Vipera Regulatory News (VIP)

VIPERA PLC

("VIPERA" or "THE COMPANY")

Annual Report and Audited Financial Statements for the year ended 31 December 2013

Notice of Annual General Meeting

The Company is pleased to announce the publication of its annual report and audited financial statements for the year ended 31 December 2013, extracts from which are set out below, and which are also available on the website www.vipera.com.

The Company has published a Notice of Annual General Meeting. The meeting takes place at the offices of Beaumont Cornish Limited, Bowman House, 29 Wilson Street, London EC2M 2SJ on Thursday, 3 July 2014 at 12 noon.

Strategic Report

Activities and business review

Vipera provides software and services that enable mobile access to personal financial services and offers multi-channel mobility solutions for a range of banking, card management and other functionality ready for deployment by financial institutions, primarily banks.

In 2013 Vipera continued its growth with revenues increasing from £974,000 to £1.4M in 2013. This builds on the growth in the prior year from revenues of £660,000 (2011) to £974,000 (2012). The results of the Group for the year are set out in the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Financial Position.

We continue to widen our customer base, with more emphasis on larger European financial institutions. In particular, we believe that we are successfully engaging in relationships which strengthen our sales channels and reinforce our credentials in the mobile financial services market place. In parallel, we have continued to receive further business from existing customers as we work with them to enhance their mobile services.

Your Board would like to thank all of our staff and our business partners for their enthusiastic work and commitment over the last year.

Strategy

The Group's core strategy is to provide and develop sophisticated customized solutions, operating both directly and also through local partners in key markets for distribution and system integration. Deployment of systems is subject to varying pricing models according to the needs of the customer, in common with normal practice in systems solutions industry.

Research and development

We have continued to invest in our product, creating enhancements in response to and in anticipation of trends in industry and technology, capitalising some £221,000 of expenditure on the Motif platform.

Acquisition

To augment our in-house team of technologists, Vipera buys in specialist programming skills and manpower resources used in deploying new customer installations, and to a lesser extent creating enhancements and additions to Vipera's software platform. This outsourcing has enabled Vipera to stay flexible in its overheads.

However, we have grown to the point where it would be beneficial to bring these resources in-house and accordingly in December 2013 we acquired a controlling 51% stake in our main supplier of such services, AC&D Srl. AC&D, also trading as Advance Codd & Date, is a software consultancy that provides contract programmers and IT advice at a senior level. It has a strong presence in the Italian banking industry. The key major shareholders are the managers who continue to develop the business. In the year to 31 December 2013, the company had a turnover of €4.2M (2012: €2.6M) and a profit before tax of €0.25M.

The consideration for the acquisition was £1.8M, satisfied by the allotment of an initial consideration of 19,125,000 new ordinary shares: deferred consideration of allotment a further 6,375,000 new ordinary shares, payable upon AC&D meeting certain conditions, was satisfied in May 2014.

Financial review and key performance indicators

The Board considers that for 2013, sales growth and the financial outturn for the year continue to be the key performance indicators. Continued sales growth reflects increasing customer acceptance and market credibility.

Targeting this sales growth has called for investment in the future, balanced against profitability. The group made a substantially reduced loss before tax of £104,360 for the year ended 31 December 2013 (2012: loss of £537,159); being a loss per share of 0.09p (2012: 0.39p). Given that the acquisition of AC&D took place on December 30, 2013, the trading results of that entity have been completely excluded from the reported Group trading results for the year, albeit the consolidated balance sheet (Statement of Financial Position in IFRS parlance) reflects the enlarged group at 31 December 2013.

Growth of the Group also calls for additional working capital. Accordingly, in December 2013 investors (a) contributed £0.54M of additional capital through the issue of 10.8M new ordinary shares, and (b) converted debts of £0.56M into 11.7M new ordinary shares, including the exercise of some older warrants. This considerably strengthened our balance sheet and provided additional capital.

Future developments

Vipera is looking to work closely with strategic partners to broaden its customer reach and to continue to develop new functionality that both takes advantage of advances in technologies, and identifies with customer and end user needs. The Group is seeking to expand its sales team to help execute its plans.

Events after the reporting period

Since 31 December the Company has raised a further £1.1M of capital through the issue of 18,880,000 new ordinary shares and allotted 6,375,000 new Ordinary shares by way of deferred consideration in respect of the acquisition of AC&D. It has also recruited a senior salesman to augment the existing sales team

Change in presentation currency

Given the growth in the Group's sales in Europe, the great majority of the Group's revenues and earnings are now denominated in Euros. Accordingly, the Board has decided to change the Group's presentation currency to Euros from 1 January 2014. The change will allow the financial statements to be presented in the currency that most closely represents the Group's operations. The first set of financial results to be presented in Euros will be the interim results for the six months ending 30 June 2014.

Vipera plc, which is registered in England, will continue to have its shares quoted in Sterling on the AIM market of the London Stock Exchange.

Notes to Editors

Vipera provides software and services to banks and financial institutions, primarily through its Motif platform, to enable mobile access to personal financial services. Additionally Vipera's software enables Government and corporate entities to allow their services and consumer transactions to take place on mobile platforms. All products within the Motif suite share market leading security models, a consumer friendly interface and support for different devices and languages.

Vipera's headquarters are in Milan and it listed on the London Stock Exchange (AIM: VIP.L). For further information, please visit www.vipera.com.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2013

The loss for the financial year dealt with in the financial statements of the Parent Company, Vipera Plc, was £255,057 (2012 - loss of £238,787). As permitted by Section 408 of the Companies Act 2006, no separate statement of comprehensive income is presented in respect of the Parent Company.

Vipera plc acquired its interest in AC&D Srl on December 30, 2013. The directors consider that the extent of trading results attributable to one day, 31 December 2013, is negligible and accordingly no profit or other comprehensive income arising from AC&D Srl in the year to 31 December 2013 has been consolidated and no non-controlling interest in the results for the year arise.

Consolidated Statement of Financial Position

As at 31 December 2013

Parent Company Statement of Financial Position

As at 31 December 2013

Company number 05383355

Consolidated Statement of Changes in Equity

For the year ended 31 December 2013

Attributable to the owners of the parent

.

Parent Company Statement of Changes in Equity

For the year ended 31 December 2013

Attributable to the owners of the parent

Consolidated and Parent Company Cash Flow Statements

For the year ended 31 December 2013

Notes to the Financial Statements

For the year ended 31 December 2013

3 Total revenue and segmental analysis

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision-maker, being the Chief Executive Officer, and the Chief Financial Officer to allocate resources to any segments and to assess their performance. Given the size and straightforward nature of the business, Management considers there to be a single activity, being the provision of software and associated services, substantially operating in one market: financial services in Europe and Middle East.

Total revenue comprises:

4 Staff costs

The average number of employees, including Directors, employed by the Group was:

Employees', including Directors', costs comprise:

Staff costs include £156,098 (2012: £112,463) of costs capitalised and included under additions to non-current intangible assets.

5 Directors

Directors' emoluments comprise:

Information regarding Directors' share options and warrants is shown under Directors' Interests in the Directors' Report.

The deferred remuneration relates to the salaries and fees of the directors that have not been paid in the financial year ended 31 December 2013 and treated as loans from the directors to the group.

6 Operating loss

The acquisition of AC&D Srl took place on 30 December 2013. Accordingly, no profit or other comprehensive income in the year to 31 December 2013 has been consolidated.

7 Operating Expenses by nature

8 Finance income

9 Finance costs

Interest payable primarily arises on long term loans. (see note 0)

10 Tax

Analysis of tax charge/(credit) on continuing operations:

Factors affecting the tax credit for the year

The tax for the year is higher (2012 - lower) than the standard rate of corporation tax in the UK applied to the Group loss before tax of 24% (2012: 24%). The difference is explained below:

Factors affecting the tax charge of future periods

Tax losses available to be carried forward by the Group at 31 December 2013 against future taxable profit are estimated to comprise excess management expenses of approximately £915,000 arising in the UK and trading losses of approximately £2,350,000 arising in Switzerland. In addition, capital losses of approximately £2,175,000 arising in the UK are available to be carried forward.

A deferred tax asset at 24% amounting to approximately £220,000 (31 December 2012: £85,000) has not been recognised in respect of accumulated realised losses in the UK (excluding capital losses), as there is insufficient evidence that the asset will be recovered in the foreseeable future. There were no other factors that may affect future tax charges.

11 Earnings per share

Basic loss per share has been calculated by dividing the loss attributable to equity holders of the company after taxation by the weighted average number of shares in issue during the year. There is no difference between the basic and diluted loss per share as the effect on the exercise of options and warrants would be to decrease the loss per share.

Since the year end, no warrants have been exercised which may result in the dilution of the earnings per share in the future. Details of share options and warrants that were anti-dilutive but may be dilutive in the future are set out in note 0.

12 Goodwill

Impairment Tests on Goodwill

Management reviews the business performance based on sales and profitability. On 30 December 2013 the Company acquired 51% of AC&D Srl.

A summary of goodwill allocation in the Group is as follows:

The goodwill relating to the Parent Company is attributable to the benefits derived from the listing of the Parent Company and reflects the cost of the reverse acquisition and admission to listing in 2010.

The goodwill relating to AC&D Srl is attributable to industry and technology know-how and customer relationships in that subsidiary.

The recoverable amount of the goodwill in AC&D Srl is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections, based on financial budgets approved by management covering a one-year period. Cash flows beyond the one-year period are extrapolated using the estimated growth rates stated below.

The key assumptions used for value-in-use calculations in 2013 are as follows:

Management determined budgeted gross margin based on past performance and its expectations of market development. The average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax, and reflect specific risks relating to the relevant operating segment.

The recoverable amount calculated based on value in use exceeded carrying value by £1.5M. A reduction in gross margin to 13.4%%, a fall in growth rate to -0.1% or a rise in discount rate to 20% would remove the remaining headroom.

13 Business Combinations

On 30 December 2013, the Group acquired 51% of the share capital of AC&D Srl for £1,816,875. As a result of the acquisition, the Group is expected to strengthen its presence in its markets. It also expects to reduce costs through economies of scale.

The goodwill of £1,680,215 arising from the acquisition is attributable to the acquired customer base and economies of scale expected from combining the operations of the Group. None of the goodwill recognised is expected to be deductible for income tax purposes.

The following table summarises the consideration paid for AC&D Srl and the fair value of assets acquired, liabilities assumed and the non-controlling interest at the acquisition date:

Recognised amounts of identifiable assets acquired and liabilities assumed

Acquisition-related costs of £9,800 have been charged to administrative expenses in the Group Statement of Comprehensive Income for the year ended 31 December 2013.

The fair value of the 25,500,000 Ordinary Shares (issued as initial consideration and to be issued as deferred consideration) paid for AC&D Srl (£1,816,875) was based on the published share price on 30 December 2013.

The fair value of trade and other receivables is £1,855,486 and includes trade receivables with a fair value of £1,623,412. The gross contractual amount for trade receivables due is £1,650,064, against which provision for bad debts of £26,652 has been made.

No revenue or profits attributable to AC&D Srl were included in the Group Statement of Comprehensive Income to 31 December 2013. Had AC&D Srl been consolidated from 1 January 2013, the Group Statement of Comprehensive Income would show revenue of £3,534,878 and profit before tax of £195,945.

14 Intangible assets

The above intangible assets comprise investment in the development of Vipera product platforms. All research and development costs not eligible for capitalisation have been expensed.

The recoverable amount of the above cash-generating unit has been determined based on value in use calculations. No goodwill is allocated to the Group's Vipera cash generating unit as this related to the Parent Company as explained in note 0. The value in use calculations use cash flow projections based on financial budgets approved by Management covering a two year period. These incorporate contracted revenues, revenues which are based on project tenders and projected revenue. Given the nature of the work and the visibility of revenue in the future, it is considered appropriate not to extend the discounted cash flow workings beyond this period. Probabilities have been assigned to revenues based on the anticipated success - a rate of 90-95% has been applied to contracted work, versus 65-82.5% applied to projected work. A discount rate of 15% has been used in the calculations. The recoverable amount based on value in use exceeded the carrying value by £2.3M. A reduction in the projected revenues by 53% would remove the remaining headroom and give rise to the recognition of an impairment charge against profit or loss. The impairment review did not identify any impairment for recognition in the current or prior year.

15 Deferred taxation

Deferred tax assets are recognised on tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable.

The movement in deferred tax assets and liabilities during the year is as follows:

16 Property, plant and equipment

17 Investment in subsidiary undertakings

In December 2013 a controlling 51% stake in AC&D Srl, for a consideration of £1.8M, satisfied by the allotment of an initial consideration of 19,125,000 new ordinary shares and, on 30 May 2014, deferred consideration of a further 6,375,000 new ordinary shares.

The following are the principal subsidiaries of the Company at 31 December 2013 and at the date of these financial statements.

On February 27, 2014 AC&D Srl changed its name to Codd & Date Srl.

18 Loans to subsidiary undertakings

During the year, the parent company advanced further funds to subsidiary undertakings to provide working capital and funds for investment in further development of the Group's motif platform.

19 Trade and other receivables

Trade receivables

Included in the Group's trade receivables are debtors with a carrying amount of £728,166 (2012 - £170,090) which are past due at the reporting date against which the Group has provided £26,652 (2012 - nil) to reflect changes in credit quality and recoverability.

The carrying amount of the Group's trade receivables are denominated in the following currencies:

The maximum exposure to credit risk at the reporting date is the carrying value reported above. The Group does not hold collateral as security.

20 Trade and other payables

Shareholder loans are unsecured, bear an interest rate of 5% and are repayable subject to the Board's evaluation of the Group's working capital needs.

21 Borrowings

Borrowings represent sales invoices, in Italy, denominated in Euros, which have been discounted at a floating borrowing rate of some 11% and are repayable upon collection of such invoices. At 31 December 2013, there was some £50,000 of unused facility.

The fair value of the current borrowings equals their carrying value, as the impact of discounting is not significant. The fair values are based on cash flows discounted using a rate based on the borrowings rate of 11%.

22 Non current liabilities

Other payables of £nil (2012 - £691,692) represent loans from shareholders. The amounts are unsecured, accruing interest and repayable at the discretion of the Board taking into account the working capital requirements of the Group.

23 Called up share capital

The Ordinary Shares entitle the holders to receive all ordinary dividends and all assets on a winding up, subject only to satisfying the entitlement, if any, of the holders of the Deferred Shares.

A Deferred Share does not entitle the holder thereof to receive notice of or attend and vote at any general meeting of the Company or to receive a dividend or other distribution or to participate in any return of capital on a winding up other than the nominal amount paid on such shares once the holders of new Ordinary Shares have received a distribution of £10,000,000 per new Ordinary Share.

Since 31 December 2013, 25,632,362 additional ordinary shares have been issued and details are set out in note 0.

24 Shares to be issued

Shares to be issued comprise the 6,375,000 new Ordinary Shares to be allotted in consideration of the deferred consideration in respect of the acquisition of AC&D as set out in note 0.

25 Share Based Payments

Warrants

At 31 December 2013, warrants to subscribe for 8,169,932 new Ordinary Shares in the Company were in issue as follows:

The outstanding warrants are exercisable as follows:

The interests of the Directors in the above warrants are set out in the Directors' Report.

The warrants outstanding at 31 December 2013 had a weighted average remaining contractual life of 2 years, 51 days (2012: 2 years, 91 days).

Options

At 31 December 2013, options to subscribe for 4,020,000 new Ordinary Shares in the Company were in issue as follows:

The outstanding options are exercisable as follows:

The interests of the Directors in the above options are set out in the Directors' Report.

The options outstanding at 31 December 2013 had a weighted average remaining contractual life of 2 years, 39 days.

Since 31 December 2013, 4,600,000 additional options have been granted and details are set out in note 0.

Fair value of warrants and options

The fair value of the share options and warrants issued during 2013 was determined using the Black Scholes valuation model. The assumptions used in applying the Black Scholes pricing model were as follows:

The volatility was determined by examining the monthly share price for the earlier part of the financial year up to the date on which the instruments were issued.

26 Contingent liabilities

The Board does not consider that the Group has any material contingent liabilities.

27 Financial commitments

Operating leases

At 31 December 2013 the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

28 Financial instruments

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis for measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument, are disclosed in the accounting policies in note Error! Reference source not found..

Categories of financial instruments

The carrying value of each class of financial asset denoted above approximates to its fair value.

Fair value measurements recognised in the statement of financial position

IFRS 13 requires the classification of fair value measurements using a fair value hierarchy that reflects the significance of the inputs used to determine those fair values. The Group has no financial instruments whose fair value has been determined using a valuation technique required to be discussed by IFRS 13.

Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders. The Group's capital structure primarily consists of equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.

Financial Risk Management

The Group's finance function monitors and manages the financial risks relating to the operations of the Group. The Group is exposed to credit risks and market risks including foreign exchange risk, price risk and to a very limited amount interest rate risk and liquidity risk.

The Board of Directors monitors risks and implements policies to mitigate financial risk exposures.

Foreign exchange risk

Foreign exchange risk arises because the Group has operations located in various parts of the world whose functional currency is not the same as the functional currency (Euro and Swiss Franc) in which other Group companies are operating. The Group's net assets arising from such overseas operations are exposed to currency risk resulting in gains and losses on retranslation into Sterling. Only in exceptional circumstances will the Group consider hedging its net investments in non Sterling operations as generally it does not consider that the reduction in foreign currency exposure warrants the cash flow risk created from such hedging techniques. It is the Group's policy to hold surplus funds over and above working capital requirements at the Parent Company treasury. The Group considers this policy minimises any unnecessary foreign exchange exposure.

In order to monitor the continuing effectiveness of this policy the Board through their approval of both corporate and capital expenditure budgets, and review of the currency profile of cash balances and management accounts, considers the effectiveness of the policy on an ongoing basis.

Price risk

The Group is not exposed to commodity price risk as a result of its operations. The Directors will revisit the appropriateness of this policy should the Group's operations change in size or nature.

The Group has no exposure to equity securities price risk, as it has no listed equity investments.

Credit risk

Credit risk arises from the Group's trade receivables. Where no independent rating of customers is available, credit control assesses the quality of customers by reference to their financial position, past experience and any other relevant factors.

Interest rate risk management

The Group has a mix of borrowings at fixed and variable interest rates and is therefore exposed to interest rate risk at renewal of facilities, and on a continuing basis. The low interest rates currently prevailing mean that there is little downside risk to rates currently earned on cash balances, and the low quantum of borrowings means that there is little downside risk to interest expense incurred.

Liquidity risk management

The Group manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

29 Treasury Policy and financial instruments

The Group operates informal treasury policies which include continuing assessments of interest rate management and borrowing policy. The Board approves all decisions on treasury policy.

Facilities are arranged, based on criteria determined by the Board, as required to finance the long-term requirements of the Group. To date the Group has primarily financed its activities by the raising of funds through the issue of shares and shareholder loans.

The risks arising from the Group's financial instruments are foreign exchange, liquidity and interest rate risk. The Directors review and agree policies for managing these risks and they are summarised below:

Foreign exchange risk

The group has not hedged against the foreign exchange risk as the Directors are of the opinion that the foreign exchange fluctuations would not have a significant impact on the financial statements of the Group at the present time. . It is the Group's policy to hold surplus funds over and above working capital requirements at the Parent Company treasury. The Group considers this policy minimises any unnecessary foreign exchange exposure. The Directors will continue to assess the effect of movements in exchange rates on the Group's financial operations and initiate suitable risk management measures where necessary.

Liquidity and interest rate risk

The Group seeks to manage financial risk, to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. This is achieved by the close control of the Directors of Vipera Plc in the day to day management of liquid resources. Cash is invested in deposit accounts which provide a modest return on the Group's resources whilst ensuring there is limited risk of loss to the Group. The deposit accounts are held at HSBC Bank plc and the Group earns interest at rates that depend on the amount of money deposited at any one time. The Standard & Poor's rating of HSBC Bank plc at December 2013 was AA-.

In parallel, cash flow management is eased through a limited use of invoice discounting as described in note 0.

30 Related party transactions

Directors' transactions

The Group paid fees amounting in total to £23,011 (2012 - £8,111) for services supplied or procured for the Group by Mobile World Srl, of which Marco Casartelli is a Director and holds an interest. Mobile World Srl has made interest free loans to the Group pursuant to which, at 31 December 2013 £79,778 was due to it (2012 - £68,773).

Details of Directors' interests in Ordinary Shares and in warrants and share options are as disclosed in the Directors' Report, together with details of other significant holdings in the equity of the Company. The Company has no ultimate controlling party.

Parent Company transactions with subsidiary companies

During the year the Company received management fees of £62,966 (2012 - £52,620) from its subsidiaries. At the year end £1,824,586 (2012 - £1,352,159) was due from the subsidiary companies.

31 Events after the Reporting Period

On 14 February 2014 the Company raised additional capital, issuing 17,648,363 new ordinary shares to raise £1,058,900 before expenses at a price of 6p per share. On that date, the Company also issued options to purchase a total of 4,000,000 New Ordinary Shares pursuant to a Share Option Plan, for the benefit of employees of the Group. These options are exercisable at a price of 6p per Ordinary Share, and are exercisable in 3 tranches as to 1/3rd from 31 December 2014, 1/3rd from 31 December 2015 and 1/3rd from 31 December 2015, in each case up and until 31 December 2017 subject to normal conditions as to the option holder being an eligible employee.

On 26 February 2014 the Company raised additional capital, issuing 1,229,999 new ordinary shares to raise £73,800 before expenses at a price of 6p per share.

On each of 14 April 2014 and 19 May 2014, the Company issued options to purchase 300,000 New Ordinary Shares pursuant to a Share Option Plan, for the benefit of employees of the Group. These options are exercisable at a price of 6.875p per Ordinary Share, and are exercisable in 3 tranches as to 1/3rd from 31 December 2014, 1/3rd from 31 December 2015 and 1/3rd from 31 December 2015, in each case up and until 31 December 2017 subject to normal conditions as to the option holder being an eligible employee.

On 30 May 2014 the Company allotted 6,375,000 new Ordinary shares as set out in note 0.

The financial information set out above comprises non-statutory accounts. The financial information for the year ended 31 December 2013 has been extracted from the accounts for the year ended 31 December 2013 on which the report of the auditors was unqualified.