The Mosaic Company Annual Report 2015

Plain-text annual report

MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 MOBILE STREAMS PLC FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 Company registration number: 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 Company registration number: 03696108 Registered office: 125 Wood Street London, EC2V 7AW Directors: 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 Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 Company no 03696108 PAGE 2 3 9 13 15 23 24 25 26 27 28 48 50 52 53 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 Contents Chairman’s statement Strategic Report Directors’ report Report of the 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 the independent auditor Company accounting policies Company balance sheet Notes to the Company financial statements Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 13 October 2015 Chairman’s Statement: The Board of Mobile Streams plc presents its audited accounts for the financial year ended 30 June 2015. The past twelve 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 large emerging 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 Argentinian currency control rules. Group revenue for the year ended 30 June 2015 was £29.1m (2014: £48.6m). Trading EBITDA* was £1.1m for year (2014: £0.7m). Profit before tax was £0.8m (2014: £0.2m). Much of the reduction in revenues is attributable to Argentina. Revenue in Argentina (which equates to 87% of our revenue) on a constant currency basis decreased by 22% from AR$440m to AR$343m. Challenges in Argentina spurred the Company to develop new premium content products, and funded products, and to diversify into new emerging markets. Our operations outside Europe represent more than 99% of the overall revenues for the period. Latin America represents 99% (see note 21) of the total revenues for the year. Of this some 87% was in Argentina. During 2012, Argentina modified its regulations regarding the 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 countries with more flexible capital controls such as Mexico and Colombia), Mobile Streams has reduced the proportion of its cash within Argentina to 4% as of 30 June 2015. 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 for apps and games in new large emerging markets including India and Nigeria. The Directors do not propose a payment of a dividend (2014: £Nil). In the new financial year, the majority of revenues are once again expected to be generated in Latin America. Despite the challenges in Argentina, the Board believes that the Group is well positioned to deliver growth in shareholder returns with established and newly developed ad funded and premium 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. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 2015. BUSINESS REVIEW Operating Review Mobile Streams’ performance during the financial year ended 30 June 2015 was driven primarily from Mobile Internet sales in Latin America. Group revenue for the year ended 30 June 2015 was £29.1m. The gross profit was £7.7m and decreased by 46% during the year (year ended 30 June 2014: £14.2m). The gross profit margin decreased from 29.3% to 26.4% due to increased marketing (Direct to Consumer) costs related to Mobile Internet. a 51% decrease on the year ended 30 June 2014. Selling, marketing and administrative expenses were £6.9m, 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 modest devaluation against the British Pound during the year (3.66% for the 12 months ended on 30 June 2015). 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 as a separate component of equity (cumulative translation reserve). On disposal of a subsidiary the corresponding cumulative exchange differences will be charged or credited to the income statement as a separate component of equity (cumulative translation reserve). 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. The group had experienced growth and then stabilization in 20132014 in Mobile Internet sales as consumers used their mobile devices to purchase mobile content subscriptions. After that, the business model (based on mobile internet) shifted to a model based on the operator platforms; and the revenue based on internet decreased. This was mostly the result of the devaluation of the Argentine peso during 2014 market in Argentina during the 2014 to 2015 financial year, resulting in a fall in sales. Latin America, primarily Argentina, accounted for the majority of revenues. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 40% year on year partially due to the fact that consumers prefer to use the open mobile internet services on their smartphones and partly because of our own increased focus on mobile internet services. There was a reduction in the number of consumer visitors to these portals, which has been a continuing trend for several 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. Financial Review Group revenue for the year ended 30 June 2015 was £29.1m, a 40% decrease on the previous year (2014: £48.6m). Gross profit was £7.7m, a decrease of 46% during the year (2014: £14.2m). The gross profit margin decreased from 29% to 26% due to increased marketing (Direct to Consumer) costs related to Mobile Internet. Selling, marketing and administrative expenses were £6.9m, £14.2m). a 51% decrease on the year ended 30 June 2014 (2014: The Group recorded a profit after tax of £337k for the year ended 30 June 2015 (2014: loss £0.5m). Basic earnings per share improved to a profit of 0.908 pence per share (2014: loss of 1.479 pence per share). Adjusted earnings per share (excluding interest, depreciation, amortisation, impairments and share compensation expense) increased to 1.560 pence per share (2014: 0.515 pence per share). Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 The Group had cash of £2.1m at 30 June 2015, with no debt (£3.0m of cash with no debt as at 30 June 2014). Argentina cash was £80k at 30 June 2015 (2014: £453k) Financial performance Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 STRATEGIC REPORT Key performance indicators (“KPI’s”) The KPIs used by the Group are Trading EBITDA*, variance in revenue and gross profit. Management review these on a regular basis, largely by reference to budgets and reforecasts. Trading EBITDA was £1.1m for the year ended on June 2015, and it was £0.7m for the year ended in June 2014. Earnings before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets (Trading EBITDA*) 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 yearonyear growth. Although revenue decreased 40% during the year, like for like revenue on a constant currency basis actually decreased by 22%. Gross profit as a percentage of revenue is a measure of our profitability. Gross profit was £7.7m for the year ended in June 2015, a decrease of 46 %. (2014: £14.2m). 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 our results have suffered from the currency issues described. In addition to expanding its mobile internet subscription services from Latin America into India and Nigeria, the Company has launched some ad funded mobile services. These services include its mobile social network http://www.terrenal.com in Latin America. Moreover, Mobile Streams has launched a mobile games store globally at http://www.mobilegaming.com that is entirely adsupported and free to use for consumers. Consumers can play each and any game an unlimited number of times as long as they watch a preroll ad each time they play a game. Mobile Streams developed a proprietary games wrapper that allows consumers to play games for free in this way. Mobile Streams has signed up several hundred games for the launch of the service. 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. * Calculated as profit before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 STRATEGIC REPORT 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, nonrenewal 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. 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 7 “Financial risk management objectives and policies”. The Group has operations in Europe, Asia Pacific, North America and Latin America and recently in Africa and India. As a result, it faces both translation and transaction currency risks. Currency exposure is not currently hedged, though the Board continuously reviews 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 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, thirdparties 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. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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. 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 25 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. 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. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 creditrating 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. The Argentina Division delivered a decreased revenue performance in line with the market expectations. The division represented 87% of the revenues of the Group. Argentina revenue decreased 22% in Argentine Pesos terms; from AR$440 Million to AR$342 Million; but the reported British Pound figures shows a 38% decrease in revenue; from £40.5M to £25.3M. Future Developments In addition to expanding its mobile internet subscription services from Latin America into India and Nigeria, the Company has launched some ad funded mobile services. These services include its mobile social network http://www.terrenal.com in Latin America. Moreover, Mobile Streams has launched a mobile games store globally at http://www.mobilegaming.com that is entirely adsupported and free to use for consumers. Consumers can play each and any game an unlimited number of times as long as they watch a prerole ad each time they play a game. Mobile Streams developed a proprietary games wrapper that allows consumers to play games for free in this way. Mobile Streams has signed up several hundred games for the launch of the service. The Strategic Report, encompassing pages 3 to 8, was approved by the Board and signed on its behalf by: Enrique Benasso Chief Financial Officer 13 October 2015 Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 2015 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 (2014: £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. All Directors served on the Board throughout the year. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 DIRECTORS’ REPORT Options The table below summarises the exercise terms of the various options over ordinary shares of £0.002 (year ended 30 June 2014: £0.002) which have been granted and were still outstanding at 30 June 2015. The remuneration of each of the Directors for the period ended 30 June 2015 is set out below: Benefits comprise medical health insurance. Post balance sheet events There have been no significant post balance sheet events. DIRECTORS’ REPORT Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 Going Concern The Group had cash balances of £2.1m at the year end (2014:£3.0m) 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. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 Auditor Grant Thornton UK LLP has indicated their willingness to continue in office, and a resolution that they be reappointed will be proposed at the annual general meeting. On behalf of the Board Enrique Benasso Chief Financial Officer 13 October 2015 Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 We have audited the consolidated financial statements of Mobile Streams Plc for the year ended 30 June 2015 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, 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 FRC'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 2015 and of its profit 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. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 Other matter We have reported separately on the parent company financial statements of Mobile Streams Plc for the year ended 30 June 2015. Christopher Smith Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants London 13 October 2015 Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 2015. 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. Disclosure of prior year restatement The group’s 2014 tax charge, tax payable and retained earnings have been restated to correct the overstatement of income tax payable in Argentina for 2014 and earlier periods. The restatement has resulted in a reduction of £14,000 in the group’s tax charge for the year ended 30 June 2014, an increase of £783,000 in the group’s retained earnings brought forward at 1 July 2013 and a reduction of £797,000 in the group’s tax payable at 30 June 2014. As a consequence the group’s loss per share and diluted loss per share for the year ended 30 June 2014 have both reduced by 0.038 pence per share and have been restated as 1.479 pence per share. 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 deconsolidated 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 related notes of the Company are presented on pages 4954, 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 the translation of monetary assets and liabilities at the balance sheet date are recognised in the income statement, except to the extent that a monetary asset or liability represents a net investment in a subsidiary when exchange differences arising on translation are recognised in equity within the translation reserve. Amount due from or to subsidiaries are treated as part of net investment in the subsidiary when settlement is neither planned nor likely to occur in the foreseeable future. Foreign currency balances are translated at the yearend using exchange rate prevailing at the yearend. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 ACCOUNTING POLICIES Going Concern The Group had cash balances of £2.1m at the year ended (2014: £3.0m) and no borrowings (2014: 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 cashgenerating units for impairment testing. (b) Assets acquired through business combinations These consist of customer relationships, technology based assets and noncompete 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 Noncompete 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 straightline basis over the period of the expected benefit. Amortisation commences when the asset is ready for use. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 reviewed 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. There is 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. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 shortterm, 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 deliver 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 interestrelated charges are reported in the income statement as finance costs. Revenue recognition As at 30 June 2015, the Group was 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). Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 sharebased payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equitysettled transactions’). The Group has applied the requirements of IFRS 2 (Amended) Sharebased 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 BlackScholes model. The cost of equitysettled 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 nonmarket 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. options are charged to the share premium account. Incremental costs directly attributable to the issue of new shares or Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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. Standards and Interpretations There are no new standards or interpretations which have been adopted by the European Union that have a material impact on the current period or are expected to have a material impact on future periods. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 The financial statements were approved by the Board of Directors and are signed on its behalf by: Enrique Benasso Chief Financial Officer Company registration number: 03696108 13 October 2015 Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 125 Wood Street, London, EC2V 7AW. The Company is listed on the London Stock Exchange's Alternative Investment Market. These consolidated financial statements have been approved for issue by the Board of Directors on October 13, 2015. 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) 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 (b) 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 during 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; • 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 (see note 15). Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 (c) 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. (d) 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 degree 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 2015 the Group (including its overseas subsidiaries) obtained the following services from the Group's auditor and network firms: 4. OPERATING PROFIT Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 5. FINANCE INCOME 6. FINANCE EXPENSE 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 2015 are as follows: 8. DIRECTORS AND EMPLOYEES Staff costs during the year were as follows: Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 The average number of employees during the year to June 2015 was as follows: 9. EARNINGS/ (LOSS) 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. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 The adjusted EPS has been calculated to reflect the underlying profitability of the business by excluding noncash charges for depreciation, amortisation, impairments and share compensation charges. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 10. INCOME TAX EXPENSE The tax charge is based on the profit before tax for the year and represents: Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 11. DIVIDENDS No dividends were paid or proposed during the current year or prior year. 12. PROPERTY, PLANT AND EQUIPMENT Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 13. GOODWILL AND INTANGIBLE ASSETS The Group 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 at June 2014. Other intangible assets Mobile Streams’ other intangible assets comprised acquired customer relationships, technology based assets and noncompete agreements. These assets are fully amortised. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 14. TRADE AND OTHER RECEIVABLES The carrying value of receivables is considered a reasonable approximation of fair value. In addition, some of the unimpaired trade receivables are past due as at the reporting date. The age profile of trade receivables is as follows: Provision for doubtful debts reconciliation Trade and other receivables that are not past due or impaired are considered to be collectible within the Group’s normal payment terms. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 15. CASH AND CASH EQUIVALENTS Cash and cash equivalents include the following components: 16. TRADE AND OTHER PAYABLES All amounts are current. The carrying values are considered to be a reasonable approximation of fair value. 17. DEFERRED TAX ASSETS AND LIABILITIES Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 18. SHARE CAPITAL The Company only has one class of share. The total number of shares in issue as at 30 June 2015 is 37,114,283 (30 June 2014: 37,075,083) 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. Allotted, called up and fully paid 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 BlackScholes option pricing model. On 12 July 2013, 2,383,594 options were granted to Company personnel. Strike value was 0.70 per option. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 riskfree 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 yearend 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. Share options exercised during the year ended 30 June 2015 were 39,200 (2014: 442,791). The total charge for the year relating to employee share based payment plans was £219k (2014: £328k), all of which related to equitysettled share based payment transactions. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 20. 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. Lease payments recognised as an expense during the period amount to £199k (2014: £180k). 21. SEGMENT REPORTING As at 30 June 2015, 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 MultiNational 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 intersegment transactions are priced and carried out at arm’s length. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 The segmental results for the year ended 30 June 2015 are as follows: Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 The segmental results for the year ended 30 June 2014 are as follows: * Earnings before interest, tax, depreciation, amortization, impaiments of assets and share compensation Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 Revenue in Argentina represents 87% of the total revenue of the Group; then Mexico 10%, and finally the rest of the companies 3%. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 INTEREST REVENUE Interest Revenue for the year ended 30 June 2015 was £64k (2014: £170k) DEFERRED TAX 22. CAPITAL COMMITMENTS The Group has no capital commitments as at 30 June 2015 (30 June 2014: £Nil). Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 23. PROVISIONS The company’s German subsidiary was placed into liquidation during 2013 and a potential claim against the Group exists in the sum of £340,000. The group is advised by its lawyers that this amount is now unlikely to be payable and so the provision of £340,000 has been released. 24. 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. 25. 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 cooperation 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 Peso 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 shortterm in nature and translated into local currency at the closing rate, are as follows. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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. Effect of possible changes in currency rates Currency: GBP Effect on Profit Effect on Equity Effect of a 10% US Dollar devaluation (against the GBP) Effect of a 10% US Dollar Appreciation (against the GBP) Effect of a 10% Australian Dollar devaluation (against the GBP) Effect of a 10% Australian Dollar appreciation (against the GBP) Effect of a 20% Peso devaluation (against the GBP) (318) 318 25 (25) (179) (318) 318 25 (25) (325) Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 2015, the Group’s financial liabilities were all current and have contractual maturities as follows: The maturity of the Group’s financial liabilities, which were all current at the previous year end, was as follows: 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: Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 2015 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, 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 www.frc.org.uk/apb/scope/private.cfm. the scope of an audit of financial statements is provided on the FRC's website at 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 2015 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. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 OTHER MATTER We have reported separately on the consolidated financial statements of Mobile Streams Plc for the period ended 30 June 2015 Christopher Smith Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants London 13 October 2015 Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 profit for the parent company for the year ended 30 June 2015 was £640,000 (year ended 30 June 2014 a loss of £450,000). 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 valueadded 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. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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 sharebased payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equitysettled 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 BlackScholes model. The cost of equitysettled 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 nonmarket 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. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 The financial statements were approved by the Board of Directors on 13 October 2015. Enrique Benasso Chief Financial Officer Company registration number: 03696108 13 October 2015 Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 1. INVESTMENT IN SUBSIDIARY COMPANIES 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. Investments in Subsidiary undertakings comprise: All the subsidiaries’ issued shares were ordinary shares and their principal activities were the distribution of licensed mobile phone content. Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 2. Debtors 3. Creditors: amounts falling due within one year 4. SHARE CAPITAL For details of share capital refer to note 18 to the Group financial statements. 5. RESERVES 6. CAPITAL COMMITMENTS The Company has no capital commitments at 30 June 2015 (2014: Nil). 7. CONTINGENT LIABILITIES As at 30 June 2015 there were no contingent liabilities (2014: Nil). Company no 03696108 MOBILE STREAMS PLC Financial Statements for the year ended 30 June 2015 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. Company no 03696108

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