Exhibit 99.2

 

 

Management Diagnostics Limited

 

Unaudited Consolidated Financial Statements

 

for the nine months ended 30 September 2014 and 2013

 

Company Number – 3714017 (England & Wales)

 

  

Management Diagnostics Limited

 

Unaudited Consolidated Profit and Loss Account

for the nine months ended 30 September 2014 and 2013

 

		Notes		2014				2013
				£				£
Turnover		2			4,579,548				4,579,321
Cost of sales					(55,501	)			(70,412	)
Gross profit					4,524,047				4,508,909
Administrative expenses		6&7			(4,328,592	)			(4,191,414	)
Operating profit		3			195,455				317,495
Interest and similar income		4			817				498
Profit on ordinary activities before taxation					196,272				317,993
Taxation		5			17,005				49,851
Profit on ordinary activities after taxation		15			179,267				268,141

 

All transactions arise from continuing operations.

 

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

 

  

Management Diagnostics Limited

 

Unaudited Consolidated Statement of Total Recognised Gains and Losses

for the nine months ended 30 September 2014 and 2013

 

		Notes		2014				2013
				£				£
Profit for the period					179,267				268,141
Exchange gain / (loss)					20,053				(98,991	)
Total recognised gains and losses for the period					199,320				169,150

 

  

Management Diagnostics Limited

 

Consolidated Balance Sheets

 

		Notes		September 30, 2014								December 31, 2013
				(unaudited)
				£				£				£				£
Fixed assets
Tangible assets		8							4,052,434								4,046,101
Current assets
Debtors		10			887,506								896,252
Cash at bank					1,176,625								1,408,124
					2,064,131								2,304,376
Creditors: amounts falling due within one year		11			(661,348	)							(670,133	)
Net current assets									1,402,783								1,634,243
Total assets less current liabilities									5,455,217								5,680,344
Deferred income		12							(2,606,641	)							(3,031,088	)
Net assets									2,848,576								2,649,256
Capital and reserves
Called up share capital		14							457,449								457,449
Share premium account		15							16,022,450								16,022,450
ESOP		18							(23,346	)							(23,346	)
Other reserves		15							559,618								559,618
Profit and loss account		15							(14,167,595	)							(14,366,915	)
		16							2,848,576								2,649,256

 

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

 

  

Management Diagnostics Limited

 

Unaudited Consolidated Statement of Cash Flows

as at 30 September 2014 and 2013

 

		Notes		2014				2013
				(UNAUDITED)				(UNAUDITED)
				£				£
Net cash inflow from operating activities		17			317,463				357,402
Returns on investments and servicing of finance
Interest received					817				498
Taxation
Tax paid					(17,005	)			(49,851	)
Capital expenditure
Payments made to acquire tangible fixed assets					(532,774	)			(563,668	)
Net cash outflow					(231,499	)			(255,619	)
(Decrease) in cash		17			(231,499	)			(255,619	)

 

  

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

1.

Accounting policies

 

1.1

Accounting convention

The financial statements are prepared under the historical cost convention and in accordance with U.K generally accepted accounting principles and include the results of the Company's and the Group’s operations all of which are continuing.

 

The principal accounting policies of the Group are set out below and have remained unchanged from the previous year.

 

1.2

Basis of preparation

The group's business activities, together with the factors likely to affect its future development, are set out in the principal activities and review of business section.

 

The group’s strategy has been incorporated into detailed forecasts which have been subject to scrutiny and sensitivity analysis. After considering a number of factors which include robust renewal rates and the current sales pipeline, the Directors, in conjunction with the ability to manage the group's cost and cash resources, have a reasonable expectation that the parent company and the group will continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the accounts.

 

1.3

Basis of consolidation

The Group financial statements consolidate those of the Company and its operating subsidiaries, Boardex LLC and Boardex India Pvt Limited. MDL ESOP Limited has been consolidated by virtue of its deduction from shareholders’ funds. None of the Company’s dormant subsidiaries have been consolidated. Financial details for the subsidiaries that have not been consolidated are detailed in note 9.

 

1.4

Turnover

Turnover represents fees earned from the provision of services, including research. The company seeks to match income to services delivered by releasing revenues on a monthly basis over the term of the contract. In this regard the Company will take in account factors such as delivery timescales and / or acceptance criteria in determining if the release point for revenue should be anything other than the start date of the contract. Turnover is exclusive of VAT and other Sales Taxes.

 

1.5

Database

In accordance with accounting standards UITF 29 – Website development costs and FRS 15 – Tangible Fixed Assets, the Company has capitalised the costs of populating and developing its database as a tangible asset.

 

 

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

1.

Accounting policies (continued)

 

1.6

Tangible fixed assets and depreciation

Tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life and is as follows:

 

	Office equipment	-	Straight line over three years
	Fixtures and fittings	-	Straight line over three years
	Database (Technology)	-	Straight line over seven years
	Database (Content)	-	Straight line over twenty years

 

1.7

Retirement benefits

The pension costs charged against operating profits are the contributions payable to defined contribution schemes in respect of the accounting period. Neither the company nor any subsidiary company operates a defined benefit scheme.

 

1.8

Research and development expenditure

With the exception of expenditure associated with the development of the Database (see note 1.5) research and development expenditure is charged to profits in the period in which it is incurred.

 

1.9

Foreign exchange gains and losses

Company: Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Any gains and losses arising on the settlement of any transactions are taken to the profit and loss account.

 

Group: The balance sheets of overseas subsidiaries are translated at the rate of exchange ruling at the balance sheet date. The profit and loss accounts of overseas subsidiaries are translated at the average rate of exchange for the financial year. Any exchange gains and losses arising on the retranslation of opening net assets and arising as a result of differences between average and year end exchange rates are shown in the Statement of Total Recognised Gains and Losses.

 

1.10

Operating lease payments

Rentals payable under operating leases are charged to the profit and loss account on a straight line basis of the lease term.

 

1.11

Provisions for liabilities and charges

A provision is recognised when the group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation.

 

  

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

1.

Accounting policies (continued)

 

1.12

Deferred taxation

Deferred tax is recognised on all timing differences where the transactions or events that give the group an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantively enacted by the balance date.

 

1.13

Share based payments

With the exception of share options granted on 22 June 2012 all share options have been granted over issued shares held by the ESOP (see note 18).

The fair value of the employee services received in exchange for the grant of options is recognised as an expense. The total amount to be expensed rateably over the vesting period is determined by reference to the fair value of the options at the grant date, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in the assumptions about the number of options that are expected to become exercisable. This estimate is revised at each balance sheet date and the difference is charged or credited to the profit and loss account, with a corresponding adjustment to equity. The proceeds received on exercise of the options (net of any directly attributable transaction costs) are credited to equity.

 

2.		Turnover		2014				2013
				£				£
		By geographic market:
		UK and Europe			1,985,616				2,019,780
		North America			2,593,932				2,559,541
					4,579,548				4,579,321
3.		Operating profit			2014				2013
					£				£
		Operating profit is stated after charging / (crediting):
		Depreciation of tangible assets			511,321				543,959
		Operating lease payments (land & buildings)			268,463				282,414

 

  

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

4.		Interest and similar income		2014				2013
				£				£
		Bank interest			817				498
					817				498
5.		Tax charge on profit on ordinary activities
					2014				2013
					£				£
		Corporation tax at 20% (2013 - 20%)			-				-
		Overseas tax			117,914				49,851
		Prior year tax credit			(100,909	)			-
					17,005				49,851

 

The tax credit assessed for the period is lower than small profit rate of corporation tax in the UK of 20% (2013 - 20%). The differences are explained as follows:

 

				2014				2013
				£				£
		Profit on ordinary activities before taxation			196,272				317,993

 

Profit on ordinary activities multiplied by small profit rate of corporation tax in the UK of 20% (2013 - 20%)

 

					39,255				63,499
		Effect of:
		Other timing differences			(39,255	)			(63,499	)
		Overseas tax			117,914				49,851
		Prior year tax credit			(100,909	)			-
		Current taxation for the period			17,005				49,851

 

Unrelieved tax losses of approximately £11m (2013: £11m) remain available to offset against future taxable trading profits.

 

  

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

6.		Employees			2014				2013
					£				£
		Staff costs during the period (including directors) were as follows:
		Wages and salaries			2,482,155				2,360,478
		Social security costs			222,659				201,234
		Pensions and other costs			83,661				83,801
					2,788,475				2,645,513

 

The average number of employees during the period was 288 (2013: 284).

 

		Research and development			264				260
		Administration, sales and customer support			24				24
					288				284

 

7.		Directors' emoluments			2014				2013
					£				£
		Emoluments			734,344				657,010
		Pension scheme contributions			32,375				28,162
					766,719				685,622
		Highest paid director:
		Emoluments			242,196				234,147
		Pension scheme contributions			13,650				13,650
					255,846				247,797

 

During the period, 3 directors (2013: 3) participated in money purchase pension schemes.

 

  

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

8.

Tangible assets

 

Group						Fixtures				Office
		Database				and fittings				equipment				Total
		£				£				£				£
Cost
At 1 January 2014			8,601,586				568,126				1,090,776				10,260,488
Additions			498,575				-				17,628				516,203
Exchange adjustments			-				2,399				3,846				6,245
At 30 September 2014			9,100,161				570,525				1,112,250				10,782,936
Depreciation
At 1 January 2014			4,638,998				533,516				1,041,873				6,214,387
Charge for the year			506,060				-				5,261				511,321
Exchange adjustments			-				1,706				3,088				4,794
At 30 September 2014			5,145,058				535,222				1,050,222				6,730,502
Net book value
At 30 September 2014			3,955,103				35,303				62,028				4,052,434
At 31 December 2013			3,962,588				34,610				48,903				4,046,101

 

Database costs comprise internal costs that have been capitalised.

 

  

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

9.

Investments

 

The Company owns 100% of the share capital of MDL ESOP Limited, a company incorporated in the UK. The Company holds 2 shares with a nominal value of £1 each.

 

The Company owns 100% of the share capital of Boardex Limited, a company incorporated in the UK. The Company holds 2 shares with a nominal value of £1 each.

 

The Company owns 100% of the share capital of Boardex.com Limited, a company incorporated in the UK. The Company holds 2 shares with a nominal value of £1 each.

 

The Company owns 100% of the share capital of Boardex India Private Limited, a company incorporated in India which carries out data compilation and quality assurance in relation to the database. The Company holds 99,980 shares with a nominal value of INR10 each (£12,497). At 30 September 2014 the net assets of Boardex India Private Limited were £749,518 (2013: £669,152).

 

The Company owns 100% of the share capital of Boardex LLC, a company incorporated in the USA which carries out product marketing on behalf of the Company. The Company holds 10 shares with a nominal value of US$1 each (£6). At 30 September 2014 the net assets of Boardex LLC were £218,173 (2013: £92,239).

  

At 30 September 2014 the aggregate capital and reserves of MDL ESOP Limited was £(2,766) (2013: £(2,766)). This represents the cost of shares held by the ESOP less the amounts owed to the Company. The result for the period then ended was £nil (2013: £nil).

 

Boardex Limited and Boardex.com Limited are dormant companies.

 

Please see note 18 for additional information regarding MDL ESOP Limited.

 

 

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

10.		Debtors
				2014				2013
				£				£
		Trade debtors			519,935				606,169
		Other debtors			33,410				33,314
		Prepayments			334,161				256,769
					887,506				896,252

 

11.		Creditors: amounts falling due within one year
				2014				2013
				£				£
		Trade creditors			40,110				21,517
		Other taxes and social security			404,168				379,534
		Accruals			217,070				269,082
					661,348				670,133
12.		Deferred income
					2014				2013
					£				£
		Service subscriptions			2,606,641				3,031,805

 

Service subscriptions are by way of an annual user licence. The Company seeks to match income to services delivered by releasing revenues on a monthly basis across the term of the contract. Amounts relating to the unexpired period of contracts are held as deferred income.

 

13.

Obligations under operating leases

 

				Land and Buildings
				2014				2013
				£				£
		Operating leases which expire; Within one year			250,760				281,703
					250,760				281,703

 

 

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

14.

Share capital

 

				2014				2013
				£				£
		Authorised
		1,500,000 Preferred Ordinary shares of 10p each			150,000				150,000
		2,500,000 Ordinary ‘A’ shares of 10p each			250,000				250,000
		2,000,000 Ordinary ‘B’ shares of 10p each			200,000				200,000
		1,000 Ordinary ‘C’ shares of 10p each			100				100
		1,000,000 Deferred Shares of 0.001p each			1,000				1,000
					601,100				601,100
		Allotted and fully paid
		884,456 Preferred Ordinary shares of 10p each			88,446				88,446
		2,199,294 Ordinary ‘A’ shares of 10p each			219,929				219,929
		1,222,183 Ordinary ‘B’ shares of 10p each			122,218				122,218
		1,000 Ordinary ‘C’ shares of 10p each			100				100
					430,693				430,693
		Allotted and nil paid
		267,559 Ordinary ‘B’ shares of 10p each			26,756				26,756
					457,449				457,449

 

Rights associated with the Preferred Ordinary shares, the Ordinary ‘A’ shares, the Ordinary ‘B’ shares, the Ordinary ‘C’ shares and the Deferred Shares are documented in the Company’s Articles of Association.

 

The Company has undertaken to issue up to 203,367 new Ordinary ‘B’ shares to satisfy the potential exercise of Share Options which were granted on 22 June 2012.

 

 

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

15.	Share premium account and reserves

 

								Share				Profit and
				Other				Premium				Loss
				Reserves				Account				Account
				£				£				£
		At 1 January 2014			559,618				16,022,450				(14,366,915	)
		Retained profit for the period			-				-				179,267
		Exchange adjustment			-				-				20,053
		At 30 September 2014			559,618				16,022,450				(14,167,595	)

 

 

16.	Reconciliation of movements in shareholders' funds

 

				2014				2013
				£				£
		Opening shareholders’ funds			2,649,256				2,278,115
		Profit for the financial period			179,267				484,722
		Exchange adjustment			20,053				(113,581	)
		Closing shareholders’ funds			2,848,576				2,649,256

 

 

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

17.	Notes to the statement of cash flows
	Reconciliation of operating profit to net cash inflow from operating activities

 

				2014				2013
				£				£
		Operating profit			195,455				317,495
		Change in debtors			8,746				343,064
		Change in creditors			(8,785	)			(9,368	)
		Change in deferred income			(424,447	)			(743,507	)
		Depreciation			511,321				543,959
		Exchange differences			35,173				(79,659	)
		Net cash inflow from operating activities			317,463				357,402

 

Reconciliation of net cash flow to movement in net funds

 

				2014				2013
				£				£
		(Decrease)/Increase in cash			(231,499	)			(255,619	)
		Net funds brought forward			1,408,124				1,075,415
		Net funds carried forward			1,176,625				819,796

 

Analysis of changes in net funds

 

				At 1 Jan 2014				Cash Flow				At 30 Sept 2014
				£				£				£
		Cash at bank and in hand			1,408,124				(231,499	)			1,176,625
					1,408,124				(231,499	)			1,176,625

 

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

18.

MDL ESOP Limited

 

MDL ESOP Limited (the “ESOP”) was established as a subsidiary of the Company to encourage and facilitate the acquisition and holding of securities by or for the benefit of employees, former employees and relatives of employees of the Company.

 

Pursuant to a loan facility made available by the Company, the ESOP has subscribed to 233,442 Ordinary ‘B’ shares (2013 - 233,442 Ordinary ‘B’ shares) in the Company and is able to offer to eligible employees options over such shares at the prevailing market price.

 

The allocation and distribution of such options is at the discretion of the Directors of the ESOP in their capacity as Trustees of the ESOP which is constituted as a Trust Fund. The Trust Fund and the income thereof is held by the Trustees for the benefit of the beneficiaries in accordance with the terms of the Trust Deed. The Trustees are required to keep accurate accounts of the Trust Fund and may have them audited annually by a firm of professionally qualified accountants selected by the Trustees and approved by the Board. The Trustees are not required to engage in the management or conduct of the business of any company whose shares or securities constitute the whole or part of the Trust Fund. The Trustees may pay out of capital or income (at the Trustees discretion) any expenses properly incurred in connection with the administration of the Trust Fund.

 

In accordance with UITF 38, the investment in own shares relating to MDL ESOP Limited as at 30 September 2014 of £23,346 (2013: £23,346) has been presented as a deduction in arriving at shareholders’ funds.

 

 

 

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

18.

MDL ESOP Limited (continued)

 

During the year the group had share option schemes falling within the scope of FRS 20. With the exception of the share options granted on 22 June 2012 all share options under these schemes have been granted over issued shares held by the ESOP. The options were granted with a fixed exercise price equal to the market price of the shares at the date of grant. Exercise of options is subject to continued employment within the group. There are no other conditions attached to the options. Options were valued using the Black-Scholes option pricing model rather than a valuation of the employee services. The expected volatility is based on historic group volatility or an approximation thereto.

 

Details of the arrangements are described below:

 

				Options at		Options at		Options at
				£5.14		£3.50		£0.10
		Grant Date(s)		June '12		Aug '06 - Jan '07		Mar '05 - Jan '07
		Number of options granted		254,638		160,505		13,307
		Share Price at date of grant		£5.14		£3.50		£0.10 - £14.00
		Exercise price		£5.14		£3.50		£0.10
		Vesting Date(s)		Immediate		Aug '09 - Jan '10		Mar '08 - Jan '10
		Expiry Date(s)		June '22		Aug '15 - Jan '16		Mar '11 - Jan '16
		Expected life		4.5 Yrs		4.5 Yrs		4.5 Yrs
		Expected volatility		37%		37%		37%
		Risk free interest rate		5%		5%		5%
		Expected dividend yield		nil		nil		nil
		Expected departures at 30 Sept 2014		10%		10%		10%
		Fair value per option		£0.00		£1.34		£0.00 - £13.90

 

 

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

18.

MDL ESOP Limited (continued)

 

With the exception of most of the share options granted on 22 June 2012 all share options have been granted over issued shares held by the ESOP.

 

A reconciliation of the movements in the number of share options is summarised as follows:

 

						2014								2013
						Weighted								Weighted
		2014				average				2013				average
		Number of				exercise				Number of				exercise
		options				price				options				price
Outstanding at 1 January			436,769								436,809
Granted			-								-
Exercised			-								-
Lapsed			(8,319	)							(40	)
Outstanding at 30 September			428,450			£	4.37				436,769			£	4.36
Exercisable at period end			428,450								436,769

 

For options outstanding at the year end, the range of exercise prices and average remaining contractual life was as follows:

 

						2014								2013
						Average								Average
		2014				remaining				2013				remaining
		Number of				contractual				Number of				contractual
Exercise price		options				life				options				life
£0.10			13,307								15,806
£3.50			160,505								160,505
£5.14			254,638								260,458
			428,450				n/a				436,769				n/a

 

 

Management Diagnostics Limited

 

Notes to the Unaudited Financial Statements

for the nine months ended 30 September 2014 and 2013

 

19.

Capital commitments

 

The group did not have any capital commitments at 30 September 2014 nor at 30 September 2013.

 

20.

Contingent liabilities

 

The group did not have any contingent liabilities at 30 September 2014 nor at 30 September 2013.

 

21.

Related party disclosure

 

The company provides IT support services to Sainty Hird and Partners Limited, a company of which JL Sainty is a director. The company charges £45,000 for these services and the contract terminated at the end of August 2014.