contents ar2015_final_0.… · contents page 2 officers and advisors 3 chairman’s statement 4...

ContentsPage2 Officers and Advisors

3 Chairman’s Statement

4 Chief Executive’s Statement

8 Strategic Report

11 Directors’ Report

13 Corporate Governance

16 Report on Remuneration

19 Report of the Independent Auditor

20 Principal Accounting Policies

30 Consolidated Statement of Comprehensive Income

31 Consolidated Statement of Financial Position

32 Consolidated Statement of Changes in Equity

33 Consolidated Cash Flow Statement

34 Notes to the Financial Statements

56 Notice of Annual General Meeting

Annual Report and Financial Statementsfor the year ended 31 December 2015

Toumaz LimitedREPORT AND ACCOUNTS 2015

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Registered office: Intertrust Group190 Elgin AvenueGeorge TownGrand CaymanCayman Islands

Directors: Mr A Sethill (CEO)Mr J Apps (CFO)Professor C Toumazou FRSMr C Batterham (Non-Executive Director)Dr M Knight (Non-Executive Director)

Secretary: Intertrust GroupCayman Islands

Assistant Secretary: Mr J Apps137 Euston RoadLondonNW1 2AA

Nominated adviser and broker: Peel Hunt LLPMoor House120 London WallLondonEC2Y 5ET

Registrars: Capita Registrars (Jersey) Limited12 Castle StreetSt Helier, JerseyJE2 3RTChannel Islands

Depository: Capita IRG Trustees LimitedThe Registry34 Beckenham Road, BeckenhamKentBR3 4TU

Solicitors: Taylor Wessing LLP5 New Street SquareLondonEC4A 3TW

Auditor: Grant Thornton UK LLP3140 Rowan PlaceOxford Business Park SouthOxfordOxfordshireOX4 2WB

Officers and Advisors


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Since I took over as Chairman of the Board in June last year, the key issue for the Group has been how to optimiseshareholder value from our investment in Healthcare. At the same time, I have been keen to ensure that our DigitalAudio business is free to take advantage of the very significant opportunities available to it in digital radio andconnected audio.

In autumn 2015, the Board appointed advisors to examine strategic options for Healthcare. This was against abackground of slower than expected commercial uptake of SensiumVitals®, relatively slow progress towardsdemonstrating the system’s ability to deliver significant cost efficiencies – and the resulting increase in investmentneeded to take the business through to break-even. The work of the advisors is under way and the Board expects totake decisions on their recommendations in mid-2016.

Despite slow progress in Healthcare, the Group’s financial performance in 2015 was broadly in line with expectations.Revenues grew 22.1% to £32.0 million and EBITDA loss improved from -£9.8m to -£8.9m. The year end cash balancewas £7.7 million and, from H2 16, the Group is expected to be cashflow positive.

As stated previously, it is my view that the R&D expenditure of the company peaked in the first half of 2015 with thecompletion of the fourth generation digital radio chip and the last major expenditure on the next generation connectedaudio chip. R&D was lower in the second half and I expect it to reduce further in 2016. The company will still beallocating resources into software development as that is a direct channel to future revenue streams.

Revenue growth was driven entirely by Digital Audio, up 24.4% to £31.7m; and the outlook for this business is veryencouraging.

The most exciting prospects are in connected audio. Last year, revenues grew 48.1% to £11.1m – driven by growingconsumer demand for Wi-Fi enabled connected audio devices. In June 2015, the Group announced it was developinga new wireless solution incorporating Google Cast, which is due for release in mid-2016. We are one of a very smallnumber of technology providers working with Google on this project. Interest from potential customers is strong. Firstrevenues for the new solution are expected in H2 16, with significant revenue growth expected in 2017.

Our digital radio business is also performing well – revenues in 2015 grew 14.6% to £20.6m. The DAB digital radiomarket is developing positively (particularly in mainland Europe) and the Group retains its strong market leadershipposition. In April 2015, we completed our 4th generation chip and this is now being rapidly adopted by customers.With the completion of this major R&D investment programme, digital radio is expected to generate healthy cash-flows for the foreseeable future.

In Healthcare, whilst the speed at which customers have moved to adopt SensiumVitals® has been disappointing,several positive developments occurred in the last year. Three NHS trials are currently under way and these haveclearly demonstrated the system’s robustness. Further trials are expected to start soon in the UK and other Europeanmarkets. Perhaps of greatest significance have been recent developments in the US. The Group regained NorthAmerican distribution rights for SensiumVitals® in Q1 2015. In the second half of the year, new regulatory penaltieswere introduced in the USA related to the detection of sepsis. Feedback from potential customers suggests stronginterest in understanding the extent to which SensiumVitals® could help address this risk.

Finally, I would like to thank staff across the whole of the Group for their efforts. I would also like to thank my Boardcolleagues for their support and advice – in particular, Sir Hossein Yassaie, who stood down from the Board lastmonth. Hossein has played a key role in the Group’s development and his contribution has been invaluable. I wishhim the very best for the future. The Board has commenced a search for a new Non-Executive Director.

Martin KnightChairman

21 March 2016

Chairman’s Statementfor the year ended 31 December 2015


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OverviewIn 2015 Group revenues rose 22.1% to £32.0 million and the adjusted EBITDA loss was reduced from £9.8 million to£7.8 million. R&D expenditure of £11.3 million has now passed its peak and, with cash at year end of £7.7 million,the Board is confident sufficient funds are in place to see the Group through to break-even this year.

The Digital Audio business (Frontier Silicon) was EBITDA positive at an operating level for the majority of 2015 andis well positioned to benefit from the developing opportunities in its two sectors – digital radio and connected audio.

In digital radio, Frontier Silicon is established as market leader in technology for consumer DAB receivers. In 2015digital radio revenues grew 14.6% to £20.6 million. The Group completed development of its fourth generation digitalradio chip in April – marking the end a period of significant R&D expenditure for this business line.

With international markets for DAB continuing to develop and grow, digital radio is expected to generate significantpositive cash-flows into the mid-term.

Frontier Silicon’s connected audio business is performing strongly with revenues up 48.1% to £11.1 million and itsprospects are promising. Underpinning this growth is the rapid expansion of the market for Wi-Fi enabled connectedaudio devices, such as wireless speakers, internet radios and soundbars.

Connected audio is attracting the interest of major technology players including Google, who have developed Cast,a technology which allows consumers easy access to multiple online music services.

Frontier Silicon is one of a very small number of technology suppliers offering connected audio solutions whichincorporate Google Cast. The Group’s new Cast-enabled solution is expected to ship in the middle of 2016 – withfirst revenues in H2 2016 and more significant uptake expected in 2017. Interest from potential customers is strong.

In the Healthcare division, it became clear in mid-2015 that the pace of commercial adoption of the Group’sSensiumVitals® wireless vital signs monitoring system would be slower than anticipated. The Board therefore decidedto review all strategic options for the business with the aim of maximising shareholder value. Advisors were appointedin Q4 2015 and the process is expected to complete in the middle of 2016.

In parallel, the commercial teams in the UK and US continue to engage positively with key accounts. Three trials inNHS hospitals in the UK are progressing well, with more expected to start soon. The Group’s recently established USteam is receiving positive interest from a number of potential customers.

R&D expenditure peaked in the first half of 2015 with the completion of the fourth generation digital radio chip andthe last major expenditure on the next generation connected audio chip. R&D was lower in the second half and isexpected to reduce further in 2016. The Group will still be allocating the necessary resources to support its softwaredevelopment needs.

Current trading and outlookThe Group expects digital radio and connected audio sales to continue in line with recent trends, with the connectedaudio unit expected to start shipping its Cast-enabled solution, Minuet, from the second half of 2016.

Research and development expenditure is expected to continue its decline in absolute terms from its peak in the firsthalf of 2015.

Overall the first two months of 2016 have seen a solid sales performance in Digital Audio. With cash resources of£7.7million at the year end and a projected positive cash flow position in mid-2016 the Board is satisfied with the cashresources of the Group.

Operational Review

Digital Audio (Frontier Silicon)In 2015 Digital Audio revenues grew 24.4% to £31.7 million (2014: £25.5 million) – up 15.3% at constant exchangerates. Growth in digital radio was based on the expansion of European markets for DAB radio – a trend likely tocontinue for the foreseeable future. Growth in connected audio was driven by a combination of design wins andunderlying market growth.

Chief Executive’s Statementfor the year ended 31 December 2015


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Digital radioFrontier Silicon is the world’s leading provider of technology solutions for consumer DAB digital radios. Customersinclude Sony, Philips, Panasonic, Roberts, Grundig and several major retailer own-brands. It has maintained thisposition through a combination of reliable, competitively priced solutions and high levels of customer service.Revenues in 2015 grew 14.6% to £20.6 million driven by a 15.3% increase in volumes to 4.4 million units.

The market for DAB/DAB+ digital radios and the technology inside them is growing steadily – driven primarily byprogress in continental Europe.

The launch of DAB+ in Germany in 2011 was the major catalyst for this growth – with significant market developmentsfollowing in the Netherlands, Italy and France. Last year, Norway became the first country in the world to set a firmdate for Digital Switchover (DSO). FM signals are scheduled to be switched off in 2017 and this has provided asignificant boost to sales in that region. Switzerland will be next with DSO planned for 2020-24.

In April 2015 the Group completed its investment in its fourth generation digital radio chip. This chip is now beingadopted in significant volumes by customers. With the completion of this major development programme, R&Dinvestment in digital radio will be considerably reduced. As a result, the business is expected to generate significantpositive cashflows for the foreseeable future.

Connected audioFrontier Silicon offers a broad range of technology solutions including modules, software and apps that enablemanufacturers to build Wi-Fi enabled connected audio devices, such as wireless speakers, soundbars and internetradios. Revenues in 2015 grew 48.1% to £11.1 million driven by a 34.4% increase in volumes to 850,000 units.

The market opportunity in Wi-Fi connected audio is developing quickly – with market volumes forecast to more thandouble in the next three years – from 22 million units in 2015 to 48 million units in 2018.

This growth is being driven by demand for devices which provide easy access to online music services, such asSpotify, Deezer and Pandora, and the emergence of Wi-Fi as a superior and cost-effective alternative to Bluetooth.

The wireless speaker market is already well-established, with Bluetooth speakers which play content streamed directlyfrom users’ phones. The advantage of Wi-Fi audio systems is that they play content taken directly from the cloud (viaa router rather than the phone). This reduces the speaker’s dependency on the user’s phone – so phone calls can bemade without interrupting the music and there is no need to run down the phone’s battery. Wi-Fi systems also offerthe potential for multi-room audio.

These developments have attracted the interest of major technology companies, who see a position in connectedaudio as a key component of their broader connected home strategies.

The Group’s connected audio business is growing rapidly, with revenues up 48.1% in 2015. The business is wellpositioned to achieve further significant growth. Over the last eight years Frontier Silicon has developed world classconnected audio software and system integration skills, starting with internet radio solutions and then expandinginto Wi-Fi audio systems.

In June last year the Group announced it would develop a new connected audio solution incorporating Google Casttechnology. At the same time the Group also terminated development of its own connected audio silicon, which ithad commissioned from a third party technology provider.

Prospects for this new solution are encouraging. At the recent Consumer Electronics Show (CES) in Las Vegas,Frontier Silicon was one of a very small number of technology providers offering Cast-enabled solutions. Developmentof the new product is proceeding well and is expected to enter mass production this summer. Interest from customersis strong and first revenues are expected in H2 2016 with further growth anticipated in 2017.

Chief Executive’s Statementcontinued


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HealthcareA reassessment of the financial prospects for the Healthcare division in 2015 resulted in the Board initiating a reviewof strategic options for the business. Advisors have been appointed with a remit to engage with potential financial orstrategic investors. This process is under way and the outcome is expected in the middle of 2016.

At an operating level Healthcare is focused on securing commercial trials which demonstrate the system’s ability toimprove both patient outcomes and hospital economics. In the last 12 months the business has made progress in anumber of areas.

In April 2015 development of an enhanced version of SensiumVitals® was completed. This new version of the patchhas been used in trials in three NHS hospitals, including Queen Elizabeth Hospital Birmingham and St James’sUniversity Hospital, Leeds. These trials, whilst still ongoing, have demonstrated the robustness of the system. In thecoming months the Group expects several more trials to start – both in the UK and in continental Europe.

In Q1 2015 the Group regained the North American distribution rights for SensiumVitals®. This was followed by thecreation of a US commercial team and the appointment in September of a new Chief Commercial Officer based inBoston.

This team is now generating significant interest from clinicians and hospital managers, who see the introduction ofSensiumVitals® as a potential means of avoiding or reducing financial penalties arising from the Affordable Care Act(2010).

Additionally, in the second half of the year, new regulatory penalties were introduced in the USA related to thedetection of sepsis. Feedback from potential customers suggests strong interest in understanding the extent to whichSensiumVitals® could help address this risk.

Financial review

RevenueGroup revenue for the year increased from £26.2 million to £32.0 million (+22.1%) this follows growth of 19.6% in2014. The 2015 increase was due to significant growth in Digital Audio, with revenues up 24.4% to £31.7 million(2014: £25.5 million) and unit shipments up 22.7% to 5.2 million (2014: 4.4 million).

Healthcare revenues were £0.3 million (2014: £0.8 million).

Gross profit margin declined marginally from 43.6% to 42.4%. Gross margins are expected to decline further in theimmediate future as connected audio, which has lower margins than digital radio, grows as a proportion of totalrevenues.

R&DThe Group largely completed its investment phase in 2015, with first half R&D expenditure having peaked at£6.4 million. Second half 2015 R&D spend was £4.9 million and is expected to decline further into 2016.

EBITDAAdjusted EBITDA loss improved to £7.8 million (2014: loss £9.8 million). EBITDA loss (loss from continuing operationsless depreciation, amortisation, share based payment costs and a £3.0 million impairment (see below), was reducedto £8.9 million (2014: loss £9.8 million) due to lower operational expenditure and increased absolute margins on theback of higher revenues.

The Board considers that the one-off “exceptional” provision against other receivables (£1.1 million – see below)should also be excluded from EBITDA on the basis that it is a one off non-cash item. On this basis adjusted EBITDAloss for 2015 was £7.8 million compared to £9.8 million in 2014.



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Exceptional chargeAs announced in July 2015, the Board took the view that the connected audio silicon development project beingundertaken by the Group at that time was not the most effective way of delivering its next generation solution. As aresult the Group terminated its involvement in the development programmes and moved to a third party silicon supplier.

As a consequence the Group impaired £3.0 million of IP licences and other intangibles in connection with the previoussilicon development project. The Group recorded a further £1.1 million of royalty receivables due from its technologypartner, who were to continue with the project independently of the Group.

Since year-end, due to a change of the management at the technology partner, the Board believes there is materialuncertainty surrounding the future of the project and has provided in full against those receivables.

These two provisions are both non-cash items.

The table below reconciles the Group’s adjusted EBITDA to its loss for the year.

2015 2014£’000 £’000

Loss for the year (14,735) (12,242)

Add back:Taxation (1,651) (1,273)Net finance charges/(income) 60 51Depreciation 457 419Amortisation 2,736 2,456Share based payment 1,229 825Impairment 3,016 –

EBITDA (8,888) (9,764)

Provision against other receivables 1,122 –

Adjusted EBITDA (7,766) (9,764)

Pre-tax lossThe Group reported a pre-tax loss of £16.4 million (2014: loss £13.5 million).

TaxationThe Group has historically applied for and received tax credits in respect of its research and development expenditure.In 2015 the tax credits amounted to £1.7 million (2014: £1.3 million). It is expected that similar claims will be madein 2016.

As at 31 December 2015 the Group has unutilised tax losses of £57.0 million which may be utilised against taxable futureprofits. These losses are still to be agreed with the UK tax authorities. In the Board’s opinion there is uncertainty overthe timing and quantum of their use in the foreseeable future and therefore a deferred tax asset has not been recognised.

Cash flowAt the year-end the Group recorded £7.7 million of cash and cash equivalents on the balance sheet. The Boardbelieves this is sufficient cover to see the Group through to cash flow breakeven in the middle of 2016.

Anthony SethillChief Executive Officer

21 March 2016



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The Directors present their annual report together with the audited consolidated financial statements of the Groupfor the year ended 31 December 2015. This report has been prepared voluntarily in order to provide appropriateinformation for shareholders.

Principal activityThe principal activity of the Group is commercial exploitation of ultra-low power wireless semiconductor and softwaretechnologies via the Sensium Healthcare and Frontier Silicon Digital Audio divisions. (Digital Audio includesconnected audio and digital radio).

Business reviewA review of the business in the year and of future developments is given in the Chairman’s Statement and ChiefExecutive’s Statement on pages 3 to 7.

The results of the Group are shown within the financial statements. The Directors do not recommend the paymentof a dividend.

The key performance indicators the Directors utilise to monitor the performance of the Group are as follows:

Unit orders and salesThe Group monitors, on a weekly basis, all products ordered and shipped (sold) across all divisions. Monthly targetsare set at the budget approval stage and these targets are reported upon in each month’s management accounts.

Average Selling Prices, Average Cost Prices and Gross MarginsAs with unit orders and sales, sales prices, cost prices and margins are monitored for each product type offered bythe Group. Gross margins by division are reported upon in the management accounts.

Total Revenues, Margins, Overheads and EBITDAThe management accounts include full financials for each division in the business and Digital Audio is split intoconnected audio and digital radio. Comparisons are made to Budget and Prior Year.

Net Working Capital and CashThe Board considers the cash balance of the Group to be of pre-eminent importance. Healthcare is still in the latterstages of being in start-up mode. The Group plans to achieve sustained positive cash flow in the near future but untilthen, cash needs to be carefully managed. Even when sustainable positive cash flow is achieved this focus on cashwill continue.

Hospital deploymentsThe Healthcare division has a number of hospitals where SensiumVitals® has been deployed. These are categorised as:

c Evaluations – the system is deployed on a stand-alone laptop demonstrator, typically used for four to six weeksto show the system’s capabilities

c Trials – deployments where the SensiumVitals® system is integrated with the hospital’s electronic medical recordsand admissions, discharges and transfer system

c Conversions – accounts where a full commercial contract is in place for a ward (or wards) for continual supplyof patches over a number of months or years.

Each of these categories is monitored by the Board on a monthly basis.

FundingDuring the year the Group concentrated on managing the cash resources of the business in line with internal financialprojections. The current forecasts indicate that no further funds are required in the foreseeable future. Shouldadditional funding be required in future periods then it is believed by the Board that a number of potential sourcesmay be available – these would be assessed at that time.

Strategic Report


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Share priceThe share price is constantly under scrutiny by the Board.

Business risksA number of risks and uncertainties could adversely affect the achievement of the Group’s corporate aims. Thefollowing are the key risks the Board has identified together with the processes and policies the Group has in placeto mitigate those risks as far as commercially practical.

The introduction of “disruptive technologies” into the Group’s marketsThe introduction of new and untested “disruptive technologies” into the digital audio and wireless healthcare marketsexposes the Group to the risk that costly developments will take longer to be adopted or not achieve acceptablefinancial returns and put a strain on financial resources. Close relationships with customers, strategic partners andattendance at technology conferences help management keep informed of new technology innovations.

Potential delays in development and testingDesigning and introducing new and revised products, at the cutting edge of the technology central to the Group, canresult in operating failures when first introduced and tested. Delays in this can adversely impact our ability to supplythe products our customers might want in a timely manner. Continued improvement of management of the IC designteam and software development team will mitigate these risks.

In Digital Audio, our customers’ products may be commercially unsuccessfulFrontier Silicon is dependent on connected audio and digital radio manufacturers selecting its solutions for inclusionin their end devices. Even if this occurs, sales of the Group’s solutions are dependent on the commercial success ofthe end consumer products.

Slow adoption of wireless technologies in Healthcare marketsThe Group’s SensiumVitals® system is one of a new class of wearable, wireless vital signs monitors. Although interestin the system appears strong, commercial adoption by hospitals could be slower than expected – for example, dueto slow organisational decision making within hospitals, reticence by some to be “early adopters”, lack of availablefunds within hospitals, concerns about integrating the system with existing hospital IT infrastructures, preference forcompetitor products.

Potential delays or failures to secure regulatory authorisationsAny delay or failure in achieving the required accreditation for our products, such as Medical Devices Approval,would lead to an underachievement of the returns expected from our Sensium Healthcare Division. TheSensiumVitals® system for hospital application (complete system from patient to hospital server and nurses’ workstations) was FDA cleared in July 2011 and European CE mark approval was obtained in October 2013. Regulatoryapprovals for regions including Japan and Brazil are yet to be secured.

Failure to protect properly our intellectual property and challenges for infringement by third partiesWhilst we seek to protect our intellectual property (IP) by a well-structured and controlled process of patentapplications, maintenance and other tools, we face the risk that others may seek to copy and/or infringe certainaspects of our intellectual property. Defence of our claims may prove unsuccessful and expensive. In addition wemight face challenges to our use of intellectual property that others could claim belongs to them. The consequencesof this would be either a complete withdrawal/redesign of the offending product or serious and costly delays inproving our right to exploit the disputed intellectual property. We are not aware of any situation of IP infringement.

Risks associated with our suppliers and partners failing and causing a disruption in supplyWe are dependent on third parties to manufacture our components and, in some cases, assemble our products.Failure of any of our major suppliers could lead to delays in designing and testing new products or in supplyingproducts on time and at the agreed costs to our customers. This risk is reduced by using a number of differentsuppliers wherever possible.

Strategic Reportcontinued


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Dependency on senior management and staff for product developmentIf we fail to retain key management and employees our ability to complete our development programmes andcommitments to customers on time and to budget could lead to delays in achieving Group strategic results. To protectour position in this regard we constantly monitor the competitive nature of our salary and rewards package (includingthe share option scheme) for key employees. We regularly update staff on the Group’s goals, strategy and progressthrough company meetings and individual briefings.

Financial risk management objectives and policiesThe Group’s principal financial instruments comprise cash and cash equivalents. The Group has various other financialinstruments such as trade receivables and trade payables, which arise directly from its operations.

The Group is exposed to a variety of financial risks which result from its operating and investing activities. TheDirectors are responsible for co-ordinating the Group’s risk management and focus on actively securing the Group’sshort to medium term cash flows.

The Group does not actively engage in the trading of financial assets and has no financial derivatives. The mostsignificant risks to which the Group is exposed are described below:

Credit riskThe Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheetare net of any allowance for doubtful receivables, estimated by the Directors. The majority of the Group’s customersare large, established businesses. Credit control checks are carried out on all new customers and credit limits areregularly reviewed.

Cash flow risksThe Group seeks to manage risks to ensure sufficient liquidity is available to meet foreseeable needs by investing cashassets safely and profitably. Short term flexibility is achieved by the use of money markets to deposit excess cashwhich is not required in the short term. The Directors prepare rolling cash flow forecasts to identify the need to raiseany additional funding where a shortfall in facilities is forecast. During the year a £5.0 million loan facility was arrangedand has been fully drawn down, this is repayable over a 3 year period and current forecasts are projecting that nofurther financing will be required.

Currency risksThe Group is exposed to foreign exchange risk. Most of its products are priced in US$ and, whilst the majority of itsthird party cost base is also denominated in US$, a large element of its labour cost is borne in sterling and with thesetting up of the research centre in Timisoara, Romania an element is borne in Romanian LEU. Management aims tokeep a reasonable balance of cash in both US$ and GBP to cover the cost base. The Group does not hedge its foreignexchange risk. At the time when the Directors consider that exposure to foreign exchange trading risks becomessignificant they will seek to adopt appropriate hedging strategies and products.

On behalf of the board

Jonathan AppsAssistant Company Secretary

21 March 2016

Strategic Reportcontinued


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DirectorsThe present Directors of the company are shown on pages 13 to 14. Details of share options held by the Directorsare set out in the Report on Remuneration on pages 16 to 18. Details of the Directors biographies are set out on page13 to 14.

Substantial shareholdingsThe only interests in substantial holdings of share capital of the Group which have been notified as at 21 March 2016were as follows:

Ordinary shares Percentageof 0.25p each of capital

Number %

M & G Investments 318,050,895 19.8Herald Investment Management 211,077,949 13.2AXA Framlington 120,755,563 7.5Luc Van Schil 97,520,754 6.1Jupiter Asset Management 69,190,242 4.3

Employee involvementThe Group has continued its practice of keeping employees informed of matters affecting them as employees and thefinancial and economic factors affecting the performance of the Group.

This is achieved through consultations with employees and regular staff meetings. Employee share option schemeshave operated since 2003 and are open to all eligible employees. Details of the various share options outstanding aregiven in note 21 of these accounts. At 31 December 2015 49,755,767 share options were outstanding with a weightedaverage exercise price of 4.10p.

Disabled employeesApplications for employment by disabled persons are given full and fair consideration for all vacancies in accordancewith their particular aptitudes and abilities. In the event of employees becoming disabled, every effort is made toretrain them in order that their employment with the Group may continue. It is the policy of the Group that training,career development and promotion opportunities should be available to all employees.

Directors’ Responsibilities StatementThe Group was incorporated as a corporation in the Cayman Islands, which does not prescribe the adoption of anyparticular accounting framework. Accordingly, the Board has resolved that the Group will follow International FinancialReporting Standards as adopted by the European Union (IFRSs) when preparing its annual financial statements.

The Directors are responsible for preparing the Strategic Report and Directors’ Report and the financial statementsin accordance with applicable law and regulations.

c select suitable accounting policies and then apply them consistently;

c make judgements and accounting estimates that are reasonable and prudent;

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

c prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Groupwill continue in business.

Directors’ Report


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The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain theGroup’s transactions and disclose with reasonable accuracy at any time the financial position of the Group. They arealso responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the preventionand detection of fraud and other irregularities.

The Directors confirm that:

c so far as each Director is aware, there is no relevant audit information of which the Group’s auditor is unaware;and

c the directors have taken all the steps that they ought to have taken as Directors in order to make themselvesaware of any relevant audit information and to establish that the auditors are aware of that information.

The Directors are responsible for the maintenance and integrity of the corporate and financial information includedon the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financialstatements may differ from legislation in other jurisdictions.

To the best of my knowledge:

c the Group financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a trueand fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakingsincluded in the consolidation taken as a whole; and

c the annual report, including the Strategic Report, includes a fair review of the development and performance ofthe business and the position of the Group and the undertakings included in the consolidation taken as a whole,together with a description of the principal risks and uncertainties that they face.


21 March 2016

Directors’ Reportcontinued


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UK Corporate GovernanceThe Board is committed to the highest standards of Corporate Governance and is accountable to the Company’sshareholders for good governance. The Company has not adopted the UK Corporate Governance Code. However,the Board believes it has complied with those aspects of the UK Corporate Governance Code it believes relevant forthe Company and disclosed any areas where they do not believe they have complied with appropriate explanationprovided. The Directors are of the opinion that the company has been in compliance with the principles of the Codeexcept where any non-compliance is disclosed and explained.

Board of Directors

Dr Martin Knight Non-Executive Chairman (Appointed 3 June 2015)Martin Knight is Chairman of Imperial Innovations Group Plc, which has stakes in some 75 technology and life sciencescompanies; he is also Chairman of LMS Capital, the quoted investment business, and Cambridge MechatronicsLimited. He is on the Board of Chrysalis VCT, the quoted SME investor. He is Chairman of the Finance Committee ofthe Royal Institution. For 18 years, until 2010, he was a Governor of Imperial College, of which he is a Fellow. Hestarted his career at Morgan Grenfell & Co Limited, of which he became a Director in 1982.

Anthony Sethill CEOBefore joining Toumaz Anthony was founder and CEO of Frontier Silicon Limited, the leading supplier of digitalbroadcast and network audio products. From 2001 he successfully grew the business and established Frontier Siliconas a strategic supplier of digital audio chips and modules to global consumer electronic brands. Prior to that Anthonywas Managing Director of Consumer & Mobile Phone Products at Amstrad PLC, Sales and Marketing Director atSamsung (UK) Limited, and has also held positions with ONDigital.

Jonathan Apps CFOJonathan has over 18 years’ experience as a Finance Director, having previously been CFO of Europe’s largestindependent Wi-Fi operator, The Cloud Networks, for over four years. Prior to that Jonathan was CFO of interactiveTV, mobile and internet content producer YooMedia, CFO at AIM listed technology venture capital fund E-capitalInvestments, and European Finance Director at network integrator EQUANT Integration Services. Jonathan qualifiedas a chartered accountant with Coopers & Lybrand and has a Bachelor of Commerce degree from BirminghamUniversity.

Professor Chris Toumazou NEDProfessor Chris Toumazou (FRS, FREng, FIEEE, FIET, FRSM, FCGI, CEng, DEng, PhD) is currently the FoundingDirector and Chief Scientist at The Institute of Biomedical Engineering, Imperial College, London. Chris is the founderof two technology-based companies with applications spanning ultra-low-power mobile technology (Toumaz Limited)and DNA Sequencing (DNA Electronics Limited). He is also Director of the Winston Wong Centre for Bio InspiredTechnology. In 2014 Professor Toumaz won the European Inventor Award 2014 in the Research category, for hisrapid USB-based DNA testing device.

Chris Batterham NEDChris Batterham has considerable financial and operational experience and expertise having had an extensive careerin a range of relevant companies. His career includes being finance Director of Unipalm plc, the first internet companyto IPO and then staying with the company for five years following its takeover by UUnet and being CFO forSearchspace. He is currently a Non-Executive Director of SDL plc, Iomart Plc. He is also Chairman of Eckoh plc. Chrishas served on the Boards of Staffware plc, DBS Management plc, DRS plc, Betfair Limited and The Invesco TechmarkEnterprise Trust plc and Blue Prism Group plc.

Corporate Governance


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The following Directors resigned prior to the date of these accounts:

Sir Hossein Yassaie NED – resigned 7 February 2016;

Dr Richard Steeves Non-Executive Chairman – resigned 3 June 2015.

The role of the BoardThe Group supports the concept of an effective Board leading and controlling the Group. The Board is responsiblefor approving Group policy and strategy. It meets on a regular basis, at least nine times a year, and has a schedule ofmatters specifically reserved to it for decision making. The Board also delegates specific responsibilities to seniormanagement and certain Board committees. Management supply the Board with appropriate and timely informationand the Directors are free to seek any further information they consider necessary. All Directors have access to advicefrom the Company Secretary and independent professional advice at the Group’s expense.

The Board consists of a Non-Executive Chairman, who was independent on appointment, two executive Directors,who hold the key operational positions in the Group, and three Non-Executive Directors, who bring a breadth ofexperience and knowledge.

Board EffectivenessDuring the year an external independent evaluation of the performance of the Board and its committees wascompleted. All Board members were asked to complete a questionnaire addressing the Board, committees, chairmanand individual performance. The questionnaire was completed anonymously to ensure frank and open discussion.The evaluation was undertaken by Apple Consulting who are independent from any connection to the Board. Theresults were presented to the Board and recommendations from the report are being implemented.

Relations with shareholdersThe Group values the views of its shareholders and recognises their interest in the Group’s strategy and performance.The Annual General Meeting will be used to communicate with private investors and they are encouraged toparticipate. The Directors will be available to answer questions. Separate resolutions will be proposed on each issueso that they can be given proper consideration and there will be a resolution to approve the annual report andaccounts.

Internal controlThe Board is responsible for maintaining a strong system of internal control to safeguard shareholders’ investmentand the Group’s assets and for reviewing its effectiveness. The system of internal financial control is designed toprovide reasonable, but not absolute, assurance against material misstatement or loss.

An Audit Committee has been established and comprises two Non-Executive Directors, C Batterham (Chair) andDr M Knight. The Committee meets at least half yearly and is responsible for ensuring that the financial performanceof the Group is properly monitored and reported on, as well as meeting the auditor and reviewing any reports fromthe auditor regarding accounts and internal control systems. The Audit Committee also review and monitor thecompany’s whistle blowing procedures and policy. Terms of reference for the Audit Committee have been reviewedand approved by the Board.

The Board has considered the need for an internal audit function but has decided the size of the Group does notjustify it at present. However, it will keep the decision under annual review.

Corporate Governancecontinued


14

Going concernAt 31 December 2015 the Group has net assets of £34.4 million and net current assets of £6.8 million, including£7.7 million of cash. However, in order to meet their strategic ambitions the Board remains committed to on-goinginvestment into the development of its products. As such the Group anticipates being cash flow negative in the shortterm.

In order to assess the appropriateness of the going concern basis the Board has prepared detailed profit and cash flowforecasts through to 31 December 2017 which incorporate the Group and its subsidiary undertakings as at31 December 2015.

Forecasts have been prepared as follows:

c Management have used their best efforts to predict revenues and gross margin from the core business for theforecast period based on existing customer relationships and expectations for developing new relationships inexisting markets.

c Revenue streams for new business lines have been modelled on a best estimate basis with growth rates reflectingthe risk associated with new lines of business.

c The Group’s cost base is designed to support existing revenue streams and the development of new integratedsolutions for consumer audio together with their expected deliverable dates. This has been forecast based onexisting costs together with an estimate of forecast costs based on management’s experience.

c The Board notes that existing forecasts demonstrate the Group achieving a cash flow positive position in mid-2016.

c The Board has initiated a strategic review of its Healthcare division and has appointed external advisors in thisregard. The Board has considered the likely outcomes of this review in assessing the appropriateness of thegoing concern basis of accounting.

The Board is satisfied that whilst there are risk factors associated with any set of forecasts, due care has been exercisedin preparing them. Having due regard to all of the factors listed above, the Board is satisfied that it is appropriate toprepare the accounts on a going concern basis.

Directors’ and Officers’ liability InsuranceDuring the period the Company maintained insurance cover for Directors’ and Officers’ liability.

Directors’ Attendance RecordThe attendance of Directors at relevant meetings of the board was as follows:

Audit RemunerationDirector Board Committee Committee

Dr R Steeves 3 of 3Mr A Sethill 9 of 9Mr J Apps 9 of 9Sir H Yassaie 6 of 9Professor C Toumazou FRS 8 of 9Dr M Knight 9 of 9 2 of 2 2 of 2Mr C Batterham 9 of 9 2 of 2 2 of 2

Corporate Governancecontinued


15

Basis of preparationThe Board is committed to openness and transparency in relation to the remuneration of the Directors. The reportbelow sets out the key elements of the Group’s policies in this respect, in order to provide appropriate informationto the shareholders.

Directors’ remunerationThe Board recognises that Directors’ remuneration is of legitimate concern to shareholders. The Group operateswithin a competitive environment where performance depends on the individual contributions of the Directors andemployees and it believes in rewarding vision and innovation.

Policy on executive Directors’ remunerationA separate Remuneration Committee has been established comprising the two Non-Executive Directors, Dr M Knightand Mr C Batterham (Chair).

The Remuneration Committee meets at least twice a year and is responsible for recommending to the Board thepolicy and structure for the remuneration of the Executive Directors and senior management and approvingperformance based remuneration. The Remuneration Committee also fulfils the role of an options committee for theEmployee Share Option Scheme and its main duty in this context is to approve the grant of options to relevantemployees. Terms of reference for the Remuneration Committee have been reviewed and approved by the board.

The policy of the Board is to provide executive remuneration packages designed to attract, motivate and retainDirectors of the calibre necessary to maintain the Group’s position and to reward them for enhancing shareholdervalue and return. It aims to provide sufficient levels of remuneration to do this, but to avoid paying more than isnecessary. The remuneration will also reflect the Director’s responsibilities and contain incentives to deliver theGroup’s objectives.

The remuneration of the Directors for the year ended 31 December 2015 is as follows:

2015 2014Fees and Fees and

Emoluments Emoluments£’000 £’000

Dr R Steeves 30 70Mr A Sethill 302 258Mr J Apps 246 242Professor C Toumazou 30 30Dr M Knight 37 30Paid to Imagination Technologies plc on behalf of Sir H Yassaie 30 30Mr C Batterham 30 30

Total 705 690

Pensions and benefits in kindIncluded in the £302,000 paid to Anthony Sethill is £8,000 in benefits in kind.

Pension ContributionsPension contributions are paid on base salary only.

BonusesDirector’s bonuses payable at 31 December 2015 are £82,000 (2014: £115,000).

Report on Remuneration


16

Notice periodsMr A Sethill has a service agreement with a six months’ notice period on either side. Mr J Apps has a serviceagreement with a six months’ notice period on either side.

The Non-Executive Directors have letters of appointment which are terminable on three months’ notice on eitherside. Future appointments of NEDs will be for specified terms subject to re-election.

Share option incentivesOn 3 November 2005 Professor C Toumazou was granted an interest in options over 1,683,835 which were grantedto him in replacement of options that he held over shares in Toumaz Technology Limited. These options vested on31 May 2006 and are exercisable at an exercise price of £0.0694 per share at any time before September 2016. On18 September 2009 Professor C Toumazou was granted a further 1,622,000 options over Ordinary Shares. Theselatter options are exercisable at a price of £0.037 per share from 15 January 2010 and expire on 14 January 2017. On21 January 2010 Professor C Toumazou was granted an additional 5,000,000 options over Ordinary Shares at £0.06per share exercisable after 21 January 2010 which expire on 20 January 2020. On 25 January 2013 ProfessorC Toumazou was granted 6,000,000 options over Ordinary Shares at £0.0025 each which expire on 10 January 2023under the Group JSOP scheme. On 23 January 2016 when these options were due to vest the performance criteriahad not been met and therefore these options have lapsed. On 26 June 2014 Professor C Toumazou was granted2,000,000 options over Ordinary Shares at £0.0025 each which expire on 25 June 2024 under the Toumaz LimitedUnapproved Share Option Scheme the vesting of these options is subject to performance criteria. On 28 January2015 Professor C Toumazou was granted 2,000,000 options over Ordinary Shares at £0.0025 each which expire on27 January 2024 under the Toumaz Limited Unapproved Share Option Scheme the vesting of these options is subjectto performance criteria.

On 21 January 2010 Dr M Knight was granted 3,000,000 options over Ordinary Shares at £0.06 per share exercisableafter 21 January 2010 and which expire on 20 January 2020.

On 1 July 2013 Mr A Sethill was granted 9,600,000 options over Ordinary Shares at £0.0025 each which expire on10 January 2023 under the Group JSOP scheme, on 23 January 2016 when these options were due to vest theperformance criteria had not been met and therefore these options have lapsed. On 26 June 2014 Mr A Sethill wasgranted 8,200,000 options over Ordinary shares at £0.0025 each which expire on 25 June 2024 under the Group JSOPScheme. On 28 January 2015 Mr A Sethill was granted 7,200,000 options over Ordinary shares at £0.0025 eachwhich expire on 27 January 2025 under the Group JSOP Scheme. These options are subject to performance criteriaas set out below.

On 25 January 2013 Mr J Apps was granted 3,000,000 options over Ordinary Shares at £0.0025 each which expireon 10 January 2023 under the Group JSOP scheme. On 23 January 2016 when these options were due to vest theperformance criteria had not been met and therefore these options have lapsed. On 26 June 2014 Mr J Apps wasgranted 6,000,000 options over Ordinary Shares at £0.0025 each which expire on 25 June 2024. On 28 January 2015Mr J Apps was granted 6,000,000 options over Ordinary Shares at £0.0025 each which expire on 27 January 2025.These options are subject to performance criteria as set out below.

Vesting of the 2014 options awards for directors is conditional on a combination of the Groups’ share price incomparison to the FTSE All Share Index and the Group’s share price attaining a value of 15p for 90 days by 1 April2019.

Vesting of the 2015 option awards for directors is conditional on the Group’s share price attaining a value of 15p for90 days by 1 April 2019.

None of the other Directors have any interests in share options of the Group.

Report on Remunerationcontinued


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SharesAt 21 March 2016

Prof C Toumazou held 15,059,895 shares in the Group.

Mr A Sethill held 4,000,000 shares in the Group.

Dr M Knight held 1,250,000 shares in the Group.

Mr C Batterham held 1,000,000 shares in the Group.

Mr J Apps held 250,000 shares in the Group.

It is company policy that Directors are not permitted to pledge shares held in the company.

Report on Remunerationcontinued


18

Report of the Independent Auditorto the members of Toumaz Limited


19

We have audited the financial statements of Toumaz Limited for the year ended 31 December 2015, which compriseof the consolidated statement of financial position, the consolidated statement of comprehensive income, theconsolidated statement of cash flow, the consolidated statement of changes in equity and the related notes. Thefinancial reporting framework that has been applied in their preparation is applicable law and International FinancialReporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the company’s members, as a body, in accordance with paragraph 101 Companies Law(revision 2013) of the Cayman Islands. Our audit work has been undertaken so that we might state to the company’smembers those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullestextent permitted by law, we do not accept or assume responsibility to anyone other than the company and thecompany’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorAs explained more fully in the Directors’ Responsibilities Statement set out on page 11, the Directors are responsiblefor the preparation of the financial statements and for being satisfied that they give a true and fair view. Ourresponsibility is to audit and express an opinion on the financial statements in accordance with applicable law andInternational Standards on Auditing (UK and Ireland). Those standards require us to comply with the AuditingPractices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsA description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s websiteat www.frc.org.uk/auditscopeukprivate.

Opinion on financial statementsIn our opinion:

c the financial statements give a true and fair view of the state of the group’s affairs as at 31 December 2015 andof the group’s loss for the year then ended;

c the financial statements have been properly prepared in accordance with IFRSs as adopted by the EuropeanUnion.

Nicholas WatsonSenior Statutory Auditorfor and on behalf of Grant Thornton UK LLPRegistered Auditor, Chartered AccountantsOxford

21 March 2016

Principal Accounting Policies


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Basis of preparationThe Company was incorporated in the Cayman Islands which do not prescribe the adoption of any particularaccounting framework. The Board has therefore adopted and complied with International Financial ReportingStandards as adopted by the European Union (IFRS). The Company’s shares are listed on the AIM market of theLondon Stock Exchange. The principal accounting policies of the Group are set out below.

Measurement basisThe consolidated financial statements have been prepared using the measurement bases specified by IFRS for eachtype of asset, liability, income and expense. The measurement bases are more fully described in the accountingpolicies below.

Adoption of new accounting policiesNew standards and interpretations that are in issue but not yet effective have been considered but have no impacton the Group’s financial statements. The Group is compliant with revised IFRS 13 on fair value measurement. Theadoption of IFRS 10 has not resulted in a change to the assessment of whether or not the Group has control over anyof its subsidiaries.

Going concernAt 31 December 2015 the Group has net assets of £34.4 million and net current assets of £6.8 million, including£7.7 million of cash. However, in order to meet their strategic ambitions the Board remains committed to on-goinginvestment into the development of its products. As such the Group anticipates being cash flow negative in the shortterm.

In order to assess the appropriateness of the going concern basis the Board has prepared detailed profit and cash flowforecasts through to 31 December 2017 which incorporate the Group and its subsidiary undertakings as at31 December 2015.

Forecasts have been prepared as follows:

c Management have used their best efforts to predict revenues and gross margin from the core business for theforecast period based on existing customer relationships and expectations for developing new relationships inexisting markets.

c Revenue streams for new business lines have been modelled on a conservative basis with growth rates reflectingthe risk associated with new lines of business.

c The Group’s cost base is designed to support existing revenue streams and the development of new integratedsolutions for consumer audio together with their expected deliverable dates. This has been forecast based onexisting costs together with an estimate of forecast costs based on management’s experience.

c The Board notes that existing forecasts demonstrate the Group achieving a cash flow positive position in mid-2016.

c The Board has initiated a strategic review of its Healthcare division and has appointed external advisors in thisregard. The Board has considered the likely outcomes of this review in assessing the appropriateness of thegoing concern basis of accounting.

The Board is satisfied that whilst there are risk factors associated with any set of forecasts, due care has been exercisedin preparing them. Having due regard to all of the factors listed above, the Board is satisfied that it is appropriate toprepare the accounts on a going concern basis.

Principal Accounting Policiescontinued

Basis of consolidationThe Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up tothe balance sheet date. Subsidiaries are entities over which the Group has control, which is defined as being exposure,or rights, to variable returns from its involvement with the investee and where the Group has the ability to affectthose returns through its power over the investee. The Group obtains and exercises control through 100% ownershipof subsidiary companies.

Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are alsoeliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported inthe financial statements of subsidiaries have been adjusted where necessary to ensure consistency with theaccounting policies adopted by the Group.

Acquisitions of subsidiaries are accounted for using the acquisition method. The acquisition method involves therecognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at theacquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary priorto acquisition. The acquisition cost is calculated as the sum of the acquisition date fair values of the assets transferredby the acquirer, the equity interests issued and excludes any transaction costs. The acquisition cost includes the fairvalue of any assets or liabilities arising from contingent consideration arrangement. On initial recognition, the assetsand liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also usedas the bases for subsequent measurement in accordance with the Group accounting policies. Goodwill is stated afterseparating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value ofthe Group’s share of the identifiable net assets of the acquired subsidiary at the date of acquisition.

Where the Group’s interest in a subsidiary changes, but does not result in a change in control, that change is treatedas an equity transaction. Any difference between the carrying value of the non-controlling interest and the fair valueof the consideration is recognised directly in equity.

Where the consideration involves a contingent element, consideration is given as to whether this meets the definitionof equity as a financial liability.

Contingent consideration initially recognised as a financial liability in accordance with the Group’s policy issubsequently remeasured at fair value through profit or loss until settled. Contingent consideration initially recognisedas equity is not subsequently remeasured.

RevenueRevenue, excluding VAT, comprises revenue arising from development contracts and the sale of products.

Royalty revenue is generated by the licensing of the Group’s technologies to customers. Revenue is only recognisedwhen the Group has performed all of its obligations under the agreement and when the revenues can be reliablymeasured.

Income from licences is recognised based on the substance of the licence arrangement. Where the Group has no on-going obligations under the licence agreement, the transaction is treated as a sale of goods and revenues arerecognised at the point at which the customer gains access to the licenced technology. Where the Group has an on-going obligation to fulfil, revenue will be recognised as those obligations are met and related invoices will be accruedor deferred accordingly.

In some instances the Group will enter into multiple element arrangements. In such instances, the considerationreceived is allocated to each separately identifiable element, based on relative fair values. Revenue, excluding VAT,in respect of the sale of goods is recognised at the point that goods are despatched to and accepted by customers.It is at this point that the customer assumes ownership of the product and therefore substantially all risks and rewardsof ownership are deemed to have transferred.


21



22

GoodwillGoodwill, representing the excess of the fair value of consideration over the fair value of the Group’s share of theidentifiable net assets acquired, is capitalised and reviewed annually for impairment. Goodwill is carried at cost lessaccumulated impairment losses. Any excess in the net fair value of an acquirer’s identifiable net assets over the costof acquisition is recognised immediately after acquisition in profit and loss.

TaxationCurrent income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating tothe current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to thetax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable result for the year. Allchanges to current tax assets or liabilities are recognised as a component of tax expense in the total comprehensiveloss.

Deferred taxes are calculated using the liability method on temporary differences. This involves the comparison ofthe carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases.However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an assetor liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax ontemporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differencescan be controlled by the Group and it is probable the reversal will not occur in the foreseeable future. In addition, taxlosses available to be carried forward as well as other income tax credits to the Group are assessed for recognition asdeferred tax assets.

Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probablethat they will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated,without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they areenacted or substantively enacted at the balance sheet date.

Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit and loss.Changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that is recognised inother comprehensive income are charged or credited in other comprehensive income, current and deferred tax thatrelates to items that are recognised in equity is recognised directly in equity.

Intangible assets

Intellectual property rights, licences and development expenditureThe costs of creating and protecting internally generated intellectual property, patents and know-how are written-offto the Consolidated Statement of Comprehensive Income in the period in which they are incurred if they do notmeet all of the following criteria:

c the technical feasibility of completing the asset so that it will be available for use or sale is probable;

c it is the intention of management to complete the asset and use or sell it;

c the Group has the ability to use or sell the asset;

c it is probable the asset will generate future economic benefit for the Group;

c adequate technical, financial and other resources to complete and use or sell the asset are available; and

c the Group has the ability to measure reliably the expenditure attributable to the asset during its development.



23

The costs of acquiring rights to the use of third party intellectual property are capitalised and, subject to impairmentreviews, amortised over the estimated economic life of the intellectual property concerned. Amortisation is calculatedso as to write off the cost of an asset, less its estimated residual value on a straight line basis over the useful economiclife of the asset as follows:

Intellectual property rights – 4 to 12 yearsLicence and development fees – over the life of the asset

Prepaid royalties and maintenance agreementsPrepaid royalties and maintenance agreements are recognised in the Statement of Comprehensive Income as theunderlying assets are utilised. In respect of royalties this is when the related goods are sold. For maintenanceagreements this is rateably over the life of the agreement.

Assets acquired as part of a business combinationAn intangible asset acquired in a business combination is deemed to have a cost to the Group of its fair value at theacquisition date. The fair value of the intangible asset reflects market expectations about the probability that thefuture economic benefits embodied in the asset will flow to the Group. The fair value is then amortised over theeconomic life of the asset. Where an intangible asset might be separable, but only together with a related tangibleor intangible asset, the group of assets is recognised as a single asset separately from goodwill where the individualfair values of the assets in the Group are not reliably measurable. Where the individual fair value of the complementaryassets is reliably measurable, the Group recognises them as a single asset provided the individual assets have similaruseful lives.

Review of the carrying value of goodwill, other intangible assets, property, plantand equipment and other investmentsFor the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separatelyidentifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment andsome are tested at cash-generating unit level. Group management have determined that cash-generating units, towhich goodwill can be allocated, are equivalent to its operating segments. Goodwill is allocated to those cash-generating units that are expected to benefit from the synergies of the related business combination and representthe lowest level within the Group at which management monitor goodwill.

Goodwill is tested for impairment at least annually. All other individual assets or cash-generating units are tested forimpairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised in the Statement of Comprehensive Income for the amount by which the asset orcash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher offair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flowevaluation. Impairment losses recognised are credited initially to the carrying amount of goodwill. Any remainingimpairment loss is charged pro-rata to the other assets in the cash generating unit. With the exception of goodwill,all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longerexist. An impairment loss is reversed if there has been a favourable change in the estimates used to determine theassets’ recoverable amount and only to the extent that the asset’s carrying amount does not exceed the carryingamount that would have been determined, net of amortisation, if no impairment loss had been recognised.



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Financial assetsThe Group’s financial assets include cash and trade and other receivables, which are classified as loans andreceivables.

All financial assets are recognised when the Group becomes party to the contractual provisions of the instrument. Allfinancial assets are initially recognised at fair value, plus transaction costs and subsequently are amortised in line withthe Group’s policy as disclosed on page 23.

Trade and other receivables are provided against when objective evidence is received that the Group will not be ableto collect all amounts due to it in accordance with the original terms of the receivable. The amount of the write-downis determined as the difference between the asset’s carrying amount and the present value of estimated future cashflows.

Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire, orwhen the financial asset and substantially all of the associated risks and rewards have transferred.

Cash and cash equivalentsCash and cash equivalents comprise cash on hand and bank demand deposits, together with other short-term highlyliquid investments that are readily convertible into known amounts of cash and which are subject to an insignificantrisk of changes in value with original maturities of three months or less from the date of acquisition.

EquityThe share capital is determined using the nominal value of shares that have been issued.

The share premium account represents premiums received on the initial issuing of the share capital. Any transactioncosts associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

The share based payment reserve represents the cumulative amount which has been expensed in the ConsolidatedStatement of Comprehensive Income in connection with equity settled share based payments, less any amountstransferred to the profit and loss account on the exercise of share options.

Retained earnings include all current and prior period results as disclosed in the Consolidated Statement ofComprehensive Income.

Where, as part of a business combination, the Group enters into an agreement which includes a contingent elementthat is classified as equity, these amounts are fair valued at the date of the acquisition and held in a separate equityreserve. These amounts are not subsequently remeasured but are transferred to share capital and share premium onsettlement of the contingent consideration.

The foreign exchange reserve represents the unrealised foreign exchange gains and losses in the Group’s overseassubsidiaries.



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Share based paymentsAll share based payment arrangements, including the newly set up JSOP scheme are recognised in the financialstatements. The Group operates equity-settled share based remuneration plans as an integral part of its remunerationof its employees.

All services received in exchange for the grant of any share-based remuneration are measured at their fair values.These are indirectly determined by reference to the fair value of the share options awarded. Their fair value isappraised at the grant date and excludes the impact of any non-market vesting conditions (for example, profitabilityand sales growth targets).

Share based payments are ultimately recognised as an expense in profit or loss in the Consolidated Statement ofComprehensive Income with a corresponding credit to the share based payment reserve, net of deferred tax whereapplicable. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period,based on the best available estimate of the number of share options that are expected to vest. Non-market vestingconditions are included in assumptions about the number of options that are expected to become exercisable.Estimates are subsequently revised, if there is any indication that the number of share options expected to vest differsfrom previous estimates. No adjustment is made to the expense or share issue cost recognised after vesting if fewershare options ultimately are exercised than vested.

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to thenominal value of the shares issued are allocated to share capital with any excess being recorded as share premium.

Financial liabilitiesThe Group’s financial liabilities include trade and other payables. Financial liabilities are obligations to pay cash or otherfinancial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument.

All financial liabilities are recognised initially at fair value, net of direct issue costs, and are subsequently recorded atamortised cost using the effective interest method with interest related charges recognised as an expense inconsolidated statement of comprehensive income.

A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Where the Group enters into a contractual arrangement which may be settled either through the issue of equity ora cash payment, consideration is given as to whether the arrangement should be classified as equity or as a liability.Such arrangements are treated as equity if and only if the following criteria are met:

c the Group has the ability to avoid settling the obligation in cash;

c the Group can settle the obligation by issuing a fixed number of shares.

Where both criteria are not met the obligation is treated as a financial liability and initially recognised at fair value.Subsequent changes in the fair value are recognised in total comprehensive income for that period. Where the effectsof discounting the payments are material, this is taken into consideration in the initial measurement. The subsequentunwinding of this discount is treated as a finance expense in total comprehensive income over the term of theobligation.



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Property, plant and equipmenti Measurement bases

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Thecost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to theworking condition and location for its intended use. Subsequent expenditure relating to property, plant andequipment is added to the carrying amount of the assets only when it is probable that future economic benefitsassociated with the item will flow to the Group and the cost of the item can be measured reliably. All othercosts, such as repairs and maintenance are charged to Consolidated Statement of Comprehensive Incomeduring the period in which they are incurred.

When assets are sold, any gain or loss resulting from their disposal, being the difference between the netdisposal proceeds and the carrying amount of the assets, is included in the consolidated statement ofcomprehensive income account.

ii DepreciationDepreciation is calculated so as to write off the cost of property, plant and equipment, less its estimated residualvalue, which is revised annually, over its useful economic life as follows:

Leasehold improvements – 33.3% straight lineOffice equipment – 20-33.3% straight lineFixtures and fittings – 20-25% straight lineComputer equipment – 20-33.3% straight line

InventoriesInventories are stated at the lower of cost and net realisable value. Cost includes all costs incurred in bringing eachproduct to its present location and condition, which comprises the cost of direct materials and third party charges.Net realisable value is the estimated selling price in the ordinary course of business less any applicable sellingexpenses.

Retirement benefit schemeThe Group operates a defined contribution retirement benefit scheme. The assets of the scheme are held separatelyfrom those of the Group in independently administered funds. Entrants into this scheme are entitled to have apercentage of their basic salary paid into the scheme by the Group. These contributions are charged to ConsolidatedStatement of Comprehensive Income as an employee benefit expense in respect of the accounting period in whichthey become payable.

Foreign currenciesThe consolidated financial statements are presented in UK Sterling, which is also the functional currency of the parentcompany. Foreign currency transactions are translated into the functional currency of the respective Group entity,using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains andlosses resulting from the settlement of such transactions and from the remeasurement of monetary items at year-endexchange rates are recognised in profit or loss in the Consolidated Statement of Comprehensive Income.

Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction(not retranslated). In the Group’s financial statements, all assets, liabilities and transactions of Group entities with afunctional currency other than UK Sterling are translated into UK Sterling upon consolidation. The functional currencyof the entities in the Group has remained unchanged during the reporting period.



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On consolidation, assets and liabilities have been translated into UK Sterling at the closing rate at the reporting date.Income and expenses have been translated into the Group’s presentation currency at the average rate over thereporting period which is deemed to be a reasonable approximation of the actual rate. Exchange differences arecharged/credited to other comprehensive income and accumulated in the foreign exchange reserve in equity.Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets andliabilities of the foreign entity and translated into UK Sterling at the closing rate.

Segmental reportingIn identifying its operating segments, Group management follows the Group reporting structure which represents thedevelopment and exploitation of its products and the overall control of operations. The Group currently reports threesegments.

Digital AudioThis division includes Frontier Microsystems Limited and Frontier Silicon Limited. Frontier Microsystems wasestablished to design, develop and sell wireless semiconductor chips and embedded solutions for the growing areaof internet and cloud-connected applications. Frontier Silicon Limited is tasked with the exploitation of the Group’sactivities in the wireless connectivity market. The main focus of Frontier Silicon Companies is the development,manufacture and sale of digital radio and internet radio technologies.

Sensium HealthcareSensium Healthcare Limited is targeting the Healthcare market.

Group costsToumaz Limited’s responsibilities are the overall management of the portfolio companies providing finance, Groupstrategy and corporate governance guidance.

Each of the segments is managed separately requiring different management, resources and marketing approaches.

The measurement policies the Group uses for segment reporting under IFRS 8 are the same as those used in itsmanagement reporting.

Critical accounting estimates and judgementsEstimates and judgements are continually evaluated and are based on historical experience and other factors,including expectations of future events that are believed to be reasonable under the circumstances.

(i) Critical accounting estimates and assumptionsThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates will,by definition, seldom equal the related actual results. The estimates and assumptions that have a significantrisk of causing a material adjustment to the carrying amounts of assets and liabilities within the next accountingyear are discussed below:

Business combinationsOn initial recognition, the assets and liabilities of the acquired business are included in the consolidatedstatement of financial position at their fair values. In particular, the fair value of contingent consideration isdependent on the outcome of certain future results. In measuring fair value, management uses estimates aboutfuture cash flows and discount rates, however, the actual results may vary. Any measurement changes frominitial recognition would affect the measurement of goodwill. Goodwill calculated on business combinations isshown in note 7.



28

In addition, judgement is also required in order to determine whether contingent consideration meets thedefinition of a financial liability or equity. In the current year management have considered the terms associatedwith the various tranches of contingent consideration which may be payable as a result of the acquisition ofFrontier. Based on this assignment, management have split the consideration between equity and financialliabilities as can be seen in note 7.

Impairment of non-financial assetsThe Group conducts annual impairment reviews of assets when events or changes in circumstances indicate thattheir carrying amounts may not be recoverable, or in accordance with the relevant accounting standards. Animpairment loss is recognised when the carrying amount of an asset is higher than the greater of its net sellingprice or the value in use. In determining the value in use, management assesses the present value of theestimated future cash flows expected to arise from the continuing use of the asset and from its disposal at theend of its useful life. Estimates and judgments are applied in determining these future cash flows and thediscount rate. These assumptions relate to future events and circumstances. The actual results may vary, andmay cause adjustments to the Group’s assets in future financial years. In particular, assumptions are made onrevenue growth rates and achievable margins which, given the markets that the Group operates in, and the newproducts the Group are introducing, may not eventuate or be slower to attain. Details of the estimates andassumptions made in respect of the potential impairment of intellectual property, goodwill on consolidation,interests in joint venture and interests in associate are detailed in notes 7 and 8 to the financial statements.

The Directors considered the applicability of the discount rate of 18% for the Healthcare & Frontier divisions,and no impairment was necessary.

Valuations of share options grantedThe fair value of share options granted is calculated using the Black Scholes option pricing model, which requiresthe input of subjective assumptions, including the volatility of share price.

Details of the inputs are set out in note 21 to the financial statements.

Internally generated software and research costsManagement monitors progress of internal research and development projects by using a project managementsystem. Significant judgement is required in distinguishing research from the development phase. Developmentcosts are recognised as an asset when all the criteria of IAS 38 are met, whereas research costs are expensedas incurred.

Deferred tax assetsThe assessment of the probability of future taxable income in which deferred tax assets can be utilised is basedon the Group’s latest approved budget forecast, which is adjusted for significant non-taxable income andexpenses and specific limits to the use of any unused tax loss or credit. The tax rules in the numerousjurisdictions in which the Group operates are also carefully taken into consideration. If a positive forecast oftaxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without atime limit, that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that aresubject to certain legal or economic limits or uncertainties is assessed individually by management based on thespecific facts and circumstances.



29

Adoption of new or amended IFRS

Standards, amendments and interpretations to existing standards that are not yet effective andhave not been adopted early by the GroupAt the date of authorisation of these financial statements, certain new standards, amendments and interpretations toexisting standards have been published but are not yet effective, and have not been adopted early by the Group.Management anticipates that all of the pronouncements will be adopted in the Group’s accounting policies for thefirst period beginning after the effective date of the pronouncement. Information on new standards, amendments andinterpretations that are expected to be relevant to the Group’s financial statements is provided below although theseare not expected to have a material impact.

The following standards, amendments and interpretations have been issued by the International AccountingStandards Board (IASB) or by the International Financial Reporting Interpretations Committee (IFRIC). The Group’sapproach to these is as follows:

New standards and interpretations currently in issue (as at 29 July 2015) but not effective, based on EU mandatoryeffective dates, for accounting periods commencing on 1 January 2015 are:

c IFRS 9 Financial Instruments (IASB effective date 1 January 2018)

c IFRS 14 Regulatory Deferral Accounts (effective 1 January 2016)

c IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)

c IFRS 16 Leases (effective 1 January 2019)

c Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) (IASB effective date 1 July 2014)(Endorsed)

c Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations (IASB effective date1 January 2016) (Endorsed)

c Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38(IASB effective date 1 January 2016) (Endorsed)

c Annual Improvements to IFRSs 2010-2012 Cycle (IASB effective date generally 1 July 2014) (Endorsed)

c Annual Improvements to IFRSs 2012-2014 Cycle (effective 1 January 2016) (Endorsed)

c Amendments to IAS 16 and IAS 41: Bearer Plants (effective 1 January 2016) (Endorsed)

c Amendments to IAS 27: Equity Method in Separate Financial Statements (effective 1 January 2016) (Endorsed)

c Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception(effective 1 January 2016)

c Disclosure Initiative: Amendments to IAS 1 Presentation of Financial Statements (effective 1 January 2016)(Endorsed)

c Disclosure Initiaitive: Amendments to IAS 7 Statement of Cash Flows (effective 1 January 2017)

c Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10and IAS 28 (effective 1 January 2016)

c Amendments to IAS 12: Recognition of Deferred Tax assets for Unrealised Losses (effective 1 January 2017)

Consolidated Statement of Comprehensive Incomefor the year ended 31 December 2015


30

2015 2014Note £’000 £’000

Revenue 1 32,044 26,238Cost of sales (18,455) (14,800)

Gross profit 13,589 11,438

Amortisation of intangible assets 8 (2,736) (2,456)Impairment 2 (3,016) –Depreciation 9 (457) (419)Share based payment (1,229) (825)Exceptional items 3 (1,122) –Research & development (11,258) (11,750)Sales & administrative expenses – other (10,097) (9,452)

Total administrative expenses (29,915) (24,902)

Loss from continuing operations (16,326) (13,464)

Finance income 4 15 68Finance charges (75) (119)

Loss before taxation 1 (16,386) (13,515)

Taxation 5 1,651 1,273

Loss for the year (14,735) (12,242)

Items that will not be reclassified subsequently to profit or loss

Exchange differences on translating foreign operations 59 22

Other comprehensive income 59 22

Total comprehensive income for the year (14,676) (12,220)

Basic loss per share attributable to owners of the parent 6 (0.87)p (0.74)p

Diluted loss per share attributable to owners of the parent (0.87)p (0.74)p


31

Consolidated Statement of Financial Positionfor the year ended 31 December 2015

2015 2014Note £’000 £’000

AssetsNon-current assetsGoodwill 7 19,118 19,118Other intangible assets 8 11,519 17,260Property, plant and equipment 9 707 578

31,344 36,956

Current assetsInventories 10 2,666 1,564Tax receivable 1,301 1,500Trade and other receivables 11 6,342 4,141Cash and cash equivalents 12 7,748 12,513

Total current assets 18,057 19,718

Total assets 49,401 56,674

LiabilitiesCurrent liabilitiesTrade and other payables 13 11,239 8,863

Total current liabilities 11,239 8,863

Other liabilities > 1 year 14 3,735 –

Total liabilities 14,974 8,863

EquityShare capital 15 4,262 4,195Share premium 115,300 115,251Share based payment reserve 4,501 3,325Foreign exchange reserve (35) (94)Retained earnings (89,601) (74,866)

Total equity 34,427 47,811

Total equity and liabilities 49,401 56,674

The consolidated financial statements were approved by the Board on 21 March 2016

Jonathan AppsChief Financial Officer

The accompanying principal accounting policies and notes form an integral part of these financial statements.

Consolidated Statement of Changes in Equityfor the year ended 31 December 2015


32

Sharebased Foreign

Share Contingent Share payment Retained exchange Totalcapital consideration premium reserve earnings reserve equity£’000 £’000 £’000 £’000 £’000 £’000 £’000

At 1 January 2014 4,101 318 114,881 2,567 (62,624) (116) 59,127

Share-based payments – – 825 – – 825Issue of share capital 83 – 63 – – – 146Deferred consideration –retention element – – – (67) – – (67)Contingent shares issued 11 (318) 307 – – – –

Transactions with owners 94 (318) 370 758 – – 904

Loss for the year – – – – (12,242) – (12,242)

Other comprehensive lossesExchange differences ontranslating foreign operations – – – – – 22 22

Total comprehensive loss – – – – (12,242) 22 (12,220)

At 1 January 2015 4,195 – 115,251 3,325 (74,866) (94) 47,811

Share-based payments – – 1,229 – – 1,229Issue of share capital 63 – – – – – 63Cost of share issue – – – – – – –Deferred consideration –retention element 4 – 49 (53) – – –

Transactions with owners 67 – 49 1,176 – – 1,292

Loss for the year – – – – (14,735) – (14,735)

Other comprehensive lossesExchange differences ontranslating foreign operations – – – – – 59 59

Total comprehensive loss – – – – (14,735) 59 (14,676)

At 31 December 2015 4,262 – 115,300 4,501 (89,601) (35) 34,427



33

Consolidated Cash Flow Statementfor the year ended 31 December 2015

2015 2014Note £’000 £’000

Cash flows from operating activitiesLoss before taxation (16,386) (13,515)Amortisation 2,736 2,456Depreciation 457 419Impairment of intangible assets 3,016 –Exceptional item 1,122 –Share based payments 1,229 825Net interest payable 60 51Increase in inventories (1,102) (89)Decrease/(increase) in trade and other receivables (2,038) 817Increase in trade and other payables 1,111 604Other foreign exchange movements 59 22Tax refund 1,998 1,772

Net cash outflow from operating activities (7,738) (6,638)

Cash flows from investing activitiesPurchase of property, plant and equipment (578) (356)Purchase of intangible assets (1,389) (1,991)

Net cash used in investing activities (1,967) (2,347)

Cash flows from financing activitiesLoan 5,000 –Loan interest payable (75) –Interest receivable/(payable) 15 (51)

Net cash inflow from financing activities 4,940 (51)

Net change in cash and cash equivalents (4,765) (9,036)Cash and cash equivalents at the beginning of period 12,513 21,549

Cash and cash equivalents at the end of period 12 7,748 12,513


Notes to the Financial Statementsfor the year ended 31 December 2015


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1 Revenue, loss before taxation and segmental informationRevenue and loss before taxationRevenue and loss before taxation are attributable to the principal activities of the Group.

The loss before taxation is stated after charging:

2015 2014£’000 £’000

Share based payment expense 1,229 825Staff costs 12,419 10,687Research and development costs written off 11,258 11,750Amortisation of intangible assets 2,736 2,456Depreciation of owned property, plant and equipment 457 419Impairment of intangibles 3,016 –Exceptional bad debt provision 1,122 –Gain on foreign exchange (210) (355)Operating leases: land and buildings 754 657Auditor’s remuneration:Fees payable to the Company’s auditor for the audit of theCompany financial statements 36 33Fees payable to the Company’s auditor for other services– audit of the Company’s subsidiaries pursuant to the legislation 55 44

Revenue by geographic location 2015 2014£’000 £’000

United States and North America 1,033 1,763Europe 3,120 1,460Asia 27,891 23,015

Total revenue 32,044 26,238

Assets and liabilities by geographic locationAssets Liabilities

2015 2014 2015 2014£’000 £’000 £’000 £’000

Cayman Islands 3,836 2,189 6,025 179Europe 44,976 54,112 8,635 8,485Asia 580 373 313 199North America 9 – 1 –

49,401 56,674 14,974 8,863

1 Revenue, loss before taxation and segmental information (continued)Segmental informationAs described under Segmental Reporting in the Principal Accounting Policies, Management currently identifiesthree divisions as operating segments.

For the year ended 31 December 2015Digital

Healthcare Audio Group Total£’000 £’000 £’000 £’000

Revenue 323 31,721 – 32,044Cost of sales (423) (18,032) – (18,455)

Gross profit (100) 13,689 – 13,589

Amortisation of intellectual property (256) (2,470) (10) (2,736)Depreciation (86) (371) – (457)Share based payment – – (1,229) (1,229)Exceptional item – (1,122) – (1,122)Impairment – (3,016) – (3,016)Research & development (3,897) (7,361) – (11,258)Sales & administrative expenses – other (2,989) (6,468) (640) (10,097)

Total administrative expenses (7,228) (20,808) (1,879) (29,915)

Loss from continuing operations (7,328) (7,119) (1,879) (16,326)

Net finance payable – 10 (70) (60)

– 10 (70) (60)

Loss before taxation (7,328) (7,109) (1,949) (16,386)

Segment assets 12,590 32,975 3,836 49,401

Segment liabilities 457 8,492 6,025 14,974

Included in revenues in the Digital Audio segment for the year ended 31 December 2015 are revenues of £5.5mfrom the largest customer, £4.3m from its second largest customer and £2.1m from its third largest customer.Together these represent 37.5% of the reported divisional revenue for the year and 37% of the total Grouprevenue for the year.


35

Notes to the Financial Statementscontinued



36

1 Revenue, loss before taxation and segmental information (continued)Segmental information (continued)

For the year ended 31 December 2014Digital

Healthcare Audio Group Total£’000 £’000 £’000 £’000

Revenue 746 25,492 – 26,238Cost of sales (445) (14,355) – (14,800)

Gross profit 301 11,137 – 11,438

Amortisation of intellectual property (15) (2,423) (18) (2,456)Depreciation (71) (348) – (419)Share based payment – – (825) (825)Impairment – – – –Research & development (1,768) (9,982) – (11,750)Sales & administrative expenses – other (1,856) (7,036) (560) (9,452)

Total administrative expenses (3,710) (19,789) (1,403) (24,902)

Loss from continuing operations (3,409) (8,652) (1,403) (13,464)

Net finance payable 1 65 (117) (51)

1 65 (117) (51)

Loss before taxation (3,408) (8,587) (1,520) (13,515)

Segment assets 12,028 42,457 2,189 56,674

Segment liabilities 510 8,174 179 8,863

Included in revenues in the Digital Audio segment for the year ended 31 December 2014 are revenues of £3.7mfrom the largest customer, £2.1m from its second largest customer and £1.7m from its third largest customer.Together these represent 34% of the reported divisional revenue for the year and 29% of the total Group revenuefor the year.

2 Impairment2015 2014£’000 £’000

Impairment of intangible assets 3,016 –

3,016 –

During the year the Board took the view that the next generation of connected audio products should be basedon third party silicon rather than the company develop its own chip. As a result of this decision certain licencesand IP recorded as intangible assets have had their value impaired.



37

3 Exceptional items2015 2014£’000 £’000

Provision against other debtor 1,122 –

1,122 –

As reported in note 2 a change in direction in respect of the Company’s connected audio strategy has resultedin an impairment of certain intangible assets. This decision resulted in other intangibles assets being reclassifiedas ”Other receivables”. It is the Board’s view that due to a change of management at its sub-contracting siliconpartner, these receivables should be provided for.

4 Finance income2015 2014£’000 £’000

Bank interest receivable 15 68

15 68

5 TaxationThe tax credit for the year is as follows:

2015 2014£’000 £’000

Current taxUK research and development tax credit – current year (1,301) (1,500)UK research and development tax credit in the prior year (499) 163Foreign tax paid 149 64

(1,651) (1,273)



38

5 Taxation (continued)The tax assessed for the period differs from the standard rate of corporation tax in the UK as follows:

2015 2014£’000 £’000

Loss before tax (16,386) (13,515)

Tax rate 20.75% 21.5%Expected tax credit (3,400) (2,906)

Adjustment for tax-exempt income– Research and development tax credit adjustment (984) (1,785)– Under-provision in the prior year (499) 163– Research and development enhanced deductions –– Effect of losses surrendered for R&D credit (514) (72)– Losses surrendered for R&D credit (72) (141)

Adjustment for non-deductible expenses:– Disallowable expenses 1,453 589– Depreciation in excess of capital allowances 142 (9)– Other adjustments/foreign tax paid 109 28– Losses not utilised 2,114 2,860

Actual tax credit (1,651) (1,273)

The Group has tax losses in the UK of approximately £57.0 million (2014: £61.5 million) available for offsetagainst future operating profits. The Group has not recognised any further deferred tax asset in respect of theseor any other of the Group’s losses. The losses are still to be agreed with the UK tax authorities. It is anticipatedthat the losses will be available for offset against future profits. However, there is uncertainty over the timingof future profits and therefore a deferred tax asset has not been recognised in respect of these additional losses.

6 Loss per shareThe calculation of the basic loss per share of 0.87p (2014: 0.74p) is based on the loss after tax of £14.7m (2014:£12.2m) divided by the weighted average number of ordinary shares in issue during the year of 1,701,426,768(2014: 1,660,220,043).

Due to the losses incurred the impact of the share options and other deferred shares is anti-dilutive. As suchthe diluted earnings per share equals the ordinary earnings per share.



39

7 GoodwillFrontier Sensium FrontierSilicon Healthcare Microsystems Total£’000 £’000 £’000 £’000

CostAt 1 January 2014 8,536 10,582 5,951 25,069Additions – – – –

At 31 December 2014 8,536 10,582 5,951 25,069Additions – – – –

At 31 December 2015 8,536 10,582 5,951 25,069

ImpairmentAt 1 January 2014 – – 5,951 5,951Charge in the year – – – –

At 31 December 2014 – – 5,951 5,951Charge in the year – – – –

At 31 December 2015 – – 5,951 5,951

Net book amount at 31 December 2015 8,536 10,582 – 19,118

Net book amount at 31 December 2014 8,536 10,582 – 19,118

Goodwill relating to Sensium Healthcare results from the acquisition of Sensium Healthcare Limited on3 November 2005. Goodwill relating to Frontier Silicon results from the acquisition of the Frontier Silicon Groupon 20 August 2012.

There is considerable cross over and exchange of knowledge, intellectual property and the application and useof products between the cash generating units. The expertise and know-how of the Group as a whole providesa platform for all of its products. The supply chain and technical knowhow acquired with Frontier is used acrossthe Group.

All principal operating divisions incurred losses in the year ended 31 December 2015, which is an indicator ofimpairment. The Directors have tested the aggregate recoverable value of goodwill, specific intellectualproperty, and licence & development fees for impairment in accordance with the Group’s accounting policy oftesting annually for impairment. Recoverable value is assessed by value in use. The Directors, in assessing therecoverability of the remaining amount have considered the technical feasibility of the technology and theopportunities for commercial exploitation, including the position with the current commercial relationships.

To determine the value in use, the Directors have produced detailed monthly profit and loss and cash flowforecasts for the five years up to December 2020. A five year forecast period is considered reasonable for themarkets that the Company addresses, particularly given the stage of development of the Group’s products andthe expected life of new technologies as explained further below.

The Chief Executive’s Statement on pages 4 to 7 provides a summary of the Group’s expectations for eachdivision, together with an overview of the relevant markets. Below we have summarised the key judgementsin relation to the individual impairment reviews.



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7 Goodwill (continued)Digital radio and connected audio – Frontier SiliconThe intangible assets of Frontier Silicon were independently valued in 2012 as part of the acquisition accounting.The difference between the fair value of the net assets and the fair value of the consideration has been treatedas goodwill.

Whilst Frontier has continued to make losses post-acquisition, primarily as a result of R&D spend, this is in linewith the forecasts at the time of the acquisition and therefore the Directors consider the Goodwill arising onconsolidation as still valid and no impairment has occurred since acquisition.

The Directors have reviewed the carrying value of these assets in light of their forecasts of revenues andprofitability for this business sector. As with the healthcare division (below), a discount rate of 18% was appliedto future cash flows with a rate of 20% used as a stress test. Under both scenarios, the carrying value of theintangible assets could be supported.

In assessing the future cash flows of the division, the Directors have looked at a 5 year forward view and thenmade a terminal value assessment at the end of 2020 assuming no further sales and cost growth. This is basedon the life cycle of the connected audio and digital radio products, where certain existing models are reachingend of life, and new models have 12 to 24 months development ahead of them before a useful sales life of 5-6years depending on future product enhancements. The Directors expect the market for digital radio to keepexpanding at its current rate and for the company to maintain its market share. In connected audio the Directorsexpect the market to expand significantly as Wi-Fi enabled speakers with much enhanced functionality reallytake hold. The forecast demonstrates that even a relatively small market share could lead to revenue growthrates significantly ahead of more mature markets. As with Healthcare, this opportunity does not come withoutrisk.

The key judgements applied by the Directors in the forecasts are in relation to sales, price, volumes and margins.The forecast model is built on the Directors’ best estimates of the addressable market and the Company’sresultant share of that market. In determining these estimates the Directors have considered information andtrends from existing markets and their expectations for emerging markets in order to develop an assessmentof both future sales volumes and prices. The Directors believe the underlying assumptions to be reasonable butare aware that there are significant competitive risks which would be magnified by delays to key programmesand therefore growth rates may not be achieved or margins could be compromised. Should the underlyingestimates not be achieved there is a risk these assets will be impaired.

Sensium HealthcareThe growth rates of revenue for Sensium Healthcare used in the projections are significantly higher than maybe expected from normal inflationary rises. These are based on the Directors’ considered estimates of thedeveloping market and include estimates of both the likely volume and individual value of sales. Theintroduction of new and untested “disruptive technology” into the market whilst allowing for large potentialrevenues also exposes the Group to the risk that costly developments will take longer than planned or notachieve the forecast financial returns. Should these estimates not be achieved there is a risk these assets willbe impaired.

Consistent with 2014, a discount rate of 18% has been applied to the aggregate results of the forecast. TheDirectors considered the applicability of a discount rate of 20% and are satisfied that even if that rate were tobe applied, the carrying value of the Healthcare goodwill is justified. In assessing the future cash flows of thedivision, the Directors have looked at a 5 year forward view and then made a terminal value assessment at theend of 2020 assuming no further sales and cost growth.



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7 Goodwill (continued)The key assumptions with regard to the revenues and profitability of the cash generating units used in testingthe aggregate recoverable value of goodwill, specific intellectual property, and licence & development fees forimpairment are as follows:

c The life cycle of any product introduced into the Healthcare market will be in the order of 3 to 10 yearswhilst it is first being tested, then gaining adoption and finally being fully rolled out.

c The forecast model is built on the Directors’ best estimates of addressable market and the Company’sresultant share of that market. In determining these estimates the company commissioned independentthird party research which provided insight into the global hospital environment, potential competitivethreats and the expected growth in the market over the expected life cycle of the company’s products.Across a number of third party studies the markets that SensiumVitals® will address are expected to growby a factor of 3-5 times over the next 3 years.

c Further products, based on the SensiumVitals® system and related technology, are forecast.

8 Other intangible assetsMarketing Customer Other Licence &intellectual intellectual intellectual developmentproperty property property fees Total

£’000 £’000 £’000 £’000 £’000

CostAt 1 January 2014 4,000 1,690 17,009 14,571 37,270Additions 1,991 1,991Disposals – – – – –

At 31 December 2014 4,000 1,690 17,009 16,562 39,261Additions – – – 1,389 1,389Disposals – – – (1,378) (1,378)

At 31 December 2015 4,000 1,690 17,009 16,573 39,272

AmortisationAt 1 January 2014 533 188 8,559 10,265 19,545Charge in the year 400 141 1,268 647 2,456Disposals – – – – –

At 31 December 2014 933 329 9,827 10,912 22,001Charge in the year 400 141 1,268 927 2,736Impairment – – – 3,016 3,016Disposals – – – – –

At 31 December 2015 1,333 470 11,095 14,855 27,753

Net book amount at31 December 2015 2,667 1,220 5,914 1,718 11,519

Net book amount at31 December 2014 3,067 1,361 7,182 5,650 17,260



42

8 Other intangible assets (continued)Intellectual propertyIntellectual property relates to the valuation of beneficial licence agreements, trade names and customerrelationships in Sensium Healthcare and Frontier Silicon at the date of their original acquisition.

Licence & development feesThe Group capitalizes certain licence and third party development fees where, in the view of management,they have intrinsic value to ongoing software and hardware development programmes. Additions in the yearrelate to technology on new projects essential to the future development of new generation solutions. Thecapitalised licence and development fees are amortised in accordance with the Group accounting policy andare subject to an annual impairment review. As reported in note 2, during the year the Board decided to ceasedevelopment of the in house silicon for the next generation connected audio platform and has thereforeimpaired the carrying value of certain licence and development fees related to this programme.

MarketingMarketing-related intangible assets are defined as those assets that are primarily used in the marketing orpromotion of products and services. The Frontier solutions are well known and preferred by a majority of theconsumer electronic brands who specifically instruct their manufacturers to use Frontier modules and solutionsin their audio systems.

Customer relationshipsCustomer-related intangible assets may consist of customer lists, order or production backlogs, customercontracts and relationships, and non-contractual customer relationships. Frontier has developed relationshipswith both consumer electronic brands and manufacturers. The customer relationship valuation captures theeconomic benefits of having these trading relationships.

Impairment reviewsThe Directors have tested all intangible assets for impairment in conjunction with their testing for goodwill, inaccordance with the Group’s accounting policy.



43

9 Property, plant and equipmentLeasehold Plant and Office Fixtures and Computer

improvements machinery equipment fittings equipment Total£’000 £’000 £’000 £’000 £’000 £’000

CostAt 1 January 2014 175 1,662 155 2,533 298 4,823Additions – 14 – 314 28 356Disposals – – – (76) – (76)Foreign exchange onopening balance – – – (8) – (8)

At 31 December 2014 175 1,676 155 2,763 326 5,095

Foreign exchange onopening balance – – – 21 – 21Additions – 159 27 362 30 578Disposals – – – (364) – (364)

At 31 December 2015 175 1,835 182 2,782 356 5,330

DepreciationAt 1 January 2014 160 1,533 87 2,161 245 4,186Charge in the year 7 94 30 247 41 419Foreign exchange onopening balance – – – (12) – (12)Disposals – – – (76) – (76)

At 31 December 2014 167 1,627 117 2,320 286 4,517

Foreign exchange onopening balance – – – 13 – 13Charge in the year 6 81 30 301 39 457Disposals – – – (364) – (364)

At 31 December 2015 173 1,708 147 2,270 325 4,623

Net book amountAt 31 December 2015 2 127 35 512 31 707

At 31 December 2014 8 49 38 443 40 578



44

10 Inventories2015 2014£’000 £’000

Raw materials 597 477Work in progress 166 139Finished goods 1,903 948

2,666 1,564

11 Trade and other receivables2015 2014£’000 £’000

Trade receivables 4,061 2,021Other debtors 1,341 689Prepayments and accrued income 940 1,431

6,342 4,141

All trade receivables are within credit terms of between 30 to 60 days and do not bear any effective interest.

The fair value of these short term financial assets is not individually determined as the carrying amount is areasonable approximation of fair value.

At the balance sheet date, trade receivables are aged as follows. Whilst some of these amounts are past due,none of the amounts are considered to be impaired in management’s opinion.

2015 2014£’000 £’000

0 – 30 days 3,501 1,60231 – 60 days 560 419

4,061 2,021

All trade receivables have been reviewed for indicators of impairment based on the age of the balancesoutstanding and the credit worthiness of the third parties from which these balances are due.

There was no provision for bad debt at the start or end of the year.

12 Cash and cash equivalents2015 2014£’000 £’000

GBP £ 4,398 4,532USD $ 3,130 7,442EuroE 76 276Hong Kong $ 106 33Romania LEU 38 230

7,748 12,513



45

13 Trade and other payables2015 2014£’000 £’000

Trade payables 3,621 2,782Other payables 1,459 738Accruals 4,996 5,343Loan (note 14) 1,163 –

11,239 8,863

All of the above are due within one year. The fair value of trade and other payables has not been disclosed as,due to their short duration, management considers the carrying amounts recognised to be a reasonableapproximation of their fair value.

14 Creditors: amounts falling due after more than one year2015 2014£’000 £’000

Loan 3,735 –

3,735 –

LoanToumaz Limited entered into a loan facility agreement in October 2015 for a maximum of £5,000,000. The loanaccrues interest monthly at 6.8% with interest repayable in 12 quarterly instalments commencing 29 December2015. Capital repayments are payable quarterly in 10 instalments commencing March 2016.

15 Share capital2015 2014£’000 £’000

Authorised4,000,000,000 ordinary shares of 0.25p 10,000 10,000

Allotted, issued and fully paid1,704,779,379 (2014: 1,677,866,400) ordinary shares of 0.25p 4,262 4,195

The movement in the number of shares is as follows:

Number ofordinary shares

At 1 January 2014 1,640,553,901Shares issued 37,312,499

At 31 December 2014 1,677,866,400Shares issued 26,912,979

At 31 December 2015 1,704,779,379

All shares are equally eligible to receive dividends and the repayment of capital and represent equal votes atmeetings of shareholders with the exception of 104,552,860 (2014: 80,506,671) shares held jointly by theEmployee Benefit Trust and participants for the purposes of the Company’s joint share ownership plan in relationto which all voting rights have been waived.



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15 Share capital (continued)Allotments during the year30 January 2015: 24,865,103 ordinary shares of 0.25p were issued (“JSOP Shares”) under the joint shareownership schedule to the Toumaz Employee Long Term Incentive Plan (“JSOP”) details of which wereannounced on 28 January 2015.

31 March 2015: 194,444 ordinary shares of 0.25p were issued in relation to the exercise of options by anemployee over ordinary shares.

20 August 2015: 1,853,432 ordinary shares of 0.25p were issued in settlement of deferred consideration dueto former shareholders of Frontier Silicon (Holdings) Limited (“Frontier”) in respect of Frontier’s acquisition byToumaz.

Employee Long Term Incentive SchemeAt 31 December 2015, shares in the JSOP of 46,000,000 (2014: 32,800,000) ordinary shares were in issue todirectors serving at that date as disclosed in the Report on Remuneration. In addition, at that date the Companyhad in issue 58,552,860 (2014: 47,706,671) further JSOP shares.

Share optionsAt 31 December 2015, options over 15,305,835 (2014: 13,305,835) ordinary shares were in issue to Directorsserving at that date as disclosed in the Report on Remuneration. In addition, at that date the Company had inissue 34,449,932 (2014: 32,338,955) further options. Details of the fair value of all options in existence areprovided in Note 21.

16 Contingent liabilitiesThere were no contingent liabilities at 31 December 2015 or 31 December 2014.

17 Capital commitmentsThere were no capital commitments at 31 December 2015 or 31 December 2014.

18 Operating lease commitmentsThe Group leases office under operating leases, in addition the Group had other annual commitments undernon-cancellable operating agreements. The future minimum lease payments are as follows:

Within 1 year 1 to 5 years Over 5 years Total£’000 £’000 £’000 £’000

Rent 604 1,164 – 1,768

Total 604 1,164 – 1,768



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19 Financial instrumentsThe Group uses financial instruments comprising cash and cash equivalents, other loans and various othershort-term instruments such as trade receivables and trade payables which arise from its operations. The mainpurpose of these financial instruments is to fund the Group’s business strategy and the short-term workingcapital requirements of the business.

Financial assets by categoryThe IAS 39 categories of financial asset included in the balance sheet and the headings in which they areincluded are as follows:

2015 2014Non Balance Non Balance

Loans and financial sheet Loans and financial sheetreceivables assets total receivables assets total

£’000 £’000 £’000 £’000 £’000 £’000

Goodwill – 19,118 19,118 – 19,118 19,118Other intangibles assets – 11,519 11,519 – 17,260 17,260Property, plant and equipment – 707 707 – 578 578Inventories – 2,666 2,666 – 1,564 1,564Trade receivables 4,061 – 4,061 2,021 – 2,021Other receivables 1,341 – 1,341 689 – 689Prepayments andaccrued income – 940 940 – 1,431 1,431Tax receivable – 1,301 1,301 – 1,500 1,500Cash and cash equivalents 7,748 – 7,748 12,513 – 12,513

Total 13,150 36,251 49,401 15,223 41,451 56,674

Financial liabilities by categoryThe IAS 39 categories of financial liability included in the balance sheet and the headings in which they areincluded are as follows:

2015 2014Other Financial Other Financial

financial liabilities at financial liabilities atliabilities fair value liabilities fair value

at through at throughamortised profit & amortised profit &

cost loss Total cost loss Total£’000 £’000 £’000 £’000 £’000 £’000

Trade payables 3,621 – 3,621 2,782 – 2,782Other payables 1,459 – 1,459 738 – 738Accruals and deferred income 4,996 – 4,996 5,343 – 5,343Loan 4,898 4,898 – – –

Total 14,974 – 14,974 8,863 – 8,863



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19 Financial instruments (continued)The following tables present financial assets and liabilities measured at fair value in the Group Statement ofFinancial Position in accordance with the fair value hierarchy. The hierarchy groups financial assets and liabilitiesinto three levels based on the significance of inputs used in measuring the fair value of the financial assets andliabilities. The fair value hierarchy has the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability,either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the assets or liability that are not based on observed market data (unobservable inputs).

The level within which the assets or liability is classified is determined based on the lowest level of significantinput to the fair value measurement.

Assets Level 1 Level 2 Level 3 Total£000 £000 £000 £000

Net fair value at 1 January 2015 – – 56,674 56,674Fair value movements during the year – – (7,273) (7,273)

Net fair value at 31 December 2015 – – 49,401 49,401

Liabilities Level 1 Level 2 Level 3 Total£000 £000 £000 £000

Net fair value at 1 January 2015 – – 8,863 8,863Fair value movements during the year – – 6,111 6,111

Net fair value at 31 December 2015 – – 14,974 14,974

The Group is exposed to a variety of financial risks which result from both its operating and investing activities.The Board is responsible for co-ordinating the Group’s risk management and focuses on actively securing theGroup’s short to medium term cash flows. Long term financial investments are managed to generate lastingreturns.

The Group does not actively engage in the trading of financial assets and has no financial derivatives. The mostsignificant risks to which the Group is exposed are described below:

Credit riskThe Group’s credit risk is primarily attributable to its trade receivables, recoverable taxation and cash and cashequivalents. The amounts presented in the balance sheet are net of any allowance for doubtful receivables,estimated by the Directors. The Group has a concentration of credit risk due to exposure from a limited numberof customers. This is managed at the highest level in the Group and is noted as Business Risk on page 10. Cashat bank is all held with highly rated banks, the suitability of which is periodically reviewed.

Liquidity riskThe Group seeks to manage risks to ensure sufficient liquidity is available to meet foreseeable needs and toinvest cash assets safely and profitably. Short term flexibility is achieved by the use of money markets to depositexcess cash which is not required in the short term. The Directors prepare rolling cash flow forecasts and seekto raise additional funding whenever a shortfall in facilities is forecast. Details of the funding status of the Groupare included in the going concern paragraph in the principal accounting policies.

All the financial liabilities noted above are expected to result in cash outflow within six months of the year end.



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19 Financial instruments (continued)Currency risksThe Group is exposed to translation foreign exchange risk in connection with its investment in Frontier SiliconLtd whose subsidiaries are Frontier Silicon (Hong Kong) Ltd incorporated in Hong Kong and Frontier Silicon SRLincorporated in Romania and its investment in Sensium Healthcare Limited whose subsidiaries, SensiumHealthcare Inc, incorporated in the US and Sensium Healthcare SRL incorporated in Romania. The Group doesnot hedge any transactions. As a result the Group is subject to foreign currency risk in respect of accountingfor its investment in the subsidiaries.

Foreign currency denominated financial assets and liabilities which expose the Group to currency risk aredisclosed below. The amounts shown are those reported to the Directors and translated into GBP at the closingrate used in the consolidated financial statements.

Romanian LEU HK$ US$£’000 £’000 £’000

Assets 807 574 9Liabilities (34) (275) (1)

Total exposure 773 299 8

20 Related party transactionsDuring the year Frontier Silicon Limited purchased goods, services and assets to the value of £1,557,000 (2014:£2,135,000) from Imagination Technologies Limited, a company that owns 10.3% of the share capital of ToumazLimited. At the year end there was an outstanding balance of £566,000 (2014: £489,000) due from FrontierSilicon Limited to Imagination Technologies Limited in respect of these purchases.

During the year Imagination Technologies Limited purchased goods from Frontier Silicon Limited to the valueof £38,000 (2014: £58,000). At the year end there was an outstanding balance of £1,000 (2014: £1,000) owingto Frontier Silicon Limited in respect of these sales.

During the year Frontier Microsystems Limited purchased goods, services and assets to the value of £260,000(2014: £657,000) from Imagination Technologies Limited, a company that owns 10.3% of the share capital ofToumaz Limited. At the year end there was an outstanding balance of £251,000 (2014: £278,000) due fromFrontier Microsystems Limited to Imagination Technologies Limited in respect of these purchases.

The company paid Imagination Technologies Limited £30,000 during the year in respect of Director’s servicesfrom Sir H Yossaie.

The Group has taken advantage of the exemption under IAS 24 ‘Related Party Disclosures’ from disclosingtransactions with other members of the group headed by Toumaz Limited.



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21 Employee remuneration(i) Employee benefits expense

The average number of employees during the year was 232 (2014: 193).

Expense recognised for employee benefits, including Directors’ emoluments, is analysed below:

2015 2014£’000 £’000

Wages and salaries 10,791 9,282Social security costs 1,139 976Share based payment 1,229 825Pensions – defined contribution scheme 488 430

13,647 11,513

Included within the above, fully disclosed in the Report on Remuneration on page 16, are amounts inrespect of Directors, including the non-executive Directors. Key Personnel include the CEO, CFO, VPsof Marketing, Sales, Engineering Operations and HR. The compensation of key management personnelis as follows:

2015 2014£’000 £’000

Fees and emoluments 1,737 1,715Share based payment 586 420

2,323 2,135

(ii) Equity compensation benefitsToumaz has adopted the following schemes to promote retention, reward loyalty and align the interestsof employees and Directors with the long term interest of the shareholders. There are currently five typesof schemes in place as detailed below.

Toumaz EMI SchemeThe Toumaz EMI Scheme was adopted in 2002 and approved by HMRC that year and was open to allemployees who were employed by the company for more than 25 hours per week or 75% of their workinghours.

The options outstanding at 31 December 2015 are exercisable at prices between 3.7p and 7p and havea weighted average remaining contractual life of 3.45 years (2014: 5 years). No options were granted inthe period ended 31 December 2015, or in the period ended 31 December 2014. No further options willbe granted under this scheme. All options lapse 10 years after date of grant.

The following performance conditions are relevant for the grant dated 13 March 2010, 50% of the optionswill vest three years after date of grant, the remaining 50% will vest three years after date of grant andwhen the market price had reached a level of 12p.



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21 Employee remuneration (continued)(ii) Equity compensation benefits (continued)

On 3 March 2015 1,712,168 options originally issued in 2005 under the EMI scheme time expired andwere extended for a further 3 years at the same exercise price, granting the shares a total life of 13 years.Although the EMI benefits to the employees expire after 10 years, the extended-life shares are includedin the table below.

Current Grants Toumaz EMI Scheme:

Date of grant Exercise price3 March 2005 5.2p Price agreed by HRMC.18 September 2009 3.7p Average market price over three previous days before grant.13 March 2010 7p Average market price over three previous days before grant.

Outstanding Outstanding Optionsat Granted Exercised Forfeited at exercisable

1 January during during during 31 December 31 December2015 year year year 2015 2015

Amount 5,676,725 – – 565,739 5,110,986 3,799,954Weighted Average price 5.91 – – 6.08 5.9 5.51

Former Toumaz Unapproved Scheme (Employees)The former Toumaz Unapproved Scheme was adopted by the board in May 2005. Options were grantedto employees who were not eligible under the Toumaz EMI Scheme.

The options outstanding at 31 December 2015 were exercisable at prices between 7p and 9.75p andhave a weighted average remaining contractual life of 3.0 years (2014: 2.6 years). No options weregranted in the period ended 31 December 2015, or in the period ended 31 December 2014. No furtheroptions will be granted under this scheme. All options lapse 10 years after grant.

The following performance conditions are relevant to the grant dated 13 March 2007, 50% can vest after13 March 2009, 50% after 13 March 2010 subject in both cases to the previous 12 months revenue beinggreater than 12 million and the last six months revenue greater than £750,000. The following performanceconditions are relevant for the grant dated 13 March 2010, 50% of the options can vest three years afterdate of grant, the remaining 50% can vest three years after date of grant and when the market share pricehad reached a level of 12p.

Current Grants Former Toumaz Unapproved Scheme (Employees):

Date of grant Exercise price13 March 2007 9.75p Average market price over three previous days before grant.13 March 2010 7p Average market price over three previous days before grant.



Amount 1,800,000 – – 100,000 1,700,000 1,200,000Weighted Average price 8.22 – – 9.75 8.13 8.6



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Former Toumaz Unapproved Scheme (Directors)The former Toumaz Unapproved Scheme was adopted by the board in May 2005. All options, bar thosegranted 30 September 2005, lapse 10 years after the date of grant. The Options granted 30 September2005, originally due to lapse on 1 June 2015 were extended on 29 September for a further 12 months withthe same exercise price and will now expire on 30 September 2016.

The options outstanding at 31 December 2015 were exercisable at prices between 3.7p and 8.75p andhad a weighted average remaining contractual life of 3.35 years (2014: 4.35 years). No options weregranted in the period ended 31 December 2015, or in the period ended 31 December 2014. No furtheroptions will be granted under this scheme.

The following performance conditions are relevant to the grants dated 24 October 2006 and 20 November2006, 50% exercisable after 1 year of date of grant, 50% subject to a share price of 25p.

Current Grants Former Toumaz Unapproved Scheme:

Date of grant Exercise price30 September 2005 6.94p Price not agreed by HMRC.24 October 2006 8.75p Average market price over three previous days before grant.18 September 2010 3.7p Average market price over three previous days before grant.21 January 2010 6p Average market price over three previous days before grant.



Amount 22,305,835 – – – 22,305,835 20,805,835Weighted Average price 6.27p – – – 6.27p 6.10p

Toumaz Unapproved Share Scheme 2012 RulesOptions were issued to employees and Directors under the Toumaz Unapproved Share Scheme whichwas approved by the board in November 2012. The exercise price for all options is 0.25p. The optionsvest after three years and the award will lapse 10 years from grant.

The Unapproved options outstanding at 31 December 2015 are all exercisable at a price of 0.25p andhave a weighted average remaining contractual life of 8.1 years (2014: 8.7 years). During the currentyear 5,556,495 (2014: 6,870,969) options were granted to employees and Directors. Good leaver rulesapply to this scheme.

The following performance conditions are relevant to the award 25 January 2013, for senior managers andDirectors the exercise is conditional on the Toumaz share price performing above 125% compared to theFTSE All share Index over the three year period commencing on the date of grant.

The following performance conditions are relevant to the award 27 June 2014, for Senior Managers 50%of the grant was subject to either both or one of the two criteria detailed below and for Directors 100%of the grant.

Criteria 1. This performance criteria has been set such that the value of an Ordinary Share is requiredto outperform the FTSE All Share Index by 25 per cent over the course of the vesting periodin order for 50 per cent of the award to vest and by 50 per cent in order for the balance ofthe awards to vest. Awards vest pro-rata between those two thresholds.



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Criteria 2. 50% of the award will be subject to the share price attaining a level of 15p for 90 days by1 April 2019. The remaining 50% will be subject to the following. The value of an OrdinaryShare is required to outperform the FTSE All Share Index by 25 per cent over the course ofthe vesting period in order for 25 per cent of the total award to vest and by 50 per cent, inorder for the balance of the awards to vest. Awards vest pro-rata between those twothresholds. This vesting will be not before 1 April 2017 and not after 1 April 2019.

For the award 28 January 2015, for Senior Managers 50% of the grant was subject to the share priceattaining a level of 15p for 90 days by 1 April 2020.

Current Grants Toumaz Unapproved Share Scheme 2012 Rules:

Date of grant Exercise price25 January 2013 0.25p15 May 2013 0.25p27 June 2014 0.25p28 January 2015 0.25p

ExercisedOutstanding during year Outstanding Options

at Granted (Weighted Forfeited at exercisable1 January during average during 31 December 31 December

2015 year Share price) year 2015 2015

Amount 15,862,230 5,556,495 194,444 –585,335 20,638,946 –4.25p

Weighted Average price 0.25p 0.25p 0.25 0.25p 0.25p –

Toumaz Employee Long Term Incentive Scheme Joint Shared Ownership Scheme (JSOP)The JSOP was approved by the board in November 2012. Under the JSOP agreement, the JSOP Sharesare held by participants jointly with the trustee of the employee benefit Trust (EBT) pursuant to the termsof joint ownership agreements between the EBT and each respective Participant.

Awards granted under the JSOP will vest on the third anniversary of their grant and value can be realisedin respect of such awards from that date until the tenth anniversary of the date of grant.

The exercise price payable by Participants under the JSOP is 0.25p being equal to the nominal value ofthe Ordinary Shares. All dividend and voting rights in the shares held by the JSOP have been waived, savethat, in accordance with the terms of the JSOP, immediately prior to certain disposals of JSOP Sharesthese rights will be reinstated.

The JSOP Awards outstanding at 31 December 2015 are all exercisable at a price of 0.25p and had aweighted average remaining contractual life of 9.0 years (2014: 8.7 years). During the year 24,865,103(2014: 31,361,243) JSOP awards were made to employees and Directors. Good leaver rules apply to thisscheme.

Directors and Senior Managers have performance targets for each award.

For the award 25 January 2013 for both Directors and Senior Managers the exercise is conditional on theToumaz share price performing above 125% compared to the FTSE All share Index over the three yearperiod commencing on the date of grant.



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For the award 27 June 2014 for Senior Managers the performance criteria has been set that the value ofan Ordinary Share is required to outperform the FTSE All Share Index by 25 per cent over the course ofthe three year vesting period. Directors are subject to two criteria:

1. The value of an Ordinary Share is required to outperform the FTSE All Share Index by between 25per cent and 50% on a pro-rata basis, over the course of the vesting period in order for 50 per centof the award to vest and by over 50 per cent in order for the balance of the awards to vest. Awardsvest pro-rata between those two thresholds.

2. 50% of the award will be subject to the share price attaining a level of 15p for 90 days by 1 April 2019.The remaining 50% will be subject to the following. The value of an Ordinary Share is required tooutperform the FTSE All Share Index by 25 per cent over the course of the vesting period in order for25 per cent of the total award to vest and by 50 per cent, in order for the balance of the awards to vest.Awards vest pro-rata between those two thresholds. This vesting will be not before 1 April 2017 andnot after 1 April 2019.

For the award 25 January 2015 50% of the award will be subject to the share price attaining a level of 15pfor 90 days by 1 April 2020.

Current Grants Toumaz JSOP Scheme:

Date of grant Exercise price25 January 2013 0.25p15 May 2013 0.25p1 July 2013 0.25p27 June 2014 0.25p28 January 2015 0.25p

ExercisedOutstanding during year Outstanding Options

at Granted (Weighted Forfeited at exercisable1 January during average during 31 December 31 December

2015 year Share price) year 2015 2015

Amount 80,506,671 24,865,103 818,914 – 104,552,860 –(2.6p)

Weighted Average price 0.25p 0.25p 0.25p – 0.25p –

The total number of Options and JSOP outstanding at 31 December 2015 is 154,308,627.

Consisting of

Total JSOP 31 December 2015 104,552,860 (2014 80,506,671)Total Options 31 December 2015 49,755,767 (2014 45,644,790)

Employee share-based expense of £1,229,000 (2014: £825,000) has been included in the consolidatedincome statement in accordance with IFRS 2 “Share Based Payments” which gave rise to a share basedpayment reserve. No liabilities were recognised due to share-based payment transactions. The deferredtax asset amounting to approximately £207,900 (2014: £352,300) has not been provided on the share-based payment expense due to there being insufficient certainty regarding its recovery.

Since the balance sheet date no further share option awards have been issued.



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22 Subsidiary undertakingsPlace of

Name Principal activity incorporation % Equity

Sensium Healthcare Limited Development and exploitation in England and Wales 100%the healthcare sector

Frontier Microsystems Limited Development and exploitation in England and Wales 100%relation to wireless semiconductorchips and embedded solutions

Frontier Silicon Limited Development, manufacture and England and Wales 100%sale of digital radio and internetradio technologies

Frontier Silicon (HK) Limited1 Company providing support Hong Kong 100%services from Hong Kong andPeople’s Republic of China

Frontier Silicon SRL1 Development of digital radio and Romania 100%internet radio technologies

Sensium Healthcare SRL2 Development of healthcare Romania 100%sector technologies

Sensium Healthcare Inc2 Company providing support USA 100%services to US customers

1 owned by Frontier Silicon Limited2 owned by Sensium Healthcare Limited & Frontier Microsystems Limited

23 Capital managementThe Group’s capital management objective is to ensure that there is adequate capital within the business topreserve the working capital required for on-going trading and to provide the Group with the necessaryresources to develop products that will generate future profitable revenue streams. Whilst management activelyseeks to secure funding in the form that is most advantageous to both the business and the shareholders, thenature of the Group’s current activities means that this is typically limited to equity funding. As such the Groupdoes not actively manage targets for ratios of debt to equity funding. For forecast data please see the goingconcern details on page 15.

24 Post balance sheet eventsThere have been no material events since 31 December 2015.

25 Approval of the financial statementsThe financial statements were approved by the Board of Directors on 21 March 2016.

Notice of Annual General Meeting


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Notice is given that the annual general meeting of the members of Toumaz Ltd will be held at Instinctif Partners,65 Gresham Street, London, EC2V 7NQ on the 17 May 2016 at 9:00am to consider and, if thought fit, to passthe resolutions set out below:

In regard to resolutions 2-4, the Directors believe that the Board continues to maintain an appropriate balance ofknowledge skills. This follows a process of formal evaluation which confirms that each Director makes an effectiveand valuable contribution to the Board and demonstrates commitment to the role.

Ordinary resolutions1 To receive the report and accounts for the year ended 31 December 2015.

2 To re-elect Professor Chris Toumazou retiring as a Director who is retiring by rotation in accordance with thearticles of association of the Company and, being eligible, offering himself for reappointment as a Director ofthe Company.

3 To re-elect Chris Batterham as a Director who is retiring by rotation in accordance with the articles of associationof the Company and, being eligible, offering himself for reappointment as a Director of the Company.

4 To re-appoint Grant Thornton UK LLP as auditors and to authorise the Directors to determine their remuneration

5 That the Directors be authorised to disapply the pre-emption rights set out in article 17 of the articles ofassociation, such power to expire at the conclusion of the Company’s next annual general meeting, and that theDirectors may allot equity securities following an offer or agreement made before the expiry of the authority andprovided that the authority is limited to:

5.1 the allotment of equity securities pursuant to the exercise of any of the options either granted or to begranted under the company’s share option scheme; and

5.2 the allotment of equity securities, otherwise than in accordance with paragraph 5.1 up to an aggregateamount being ten per cent of the company’s issued share capital on the date of this notice.

By order of the Board


Intertrust Group190 Elgin AvenueGeorge TownGrand CaymanCayman Islands

21 March 2016

Notice of Annual General Meetingcontinued


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Notes to General Meeting1 A member entitled to attend and vote at the above meeting may appoint one or more proxies to attend and, on

a poll, vote in his place. A proxy need not be a member of the company.

2 The instrument appointing a proxy and (in the case of an instrument signed by an agent of the member who isnot a corporation) the authority under which such instrument is signed or and office copy or duly certified copymust be deposited at the office of Capita Asset Services, PXS, 34 Beckenham Road, Kent BR3 4TU, not less than48 hours before the time appointed for the meeting or any adjourned meeting; A prepaid form of proxy foruse in respect of the meeting is enclosed.

3 Completion of a form of proxy will not prevent a member from attending and voting in person.

4 Members will be entitled to attend and vote at the meeting if they are registered on the Company’s register ofmembers 48 hours before the time appointed for the meeting or any adjourned meeting.

5 In the case of joint holders of the shares in the Company, the vote of the senior holder shall be accepted to theexclusion of the votes of the other joint holders(s). For this purpose, seniority will be determined by the orderin which the names appear in the Company’s register of shareholders (or the Company’s registrar’s records).

For your shareholder notes


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For your shareholder notes


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