a La 1 14/04/2014 14:30 Pa 2 - Frontier Smart AR2013 FINAL_0.pdf · SincejoiningtheToumazGroupinSeptember2013,Iampleasedtoreportthatwehavemadesignificantprogress....

Toumaz LimiTed

Annual Report and Accounts

For the year ended 31 December 2013

Toumaz L imited

137 Euston Road

London NW1 2AA, UK

© 2014

toumaz.com

toumaz fin_Layout 1 14/04/2014 14:30 Page 2

ContentsPage

2 Officers and Advisors

3 Chairman’s Statement

4 Chief Executive’s Statement

9 Strategic Report

12 Directors’ Report

14 Corporate Governance Statement

17 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

54 Notice of Annual General Meeting

Annual Report and Financial Statementsfor the year ended 31 December 2013

Toumaz LimitedREPORT AND ACCOUNTS 2013

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17435 Toumaz Annual Report 2013:Layout 1 15/04/2014 19:29 Page 1

Registered office: Intertrust Group190 Elgin AvenueGeorge TownGrand CaymanCayman Islands

Directors: Dr R Steeves (Non-executive Chairman)(Appointed 4 September 2013)Mr A Sethill (CEO)Mr J Apps (CFO)Professor C Toumazou FRS (Non-executive director)Mr C Batterham (Non-executive director)Dr M Knight (Non-executive director)Sir H Yassaie (Non-executive director)

Secretary: Intertrust GroupCayman Islands

Assistant Secretary: Mr J Apps137 Euston RoadLondonNW1 2AA

Nominated adviser and broker: Peel HuntMoor House,120 LondonWallLondonEC2Y 5E

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

Depository: Capita IRG Trustees LimitedThe Registry34 Beckenham RoadBeckenhamKentBR3 4TU

Solicitors: Taylor Wessing5 New Street SquareLondonEC4A 3TW

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

Officers and Advisors


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Since joining the Toumaz Group in September 2013, I am pleased to report that we have made significant progress.We have evolved clear strategic objectives, laid the building blocks for future growth and have completed a £17.2mfundraising in Q4 2013 that will enable the Group to realise its ambitions. Toumaz is now well funded and this willenable us to continue the momentum that has been building throughout the year.

Our focus is on commercially exploiting our expertise in low power, wireless connectivity in semiconductorsdeployed in professional healthcare environments and consumer, connected audio markets. In addition we aremarket leaders in digital radio. The £17.2m raised will allow the business to develop these areas of focus with thecompletion of twomajor chip development programmes and the establishment of a sales andmarketing infrastructurefor SensiumVitals®.

The Group’s healthcare business, now renamed Sensium Healthcare, has made great progress with the firstcommercial revenues achieved in the last few months together with a growing order book for the FDA approvedand CE certified SensiumVitals®. Following the successful conclusion of the US pilot in April 2013, a new distributionagreement was signed for North America in October 2013 followed by an expanding number of internationaldistributor agreements so far in 2014. Following the installation of the necessary hardware, two major deploymentsare about to begin: in the US, the Hurley Medical Center in Flint, Michigan will be the first emergency departmentto deploy the system; and in the UK Spire Healthcare’s Montefiore Hospital in Brighton and Hove will be the firstprivate hospital to use the system. The Board is confident of seeing further deployments in several territories aroundthe world in 2014.

The Group’s connected audio business, Frontier Silicon, has developed relationships with Spotify and ImaginationTechnologies. These relationships are an endorsement of Frontier’s technical and commercial expertise and havealready contributed to a number of design wins. In parallel, we are developing our next generation Connected Audiochipset, scheduled to come tomarket in 2015. Frontier is also themarket leader in digital radio providing technologysolutions for device manufacturers. Its next generation digital radio chip will be launched in the next 12 months.

The Board saw a number of changes in 2013, with Professor Christofer Toumazou stepping down as Chairman andtaking a role as a Non-Executive Director. The Board owes a debt of gratitude to Christofer whose vision has helpeddefine what Toumaz Group is today.

I would also like to thank the Group’s employees for their commitment and energy over the last 12 months, and takethis opportunity to welcome the new employees who have recently joined the company, particularly in SensiumHealthcare, where several years of engineering endeavour are on the brink of achieving a commercial breakthrough.

Looking ahead, the Group’s priorities are clear – full commercialisation of SensiumVitals® and completion of the latestchip developments in Connected Audio and Digital Radio. The foundations to achieve these objectives are nowlargely in place and I am confident that 2014 will be a year of significant progress.

Dr Richard SteevesChairman

28 March 2014

Chairman’s Statementfor the year ended 31 December 2013


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Overview2013 was an important year in establishing the foundations for the Toumaz Group’s future growth. The Group’sfinancial performance was in line with the Board’s expectations. Revenues were £21.9m (2012 pro forma: £22.3m),with a 13% increase in Digital Audio volumes offset by lower average prices, due largely to existing chip setsapproaching their end of life. EBITDA loss improved to £9.4m (2012: pro forma loss of £11.2m). Following thefundraising, completed in November 2013, cash at the end of the year was £21.5m.

Within the operating businesses, good progress was made within both the Wireless Healthcare and DigitalAudio divisions.

Wireless Healthcare saw the successful pilot of its wireless healthcaremonitoring system, SensiumVitals®, completedin the US in April 2013. This was followed by a new distribution agreement signed with its North American partnerand first commercial orders from the US. CEmarking was also received for SensiumVitals® and its first UK installationhas been completed. A direct sales force is now operational in UK, France and Germany and since the period end,distributors have been appointed in Scandinavia, Portugal, Middle East, Australia and New Zealand. SensiumHealthcare is expected to begin generating significant revenues in 2014. Hospitals and medical institutions areshowing strong interest in the potential of SensiumVitals® to improve patient safety, shorten hospital stays and reducehealthcare costs. By the end of the year, several deployments are expected to be under way.

In Connected Audio, agreements were signed with Spotify and Imagination Technologies to provide connectedsolutions for their direct music streaming services. The Group’s existing solutions will continue to be enhanced andseveral new design wins should result in 2014. Another major development focus is on the Symphony programme,a next generationWi-Fi Connected Audio solution.Working closely with Imagination Technologies, this should startgenerating revenues in 2015.

The Digital Radio business retained its 80% market share in consumer DAB/DAB+ during 2013. The Group expectsto see continued market growth, particularly in the UK and Germany, and its priority will be the introduction of thenext generation digital radio chip, Chorus 4. Discussions with customers have already begun, with strong interestbeing shown by leading digital audio manufacturers.

Current trading and outlookThe Group is trading in line with the Board’s expectations. Revenue is underpinned by strong recurring revenues inthe Digital Radio sector where the Group enjoys a significant market share. The Digital Radio market is expected toexpand over the coming years and although there is likely to be some price erosion on sales, the new chipdevelopment will lead to significantly lower costs.

Connected Audio revenues are also performing as expected and as the business develops in the next two years, inparticular with the introduction of its next generation chip, strong growth is anticipated.

In Wireless Healthcare, following the signing of the new North American distribution agreement in October2013, the business recorded its first commercial orders and this is expected to become a key driver of growth ofGroup revenues.

The Group aims to become cash flow positive in 2015 and to have increased revenues fivefold by 2017.

TheGroup’s underlying ultra-low power connectivity solutions have the potential to enablemuch functionality withinthe Internet of Things, focusing at first on healthcare monitoring and digital audio.

The Group’s immediate priority is to ensure that the timetables for the chip developments currently under way areadhered to, existingmarkets are maintained and that the commercial potential within the Healthcare and ConnectedAudio market is realised.

Chief Executive’s Statementfor the year ended 31 December 2013


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Operational Review

Wireless Healthcare2013 saw the first meaningful steps towards the commercialisation of the SensiumVitals® wireless vital signsmonitoring system. The first pilot of SensiumVitals® was completed in the US in April 2013. The results of the sixmonth study at Saint John’s Health Center were highly encouraging. On average, patients who received early warningalerts stayed in hospital four days fewer than would have normally been expected, resulting in average savings foreach of these patients of $5,500*.

In October 2013, the Group announced a new distribution agreement with its North American partner, Nant Health.SensiumVitals® is being deployed at Hurley Medical Center in Flint, Michigan, where the system is being used in anAccident & Emergency department for the first time. It will be used to monitor patients who, post-triage, may needto sit in a waiting area for extended periods. The system is scheduled to go live in May 2014.

Also in October 2013, SensiumVitals® received its CE Mark, enabling the system to be sold across the EuropeanUnion. The first UK deployment, at private hospital group Spire Healthcare’s Montefiore Hospital, was installed andtested in Q1 2014. Full deployment is expected in May 2014 once the system has been wholly integrated with thehospital’s existing IT networks.

At the beginning of 2014, the Toumaz Healthcare business was renamed as Sensium Healthcare, in order to buildawareness and recognition of the Sensium brand. The Group has also appointed a Medical Advisor, Dr Ian Jackson,Chief Information Officer and Patient Safety Officer for York Teaching Hospitals NHS Trust and President of theInternational Association for Ambulatory Surgery.

Sensium Healthcare is rapidly developing its commercial infrastructure with the appointment of management withextensive medical device industry experience, and a direct salesforce for SensiumVitals® in the UK, Germany andFrance. In addition to the Nant Health distribution partnership in North America, further distributors are beingappointed throughout Europe and the Middle East. Agreements have been signed in Australia, New Zealand,Scandinavia, Portugal and Bahrain.

SensiumVitals® also received regulatory approval from the Therapeutics Goods Administration (TGA) during the firstquarter of 2014, enabling the system to be commercialised in Australia. This nowmeans that SensiumVitals® is beingmarketed to countries collectively accounting for 60% of the world’s healthcare expenditure.

The focus for Sensium Healthcare is now to ensure the successful roll-out of SensiumVitals® in several territoriesaround the world. There have been positive indications from public and private hospitals in North America, the UK,France, Germany, Sweden, Australia and the Middle East and the Group hopes to start deployment in thesegeographies during 2014. There is currently a pipeline of 60 potential customers, in addition to advanced discussionswith potential distribution partners in Italy, Poland, Finland, Saudi Arabia and Qatar. The Group is also seekingregulatory approval for SensiumVitals® in Japan.

The Group plans to undertake at least one additional health economic study in 2014 in order to provide further clear,robust evidence of the benefits that SensiumVitals® offers to both patients and healthcare providers. In parallel, thecompany has a product roadmap for future enhancements to SensiumVitals®; this will bring new features, improvedfunctionality and lower costs.

The Group is also assessing potential longer term opportunities in the home health sector. Opportunities may existto introduce tailored SensiumVitals® solutions for patients recently discharged from hospital or those with chronicconditions such as congestive heart failure (CHF), chronic obstructive pulmonary disease (COPD) or diabetes.However, the short term focus remains on building the SensiumVitals® business in the hospital market.

Chief Executive’s Statementcontinued


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* Health economic study by Analysis Group Inc, in whichmonitored patients werematched, by diagnosis and age, against a control group of 18,279 patients sourcedfrom OptimumCare &Medicare databases. For a sub-group of the patients receiving early warning of deterioration (65% of total), average savings were $9,000.


Digital Audio

Connected Audio2013 has been a significant year for Connected Audio as its focus has shifted towardsWi-Fi enabledwireless speakersand other connected audio devices.

TheGroup achieved a number of notable designwins and established a strongworking relationship with Spotify, withthe Group’s Venice 6.5 Connected Audio solution supporting Spotify Connect. The first devices based on thissolution, from a range of international consumer electronics brands, came to market in Q4 2013. Furtherenhancements to Venice 6.5 will be implemented in the next few months.

The Group is currently working on the Symphony programme, its next generationWi-Fi Connected Audio solution,in partnership with Imagination Technologies. This new chipset will offer increased functionality, greater processingpower and lower costs and is expected to launch in 2015. Symphony will target a wide range of connected audiodevices, such as wireless speakers, internet radios and soundbars.

The Connected Audio market made strong progress in 2013, with wireless speakers rapidly becoming a mainstreamconsumer sector. The key driver of this trend has been the growing penetration of smartphones and tablets, coupledwith the rise of cloud-based music streaming services.

Currently, the Connected Audiomarket is basedmainly on Bluetooth-enabled devices and proprietary systems. Overthe next four years, the market is expected to shift significantly towards Wi-Fi enabled devices (as Wi-Fi’s superiorfunctionality becomes available at lower price points). By 2017, global sales of Wi-Fi connected audio devices areexpected to reach 37m units – with the market forWi-Fi connected audio technology solutions to grow from $100min 2013 to $350m in 2017†.

TheGroup’s technology also has the potential to provide solutions for the Internet of Things, orMachine-to-Machineapplications, particularly in areas such as home automation, healthcare monitoring, energy management, securityand connected/intelligent toys. In the longer term, Symphony will offer a platform from which to address thesegrowing markets.

Digital RadioIn 2013, the consumer DAB/DAB+ market saw volume growth of 20%. Key drivers were a 52% increase in volumesin Germany‡ following the launch of DAB+ in August 2011, and a 148% increase in sales in Norway as it prepares forDigital Switchover in 2017. In the other established markets (UK, Australia, Denmark and Switzerland), sales werebroadly flat year on year.

Further growth can be expected as additional countries adopt digital radio:

c In September 2013, the Netherlands launched national DAB+ services

c In October 2013, Poland launched DAB+ services in Warsaw and Katowice

c In December 2013, France confirmed that services will launch in Paris, Nice and Marseille in June 2014

c In December 2013, the UK Government confirmed the roll-out of 351 new Digital Radio transmitters andannounced the building of a second national commercial multiplex.

The Group successfully maintained its leadership position within digital radio, continuing to account for80% of worldwide consumer DAB/DAB+ shipments. Key clients in the last year include Bose, Grundig, Philips, Pure,Roberts and Sony.

In 2014, Frontier intends to enter the US digital radio market for the first time, where the HD Radio™ standard isused. In partnership with HD Radio developers, iBiquity Digital, the Group is creating a tailored solution for the USmarket. To date, HD Radio has been primarily focused on the line-fit automotive sector. This new initiative will targetthe market for domestic receivers.



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† Source: Parks Associates, Frontier Silicon analysis‡ Source GfK


For the last 18months, development focus has been on the next generation digital radio chip, Chorus 4, an integratedsolution which will deliver enhanced functionality and power consumption savings for customers and marginimprovements for the business. The integrated nature of the chip also offers the potential for it to be incorporatedinto smartphones and tablets. Working samples of the chip were delivered in December, testing with customers istaking place fromMarch of this year and first revenues are expected in Q4 2014.

Financial Review

RevenueGroup revenue for the year increased from £8.8m to £21.9m due to the full year consolidation of Frontier Silicon. Ona pro-forma basis, revenuewas broadly static at £21.9m (2012 pro forma: £22.3m). Overall unit shipments increasedfrom 3.1m to 3.5m offset by declining average selling price.

Revenuewas primarily derived from theDigital Audio division (Digital Radio and Connected Audio) in 2013. Againsta difficult economic background the division performed well with a 12.9% increase in unit sales year on year.

TheWireless Healthcare division recorded its first commercial sales in 2013 following the signing of a new distributionagreement in October.

Gross profit margin for the Group was 44.4% (2012: 45.6%) representing a change in product mix and certain of theolder chipsets nearing end of life.

Retained lossFull year retained comprehensive losses in 2013were £10.8m (2012: loss £20.4m). The reduced loss is due primarilyto the one-off impairment charge taken in 2012 in respect of intangible assets. The company continues to be in aninvestment phase and has spent over £9.1m on Research and Development in 2013 (2012:£6.4m).

2013 2012*£’000 £’000

Loss for the year (10,794) (22,834)

Add back:Taxation (2,473) (1,035)Net finance charges/(income) 67 (169)Depreciation 454 470Amortisation 2,531 2,155Share based payment 792 59Impairment 63 10,151

EBITDA (9,360) (11,203)

* on pro forma basis

Group EBITDA loss (loss from continuing operations less depreciation, amortisation and impairment and share basedpayment costs) in 2013 was £9.4m (2012: loss £9.2m). On a pro-forma basis, the EBITDA loss in 2012 was £11.2m.During 2012 an impairment review was carried out on the Group’s intangible assets and a charge of £10.2m wastaken, to reflect the end of life of certain of the intellectual property previously recognised on the balance sheet, dueto technological advances in the industry.

Pre-tax lossThe Group reported a pre-tax loss of £13.3m for the year (2012: loss £21.6m) reflecting the fact that it is still in adevelopmental phase, which should start to drive further revenues from 2015 onwards.



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TaxationTheGroup has historically applied for and received tax credits in respect of its research and development expenditure.In 2013, the tax credits amounted to £2.5m (2012: £1.3m). It is expected that similar claims will bemade in the future.

As at 31 December 2013 the Group has unutilised tax losses of £41m that may be utilised against taxablefuture profits. These losses are still to be agreed with the UK tax authorities. In the Board’s opinion there isuncertainty over the timing and quantum of their use in the foreseeable future and therefore a deferred tax assethas not been recognised.

Cash flowDuring the year the Group raised £17.2m net of new funds and at the year-end recorded £21.5m of cash and cashequivalents on the balance sheet.

Anthony SethillChief Executive Officer

28 March 2014



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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 2013. This report has been prepared voluntarily in order to provide appropriateinformation for the shareholders.

Principal activityThe principal activity of the Group is that of commercial exploitation of ultra-low power wireless infrastructuretechnologies with commercial propositions within the Sensium Healthcare and Frontier Digital Audio (Digital Radioand Connected Audio) divisions as discussed in the Chief Executive’s Statement.

Business reviewA review of the business in the year and of future developments is given in the Chairman’s statement and ChiefExecutive’s report on pages 4 to 8.

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:

Product commercialisationThe Group is currently undertaking a number of major chip developments where sales to end customers are notassured. The Board receives and monitors regular reports on the status of end programme.

Sales contracts and licence deals signed and third party development projects undertaken by Group companies aremonitored on a regular basis. In 2013, the Group signed a distribution agreement for North America with NanthealthLLC to commercialize the SensiumVitals® system to hospitals. Following the signing of that agreement, the firstcommercial orders have been placed to fit out the Hurley Medical Centre in Flint, Michigan. A trial is also plannedwith Spire Group in the UK for early 2014. The digital radio division has long established relationships with majorconsumer electronics brands, including Sony, Philips, Pure, Roberts, Bose, Grundig and Panasonic plus during the yearthere were a significant number of design wins with large retailers.

FundingDuring the year the Group concentrated onmanaging the cash resources of the business in line with internal financialprojections. On 7 November 2013 the Group raised £17.2m net from investors in the City of London to fund itsdevelopment programme and provide working capital. The current forecasts assume that no further funds arerequired in the near term and that should funding be required in future periods then it is believed a number ofpotential sources may be available and that these be assessed at that time.

Share priceThe share price is constantly under scrutiny by the management, and commented upon at Board meetings.

Business risksThere are a number of potential risks and uncertainties which could adversely impact the achievement of the Group’scorporate aims. The following are the key risks the Board has identified together with the processes and policies theGroup has in place to mitigate those risks as far as commercially practical.

The introduction of “disruptive technology” into the market exposes us to risksThe introduction of new and untested “disruptive technology” into the market place exposes the Group to the riskthat costly developments will take longer or not achieve acceptable financial returns and put a strain on financialresources. Close relationships with customers, strategic partners and attendance at technology conferences helpmanagement keep informed of new technology innovations.

Strategic Report


9


The length of our product design cycle exposes us to risksThe lengthy design cyclemakes it difficult to forecast product demand, with the possibility that products will ultimatelynot be required by our customers or alternatives become available to them, leading to a failure to achieve expectedreturns. A close relationship with customers and good management of the Integrated Circuit (IC) design team willmitigate these risks.

Delays in development and testing may occurDesigning 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.

Delay or failure in achieving regulatory authorisationAny 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 in other regions are expected in 2014.

The success of our customers’ products is critical to our businessWe are dependent, particularly in the Frontier Digital Audio (Digital Radio and Connected Audio) Division, onmanufacturers to select and design in our products into their own products. Even if this occurs sales of our productsare dependent on the commercial success of the end consumer product. With the acquisition of Frontier this risk isreduced as the products within this division have been established within the market for a number of years and arebuilt into a wide range of end brands.

We may be unable to protect properly our intellectual property and may face challenges for infringementby third partiesWhilst we seek to protect our intellectual property by a well-structured and controlled process of patent applications,maintenance and other tools, we face the risk that others may seek to copy and/or infringe certain aspects of ourintellectual property. Defence of our claims may prove unsuccessful and expensive. In addition we might facechallenges to our use of intellectual property that others might claim belongs to them. The consequences of thiswould be either a complete withdrawal and redesign of the offending product or serious and costly delays in provingour right to exploit the disputed intellectual property. We are not aware of any situation of IP infringement.

We are exposed to 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 and in supplyingproducts on time and at the agreed costs to our existing customers. This risk is reduced by using a number of differentsuppliers wherever possible.

We are dependent on our senior management and staff for our product development and delivery to customersIf we fail to retain key management and employees our ability to complete on time successfully and to budget bothour development programme and commitments to customers will lead to delays in achieving Group strategic results.To protect our position in this regardwe constantly monitor the competitive nature of our salary and rewards package,look to the share option scheme to add additional benefits to key employees and regularly update them, through staffmeetings and individual briefings, to add “buy in” to our corporate objectives.

Strategic Reportcontinued


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Financial risk management objectives and policiesTheGroup’s principal financial instruments comprise cash and cash equivalents. TheGroup 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 both 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. Themajority 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 investingcash assets safely and profitably. Short term flexibility is achieved by the use of money markets to deposit excesscash which is not required in the short term. The Directors prepare rolling cash flow forecasts to identify the needto raise any additional funding where a shortfall in facilities is forecast. £17.2m was raised in November 2013 froma share issue.

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$, a large element of its labour cost is borne in sterling and with thesetting up of the research centre in Timisoara, Romania an element is borne in Romanian LEU. Management aim tokeep a reasonable balance of cash in both US$ and £GBP to cover the cost base. The Group does not seek to hedgeits foreign exchange risk and the Directors consider that the exposure to movements in foreign currencies is notsignificant. 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

28 March 2014

Strategic Reportcontinued


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DirectorsThe present Directors of the company are shown on pages 16 to 18. Details of share options held by the Directorsare set out in the Report on Remuneration on pages 17 to 18. Details of the Directors biographies are set out onpages 14 to 15.

Substantial shareholdingsThe only interests in excess of 3% of the issued share capital of the Group which have been notified as at 28 March2014 were as follows:

Ordinary shares Percentageof 0.25p each of capital

Number %

M&G Investments 318,050,895 19.98Herald Investment Management 211,077,949 13.26Imagination Technologies Limited 174,073,384 10.93AXA Framlington 150,178,654 9.43J.M Finn & Co 63,074,634 3.96

Employee involvementTheGroup has continued its practice of keeping employees informed ofmatters affecting them as employees and thefinancial and economic factors affecting the performance of the Group. This is achieved through consultations withemployees and regular staff meetings.

Employee share option schemes have operated since 2003 and are open to all eligible employees. Details of thevarious share options outstanding are given in note 20 of these accounts. At 31 December 2013 41,358,330 shareoptions were outstanding with a weighted average exercise price of 4.27p.

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’ responsibilitiesThe 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 theGroupwill follow International FinancialReporting Standards as adopted by the European Union (IFRSs) when preparing its annual financial statements.

TheDirectors prepare financial statements for each financial periodwhich give a true and fair view of the state of affairsof the Group and of the profit or loss of the Group for that period. In preparing these financial statements, theDirectors are required to:

c select suitable accounting policies and then apply them consistently;

c make judgements and estimates that are reasonable and prudent;

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

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 transactions and disclose with reasonable accuracy at any time the financial position of the Group, forsafeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraudand other irregularities.

The Directors are also responsible for the preparation of the Report of the Directors and other information in theannual report.

The Directors confirm that:

c there is no relevant audit information of which the Group’s auditor is unaware; and

c the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant auditinformation and to establish that the auditor is aware of that information.

The Directors confirm that the accounting policies adopted in the preparation of the financial statements areappropriate to the Group, have been consistently applied and are supported by reasonable prudent judgements andestimates. All applicable accounting standards have been followed.

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

RisksAll risks and uncertainties affecting the business are disclosed in the Strategic Report on page 9.

Post balance sheet eventsThere have been no material events since 31 December 2013.

AuditorGrant Thornton UK LLP have expressed their willingness to continue in office. A resolution to re-appoint GrantThornton UK LLP will be proposed at the Annual General Meeting.

On behalf of the Board


28 March 2014

Directors’ Reportcontinued


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Board of Directors

Dr Richard Steeves Non-Executive ChairmanRichard was appointed non-executive Chairman of the Toumaz Group in September 2013. He brings to the Groupconsiderable experience of global healthcare markets as the founder and CEO of Synergy Health plc (“Synergy”),a FTSE 250 provider of outsourced services to healthcare and health related markets. Having developed Synergyinto a market leader in the NHS, he has led the development of Synergy’s expansion over the last decade intoEurope, Asia and importantly the United States, a market that Toumaz sees as an early adopter of itsSensiumVitals® technology. Richard also has experience in wider health and social care markets having previouslyheld the position of deputy non-executive Chairman of CareTech Holdings plc, an AIM listed provider of carehomes for clients with disabilities. Richard holds a BSc from the University of British Columbia, Canada and a PhDfrom Cambridge University.

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 andmodules 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 and Alba Group Plc.

Jonathan Apps CFOJonathan has over 16 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 ofinteractive TV, mobile and internet content producer YooMedia, CFO at AIM listed technology venture capitalfund E-capital Investments, and European Finance Director at network integrator EQUANT Integration Services.Jonathan qualified as a chartered accountant with Coopers & Lybrand and has a Bachelor of Commerce degreefrom Birmingham University.

Sir Hossein Yassaie NEDSir Hossein Yassaie, PhD, is the chief executive officer of Imagination Technologies plc. After attaining his PhD,Hossein was a research fellow at the University of Birmingham. He spent eight years with STMicroelectronics andInmos, where he set up and managed the DSP and digital video developments. Ultimately he became responsiblefor the system divisions, including research and development, manufacturing and marketing. Hossein joinedImagination Technologies in 1992 as CTO, joined the Board in 1995, and became CEO in 1998. He was knighted inthe 2013 New Year’s Honours List for services to technology and innovation.

Professor Christofer Toumazou NEDProfessor Christofer Toumazou (FRS, FREng, FIEEE, FIET, FRSM, FCGI, CEng, DEng, PhD) is currently theFounding Director and Chief Scientist at The Institute of Biomedical Engineering, Imperial College, London.Christofer is the founder of two technology-based companies with applications spanning ultra-low-power mobiletechnology (Toumaz Ltd) and DNA Sequencing (DNA Electronics Ltd). He is also Director of the Winston WongCentre for Bio Inspired Technology.

Dr Martin Knight NEDDr Martin Knight is Chairman of Imperial Innovations Group Plc, which has stakes in some 75 technology and lifesciences companies; he is also Chairman of LMS Capital, the quoted investment business, and CambridgeMechatronics Limited. He is on the Board of Chrysalis VCT, the quoted SME investor. He is Chairman of the FinanceCommittee of the Royal Institution. For 18 years, until 2010, he was a Governor of Imperial College, of which he is aFellow. He started his career at Morgan Grenfell &Co Limited, of which he became a Director in 1982.

Corporate Governance Statement


14


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 and office2office plc. He is also Chairmanof Eckoh plc. Chris has served on the boards of Staffware plc, DBS Management plc, DRS plc, Betfair Limited andThe Invesco Techmark Enterprise Trust plc.

Governance structureThe 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 six times a year, and has a schedule ofmatters specifically reserved to it for decision.Management supply the Boardwith appropriate and timely informationand theDirectors 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 and two executive directors, who hold the key operational positionsin the Group, and four non-executive directors, who bring a breadth of experience and knowledge.

Relations with shareholdersThe Group values the views of its shareholders and recognises their interest in the Group’s strategy andperformance. The Annual General Meeting will be used to communicate with private investors and they areencouraged to participate. The Directors will be available to answer questions. Separate resolutions will beproposed on each issue so that they can be given proper consideration and there will be a resolution to approvethe annual report and accounts.

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 three non-executive directors, C Batterham (Chair),Dr M Knight and Sir H Yassaie. The Committee meets at least half yearly and is responsible for ensuring that thefinancial performance of the Group is properly monitored and reported on, as well as meeting the auditor andreviewing any reports from the auditor regarding accounts and internal control systems.

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 Governance Statementcontinued


15


Going concernAt 31December 2013 theGroup has net assets of £59.1m and net current assets of £21.6m, including £21.5m of cash.However, in order to meet their strategic ambitions the Board remains committed to on-going investment into thedevelopment of its products. As such the Group anticipates being cashflow negative in the short term.

In order to assess the appropriateness of the going concern basis the Board has prepared detailed profit and cashflowforecasts through to 31 December 2015 which incorporate the Group and its subsidiary undertakings as at31 December 2013.

The key assumptions in preparing the forecasts are 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 beenmodelled 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 chipprogrammes together with their expected deliverable dates. This has been forecast based on existing coststogether with an estimate of forecast costs based on management’s experience. Management is currentlyconsidering a number of cost saving initiatives which would further reduce the forecast expenditure on researchand development, without limiting the quality of its product development.

The Board is satisfied that whilst there are risk factors associatedwith any set of forecasts, due care has been exercisedin preparing them. The Board notes that it continues tomonitor its product development strategy and that, if a decisionwas made to enhance the development expenditure or to accelerate the timing of planned development, additionalfunding may be required. The Board is confident that should further funding be required that the Group would beable to source this and that therefore it is appropriate to prepare these 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.

Director Attendance

Dr R Steeves 8 of 8 (Dr Richard Steeves joined the board 3 Sept 2013)Mr A Sethill 15 of 15Mr J Apps 14 of 15Sir H Yassaie 12 of 15Professor C Toumazou FRS 9 of 15Dr M Knight 13 of 15Mr C Batterham 11 of 15

Corporate Governance Statementcontinued


16


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 three non-executive directors, Sir H Yassaie(chair), C Batterham and Dr M Knight.

The Remuneration Committeemeets at least twice a year and is responsible for recommending to the Board the policyand structure for the remuneration of the Executive Directors and senior management and approving performancebased remuneration. The Remuneration Committee also fulfils the role of an options committee for the EmployeeShare Option Scheme and its main duty in this context is to approve the grant of options to relevant employees.

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 2013 is as follows:

2013 2012Fees and Fees and

Emoluments Emoluments£’000 £’000

Dr R Steeves 23 –A Sethill 320 140J Apps 240 28Professor C Toumazou 112 160Dr M Knight 32 18Paid to Imagination Technologies plc on behalf of Sir H Yassaie 30 18C Batterham 30 13Sir R Sykes – 17P Stephansen – 84S Grisard – 5I McWalter – 5WWong – 9

Total 787 497

Report on Remuneration


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Pensions and benefits in kindIncluded in the £112,000 paid to Professor Christofer Toumazou is £2,000 in benefits in kind (2012: £2,000). TheDirectors did not participate in the Group’s pension scheme and do not receive any significant benefits in kind.

BonusesDirector’s bonuses payable at 31 December 2013 are £110,000 (2012: Nil).

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 oneither side.

Share option incentivesAt 31 December 2013 and 31 December 2012, Professor C Toumazou had an interest in options over 1,683,835Ordinary Shares which were granted to him on 3 November 2005 in replacement of options that he held over sharesin Toumaz Technology Limited. These options vested on 31 May 2006 and are exercisable at an exercise price of6.94 pence per share at any time before September 2015. On 18 September 2009 Professor C Toumazouwas granteda further 1,622,000 options over Ordinary Shares. These latter options are exercisable at a price of 3.70 pence pershare from 15 January 2010 and expire on 14 January 2017. On 21 January 2010 Professor C Toumazou was grantedan additional 5,000,000 options over Ordinary Shares at 6.0 pence per share exercisable after 21 January 2010whichexpire on 20 January 2020. On 25 January 2013 Professor C Toumazouwas granted 6,000,000 options over OrdinaryShares at £0.0025 eachwhich expire on 10 January 2023 under the Group JSOP scheme. The vesting of these optionsfor directors is conditional on the performance of the Group share price relative to the FTSE All Share Index.

On 21 January 2010 Dr M Knight was granted 3,000,000 options over Ordinary Shares at 6.0 pence per shareexercisable after 21 January 2010 and which expire on 20 January 2020.

25 January 2013 Mr J Apps was granted 3,000,000 options over Ordinary Shares at £0.0025 each which expire on10 January 2023 under the Group JSOP scheme. The vesting of these options for directors is conditional on theperformance of the Group share price relative to the FTSE All Share Index.

On 1st July 2013Mr 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. The vesting of these options for directors is conditional on theperformance of the Group share price relative to the FTSE All Share Index.

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

SharesAt the 28 March 2014

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

Dr R Steeves held 6,250,000 shares in the Group.

Mr A Sethill held 2,500,000 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


We have audited the group financial statements of Toumaz Limited for the year ended 31 December 2013, whichcomprise the principal accounting policies, the Consolidated Statement of Comprehensive Income, the ConsolidatedStatement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Cash FlowStatement and the related notes. The financial reporting framework that has been applied in their preparation isapplicable law and International Financial Reporting 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 wemight state to the company’smembers thosematters 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 explainedmore fully in the Directors’ Responsibilities Statement set out on page 12, the Directors are responsiblefor the preparation of the group financial statements and for being satisfied that they give a true and fair view. Ourresponsibility is to audit and express an opinion on the group financial statements in accordance with applicable lawand International 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 statementsAn audit involves obtaining evidence about the amounts and disclosures in the group financial statements sufficientto give reasonable assurance that the group financial statements are free frommaterial misstatement, whether causedby fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’scircumstances and have been consistently applied and adequately disclosed; the reasonableness of significantaccounting estimates made by the directors; and the overall presentation of the group financial statements. Inaddition, we read all the financial and non-financial information in the annual report of Toumaz Limited for the yearended 31 December 2013 to identify material inconsistencies with the audited group financial statements and toidentify any information that is apparently materially incorrect based on, ormaterially inconsistent with, the knowledgeacquired by us in the course of performing the audit. If we become aware of any apparent material misstatements orinconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the group financial statements give a true and fair view of the state of the Group’s affairsas at 31 December 2013 and of its loss for the year then ended in accordance with IFRSs as adopted by theEuropean Union.

Grant Thornton UK LLPRegistered auditorStatutory Auditor, Chartered AccountantsOxford

28 March 2014

Report of the Independent Auditorto the members of Toumaz Limited


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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 measurement.

Going concernAt 31 December 2013 the Group had net assets of £59.1m and net current assets of £21.6m, including £21.5m ofcash. However, in order to meet their strategic ambitions the Board remains committed to on-going investment intothe development of its products. As such the Group anticipates being cashflow negative in the short term.

In order to assess the appropriateness of the going concern basis the Board has prepared detailed profit and cashflowforecasts through to 31 December 2015 which incorporate the Group and its subsidiary undertakings as at31 December 2013.

The key assumptions in preparing the forecasts are 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 beenmodelled 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 chipprogrammes together with their expected deliverable dates. This has been forecast based on existing coststogether with an estimate of forecast costs based on management’s experience. Management is currentlyconsidering a number of cost saving initiatives which would further reduce the forecast expenditure on researchand development, without limiting the quality of its product development.

The Board is satisfied that whilst there are risk factors associatedwith any set of forecasts, due care has been exercisedin preparing them. The Board notes that it continues tomonitor its product development strategy and that, if a decisionwas made to enhance the development expenditure or to accelerate the timing of planned development, additionalfunding may be required. The Board is confident that should further funding be required that the Group would beable to source this and that therefore it is appropriate to prepare these accounts on a going concern basis.

Principal Accounting Policies


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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 the power to control the financial andoperating policies so as to obtain benefits from their activities. The Group obtains and exercises control throughvoting rights.

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 accordancewith 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 onlyrecognised when the Group has performed all of its obligations under the agreement and when the revenues canbe reliably measured.

Income from licences is recognised based on the substance of the licence arrangement. Where the Group has noon-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 anon-going obligation to fulfil, revenue will be recognised as those obligations are met and related invoices will beaccrued or 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 andaccepted by customers. It is at this point that the customer assumes ownership of the product and thereforesubstantially all risks and rewards of ownership are deemed to have transferred.

Principal Accounting Policiescontinued


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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 relatingto the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated accordingto the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable result forthe year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the totalcomprehensive loss.

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 associatedwith 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.



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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 atthe acquisition date. The fair value of the intangible asset reflects market expectations about the probability thatthe future economic benefits embodied in the asset will flow to the Group. The fair value is then amortised overthe economic life of the asset. Where an intangible asset might be separable, but only together with a relatedtangible or intangible asset, the group of assets is recognised as a single asset separately from goodwill where theindividual fair values of the assets in the Group are not reliably measurable. Where the individual fair value of thecomplementary assets is reliably measurable, the Group recognises them as a single asset provided the individualassets have similar useful lives.

Impairment testing of goodwill, other intangible assets, property, plant andequipment 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 thosecash-generating units that are expected to benefit from the synergies of the related business combination andrepresent the 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 loansand receivables.

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 beable to collect all amounts due to it in accordance with the original terms of the receivable. The amount of thewrite-down is determined as the difference between the asset’s carrying amount and the present value of estimatedfuture cash flows.

Financial assets are derecognised when the contractual rights to the cashflows 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’soverseas subsidiaries.



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Share based paymentsAll share based payment arrangements, including the newly set up JSOP scheme are recognised in the financialstatements. TheGroup 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 liabilitiesTheGroup’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 theeffects of discounting the payments are material, this is taken into consideration in the initial measurement. Thesubsequent unwinding of this discount is treated as a finance expense in total comprehensive income over the termof the obligation.



25


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 bringingeach product to its present location and condition, which comprises the cost of direct materials and third partycharges. Net realisable value is the estimated selling price in the ordinary course of business less any applicableselling expenses.

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 itemsmeasured 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 thanUK Sterling are translated into UK Sterling upon consolidation. The functional currencyof the entities in the Group has remained unchanged during the reporting period.



26


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, Groupmanagement follows the Group reporting structure which represents thedevelopment and exploitation of its products and the overall control of operations. The Group currently reports threesegments.

Sensium Healthcare(Formerly Toumaz Healthcare) – Sensium Healthcare Limited is targeting the Healthcare market.

Digital Radio/Connected AudioThis division includes Frontier Microsystems Limited (Formerly Toumaz Microsystems Limited) and Frontier SiliconGroup. Frontier Microsystems was established to design, develop and sell wireless semiconductor chips andembedded solutions for the growing area of internet and cloud-connected applications. Frontier is tasked with theexploitation of the Group’s activities in the wireless connectivity market. The main focus of Frontier Silicon Group isthe development, manufacture and sale of digital radio and internet radio technologies.

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 andmarketing 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 amaterial 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 6.



27


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 6.

Impairment of non-financial assetsTheGroup 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. Details of the estimates and assumptionsmade in respect of the potential impairment of intellectual property, goodwill on consolidation, interests in jointventure and interests in associate are detailed in notes 6 and 7 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 pricingmodel, which requiresthe input of subjective assumptions, including the volatility of share price.

Details of the inputs are set out in note 20 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 bymanagement based on thespecific facts and circumstances.



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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 30 January 2014) but not effective for accounting periodscommencing on 1 January 2013 are:

c IFRS 9 Financial Instruments (no mandatory effective date)^^

c IFRS 10 Consolidated Financial Statements (IASB effective date 1 January 2013**)

c IFRS 11 Joint Arrangements (IASB effective date 1 January 2013**)

c IFRS 12 Disclosure of Interests in Other Entities (IASB effective date 1 January 2013**)

c IAS 27 (Revised), Separate Financial Statements (IASB effective date 1 January 2013**)

c IAS 28 (Revised), Investments in Associates and Joint Ventures (IASB effective date 1 January 2013**)

c Transition Guidance – Amendments to IFRS 10, IFRS 11 and IFRS 12 (IASB effective date 1 January 2013**)

c Investment Entities – Amendments to IFRS 10, IFRS 12 and IAS 27 (effective 1 January 2014)

c Offsetting Financial Assets and Financial Liabilities – Amendments to IAS 32 (effective 1 January 2014)

c IFRIC Interpretation 21 Levies (effective 1 January 2014)^^

c Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36) (effective 1 January 2014)

c Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39) (effective1 January 2014)

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

c Annual Improvements to IFRSs 2010-2012 Cycle (effective 1 July 2014)^^

c Annual Improvements to IFRSs 2011-2013 Cycle (effective 1 July 2014)^^

** EU mandatory effective date is 1 January 2014 not 2013.^^Not adopted by the EU (as at 30 January 2014).



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2013 2012Note £’000 £’000

Revenue 1 21,948 8,767

Cost of sales (12,201) (4,766)

Gross profit 9,747 4,001

Amortisation of intangible assets 7 (2,531) (2,083)Impairment 2 (63) (10,151)Depreciation 8 (454) (239)Share based payment (792) (59)Research & development (9,148) (6,448)Professional fees on acquisition – (569)Sales & administrative expenses – other (9,959) (6,203)

Total administrative expenses (22,947) (25,752)

Loss from continuing operations (13,200) (21,751)

Finance income 3 39 115Finance charges (106) –

Loss before taxation 1 (13,267) (21,636)

Taxation 4 2,473 1,317

Loss for the year (10,794) (20,319)

Items that will not be reclassified subsequently to profit or loss

Exchange differences on translating foreign operations 40 (37)

Other comprehensive income 40 (37)

Total comprehensive income for the year (10,754) (20,356)

Basic loss per share attributable to owners of the parent 5 (0.88p) (2.19p)

Diluted loss per share attributable to owners of the parent (0.88p) (2.19p)

Consolidated Statement of Comprehensive Incomefor the year ended 31 December 2013


30

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


2013 2012Note £’000 £’000

AssetsNon-current assetsGoodwill 6 19,118 19,118Other intangible assets 7 17,725 17,742Property, plant and equipment 8 637 665

37,480 37,525

Other Non-current assets 9 – 221

Current assetsInventories 10 1,475 1,804Tax receivable 2,721 1,598Trade and other receivables 11 4,161 3,250Cash and cash equivalents 12 21,549 15,265

Total current assets 29,906 21,917

Total assets 67,386 59,663

LiabilitiesCurrent liabilitiesTrade and other payables 13 8,259 7,780

Total current liabilities 8,259 7,780

Total liabilities 8,259 7,780

EquityShare capital 14 4,101 2,838Contingent consideration 318 1,081Share premium 114,881 98,034Share based payment reserve 2,567 1,916Foreign exchange reserve (116) (156)Retained earnings (62,624) (51,830)

Total equity 59,127 51,883

Total equity and liabilities 67,386 59,663

The consolidated financial statements were approved by the Board on 28 March 2014.

Jonathan AppsChief Financial Officer

Consolidated Statement of Financial Positionfor the year ended 31 December 2013


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Sharebased Foreign Non-

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

At 1 January 2012 1,574 – 51,263 1,857 (31,386) (119) 4,875 28,064

Share-based payments – – – 59 – – – 59Issue of share capital 1,121 – 42,213 – – – – 43,334Non-controlling interest –investment in subsidiary 143 – 4,857 – (586) – (4,414) –Cost of share issue – – (299) – – – – (299)Contingent consideration – 1,081 – – – – – 1,081

Transactions with owners 1,264 1,081 46,771 59 (586) – (4,414) 44,175

Loss for the year – – – – (19,858) – (461) (20,319)

Other comprehensive lossesExchange differences ontranslating foreign operations – – – – – (37) – (37)

Total comprehensive loss – – – – (19,858) (37) (461) (20,356)

At 1 January 2013 2,838 1,081 98,034 1,916 (51,830) (156) – 51,883

Share-based payments – – 792 – – – 792Issue of share capital 1,239 – 16,657 – – – – 17,896Cost of share issue – – (549) – – – – (549)Deferred consideration –retention element – – – (141) – – – (141)Contingent shares issued 24 (763) 739 – – – – –

Transactions with owners 1,263 (763) 16,847 651 – – – 17,998

Loss for the year – – – – (10,794) – – (10,794)

Other comprehensive lossesExchange differences ontranslating foreign operations – – – – – 40 – 40

Total comprehensive loss – – – – (10,794) 40 – (10,754)

At 31 December 2013 4,101 318 114,881 2,567 (62,624) (116) – 59,127

Consolidated Statement of Changes in Equityfor the year ended 31 December 2013


32



2013 2012Note £’000 £’000

Cash flows from operating activitiesLoss before taxation (13,267) (21,636)Amortisation 2,531 2,083Depreciation 454 239Goodwill impairment – 5,951Impairment of other intangible assets – 3,299Impairment of prepayments 63 901Share based payments 792 59Net interest payable/(receivable) 67 (115)Decrease in inventories 329 925(Increase)/decrease in trade and other receivables (519) 2,041Decrease in non-current debtors 221 313Increase/(decrease) in trade and other payables 479 (2,231)Other foreign exchange movements 40 211Tax refund 900 386Non cash flow movement in respect of associates – 11

Net cash outflow from operating activities (7,910) (7,563)

Cash flows from investing activitiesPurchase of property, plant and equipment (431) (237)Purchase of intangible assets (2,514) (71)Interest (payable)/received (67) 115Acquisition of subsidiaries, net of cash – (14,026)

Net cash used in investing activities (3,012) (14,219)

Cash flows from financing activitiesProceeds from issue of share capital 17,755 40,421Share issue costs (549) (299)Loan Notes repaid – (5,249)

Net cash inflow from financing activities 17,206 34,873

Net change in cash and cash equivalents 6,284 13,091

Cash and cash equivalents at the beginning of period 15,265 2,174

Cash and cash equivalents at the end of period 12 21,549 15,265

Consolidated Cash Flow Statementfor the year ended 31 December 2013


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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:

2013 2012£’000 £’000

Share based payment expense 792 59Staff costs 10,565 5,637Research and development costs written off 9,148 6,448Amortisation of intangible assets 2,531 2,083Depreciation of owned property, plant and equipment 454 239Goodwill impairment – 5,951Impairment of intangible assets – 3,299Impairment of prepayments 63 901Foreign exchange gains and losses 92 155Operating leases: land and buildings 774 637Auditor’s remuneration:Fees payable to the Company’s auditor for the audit ofthe Company financial statements 33 41Fees payable to the Company’s auditor for other services– audit of the Company’s subsidiaries pursuant to the legislation 46 49– taxation services 28 16

Revenue by geographic location 2013 2012£’000 £’000

United States and North America 964 721Europe 449 175Asia 20,535 7,871

Total revenue 21,948 8,767

Assets and liabilities by geographic locationAssets Liabilities

2013 2012 2013 2012£’000 £’000 £’000 £’000

Cayman Islands 2,082 8,057 1,355 85Europe 65,091 51,303 6,716 7,520Asia 213 303 188 175

67,386 59,663 8,259 7,780

Notes to the Financial Statementsfor the year ended 31 December 2013


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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 2013Sensium

Healthcare(Formerly Digital Radio/Toumaz Connected

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

Revenue 57 21,891 – 21,948Cost of sales (1) (12,200) – (12,201)

Gross profit 56 9,691 – 9,747

Amortisation of intellectual property (309) (2,218) (4) (2,531)Depreciation (67) (387) – (454)Share based payment – – (792) (792)Impairment – (63) – (63)Research & development (1,140) (8,008) – (9,148)Sales & administrative expenses – other (1,360) (7,972) (627) (9,959)

Total administrative expenses (2,876) (18,648) (1,423) (22,947)

Loss from continuing operations (2,820) (8,957) (1,423) (13,200)

Net finance payable – 21 (88) (67)

– 21 (88) (67)

Loss before taxation (2,820) (8,936) (1,511) (13,267)

Segment assets 11,150 54,153 2,083 67,386

Segment liabilities 273 6,606 1,380 8,259

Included in revenues in the Digital Radio/Connected Audio segment for the year ended 31December 2013 arerevenues of £3.1m from the largest customer and £1.7m from its second largest customer and £1.7m from itsthird largest customer. Together these represent 30% of the reported divisional revenue for the year and 30%of the total Group revenue for the year.

Notes to the Financial Statementscontinued


35


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

Segmental information (continued)

For the year ended 31 December 2012

SensiumHealthcare(Formerly Digital Radio/Toumaz Connected

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

Revenue 366 8,401 – 8,767Cost of sales (213) (4,553) – (4,766)

Gross profit 153 3,848 – 4,001

Amortisation of intellectual property – (526) (1,557) (2,083)Depreciation (82) (157) – (239)Share based payment – – (59) (59)Impairment – (10,151) – (10,151)Research & development (1,540) (4,908) – (6,448)Professional fees on acquisition – – (569) (569)Sales & administrative expenses – other (2,007) (3,545) (651) (6,203)

Total administrative expenses (3,629) (19,287) (2,836) (25,752)

Loss from continuing operations (3,476) (15,439) (2,836) (21,751)

Finance income – 15 100 115

– 15 100 115

Loss before taxation (3,476) (15,424) (2,736) (21,636)

Segment assets 12,078 38,733 8,852 59,663

Segment liabilities 410 4,508 2,862 7,780

Included in revenues in the Digital Radio/Connected Audio segment for the year ended 31December 2012 arerevenues of £1.7m from the largest customer and £1.2m from its second largest customer and £1.1m from itsthird largest customer. Together these represent 48% of the reported divisional revenue for the year and 46%of the total Group revenue for the year.

2 Impairment2013 2012£’000 £’000

Impairment of goodwill – 5,951Impairment of other intangible assets – 3,299Impairment of prepayments 63 901

63 10,151

During the year the Board has reviewed the carrying value of its intangible assets as required by IAS38. As aresult of this review the Board decided that no impairment was required during the year.



36


3 Finance income2013 2012£’000 £’000

Bank interest receivable 39 115

39 115

4 TaxationThe tax credit for the year is as follows:

2013 2012£’000 £’000

Current taxUK research and development tax credit – current year (1,709) (980)UK research and development tax credit in the prior year (836) (386)Foreign tax paid 72 49

(2,473) (1,317)

The tax assessed for the period differs from the standard rate of corporation tax in the UK as follows:

2013 2012£’000 £’000

Loss before tax (13,267) (21,636)

Tax rate 23.5% 24.5%Expected tax credit (3,118) (5,301)

Adjustment for tax-exempt income– Research and development tax credit adjustment (1,709) (980)– Under-provision in the prior year (836) (386)– Research and development enhanced deductions (406) (1,149)– Effect of losses surrendered for R&D credit (16) 1,137– Losses surrendered for R&D credit (756)

Adjustment for non-deductible expenses:– Disallowable expenses 531 2,672– Depreciation in excess of capital allowances 10 17– Other adjustments/foreign tax paid 245 49– Losses not utilised 3,582 2,624

Actual tax credit (2,473) (1,317)

The Group has tax losses in the UK of approximately £41.0 million (2012: £39.5 million) available for offsetagainst future operating profits. TheGroup 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 losseswill be available for offset against future profits. However, there is uncertainty over the foreseeablefuture and therefore a deferred tax asset has not been recognised in respect of these additional losses.

A deferred tax liability arises on the intangible assets acquired as part of the acquisition of the group headedby Frontier Silicon (Holdings) Limited of approximately £3.9m. At that time the group headed by Frontier Silicon(Holdings) Limited had accumulated trading losses which would have resulted in a deferred tax asset in excessof these amounts. Given that these amounts would be expected to be settled at the same time as the liability,an asset in respect of these losses has been recognised to an equal value of the potential liability. Given theGroup has a right and the ability to settle these amounts at the same time, the asset and liability have beenoffset in these financial statements.



37


5 Loss per shareThe calculation of the basic loss per share of 0.88p (2012: 2.19p) is based on the loss after tax of £10.8m (2012:£20.3m) divided by the weighted average number of ordinary shares in issue during the year of 1,225,760,858(2012: 927,984,462).

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.

6 GoodwillSensium Frontier

Healthcare Microsystems(Formerly (Formerly

Frontier Toumaz ToumazSilicon Healthcare) Microsystems) Total£’000 £’000 £’000 £’000

CostAt 1 January 2012 – 10,582 5,951 16,533Acquisition of Frontier Silicon 8,536 – – 8,536

At 31 December 2012 8,536 10,582 5,951 25,069Additions – – – –

At 31 December 2013 8,536 10,582 5,951 25,069

ImpairmentAt 1 January 2012 – – – –Charge in the yearImpairment in the year – – 5,951 5,951

At 31 December 2012 – – 5,951 5,951Charge in the year – – – –

At 31 December 2013 – – 5,951 5,951

Net book amount at 31 December 2013 8,536 10,582 – 19,118

Net book amount at 31 December 2012 8,536 10,582 – 19,118

Goodwill relating to Sensium Healthcare results from the acquisition of Sensium Healthcare Limited on3November 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 customer access, supply chain and technical knowhow acquired withFrontier will be used across the Group.

All principal operating divisions incurred losses in the year ended 31 December 2013, 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.



38


6 Goodwill (continued)To determine the value in use, the Directors have produced detailed monthly profit and loss and cash flowforecasts for the four years ended December 2017 and annual profit and loss forecasts for the years toDecember 2021. An eight year forecast period is considered reasonable for the markets that the Companyaddresses, particularly given the stage of development of the Group’s products and the expected life of newtechnologies as explained further below.

The Chief Executive’s Statement on pages 4 to 8 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.

Sensium HealthcareThe above average growth rates of revenue for Sensium Healthcare used in the projections are based on theDirectors’ considered estimates in a developingmarket and include significant estimates of both the volume andindividual value of sales. The introduction of new and untested “disruptive technology” into the market placeexposes the Group to the risk that costly developments will take longer than planned or not achieve the forecastfinancial returns. Should these estimates not be achieved there is a risk these assets will be impaired.

Consistent with 2012, a discount rate of 15% has been applied to the aggregate results of the forecast. TheDirectors considered the applicability of a discount rate of 18% and are satisfied that even if that rate were tobe applied, the carrying value of the Healthcare goodwill is justified.

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. Revenues wererecorded in 2013 and are expected to increase over the remainder of the planning horizon based onexpectations of sales volumes and price.

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 3-5times over the next 3 years.

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

Digital Radio and Connected Audio – Frontier SiliconThe intangible assets of Frontier Silicon were independently valued in the prior year as part of the acquisitionaccounting. The difference between the fair value of the net assets and the fair value of the consideration hasbeen treated as goodwill.

Whilst Frontier has continued to make losses post acquisition this is in line with the forecasts at the time of theacquisition and therefore the directors consider the Goodwill arising on consolidation as still valid and noimpairment 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, a discount rate of 15%was applied to futurecash flows with a rate of 18% used as a stress test. Under both scenarios, the carrying value of the intangibleassets could be supported.



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6 Goodwill (continued)In assessing the future cash flows of the division, the Directors have looked at a 6-8 year forward view. This isbased on the life cycle of the connected audio and digital radio products, where existing models are reachingend of life, and new models have 12 to 24 months development ahead of them before a useful sales life of5-6 years depending on future product enhancements. The Directors expect the market for digital radio tokeep expanding at its current rate and for the company to maintain its market share and for the connectedaudio market to expand significantly as the “Internet of Things” really takes hold.

The key judgements applied by the directors in the forecasts are in relation to sales price and volumes. Theforecast model is built on the Directors’ best estimates of the addressable market and the Company’s resultantshare of that market. In determining these estimates the directors have considered information and trends fromexisting markets and their expectations for emergingmarkets in order to develop an assessment of both futuresales volumes and prices. Should these estimates not be achieved there is a risk these assets will be impaired.

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

£’000 £’000 £’000 £’000 £’000

CostAt 1 January 2012 – – 6,806 5,495 12,301Additions 71 71Recognised on acquisition 4,000 1,690 10,203 8,912 24,805

At 31 December 2012 4,000 1,690 17,009 14,478 37,177Additions – – – 2,514 2,514Disposals – – – (2,421) (2,421)

At 31 December 2013 4,000 1,690 17,009 14,571 37,270

AmortisationAt 1 January 2012 – – 4,294 1,370 5,664Charge in the year 133 47 1,377 526 2,083Recognised on acquisition – – – 8,389 8,389Impairment – – 1,312 1,987 3,299

At 31 December 2012 133 47 6,983 12,272 19,435Charge in the year 400 141 1,576 414 2,531Disposals – – – (2,421) (2,421)

At 31 December 2013 533 188 8,559 10,265 19,545

Net book amount at31 December 2013 3,467 1,502 8,450 4,306 17,725

Net book amount at31 December 2012 3,867 1,643 10,026 2,206 17,742



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7 Other intangible assets (continued)

Intellectual propertyIntellectual property at 1 January 2013 relates to the valuation of beneficial licence agreements, trade names andcustomer relationships in Sensium Healthcare and Frontier Silicon at the date of their original acquisition.

Licence & development feesAt 1 January 2012 licence and development fees related to an agreement, dated 14May 2009, with ImaginationTechnologies Group plc to licence a next generation communication and digital radio multimedia IP platform.The consideration for the licence deal consisted of a number of payments scheduled over the duration of theGroup’s development projects. The remaining life of this asset is five years. The additions in the year relate totechnology on new projects essential to the future development of the new generation digital chips. Thelicences will be amortised in accordance with the Group accounting policy and will be subject to an annualimpairment review.

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.



41


8 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 2012 175 – 72 123 275 645Additions – 22 16 99 100 237Recognised on acquisition – 1,595 – 2,120 580 4,295Disposals – – – (94) (76) (170)

At 31 December 2012 175 1,617 88 2,248 879 5,007

Foreign exchange onopening balance – – – (34) 18 (16)Additions – 45 67 319 – 431Disposals – – – – (599) (599)

At 31 December 2013 175 1,662 155 2,533 298 4,823

DepreciationAt 1 January 2012 112 – 63 116 202 493Charge in the year 35 47 9 94 54 239Recognised on acquisition – 1,361 – 1,828 567 3,756Disposals – – – (94) (52) (146)

At 31 December 2012 147 1,408 72 1,944 771 4,342

Foreign exchange on opening balance – – – (29) 18 (11)Charge in the year 13 125 15 246 55 454Disposals – – – – (599) (599)

At 31 December 2013 160 1,533 87 2,161 245 4,186

Net book amountAt 31 December 2013 15 129 68 372 53 637

At 31 December 2012 28 209 16 304 108 665



42


9 Other non-current assets2013 2012£’000 £’000

Prepaid royalties and maintenance agreements – 221

The prepaid royalties and maintenance agreements in the prior year reflect the non-current portion of theamounts prepaid greater than one year consequent on the signing of the Shareholders’ Agreement betweenToumaz Limited and Imagination Technologies Group plc.

These amounts are released to the profit and loss account in line with the rendering of the associated services.In respect of the maintenance services this will be on a straight line basis over the service period. The pre-paidroyalties will be released as the related products are sold to customers.

10 Inventories2013 2012£’000 £’000

Raw materials 471 493Work in progress 401 273Finished goods 603 1,038

1,475 1,804

11 Trade and other receivables2013 2012£’000 £’000

Trade receivables 1,405 1,107Other debtors 1,734 1,146Prepayments and accrued income 1,022 997

4,161 3,250

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.

2013 2012£’000 £’000

0 – 30 days past due 1,214 93831 – 60 days past due 191 169

1,405 1,107



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11 Trade and other receivables (continued)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.

The movement in the provision for impairment during the year is as follows:

£’000

At 1 January 2012 19Increase in provision for impairment 1

At 31 December 2012 20

Reduction in provision for impairment (20)

At 31 December 2013 –

12 Cash and cash equivalents2013 2012£’000 £’000

GBP £ 15,833 9,133USD $ 4,783 4,940Euro C 739 1,078Hong Kong $ 10 114Romania LEU 184 –

21,549 15,265

13 Trade and other payables2013 2012£’000 £’000

Trade payables 3,255 1,571Other payables 1,405 3,219Accruals 3,599 2,990

8,259 7,780

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.



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14 Share capital2013 2012£’000 £’000

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

Allotted, issued and fully paid1,640,553,901 (2012: 1,135,651,456) ordinary shares of 0.25p 4,101 2,838

The movement in the number of shares is as follows:

Number ofordinary shares

At 1 January 2012 629,437,868Shares issued 506,213,588

At 31 December 2012 1,135,651,456Shares issued 504,902,445

At 31 December 2013 1,640,553,901

All shares are equally eligible to receive dividends and the repayment of capital and represent equal votes atmeetings of shareholders with the exception of 49,501,801 shares held jointly by the Employee Benefit Trustand participants for the purposes of the Company’s joint share ownership plan in relation to which all votingrights have been waived.



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14 Share capital (continued)Allotments during the year11 January 2013: 1,728,192 ordinary shares of 0.25p were issued in relation to the exercise of options byemployees over ordinary shares.

25 January 2013: 33,504,887 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 25 January 2013.

30 April 2013: 1,195,122 new ordinary shares of 0.25p were issued in settlement of deferred considerationdue to a former employee of Frontier Silicon (Holdings) Limited (“Frontier”) in respect of Frontier’s acquisitionby Toumaz.

8May 2013: 2,718,894 new ordinary shares of 0.25p were issued in settlement of deferred consideration dueto a former employee of Frontier Silicon (Holdings) Limited (“Frontier”) in respect of Frontier’s acquisitionby Toumaz.

15May 2013: 6,446,914 ordinary shares of 0.25pwere issued (“JSOP Shares”) under the joint share ownershipschedule to the Toumaz Employee Long Term Incentive Plan (“JSOP”) details of which were announced on25 January 2013.

23May 2013: 2,302,676 new ordinary shares of 0.25pwere issued in settlement of deferred consideration dueto a former employee of Frontier Silicon (Holdings) Limited (“Frontier”) in respect of Frontier’s acquisitionby Toumaz.

23May 2013: 2,083,857 new ordinary shares of 0.25pwere issued in settlement of deferred consideration dueto former shareholder of Frontier Silicon (Holdings) Limited (“Frontier”), Imagination Technologies in respectof Frontier’s acquisition by Toumaz.

24May 2013: 144,016 ordinary shares of 0.25pwere issued in relation to the exercise of options by employeesover ordinary shares.

1 July 2013: 9,600,000 ordinary shares of 0.25p were issued (“JSOP Shares”) under the joint share ownershipschedule to the Toumaz Employee Long Term Incentive Plan (“JSOP”) details of which were announced on25 January 2013.

20 August 2013: 2,677,887 new ordinary shares of 0.25p were issued in settlement of deferred considerationdue to a former employee of Frontier Silicon (Holdings) Limited (“Frontier”) in respect of Frontier’s acquisitionby Toumaz.

7 November 2013: 442,500,000 ordinary shares of 0.25p were issued to institutional investors and otherinvestors each at a price of 4p per share. The difference between the total consideration received of £17.7mand the total nominal value of shares issued has been transferred to the share premium account.

Employee Long Term Incentive SchemeAt 31 December 2013, shares in the JSOP of 18,600,000 (2012: 0) 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 12,301,801 (2012: 0) further JSOP shares.

Share optionsAt 31 December 2013, options over 11,305,835 (2012: 14,305,385) 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 30,052,495 (2012: 19,386,110) further options. Details of the fair value of all options in existence areprovided in Note 20.



46


15 Contingent liabilitiesThere were no contingent liabilities at 31 December 2013 or 31 December 2012.

16 Capital commitmentsOn 20 December 2013 the Group signed a contract for the next phase of the Symphony developmentprogramme. The Capital portion of the project is $1,900,000 (approximately £1,166,000) of which nothing hasbeen invoiced before the 31 December 2013. There were no capital commitments at 31 December 2012.

17 Operating lease commitmentsThe Group leases offices 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 635 1,405 – 2,040Other 853 497 – 1,350

Total 1,488 1,902 – 3,390



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18 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:

2013 2012Non 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 – 17,725 17,725 – 17,742 17,742Property, plant and equipment – 637 637 – 665 665Other non-current assets – – – – 221 221Inventories – 1,475 1,475 – 1,804 1,804Trade receivables 1,405 – 1,405 1,107 – 1,107Other receivables 1,734 – 1,734 1,146 – 1,146Prepayments andaccrued income – 1,022 1,022 – 997 997Tax receivable – 2,721 2,721 – 1,598 1,598Cash and cash equivalents 21,549 – 21,549 15,265 – 15,265

Total 24,688 42,698 67,386 17,518 42,145 59,663

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:

2013 2012Other 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 3,255 – 3,255 1,571 – 1,571Other payables 351 1,054 1,405 313 2,906 3,219Accruals and deferred income 3,599 – 3,599 2,990 – 2,990

Total 7,205 1,054 8,259 4,874 2,906 7,780

TheGroup is exposed to a variety of financial riskswhich result fromboth its operating and investing activities. TheBoard is responsible for co-ordinating theGroup’s riskmanagement and focuses on actively securing theGroup’sshort to medium term cash flows. Long term financial investments are managed to generate lasting returns.



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18 Financial instruments (continued)The Group does not actively engage in the trading of financial assets and has no financial derivatives. Themostsignificant 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 theDirectors. 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 9. Themaximum credit risk to which the Group is exposed from its trade receivables is £1.1m. Cash at bank is all heldwith 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 moneymarkets to depositexcess cash which is not required in the short term. The Directors prepare rolling cashflow forecasts and seekto raise additional fundingwhenever 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 outflowwithin six months of the year end.

Currency risksThe Group is exposed to translation foreign exchange risk in connection with its investment in Frontier Silicon(Holdings) Ltd whose subsidiaries are Frontier Silicon (Hong Kong) Ltd incorporated in Hong Kong and FrontierSilicon (Romania) Ltd incorporated in Romania and its investment in Sensium Healthcare Limited whosesubsidiary, Toumaz Asia Pte Limited, is Singapore incorporated. The Group does not hedge any transactions.As a result the Group is subject to foreign currency risk in respect of accounting for its investment in thesubsidiaries.

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$£’000 £’000

Assets 351 207Liabilities (42) (150)

Total exposure 309 57



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19 Related party transactionsDuring the year Frontier Silicon Limited purchased goods, services and assets to the value of £2,004,000(2012: 1,764,000) from Imagination Technologies Limited, a company that has a common directorship withSir H Yossaie. At the year end there was an outstanding balance of £1,410,000 (2012: £311,000) due fromFrontier Silicon 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 £62,000 (2012: £36,000). At the year end there was an outstanding balance of £1,000 (2012: £16,000) owingto Frontier Silicon Limited in respect of these sales.

During the year Frontier Microsystems Limited purchased goods, services and assets to the value of£463,000 (2012: nil) from Imagination Technologies Limited. At the year-end there was an outstanding balanceof £nil (2012: nil) due from Frontier Microsystems Limited to Imagination Technologies Limited in respect ofthese 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.

20 Employee remuneration(i) Employee benefits expense

The average number of employees during the year was 166 (2012: 89).

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

2013 2012£’000 £’000

Wages and salaries 9,492 5,463Share based payment 792 51Pensions – defined contribution scheme 430 123

10,714 5,637

Included within the above, fully disclosed in the Report on Remuneration on page 17, 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:

2013 2012£’000 £’000

Fees and emoluments 1,364 760Share based payment 184 11

1,548 771



50


20 Employee remuneration (continued)

(ii) Equity compensation benefitsOn 25 January 2013 the Company approved grants under an Unapproved Share Option Scheme (2012Rules) over 10,410,285 ordinary shares to employees of the company and certain other individuals. Onthe 15 May 2013 a further 20,218 options were issued under this scheme.

On 1 July 2013 the Company issued 9,600,000 ordinary shares of 0.25p.

At 31 December 2013, the Group had the following options outstanding:Shareprice

Date of Exercise at dateoriginal grant Dates exercisable and lapse price of issue Number Fair value

3 March 2005 50% after 3 March 2007 and 50% 5.2p 16.25p 2,144,216 12.58pafter 3 March 2008. These optionslapse on 2 March 2015.

30 September 2005 After 31 May 2006. These options 6.94p 16.25p 1,683,835 9.54plapse on 1 June 2015.

24 October 2006 50% after 23 October 2008 and 8.75p 8.75p 2,000,000 2.72p and50% after 23 October 2009 subject 3.35pto a share price of 25p. Theseoptions lapse on 1 October 2016.

20 November 2006 50% after 19 November 2008 and 8.5p 8.5p 1,000,000 2.66p and50% after 19 November 2009 subject 3.28pto a share price of 25p. Theseoptions lapse on 1 November 2016.

13 March 2007 50% after 13 March 2009 and 9.75p 9.75p 1,225,000 3.99p50% after 13 March 2010 subject tolast 12 months revenue being greaterthan £12 million and the last sixmonths average monthly revenue isgreater than £750,000. These optionslapse on 1 March 2017.

18 September 2009 Conversion of former share options 3.7p 8.63p 1,622,000 4.93pheld by directors in Future WavesUK Ltd. Exercisable on or after18 September 2009. These optionslapse on 1 September 2017.

18 September 2009 Conversion of former share options 3.7p 8.63p 729,900 4.93pheld by employees in Future WavesUK Ltd. Exercisable on or after18 January 2010. Good leaverrules apply. These options lapseon 1 September 2017.

21 January 2010 Directors’ options exercisable after 6p 8.63p 16,000,000 2.73p21 January 2010. These optionslapse on 20 September 2017.



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20 Employee remuneration (continued)

(ii) Equity compensation benefits (continued)Shareprice

Date of Exercise at dateoriginal grant Dates exercisable and lapse price of issue Number Fair value

13 March 2010 Employee share options exercisable 7p 6.78p 4,599,575 2.23pafter 12 March 2013.

25 January 2013 JSOP Shares exercisable at 0.25p 6.66p 33,454,887 2.8p24 January 2016

25 January 2013 Unapproved share options under 0.25p 6.66p 10,333,586 2.8pthe Toumaz Unapproved ShareOption Scheme (2012 Rules)

15 May 2013 JSOP Shares exercisable at 0.25p 5.3p 6,446,914 2.89p14 May 2016

15 May 2013 Unapproved share options under 0.25p 5.3p 20,218 2.89pthe Toumaz Unapproved ShareOption Scheme (2012 Rules)

1 July 2013 JSOP Shares exercisable at 0.25p 5.12p 9,600,000 2.69p1 July 2015

Outstanding at 31 December 2013Options 41,358,330

JSOP 49,501,801

Total 90,860,131

The movement on share options and their weighted average exercise price are as follows:Weightedaverage

exercise priceNumber (pence)

Outstanding at 1 January 2013 33,691,945 5.24Granted during year 10,406,282 0.25Lapsed during the year (867,689) 6.8Exercised during the year (1,872,208) 3.6

Outstanding at 31 December 2013 41,358,330 4.27

Of the 41,358,330 (2012: 33,691,945) share options in existence at 31 December 2013, 24,479,739 (2012:24,367,466) are exercisable.

The weighted average remaining contractual life of share options outstanding at 31 December 2013 is 6 years(2012: 4.7 years).

Employee share-based expense of £792,000 (2012: £59,000) has been included in the consolidated incomestatement in accordancewith IFRS 2 “Share Based Payments” which gave rise to a share based payment reserve.No liabilities were recognised due to share-based payment transactions. The deferred tax asset amounting toapproximately £127,600 (2012: £14,600) has not been provided on the share-based payment expense due tothere being insufficient certainty regarding its recovery.

No options have been issued since the balance sheet date.



52


21 Principal subsidiary undertakingsPlace of

Name Principal activity incorporation % Equity

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

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

Future Waves UK Limited Dormant Intermediate holding England andWales 100%Company.

Nanoscience Limited Dormant. England andWales 100%

Frontier Silicon (Holdings) Dormant holding company. England andWales 100%Limited

Frontier Silicon Limited1 Development, manufacture and England andWales 100%sale of digital radio and internetradio technologies.

Frontier Silicon (Ireland) Limited1 Development of digital radio and Republic of Ireland 100%internet radio technologies.

Frontier Silicon (HK) Limited2 Company providing support Hong Kong 100%services from Hong Kong andPeople’s Republic of China.

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

1 owned by Frontier Silicon (Holdings) Limited2 owned by Frontier Silicon Limited

22 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 16.

23 Post balance sheet eventsThere have been no material or disclosable events since 31 December 2013.

24 Aprroval of the financial statementsThe financial statements were approved by the Board of Directors on 28 March 2014.



53


Notice is given that the annual general meeting of the members of Toumaz Limited will be held at Instinctif Partners,65 Gresham Street, London, EC2V 7NQ on the 23rd May 2014 at 9:30am to consider and, if thought fit, to pass theresolutions set out below:

Ordinary resolutions1. To receive the report and accounts for the year ended 31 December 2013.

2. To elect Dr Richard Steeves retiring as a director due to his appointment having beenmade since the last annualgeneral meeting in accordance with the Company’s articles of association and, being eligible, offering himselffor reappointment as a director of the Company.

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

4. To re-elect Professor Christofer Toumazou as a director who is retiring by rotation in accordancewith the articlesof association of the Company and, being eligible, offering himself for reappointment as a director of theCompany.

5. To re-elect DrMartin Knight as a director who is retiring by rotation in accordancewith the articles of associationof the Company and, being eligible, offering himself for reappointment as a director of the Company.

6. To re-appoint Grant ThorntonUK LLP as auditors and to authorise the directors to determine their remuneration.

7. 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 agreementmade before the expiry of the authority andprovided that the authority is limited to:

7.1 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

7.2 the allotment of equity securities, otherwise than in accordance with paragraph 7.1 up to an aggregatenominal amount of 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

28 March 2014

Notice of Annual General Meeting


54


Notes to General Meeting1. Amember entitled to attend and vote at the abovemeetingmay 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 copymay be deposited, by hand or by courier, at the office of Capita Asset Services, PXS, 34 BeckenhamRoad, KentBR3 4TU, not less than 48 hours before the time appointed for the meeting or any adjourned meeting;alternatively a business reply envelope has been provided for this purpose. If a holder of depository interestsplease return its form of direction in the enclosed business reply envelope.

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).

6. On 28 March 2014 the Company’s issued share capital comprised 1,641,553,901 ordinary shares of0.25p each. Each ordinary share carries the right to one vote at a general meeting of the Company. The sharesheld in the JSOP Employee trust have at present no voting rights. Therefore the total number of voting rightsin the Company as at 28 March 2014 is 1,592,052,100.

Notice of Annual General Meetingcontinued


55


Shareholder Notes


56


Toumaz L imited

137 Euston Road

London NW1 2AA, UK

© 2014

toumaz.com

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