options schemes. The schemes have restrictions on headroom so as not to dilute the value of issued shares of the Company. The Group has not raised debt financing in the past and expects not to do so in the future. Authorised 69,150,000 ordinary shares of £0.002 each (30 June 2013: 69,150,000) 2014 £000's 2013 £000's 138 138 Allotted, called up and fully paid: 37,075,083 ordinary shares of £0.002 each (30 June 2013: 36,632,292) 74 73 Allotted, called up and fully paid Outstanding at 1 July Exercised Outstanding at 30 June Year ended 2014 Year ended 2013 36,632,292 442,791 37,075,083 36,457,692 174,600 36,632,292 Page 38 Other Reserves Share Premium Account The balance in the share premium account represents the proceeds received above the nominal value on the issue of the Company's equity share capital. Translation Reserve The Translation reserve contains the exchange differences arising on translating foreign operations. 19. SHARE BASED PAYMENTS The Group operates three share option incentive plans – an Enterprise Management Incentive Scheme, a Global Share Option Plan and an ISO Sub Plan - in order to attract and retain key staff. The remuneration committee can grant options over shares in the Company to employees of the Group. Options are granted with a fixed exercise price equal to the market price of the shares under option at the date of grant and are equity settled, the contractual life of an option is 10 years. Exercise of an option is subject to continued employment. Options are valued at date of grant using the Black-Scholes option pricing model. On 12 July 2013, 2.383.594 options were granted to Company personnel. Strike value was 0.70 per option. The fair value per option of options granted during the year 2014 and the assumptions used in the calculation are shown below: Date of grant Share price at grant (£) Exercise price (£) Shares under option Vesting period (years) Expected volatility Option Life (years) Expected life (years) Risk-free rate Dividend yield Fair value per option (£) 07/30/2013 Fair value per option (£) 06/12/2014 0.6500 0.1975 13 June 2014 0.6500 0.1975 877,865 877,865 1 86.66% 10 5 1.9934% 0.00% 0.253 0.071 2 86.66% 10 5 1.9934% 0.00% 0.345 0.097 0.6500 0.1975 877,865 3 86.66% 10 5 1.9934% 0.00% 0.410 0.115 The volatility of the Company's share price on the date of grant was calculated as the average of volatilities of share prices of companies in the Peer Group on the corresponding date. The volatility of share price of each company in the Peer Group was calculated as the average of annualised standard deviations of daily continuously compounded returns on the Company's stock, calculated over 1, 2, 3, 4 and 5 years back from the date of grant, where applicable. The risk-free rate is the yield to maturity on the date of grant of a UK Gilt Strip, with term to maturity equal to the life of the option. The expected life of an employee share option is 5 years. Share options in issue at the year-end under the various schemes are: 1. 2. 3. Personal to the Option Holder and are not transferable, or assignable. Shall not be exercisable on or after the tenth anniversary of the grant date. Subject to the rules of the Plans, the Options shall Vest as follows – Options vest at 33.3% per year:    33.3% vest on the First Anniversary of the grant of option; A second 33.3% vest on the Second Anniversary of the grant of option; and The last 33.33% vest on the Third Anniversary of the grant of option. Page 39 2014 2013 Number (000's) exercise price Number (000's) Weighted average Weighted average exercise price 2,196 2,634 (443) £0.50 £0.65 £0.25 - - 2,200 250 (175) (79) 0.70 - - £0.46 £0.61 £0.20 £0.16 £0.62 2,196 £0.50 (282) 4,105 Outstanding at 1 July Granted Exercised Forfeited Other leavers on vesting period Outstanding at 30 June Exercisable at 30 June 1,503 £0.56 1,587 £0.53 2014 2013 Range of exercise prices Weighted average exercise price (£) Number of Shares (000's) Weighted average remaining life (years): Contractual Weighted average exercise price (£) Number of Shares (000's) Weighted average remaining life (years): Contractual £0 - £0.50 0.272 1,054 £0.51 - £1.00 0.739 3,051 7.0 7.4 0.279 1,246 0.801 949 6.8 3.5 Share options exercised during the year ended 30 June 2014 were 442,791 (2013: 174,600). The total charge for the year relating to employee share based payment plans was £328k (2013: £13k), all of which related to equity-settled share based payment transactions. 20. MERGER RESERVE 2014 £000's 2013 £000's Balance at 1 July 2013 and 30 June 2014 - 153 The merger reserve was created on the issue of shares in consideration for the acquisition of Mobile Streams Europe GmbH. During the period, the entity was dissolved and so the merger reserve was reduced to Nil via a transfer to retained earnings. Page 40 21. OPERATING LEASES The Group has commitments under operating leases for land and buildings to pay the following amounts. The reduction is due to the reduction of the remaining period of the contract, by one year. Annual commitments under non-cancellable operating leases expiring: Within one year Within two to five years Land and Buildings 2014 £000's 2013 £000's 154 59 266 284 213 550 Lease payments recognised as an expense during the period amount to £180k (2013: £127k). 22. SEGMENT REPORTING As at 30 June 2014, the Group was organised into 4 geographical segments: Europe, North America, Latin American, and Asia Pacific. The operating segments are organised, managed and reported to the Chief Operating Decision Maker based on their geographical location. Revenues are from external customers only and generated from three principal business activities: the sale of mobile content through Multi-National Organisation‟s (Mobile Operator Services), the sale of mobile content over the internet (Mobile Internet Services) and the provision of consulting and technical services (Other Service Fees). All operations are continuing and all inter-segment transactions are priced and carried out at arm‟s length. The segmental results for the year ended 30 June 2014 are as follows: £000's Europe Asia Mobile Operator Services Mobile Internet Services Other Service fees Total Revenue Cost of sales Gross profit Operating Expenses 66 5 30 101 (28) 73 (513) 368 - 3 371 (223) 148 (303) North America Latin America 230 250 3 483 1,258 46,353 6 47,617 Group 1,922 46,608 42 48,572 (236) 247 (33,857) 13,760 (34,344) 14,228 3 (12,675) (13,488) EBITDA (440) (155) 250 1,085 740 Depreciation, amortisation and impairment Share based compensation Finance income/(expense) (380) - - (1) - - Profit/(Loss) before tax (820) (156) Income tax expense Profit/(Loss) - (820) - (156) (6) - - 244 - 244 (29) (328) 157 885 (713) 172 (416) (328) 157 153 (713) (560) Page 41 The segmental results for the year ended 30 June 2013 are as follows: £000's Europe Asia Mobile Operator Services Mobile Internet Services Other Service fees Sales Revenue Cost of sales Gross profit Operating Expenses EBITDA Depreciation, amortisation and impairment Share based compensation Finance income/(expense) Profit/(Loss) before tax Income tax expense Profit/(Loss) 73 40 2 115 (43) 72 (202) (130) (334) - - (464) (34) (498) 789 - 35 824 (595) 229 (312) (83) (1) - - (84) - (83) North America Latin America 477 4 - 481 2,886 49,581 49 52,516 Group 4,225 49,625 86 53,936 (173) 308 (35,539) 16,977 (36,350) 17,586 513 821 (11) - - 810 - 810 (12,408) (12,409) 4,569 5,177 (13) (18) (12) (359) (18) (12) 4,526 4,788 (2,143) 2,383 (2,177) 2,611 * Earnings before interest, tax, depreciation, amortisation and share compensation. The totals presented in the Group‟s operating region segments reconcile to the Group's key financial figures as presented in its financial statements as follows: 2 2006 Segment revenues Total segment revenues Group’s revenues Segment results Total segment Profit after tax Group’s Profit after tax Segment assets Total segment assets Consolidation elimantions Group’s assets Segment liabilities Total segment liabilities Consolidation elimantions Groups’s liabilities 2014 £000’s 2013 £000’s 48,573 53,936 48,573 53,936 (560) 2,611 (560) 2,611 9,865 (40) 11,865 10 9,825 11,875 7,348 - 8,042 - 7,348 8,042 Page 42 INTEREST REVENUE Interest Revenue for the year ended 30 June 2014 was £170k (2013: Nil) DEFERRED TAX Year ended 30 June 2014 DEFERRED TAX Deferred Tax BENEFITS Employee Benefits Year ended 30 June 2013 DEFERRED TAX Deferred Tax BENEFITS Employee Benefits Europe Asia Pacific North America Latin America Consol Group - - 260 - 260 - - - - 260 - 260 Europe Asia Pacific North America Latin America Consol Group - - (22) (42) (1) (22) (42) (1) - (65) (65) - Europe Asia Pacific North America Latin America Consol Group - - - 194 - - - 194 194 - 194 - Europe Asia Pacific North America Latin America Other Group - (23) (51) (1) (1) - (23) (51) - (75) (75) - 23. CAPITAL COMMITMENTS The Group has no capital commitments as at 30 June 2014 (30 June 2013: £Nil). Page 43 24. PROVISIONS Carrying amount at 1 July 2013 Additional provisions made in period Amounts used in period Unusued amounts reversed in period Carrying amount at end of 30 June 2014 2014 £000's 120 220 - - 340 The company‟s German subsidiary was placed into liquidation during 2013. The German subsidiary is the subject of a local tax enquiry and an amount of £200,000 is claimed by the German tax authorities. The company‟s liquidator has lodged a separate claim against the Group in the sum of €425,000 and the group is advised by its lawyers that this amount is likely to be payable. A provision of £340,000 (2013: £120,195) has been made as the Directors‟ best estimate of the amount that will be payable by the Group. 25. RELATED PARTY TRANSACTIONS Key Management The only related party transactions that occurred during the year were the remuneration of senior management disclosed in note 7. 26. RISK MANAGEMENT OBJECTIVES AND POLICIES The Group is exposed to currency and liquidity risk, which result from both its operating and investing activities. The Group's risk management is coordinated in close co-operation with the Board and focuses on actively securing the Group's short to medium term cash flows by minimising the exposure to financial markets. The most significant financial risks to which the Group is exposed are described below. Also refer to the accounting policies. Foreign currency risk The Group is exposed to transaction foreign exchange risk. The currencies where the Group is most exposed to volatility are US Dollars, Australian Dollars, Argentine Peso, Mexican Paso and Colombian Peso. Currently, there is generally an alignment of assets and liabilities in a particular market and no hedging instruments are used. In Latin American markets cash in excess of working capital is converted into a hard currency such as US Dollars, except in Argentina, where domestic regulations prevent companies from acquiring US Dollars. Given this situation, the Argentine subsidiary is considering other alternatives to hedge a possible devaluation of local currency. The Company will continue to review its currency risk position as the overall business profile changes. Foreign currency denominated financial assets and liabilities, which are all short-term in nature and translated into local currency at the closing rate, are as follows. Page 44 2014 000’s 2013 000’s USD £ AUS £ AR$ £ Other £ USD £ AUS £ AR$ £ Other £ 236 93 6,286 2,302 227 148 9,867 892 (330) (307) (5,594) (642) (472) (554) (6,180) (597) (94) (214) 692 1,660 (245) (406) 3,687 295 Nominal amounts Financial assets Financial liabilities Short-term exposure Percentage movements for the period in regards to the British Pound to US Dollar, Australian Dollar and Argentine Peso exchange rates are as follows. These percentages have been determined based on the average market volatility in exchange rates during the period. US Dollar Australian Dollar Argentine Peso 2014 12% 8% 68% 2013 -2% 8% 18% Foreign exchange currency Gain/ (loss) Year ended 2014 £000's Year ended 2013 £000's Foreign currency (989) (350) Liquidity risk The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs. Management prepares cash flow forecasts which are reviewed at Board meetings to ensure liquidity. The Group has no borrowing arrangements. As at 30 June 2014, the Group‟s financial liabilities were all current and have contractual maturities as follows: 30 June 2014 Within 6 months 6 to 12 months £000’s £000’s Trade and other payables 2,511 - The maturity of the Group‟s financial liabilities, which were all current at the previous year end, was as follows: Page 45 Trade and other payables30 June 2013£000’s£000’s1,387-6 to 12 monthsWithin 6 months Capital Management Disclosures Management assesses the Group‟s capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group could return capital to shareholders or issue new shares. The Group considers its capital to comprise the following: Capital Ordinary share capital Share premium Translation reserve Merger reserve Retained earnings 27. BUSINESS DISPOSAL 2014 74 10,579 (2,041) - (6,135) 2,477 2013 73 10,357 (695) 153 (6,055) 3,833 In the year, the Group completed the liquidation of its wholly owned subsidiary, Mobile Streams Europe GmbH, The loss on disposal was determined as follows: Cash disposed of Net assets disposed (other than cash) Property, plant and equipment Deferred tax asset Trade and other receivables Trade and other payables Reclassification of merger reserve on disposal Loss on disposal £000 15 - - 461 (148) (153) (175) Page 46 Financial Statements for the year ended 30 June 2014 REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF MOBILE STREAMS PLC We have audited the parent company financial statements of Mobile Streams Plc for the year ended 30 June 2014 which comprise the parent company accounting policies, the parent company balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). 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 auditor‟s 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 DIRECTORS AND AUDITOR As explained more fully in the Directors‟ Responsibilities Statement set out on page 10, the Directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company 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 (APB‟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 APB's website at www.frc.org.uk/apb/scope/private.cfm. OPINION ON FINANCIAL STATEMENTS In our opinion the parent company financial statements:    give a true and fair view of the state of the Company's affairs as at 30 June 2014; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006. OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion the information given in the Strategic Report and Directors' Report for the financial period for which the financial statements are prepared is consistent with the parent company financial statements. 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. Page 47 Financial Statements for the year ended 30 June 2014 OTHER MATTER We have reported separately on the consolidated financial statements of Mobile Streams Plc for the period ended 30 June 2014. Christopher Smith Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants London 8 October 2014 Page 48 Financial Statements for the year ended 30 June 2014 PARENT COMPANY ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of preparation As used in the financial statements and related notes, the term „Company‟ refers to Mobile Streams Plc. The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by the Act, the separate financial statements have been prepared in accordance with the UK Generally Accepted Accounting Principles (“UK GAAP”). The financial statements have been prepared on the historical cost basis. The principal accounting policies are set out below. The company has applied the exemption under section 408 of the Companies Act 2006 and has not included the individual profit and loss account statement in the financial statements. The loss for the parent company for the year ended 30 June 2014 was £450,000 (year ended 30 June 2013:£972,000). The following paragraphs describe the main accounting policies. The policies have been consistently applied to all periods presented. Revenue recognition Revenues are from external customers only and generated from three principal business activities: the sale of mobile content through mobile network operators (Mobile Operator Sales), the sale of mobile content over the internet (Mobile Internet Sales) and the provision of consulting and technical services (Other Service Fees). Revenue includes the fair value of goods and services sold, net of value-added tax, rebates and discounts. Revenue is recognised as follows: a) Mobile Operator Sales & Mobile Internet Sales Sales of goods are recognised when the Company has delivered media content to the end consumer, who has accepted the product and collectability of the related receivable is reasonably assured from the customer. b) Other services Revenue is recognised in the accounting period in which the services are rendered, by reference to the stage of completion of the specific transaction, on the basis of the actual service provided as a proportion of the total services to be provided. c) Interest income Interest receivable is recognised in the income statement using the effective interest method. If the collection of interest is considered doubtful, it is suspended and excluded from interest income in the income statement. d) Deferred income Revenue that has been collected from customers but where the above conditions are not met is recorded in the balance sheet under accruals and deferred income and released to the income statement when the conditions are met. INVESTMENTS IN SUBSIDIARIES Investments in subsidiaries are stated in the Company‟s balance sheet at cost less provisions for impairment. DEFERRED TAXATION Deferred tax is recognised on all timing differences where the transactions or events that give the Company an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Page 49 Financial Statements for the year ended 30 June 2014 PARENT COMPANY ACCOUNTING POLICIES Deferred tax is measured using rates of tax that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets and liabilities are not discounted. FOREIGN CURRENCIES Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. All exchange differences are dealt with through the profit and loss account. OPERATING LEASES Rentals in respect of leases are charged to the profit and loss account in equal amounts over the lease term. SHARE BASED PAYMENTS Employees (including Directors) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares („equity-settled transactions‟). Equity settled transactions The Group has applied the requirements of Financial Reporting Standard 20 “Share Based Payments” to all grants of equity instruments. The cost of equity settled transactions with employees is measured by reference to the fair value at the grant date of the equity instruments granted. The fair value is determined by using the Black-Scholes model. The cost of equity-settled transactions is recognised, together with a corresponding increase in retained earnings, over the periods in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award („vesting date‟). At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management‟s best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately vest. Market conditions are taken into account in determining the fair value of options granted, at grant date, and are not subsequently adjusted for. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity. No expense or increase in equity is recognised for awards that do not ultimately vest. Awards where vesting is conditional upon a market condition are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. Page 50 Financial Statements for the year ended 30 June 2014 COMPANY BALANCE SHEET 30 June 2014 30 June 2013 £000’s £000’s Fixed assets Investments in subsidiaries 1 20 347 Total fixed assets Current assets Debtors Cash and cash equivalents Others assets Total current assets Creditors: amounts falling due within one year Net current assets 20 347 2 903 698 1,548 256 46 4 1,647 1,808 3 (473) 1,174 (734) 1,074 Net assets 1,194 1,421 Capital and reserves Called up share capital Share premium Profit and loss account Shareholders funds 4 74 73 5 10,579 10,357 (9,459) 5 (9,009) 1,194 1,421 The financial statements were approved by the Board of Directors on 8 October 2014. Enrique Benasso Chief Financial Officer Company registration number: 03696108 8 October 2014 Page 51 Financial Statements for the year ended 30 June 2014 NOTES TO COMPANY FINANCIAL STATEMENTS 1. INVESTMENT IN SUBSIDIARY COMPANIES Cost At July 2012 and 30 June 2014 30 June 2014 30 June 2013 £000’s £000’s 3,636 3,636 Net Book Value after impairment 20 347 Investments in subsidiaries are reviewed for impairment when events indicate the carrying amount may not be recoverable and are accounted for in the Company‟s financial statements at cost less accumulated impairment losses. At the year-end the Company‟s investments were reviewed for impairment. A valuation of the Company‟s investments indicated that, in the case of the investments in the subsidiaries in Germany, USA, Hong Kong, Australia, Mexico and Colombia, their fair market value was less than their carrying value and therefore no impairment charge needed to be recognised (2013: ₤7k). Investments in Subsidiary undertakings comprise: Mobile Streams Inc. Appitalism, Inc. Mobile Streams de Argentina SRL Mobile Streams Chile Ltda. Mobile Streams de Colombia Ltda. Mobile Streams of Mexico S De RL De CV The Nickels Group Inc. Mobile Streams Venezuela SA Mobile Streams Asia Limited Mobile Streams Australia Pty Limited Mobile Streams (Hong Kong) Limited Mobile Streams Singapore Limited Proportion held Directly by Mobile Streams Plc By other Group companies Total held by Group Country of incorporation 100% - 100% - 50% 50% 50% 50% 50% 50% 50% 50% 100% 100% USA 100% USA 100% Argentina 100% Chile 100% Colombia 100% Mexico 100% USA 100% - 100% Venzuela 100% - 100% UK 100% 100% Australia 100% - 100% Hong Kong 100% 100% Singapore - - - All the subsidiaries‟ issued shares were ordinary shares and their principal activities were the distribution of licensed mobile phone content. Page 52 Financial Statements for the year ended 30 June 2014 NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED) 2. Debtors Trade debtors and receivables Amounts owed by Group undertaking 3. Creditors: amounts falling due within one year Trade creditors Amounts owed to Group undertakings Accruals and deferred income 2014 £000’s 2013 £000’s 56 71 847 1,477 903 1,548 2014 £000’s 2013 £000’s 26 86 - 494 447 154 473 734 4. SHARE CAPITAL For details of share capital refer to note 18 to the Group financial statements. 5. RESERVES At 1 July 2013 Premium on shares issued in year Loss for the year At 30 June 2014 6. CAPITAL COMMITMENTS The Company has no capital commitments at 30 June 2014 (2013: Nil). 7. CONTINGENT LIABILITIES As at 30 June 2014 there were no contingent liabilities (2013: Nil). Share Premium Profit and loss Account £000’s £000’s 10,357 (9,009) 222 - - (450) 10,579 (9,459) Page 53 Financial Statements for the year ended 30 June 2014 NOTES TO COMPANY FINANCIAL STATEMENTS 8. RELATED PARTY TRANSACTIONS During the year the Company remunerated senior management personnel as disclosed in note 7 in the consolidated financial statements. The company is taking advantage of the exemption per FRS 8 which does not require disclosure of transactions entered into between members of a group when one of the transacting parties is a wholly owned subsidiary. Page 54 

Continue reading text version or see original annual report in PDF format above