Mobile Streams Regulatory News (MOS)

02 October 2013

Mobile Streams plc

("Mobile Streams", the "Group" or the "Company")

Financial Results for the Year Ended 30 June 2013

Highlights

· Revenue up 145% at £53.9m (2012: £22.0m)

· Mobile internet revenues up 201% at £49.6m (2012: £16.5m)

· Profit before tax up 200% at £4.8m (2012: £1.6m)

· Basic earnings per share increased 238% to 7.1p per share (2012: 2.1p per share)

· Mobile internet subscribers in Latin America increased by 95% to over 3.4m (2012: 1.75m)

· Highly cash generative business with no debt

· Continued growth in Latin America with operations in Colombia, Mexico and recently launched mobile internet services in Brazil

· International expansion, including signing an agreement to provide app services with a major US mobile carrier and with Optus in Australia 

· Mobile Streams now has an active presence in 6 countries and employs more than 50 people around the world 

Key Financials

Outlook

The Company has started the new financial year positively and continued to increase its mobile internet subscriber numbers. Revenues in July and August were in line with those generated at the end of the prior financial year and the Company has recently launched services in Brazil and is excited about the growth prospects in that market during the current financial year.

Simon Buckingham, founder and CEO said: "Mobile Streams has had another fantastic year, with record growth in revenues and profits as a result of our successful and expanding operations around the world, most notably in Latin America. We are delivering mobile entertainment content across a wide range of devices to an ever expanding customer base and we have strong momentum behind. We are very excited about the Company's future as demand for mobile services continues to grow across Latin America and further afield."

Enquiries

About Mobile Streams

Mobile Streams licenses and distributes a wide range of mobile content including games, apps, eBooks, music, pictures and videos that are retailed around the world. The Company's main customer portal is its Appitalism site, which is the largest app store by number of apps available in the world and provides direct content for smartphones, tablets, PCs and eBook readers. The Company's main operations are in Latin America and in particular Argentina. Its shares are traded on the AIM market in London under the symbol MOS LN.

Chairman's Statement

Mobile Streams is pleased to present its audited accounts for the financial year ended 30 June 2013.

The past 12 months has seen Mobile Streams plc (the "Group" or the "Company") continue on its growth strategy to develop a content offering across a wide range of mobile devices direct to consumers. This is in addition to our original business of providing content to mobile network operators and other business partners. The operating performance of the business reflects our strong positioning in Latin America.

Group revenue for the year ended 30 June 2013 was £53.9m (2012: £22.0m). Trading EBITDA* was £5.2m for year (2012: £2.0m). Profit before tax was £4.8m (2012 £1.6m).

Our operations outside Europe represent more than 99% of the overall revenues for the period. Latin America represents 97% (see note 21) of the total revenues for the year.

During the year ended 30 June 2012, Argentina modified its laws on the cross border intercompany transfer of funds. As of 30 June 2013, more than 73% of the Group's cash is in Argentina whose government, as previously reported, imposed currency controls at the beginning of 2012, which continue to inhibit the repatriation of funds to the parent company. Management are taking steps to mitigate this risk by diversifying our sources of cash generation, in particular utilising the cash flow from its operations in markets such as Mexico and Colombia, which do not face the same cash withdrawal restrictions as Argentina.

Mobile Streams enters the new financial year with strong momentum and a clear focus on continuing to expand its operating base in Latin America and on open mobile Internet services including Appitalism for apps and games. The Company expects to see Brazil contribute to the current financial year with the launch of our Mobile Internet services in that market. The Directors do not propose a payment of a dividend (2012 : £Nil). However, the Directors intend to review this policy in the event of changes in Argentina's currency control issues. The Company's management remains upbeat for the new financial year, in which revenue is once again expected to be largely generated in Latin America in markets such as Argentina, Brazil, Colombia and Mexico. The Company has now completed the process of relocating its global finance function, including our new CFO Gaston Cerf, to Argentina.

We are excited about the Company's positioning and opportunities as mobile services continue to grow in importance for most companies. We are a highly cash generative business serving a growing market. We look forward to updating shareholders with our progress over the course of the next twelve months and beyond.

Roger ParryChairman

*Calculated as profit before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets.

Operating Review

Mobile Streams' performance during the financial year ended 30 June 2013 was driven primarily from Mobile Internet sales in Latin America.

Revenues are generated from two principal business activities: the sale of mobile content through mobile operators (Mobile Operator Sales) and the sale of mobile content over the internet (Mobile Internet Sales). Additionally, the Group is engaged in the provision of consulting and technical services (Other Service Fees).

During the period, the Group's Mobile Internet revenues grew, whilst its Mobile Operator revenues decreased slightly. As consumers steadily update their phones from legacy feature and flip phone models to smartphones, they have generally used the operator content portals and application stores less, and used independent portals as well as the open mobile internet more actively.

Mobile Internet Sales

The Group anticipated the shift to the open Mobile Internet several years ago and added new products at new price points in new markets.

As a result, the Group experienced rapid growth in Mobile Internet sales, as consumers used their mobile devices to purchase mobile content subscriptions.

Latin America- primarily Argentina- accounted for the majority of both revenues and growth.

Mobile Streams continued to enjoy record growth in revenues and profits for the most recent financial year, driven primarily by Argentina, Mexico and Colombia. We achieved another new milestone in exceeding £50m in revenues for the year. Whilst Latin America has continued to grow strongly, we are pleased that we have also successfully leveraged our Appitalism (http://www.appitalism.com) expertise and market positioning and recently won new apps business in Asia Pacific, with the recently announced Optus App Store deal, and also launched apps services in partnership to market and distribute Appitalism with a major U.S. carrier, which has immediately become our largest revenue generator for the North America region.

Mobile Operator Sales

The Group has several contracts with mobile operators that allow the distribution of content through their mobile portals.

Through active management of operator channels by the Group's channel management teams around the world, we have been successful in maintaining our mobile carrier revenue streams at relatively stable levels, despite generally reduced consumer visitors to these portals, which has been a continuing trend for the past couple of years. Our teams share and implement the best retailing practices in order to increase the conversion of visitors into customers to mitigate the natural decline in this revenue stream as the market changes.

Mobile Streams maintains direct operator relationships in several markets around the world including Australia, Singapore, Argentina, Mexico and Colombia, as well as partnerships with well-known telecoms companies around the world.

Financial Review

Group revenue for the year ended 30 June 2013 was £53.9m, a 145% increase on the previous year (£22.0m).

Gross profit was £17.6m and increased by 99% during the year (year ended 30 June 2012: £8.8m). The gross profit margin decreased from 40% to 33% due to increased marketing (Direct to Consumer) costs related to Mobile Internet.

Selling, marketing and administrative expenses were £12.4m, an 82% increase on the year ended 30 June 2012 (£6.8m).

The Group recorded a profit after tax of £2.6m for the year ended 30 June 2013 (2012: £0.8m).

Basic earnings per share increased to 7.1 pence per share (2012: 2.1 pence per share).

Adjusted earnings per share (excluding depreciation, amortisation, impairments and share compensation expense) increased to 8.1 pence per share, (2012: 3.2 pence per share).

Directors' Report

Mobile Streams PLC (AIM: MOS), the global mobile media company, is pleased to provide an update to its shareholders on its unaudited expected financial and business performance for the 12 months ended 30 June 2013.

The principal activity of the Group is the sale of content for distribution on mobile devices. The Company is registered in England and Wales under company number 03696108.

Results and dividends

The trading results and the Group's financial position for the year ended 30 June 2013 are shown in the attached financial statements, and are discussed further in the Business Review below.

The Directors have not proposed a dividend for this year (2012: £nil).

Business review

Financial overview

The Group had cash of £2.8m at 30 June 2013, with no debt, (£1.8m of cash with no debt as at 30 June 2012). More than 73% of the Group's cash is in Argentina whose government, as previously reported, imposed currency controls at the beginning of 2012 which continue to inhibit the repatriation of funds to the Group´s parent Company.

Financial performance

Financial performance for the year has been analysed as follows:

* Calculated as profit before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets

.

Key performance indicators ("KPI's")

The KPI's used by the Group are monthly trading EBITDA*, cash projections, growth in revenue and gross profit. Management review these on a regular basis, largely by reference to budgets and reforecasts.

Earnings before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets (Trading EBITDA*) is a non-GAAP metric that is measured exactly as stated. All tax, interest, amortisation, depreciation, share compensation expense and impairment of assets entries in the income statement are added back to profit after tax in calculating this measure.

The cash flow projection shows how cash is expected to flow in and out which is an important business decision-making tool.

Growth in revenue is a measure of how we are growing our business. Our goal is to achieve year-on-year growth. Gross profit as a percentage of revenue is a measure of our profitability.

Strategy

The Group's revenues are generated though relationships with mobile operators and content aggregators and retailing directly to the consumer.

Principal risks and uncertainties

The nature of the Group's business and strategy makes it subject to a number of risks.

The Directors have set out below the principal risks facing the business.

Contracts with Mobile Network Operators (MNOs)

While Mobile Streams maintains relationships with numerous MNOs in the various territories, a small number of operators account for a high portion of the Group's business.

As the Group grows, management are using geographic and product diversity to counter this risk.

Contracts with rights holders

The majority of content provided by Mobile Streams is licensed from rights holders. While Mobile Streams is not dependent on any single rights holder for its entertainment content, termination, non-renewal or significant renegotiation of a contract could result in lower revenue.

The Group continues to enter into new content licensing arrangements to mitigate these risks.

Competition

Competition from alternative providers could adversely affect operating results through either price pressures, or lost custom.

Products and pricing of competitors are continuously monitored to ensure the Group is able to react quickly to changes in the market.

* Calculated as profit before tax, interest, amortisation, depreciation, share compensation expense and impairment of assets

Evolution of mobile entertainment content

Mobile entertainment content is constantly evolving in terms of what is popular, how it is distributed and business models.

Management continues to review changes in the market, explore new business models and form new relationships with content partners.

Fluctuations in currency exchange rates

Approximately 99% of the Group's revenue relates to operations outside the UK. The Group is therefore exposed to foreign currency fluctuations and the financial condition of the Group may be adversely impacted by foreign currency fluctuations. See note on page 8 "Financial risk management objectives and policies".

The Group has operations in Europe, Asia Pacific, North America and Latin America. As a result, it faces both translation and transaction currency risks.

Currency exposure is not hedged.

Dependencies on key executives and personnel

The success of the business is substantially dependent on the Executive Directors and senior management team.

The Group has incentivised all key and senior personnel with share options and has taken out a Key Man insurance policy on its Chief Executive Officer, Simon Buckingham.

Intellectual property rights

The protracted and costly nature of litigation, particularly in North America, may make it difficult to take a swift or decisive action to prevent infringement of the Group's intellectual property rights.

Although the Directors believe that the Group's content and technology platform and other intellectual property rights do not infringe the IP rights of others, third-parties may assert claims of infringement which could be expensive to defend or settle. The Group holds suitable insurance to reduce the risk and extent of financial loss.

Technology risk

A significant portion of the future revenues are dependent on the Group's technology platforms. Instability or interruption of availability for an extended period could have an adverse impact on the Group's financial position.

Mobile Streams has invested in resilient hardware architecture and continues to maintain software control processes to minimise this risk.

Management controls and reporting procedures and execution

The ability of the Group to implement its strategy in a competitive market requires effective planning and management control systems. The Group's future growth will depend upon its ability to expand whilst improving exposure to operational, financial and management risk.

Going concern risk

The current uncertain economic climate and changing market place may impact the Group's cash flows and thereby its ability to pay its creditors as they fall due.

A principal responsibility of management is to manage liquidity risk, as detailed in Note 26 to the financial statements. The Group uses annual budgeting, forecasting and regular performance reviews to assess the longer term profitability of the Group and make strategic and commercial changes as required ensuring cash resources are maintained.

As at 30 June 2013, more than 73% of the Group´s cash is held in Argentina (94% as at 30 June 2012) whose government, as previously reported, imposed currency controls at the beginning of 2012 which continue to inhibit the repatriation of funds to the parent company. Management is making changes to mitigate this risk and has moved its finance operations to Argentina to ensure stability and continuity.

Financial risk management objectives and policies

The Group uses various financial instruments. These include cash and various items, such as trade receivables and trade payables that arise directly from its operations. The numerical disclosures relating to these policies are set out in notes to the financial statements.

The existence of these financial instruments exposes the Group to a number of financial risks, which are described in more detail below. The Group does not currently use derivative products to manage foreign currency or interest rate risks.

The main risks arising from the Group's financial instruments are market risk, currency risk, liquidity risk and credit risk. The Directors review and agree policies for managing each of these risks and they are summarised below. These policies have remained unchanged from previous periods.

Market risk

Market risk encompasses three types of risk, being currency risk, fair value interest rate risk and price risk. In this review interest rate and price risk have been ignored as they are not considered material risks to the business. The Group's policies for currency risk are set out below.

Currency risk

The Group is exposed to translation and transaction foreign exchange risk. Currently, there is generally an alignment of assets and liabilities in a particular market, and no hedging instruments are used. In Latin American markets cash in excess of working capital is converted into a hard currency such as US Dollars, except in Argentina, where domestic regulations prevent companies from acquiring US Dollars. Given this situation, the Argentine subsidiary is considering other alternatives to hedge a possible devaluation of local currency.

The Group will continue to review its currency risk position as the overall business profile changes.

Liquidity risk

The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably.

As at 30 June 2013, more than 73% of the Group´s cash is held in Argentina (94% as at 30 June 2012) whose government, as previously reported, imposed currency controls at the beginning of 2012 which continue to inhibit the repatriation of funds to the parent company. Management is making changes to mitigate this risk and has moved its finance operations to Argentina to ensure stability and continuity.

The aforesaid modified laws severely restrict the Argentina subsidiary from transferring funds to the Group´s parent company for the payment of dividends or for services rendered. This risk is being mitigated by the launch of similar businesses to Argentina in Colombia and Mexico where the cross border transfer of funds is not restricted. Vendor related payments can be made from Argentina on behalf of other subsidiaries.

The Group currently has no borrowing arrangements in place and prepares cash flow forecasts which are reviewed at Board meetings to monitor liquidity.

Credit risk

The Group's principal financial assets are bank deposits, cash and trade receivables. The credit risk associated with the bank deposits and cash is limited as the counterparties have high credit ratings assigned by international credit-rating agencies. The principal credit risk arises therefore from the Group's trade receivables. Most of the Group's trade receivables are large mobile network operators or media groups. Whilst historically credit risk has been low management continuously monitors its financial assets and performs credit checks on prospective partners.

Policy on payment on trade payables

It is the Group's policy to settle supplier accounts in accordance with individual terms of business. The number of days purchases outstanding at the year-end in respect of the Group were 50 days (2012: 50 days).

Directors and their interests

The present membership of the Directors of the Company (the "Board" or the "Directors"), together with their beneficial interests in the ordinary shares of the Group, is set out below. Except where indicated, all Directors served on the Board throughout the year.

Options

The table below summarises the exercise terms of the various options over ordinary shares of £0.002 (year ended 30 June 2012: £0.002) each which have been granted and were still outstanding at 30 June 2013.

The remuneration of each of the Directors for the period ended 30 June 2013 is set out below:

Benefits comprise medical health insurance.

*Appointed on 13 June 2013.

Post balance sheet events

There have been no significant post balance sheet events.

Going Concern

The Group had cash balances of £2.8m at the year end (2012:£1.8m) and no borrowings. Having reviewed cash flow forecasts and budgets for the year ahead the Directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future. During the year ended 30 June 2012, Argentina modified its laws on the cross border intercompany transfer of funds. Management are making changes to mitigate this risk and have moved the finance operations to Argentina to ensure stability and continuity. As at 30 June 2013, more than 73% of the Group´s cash is held in Argentina (94% as at 30 June 2012). The risk is also mitigated by the launch of similar businesses in Columbia and Mexico where the cross border transfer of funds is not restricted. For these reasons, the Board consider Mobile Streams to be a going concern. No material uncertainties or events that may cast significant doubt about the ability of the Group to continue as a going concern have been identified by the Directors.

Directors' Responsibilities Statement

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs) and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UKGAAP). Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to:

§ select suitable accounting policies and then apply them consistently;

§ make judgments and accounting estimates that are reasonable and prudent;

§ state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

§ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that:

§ in so far as each Director is aware, there is no relevant audit information of which the Company's auditor is unaware; and

§ The Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Auditors

Grant Thornton UK LLP has indicated their willingness to continue in office, and a resolution that they be re-appointed will be proposed at the annual general meeting.

On behalf of the Board

Gaston Cerf

Chief Financial Officer

1 October 2013

ACCOUNTING POLICIES

Summary of significant accounting policies

Basis of preparation

The Group financial statements consolidate those of the parent company and all of its subsidiary undertakings drawn up to 30 June 2013. They have been prepared in accordance with applicable International Financial Reporting Standards as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. All references to IFRS in these statements refer to IFRS as adopted by the EU.

The historical cost convention has been applied as set out in the accounting policies.

Consolidation

Subsidiaries are all entities over which the Group has the power to govern the operating and financial policies generally accompanying a shareholding of more than half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control is lost.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of a business combination is measured as the fair value of assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, in line with IFRS 3, Business Combinations. Any assets acquired and liabilities and contingent liabilities assumed that are identifiable are measured initially at their fair values at the acquisition date. Goodwill is stated after separating out identifiable intangible assets. The excess of the cost of a business combination over the fair value of the identifiable net assets acquired is recorded as goodwill. If the cost of a business combination is less than the fair value, the difference is recognised directly in the income statement. 

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated in full. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Subsidiaries' accounting policies have been changed where necessary to ensure consistency with the policies adopted by the Group.

The separate financial statements and notes of the Company are presented on pages 44-51, which are prepared in accordance with UK GAAP.

Foreign currency translation

(a) Presentational currency

The consolidated and parent company financial statements are presented in British pounds. The functional currency of the parent entity is also British pounds.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date the transaction occurs. Any exchange gains or losses resulting from these transactions and from the translation of monetary assets and liabilities at the balance sheet date are recognised in the income statement.

Foreign currency balances are translated at the year-end using exchange rates prevailing at the year-end.

(c) Group companies

The financial results and position of all group entities that have a functional currency different from the presentation currency of the Group are translated into the presentation currency as follows:

i assets and liabilities for each balance sheet are translated at the closing exchange rate at the date of the balance sheet

ii income and expenses for each income statement are translated at average exchange rates (unless it is not a reasonable approximation to the exchange rate at the date of transaction)

iii all resulting exchange differences are recognised as a separate component of equity (cumulative translation reserve)

Property, plant and equipment

All property, plant and equipment (PPE) is stated at cost, less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the purchase of the items.

Depreciation is calculated to write off the cost of property, plant and equipment less estimated residual value on a straight line basis over its estimated useful life. The following rates and methods have been applied:

Each asset's residual value and useful life is reviewed, and adjusted if required, at each balance sheet date. The carrying amount of an asset is written down immediately to its recoverable amount if the carrying amount is greater than its estimated recoverable amount.

Gains/losses on disposal of assets are determined by comparing proceeds received to the carrying amount. Any gain/loss is recognised in the income statement.

Going Concern

The Group had cash balances of £2.8m at the year ended (2012, £1.8m) and no borrowings (2012: no borrowings). Having reviewed cash flow forecasts and budgets for the year ahead the Directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future. During the year ended 30 June 2012 Argentina modified its laws on the cross border intercompany transfer of funds. Management are making changes to mitigate this risk and are also moving finance operations to Argentina to ensure stability and continuity. As at 30 June 2013, 73% of the Group's cash balance of £2.8m was held in Argentina. The risk is also mitigated by the launch of similar businesses in Columbia and Mexico where cross border transfers of funds are not restricted. For these reasons, the Board consider Mobile Streams to be a going concern. No material uncertainties or events that may cast significant doubt about the ability of the Group to continue as a going concern have been identified by the Directors.

Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of a business combination over the fair value of net identifiable assets of the acquired entity at the date of acquisition. This goodwill for subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units for impairment testing. 

(b) Assets acquired through business combinations

These consist of customer relationships, technology based assets and non-compete agreements acquired through business combinations. To meet this definition, the intangibles must be identifiable either by being separable, or by arising from contractual or other legal rights. Intangibles acquired through business combinations are recognised at fair value. Where a reliable estimate of useful life of the intangible can be obtained, the intangible asset is to be amortised using the straight line basis, over the useful life. Where there is an indication of impairment of intangibles, the intangible will be tested for impairment. The estimated useful lives of these assets are:

 (c) Media content and Media platform development

Media content and Media platform development represent intangible assets that have been acquired from third parties and also that are internally generated, including capitalised direct staff costs. Content and platform expenditure is charged against income in the year in which it is incurred unless it meets the recognition criteria of IAS 38 Intangible Assets. To meet the criteria of an intangible asset the Group must demonstrate the following criteria:

- the technical feasibility of completing the asset so that it will be available for use,

- its intention to complete the intangible (or sell it),

- its ability to use or sell the intangible,

- that the intangible will generate future economic benefit,

- that adequate resources are available to complete the intangible, and

- the expenditure can be reliably measured.

Intangible assets, if capitalised, are amortised on a straight-line basis over the period of the expected benefit. Amortisation commences when the asset is ready for use.

 (d) Appitalism

Appitalism development represents intangible assets that have been internally generated, including capitalised direct staff costs. To meet the intangible asset criteria the group must demonstrate the technical feasibility of completing the asset so that it will be available for use, its intention to complete the intangible (or sell it), its ability to use or sell the intangible, that the intangible will generate future economic benefit, adequate resources to complete the intangible and the expenditure can be reliably measured. Intangible assets, if capitalized, are amortised on a straight line basis, and renewed annually for indicators of impairment.

 (e) Software

Software represents assets that have been acquired from third parties. To meet the criteria for recognition the intangible asset must be both identifiable and either separable, or arise from contractual or other legal rights. Intangible Assets acquired from third parties are stated at cost less accumulated amortisation and impairment losses. Where a reliable estimate of useful life of the intangible can be obtained, the intangible asset is to be amortised using the straight line basis, over the useful life. Where there is an indication of impairment of Intangible assets with a definite life, the intangible will be tested for impairment. The estimated useful life of acquired software is 2 years.

Amortisation is included in "Admin expenses" in the income statement.

Impairment of assets

Assets that have an indefinite useful life, such as goodwill, are not subject to amortisation, but are instead tested annually for impairment and also tested whenever an event or change in situation indicates that the carrying amount may not be recoverable. Assets that are subject to amortisation are also tested for impairment whenever an event or change in situation indicates that the carrying amount may not be recoverable. An impairment loss is recognised in the income statement as the amount by which the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is determined by the higher of the fair value of an asset less costs to sell and the value in use. In order to assess impairment, assets are grouped at the lowest levels for which separate cash flows can be identified (cash-generating units).

Impairment charges are included in the "Admin expenses" in the income statement.

Taxation

Current tax is the tax currently payable based on taxable profit for the year.

Deferred income tax is provided, using the liability method, on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.

Deferred income tax is determined using tax rates known by the balance sheet date and that are expected to apply when the deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax liabilities are provided in full, with no discounting of assets or liabilities.

Changes in deferred tax assets or liabilities are recognised as a component of the tax expense in the income statements, except where they relate to items that are charged or credited directly to equity, in which case the related deferred tax is also charged or credited directly to equity.

Provisions

Provisions, including those for legal claims, are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of economic benefits will be required to settle the obligation and the amount can be reliably estimated.

Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability.

Financial Assets

a) Cash and cash equivalents

Cash and cash equivalents include cash on hand, demand deposits held with financial institutions and other short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

b) Trade and other receivables

Trade receivables are included in trade and other receivables in the balance sheet. Trade receivables are recognised initially at fair value and later measured at amortised cost using the effective interest method, less any provision for impairment. An impairment provision for trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the terms of the receivables. The provision is calculated as the difference between the receivable's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the income statement. Subsequent recoveries of amounts previously written off are credited in the income statement

Financial Liabilities

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. All financial liabilities are recorded initially at fair value, net of direct issue costs.

A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

The Group's financial liabilities consist of trade and other payables, which are measured subsequent to initial recognition at amortised cost using the effective interest rate method. 

All interest-related charges are reported in the income statement as finance costs.

Revenue recognition

As at 30 June 2013, the Group is organised into four geographical segments: Europe, North America, Latin America, and Asia Pacific. Revenues are from external customers only and generated from three principal business activities: the sale of mobile content through Mobile Operator Services (Mobile Operator Sales), the sale of mobile content over the internet (Mobile Internet Sales) and the provision of consulting and technical services (Other Service Fees).

Revenue includes the fair value of sale of goods and services, net of value added tax, rebates and discounts and after eliminating intercompany sales within the Group. Revenue is recognised as follows:

a) Mobile Operator Sales & Mobile Internet Sales

Revenue from the sale of goods is recognised when a Group entity has delivered media content to the end consumer, who has accepted the product and collectability of the related receivable is reasonably assured from the customer.

b) Other service Fees

Revenue is recognised in the accounting period in which the services are rendered, by reference to the stage of completion of the specific transaction, on the basis of the actual service provided as a proportion of the total services to be provided.

c) Interest income

Interest receivable is recognised in the income statement using the effective interest method. If the collection of interest is considered doubtful, it is suspended and excluded from interest income in the income statement.

d) Deferred income

Revenue that has been collected from customers but where the above conditions are not met is recorded in the Statement of Financial Position under accruals and deferred income and released to the income statement when the conditions are met.

Share based payments

Employees (including Directors) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares ('equity-settled transactions').

The Group has applied the requirements of IFRS 2 (Amended) Share-based Payments to all grants of equity instruments.

The cost of equity settled transactions with employees is measured by reference to the fair value at the grant date of the equity instruments granted. The fair value is determined by using the Black-Scholes model.

The cost of equity-settled transactions is recognised in the income statement, together with a corresponding increase in retained earnings, over the periods in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award ('vesting date'). At each balance sheet date before vesting the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately vest. Market conditions are taken into account in determining the fair value of the options granted, at grant date, and are subsequently not adjusted for. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.

No expense or increase in equity is recognised for awards that do not ultimately vest. Awards where vesting is conditional upon a market condition are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are charged to the share premium account.

Leased assets

In accordance with IAS 17, all the Group's leases are determined to be operating leases and the payments made under them are charged to the income statement on a straight line basis over the lease term. Lease incentives are spread over the term of the lease.

Operating leases are leases in which the risks and rewards of ownership are not transferred to the lessee.

a) Called up share capital

Called up share capital represents the aggregate nominal value of ordinary shares in issue.

b) Share premium

The share premium account represents the incremental paid up capital above the nominal value of ordinary shares issued.

c) Translation Reserve

The translation reserve represents the cumulative translation adjustments on translation of foreign operations.

d) Merger Reserve

The merger reserve represents the excess over nominal value of the fair value of consideration received for equity shares issued directly to acquire another entity meeting the specific requirements of section 612 of the Companies Act 2006. 

Standards and interpretations not yet applied

The following new Standards and Interpretations, which have been adopted by the European Union and are yet to become mandatory, have not been applied in the 2013 group financial statements.

Standard or Interpretation Effective for periods beginning on or after

IAS 19 Employee Benefits (revised June 2011) 1 January 2013

Amendments to IAS 1 Presentation 1 January 2014

Amendments to IAS 27 Presentation 1 January 2013

Amendments to IAS 32 Presentation 1 January 2013

CONSOLIDATED INCOME STATEMENT

* Administrative expenses include Depreciation, Amortisation and Impairment £0.36 m (2012: £0.1m); Share Based Compensation £ 13K (2012: £Nil). Administrative expenses £4.6m (2012: £3.2m).

Consolidated STATEMENT OF COMPREHENSIVE INCOME

Consolidated STATEMENT OF FINANCIAL POSITION

The financial statements were authorised by the Board of Directors and were signed on its behalf by:

Gaston Cerf

Chief Financial Officer

1 October 2013

Company number: 03696108

Consolidated STATEMENT OF CHANGES IN EQUITY

consolidated CASH FLOW statement

Notes to the consolidated financial statements (CONTINUED)

1. General information

Mobile Streams Plc (the Company) and its subsidiaries (together 'the Group') sell digital content, primarily for distribution on wireless devices. The Group has subsidiaries in Europe, Asia, North America and Latin America. The Group has made various strategic acquisitions to build its market share in these regions.

The Company is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is Abacus House, 33 Gutter Lane. London, EC2V 8AR.

The Company is listed on the London Stock Exchange's Alternative Investment Market.

In the current year, the Brazilian subsidiary was dissolved in October 2012, so it is no longer included in the consolidated financial statement, with effect from the date of liquidation.

These consolidated financial statements have been approved for issue by the Board of Directors on 2 October 2013.

2. Critical accounting estimates and judgements

Estimates are evaluated on a regular basis and are based on historical experience and other factors, such as expectations of future events that are believed to be reasonable under the circumstances.

Judgements are evaluated on a regular basis and are based on historical experience and other factors, such as expectations of future events that are believed to be reasonable under the circumstances.

2.1 Critical accounting estimates, judgements and assumptions

The Group makes estimates and assumptions concerning the future. These estimates, by definition, will rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimates

(a) Goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy. The recoverable amount of cash-generating units has been determined based on value-in-use calculations. These calculations require estimates to be made. Refer to note 13.

(b) Accrued revenue and accrued content costs

Estimation is required by management to determine the value of accrued revenue and accrued content cost liability which is based on the content delivery to its customers. Due to the timing of confirmation of delivery of content to its customers from the service providers, management estimation is applied to determine the level of accrued revenue and accrued content liability to be recognised within the financial statements until confirmation is received.

Judgement

(c) Risk of currency

73% of the company's cash is held within its Argentinian subsidiary. The Argentinian government has imposed restrictions on certain cross border transactions, including the remitting of cash back to the Group's parent company in the UK. While the Argentinian subsidiary is currently unable to freely transfer cash back to its parent company, there are mechanisms by which cash can be transferred indirectly albeit at a discount on the official exchange rate.

The results and financial position of the Argentinian subsidiary are translated into Sterling at official exchange rates for inclusion in the Group's consolidated financial statements. The directors have considered whether dual exchange rates might exist, with a second 'effective' exchange rate arising from the mechanism through which cash can be remitted, and whether the results and position of the Argentinian subsidiary should be translated at this second rate on consolidation. The directors are of the opinion that using the official exchange rate is most appropriate because:

• The Group has no requirement to transfer cash from Argentina to the UK and is not projected to have any such requirement for the foreseeable future

• The directors do not expect the currency restrictions to remain in place indefinitely and it is unlikely that the Group would remit cash to its parent unless this could be achieved at the official exchange rate

• The Group is currently able to utilise the cash held in Argentina to support the trading activities of certain other companies within the Group without restriction

 (d) Income taxes

The Group is subject to income taxes in various jurisdictions. Judgement is required in determining the worldwide provision for income taxes. There are many transactions/calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome is different to what is initially recorded, such differences will impact the income tax and deferred tax provisions. 

e) Deferred taxation

Judgement is required by management in determining whether the Group should recognise a deferred tax asset. Management consider whether there is sufficient certainty its tax losses available to carry forward will ultimately be offset against future earnings, this judgement impacts on the degrees to which deferred tax assets are recognised (see note 17).

3. Directors' and Officers' remuneration

The Directors are regarded as the key management personnel of Mobile Streams Plc.

Charges in relation to remuneration received by key management personnel for services in all capacities during the Year ended 30 June 2013 are as follows:

*Appointed on 13 June 2013. 250,000 shares options were granted to Mr. Cerf on 13 June 2013.

4. Services provided by the group's auditor and network firms

5. Depreciation, amortisation and impairment

6. Finance income

7. Finance EXPENSE

8. EARNINGS PER SHAREBasic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

Weighted average number of shares

The adjusted EPS has been calculated to reflect the underlying profitability of the business by excluding non-cash charges for depreciation, amortisation, impairments and share compensation charges

9. Directors and employees

Staff costs during the year were as follows:

The average number of employees during the year to June 2013:

10. income tax expense

The tax charge is based on the loss for the year and represents:

11. DIVIDENDS

No dividends were paid or proposed during the current year or prior year.

12. Property, plant and equipment

13. Goodwill AND INTANGIBLE ASSETS

The carrying amount of goodwill is entirely attributable to Mobile Streams (Hong Kong) Limited and its subsidiaries in Singapore and Australia which make up the Asia Pacific reportable segment. Following an impairment review at the balance sheet date the recoverable amount of this asset was found to be lower than its carrying value so an impairment of ₤334k has been charged (2012: No impairment charge). The recoverable amount was determined based on value-in-use calculations, based on budgets for the next seven years prepared by senior management. These budgets are for longer than the standard five year period suggested by IFRS because new contracts have been signed by existing customers extending over this period. These budgets have been extrapolated over a twenty year forecast using a growth rate of 2.5%. A discount rate of 13.7%, based on WACC of the group, is used in the valuation of cash-generating units. There was no change in the method of estimation during the year.

Other intangible assets

Mobile Streams' other intangible assets comprised acquired customer relationships, technology based assets and non-compete agreements. These assets were fully amortised in the year.

14. Trade and other receivables

The carrying value of trade receivables is considered a reasonable approximation of fair value.

Trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables, on the basis of age and collectability, were found to be impaired and a provision for doubtful debts of £136,000 (year ended 30 June 2012: £91,000) has been recorded.

In addition, some of the unimpaired trade receivables are past due as at the reporting date. The profile of financial assets past due but not impaired is as follows:

Provision for doubtful debts reconciliation

Trade and other receivables that are not past due or impaired are considered to be collectible within the Group's normal payment terms.

15. Cash and cash equivalents

Cash and cash equivalents include the following components:

*See note 2.1

16. Trade and other payables

All amounts are short term. The carrying values are considered to be a reasonable approximation of fair value.

17. Deferred TAX ASSETS AND liabilities

Deferred tax liability on intangible assets has decreased as a result of impairment and amortisation. 

18. SHARE CAPITAL

The Company only has one class of share. The total number of shares in issue as at 30 June 2013 is 36,632,292 (30 June 2012: 36,457,692) with a par value of £0.002 per share. All issued shares are fully paid.

The Group's main source of capital is the parent company's equity shares. The policy which is met by the Group is to retain sufficient authorised share capital so as to be able to issue further shares to fund acquisitions, settle share based transactions and raise new funds. Share based payments relate to employee share options schemes. The schemes have restrictions on headroom so as not to dilute the value of issued shares of the Company. The Group has not raised debt financing in the past and expects not to do so in the future.

Allotted, called up and fully paid

19. Share based payments

The Group operates three share option incentive plans - an Enterprise Management Incentive Scheme, a Global Share Option Plan and an ISO Sub Plan - in order to attract and retain key staff. The remuneration committee can grant options over shares in the Company to employees of the Group. Options are granted with a fixed exercise price equal to the market price of the shares under option at the date of grant and are equity settled, the contractual life of an option is 10 years. Exercise of an option is subject to continued employment. Options are valued at date of grant using the Black-Scholes option pricing model.

The fair value per option of options granted during the year 2013 and the assumptions used in the calculation are shown below: