Interim / Quarterly Report • Mar 31, 2017
Interim / Quarterly Report
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Unaudited Interim Report for the Six Month Period Ended 31 March 2017
| Company Information | 3 |
|---|---|
| Interim Management Report | .4 |
| Responsibility Statement | 9 |
| Condensed Consolidated Statement of Comprehensive Income | 11 |
| Condensed Consolidated Statement of Financial Position |
12 |
| Condensed Consolidated Statement of Changes in Equity |
13 |
| Condensed Consolidated Statement of Cash Flows |
15 |
| Notes to the Condensed Consolidated Interim Report | 16 |
Richard Horsman (Chairman & Non-Executive Director) Geoffrey Wilson (Non-Executive Director) Andrew Hollingworth (Chief Executive Officer) Neil Taylor (Chief Financial Officer)
WKH Company Secretary Services
PO Box 501 The Nexus Building Broadway Letchworth Garden City Hertfordshire SG6 9BL
10037980 (England and Wales)
The last six months has seen Toople make significant progress in establishing itself as a new brand in the competitive UK small business communications market. The Board believes that Toople is increasingly being recognised by SMEs as a trusted, reliable and transparent provider of business communications solutions. We also believe we have the potential to achieve our ambition to become one of the leading providers of bespoke telecom services to UK SMEs. This is based on the response so far to Toople's range of telecoms products and customer service. As a Board, our focus is on supporting management to capture the opportunity we see in the five million-strong UK SME market and delivering long-term value to our shareholders.
Our cash position as at 31 March 2017 was £191,584. However, in order to continue growing our customer base, further investment is required. To ensure the Company has the resources to take advantage of the market opportunity, as noted in our March 2017 trading update, the Board is reviewing funding options to provide additional working capital to drive accelerated sales growth in the higher margin, retail business and cloud based telephony services through targeted marketing and advertising campaigns. Funds will also be used for general working capital purposes to support the needs of the business. The Directors are seeking shareholder authorities to provide the Company with the flexibility to raise these further funds in the future. A Notice of General Meeting was published and sent to shareholders on 4 May 2017 and the Company will be holding the meeting at the offices of Gowling WLG, 4 More London Riverside, London, SE1 2AU on 24th May 2017 at 10:00 a.m.
In April, we announced Neil Taylor is stepping down from his role as Chief Financial Officer and from the Board of Directors following the publication of these results. Neil has been a director of Toople on a part-time basis since March 2016 and has established our financial operations, supported the Company through the IPO process and helped establish the Toople brand. This change is in line with the expectations set out in our IPO prospectus. We are in the process of recruiting a permanent replacement and in the meantime Geoffrey Wilson, Non-Executive Director will assume the role of part-time CFO. Geoff has considerable experience in the telecoms industry, having held a number of senior roles including Finance Director of TalkTalk Business. To ensure a smooth transition, Neil will remain as a consultant until the recruitment process is completed. I would like to take this opportunity on behalf of the Board to thank Neil for his hard work and dedication. Furthermore, I would also like to thank our all our employees for their hard work and commitment and shareholders for their continued support.
Over the last six months, we have made significant progress against key objectives. Our SME customer base is growing, our direct digital marketing has started well, our cloud based telephony services have proved popular and we see opportunities to increase the number of Toople products purchased by our customers.
The growth in customer numbers and revenue generating units ("RGUs) since launch of the Toople brand in H2 2016 has resulted in revenue of £654,721 during the period, being a 63% increase since H1 2016 (£402,609). The launch of our first direct digital marketing campaign at the end of February saw customer numbers accelerate to almost 800 at the end of April (excluding wholesale), representing over 1200 RGUs. The campaign helped orders grow by 81% to the end of April 2017 from the campaign launch compared to the number of orders in January and February.
As we said in January 2017, due to the increased competition in the SME broadband market, we are focusing on driving our cloud based business telephony services — Toople.com Classic and Toople.com Premium — which offer higher margins and customers taking longer contracts. Despite this, we have still seen broadband orders increase, though we have declined to fight for market share by getting involved in high cost promotional activity.
As a result of the focus on higher margin direct propositions, gross margins have increased from 8.1% in full year 2016, to 12.5%, and at £82,034, gross profit is 89% higher than the second half of 2016. This helped the operating loss before taxation improve 49% versus the second half of 2016 to £603,763 where the loss had grown to £1,193,876 million, albeit that the H2 2016 loss included one-off IPO related costs. We expect to see margins continuing to improve as we focus on direct orders as opposed to wholesale growth.
Finally, as previously noted our cash position as at 31 March 2017 is £191,584.
Our ambition is to become the one of the leading providers of bespoke telecom services to UK SMEs. We have developed a range of telecoms products to meet the communications needs of this market based around connectivity, mobility and business telephony. These products are:
Since launch in January 2017 we have seen strong interest in our cloud-based telephony services which the Board identified as a key driver for new customer acquisitions. The services, Toople.com Classic and Toople Premium, which allow the service to be used on any Android or IoS device as well as the customer's default hardware, have proved popular. Both propositions provide an efficient way for small businesses to have a reliable, maintenance free phone system that requires minimum capital expenditure and no advance payment. For Toople, it has the additional benefit that all Toople.com Classic and Toople Premium customers are signing 36 month agreements compared to 12 or 24 months for Broadband and Mobile. Furthermore, all of the customers have paid for Toople's unlimited calls package and over 70% of these customers also order Toople broadband for their connectivity.
The broadband business market remains competitive. However, we continue to grow our orders without committing to taking market share at all costs. Our fixed, transparent pricing based on great customer service still remains attractive to customers. More customers are also taking up our business mobile phone offering as we have improved our proposition. We are benefiting from the addition last May of O2 4G and Vodafone 4G to our existing EE 3G services. This was five months ahead of schedule allowing us to market our highly competitive mobile propositions earlier than planned. Early in 2017, we also enhanced the packages by adding 2,000 EU roaming minutes and 2,000 EU roaming texts to existing deals and 500mb of EU data roaming with no increase in cost for the customer.
All Toople products are delivered and managed through Merlin, the Group's proprietary software platform. Merlin provides an end-to-end automated process that allows customers to place orders easily, and enables the business to grow its customer base, without the need to scale expensive resources. This helps support one of our key differentiators - quality of customer service.
A number of other telecoms companies buy services from Toople, white label the propositions and resell to their own customers. Furthermore, the Merlin software platform gives access to wholesalers who want to interconnect with carriers for provisioning and billing services for their own customers, where a monthly licence fee is applicable to access Merlin. Over time, the proportion of revenues we achieve from wholesale will reduce as we focus on the higher margin retail business. Wholesale is not a strategic priority for the Company.
As discussed, we have already started to grow our SME customer base through direct digital marketing and we anticipate building on this growth through further investment in the future. Toople's approach to customer acquisition is to deploy a marketing and advertising strategy aimed at delivering high-levels of online market penetration either directly or via comparison sites to increase brand awareness. The focus is on attracting customers through the quality and transparency of Toople's products and keeping them through their service experience once they are signed up. This means opportunities for us to grow the number of Toople products they have.
Since our launch, Toople has been steadily increasing our SME customers with a step up of 81% in orders following the start of the digital marketing campaign at the end of February to 30 April 2017. The campaign used cost effective digital communication channels including social media to allow potential customers to experience Toople's services through Toople.com. The website allows customers to design their services package in accordance with the needs of their business which greatly influences their decision to buy.
Senior management intend to focus on increasing the average monthly order rate during 2017 as we seek to grow our customer base. Over time, we aim to increase the customers acquired directly through online marketing driven by our proprietary CRM system – Merlin – or through greater brand recognition, with customers increasingly searching directly for Toople. This will achieve lower customer acquisition costs overall. All online marketing activity is closely monitored by Toople's management on a daily and even hourly basis to assess the impact and effectiveness of the marketing campaigns and make changes as required.
The current cost of customer acquisition ranges between £40 and £91 per customer with the aim of achieving a 30% margin over the contract life of a typical customer.
In the near term, brand recognition is primarily being driven by Toople's presence on comparison sites. Toople has been accredited by more than 30 of the UKs biggest businessto-business cashback and comparison sites, with the most notable listings on; uSwitch, Quidco, Topcashback, Money Supermarket and Broadband Genie. Orders continue to be placed online or through our agents as a result of our presence on these sites. Brand presence on these sites will also help drive overall brand recognition for the Company resulting in more organic brand search which means overtime, lower customer acquisition costs.
Once signed, customer experience is critical to delivering best in class retention rates: and as customer contracts mature, it provides us with the best opportunity to sell more than one product to re-contracting customers. This is central to Toople's strategy and we aim to attract and retain customers by delivering "right first time" UK based customer service. Our average customer satisfaction score of 8.7 out of 10 via Trustpilot is higher than the average scores achieved by the more established companies operating in the sector including BT Business and Virgin Media Business.
It means that as Toople grows, growing absolute customer numbers will become less relevant to our success as we increase the number of customers taking more than one product. Therefore, we also report on RGUs, which represent the number of individual services that result in recurring billable revenue and margin. This can encompass telephone lines; broadband lines, data lines, sim cards and hosted seats. Since launch of the Toople brand, RGUs (excluding wholesale) have increased to over 1200.
We believe recent developments in the political environment and in the regulation of the UK telecoms sector following the 2016 Strategic Review of Digital Communications by Ofcom will support the successful long term delivery of Toople's strategy.
First, the legal separation of Openreach from BT is a welcome step which should improve the competitive landscape, reducing the advantage enjoyed by BT Business while allowing better access to the network assets by alternative infrastructure companies to release more investment.
Second, the UK political establishment has recognised the need to improve the nation's historically low rates of the productivity. UK SMEs are the backbone of the economy and improving their productivity is vital. We believe this means SME's need access to better digital infrastructure that is in line with the very best in the world. It is vital that the next Government ensures that the UK's digital infrastructure is a key priority and has a plan that ensures even greater role out of FTTP.
Third, while the uncertainty around the political environment and Britain's decision to leave the European Union may have a negative impact on business and consumer confidence this means SMEs will be more focused on operational costs. We believe Toople's transparent and competitively priced offer is well-placed to benefit.
The first six months has seen solid progress as Toople establishes itself in the UK SME communications market. Since the launch of the brand a year ago, we have proved that there is a real appetite for a new entrant in the SME business communications market. We are still very early in our development and our primary focus is on growing our customer base and building greater recognition of the Toople brand and its products. We are beginning to see the rewards from our investment. The launch of our first direct digital marketing campaign at the end of February 2017 saw orders increase 81% by the end of April 2017 with almost 30% of all orders in March and April for our new cloud based telephony services.
Over the next six months, subject to funding, we plan to continue to invest in direct digital marketing to drive further growth in customer numbers and RGUs across all our propositions, while keeping the cost of customer acquisition as low as possible.
Like any business, our outlook is impacted by external factors. The economic outlook for UK following the Brexit vote may result in a period of uncertainty for businesses. However, we believe our fixed, transparent pricing policy will position Toople as an even more attractive proposition for UK SMEs. Toople propositions require no upfront capital expenditure and can help reduce the operational costs of small businesses, which is valuable in such times.
Our experience over the last year confirms our view that Toople enjoys significant advantages over our competitors. We are already recognised as a more trusted, reliable and transparent provider of business communications solutions than many traditional, larger providers with the flexibility to move more quickly to address changing customer demand. We are confident that our ambition to become one of the UK's leading providers of bespoke telecom services to SMEs is achievable.
I would like to thank the shareholders, the Board, the Toople team and most importantly our customers who have all contributed to the progress of Toople over the last 12 months.
Andrew Hollingworth Chief Executive Officer
The Group is subject to a number of risk factors. The Company's prospectus published at the time of its Standard Listing included a detailed assessment of the risks facing the business. The Directors have identified the following key risks in the second six months of this financial year. Other risk factors not presently known or currently deemed immaterial may also apply.
The Directors seek to mitigate these risks by applying their considerable experience of operating businesses in the sector and by devising trading and operating strategies designed to seek out and exploit profitable trading opportunities whilst seeking to protect the business from downside risks.
The Directors are responsible for preparing the Interim Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority ('DTR') and with International Accounting Standard 34 on Interim Financial Reporting (IAS 34).
The Directors confirm that the interim financial statements have been prepared in accordance with IAS 34 and that as required by DTR 4.2.7 and DTR 4.2.8, the Interim Report includes a fair review of:
The Directors who served during the period and up to the date of signing the interim financial statements were:
Richard Horsman Geoffrey Wilson Andrew Hollingworth Neil Taylor
Company Secretary: WKH Company Secretary Services
By Order of the Board Andrew Hollingworth Chief Executive Officer 8 May 2017
The condensed consolidated statement of comprehensive income of the Group for the six month period from 1 October 2016 to 31 March 2017 is set out below.
| NOTE | Period ended | Period ended | |
|---|---|---|---|
| 31 Mar 17 | 31 Mar 16 | ||
| Continuing operations | £ | £ | |
| Revenue | 654,721 | 402,609 | |
| Cost of Sales | (572,687) | (368,388) | |
| Gross Profit | 82,034 | 34,221 | |
| Administrative expenses | (661,983) | (573,459) | |
| Operating loss | (579,949) | (539,238) | |
| Interest payable and similar charges | (23,947) | (464) | |
| Interest receivable | 133 | ||
| Loss before taxation | (603,763) | (539,702) | |
| Taxation | - | ||
| Loss for the period | (603,763) | (539,702) | |
| Other comprehensive loss for the period | (603,763) | (539,702) | |
| Total comprehensive loss for the period attributable to the equity owners |
(603,763) | (539,702) | |
| Loss per share | |||
| Basic and diluted earnings/(loss) per share | 5 | (0.60) | (0.72) |
The condensed consolidated statement of financial position as at 31 March 2017 is set out below:
| As at | As at | ||
|---|---|---|---|
| NOTE | 31 Mar 17 | 30 Sep 16 | |
| (Unaudited) | (Audited) | ||
| £ | £ | ||
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 10,096 | 14,546 | |
| 10,096 | 14,546 | ||
| Current assets | |||
| Trade and other receivables | 191,920 | 223,674 | |
| Cash and cash equivalents | 191,584 | 743,824 | |
| 383,504 | 967,498 | ||
| Total assets | 393,600 | 982,044 | |
| EQUITY and LIABILITIES | |||
| Share capital | 6 | 66,700 | 66,700 |
| Share premium | 1,900,245 | 1,900,245 | |
| Merger reserve | (25,813) | (25,813) | |
| Share based payment reserve | 55,705 | 24,130 | |
| Capital contribution reserve | 113,669 | 137,616 | |
| Retained earnings | (2,555,180) | (1,975,364) | |
| Total equity | (444,674) | 127,514 | |
| Current liabilities | |||
| Trade and other payables | 7 | 345,602 | 385,390 |
| 345,602 | 385,390 | ||
| Non-current liabilities | |||
| Financial liabilities – borrowings | 7 | 492,672 | 469,140 |
| 492,672 | 469,140 | ||
| Total equity and liabilities | 393,600 | 982,044 |
The unaudited condensed consolidated statement of changes in equity of the Group for the period to 31 March 2017 is set out below:
| NOTE | Share capital |
Share premium |
Merger reserve |
Share Based Payment reserve |
Capital contribution Reserve |
Accumulated deficit |
Total |
|---|---|---|---|---|---|---|---|
| PRIOR PERIOD | £ | £ | £ | £ | £ | £ | £ |
| Brought forward at 01 October 2015 Loss for the period |
26,013 | 0 | (25,813) | 0 | 0 | (260,851) (539,702) |
(260,651) (539,702) |
| Total comprehensive loss for the period |
(539,702) | (539,702) | |||||
| At 31 Mar 2016 | 26,013 | 0 | (25,813) | 0 | 0 | (800,553) | (800,353) |
| NOTE | Share capital |
Share premium |
Merger reserve |
Share Based Payment reserve |
Capital contribution Reserve |
Accumulated deficit |
Total |
|---|---|---|---|---|---|---|---|
| CURRENT YEAR | £ | £ | £ | £ | £ | £ | £ |
| Brought forward at 1 October 2016 |
66,700 | 1,900,245 | (25,813) | 24,130 | 137,616 | (1,975,364) | 127,514 |
| Loss for the period | (603,763) | (603,763) | |||||
| Total comprehensive loss for the year Transactions with owners |
(603,763) | (603,763) | |||||
| Share based payment charge credited to equity |
31,575 | 31,575 | |||||
| Equity component of interest free loan Transfer of interest |
- | ||||||
| accrued | (23,947) | 23,947 | 0 | ||||
| At 31 March 2017 | 66,700 | 1,900,245 | (25,813) | 55,705 | 113,669 | (2,555,180) | (444,674) |
The condensed consolidated cash flow statement of the Group from 1 October 2016 to 31 March 2017 is set out below:
| Period ended | Period ended | |
|---|---|---|
| 31 Mar 17 | 31 Mar 16 | |
| £ | £ | |
| Cash flows from operating activities | ||
| Operating loss | (579,949) | (539,238) |
| Depreciation and amortisation | 4,450 | - |
| Share based payment charge | 31,575 | - |
| Changes in working capital | ||
| Decrease in receivables | 31,753 | 838 |
| (Decrease)/Increase in payables | (40,201) | 170,259 |
| Taxation | - | - |
| Net cash outflow from operating activities | (552,372) | (368,141) |
| Cash flows from financing activities | ||
| Finance costs | - | 464 |
| Proceeds from Director Loan | - - |
- 150,078 |
| Net cash from financing activities | - - |
- 149,614 |
| Cash flows from investing activities | ||
| Finance income | 132 | 0 |
| Net cash from investing activities | 132 | 0 |
| Net increase/(decrease) in cash and cash equivalents | (552,240) | (218,527) |
| Cash and cash equivalents at start of year | 743,824 | 130,853 |
| Cash and cash equivalents at end of year | 191,584 | (87,674) |
The Company was incorporated in England and Wales on 2 March 2016 as a public limited company. The Company's registered office is located at PO Box 501, The Nexus Building, Broadway, Letchworth Garden City, Hertfordshire, SG6 9BL.
The Group provides a range of telecoms services primarily targeted at the UK SME market. Services offered by the Group include business broadband, fibre, Ethernet First Mile and Ethernet data services, business mobile phones, cloud PBX and SIP Trunking and traditional services (calls and lines) all of which are delivered and managed through Merlin, the Group's proprietary software platform.
On 15 April 2016, the Company entered into four share for share exchange agreements with David Breith pursuant to which the Company acquired the entire issued share capital of each of Toople.com Limited, Toople Finance Limited, Toople Management Services Limited and AskMerlin Limited (together the "Subsidiaries") in consideration for the issue and allotment to David Breith of 39,000,000 ordinary shares in the Company.
The Directors consider the substance of the acquisition of the Subsidiaries by the Company to have been a reverse asset acquisition by the Subsidiaries and that the substance of the Subsidiaries was that of a single business under common ownership and control. Further, the Directors consider that the Company did not meet the definition of a business set out in IFRS3 'Business combinations'. As a consequence, the Directors consider that the transaction which gave rise to the formation of the Group fell outside the scope of IFRS3 and have applied the business reorganisation principles of UK GAAP to account for the combination. The consolidated financial statements therefore present the combination as a continuation of the combined financial information of the Subsidiaries with no goodwill arising on the transaction. The financial information prior to the date of the combination on 15 April 2016 is pro forma.
The interim condensed unaudited financial statements for the period ended 31 March 2017 have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at the year ended 30 September 2016. The results for the period ended 31 March 2017 are unaudited.
The condensed unaudited consolidated financial statements for the period ended 31 March 2017 have adopted accounting policies consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 30 September 2016
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the group's accounting policies.
This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong. Detailed information about each of these estimates and judgements is included together with information about the basis of calculation for each affected line item in the financial statements.
The areas involving significant estimates or judgements are:
• Going concern
At 31 March 2017 the Group had £191,584 of cash and net assets of £47,998 excluding the non-current liability owed to a shareholder that (at the option of the company) is not payable until 2019, and then only at the Boards discretion with reference to liquidity of the business.
In order to continue growing our customer base, further investment is required. To ensure the Company has the resources to take advantage of the market opportunity the Board is reviewing funding options to provide additional working capital. The Directors are therefore seeking shareholder authorities to provide the Company with the flexibility to raise these further funds in the future and are confident that the necessary further investment will be forthcoming. There can, however, be no assurance that this will be the case.
Should the company be unable to continue trading, adjustments would have to be made to reduce the value of the assets to their reasonable amounts, to provide for further liabilities which might arise, and to classify fixed assets as current.
The going concern basis of accounting has been applied based on management's consideration of financial projections and business plan for the business, these include a number of forward looking assumptions about the future growth in the customer base and a reduction in costs following the successful website development, digital marketing, and Merlin integration with its associated consultants and agencies.
Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectation of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
For the purpose of IFRS 8 the chief operating decision maker ("CODM") is the board of Directors. The Directors are of the opinion that the business comprises a single economic activity, being the provision of telephony services and that currently this activity is undertaken solely in the United Kingdom. All of the income and non-current assets are derived from the United Kingdom. The Company has a single customer that, in the reporting period, amounted to more than 10% of the Company revenue, revenue generated from this customer amounted to £326,161. At meetings of the Directors, income, expenditure, cash flows, assets and liabilities are reviewed on a whole Group basis. Based on the above considerations there is considered to be one reportable segment only, namely telephony services.
Therefore, the financial information of the single segment is the same as that set out in the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes to equity and the consolidated statement of cash flows.
The calculation of loss per share is based on the following loss and number of shares:
| Period ended | Period ended | |
|---|---|---|
| 31 Mar 17 | 31 Mar 16 | |
| Loss for the year from continuing operations |
(603,763) | (539,702) |
| Weighted average shares in issue Basic and diluted number of shares |
100,000,000 | 75,000,000 |
| Basic and diluted earnings/loss per share (pence) |
(0.60) | (0.72) |
As detailed in note 1, the consolidated financial statements present the combination as a continuation of the combined financial information of the Subsidiaries with no goodwill arising on the transaction. Basic loss per share is calculated by dividing the loss for the year from continuing operations of the Company by the weighted average number of ordinary shares in issue during the year.
The denominator for loss per share for the period ended 31 March 2016 reflects the shares issued on incorporation of the Company and to acquire the Subsidiaries on 15 April 2016 and is therefore pro forma.
The Company has in issue 8,100,000 warrants at 31 March 2017. The inclusion of the warrants in the weighted average number of shares in issue would be anti dilutive and therefore they have not been included.
| No | Nominal value £ |
|---|---|
| 36,000,000 | 24,012 26,013 |
| 25,000,000 | 16,675 |
| 100,000,000 | 66,700 |
| 39,000,000 |
On incorporation, the Company had an unlimited authorised share capital and an issued share capital of 36,000,000 ordinary shares of par value 0.0667 pence each.
On 15 April 2016, 39,000,000 ordinary shares were issued and allotted to David Breith in accordance with the terms of the share exchange agreements in relation to the acquisition of the subsidiaries
On 10 May 2016 following the Company's listing on the London Stock Exchange, 25,000,000 ordinary shares of par value 0.0667 pence each were issued, fully paid at £0.08 per share. A commission of £80,000 was payable to the brokers and this has been recognised against the share premium account.
Also on 10 May 2016 following the Company's listing on the London Stock Exchange, the Company issued warrants over 8,100,000 ordinary shares as follows:
The ordinary shares have attached to them full voting, dividend and capital distribution rights (including on a winding up). The ordinary shares do not confer any rights of redemption.
The fair value of the 3,000,000 warrants issued to the Non-Executive Directors and of the 100,000 warrants issued to Cairn Financial Advisers have been determined using the BlackScholes option pricing model. The fair value at the date of grant per warrant was £0.04 for the 3,000,000 tranche and £0.03 for the 100,000 tranche. The fair value of the warrants issued to the Non-Executive Directors has been charged to the income statement evenly over the vesting period resulting in a charge in the current period of £31,575. The fair value of the warrants issued to Cairn Financial Advisers of £3,080 has been included in the costs of the Company's and placing and therefore debited to share premium in the year ended 30 September 2016.
The inputs to the Black-Scholes model were as follows:
| Warrants granted | 3,100,000 |
|---|---|
| Stock price | 8p |
| Exercise price | 8p |
| Risk free rate | 1% |
| Volatility | 70% |
| Time to maturity | 4 years/2 years |
The Company has recently listed on the main market of the London Stock Exchange. It is difficult to calculate the expected volatility of its share price at the year end. Management have therefore considered volatility of listed entities in similar operating environments to calculate the expected volatility.
The fair value of the 5,000,000 warrants issued to subscribers to the placing is considered to comprise a component of the fair value of the ordinary shares issued in the placing. The Directors do not consider the fair value of the warrants to be a material component of the fair value of the shares issued in the placing.
| As at | As at | |
|---|---|---|
| 31 Mar 17 | 30 Sep 16 | |
| £ | £ | |
| Trade payables | 104,048 | 187,087 |
| Social Security and other taxes | 39,638 | 56,606 |
| Other payables | 22,271 | 10,271 |
| Accruals and deferred income | 179,645 | 131,426 |
| 345,602 | 385,390 | |
| As at | As at | |
| 31 Mar 17 | 30 Sep 16 | |
| Non – current liabilities |
||
| Shareholder loan account | 492,672 | 469,140 |
Financial liabilities, with the exception of the shareholder loan included within trade and other payables are all considered to be repayable within 30 days.
On 3 May 2016, the Company put in place formal documentation relating to the balance owed to David Breith, the majority shareholder. The balance cannot be recalled by the shareholder until the third anniversary of the agreement and after this anniversary only repayable if the board consider the Company in a position to service the debt. Therefore, the balance has been classified as non-current in the financial statements but is shown as current in the comparative.
The loan is interest free and has a cash value of £606,756, the Directors consider the market rate of interest that they may be able to obtain for a similar borrowing from a 3rd party to be 10%. The present value of the loan is £492,672 and the present value adjustment has been recognised as a capital contribution within equity. The value of the interest that has been recognised in the statement of comprehensive income at 31 March 2017 is £23,947.
| 6 months to | 6 months to | |
|---|---|---|
| 31 Mar 17 | 31 Mar 16 | |
| £ | £ | |
| Goods/services purchased from Vitrx Limited | 4,599 | 2,797 |
| Goods/services purchased from Blabbermouth Marketing Limited |
0 | 2,000 |
| Goods/services purchased from Diffrenet Limited | 8,368 | - |
| Goods/services purchased from Dotfusion Limited | 30,780 | 7,000 |
| Goods/services supplied to Vitrx Limited | 9,489 | |
| Goods/services supplied to Diffrenet Limited | 240 | - |
| 53,476 | 11,797 |
The above companies are disclosed as related parties due to the nature of the business relationship with Mr David Breith, a major shareholder of Toople PLC. Mr David Breith is a Director or co-owner of the above companies, excluding Dotfusion.
Mr Piotr Kwiatowski is the owner of Dotfusion and is a shareholder in Toople PLC.
The Board does not believe there are any subsequent events requiring further disclosure or comment.
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