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Proxama PLC

Proxama PLC (AIM: PROX) ("Proxama" or the "Company"), the global platform provider of mobile proximity marketing, mobile wallet and payment solutions, announces its audited results for the year ended 31 December 2013.

Highlights

Financial highlights

· Full year revenues of £813,380 (2012: £1,381,096)

· Cash at year end: £7.47m

· EBITDA1 loss of £3,144,415 (2012: £1,771,047)

· Adjusted loss per share2 of 0.75p (2012: 0.51p)

Listing highlights

· Successful listing on AIM through reverse takeover of Longships Plc in August 2013.

· £8.6 million raised in aggregate in December '13 /January '14

Operational highlights

· Three year exclusive license and distribution agreement signed with Valid, the leading provider of payment solutions in Latin and South America.

· Partnership agreed with Cryptomathic, a leading security provider, to launch a mobile contactless payment solution, called EMV Tokenised Transaction (EMV-TT).

· Selected by Weve, a joint venture between the UK's three largest mobile network operators to be their partner in the development of its mobile loyalty service.

Market Developments

· Launch of Apple iBeacon- renabling Bluetooth proximity marketing, an area of extensive expertise within Proxama.

· Introduction of NFC Host Card Emulation ("HCE") for Google Android- allowing Proxama software implementation to simplify the creation of mobile wallets.

1 EBITDA means earnings before interest, tax, depreciation, amortization and exceptional items

2 Adjusted earnings per share is computed from statutory profits after tax adjusted to exclude exceptional items

 Neil Garner, Chief Executive of Proxama, commented,

"We plan 2014 to be a further year of building our partnerships and our platform infrastructure to enable Proxama to be a core part of the future global retail commerce ecosystem, and ensure that TapPoint® becomes the de facto platform for connecting bricks-and-mortar stores with state-of-the-art mobile commerce.

We are confident that the leading global retailers, banks and wallet providers will use Proxama's platform and capabilities in 2014 to pilot innovative services with the aim of rolling them out for mass market scale in 2015 and beyond."

For further Information:

Notes to Editors

Proxama PLC is a global platform provider of mobile proximity marketing, mobile wallet and payment solutions. The company connects physical and digital assets via mobile to increase consumer engagement, retail sales and loyalty. Proxama's customers are retailers, global brands, mobile network operators and financial institutions.

http://www.proxama.com 

PROXAMA PLC (FORMERLY LONGSHIPS PLC)

CHAIRMAN'S REPORT

FOR THE YEAR ENDED 31 DECEMBER 2013

Introduction

I am very pleased to present the maiden results of Proxama Plc for the year ended 31 December 2013.

2013 has been an exciting year in Proxama's development. On the commercial side, the Company has made significant progress with its partnership and customer engagements. These will set the foundations for rapid growth as the market fully establishes itself which the Board anticipate is still set to happen in 2015.

Furthermore, Proxama completed its listing on AIM in August through the reverse takeover of Longships Plc which provided £1.8m of cash, followed by a placing aggregating to £8.6 million in December and January which provided the financial resources the Company needs to execute its strategy.

Financial highlights

Revenue for the period totalled £813,380 (2012: £1,381,096) with EBITDA before exceptional items (earnings before interest, tax, depreciation and amortisation) of £3,144,415 (2012: £1,771,047) and as at 31 December 2013, the Company had net cash of £7,468,818 (2012: £361,379). The exceptional item in the year of £2,063,921 relates to the deemed cost of listing as disclosed in note 6. An additional £920,000 was received from the final part of the fund raising on 6 January 2014.

The revenue reduction was primarily due to Proxama shifting its focus to working with customers and partners that present a long term scaling opportunity and particularly those that fit in with the Company's strategic aim to reduce "one off" revenue opportunities in preference to per event and per handset based recurring revenue.

There was also a delay in closing a number of sales opportunities as customers considered the business impact of new technologies that were launched in Q4. These included the release of Android's HCE (Host Card Emulation) and Bluetooth Low Energy (BLE) in products such as Apple's iBeacon.

Our business

Proxama is a global technology company that harnesses mobile proximity technologies, such as NFC (Near Field Communications) and Bluetooth. Proxama connects physical and digital assets via mobile to increase consumer engagement, retail sales and loyalty.

Proxama works with banks and card schemes to transition their physical card portfolio (such as credit/debit cards) onto mobile for mobile contactless payments in retail stores.

Proxama also works with retailers to transition their physical loyalty and gift cards onto mobile. Retailers can present relevant offers, products and services to customers on mobile to increase sales and loyalty via a more intimate and mutually beneficial relationship. 

Additionally, Proxama works with outdoor media owners and retailers to mobile-enable physicalassets, such as high street stores, shopping centres, beer fonts and beer mats in pubs, posters and other advertising material. Brands and retailers can now deliver contextually relevant offers and product information direct to consumers on their mobiles, in store, and on the high street.

What differentiates Proxama from our competitors is our award winning cloud based TapPoint® platform and associated app technologies. TapPoint® is an open API hub, providing the only end-to-end mobile engagement, mobile loyalty and mobile payments platform in Europe. Our partners are leading loyalty management companies, point of sale vendors, Mobile Network Operators and secure service providers.

2013 Operational highlights / Key announcements

In the first half of the financial year Proxama focused on building its platform, products and services in preparation for the anticipated acceleration in mobile commerce including NFC and Bluetooth (iBeacon) adoption. In the latter half of the year we worked to secure key blue chip customer and partner relationships, which were finally made public in early 2014.

These included:

· A three year exclusive license and distribution agreement with Valid, the leading provider of payment solutions, identification and telecommunication systems in Latin and South American markets.

· In conjunction with security software solutions Cryptomathic, we launched a ground-breaking new mobile contactless payment solution which enables contactless payments to be made from mobile applications without the need for a hardware secure element, such as SIM or embedded Secure Element.

· Our partnership with Wevethe joint venture of the three largest UK mobile network operators Vodafone, O2 Telefonica and Everything Everywhere for a loyalty wallet. Proxama's TapPoint® platform will form the technology foundation for Weve's loyalty service to be deployed in collaboration with UK retailers.

These agreements are testament to the significant progress Proxama has made during 2013 to establish itself for future mass market adoption of mobile commerce. We look forward to expanding on this throughout 2014 and reporting further significant partnerships, customer engagements and geographic expansion as we pursue our global ambitions in this very exciting high growth market.

David J Bailey

Chairman

PROXAMA PLC (FORMERLY LONGSHIPS PLC)

CHIEF EXECUTIVE OFFICER'S REPORT

FOR THE YEAR ENDED 31 DECEMBER 2013

Changing Role of Mobile for Commerce 

Consumers are becoming increasingly comfortable using their smartphones as their primary device for on-line banking, shopping, browsing, social media and communications. With the advent of technologies such as NFC, Bluetooth Low Energy (iBeacon) and advanced camera technologies, the standard consumer smartphone is now capable of seamlessly communicating with the world around it. These 'proximity' technologies are Proxama's specific areas of expertise, where our TapPoint® platform can be used by brands, retailers, media owners, wallet owners and card issuers to connect the physical world to mobile across the full commerce consumer journey.

Whilst we believe that we are moving rapidly into a world where we will be able to tap, scan or simply go near location after opting in to receive relevant offers and information, there is still a long way to go for all consumers to understand and use the new capabilities in their smartphones. Proxama's role is to work with mass market consumer brands and retailers to enable their physical assets in readiness for the next fundamental change in commerce.

Evolving Technology Landscape

Proxama's heritage has been to harness NFC technology in smartphones for proximity marketing, loyalty redemption and enabling contactless payment wallets. Whilst NFC is now becoming a standard feature on smartphones, there has been a significant amount of complexity in deploying scalable consumer offerings, resulting in creation of network operator joint ventures. Proxama has had the great fortune to have been selected to partner with some of the largest operators in the world including, ISIS (the joint venture of AT&T, Verizon and T-Mobile in the US) for implementations on Blackberry 10 and to also be selected as the wallet platform partner for WEVE (the joint venture of Vodafone, O2 Telefonica and Everything Everywhere in the UK).

Against the backdrop of increasing NFC-enabled phone penetration, we also see significant growth in NFC-compatible contactless card issuance and usage in most global markets, but especially in the UK. Here, contactless payments are increasingly becoming standard with Transport-for-London now supporting NFC contactless payment cards as well as the existing Oyster card.

Apple's launch of iBeacon last year was another key milestone in enabling Bluetooth to be used for Proximity marketing again. Bluetooth has always been part of the Proxama DNA following the acquisition of the original global leader in Bluetooth Proximity marketing, Hypertag, in 2011. Ironically, the main reason for the slow down in use of Bluetooth for marketing was the lack of support in the iPhone. Now this is no longer the case, we expect a significant boost to Bluetooth marketing adoption.

Another significant change in our market was the introduction of Host Card Emulation (HCE) for Google Android devices from the release of Android v4.4 'KitKat'. This capability has been used by our R&D team on Blackberry devices for some time and we were eagerly awaiting its arrival on Android to kick start a renewed simpler approach to creating mobile wallets, by allowing the Proxama software implementation to replace a physical secure element.

Full commerce approach to join physical and digital channels

Proxama's platform approach is designed to enable existing physical media, physical cards and physical point-of-sale to seamlessly connect with the consumer's mobile devices across the full commerce journey. We enable 3 key parts of this commerce journey:

· Proximity Marketing- We enable Out-Of-Home media and in-store merchandising to become interactive, transforming passive physical signage and creating interactivity across digital signage estates. We partner with media specialists and media owners using our TapPoint® platform and in 2013 we announced strategic partnerships with CBS Outdoor (now called Exterion), Posterscope (media planner for Aegis Media group), Diageo (where we are NFC-enabling Guinness beer pumps) and Signbox (a pioneer in poster technology).

We also executed innovative proximity marketing campaigns for Blackberry 10, Harrods, Dominos, KFC, Starbucks, Guinness, and the Remembrance Day Poppy Appeal, as well as promoting the band Rizzle Kicks in Westfield, West London.

· Retail and Brand loyalty solutions - we create highly personalised, location and context aware services in retailer apps or aggregated 'High Street' wallet applications. We are very proud of our selection by ISIS and WEVE, who are pre-eminent wallet owners in the US and UK respectively, and have built a partnership with The Logic Group (who provide loyalty and transaction processing services to many Tier 1 retailers in the UK).

Proxama worked with the GSMA (the association of global network operators) and other key industry players to standardize loyalty card and coupon redemption at Point-of-Sale, allowing retailers to implement a common technology standard which Proxama will support as a standard part of our loyalty offering.

· Contactless cards in mobile wallets - payment cards are being migrated into mobile wallets or becoming extended functions of existing mobile banking or shopping apps. Network operators and handset manufacturers no longer control the technical infrastructure, which allows Proxama to work directly with banks and card issuers to embed the payment card on the devices without relying on Trusted Service Managers or traditional plastic card manufacturers.

Proxama has a long standing relationship with ARM and became a Platinum partner with their spin-out company, Trustonic, for use of the Trusted Execution Environment (TEE) in the mobile phone microprocessor, which can be used to create the next generation of 'cardholder present' payment capability in consumer mobile phones.

Outlook for 2014

The public adoption of mobile commerce, which will include loyalty and payments, is expected to accelerate throughout 2014, which we believe will lead to rapid revenue growth in 2015 as our existing customers move from pilot based projects to full commercial releases with revenue streams increasingly shifting from "fee for service" to "event based" revenues.

We plan 2014 to be a further year of building our partnerships and our platform infrastructure to enable Proxama to be a core part of the future global retail commerce ecosystem, and ensure that TapPoint®becomes the de facto platform for connecting bricks-and-mortar stores with state-of-the-art mobile commerce. We are confident that leading global retailers, banks and wallet providers will use Proxama's platform and capabilities in 2014 to pilot innovative services with the aim of rolling them out for mass market scale in 2015 and beyond.

Dr Neil Garner

CEO & Founder

PROXAMA PLC (FORMERLY LONGSHIPS PLC)

CHIEF FINANCIAL OFFICER'S REPORT

FOR THE YEAR ENDED 31 DECEMBER 2013

Revenue of £813,380 was in line with expectations, but down on last year (2012: £1,381,096). The reduction in revenue is largely due to Proxama shifting its focus to working with customers and partners that present a long term scaling opportunity. In particular, the Company focused its efforts on those that fit in with the company's strategic aim to reduce "one off" revenue opportunities in preference to per event and per handset based recurring revenue.

The geographic split of the revenue was 49% UK, 8% USA and 43% from other countries compared to 87%, 9% and 4% respectively for the 2012 period.

The product revenue mix saw a reduction in wallet related business from 87% in 2012 to 78% in 2013, with an increase of loyalty and marketing related revenues from 7% in 2012 to 22% for 2013.

The group loss for 2013 was £5,239,789 and EBITDA loss before exceptional items of £3,144,415 in line with expectations and compares to the 2012 group loss of £1,596,912 and EBITDA loss of £1,771,097. The 2013 Group loss includes £160,690 of amortisation and depreciation compared to 2012's £38,957. This increase is as a result of this being the first year that we have met the requirements of IAS 38 Intangible Assets to capitalise R & D expenditure in the year of £515,258 and reflects the first year's amortisation thereon. The exceptional item of £2,063,921 is a non-cash item arising from the accounting of the reverse acquisition listing on AIM.

Balance sheet

As at 31 December 2013 total equity was £7,367,514 (2012: £824,108) of which £7,468,818 (2012: £361,379) were cash and cash equivalents.

Net current assets are £7,353,942 (2012: £733,912) comprised £7,468,818 (2012: £361,379) cash and cash equivalents, trade receivables of £162,673 (2012: £68,413), other receivables £478,322 (2012: £355,327) including current tax receivable £172,723 (2012: £214,352), trade and other payables £739,033 (2012: £253,605) and current portion of long term borrowings £16,838 (2012: £11,954).

Adrianus GJC van Breda C.A.

Chief Financial Officer

PROXAMA PLC (FORMERLY LONGSHIPS PLC)

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2013

PROXAMA PLC (FORMERLY LONGSHIPS PLC)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2013

PROXAMA PLC (FORMERLY LONGSHIPS PLC)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 AS AT 31 DECEMBER 2013

PROXAMA PLC (FORMERLY LONGSHIPS PLC)

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2013

PROXAMA PLC (FORMERLY LONGSHIPS PLC)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2013

1. GENERAL INFORMATION

Proxama PLC ("the Company") and its subsidiary Proxama Solutions Ltd (together 'the Group') specialise in next generation mobile marketing, loyalty and mobile wallets. The TapPoint®platform helps businesses accelerate commerce by combining mobile brand engagement, loyalty and mobile contactless payments.

By connecting the physical and the digital worlds businesses such as retailers, brands, Out-of-Home media and stadia owners can engage with consumers by mobile-enabling their physical infrastructure to increase loyalty, receive relevant offers and increase sales.

Proxama's TapPoint® platform is an open API cloud based solution that allows businesses to deploy services quickly and cost effectively by utilising technologies such as NFC, Bluetooth LE, geo-fencing and QR codes.

The Company is a public limited company which is listed on the Alternative Investment Market of the London Stock Exchange and is incorporate and domiciled in the United Kingdom. The address of its registered office is given on the Company Information page.

Further to the acquisition of Proxama Solutions Ltd on 23 August 2013, the consolidated financial statements presented are a continuation of the financial statements of the legal subsidiary, Proxama Solutions Ltd, except the equity structure reflects the equity of the parent, with the comparatives restated using the exchange ratio established on the reverse acquisition.

2. ACCOUNTING POLICIES

Basis of preparation

The share exchange by Proxama Plc for 100% of the shares of Proxama Solutions Ltd is considered to be outside the scope of IFRS3 Business Combinations as Proxama Plc was a cash shell prior to the reverse acquisition and therefore is not classified as a business under IFRS3 and hence this is not treated as a business combination. The principles of reverse acquisition accounting have been applied with the consolidated financial statements being a continuation of the results and balances of the legal subsidiary. The difference between the consideration transferred over the cash balances and other net assets of the listed entity is treated as a cost of obtaining the listing and recorded as an expense with transaction costs allocated between the cost of the issue of equity and the cost of the listing. No goodwill is recognised.

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The consolidated financial statements have been prepared under the historical cost convention basis as discussed in the accounting policies below.

Going Concern

The Directors have a reasonable expectation that the Company has adequate resources to continue its operational existence for the foreseeable future based on future projections and cash flow forecasts. The fund raising in December 2013 and January 2014 has raised £8.6m and cash and cash equivalents at the year end are £7.5m. The Board considers it appropriate to use the going concern basis of preparation for the Group's financial statements for the year ended 31 December 2013.

Adoption of new accounting standards

For the purposes of the preparation of these consolidated financial statements, the Group has applied all standards and interpretations that are effective for accounting periods beginning on or after 1 January 2013. The adoption of new standards and interpretations in the year has not had a material impact on the Group's financial statements.

No new standards, amendments or interpretations to existing standards that have been published and that are mandatory for the Group's accounting periods beginning on or after 1 January 2014, or later periods, have been adopted early. The directors do not consider that the adoption of these standards and interpretations will have a material impact on the Group's financial statements.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker for the use in strategic decision making and monitoring of performance. The group considers the chief operating decision maker to be the executive board.

Revenue Recognition

Revenue represents the invoice value of services and software licences provided to external customers in the period, stated exclusive of value added tax.

Consideration received from customers in respect of services is only recorded as revenue to the extent that the company has performed its contractual obligations in respect of that consideration. Management assess the performance of the company's contractual obligations against project milestones and work performed to date.

Revenue from software licenses sold in conjunction with services is invoiced separately from those services and recognised over the period of the licence.

Revenue from software licences for the use of the technology platform is recognised over the period of the licence.

Foreign currencies

The functional currency of the parent and its subsidiary is sterling and all of its assets are held in this currency.

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date.

Financial instruments

Trade receivables are recognised initially at fair value and subsequently held at amortised cost using the effective interest rate method, less provision for impairment. Trade receivables are first assessed individually for impairment, or collectively where the receivables are not individually significant. Where there is no objective evidence of impairment for an individual receivable, it is included in a group of receivables with similar credit risk characteristics and these are collectively assessed for impairment. Movements in the provision for doubtful debts are recorded in the income statement within operating expenses.

Trade payables are recognised initially at fair value and subsequently held at amortised cost. Trade payables are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

Interest-bearing borrowings are stated at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability.

Equity instruments issued by the group are recorded at the proceeds received, net of direct issue costs.

Property, plant and equipment

Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment in value. Depreciation is provided on all property, plant and equipment, at rates calculated to write off the cost, less estimated residual value, of each asset on a straight-line basis over its expected useful economic life. Depreciation is recognised within operating expenses within the consolidated income statement.

The principal annual rates used for this purpose are:

Computer and office equipment 33 1/3% per annum

Motor Vehicles 25% per annum

Intangible assets

Research and development costs are capitalised when certain criteria are met. The product must be technically feasible, sale is intended, a market exists, expenditure can be measured reliably, and sufficient resources are available to complete the project. The extent of capitalisation is limited to the amount which, taken together with further related costs, will be recovered from the future economic benefits related to the asset. When the board is sufficiently confident that all of the criteria for capitalisation are met, research and development costs are capitalised and amortised over the expected useful life, currently 5 years, from the date that the asset is available for use. Development costs that have been capitalised, but where amortisation has not yet commenced are reviewed annually for impairment. If no intangible asset can be recognised based on the above then research and development costs are recognised in the consolidated income statement in the period in which they are incurred.

Acquired trademarks and intellectual property rights are recognised as an asset at cost, or deemed cost less accumulated amortisation, and any recognised impairment loss.

Amortisation is charged so as to write off the cost or valuation of intangible assets less any residual value over their estimated useful lives on the following basis:

Trademarks and intellectual property rights 10% straight line

Impairment of property, plant and equipment and intangible assets

At each balance sheet date, the Group performs an impairment review in respect of any intangible assets not yet ready for use and reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered any impairment. If any such indication exists, the recoverable amount of the asset (being the higher of fair value less costs to sell and value in use) is estimated in order to determine the extent of any impairment. Any impairment loss is recognised as an expense in the income statement in the period in which it was identified.

Cash and cash equivalents

Cash and cash equivalents are defined as cash in hand, demand deposits and short-term, highly liquid investments which are readily convertible to known amounts of cash, subject to insignificant risk of changes in value, and have a maturity of less than 3 months from the date of acquisition.

For the purposes of the statement of cash flows, cash and cash equivalents consist of cash in hand and bank deposits.

Taxation

The tax currently receivable is based on the taxable loss for the period and relates to R & D tax credits. Taxable loss differs from net loss as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible.

Deferred taxation

Deferred tax is provided for using the liability method on temporary differences at the balance sheet date between tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised in full for all temporary differences. Deferred tax assets are recognised for all deductible temporary differences carried forward of unused tax credits and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and carry-forward of unused tax credits and unused losses can be utilised.

The carrying amount of deferred tax assets is assessed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it is probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.

Employee benefits

Share-based compensation

The Group operates an equity-settled, share-based compensation plan. Equity-settled share -based payments are measured at fair value at date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured by use of the Black-Scholes pricing model.

Grants

Grants receivable are accounted for where the conditions for receipt have been substantially fulfilled and recoverability is assured. Grants in relation to items recognised in profit or loss are included within other operating income.

Leases

Leases in which a significant portion of the risks and rewards are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease.

Assets held under finance leases are recognised as assets of the group at the fair value at the inception of the lease or if lower, at the present value of the minimum lease payments. The related liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between interest expenses and capital redemption of the liability. Interest is recognised immediately in profit or loss, unless attributable to qualifying assets, in which case they are capitalised to the cost of those assets.

Equity

Equity comprises:

Share capital - the nominal value of ordinary shares is classified as equity.

Share premium reserve - represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

Capital reserve - represents a capital contribution to the company.

Share-based payment reserve - represents equity settled share-based employee remuneration.

Retained earnings - includes all current and prior period retained profits/(losses).

Convertible loan - represents the equity element of the convertible loan note.

Merger relief reserve - the difference between cost and the nominal value of shares issued on the exchange of shares with Proxama Solutions Ltd.

Other reserve - the balance of the amount recognised as issued equity instruments arising on restatement of Proxama Solutions Ltd to reflect the parent equity structure.

Critical accounting estimates and judgements

The preparation of financial information in conformity with IFRS requires the directors to make critical accounting estimates and judgements that affect the application of policies and reported amounts of assets and liabilities, income and expenses. An assessment of the impact of these estimates and judgements on the financial statements is set out below.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results could differ from these estimates and any subsequent changes are accounted for with an effect on income at the time such updated information is available.

Estimates in applying the Group's accounting policies:

Fair values for employee share schemes

The establishment of fair values in respect of employee services received in exchange for share options require the exercise of judgement and estimation in respect of the life of the option, the expected dividend yield and, in particular, the expected volatility of the underlying shares. A calculated value for the latter may not accurately reflect the future share price movements given the Group's stage of development.

Critical judgements in applying the Group's accounting policies:

Assessing whether research and development costs meet the criteria for capitalisation

The point at which research and development costs meet the criteria for capitalisation is critically dependent on management's judgement of the point at which technical feasibility is demonstrable. Furthermore, the estimate of useful economic lives are based on management's knowledge of the Group's projects and technology.

3. SEGMENTAL ANALYSIS

Operating segments are based on internal reports about components of the company, which are regularly reviewed and used by the Board of Directors being the Chief Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate resources to the segment and to assess its performance.

The group's operations are centred on providing bespoke near field communication solutions to its customers, primarily mobile wallet functionality. The group issues licences as part of the overall service package provided to its customers. The trading business is structured as a single entity company and its financial reporting is set to report to the CODM information as a whole. Management therefore considers there to be only a single operating segment covering the entire group although revenue analysis is provided below. Therefore additional analysis of the figures reported in these financial statements is neither appropriate nor necessary to enable users of the financial statements to evaluate the nature and financial effects of the business activities.

An analysis of revenue is as follows:

Other revenue relates to projects undertaken historically and not classified as Mobile Wallet or Marketing.

The geographical analysis of revenue is as follows:

A summary of the group's significant (defined as accounting for more than 10% of revenue in the year) customers is as follows:

4. FINANCE INCOME

5. FINANCE EXPENSE

Other loan interest relates to interest on loans of £170,000 from Gavin Breeze Consulting Limited. These loans were repaid on 17 October 2013.

6. LOSS BEFORE TAXATION

The exceptional item is the deemed cost of listing arising on the reverse acquisition being the difference between the consideration exchanged for the share capital of Longships Plc and the net assets of Longships Plc immediately prior to the reverse acquisition.

7. STAFF COSTS

The average number of persons employed by the group during the year including executive directors was:

Their aggregate remuneration comprised:

8. KEY MANAGEMENT COMPENSATION

Details of aggregate key management emoluments for the year are as follows:

The directors are of the opinion that the key management of the Group comprises the executive and non-executive directors of Proxama plc. These persons have authority and responsibility for planning, directing, and controlling the activities of the entity, directly or indirectly. At 31 December 2013, key management comprised five people.

Directors' emoluments are disclosed in the directors' remuneration report on pages 9 to 12.

9. CORPORATION TAX CHARGE

(a) Analysis of credit in the period

(b) Factors affecting the tax credit for the period,

The tax assessed for the period does not reflect an expense equivalent to the profit before tax multiplied by the UK standard rate of corporation tax of 20% (2012: 20%).

Subject to the UK tax authority's agreement, the group has tax losses of approximately £5,250,000 (2012: £2,645,000) available for carry forward and offset against future taxable profits arising from the same trade. The group has a potential deferred tax asset of £1,050,000 (2012: £529,000) which will not be recognised until it is regarded as more likely than not that there will be sufficient taxable profits from which the tax losses can be deducted.

10. EARNINGS PER SHARE

The calculation of earnings per share is based on the loss of £5,239,789 (2012: £1,596,912) and on the number of shares in issue, being the weighted average number of equity shares in issue during the period of 419,904,967 (2012: 314,805,040) ordinary 1p shares. Diluted earnings per share has not been presented as the company is loss making and hence presenting the diluted earnings per share would reduce the loss per share.

A separate adjusted earnings per share calculation has been prepared related to the loss before exceptional items.

11. INTANGIBLE ASSETS

Research and development represents the costs incurred in developing the company's TapPoint platform. These internal costs have been capitalised in accordance with the company's accounting policies where all of the conditions for capitalisation have been met. Other intangible assets represent amounts paid to third parties for acquiring trademarks and intellectual property rights.

The directors have not identified any circumstances which indicate that they may have become impaired. Impairment of research and development is considered within the conditions of capitalisation. The directors do not consider formal impairment testing is necessary for other intangible assets given their carrying value. Amortisation charges are included in administrative expenses in profit and loss.

12. PROPERTY, PLANT AND EQUIPMENT

Hire purchase agreements

Included within the net book value of £102,621 is £27,208 (2012: £27,688) relating to assets held under finance lease agreements. The depreciation charged in the year in respect of such assets amounted to £14,367 (2012: £11,835).

13. TRADE AND OTHER RECEIVABLES

Other receivables in 2012 includes £260,000 in called up share capital issued by Proxama Solutions Ltd but not received at the balance sheet date.

Trade receivables comprise amounts due from customers for services provided. No impairment adjustments have been considered necessary. Average credit terms were 30 days and average debtor days outstanding were 20 (2012: 18).

An aged analysis of trade receivables that were past due at the year end but not impaired is presented below:

14. CASH AND CASH EQUIVALENTS

15. TRADE AND OTHER PAYABLES

Trade payables and accruals principally comprise amounts outstanding for on-going costs.

The directors consider that the carrying amount of trade and other payables approximated their fair value.

Trade payables are paid between 30 and 60 days of receipt of the invoice.

16. BORROWINGS

The bank loan is secured by way of a debenture over the assets of the Group.

Interest on the bank loan is payable at 3% above the National Westminster Bank Plc's base rate. The loan is repayable by monthly instalments over ten years.

Interest is accruing on the loan note at 10% per annum (non-compound). Both the interest and the loan notes are repayable on the third anniversary of the issue of the loan note instrument.

The present value of finance lease liabilities is analysed as follows:

Finance lease agreements are secured on the assets concerned.

Interest rates are fixed for the term of the agreements which are payable by equal fixed monthly amounts.

17. FINANCIAL INSTRUMENTS AND TREASURY RISK MANAGEMENT

Treasury risk management

The group manages a variety of market risks, including the effects of changes in foreign exchange rates, liquidity and counterparty risks.

Credit risk

The group's principal financial assets are bank balances, cash, trade and other receivables.

The credit risk on liquid funds is limited because the counterparties are UK banks with high credit ratings assigned by international credit rating agencies.

The group currently operates with positive cash and cash equivalents as a result of issuing share capital in anticipation of future funding requirements. The group's investment policy is therefore one of achieving high returns with minimal risks. The group primarily invests in no-notice deposits and has no fixed interest deposits. The consolidated income statement would be affected by £5,000 (2012: £3,600, 2011: £1,500) by a reasonably possible 1 percentage point change in floating interest rates on a full year basis in respect of interest earning bank balances.

The maximum exposure due to credit risk for the group on trade and other receivables during the year was £435,687 (2012: £423,740, 2011: £234,298). No collateral is held in respect of these amounts which are expected to be received in full and no impairment has been made.

Currency risks

The group's operations are located in the United Kingdom. The group's transactions are primarily denominated in sterling with little exposure to foreign currency risks. Due to the limited risks to the group, forward exchange contracts are not considered necessary and are not used. The group does not operate foreign currency bank accounts.

The translation risk on the group's foreign exchange payables and receivables is considered to be immaterial due to their short-term nature.

Liquidity risk

Operational cash flow represents on going trading revenue and costs, administrative costs and research and development activities. The group manages its liquidity requirements by the use of both short-term and long-term cash flow forecasts. The group's policy to ensure facilities are available as required is to issue equity share capital in accordance with long-term cash flow forecasts. The group currently has no undrawn committed facilities as at 31 December 2013.

The financial market turbulence and associated illiquidity in credit markets during the year has had no impact on the group's ability to meet its financing requirements.

The group actively manages its working finance to ensure it has sufficient funds for operations and planned research and development activities.

The group's main financial liabilities are primarily trade payables and operational costs. All amounts are due for payment in accordance with agreed settlement terms with suppliers or statutory deadlines.

The group has long term financial liabilities in the way of one bank loan, convertible loan note and three (2012: two, 2011: one) finance lease agreements which are repayable by monthly instalments. The bank loan bears interest at a floating rate whilst interest rates on the convertible loan and hire purchase agreements are fixed. The statement of comprehensive income would be affected by £200 (2012: £200, 2011: £200) by a reasonably possible 1 percentage point change in floating interest rates on a full year basis in respect of the bank loan.

Derivative financial instruments

The group does not currently use derivative financial instruments as hedging is not considered necessary. Should the group identify a requirement for the future use of such financial instruments, a comprehensive set of policies and systems as approved by the directors will be implemented.

In accordance with IAS 39, "Financial instruments: recognition and measurement", the group has reviewed all contracts for embedded derivatives that are required to be separately accounted for if they do not meet specific requirements set out in the standard. No material embedded derivatives have been identified.

Commodity contracts

The group does not use commodity forward contracts and futures to hedge against price risk in commodities as these are not considered necessary.

Capital management

The group's activities are of a type and stage of development where the most suitable capital structure is that of one almost entirely financed by equities. The directors will reassess the future capital structure when projects under development are sufficiently advanced.

The group's financial strategy is to utilise its resources and current trading revenue streams to further appraise and test the group's research and development projects. The group keeps investors informed of its progress with its projects through regular announcements and raises additional equity finance at appropriate times.

The amounts managed as capital by the group for the reporting periods under review are summarised as follows:

Categories of financial instruments

All of the group's financial assets are classified as loans and receivables, and all of the group's financial liabilities are classified as being measured at amortised cost.

The accounting policies applied are set out in note 2. The carrying amounts of financial assets and liabilities as at 31 December 2013 are categorised as follows:

18. SHARE CAPITAL

Allotted, called up and fully paid:

Shares issued and cancelled during the year

Pursuant to a share option deed dated 10 May 2013 and made between the company and Arlington Group Asset Management Limited (AGAM), the company granted to AGAM an option to subscribe 10,000,000 new ordinary shares at an exercise price of 4 pence per share, conditionally on the approval of shareholders at the annual general meeting of the company which was held on 24 May 2013. The option is exercisable in whole or in part at any time during the 5 years ending on 24 May 2018. The option is subject to adjustment in certain circumstances, including on any share consolidation, capitalisation or capital distribution by the company.

On 22 August 2013 Proxama plc acquired 100% of the share capital of Proxama Ltd (which subsequently changed its name to Proxama Solutions Ltd) by way of a reverse takeover. The shareholders of Proxama Ltd were issued 1p ordinary shares in Proxama plc at a ratio of approximately 16.84 shares in Proxama Plc for every share held.

On 6 December 2013 307,200,000 ordinary 1p shares were issued at a premium of 1.5p per share.

Costs of £475,773 relating to the share issue on 6 December have been deducted from equity.

At 31 December 2012, Proxama Limited had issued ordinary share capital of £2,116. On the basis of exchange ratio established at the date of the reverse takeover this equates to 356,260,900 ordinary shares of 1p each in Proxama Plc.

19. SHARE BASED PAYMENTS

The share option scheme was adopted by the company on 29 September 2011. It was established to attract and retain the best available personnel for positions of responsibility, to provide additional incentive to employees, officers or consultants of the company and to promote the success of the company's business. The share option scheme is administered by the directors.

Five tranches of share options have been issued as detailed below.

Details of the share options outstanding at the year end are as follows; as restated for the shareholding in Proxama Plc:

The weighted average fair value of the options granted in the year was 2p.

The options outstanding at the end of the year have a weighted average remaining contractual life of 8.2 years.

These fair values were calculated using the Black-Scholes option pricing model. The inputs into the model were as follows:

The expected volatility was determined with reference to the industry volatility. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The company recognised total expenses of £258,564 (2012: £63,319) related to equity-settled, share-based payment transactions during the year.

20. OPERATING LEASE COMMITMENTS

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

The company leases all of its properties. The terms of property leases vary between properties, although they all tend to be tenant-repairing with periodic rent reviews and break clauses. The company also leases office equipment under a non-cancellable operating lease agreement.

21. CAPITAL COMMITMENTS

No capital expenditure was committed to as at 31 December 2013.

22. RELATED PARTY TRANSACTIONS

As at 31 December 2013, Dr N R Garner was owed £525 by the company (2012: £965), M L Quitmann was owed £212 (2012: £333) and A GJC van Breda was owed £1,000.

As at 31 December 2013, Gavin Breeze Consulting Ltd was owed £25,000 (2012: £6,250) by the company. Gavin Breeze is a director and shareholder of Proxama PLC.

During 2013 Gavin Breeze loaned the company £170,000 which was repaid during the year. Interest of £4,129 relating to this was also repaid.

During the period the company issued a total of 1,000,000 50p loan notes to White Angle Ltd, a company wholly owned by Gavin Breeze for a total of £500,000. Interest is accruing on the loan notes at 10% per annum (non compound). Both the interest and the loan notes are repayable on the third anniversary of the issue of the loan note instrument. The interest charge included in these accounts amounts to £38,503 and the balance of the loan as at 31 December 2013 is £538,503. The total amount expected to be repaid on 19 March 2016 is £650,000.

The holder of the loan note has the right to convert it, together with accrued interest if he so chooses, into ordinary shares at the rate of one ordinary share per 50p loan note. The loan note is a compound financial instrument, containing both elements of liability and equity. Included in the amount above, an amount of £55,200 has been estimated as being in relation to the equity element.

23. BUSINESS COMBINATIONS

On 22 August 2013, Longships Plc (now Proxama Plc) acquired 100% of the share capital of Proxama Limited (now Proxama Solutions Limited) by way of a reverse acquisition. This acquisition was facilitated in order that Proxama could become AIM listed.

On acquisition 365,353,532 new 1p ordinary shares were issued to the shareholders of Proxama at a premium of 3p per share.

24. POST BALANCE SHEET EVENTS

On 9 January 2014 a further 36,800,000 1p shares were issued at a premium of 1.5 pence per share.