NOTE 1: GENERAL
The combined financial information of the Group has been prepared by XLMedia PLC (the
‘‘Company’’) in a condensed format as of 30 June 2013 and for the six months then ended (‘‘interim combined financial information’’). The interim combined financial information should be read in conjunction with the Group’s annual combined financial information as of 31 December 2012 for the Group’s business and for the year then ended and accompanying notes (‘‘annual combined financial information’’) as included in the AIM admission document.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation of the interim combined financial information:
The interim combined financial information has been prepared using the same accounting policies as those followed in the preparation of the annual combined financial information, as included in the AIM admission document, except for the adoption of new standards effective as of 1 January 2013, as described below. The interim combined financial information is prepared in accordance with International Financial Reporting Standards as adopted by the European Union as applicable to interim condensed financial statements, except in respect of certain matters as more fully described in the annual combined financial information.
Adoption of new standards:
The Group applies, for the first time, the following new Standards which had no material effect on the combined financial information:
IFRS 10 – Consolidated Financial Statements IFRS 11 – Joint Arrangements
NOTE 3: OPERATING SEGMENTS (a) General:
The operating segments are identified on the basis of information that is reviewed by the chief operating decision maker (‘‘CODM’’) to make decisions about resources to be allocated and assess its performance. Accordingly, for management purposes, the Group is organised into operating segments based on the products and services of the business units and has operating segments as follows
Content and Search Engine Optimisation (‘‘SEO’’)
— The Group earns the majority of its revenue from the monetisation of traffic generated by its own portfolio of websites. The Group owns more than 2,000 websites which provide gambling related content, in 17 languages, to potential players. The sites’ content, written by professional writers, is designed to attract online gamblers which the Group then directs to gambling operators. The sites either direct players to a certain operator or will allow the players to select the operator most relevant to their requirements.
Media — The Group’s Media Buying division acquires online
advertising media targeted at potential players with the objective of directing them to the Group’s customers. The Group buys advertising space on search engines, websites and social networks and places adverts referring potential players to the Group’s customers’ websites or to its own websites.
Affiliates Network — The Group manages affiliates, whose role is to direct potential players to the Group’s customers for which the Group receives revenues. The Group is the
responsible for paying its affiliate partners. The Group’s affiliate programme enables affiliates to have a single point of contact to direct traffic to, and receive monies from, rather than engaging in multilateral negotiation, administration and collection of revenues.
Segment performance (segment income) is evaluated based on revenues less direct operating costs.
Items that were not allocated are managed on a group basis.
(b) Reporting on operating segments:
SEO segment
Media segment
Affiliates Network
segment Total USD in thousands
Period ended 30 June 2013:
Revenues 9,374 3,976 2,655 16,005
Segment profit 7,340 2,567 351 10,258
Unallocated corporate expenses (3,340)
Finance expense, net (292)
Income before taxes on income 6,626
Period ended 30 June 2012:
Revenues 7,335 4,404 1,015 12,754
Segment profit 4,575 3,170 166 7,911
Unallocated corporate expenses (1,807)
Other income, net 1,536
Finance expense, net (1)
Income before taxes on income 7,639
SEO segment
Media segment
Affiliates Network
segment Total USD in thousands
Year ended 31 December 2012:
Revenues 14,922 8,183 3,030 26,135
Segment profit 10,188 5,607 477 16,272
Unallocated corporate expenses (4,203)
Other income, net 1,378
Finance income, net 27
Income before taxes on income 13,474
NOTE 4: SIGNIFICANT EVENTS DURING THE PERIOD
(a) In January 2013 the Company paid USD 2 million on account of the contingent consideration (for more details see Note 5(a)(i) for the annual combined financial information).
(b) In May 2013 the Company fully repaid the liabilities to Related Parties in amount of USD 2,381 thousands (for more details see Note 5(a)(iii) and (iv) for the annual combined financial information).
(c) In June 2013 the Group (as lessee) has entered into new commercial real estate lease agreements.
The leases are under non-cancellable terms and mature over 2-4 years with annual lease fees in amount of about USD 517 thousands, started from August 2013.
NOTE 5: SUBSEQUENT EVENTS
(a) In July 2013 the Company entered into an agreement to sell its assets and business activity in Turkey (the ‘‘Sale Agreement’’), for consideration of USD 1,500 thousands to be paid in 60 monthly installments beginning 30 days after closing of the Sale Agreement. The Sale Agreement also sets that the parties will enter into a service agreement (the ‘‘Sale Service Agreement’’) to be provided by the Company to the purchaser. The closing took place on 31 October 2013.
In addition the Company entered into Sale Service Agreement under which the Company will provide certain services including marketing and IT services to the purchaser for consideration of USD 150 thousands per quarter. The Company will also be entitled to an annual bonus as will be agreed between the parties. The Sale Service Agreement will be in force for at least 60 months commencing from the closing date. However, following a change of control in the Company, the purchaser will have the right to immediately terminate the service agreement within a period of 60 days following such change of control.
(b) In June 2013, the Company’s shareholders authorised and approved the effectuation of a 1:100 share split of the authorised share capital of the Company (‘‘Split I’’), so that all the Company’s shares shall be subject to the Split I (i.e. each share, USD 1.00 par value, shall be split into 100 shares, USD 0.01 par value each). Following the Split I the Company’s authorised share capital consisted of 10,000,000 Ordinary Shares par value USD 0.01, of which 10,000 shares were issued and outstanding.
In addition in December 2013 the Company’s shareholders authorised and approved the effectuation of 1:10,000 share split of the authorised share capital of the Company (‘‘Split II’’), so that all the Company’s shares shall be subject to the Split II (i.e. each share, USD 0.01 par value, shall be split into 10,000 shares, USD 0.000001 par value each), and adjustment of all the Company’s securities effectuated by the Split II, to correspond with the Split II. Following the Split II the Company’s authorised share capital consists of 100,000,000,000 Ordinary Shares par value USD 0.000001, of which 100,000,000 shares are issued and outstanding.
(c) In August 2013 the Company adopted a Share Option Plan. According to the plan, The Company’s Board of Directors is entitled to grant certain employees/other service providers of the Company (including its present and future subsidiaries) remuneration in the form of equity-settled share-based payment transactions that are measured based on the increase in the Company’s share price.
Pursuant to the plan, subject to the Company’s Board of Directors’ approval, the Company’s employees/other service providers will be granted with options exercisable into a corresponding number of the Company’s ordinary shares. Grants to Israeli employees will be made in accordance with Section 102 of the Income Tax Ordinance, capital-gains track (with a trustee).
These options may be exercised, subject to the continuance of engagement of such employees/
other service providers with the Company, within a period of eight years, at an exercise price to be determined by the Company’s Board of Directors.
In October 2013, the Company granted, within the framework of the plan, certain employees/
service providers of the Company, an aggregate amount of 3,250,000 options, exercisable into 3,250,000 ordinary shares of the Company (‘‘Options A’’). The exercise price of these Options A is USD 0.154 per each share.
Subject to the terms of the plan, each of Options A optionees will be entitled to exercise the options into shares in accordance with the following vesting scheme: 25% of the options have vested on 22 April 2013 (‘cliff’) and the remaining 75% of the options will vest on a quarterly basis over a period of 3 years, in equal portions, i.e. 6.25% per each calendar quarter.
In February 2014 the Company granted the CEO 1,540,000 options to purchase 1,540,000 ordinary shares. The exercise price of Options B is USD 0.154 per share. Options B vest over a period of three years from 1 January 2014. 25% of Options B are deemed to have vested on 1 January 2014 with the remaining options vesting pro rata on a quarterly basis over the three year period.
In February 2014 the Company granted 1,260,000 options to purchase 1,260,000 ordinary shares at an exercise price of $0.154 (‘‘Options C’’). Options C vest over a period of 27 months from 1 January 2014. 44% of Options C are deemed to have vested on 22 January 2014 with the remaining options vesting pro rata on a quarterly basis over the 27 months period.
In February 2014 the Company granted 1,200,000 options to purchase 1,200,000 ordinary shares at an exercise price equal to the price per share on admission to AIM (‘‘Options D’’). Options D vest over a period of four years from 1 January 2014. 25% of Options D shall vest on 1 January 2015 with the remaining options vesting pro rata on a quarterly basis over the remaining three year period.
In March 2014, the Company granted the CEO 1,000,000 options to purchase 1,000,000 shares.
The exercise price of these options is the Placing Price. These options vest over a period of three years from the date of Admission pro rata on a quarterly basis over the three year period.
(d) In August 2013 the Company declared and paid a dividend in amount of USD 1.8 million.
(e) In November 2013 the Company (through a subsidiary founded for this purpose) entered into an agreement to buy 100% of the shares of the Subsidiary for the consideration of USD 3,4 million. According to the agreement the consideration will be paid in two installments, the first of USD 1,2 million to be paid immediately, and the remainder to be paid no later than 31 December 2013. This transaction is a business combination involving entities under the common control of the Parent Company and will be accounted for in a manner similar to a pooling of interests. For further details in the accounting policy see Note 2(c) for the annual combined financial information.
(f) In November 2013 the Company changed its name from Webpals Marketing Systems Ltd. to its current name and moved its place of incorporation from Seychelles to Jersey.
(g) In December 2013 the Company has entered into a Share Purchase Agreement (‘‘SPA’’) with a new investor under which the Company issued 2,016 ordinary shares, par value USD 0.01 each constituting 16.78% of the Company’s capital for consideration for USD 15 million.
The agreement provides for the investor being issued with additional ordinary shares to the extent that an IPO is completed within six months of closing at a price per share that is less than 25 per cent. higher than the price per ordinary (as may be adjusted in the interim) paid by the investor under the terms of the agreement. As a consequence of this, the investor will be issued with additional 2,377,500 ordinary shares on Admission.