REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 31 December 2011
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 31 December 2011 CONTENTS PAGE Board of Directors and other Officers 1 Report of the Board of Directors 2 Independent Auditor's report 3-4 Consolidated statement of comprehensive income 5 Consolidated statement of financial position 6 Consolidated statement of changes in equity 7 Consolidated cash flow statement 8 Notes to the consolidated financial statements 9-20
BOARD OF DIRECTORS AND OTHER OFFICERS Board of Directors: Petros Petridis Stavros Stavrinides Soultana Petridou (Appointed on 21/10/2011) Christos Gkrozoudis (Appointed on 21/10/2011) Nikolaos Antoniadis (Appointed on 21/10/2011 - resigned on 13/02/2012) Osame El-Ansary (Appointed on 21/10/2011 - resigned on 10/02/2012) Company Secretary: Stavros Stavrinides Independent Auditors: PAPACHRISTOFOROU & FANDEOS LTD CHARTERED CERTIFIED ACCOUNTANTS 32, Kritis Street Papachristoforou Building 2nd Floor 3087 Limassol, Cyprus Registered office: Pentelis, 33 2nd Floor, Apt 202 Dasoupoli, Strovolos, P.C. 2013, Nicosia, Cyprus 1
REPORT OF THE BOARD OF DIRECTORS The Board of Directors presents its report and audited consolidated financial statements of Axon Global Plc and its subsidiaries (the Group) for the year ended 31 December 2011. Principal activity The principal activity of the Company, which is unchanged from last year, is to act as a holding company for the Axon Group of companies. Results and Dividends The Group's results for the year are set out on page 5. The Board of Directors approved the payment of a dividend as detailed below and the remaining net profit for the year is retained. Dividends On 31 January 2011 the Board of Directors approved the payment of an interim dividend of 500,000 (2010: NIL). Share capital Authorised capital On 6 February 2012 the Company increased its authorised share capital by an additional 5,000,000 ordinary shares of nominal value 0.006 each. Board of Directors The members of the Group's Board of Directors as at 31 December 2011 and at the date of this report are presented on page 1. In accordance with the Company's Articles of Association all directors presently members of the Board continue in office. There were no significant changes in the assignment of responsibilities and remuneration of the Board of Directors. Events after the reporting period Any significant events that occurred after the end of the reporting period are described in note 24 to the financial statements. Independent Auditors The Independent Auditors, PAPACHRISTOFOROU & FANDEOS LTD, have expressed their willingness to continue in office and a resolution giving authority to the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting. By order of the Board of Directors, Petros Petridis Director Limassol, Cyprus, 26 April 2011 2
To the Members of Axon Global Plc Report on the Consolidated Financial Statements Independent Auditor's Report We have audited the consolidated financial statements of Axon Global Plc (the ''Company'') and its subsidiaries ('the Group') on pages 5 to 20, which comprise the consolidated statement of financial position as at 31 December 2011, and the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Board of Directors' Responsibility for the Consolidated Financial Statements The Board of Directors is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap. 113. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 3
To the Members of Axon Global Plc Independent Auditor's Report (continued) Opinion In our opinion, the consolidated financial statements give a true and fair view of the financial position of Axon Global Plc and its subsidiaries as at 31 December 2011, and of its financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and the requirements of the Cyprus Companies Law, Cap. 113. Report on Other Legal and Regulatory Requirements Pursuant to the requirements of the Cyprus Companies Law, Cap. 113, we report the following: We have obtained all the information and explanations we considered necessary for the purposes of our audit. In our opinion, proper books of account have been kept by the Company. The Company's consolidated financial statements are in agreement with the books of account. In our opinion and to the best of our information and according to the explanations given to us, the consolidated financial statements give the information required by the Cyprus Companies Law, Cap. 113, in the manner so required. In our opinion, the information given in the report of the Board of Directors on page 2 is consistent with the consolidated financial statements. Other Matter This report, including the opinion, has been prepared for and only for the Company's members as a body in accordance with Section 156 of the Cyprus Companies Law, Cap.113 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to. PAPACHRISTOFOROU & FANDEOS LTD CHARTERED CERTIFIED ACCOUNTANTS Limassol, 26 April 2011 4
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Period from 17 March 2010 to 31 December Note Revenue 5 1,122,155 1,182,801 Cost of sales (333,683) (358,106) Gross profit 788,472 824,695 Other income 6 3,955 35,343 Selling and distribution expenses (49,426) (121,787) Administration expenses (115,041) (106,006) Other expenses 7 (2,135) (953) Operating profit 625,825 631,292 Finance costs 9 (3,403) (1,494) Net profit from investing activities 10 3 102 Profit before tax 622,425 629,900 Tax 11 (7,644) (717) Net profit for the year / period 614,781 629,183 Other comprehensive income - - Total comprehensive income for the year / period 614,781 629,183 Attributable to: Equity holders of the parent 620,111 657,773 Minority interest (5,330) (28,590) 614,781 629,183 The notes on pages 9 to 20 form an integral part of these consolidated financial statements. 5
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 December 2011 ASSETS Note Non-current assets Property, plant and equipment 13 15,267 16,287 Deferred tax assets 51,183 51,740 66,450 68,027 Current assets Inventories 14 52,446 - Trade and other receivables 15 1,523,755 1,517,752 Cash at bank and in hand 16 65,641 66,006 1,641,842 1,583,758 Total assets 1,708,292 1,651,785 EQUITY AND LIABILITIES Equity Share capital 17 60,000 30,000 Retained earnings 777,884 657,773 837,884 687,773 Non controlling interests (62,385) (57,055) Total equity 775,499 630,718 Non-current liabilities Provisions for other liabilities and charges 6,121 3,520 6,121 3,520 Current liabilities Trade and other payables 19 828,701 960,857 Borrowings 18 13,415 - Current tax liabilities 20 84,556 56,690 926,672 1,017,547 Total liabilities 932,793 1,021,067 Total equity and liabilities 1,708,292 1,651,785 On 26 April 2011 the Board of Directors of Axon Global Plc authorised these financial statements for issue....... Petros Petridis Stavros Stavrinides Director Director The notes on pages 9 to 20 form an integral part of these consolidated financial statements. 6
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to equity holders of the Company Non Share capital Retained earnings Total controlling interests Total Note Total comprehensive income for the period - 657,773 657,773 (28,590) 629,183 Issue of share capital 17 30,000-30,000-30,000 Non-controlling interest arising on the acquisition of subsidiaries - - - (28,465) (28,465) 30,000 657,773 687,773 (57,055) 630,718 Balance at 31 December 2010/ 1 January 2011 30,000 657,773 687,773 (57,055) 630,718 Total comprehensive income for the year - 620,111 620,111 (5,330) 614,781 Issue of share capital 17 30,000-30,000-30,000 Dividends 12 - (500,000) (500,000) - (500,000) 30,000 120,111 150,111 (5,330) 144,781 Balance at 31 December 2011 60,000 777,884 837,884 (62,385) 775,499 Companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two years after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for defence at 20% for the tax years 2012 and 2013 and 17% for 2014 and thereafter (in 2011 the rate was 15% up to 30 August 2011and 17% thereafter) will be payable on such deemed dividends to the extent that the shareholders (companies and individuals) are Cyprus tax residents. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time. This special contribution for defence is payable by the Company for the account of the shareholders. The notes on pages 9 to 20 form an integral part of these consolidated financial statements. 7
CONSOLIDATED CASH FLOW STATEMENT Period from 17 March 2010 to 31 December Note CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax 622,425 629,900 Adjustments for: Depreciation of property, plant and equipment 13 9,680 7,562 Unrealised exchange loss / (profit) 296 (41) Excess of Group's interest in the net fair value of the subsidiaries' assets and liabilities over cost on acquisition - (32,468) Interest income 10 (3) (61) Interest expense 9 1,521 - Cash flows from operations before working capital changes 633,919 604,892 Increase in inventories (52,446) - Decrease / (increase) in trade and other receivables 17,377 (1,647,349) (Decrease) / increase in trade and other payables (132,156) 960,857 Net cash flows from / (used in) operating activities 466,694 (81,600) CASH FLOWS FROM INVESTING ACTIVITIES Payment for purchase of property, plant and equipment 13 (8,660) (200) Acquisition of subsidiaries, net cash inflow on acquisition - 117,704 Interest received 3 61 Net cash flows (used in) / from investing activities (8,657) 117,565 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of share capital 30,000 30,000 Proceeds from borrowings 13,405 - Unrealised exchange (loss) / profit (296) 41 Interest paid (1,521) - Dividends paid (500,000) - Net cash flows (used in) / from financing activities (458,412) 30,041 Net (decrease) / increase in cash and cash equivalents (375) 66,006 Cash and cash equivalents: At beginning of the year/ period 66,006 - At end of the year/ period 16 65,631 66,006 The notes on pages 9 to 20 form an integral part of these consolidated financial statements. 8
1. Incorporation and principal activities Country of incorporation The Company Axon Global Plc (the ''Company'') was incorporated in Cyprus on 17 March 2010 as an international business company with limited liability under the Cyprus Companies Law, Cap. 113. Its registered office is at Pentelis, 33, 2nd Floor, Apt 202, Dasoupoli, Strovolos, P.C. 2013, Nicosia, Cyprus. Principal activity The principal activity of the Company, which is unchanged from last year, is to act as a holding company for the Axon Group of companies. 2. Accounting policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented in these consolidated financial statements unless otherwise stated. Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap.113. The consolidated financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates and requires Management to exercise its judgement in the process of applying the Group's accounting policies. It also requires the use of assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on Management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. Adoption of new and revised IFRSs During the current year the Group adopted all the new and revised International Financial Reporting Standards (IFRS) that are relevant to its operations and are effective for accounting periods beginning on 1 January 2011. This adoption did not have a material effect on the accounting policies of the Group except for the application of International Accounting Standard 1 (Revised) ''Presentation of Financial Statements'' which has a material effect on the presentation of the consolidated financial statements. At the date of approval of these financial statements, standards and interpretations were issued by the International Accounting Standards Board which were not yet effective. Some of them were adopted by the European Union and others not yet. The Board of Directors expects that the adoption of these accounting standards in future periods will not have a material effect on the consolidated financial statements of the Group. Basis of consolidation The Group consolidated financial statements comprise the financial statements of the parent company Axon Global Limited and the financial statements of the following subsidiaries, Gestrona Investments Limited, Comlax Holding Limited, Harlingen Holdings Limited, Ampton Business Corp. and Franchising Axon Hellas EPE. The financial statements of all the Group companies are prepared using uniform accounting policies. All intercompany transactions and balances between Group companies have been eliminated during consolidation. 9
2. Accounting policies (continued) Business combinations The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 ''Non-current Assets Held for Sale and Discontinued Operations'', which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. The interest of minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. Revenue recognition Revenue comprises the invoiced amount for the sale of products net of Value Added Tax, rebates and discounts. Revenues earned by the Group are recognised on the following bases: Interest income Interest income is recognised on a time-proportion basis using the effective interest method. Employee benefits The Group and its employees contribute to the Government Social Insurance Fund based on employees' salaries. The Group's contributions are expensed as incurred and are included in staff costs. The Group has no legal or constructive obligations to pay further contributions if the scheme does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods. Finance costs Interest expense and other costs on borrowings to finance construction or production of qualifying assets are capitalised, during the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs are expensed. Foreign currency translation (1) Functional and presentation currency Items included in the Group's financial statements are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The financial statements are presented in Euro ( ), which is the Group's functional and presentation currency. (2) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of comprehensive income. 10
2. Accounting policies (continued) Tax Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax liabilities and assets are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and laws that have been enacted, or substantively enacted, by the reporting date. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority. Dividends Interim dividends are recognised in equity in the year in which they are paid. Dividend distribution to the Group's shareholders is recognised in the Group's financial statements in the year in which they are approved by the Group's shareholders. Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on the straight-line method so as to write off the cost of each asset to its residual value over its estimated useful life. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Where the carrying amount of an asset is greater than its estimated recoverable amount, the asset is written down immediately to its recoverable amount. Expenditure for repairs and maintenance of property, plant and equipment is charged to the consolidated statement of comprehensive income of the year in which it is incurred. The cost of major renovations and other subsequent expenditure are included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset. Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with carrying amount and are included in the consolidated statement of comprehensive income. 11
2. Accounting policies (continued) Financial instruments Financial assets and financial liabilities are recognised in the Group's consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Trade receivables Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Prepayments from clients Payments received in advance on development contracts for which no revenue has been recognised yet, are recorded as prepayments from clients as at the reporting date and carried under liabilities. Payments received in advance on development contracts for which revenue has been recognised, are recorded as prepayments from clients to the extent that they exceed revenue that was recognised in the consolidated statement of comprehensive income as at the reporting date. Cash and cash equivalents For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks and bank overdrafts. In the consolidated statement of financial position, bank overdrafts are included in borrowings in current liabilities. Borrowings Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any differences between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of comprehensive income over the period of the borrowings using the effective interest method. Trade payables Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Derecognition of financial assets and liabilities Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when: the rights to receive cash flows from the asset have expired; the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a 'pass through' arrangement; or the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. 12
2. Accounting policies (continued) Derecognition of financial assets and liabilities (continued) Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. Impairment of assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the consolidated statement of financial position. Inventories Inventories are stated at the lower of cost and net realisable value. The cost is determined using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less the costs to completion and selling expenses. Share capital Ordinary shares are classified as equity. Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Non-current liabilities Non-current liabilities represent amounts that are due more than twelve months from the reporting date. 13
3. Financial risk management Financial risk factors The Group is exposed to interest rate risk, credit risk, liquidity risk, currency risk and capital risk management arising from the financial instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below: 3.1 Interest rate risk Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group's Management monitors the interest rate fluctuations on a continuous basis and acts accordingly. 3.2 Credit risk Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. The Group has no significant concentration of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and monitors on a continuous basis the ageing profile of its receivables. Cash balances are held with high credit quality financial institutions and the Group has policies to limit the amount of credit exposure to any financial institution. 3.3 Liquidity risk Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Group has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities. 3.4 Currency risk Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Group's measurement currency. The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the US Dollar and the Euro. The Group's Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. 3.5 Capital risk management The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group's overall strategy remains unchanged from last year. Fair value estimation The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the reporting date. 4. Critical accounting estimates and judgements Estimates 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. 14
4. Critical accounting estimates and judgements (continued) The 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 significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Provision for bad and doubtful debts The Group reviews its trade and other receivables for evidence of their recoverability. Such evidence includes the customer's payment record and the customer's overall financial position. If indications of irrecoverability exist, the recoverable amount is estimated and a respective provision for bad and doubtful debts is made. The amount of the provision is charged through the consolidated statement of comprehensive income. The review of credit risk is continuous and the methodology and assumptions used for estimating the provision are reviewed regularly and adjusted accordingly. Provision for obsolete and slow-moving inventory The Group reviews its inventory records for evidence regarding the saleability of inventory and its net realizable value on disposal. The provision for obsolete and slow-moving inventory is based on Management's past experience, taking into consideration the value of inventory as well as the movement and the level of stock of each category of inventory. The amount of provision is recognized in the consolidated statement of comprehensive income. The review of the net realisable value of the inventory is continuous and the methodology and assumptions used for estimating the provision for obsolete and slow-moving inventory are reviewed regularly and adjusted accordingly. Income taxes Significant judgement is required in determining the provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Retirement benefits The cost of defined benefit pension plans is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rate of return on plan assets, future salary increases, mortality rates and future pension increases where necessary. The Group sets these assumptions based on market expectations at the reporting date using best-estimates for each parameter covering the period over which obligations are to be settled. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. 5. Revenue Period from 17 March 2010 to 31 December Revenue 1,122,155 1,182,801 1,122,155 1,182,801 15
6. Other income Period from 17 March 2010 to 31 December Excess of Group's interest in the net fair value of the subsidiaries' assets and liabilities over cost on acquisition - 32,468 Sundry operating income 3,955 2,875 3,955 35,343 7. Other expenses Period from 17 March 2010 to 31 December Other operating expenses 2,135 953 2,135 953 8. Staff costs Period from 17 March 2010 to 31 December Wages and salaries 16,670 - Social insurance costs and other funds 1,417 - Social cohesion fund 333-18,420-9. Finance costs Period from 17 March 2010 to 31 December Net foreign exchange transaction losses 296 - Interest expense 1,521 - Other finance expenses 1,586 1,494 3,403 1,494 16
10. Profit from investing activities Period from 17 March 2010 to 31 December Interest income 3 61 Exchange profit - 41 3 102 11. Tax Period from 17 March 2010 to 31 December Corporation tax - current year / period 7,087 14,698 Overseas tax - 6 Defence contribution - current year / period - 411 Deferred tax - charge/ (credit) 557 (14,398) Charge for the year 7,644 717 12. Dividends Period from 17 March 2010 to 31 December Interim dividend paid 500,000-500,000 - On 31 January 2011 the Board of Directors approved the payment of an interim dividend of 500,000 (2010: NIL). Dividends are subject to a deduction of special contribution for defence at the rate of 17% (15% to 30 August 2011) for individual shareholders that are resident in Cyprus. Dividends payable to non-residents of Cyprus are not subject to such a deduction. 17
13. Property, plant and equipment Furniture, fixtures and office equipment Cost Additions 23,849 Balance at 31 December 2010/ 1 January 2011 23,849 Additions 8,660 Balance at 31 December 2011 32,509 Depreciation Charge for the period 7,562 Balance at 31 December 2010/ 1 January 2011 7,562 Charge for the year 9,680 Balance at 31 December 2011 17,242 Net book amount Balance at 31 December 2011 15,267 Balance at 31 December 2010 16,287 14. Inventories Goods for resale 52,446-52,446 - The cost of inventories recognised as expense and included in 'cost of goods sold' amounted to (40,000) (2010: - ). Inventories are stated at cost. 15. Trade and other receivables Trade receivables 932,114 456,362 Directors' current accounts - debit balances (Note 21) 215,849 688,187 Loans receivable 97,028 138,482 Other claims 58,739 83,583 Other receivables 219,730 151,107 Refundable VAT 295 31 1,523,755 1,517,752 The fair values of trade and other receivables due within one year approximate to their carrying amounts as presented above. The exposure of the Group to credit risk and impairment losses in relation to trade and other receivables is reported in note 3 of the financial statements. 18
16. Cash and cash equivalents For the purposes of the cash flow statement, the cash and cash equivalents include the following: Cash at bank and in hand 65,641 66,006 Bank overdrafts (Note 18) (10) - 65,631 66,006 The exposure of the Group to credit risk and impairment losses in relation to cash and cash equivalents is reported in note 3 of the financial statements. 17. Share capital 2011 2010 Number of shares Number of shares Authorised Ordinary shares of 0.006 each 10,000,000-5,000,000 - Issued and fully paid On 1 January / 17 March 5,000,000 30,000 - - Issue of shares 5,000,000 30,000 5,000,000 30,000 Balance at 31 December 10,000,000 60,000 5,000,000 30,000 Authorised capital On 6 February 2012 the Company increased its authorised share capital by an additional 5,000,000 ordinary shares of nominal value 0.006 each. 18. Borrowings Current borrowings Bank overdrafts (Note 16) 10 - Other loans 13,405-13,415-19. Trade and other payables Trade payables 156,961 198,172 Prepayments from clients 592,331 411,905 Accruals 23,689 12,520 Other creditors 55,720 338,260 828,701 960,857 The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above. 19
20. Current tax liabilities Corporation tax 84,144 55,604 Special contribution for defence 412 1,086 84,556 56,690 21. Related party transactions The following transactions were carried out with related parties: 21.1 Directors' current accounts - debit balances (Note 15) Petros Petridis 215,849 688,187 215,849 688,187 Mr Petros Petridis is a member of the Board of Directors of Axon Global Plc. The balance due is interest free, and has no specified repayment date. 22. Contingent liabilities The Group had no contingent liabilities as at 31 December 2011. 23. Commitments The Group had no capital or other commitments as at 31 December 2011. 24. Events after the reporting period There were no material events after the reporting period, which have a bearing on the understanding of the financial statements. Independent Auditor s Report pages 3 and 4 20