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40 Consolidated statement of comprehensive income For the year ended 31 December 2011 Continuing Operations Year Year ended ended 31 December 31 December Note restated Revenue 4 45,311 30,909 Cost of sales 5 (24,497) (19,476) Gross Profit 20,814 11,433 Other operating income Distribution expenses 7 (2,401) (1,957) Administrative expenses 8 (5,035) (4,015) Other operating expenses 6 (1,173) (328) Operating Profit 13,168 5,864 Finance income Finance costs 11 (1,275) (1,279) Profit before Tax 12,054 4,634 Taxation 12 (3,174) (243) Profit for the Year 8,880 4,391 Other comprehensive income: Currency translation differences on foreign operations Write back of contingent consideration on acquisition of subsidiary Other comprehensive income for the year, net of tax Total Comprehensive Income for the Year 9,425 4,511 Attributable to: Equity holders of the Company 8,800 4,351 Non-controlling interests ,880 4,391 Total comprehensive income attributable to: Equity holders of the Company 9,345 4,471 Non-controlling interests Earnings per share from continuing operations attributable to the equity holders of the Company ( per share): 9,425 4,511 Basic and diluted The Accounting Policies and Notes on pages 47 to 102 form an integral part of these financial statements.

41 Consolidated balance sheet At 31 December 2011 As at As at 31 December 31 December Note restated ASSETS Non-Current Assets Property, plant and equipment 14 4,237 3,475 Intangible assets 15 19,793 14,486 Goodwill Deferred tax assets Other receivables Total Non-Current Assets 24,838 19,122 Current Assets Inventories and work in progress 20 4,900 5,495 Trade receivables 21 25,002 21,305 Other receivables Other current assets 23 18,036 10,765 Cash and cash equivalents 24 9,338 2,895 Total Current Assets 57,728 40,765 TOTAL ASSETS 82,566 59,887 EQUITY AND LIABILITIES Shareholders Equity Ordinary shares 25 3,710 2,296 Share premium 25 27,231 8,499 Other reserves 26 5,480 5,788 Reverse acquisition reserve Translation reserve 382 (163) Retained earnings 18,265 9,465 55,419 26,236 Non-controlling interest in equity 51 Total Equity Capital and Reserves 55,419 26,287 Non-Current Liabilities Borrowings 27 3,224 3,569 Retirement benefit obligations Finance lease liabilities 27 1,509 1,698 Deferred tax liabilities 19 2,319 Provisions for other liabilities and charges Taxes payable Total Non-Current Liabilities 7,396 5,779 Current Liabilities Trade and other payables 29 10,716 15,268 Income tax payable Taxes payable Borrowings 27 5,271 9,721 Finance lease liabilities Accrued liabilities and deferred income 31 2,902 1,809 Total Current Liabilities 19,751 27,821 TOTAL EQUITY AND LIABILITIES 82,566 59,887 Approved and authorised for issue by the Board of Directors on 30 April 2012 and signed on its behalf by: Costis Papadimitrakopoulos Chief Executive Officer The Accounting Policies and Notes on pages 47 to 102 form an integral part of these financial statements. 41

42 Company balance sheet At 31 December 2011 Company Number: As at As at 31 December 31 December Note ASSETS Non-Current Assets Investments in subsidiaries 16 7,403 4,855 Total Non-Current Assets 7,403 4,855 Current Assets Other receivables 22 22,775 5,001 Cash and cash equivalents Total Current Assets 23,012 5,001 TOTAL ASSETS 30,415 9,856 EQUITY AND LIABILITIES Shareholders Equity Ordinary shares 25 3,710 2,296 Share premium 25 26,531 7,799 Other reserves 26 1,890 1,634 Translation reserve (203) (982) Retained losses (1,788) (1,234) Total Equity Capital & Reserves 30,140 9,513 Non-Current Liabilities Taxes payable Total Non-Current Liabilities 7 39 Current Liabilities Trade and other payables Taxes payable Accrued liabilities Total Current Liabilities TOTAL EQUITY AND LIABILITIES 30,415 9,856 Approved and authorised for issue by the Board of Directors on 30 April 2012 and signed on its behalf by: Costis Papadimitrakopoulos Chief Executive Officer The Accounting Policies and Notes on pages 47 to 102 form an integral part of these financial statements.

43 Consolidated statement of changes in equity GROUP Attributable to owners of the parent Reverse Non- Share Share Other Acquisition Translation Retained controlling Total Capital Premium Reserves Reserve Reserve Earnings Total Interest Equity Balance at 1 January ,916 4,847 5, (183) 5,022 17, ,796 Profit for the year 4,351 4, ,391 Other comprehensive income for the year Total comprehensive income for the year 20 4,451 4, ,511 Increase in capital 380 3,850 4,230 4,230 Share issue costs (198) (198) (198) Write back of deferred consideration (100) (100) (100) Share based payments 56 (8) Total contributions by and distributions to owners of the Company 380 3,652 (44) (8) 3,980 3,980 Balance at 31 December ,296 8,499 5, (163) 9,465 26, ,287 Balance at 1 January ,296 8,499 5, (163) 9,465 26, ,287 Profit for the year 8,800 8, ,880 Other comprehensive income for the year Total comprehensive income for the year 545 8,800 9, ,425 Increase in capital 1,414 19,867 21,281 21,281 Share issue costs (1,135) (1,135) (1,135) Share based payments Total contributions by and distributions to owners of the Company 1,414 18, ,402 20,402 Acquisition of non-controlling interest (564) (564) (131) (695) Increase in ownership (564) (564) (131) (695) Total transactions with owners of the Company, recognised directly in equity 1,414 18,732 (308) 19,838 (131) 19,707 Balance at 31 December ,710 27,231 5, ,265 55,419 55,419 The Accounting Policies and Notes on pages 47 to 102 form an integral part of these financial statements. 43

44 Company statement of changes in equity COMPANY Attributable to owners of the parent Share Share Other Translation Retained Total Capital Premium Reserves Reserve Earnings Equity Balance at 1 January ,916 4,146 1,678 (1,146) (816) 5,778 Loss for the year (418) (418) Other comprehensive income for the year Total comprehensive income for the year 164 (418) (254) Increase in capital 380 3,850 4,230 Share issue costs (197) (197) Write back of deferred consideration (100) (100) Share based payments Total contributions by and distributions to owners of the Company 380 3,653 (44) 3,989 Balance at 31 December ,296 7,799 1,634 (982) (1,234) 9,513 Balance at 1 January ,296 7,799 1,634 (1,234) 9,513 Loss for the year (554) (554) Other comprehensive income for the year Total comprehensive income for the year 779 (554) 225 Increase in capital 1,414 19,867 21,281 Share issue costs (1,135) (1,135) Share based payments Total contributions by and distributions to owners of the Company 1,414 18, ,402 Balance at 31 December ,710 26,531 1,890 (203) (1,788) 30,140 The Accounting Policies and Notes on pages 47 to 102 form an integral part of these financial statements.

45 Consolidated cash flow statement For the year ended 31 December 2011 Year Year ended ended 31 December 31 December Note restated Cash Flows from Operating Activities Cash generated from operations 33 6,480 4,143 Interest paid 11 (1,275) (1,279) Income tax paid (195) (130) Net Cash from Operating Activities 5,010 2,734 Cash Flows from Investing Activities Investment in start-up subsidiaries (42) Purchases of tangible and intangible assets 14, 15 (14,518) (8,199) Proceeds from sale of tangible and intangible assets 1,400 1,106 Interest received Net Cash used in Investing Activities (12,957) (7,086) Cash Flows from Financing Activities Proceeds from issue of share capital 25 20,586 4,230 Share issue expenses 25 (1,135) (198) Proceeds from borrowings 4,981 3,656 Repayments of borrowings (9,776) (3,178) Repayment of obligations under finance leases (266) (368) Dividends paid to non-controlling interest (8) Net Cash from Financing Activities 14,390 4,134 Net Increase/(Decrease) in Cash and Cash Equivalents 6,443 (218) Movement in Cash and Cash Equivalents Cash and cash equivalents at the beginning of the year 2,895 3,113 Net increase/(decrease) in cash and cash equivalents 6,443 (218) Cash and Cash Equivalents at the End of the Year 24 9,338 2,895 Major Non-Cash Transactions On 7 November 2011 the Company issued 3,500,000 ordinary shares of 1p each at 17p per share fully paid as consideration for the acquisition of the 65% non-controlling interest in subsidiary undertaking ReachFurther Communications Limited. The Accounting Policies and Notes on pages 47 to 102 form an integral part of these financial statements. 45

46 Company cash flow statement For the year ended 31 December 2011 Year Year ended ended 31 December 31 December Note Cash Flows from Operating Activities Cash used in operations 33 (19,234) (3,999) Interest paid (4) Net Cash used in Operating Activities (19,238) (3,999) Cash Flow from Investing Activities Investment in start-up subsidiaries (42) Interest received 24 Net Cash inflow/(outflow) from Investing Activities 24 (42) Cash Flows from Financing Activities Proceeds from issue of share capital 25 20,586 4,230 Share issue expenses 25 (1,135) (197) Net Cash Inflow from Financing Activities 19,451 4,033 Net Increase/(Decrease) in Cash and Cash Equivalents 237 (8) Movement in Cash and Cash Equivalents Cash and cash equivalents at the beginning of the year 8 Net increase/(decrease) in cash and cash equivalents 237 (8) Cash and Cash Equivalents at the End of the Year Major Non-Cash Transactions On 7 November 2011 the Company issued 3,500,000 ordinary shares of 1p each at 17p per share fully paid as consideration for the acquisition of the 65% non-controlling interest in subsidiary undertaking ReachFurther Communications Limited. During the year, part of the Receivables from related parties balance amounting to 2,126,938 was transferred to investments in subsidiaries. The Accounting Policies and Notes on pages 47 to 102 form an integral part of these financial statements.

47 Notes to the financial statements 1. General Information The Consolidated Financial Statements ( the Financial Statements ) of Globo plc ( the Company ) consists of the following companies: Globo plc, Globo Technologies S.A., Profitel Communications S.A., Globo Mobile S.A., Globo IT and Telecom Services SRL, ReachFurther Communications Limited, Globo Holdings Ltd, Gylenhall Investments Ltd, Globo Services (CY) Ltd, Oumpalumpa Ltd, Globo Mobile Technologies International FZ LLP and Globo International LLC ( the Group ). The registered office address is 3 Vaughan Avenue, Tonbridge, Kent TN10 4EB. 2. Group Companies (a) Globo Technologies S.A. and Profitel Communications S.A. Globo Technologies S.A. is engaged in the provision of e-business, Mobile and Telecom Software Solutions and related professional services to the public and private sector, primarily in Greece. Globo Technologies S.A. s registered office is located in Athens, at 67 Ethnikis Antistaseos Street, Chalandri, Greece. Globo Technologies S.A. is a private company, incorporated in Greece in November Globo Technologies S.A. owns 100 per cent of Profitel Communications S.A. Profitel Communications S.A. provides business communication services. Profitel Communications S.A. purchases software applications from Globo Technologies S.A. in the form of Software as a Service (S.a.a.S.) and, together with central infrastructure services, integrates them with third party telecom services. Profitel Communications S.A. s registered office is located in Athens, at 67 Ethnikis Antistaseos Street, Chalandri, Greece. Profitel Communications S.A. is a private company, incorporated in Greece in October Prior to 14 December 2007, Globo Technologies S.A. was the ultimate parent company of the Group. On 15 November 2007, Globo Technologies S.A. entered into an Acquisition Agreement with the shareholders of Globo plc, in the form of a binding memorandum of understanding under Greek law. This agreement was to acquire the entire issued share capital of Globo Technologies S.A. by means of a contribution in kind by each shareholder of their shares in Globo Technologies S.A., in exchange for a total of 110,000,000 new ordinary shares in Globo plc, being the Consideration Shares. On 14 December 2007, Globo plc became the ultimate parent company of the Group through a share exchange and was admitted to the AIM stock market in London. (b) Globo Mobile S.A. and Globo IT and Telecom Services SRL Globo Mobile S.A. and Globo IT and Telecom Services SRL were formed on 18 November 2008 and 16 July 2008 respectively. Globo Mobile S.A. executes the mobile global strategy of the Group and the commercialisation of the mobile products together with platforms and services related to mobile projects through its extensive network of partners and Mobile Network Operators. Globo Mobile S.A. s registered office is located in Athens, at 67 Ethnikis Antistaseos Street, Chalandri, Greece. Globo Technologies S.A. owns 100% of Globo Mobile S.A. Globo IT and Telecom Services SRL is engaged in the provision of computer programming, consulting and related activities. Globo IT and Telecom Services SRL s registered office is located in Sos. Bucuresti-Ploiesti No 1A, Bucharest Business Park, Intrarea A. et.1, Birou 125, sector 1 Bucuresti, Romania. Globo Technologies S.A. owns 99% and Profitel Communications S.A. owns 1% of Globo IT and Telecom Services SRL. (c) ReachFurther Communications Limited 35% of the equity shares of ReachFurther Communications Limited were acquired on 31 December The remaining 65% of the equity shares of the company were acquired on 11 November ReachFurther Communications Limited is a content/service aggregator/enabler with an extensive content/service portfolio that caters to the entire mobile and fixed telecommunications market and was established in 2004 by a team of telecommunications professionals with many years experience in the field of management and advisors to telecommunications operators in selected European & Middle Eastern countries. ReachFurther Communications Limited s registered office is located in 31 Evagorou Street, 4th Floor, Office 43, 1066 Nicosia, Cyprus. Globo Mobile S.A. owns 100% of ReachFurther Communications Limited. 47

48 Notes to the financial statements (d) Globo Holdings Ltd Globo Holdings Ltd was incorporated in the British Virgin Islands on 23 April 2010 as a limited liability company. The company was acquired by Globo Plc on 29 July The principal activity of Globo Holdings Ltd is the holding of investments. Globo Holdings Ltd s registered office is located in Tortola, at Road Town, Nerine Chamber, Quastisky Building, British Virgin Islands. Globo plc owns 100% of Globo Holdings Ltd. (e) Gylenhall Investments Ltd Gylenhall Investments Ltd was incorporated in Cyprus on 16 February 2008 as a limited liability company. The company was acquired by Globo Holdings Ltd on 29 July The principal activity of Gylenhall Investments Ltd is the holding of investments. Gylenhall Investment Ltd s registered office is located in Limassol, at Agias Fylaxeos & Zenonos Rossides 2, Cyprus. Globo Holdings Ltd owns 100% of Gylenhall Investments Ltd. (f) Globo Services (CY) Limited Globo Services (CY) Limited was incorporated in Cyprus on 14 June 2010 as a limited liability company. The principal activity of Globo Services (CY) Limited is the provision of mobile, e-business and software products and related services. Globo Services (CY) Limited s registered office is located in Nicosia, at Corner of Prodromos str. & Zinonos Kitieos, Cyprus. Globo plc owns 100% of Globo Services (CY) Limited. (g) Oumpalumpa Ltd Oumpalumpa Ltd was incorporated in Cyprus on 18 February 2008 as a limited liability company. The company was acquired by Globo Holdings Ltd on 29 July The principal activity of Oumpalumpa Ltd is the holding of investments. Oumpalumpa Ltd s registered office is located in Limassol, at Agias Fylaxeos & Zenonos Rossides 2, Cyprus. Globo Holdings Ltd owns 100% of Oumpalumpa Ltd. (h) Globo Mobile Technologies International FZ LLC ( Globo Mobile Dubai ) Globo Mobile Technologies International FZ LLC was established on 17 August Globo Mobile Dubai has been formed as a Free Zone Authority, under commercial license no issued by Media Free Zone Authority. The principal activities of Globo Mobile Dubai are software developer, mobile solution and support service provider, consultancy and customer service. Globo Mobile Dubai s registered office is located in Dubai, at Al Thuraya Tower No 1, Office No 201, United Arab Emirates. Oumpalumpa Ltd owns 66.66% and Gylenhall Investments Ltd owns 33.33% of Globo Mobile Dubai. (i) Globo International LLC Globo International LLC was incorporated in Delaware USA on 16 November 2011 as a limited liability company. The principal activity of Globo International LLC is the provision of mobile products and related services. The company s registered office is located in Wilmington (New Castle County) at 1209 Orange Street, Delaware 19801, USA. The company also has a trading office in 36 Tanner Street, London, United Kingdom. Gylenhall Investments Ltd owns 100% of Globo International LLC.

49 3. Summary of Significant Accounting Policies The principal accounting policies adopted in the preparation of the Financial Statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. (a) Basis of Preparation The Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ( IFRS ), IFRIC interpretations and the parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Financial Statements have been prepared under the historical cost convention. The preparation of Financial Statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial information, including the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management s best knowledge of current events and actions, actual results may ultimately differ from those estimates. The Directors have restated the comparative information as follows: (i) (ii) (iii) (iv) (v) (vi) Finance costs and finance income are now shown separately in the Consolidated Statement of Comprehensive Income as required by IAS 1; The current income tax liability is now shown separately from other tax liabilities in the Consolidated Balance Sheet as required by IAS 1; The effect on the Consolidated Cash Flow Statement of the movement in non income tax liabilities is now included in Cash generated from operations rather than Income tax paid as required by IAS 7; The acquisition of certain assets under finance leases has now been excluded from Purchase of tangible and intangible assets and Proceeds of borrowings in the Consolidated Cash Flow Statement; Proceeds from borrowings and repayments of borrowings are now shown separately in the Consolidated Cash Flow Statement as required by IAS 7; Payments to close prior year tax liabilities are now shown separately in the reconciliation in the Taxation note (Note 12) so that the effect of these can be more readily understood. None of these restatements is considered to have an effect on the comparative period, and there is no change in reported profit, total comprehensive income, earnings per share, total assets, total liabilities, equity or movement in cash for that period. Standards, amendments and interpretations effective in 2011 (i) New and amended standards adopted by the Group There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning 1 January 2011 that would be expected to have a material impact on the Group. (ii) New and amended standards and interpretations mandatory for the first time for the financial year beginning 1 January 2011 but not currently relevant to the Group The following standards and amendments to existing standards have been published and are mandatory for the Group s accounting periods beginning on or after 1 January 2011 but not currently relevant to the Group. A revised version of IAS 24 Related Party Disclosures simplified the disclosure requirements for government-related entities and clarified the definition of a related party. This revision was effective for periods beginning on or after 1 January An amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards relieved first-time adopters of IFRSs from providing the additional disclosures introduced in March 2009 by Improving Disclosures about Financial Instruments (Amendments to IFRS 7). This amendment was effective for periods beginning on or after 1 July

50 Notes to the financial statements Amendments to IAS 32 Financial Instruments: Presentation addressed the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. These amendments were effective for periods beginning on or after 1 February IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments clarified the treatment required when an entity renegotiates the terms of a financial liability with its creditor, and the creditor agrees to accept the entity s shares or other equity instruments to settle the financial liability fully or partially. This interpretation was effective for periods beginning on or after 1 July An amendment to IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, on prepayments of a minimum funding requirement, applies in the limited circumstances when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements. The amendment permitted such an entity to treat the benefit of such an early payment as an asset. This amendment was effective for periods beginning on or after 1 January (iii) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2011 and not early adopted The Group s and Parent Company s assessment of the impact of these new standards and interpretations is set out below. IFRS 10 Consolidated Financial Statements builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of this standard on the Group s and Parent Company s Financial Statements. IFRS 11 Joint Arrangements provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of this standard on the Group s and Parent Company s Financial Statements. IFRS 12 Disclosure of Interests in Other Entities is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of this standard on the Group s and Parent Company s Financial Statements. IFRS 13 Fair Value Measurement improves consistency and reduces complexity by providing, for the first time, a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. It does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of this standard on the Group s and Parent Company s Financial Statements. IAS 27 Separate Financial Statements replaces the current version of IAS 27 Consolidated and Separate Financial Statements as a result of the issue of IFRS 10 (see above). This revised standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of this standard on the Group s and Parent Company s Financial Statements. IAS 28 Investments in Associates and Joint Ventures replaces the current version of IAS 28 Investments in Associates as a result of the issue of IFRS 11 (see above). This revised standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of this standard on the Group s and Parent Company s Financial Statements.

51 Amendments to IAS 1 Presentation of Financial Statements require items that may be reclassified to the profit or loss section of the income statement to be grouped together within other comprehensive income (OCI). The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single statement or two consecutive statements. These amendments are effective for periods beginning on or after 1 July 2012, subject to EU endorsement. The Directors are assessing the possible impact of these amendments on the Group s and Parent Company s Financial Statements. Amendments to IAS 19 Employment Benefits eliminate the option to defer the recognition of gains and losses, known as the corridor method ; streamline the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring remeasurements to be presented in other comprehensive income; and enhance the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans. These amendments are effective for periods beginning on or after 1 January 2013, subject to EU endorsement, and are not expected to have an impact on the Group s or Parent Company s Financial Statements. IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine clarifies when stripping costs incurred in the production phase of a mine s life should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. This interpretation is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors do not expect any impact on the Group s or Parent Company s Financial Statements. Amendments to IFRS 7 Financial Instruments: Disclosures require disclosure of information that will enable users of financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity s recognised financial assets and recognised financial liabilities, on the entity s financial position. These amendments are effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of these amendments on the Group s and Parent Company s Financial Statements. Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures require entities to apply IFRS 9 for annual periods beginning on or after 1 January 2015 instead of on or after 1 January Early application continues to be permitted. The amendments also require additional disclosures on transition from IAS 39 Financial Instruments: Recognition and Measurement to IFRS 9. The Directors are assessing the possible impact of these amendments on the Group s and Parent Company s Financial Statements. Amendments to IAS 32 Financial Instruments: Presentation add application guidance to address inconsistencies identified in applying some of the criteria when offsetting financial assets and financial liabilities. This includes clarifying the meaning of currently has a legally enforceable right of set-off and that some gross settlement systems may be considered equivalent to net settlement. These amendments are effective for periods beginning on or after 1 January 2014, subject to EU endorsement, and are not expected to have an impact on the Group s and Parent Company s Financial Statements. (b) Basis of Consolidation The Consolidated Financial Statements include the results of the Company and entities controlled by the Company (its subsidiaries) forming the Group. Subsidiaries are all entities over which the Company has the power to govern the financial and operating activities, generally accompanied by a shareholding equal to more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities assumed are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group s share of the identifiable net assets acquired is recorded as goodwill. In accounting for the acquisition of Globo Technologies S.A., the Company took advantage of Section 131 of the Companies Act 1985 and accounted for the transaction using merger relief. 51

52 Notes to the financial statements Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions that is, as transactions with the owners in their capacity as owners. The difference between the fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. (c) Going Concern The Financial Statements are prepared under the going concern assumption. The Group s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman s Statement and Chief Executive Officer s Report. The financial position of the Group and Company, their cash flows, liquidity position and borrowing facilities are described in the Financial Review. In addition, notes 3 and 36 to the Financial Statements includes the Group s and Company s objectives, policies and processes for managing their capital; their financial risk management objectives; details of their financial instruments and exposure to credit risk, interest rate risk and liquidity risk. During the year ended 31 December 2011, the Company raised million before expenses to support the working capital requirements of the Group and fund product development and further international expansion. Some of the funds have been utilised to repay certain bank borrowings ahead of schedule. The Group currently has considerable financial resources together with long-term contracts with a number of customers and suppliers across different product lines and geographic areas. As a consequence, the Directors believe that the Group is well placed to manage its business and financial risks successfully despite the current uncertain economic climate and competitive market conditions. The Group also retains banking facilities through short and long-term borrowings in order to meet working capital requirements and, together with the new funds raised from investors, continued with the development of software platforms and international development. All loan repayments and banking covenants were fully met. The majority of the receivables from the Greek public sector have been collected within the year and the Directors anticipate that the remaining amounts will be collected within the current year. Recovery within the Greek private sector continues to be slow given the continued difficult economic climate in Greece; however, progress has been made during the year and since the year end in collecting the outstanding receivables. The Group s international expansion has also progressed and continues to be a key part of the Group s overall strategy, reducing the Group s reliance on the Greek marketplace. The Group s forecasts and projections, taking into account reasonably possible changes in trading performance, show that the Group should be able to operate with the cash funds and existing bank borrowings. In addition, on 24 April 2012 the Company raised approximately 9.63 million before expenses via a placing of new ordinary shares of 1 pence each at a price of 26.5 pence per share. The Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the Financial Statements. (d) Measurement Currency Items included in the Financial Statements are measured using the currency of the primary economic environment in which the entity operates (its functional currency ). The Financial Statements are presented in Euros ( ), which is the Group s presentational currency. The Financial Statements of the parent undertaking, whose functional currency is pounds sterling, have been translated and stated in Euros.

53 (e) Foreign Currency Translation Transactions in currencies other than the Euro are accounted for at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are retranslated at the rates of exchange ruling at the balance sheet date. Foreign exchange differences on retranslation and settlement are recognised in profit or loss. The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; Income and expenses for each statement of comprehensive income are translated at average exchange rates; and All resulting exchange differences are recognised in other comprehensive income. (f) Property, Plant and Equipment Property, plant and equipment, comprising land, property, vehicles and furniture and fittings, are recorded at historical cost less depreciation and impairment losses. Property, plant and equipment is depreciated on the straight line method over the expected useful life of the assets, as follows: Asset Buildings Leasehold improvements Office furniture and fittings Vehicles Computer and telecom equipment Useful life 33 years 6 years 6 years 9 years 3-6 years In accordance with IAS 16 land is not depreciated. Gains and losses on disposal, determined by comparing proceeds with the carrying amount of the respective assets, are included in operating profit within other operating income. All maintenance and repair costs are expensed as incurred. Furthermore, interest costs on borrowings not directly attributable to software development costs are not capitalised but are instead recognised in profit or loss during the period. Where an indication of impairment exists, the carrying amount of any tangible asset is assessed and is written down immediately to its recoverable amount. (g) Intangible Assets Intangible assets that are acquired or developed by the Group are carried at historical cost less accumulated amortisation and impairment losses. Licences Research expenditure is recognised as an expense in the period in which it is incurred. Costs incurred on development projects (relating to the design and testing of new and improved products) are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility, and only if the cost can be reliably measured. Other development expenditures are recognised as an expense, as they are incurred. Costs incurred on development projects are recognised as intangible assets only if all of the following conditions are met: it is technically feasible to complete the product so that it will be available for use or sale; it is the intention to complete the intangible asset and use or sell it; 53

54 Notes to the financial statements there is an ability to use or sell the intangible asset; it can be demonstrated how the intangible asset will generate probable future economic benefits; adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and the expenditure attributable to the intangible asset during its development can be reliably measured. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Development costs that have been capitalised are amortised from the commencement of the commercial availability of the product on a straight-line basis over its expected benefit period. Licenses are amortised over the shorter of the contract term of the license agreement and the useful life of the asset which does not exceed a four year period. Computer Software Costs Computer software costs generally represent costs incurred to purchase software programmes and packages that are used both internally and to develop and ultimately sell the Group s products. Generally, costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. However, costs that are directly associated with identifiable and unique software products controlled by the Group, which have probable economic benefit beyond one year, are recognised as intangible assets. Direct costs include staff costs of the software development team as well as the cost of subcontractors. All other overheads are expensed in the period in which they are incurred. Expenditure which enhances or extends the performance of computer software programmes beyond their original specifications is recognised as a capital improvement and added to the original cost of the software. Computer software development costs recognised as assets are amortised using the straight-line method over their useful lives, not exceeding a period of four years. Costs associated with the maintenance of existing computer software programmes are expensed as incurred. Royalties Royalties represent the cost of acquiring the rights to certain film content for utilisation within the Group s products. The rights acquired can be used over a two year term and accordingly the costs recognised as intangible assets are being amortised over the same period. All amortization costs for intangible assets are included in cost of sales. (h) Impairment of Non-Current Assets other than goodwill The carrying amount of property, plant and equipment and intangible assets other than goodwill, is reviewed at each balance sheet date to determine if there is any indication of impairment. An impairment loss is recognised in profit or loss when the carrying amount exceeds the recoverable amount. The recoverable amount is the greater of net realisable value and value in use. A previously recognised impairment loss will be reversed in so far as estimates change, but not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognised. A reversal of an impairment loss is recognised as income. (i) Leases A finance lease is one in which a significant portion of the risks and rewards of ownership are transferred to the lessee. Assets obtained under finance leases and hire purchase contracts are capitalised in the balance sheet and are depreciated over their useful lives. The interest element of the rental obligations is charged to profit or loss over the period of the lease, and represents a constant proportion of the balance of capital repayments outstanding. Assets acquired under finance leases are depreciated over the term of the lease. The Group has finance leases relating to an office building, vehicles and computer and telecommunications equipment under which substantially all of the risks and rewards of ownership are the obligation of the lessee.

55 An operating lease is one in which a significant portion of the risks and rewards of ownership are retained by the lessor. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the lease. (j) Inventories and work in progress Inventories are stated at the lower of their purchase or production cost and their corresponding net realisable value. Net realisable value is the estimated re-sale value of the inventories, reduced by the cost of disposal. The cost of inventories is quantified on the basis of the weighted average method and is inclusive of the costs associated with their acquisition or production (in the case of internally produced goods) and the costs incurred in bringing them to their present location and condition. Expenses related to client projects which have been won but not yet contracted are classified as work in progress and included in inventories. (k) Trade Receivables Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts at the year-end. A provision for doubtful trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. (l) Cash and Cash Equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand and call deposits held with banks. (m) Share Capital Ordinary Shares are classified as equity. Share premium is shown as an addition to the shareholders equity and represents the premium amount paid on the issue of new shares. External costs directly attributable to the issue of new shares are shown as a deduction, net of tax, in equity from the proceeds. (n) Borrowings Borrowings, including transaction costs, are initially recognised as the net proceeds received. In subsequent periods, borrowings are stated at amortised cost using the effective interest method. Interest costs are expensed as incurred. (o) Trade Payables Trade payables are not interest bearing and are stated at their nominal value, which is considered to be their fair value. (p) Income Taxes The tax expense represents the sum of the tax payable for the current period and deferred tax. The tax payable in the current period is based on taxable profit for the period. Taxable profit differs from profit for the year as reported in the statement of comprehensive income because it excludes items of income or expenditure which are taxable or deductible in other periods. It further excludes items that are never taxable or deductible. The Group s liability for tax in the current period is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. 55

56 Notes to the financial statements The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis. (q) Post Retirement Benefits The Group s obligation in respect of post retirement benefits is calculated by estimating the value of benefits that employees have earned in return for their service in the current and prior periods, based on the level of employee earnings in accordance with Greek Labour Law. The Group has established a provision for staff retirement indemnities based on an actuarial study. The actuarial study is performed every year by an independent qualified firm. There is no requirement for the Group to contribute to any pension plan. (r) Government Grants Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to expenses are recognised in profit or loss in order to match them with the costs they are intended to compensate. Government grants in relation to the construction of intangible assets are initially treated as deferred income and recognised as income over the life of the asset by way of a reduced amortisation charge. (s) Provisions Provisions are only recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. (t) Revenue Recognition Revenue from sale of goods is recognised when the significant risks and rewards of ownership of the goods are transferred to the buyer. Revenue from rendering of services is based on the stage of completion determined using the percentage of completion method where revenue is matched with the costs incurred in reaching the stage of completion. The stage of completion is determined by comparing the proportion that costs incurred for work performed to date bear to the budgeted total cost of the services to be performed. The Group recognises revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity. Amounts recoverable on such long-term contracts are included in Other Current Assets. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes. The Group has the revenue streams from the following segments: Third party goods: The Group resells third party goods, to its customers, mainly comprising hardware to complement a software project. Revenue is recognised when the risks and rewards of ownership, together with title to the goods, have passed to the customer and the amount can be measured reliably. Software products and services: The Group sells its own software products and services to its clients both in the private and public sector. Individually contracted projects with customers do not give rise to recurring revenue. Contract revenue is recognised using the percentage completion method as described above.

57 Telecom services (S.a.a.S.): The Group combines telecom services with its own software products that are then sold on a software as a service basis. This revenue stream includes repeat customer orders for services such as bulk SMS, SMS service integration and web hosting. Revenue from recurring S.a.a.S. transactions is recognised on the basis of usage volume at the contracted unit price. Revenues from the provision of WiFi broadband networks is recognised at the date of sale of the non refundable prepaid access card to the venue owner and is determined as a percentage of the price charged to the end user. Mobile products and services: The Group sells its own mobile software products and services to its clients, being Mobile Network Operators ( MNOs ) and resellers. Revenue on contracts for the sale of services is recognised on a monthly basis, based on a fixed service fee per active user (a revenue share model ). The fixed fee is determined as a percentage of the reference price charged to the end user, agreed between the Group and the MNO or reseller. Revenue from the sale of product licences is recognised when ownership of the licence, and the right to use the licence, is unconditionally transferred to the buyer. This is the point at which the buyer takes on all risks and rewards associated with the licence. Interest income is recognised on the accruals basis taking into account the effective yield on the asset. (u) Financial Instruments Financial instruments are recognised in the Group s balance sheet when the Group becomes a party to the contractual provision of the instrument. Financial assets carried on the balance sheet include cash and cash equivalents, trade receivables, trade payables, and borrowings. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. Financial Assets Classification The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. (i) Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group s loans and receivables comprise Trade and Other Receivables and Cash and Cash Equivalents in the Statement of Financial Position. (ii) Available-for-Sale Financial Assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period. Recognition and Measurement Regular purchases and sales of financial assets are recognised on the trade date the date on which the Group commits to purchasing or selling the asset. Investments are initially recognised at fair value plus transaction costs. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred, and the Group has transferred substantially all of the risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Offsetting Financial Instruments Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. 57