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blur Group plc

The Enterprise Services Platform

Annual Report and Accounts

For the Year Ended 31 December 2015

Company number: 08188404

Contents

2015 HIGHLIGHTS 2

STRATEGIC REPORT 3

CHAIRMAN’S REPORT 9

CHIEF EXECUTIVE’S REPORT 10

BOARD OF DIRECTORS 16

DIRECTORS’ REPORT 18

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BLUR GROUP PLC 26

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME 28

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 29

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 30

CONSOLIDATED STATEMENT OF CASHFLOWS 31

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION 32

COMPANY STATEMENT OF FINANCIAL POSITION - BLUR GROUP PLC 61

COMPANY STATEMENT OF CHANGES IN EQUITY - BLUR GROUP PLC 62

COMPANY STATEMENT OF CASHFLOWS - BLUR GROUP PLC 63

NOTES TO THE COMPANY FINANCIAL STATEMENTS 64

COMPANY INFORMATION 70

blur Group PLC Annual Report and Accounts for the Year Ended 31 December 2015 1

Welcome to blur Group blur Group operates an Enterprise Services Platform that helps private and public sector organizations eliminate the waste and inefficiency inherent in the ‘traditional’ purchasing of business services. blur provides both cloud based software and managed services to create an end-to-end solution that includes sourcing, supplier short listing, contract and project management through to payment processing and reporting.

In 2010, we embarked on a ten-year plan to build a next generation solution for Enterprises to more effectively manage previously challenging areas of business services procurement, a key component of indirect spend. blur defines the Enterprise as a business with 50 or more employees. We set out to build an end-to-end services procure-to-pay platform that gives Enterprises the ability to outsource the purchasing, management, payment and delivery of the business services they require. The resulting solution combines managed services, cloud software and a global marketplace of service providers that will, over time, be driven increasingly by machine intelligence and big data.

Between 2010 and 2014, we both developed the platform and evolved the business support model. We released four versions of the cloud software platform, one per year; blur 1.0, through 4.0, with each release increasing functionality and providing greater customer and service provider automation. With blur 1.0 and blur 2.0 the majority of customers were small buyers and suppliers. Early revenues were generated through the spot purchasing of small projects with spend in the low $’000s. The release of blur 3.0 and 4.0 marked the introduction of Enterprise features such as Project Space and blurSenseTM and we began to test the platform with medium and large Enterprises to better shape the solution. In 2014, project size and complexity grew and the annual spend for the largest customers increased towards $100,000 per annum. By the end of 2014 the platform and marketplace could be said to be proven as an Enterprise class solution.

Our focus throughout 2015 has been on the Enterprise buyer and Enterprise-class supplier. The release of blur 5.0 saw an increasing number of multinational Enterprises piloting the platform and, having met their onerous selection criteria, commence buying business services online. The repeat purchasing and growing activity from Enterprise customers vindicates our strategy and provides us with confidence that we are on the right path to systematically improve the way Enterprises are able to buy and sell services. At the same time, we have worked to increase the number and quality of our expert service providers, to match the demands of Enterprise customers.

Looking ahead, blur will introduce technology which will further advance the buying and selling of business services online. We expect to see an increasing number of larger Enterprises adopt blur to improve control over the unmanaged element of their indirect spend. As Enterprises adopt our cloud software as a company wide solution, blur’s revenues will scale while continued cost efficiencies will take us through breakeven into profitability.


2015 Highlights

2015 Operational highlights

Top 5 Operational highlights:

1. Transition to an Enterprise-only strategy complete. Evolved from the early stage, proof-of-concept phase, supporting small buyers and sellers to an Enterprise*-focused strategy that supports larger organizations.

2. blur 5.0 launched - a fully Enterprise level platform with the security, features and automation required for adoption within a large corporate environment.

3. Launch of high margin SaaS Premium Services products - Buyer Plans, Service Provider Subscriptions and Premium Services offerings.

4. Elimination of all contingent projects in the Marketplace. 5. Enhanced quality control of projects, customers and Service Providers.

2015 Financial highlights

Measure 2015 2014

Year on

year Project revenue $1.95m $2.59m (25%)

Cancellation (previously Listing fees) $0.63m $2.13m (70%)

Other revenue $0.12m $0.00m N/A

Gross profit $0.29m $1.65m (82%)

LBITDA1 $(8.90)m $(9.01)m (1%)

Cash balance $7.1m $17.4m (59%)

1 LBITDA is loss before interest, tax, depreciation and amortization, foreign exchange movements and share option costs.

1. Financial Reporting Council (FRC) Enquiry closed – blur’s accounting policy and position as ‘principal’ within project transactions confirmed as reasonable.

2. Clear, robust and proven revenue recognition processes implemented. 3. Phasing out of Listing Fee income - replaced by ‘Single User Access Fee’ in H2 2015; improved

up-front project vetting processes; greater proportion of projects completing. 4. Administrative and development costs reduced as efficiency increases and the platform reaches

Enterprise maturity. 5. LBITDA improved by 1% compared to 2014. Q4 2015 LBITDA improved by 40% compared to Q3

2015. 6. Cash burn reduced in Q4 2015 by 58% compared to Q3 2015.

* blur defines the Enterprise as a business with 50 or more employees.


Group Strategic Report

Strategic outcome We plan, by the end of this Strategic Planning period, to be a profitable and cash generative business that Enterprise businesses worldwide trust as a complete platform for sourcing, managing and delivering business services. Strategic assets and stakeholders We focus our resources on five strategic assets:

1. Our online platform; 2. Our service providers; 3. Our insight into the market as an early pioneer; 4. Our proprietary data; and 5. Our unique business model.

We serve five key stakeholders – our customers, our people, our investors, our service providers and the market at large. Growth The blur team is focused on increasing the adoption of blur’s model among Enterprise organizations. We believe that the more customer advocates we have in more Enterprise accounts, each achieving personal and business success from use of the blur platform, the more they will repeat buy, resulting in a lower cost of sale and higher operating profitability. We continue to closely monitor our overall progress by revenue and gross margin growth, as well as measure the quantity, value and quality of projects as they move through our platform; from submission to completion. Automation The more we continue to automate our business model, the lower our cost to serve, and the greater our capacity to scale and produce high quality outcomes for our customers. We monitor our revenue per employee as a key metric of increasing productivity. UK and US sales and delivery blur has built sales and delivery teams with representatives based in both the UK and the US. blur believes that these two key geographic markets present significant growth opportunities for blur. blur’s sales team aims to be familiar with our customers’ businesses, helping them understand the value blur’s unique cloud software and managed services platform can bring to their organization. blur’s delivery teams ensure that our customers’ project is delivered on time and on budget. Our delivery professionals work seamlessly with sales to ensure we consistently deliver the optimal user experience. We help our customers make Enterprise wide savings, build efficiency across their business services spend and deliver quality projects. Success comes from the partnership between blur’s sales and delivery teams providing a consistent level of service at each stage of the project. Enterprises and partnerships blur believes that the Enterprise market is likely to adopt this new generation of purchasing behavior for business services. We will reach these organizations directly and through partnerships with management consultancies and professional services organizations.


Growth drivers blur has invested significantly in its technology and the development of the global service provider base. Our investment in sales and marketing has led to Enterprises adopting blur’s platform to acquire business services. We will continue to focus on repeat projects from a growing number of Enterprise customers to provide our business with quality income streams. We continue to target productivity improvements through technology and process automation. Our user access fees, buyer plans, premium services and service provider subscriptions will provide additional revenue streams and improve our project profitability.


Business Overview blur’s Enterprise Services Platform blur Group operates an Enterprise Services Platform that helps private and public sector organizations eliminate the waste and inefficiency inherent in the purchasing of business services. It combines cloud software and managed services which includes sourcing, supplier short listing, contract and project management with payment processing and reporting. Organizations such as Argos, Danone and the University of Greenwich increasingly trust blur to source, manage and deliver their business service needs. blur’s Marketplace has the world's largest number of approved organizations supplying business services. A typical project The process starts with a customer submitting their services requirements, timeline and budget range using blur's ‘Brief App’. The project is then ‘Listed’ on the marketplace and relevant service providers are invited to pitch for the business. At this stage, we say a project has moved to ‘Pitching On’. blur’s intelligent matching engine, blurSenseTM, efficiently identifies the best service provider pitches using references, ratings, credentials and credit scores. The shortlist is finalized by blur’s ‘Customer Success’ team. Once an approved service provider has been chosen, blur’s platform produces a digital ‘Statement of Work’ (SOW) that forms the contract for the work. At this stage, we determine the project to have ‘Kicked Off”. During the delivery cycle, our project management team, the customer and service provider keep in touch through ‘Project Space’, our online project management and collaboration system. At agreed milestones, and on project completion, billing and payments are handled by ‘blurPayTM’, our secure payment gateway. The business model blur derives revenue in the following five ways:

1. Buyer Plans - customers pay for access to the global Marketplace of around 65,000 service providers either on a one-time ‘Single Access’ basis or through an annual ‘Buyer Plan’. The annual plans were introduced in 2015 to better suit the repeat business expected from the Enterprise market.

2. Buyer Premium Services - comprising additional wraparound support services: a. blur Manage Ultra – a dedicated project manager improves the customer experience and

provides the single point of contact our Enterprise customers appreciate; b. blur Protect Advanced – provides greater control and flexibility to the customer, specifically

with respect to change requests and budgets; c. blur Express – shortens the process and timeline to engage a service provider if a project

is on a tight deadline; and d. blur Engage – provides bespoke industry-specific expertise over and above blur’s standard

support package; this may be offered at any stage during the customer journey. 3. Buyer Market Intelligence tools - blur sells subscriptions to our online tool, ‘blur Data’, which

analyses the business services landscape including category trends, pricing and timeline forecasts. 4. Service Provider Subscriptions - service providers can select from a tiered annual subscription

model to gain access to high value project opportunities and market insights. 5. Project revenue - for each project that a service provider delivers blur charges the service provider

a percentage of the project value.

Market insight There is a general and growing requirement in medium and large Enterprises for cloud-based procure to pay (P2P) solutions to better manage indirect spend. A number of vendors in adjacent areas of the procurement process are moving into the SOW services procurement field. Notably this includes Vendor Management Systems for contingent workforce management, as well as e-catalogue solution providers.


Notwithstanding this, there is an emerging trend among large Enterprises to look at work-stream specific, cloud-based solutions where there is little to no integration. These Enterprises are looking for solutions to address particular types of bespoke spend that are less suitable for some of the broader P2P suites. blur's cloud-based software and managed services offering has been selected by a number of global Enterprises to specifically address indirect services procurement. Compared to some of the broader suites on offer in the market where an annual spend area of less than $50m makes implementing them barely viable, blur's offering with immediate integration lowers the barrier to adoption by Enterprises. A further developing trend, that is starting to become apparent within the target Enterprise market, is the recognition that some of the large monolithic outsourcing contracts, many of which have been placed with the same supplier for many years, are not as efficient or cost effective as previously thought. Enterprise organizations have approached blur to explore the alternative of adopting the platform as an efficient and agile approach to procuring business services in small packages that were previously bundled into multi-million-pound outsourcing contracts, renewed without necessarily improving cost efficiency or improving delivery success. In 2015, we met with many business and procurement leaders to better understand their concerns and identify emerging procurement trends. We consistently heard them express their need to reduce costs in indirect spending. Business leaders are becoming more aware of unnecessary cost and risk in their unmanaged spend. This area of indirect spend is resource heavy and can be better served by outsourcing and adopting solutions such as blur. Enterprise customers blur’s focus on Enterprises saw several large customers adopting the platform for the first time in 2015. These include:

• University of Greenwich • Newcastle-under-Lyme Borough Council • FTSE-100 UK oil and gas company • Multi-channel British menswear retailer

Adoption of the platform by these customers validates our strategy as testified by the facts below:

• The proportion of Enterprise projects Kicking Off rose to 66% in Q4 2015. • The propensity for Enterprise customers to place repeat projects with blur during the year grew,

with 84% of Enterprise projects coming from existing customers in Q4 2015. • The conversion rate of Pitching On to Completed projects reached 75% in Q4 2015.

Sales and marketing The transition to ‘Enterprise-only’ has evolved our sales team toward more advanced account management for key customers. We no longer use broad based, online advertising to attract potential customers to blur’s website. Instead we market directly to target executives within larger organizations. Our sales teams focus their activities on targeting repeat business from our existing customer base, while also developing new sales opportunities for platform buyers and spot purchasers. blur’s marketing team directly targets specific Enterprises, with an emphasis on identifying prospect customers who have already begun to embrace indirect spend management as a cost reduction strategy and recognize the opportunity to create better efficiencies within their procurement process. During our initial engagements with potential users of the platform, we help organizations quantify their cost of wasteful spending when purchasing business services. We aim to secure Enterprise customers who submit multiple projects annually on our platform. To on-board our customers, we take them through a three-phase process that firstly pilots the marketplace within a single department, then rolls out blur’s solution across multiple functions, and finally leads to the launch of a company-wide purchasing scheme for business services. blur’s managed services team provides a quality outcome for all of our customers, evidenced by our rating on Europe’s largest and fastest growing consumer review platform, Trustpilot.


Technology developments During the year, we launched blur 5.0 which provides our customers with a complete, Enterprise-grade cloud software platform that has improved efficiency while providing an enhanced experience to our customers. This latest version of blur’s platform enables greater automation of the pitch selection process, shaving weeks off the time taken by businesses to find a solution that fits their specific requirements. It removes the need to filter through dozens of tender documents to shortlist the best service provider pitches. Instead, the shortlist is generated by the machine intelligence capabilities of blurSense™, which uses a set of proprietary algorithms to match service providers and their pitches with the customer and the specific requirements of their brief. Once a service provider has been selected, blur's SOW App provides a simple way of capturing a complex services agreement in bilateral SOW agreements between blur and the customer and blur and the service provider. blur's ‘Project Space’ and service provider vetting process provides real time analytics on project and task status. As well as shortening the pitch process for our customer, the new technology allows blur to scale more rapidly with fewer internal staff hours consumed in shortlisting pitches. In 2015, we also implemented on-platform messaging enabling both customers and service providers to communicate with blur about their project without the need to use separate e-mail or instant messaging tools. Finally, the significant investment made to date and the resulting level of maturity of blur’s platform has facilitated the introduction of an offshore IT development team. This brings a greater level of flexibility to blur’s development function as well as reducing overall costs. blur 5.0 has improved efficiency while providing an enhanced experience to our customers. People At blur we recruit high performing dedicated teams and functional specialists from the Enterprise software industries. Throughout the UK and US our people work to give our customers and service providers the best possible experience whenever they use our platform. Everyone adds value. Governance and controls In the period under review, the governance of the Group was enhanced through a series of new Board appointments. As well as further strengthening Board governance, the new non-executive appointments will be working with the Board to explore the options available to blur with regards to increasing the Company’s profile and providing further growth and investment opportunities for both current and future shareholders.


Board appointments Roger de Peyrecave joined blur’s Board on 1 September 2015 as a Non-Executive Director and chair of the Audit Committee. Roger was a partner at PricewaterhouseCoopers LLP (PwC), where he qualified as a Chartered Accountant in 1983, and held senior management positions within PwC UK, including office and regional leader. He was also a Director of PwC’s internal company running a service delivery center in Poland. Roger has over 20 years’ experience as a PwC partner and auditor to FTSE 100 and mid cap Plcs. Rob Wirszycz joined blur’s Board on 15 September 2015 as a Non-Executive Director. Rob works as a Non-Executive Chairman, adviser and mentor for a range of quoted and private businesses including Innovation Group and iForce. He has extensive domain expertise in Enterprise outsourcing, managed services, software products, and consumer electronics. Rob applies this experience and knowledge to the companies he works with, in the areas of strategy, sales, marketing and people development. On 30 September 2015, we announced that David Sherriff was appointed to the position of Non-Executive Chairman. David Sherriff has been a Non-Executive Director of the Company since 1 October 2013 and was appointed to the position of Deputy Chairman and lead independent Director in February 2015. Tim Allen was appointed to the blur Board on 16 December 2015. Tim joined the Company on 20 July 2015 as Chief Financial Officer. Tim has over 20 years’ experience leading finance teams, focused on technology companies. His experience spans both small and large corporates. Philip Letts Chief Executive Officer 26 April 2016


Chairman’s Statement Prior to 2015 blur Group invested in developing and proving a new concept in business services procurement, which resulted in the development of a service provider base of over 60,000 and the use of our evolving technology platform by a broad spectrum of organizations seeking a new and efficient way of procuring business services. In 2015, blur Group applied this experience and resultant V5.0 of the technology platform to the international Enterprise market and successfully started to achieve recognition from this target customer base that blur offers a new, agile and cost effective way in which business services can be procured. In turn blur’s sales and marketing efforts, delivery processes and internal controls have been polished to ensure a high quality customer experience and provide our staff, investors and service providers with confidence in the relevance of the business model. By introducing industry-based calculators and business intelligence tools, blur Group has helped its current portfolio of key Enterprise customers shape and quantify wasteful spending within their organizations. Framing initial conversations with new prospects around potential savings has helped them engage with blur. Our messaging around indirect spend cost reduction for Enterprises has proved timely with an increasing number of businesses prioritizing this strategy, especially as uncertainty continues in the global economy. blur Group is no longer proactively pursuing high volume transactional sales via single, low-value project submissions, but rather partnering with Enterprise customers to help them achieve larger scale savings. Our offering is unique, combining both cloud software and managed services through a single platform. It is a highly accessible cloud based solution that benefits either several functions across any large organization or a centralized procurement strategy. A consequence of our transition to the larger Enterprise is the inevitable extension of the sales cycle. Despite this challenge (for which we have tuned our sales and marketing approach and reset our investment levels) we are confident that the Enterprise strategy is the right one to build long-term shareholder value. Our buyer plan products and the introduction of premium services are influencing our model and should show improvements to our margins as they are adopted. The Executive team have continued to work hard to improve blur’s own efficiency, with administrative costs significantly reduced in the second half of the year. For 2016, we will continue to leverage costs and maintain a tight focus on cash. The conclusion of the Financial Reporting Council’s enquiry has confirmed our recognition as Principal in our market and the implementation of robust revenue recognition policies. To support the continued development of the Group we have appointed new Board members in 2015. Each brings a high degree of expertise in their field, together with extensive Enterprise software experience. I believe we have a Board and management team that understand the customers and the market in which blur operates and an organization that can leverage the investment made in developing its business model, its staff and its technology to achieve success in the Enterprise market. And I would like to thank them, as well as all the staff, for their commitment and outstanding efforts in 2015 in achieving the difficult transition to an Enterprise focused delivery platform and service. Finally, I would like to thank blur’s shareholders and stakeholders for their continued support of the business and for their input and help in developing the business model and structure. David Sherriff Chairman 26 April 2016


Chief Executive Officer’s Report The team at blur worked hard in 2015 to complete the transition to an Enterprise-focused strategy. This means that in 2016 we operate a comprehensive next generation solution for Enterprises to better manage their indirect business services spend. At the same time, we achieved considerable internal cost efficiencies with a step change reduction in our cash burn rate once blur 5.0 was completed in H2. We expect that our operational gearing will drive future improvement in our financial performance. We have built an end-to-end services procure-to-pay platform that provides Enterprises with the ability to efficiently outsource the purchasing, management, payment and delivery of business services. This solution combines managed services, cloud software and a global marketplace of service providers in a single platform that is driven by machine intelligence and data analysis. During 2015 our focus has been on the Enterprise customer and service provider. blur 5.0 saw the platform piloted by a growing number of larger Enterprises. At the same time, we saw an increase in repeat projects from existing Enterprises. Indeed, in Q4 2015 84% of Enterprise projects came from existing customers. Business leaders are eager to improve profitability and cash flow. They are looking to be more innovative in the way they approach cost reduction. Digital procurement strategies are becoming increasingly popular. Over the last 12 months, we have met with customers and prospects to better understand their cost reduction strategies. Certain companies, for example, those in oil and gas and FMCG sectors, are looking closely at indirect spend management as a means to make immediate cost savings. They already see the potential to eliminate wasteful spending and inefficiencies within the procurement of business services. This approach combined with a tighter partnership between our sales and delivery teams has helped us streamline our positioning and our services to more effectively identify and address the business-critical requirements of our customers. One size does not fit all when it comes to procuring business services across the Enterprise. This has driven us to create a core service offering for all customers, with a suite of wraparound premium services to meet the individual needs and requirements of each project. Buyers have complete control of their project delivery through the use of blur’s platform. Our marketing team has concentrated on developing channels that cost effectively acquire Enterprise customers rather than projects, signaling a move away from broader digital advertising acquisition. We target customers and prospects on their company wide indirect spend issues with sustainable long-term savings being a key element. This move has resulted in a significant reduction in our cost of acquisition. Our key message; eliminating the waste and inefficiency inherent across the indirect procurement process is resonating with customers across our primary markets of Western Europe and North America. In delivery, we continue to enhance our offering by showcasing the benefits of cloud software and managed services to source and deliver projects. The improved technology associated with the release of blur 5.0 brings a superior level of automation to some of the standard aspects of project management processes. This allows our people to remain dedicated to enhancing the customer experience and repeat business. Our improved understanding of our Enterprise customers has influenced further development of our cloud-based software, resulting in an Enterprise-grade solution. We start 2016 with an Enterprise platform engineered to support large scale projects. Whether shortening the pitch process or using a greater degree of machine-intelligence to better match a service provider with a buyer, we are constantly listening to our customers and adding new features to improve their experience. This will result in the next iteration of our platform, blur 6.0 to be in line with management expectations, which we will begin to rollout in the first half of 2016. Financially, we have seen a decline in project revenues over the period. However, I believe this to be transitional as we shift from higher volume, small business project sales to Enterprise account-driven sales. These changes are leading to an increasing mix of Enterprise revenues and repeat buyers.


In Q4 2015 the proportion of Enterprise projects Kicking Off rose to 66% and the conversion rate of Pitching On to Completed Projects reached 75%. These statistics are a sign of things to come. Another indicator of our improving revenue quality is the phasing out of Listing Fee revenues. With our rejection of contingent projects and the move away from online advertising driven business, we are seeing a higher rate of project completion and greater initial income from buyer plans and premium service products. Driving growth in these product areas will prove important in increasing future gross profitability. During the year a major step forward was taken with the conclusion of the Financial Reporting Council’s enquiry into blur’s Annual Report and Accounts for the year ended 31 December 2013. Restating the results for that year was a challenging experience for the whole Group, but we also saw affirmation of blur’s judgement that it takes the role of principal in its transactions with its customers. We have also confirmed a set of revenue recognition policies that are robust, clear and appropriate. Now that our Enterprise transition is complete, I remain convinced that our Enterprise strategy is the right one for blur and its stakeholders. Acquiring repeating, loyal accounts is key to our future success. By maintaining high levels of delivery and focusing on helping our customers buy business services better, blur will continue on its path to profitability. Outlook Q1 2016 saw further progress executing on our Enterprise strategy. During the period our engagement with Enterprise customers told us that business leaders, in the current uncertain macroeconomic conditions, are becoming increasingly aware of the need to prioritize the control of unnecessary cost and risk in their unmanaged, indirect business services spend. Increasingly these Enterprises are recognizing that blur’s unique combination of cloud software and managed services offers an efficient, digital and agile solution to drive new efficiencies in indirect spend. We recognized that our Enterprise strategy would lead to an extension of the sales cycle. The decentralized nature of indirect procurement in a large Enterprise, combined with the time that can be taken for an Enterprise to identify and quantify the issue, means that we expect the cycle between initial meetings and the placement of high volumes of project spend with blur to extend over several quarters. However, our Enterprise-focus continues to drive internal efficiencies which will lead to further reductions in our cash burn rate. I would like to thank all of our employees, our customers and our shareholders for their continued support. Philip Letts Chief Executive Officer 26 April 2016


Principal risks and uncertainties

The key business risks affecting the Group are set out below:

Liquidity risk The Group seeks to manage this risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest in cash assets safely and profitably. The Group had cash reserves of $7.1m as at the 31st December 2015. The cash burn in Q4 2015, excluding foreign exchange effects was $1.5m. The Directors have prepared a cash flow forecast covering a period extending 12 months from the date of approval of these financial statements which shows that the Group will have sufficient cash to meet its debts as they fall due over that period. blur is a disruptive and evolving technology company and uncertainties exist in the forecast as a result. The forecast contains certain assumptions about the performance of the business including growth in future revenue, both in project revenues and in premium services, the cost model and margins, and the level of cash recovery from trading. In the next 12 months, the most critical assumptions are those concerning the control of costs. The directors are aware of the risks and uncertainties facing the business as it builds on its Enterprise-only strategy but the assumptions used are the Directors’ best estimate of the future development of the business. As with any disruptive, evolving technology company there is always an inherent risk over the viability of the Group and Company if forecasts are not met and cash resources are not adequate.

Operational risk As we acquire the trust and loyalty of larger Enterprise customers, the dynamics of projects that generate revenue continue to evolve, with more complex and longer life cycle projects being submitted to the platform. In addition, the Enterprise customer requires an enhanced level of service and high quality outcomes for their projects.

blur focuses on the customer experience with dedicated Customer Success and Projects teams making up our Delivery function. blur also offers a range of defined Premium Services to allow the Enterprise customer access to higher levels of project support.

Credit risk Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to this risk for various financial instruments, for example by granting receivables to customers. The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls.

Collection of cash and bad debt risk has been a significant issue which blur has had to manage as it has evolved. blur no longer takes contingent projects and is now focused on Enterprise customers, both of which are reducing the credit risk. blur is also increasingly taking cash in advance of projects going onto the platform to further reduce credit risk. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are also obtained and used.

The Group's maximum exposure to credit risk is the carrying amount of financial assets at the reporting date excluding equities, as summarized in note 3.

Foreign exchange risk The Group is exposed to foreign exchange risk predominantly on its sales and purchases in the USA and the Euro zone. The Group manages its foreign exchange exposure on a net basis. To reduce its exposure to movements in foreign exchange rates the Group enters into forward currency contracts when appropriate. See note 3 to the consolidated financial statements for further information.

Technology The Group’s performance is dependent on its technology keeping pace with developments in cloud and mobile technology, including volumes of data and growth in applications. The Group manages this risk by a commitment to research and development combined with ongoing dialogue with trading partners and sector specialists to ensure that market developments are understood and updates to the platform are made.


Competition blur believes it continues to hold ‘first mover’ advantage. As sourcing of business services through an online platform grows and becomes more widely known among Enterprise customers we recognize that this may attract a competitor who has greater financial resources. blur continues to invest in expanding our lead in technology, expertise, and service delivery and believes it has a level of knowledge, expertise and established service provider base of over 60,000 which would take several years for a competitor to replicate.

Staff Capitalizing on the opportunity blur faces will also require blur to industrialize our business processes and expand our skill sets within short time frames. This may require us to recruit, train and develop a larger employee base. blur believes that the skills required are available, either in the locations where its offices are located or in the wider workforce.

To ensure efficiency, the business is investing in its technology to allow for future scaling and growth without a concomitant rise in staff numbers.

Service providers Maintenance and addition of high quality service providers able to deliver high value projects over all service categories is key to growth particularly as Enterprise customers submit larger and more complex projects. blur attracts service providers by maintaining leading edge technology and by the quality and volume of potential projects on offer on its platform.


2015 Financial Review Financial Reporting Council enquiry In March 2015, the Financial Reporting Council informed the Group of an enquiry into the Annual Report for year ended 31 December 2013.

The principal issues raised were whether the Company was principal or agent in relation to the outsourcing services it provides, whether revenue was recognized only when there was sufficient evidence to conclude that the stage of completion could be assessed reliably and that it was probable that economic benefits would be received, and whether the strategic report gave a fair and balanced analysis of the Company’s performance.

This enquiry concluded on 30 September 2015. No further adjustments or restatements were required to the restated results for the year ended 31 December 2013 published in the 2014 Annual Report on 30 June 2015. In addition, no further adjustments or changes are required to the 2014 results included in the Annual Report to 31 December 2015. The Financial Reporting Council agreed that it was reasonable for the company to view itself as principal rather than agent.

Revenue Revenue for the year decreased by 43% to $2.70m (2014: $4.72m) within which Project fee revenue declined by 25% to $1.95m (2014: $2.59m). As the Group transitioned to an Enterprise-only strategy, it removed access to all contingent projects in the Marketplace and ceased direct marketing activities aimed at the SME market.

blur has experienced longer sales cycles in the more mature Enterprise market, while revenue from one-off SME projects dropped off more quickly, which led to the decline in project revenues. However, the overall quality and collectability of blur’s project revenues has improved during the year.

Cancellation fee income (previously Listing fees) declined by 70% to $0.63m (2014: $2.13m). The improving quality of projects during the year, which has led to a higher proportion of projects completing, drove this decline. Income from Access fees (including subscriptions) totaled $0.10m with the Single User Access Fee and Subscriptions being launched in H2 2015.The newly launched Premium Service products generated $0.02m of income in the year.

Gross margin From 2014 blur includes the cost of blur staff directly involved in the delivery of projects from listing to completion, in cost of sales.

Gross profit was $0.29m in 2015 (2014: $1.65m). The reduction has been driven by the reduction in Cancellation fee (previously Listing fee) income. The staff costs charged to cost of sales reduced by 11% to $0.84m (2014: $0.94m).

LBITDA The LBITDA (Loss before Interest, Tax, Depreciation and Amortization, Foreign Exchange movements and Share Option costs) for the year reduced by 1% to $8.90m (2014: $9.01m) despite the reduction in gross profit. Q4 2015 LBITDA improved by 40% compared to Q3 2015. This was largely driven by the reduction in administrative costs.

Costs Administrative costs decreased by 13% to $11.0m (2014: $12.62m) due to blur’s increasing ability to improve efficiency with the launch of blur 5.0.

As anticipated, operational efficiencies continued to improve in Q4 with the Group increasingly able to streamline its processes. The structural changes made in Q3 and Q4 2015 led to a 58% reduction in the underlying cash burn in Q4, compared to Q3.

The credit risk associated with the customers using the marketplace in 2015 resulted in a $0.85m (2014: $0.83m) bad debt provision included in administrative costs, the majority of which was incurred in H1.

blur Group PLC Annual Report and Accounts for the Year Ended 31 December 2015


During 2015 the average number of full-time employees reduced from 65 to 50 with a consequent reduction in staff costs. Share-based payments costs of $0.52m (2014: $0.46m) remained broadly flat year-on-year.

Loss after tax The loss after tax for the year reduced to $10.1m (2014: $10.5m).

Finance income of $0.2m (2014: $0.1m) reflects higher cash balances held on deposit. Taxation includes $0.45m (2014: $0.53m) of R&D tax credit.

Tax losses Tax losses for the Group up to the end of December 2015 amount to a total of $22.5m, none of which are recognized as a deferred tax asset.

Cash The cash balance at year-end was $7.1m (31 December 2014: $17.4m).

Operating cash outflow from operating activities was $7.8m (2014: $9.7m) and working capital decreased by $0.8m (2014: decrease $0.2m). Investments in intangible technology assets totaled $1.5m (2014: $1.9m), primarily reflecting the capitalization of internal technology development.

Trade receivables Historically, blur had a diverse list of customers, with differing levels of credit risk. There were significant levels of bad debts in respect of small and medium sized businesses as blur tested the marketplace.

The transition to an Enterprise-only strategy, the denial of access to the marketplace to all contingent projects and an increased focus on collections has served to mitigate this credit risk in 2015.

blur Group PLC Annual Report and Accounts for the Year Ended 31 December 2015


GOVERNANCE

Board of Directors

David Sherriff – Chairman. Appointed 1 October 2013

David, 53, started his working life as an Officer in the British Army. During his early business career David worked in sales roles for RR Donnelly and then Hoskyns which was acquired by CapGemini where he started the development of the Telecoms sector in the UK. In 1993 David joined ECsoft Group, which he grew to 500 staff in the UK in three years. The ECsoft Group undertook an IPO in 1995 on NASDAQ and then a full listing on the LSE in 1997. David was the UK Managing Director from 1996 until leaving in late 1998. David joined Kaisha Ltd a Business Intelligence Company in 1999 which was then acquired by Microgen plc. He was appointed Chief Operating Officer of Microgen plc in 2005 and in 2011 was appointed Chief Executive Officer of Microgen managing both the Group and the Aptitude Solutions Division. In August 2013 David announced that he was retiring from full time executive roles and would be pursuing a career in agriculture as well as undertaking non-executive director roles with select UK-based technology companies such as blur Group.

Philip Letts – Chief Executive Officer. Appointed 23 August 2012

Philip, 50, has run a string of high profile web ventures operating across the US and Europe including an established Silicon Valley venture. Philip co-founded Beenz.com in 1998, an internet currency program. By mid-2000, the business was valued at $300m in a transaction led by Philip just prior to him being recruited to run Tradaq Inc. Beenz.com was sold privately in 2001 to a US corporation. In 2000, he became CEO of Tradaq, formerly Internet Barter Inc., which became a part of a public company post-merger. Following this he was CEO of Surfkitchen which was later sold to SymphonyTeleca. Philip then decided to focus on a new enterprise, wanting to embrace the open source software principles whilst creating a game-changing business – this became blur Group.

Tim Allen – Chief Financial Officer. Appointed 16 December 2015

Tim, 47, joined blur Group as its Chief Financial Officer in July 2015 being appointed to its Board in December 2015. His experience spans both small and large corporates. He was the Finance lead on the sale of Orthogon Systems to Motorola Inc. in 2006 and also on the subsequent sale and divestiture of the Cambium Networks business in 2011.

From 2011, Tim was the CFO of Cambium Networks, a Private Equity backed Wireless Infrastructure company. He successfully led Finance, HR and IT teams, implementing scalable efficient processes, across the globe, in a complex hi-tech business.

Kara Cardinale – Chief Delivery Officer. Appointed 23 August 2012

Kara, 50, is a US entrepreneur with experience in the design and media industry. She started her career in public relations and marketing at Bergdorf Goodman, New York and Giorgio Armani. She then moved to Italy’s second largest press agency and spearheaded their growth into corporate video network releases and developed several music news programs for broadcast on Radiotelevisione Italiana S.p.A. as well as regional television networks, in conjunction with BMG and EMI. She built her own design firm and managed artists and their public studios before co-founding b-uncut.net in 2007.

Richard Bourne-Arton – Non-Executive Director. Appointed 13 September 2012

Richard, 50, is a clean-tech entrepreneur, with businesses involved in hydropower development and turbine manufacture. He started his career as a technology headhunter, helping as an owner and Director to grow, develop and finally sell Talisman to Penna plc in 1999. He continued to assist the growth of the business both organically and through acquisition to become the largest specialist European tech headhunting firm. In 2005, he left to pursue his property interests in the UK and Eastern Europe including land acquisition and development. Since 2008, he has been involved in the renewable energy sector and is a co-owner of TASC, owner of Yorkshire Hydro and co-owner of UK Hydro.


Roger de Peyrecave – Non-Executive Director. Appointed 1 September 2015

Roger, 58, qualified as a Chartered Accountant in 1983 and is a member of the Institute of Chartered Accountants in England and Wales. In 1992 he became an audit partner at PricewaterhouseCoopers and since then has worked with many private and public companies, particularly in the media, technology and travel sectors.

His clients have ranged from entrepreneurial businesses to international FTSE 100 companies and he has been reporting accountant on many IPOs and Class 1 transactions. With PwC he held senior management positions at office and regional level and he was also Director of the PwC company that owns a shared service delivery center in Poland. Roger retired from PwC in December 2015.

Rob Wirszycz – Non-Executive Director. Appointed 15 September 2015

Rob, 58, has worked for the last 15 years as Chairman, adviser and mentor for start-up, scale-up, turnaround, private equity and public businesses. He has expertise in strategy, marketing, sales and people, in areas such as e-commerce, outsourcing, software products, insurance and consumer electronics.

Rob previously worked for EDS as European Marketing Director; the IT industry trade association; CSSA as Director General; and was CEO of a number of fast-growing companies in the UK and overseas.

Rob has an MBA, is a Chartered engineer and Marketer; a fellow of the RSA, IoD, ISMM and BCS; a Court Liveryman of the IT Livery Company, where he is Chairman of the Entrepreneurs Panel; and a Visiting Senior Fellow at Cass Business School. He is on the Maserati 100 list of entrepreneur mentors and won Mentor of the Year for the second time at the 2015 Enterprise Awards.


Group Directors’ report

The Directors present their report and the audited financial statements for the year ended 31 December 2015.

blur Group plc was incorporated on 22 August 2012. These financial statements are prepared in compliance with IFRS as adopted by the European Union. The Group financial statements consolidate the financial statements of the Company and its subsidiaries. The parent Company financial statements present information about the Company as a separate entity and not about its Group.

Dividend The Group’s current policy is not to pay dividends. There can be no assurance as to the level of future dividends (if any) that may be paid by the Group.

The Board intends to adopt a dividend policy appropriate to the Company’s financial performance. This will take into account its ability to operate and grow and the need to retain a prudent level of cash resources. Any profits are likely to be retained and used towards the development of the Group’s activities and business for the foreseeable future.

Directors and Directors’ interests The Directors who held office during the financial year are set out below, together with their interests in the ordinary shares of the Company according to the register of Directors’ interests:

Interest at 31 December, 2015

Interest at 31 December, 2014

Philip Letts 14,179,840 14,179,840 Kara Cardinale - -

Tim Allen 4 - - Barbara Spurrier 1 - 13,289

Richard Bourne-Arton 2 432,381 400,330

Robert Brooksbank 3 - 144,119 David John Sherriff 2 72,600 - Roger de Peyrecave 2,5 - - Robert Wirszycz 2,5 47,700 -

1 Resigned December 2015.

2 Non-Executive Director.

3 Resigned June 2015.

4 Appointed December 2015.

5 Appointed September 2015.


The Directors interests in share options of the company were:

Options at 1 January

2015 Granted Surrendered

Options at 31

December 2015

Date of Grant

Exercise Price

Earliest date of exercise

Latest date of

exercise

Philip Letts

30,000 - -

30,000 1/23/2013 £1.45 1/23/2017 1/22/2023

500,000 - -

500,000 12/31/2014 £0.66 12/31/2018 12/30/2024

Kara Cardinale 375,000 - - 375,000 04/09/2012 £0.32 09/03/2013 04/08/2022

25,000 - -

25,000 01/12/2013 £1.45 1/23/2017 01/11/2023

125,000 - -

125,000 12/31/2014 £0.66 12/31/2018 12/30/2024

Timothy Allen

- 400,000 -

400,000 7/20/2015 £0.27 7/20/2019 7/19/2025 Robert Brooksbank 1

15,000 -

15,000 - 07/01/2012 £0.32 07/01/2016 06/30/2022

15,000 -

15,000 - 12/31/2014 £0.66 12/31/2018 12/30/2024 Richard Bourne-Arton1 45,000 - - 45,000 04/09/2012 £0.32 04/09/2016 04/08/2022 15,000 - - 15,000 12/31/2014 £0.66 12/31/2018 12/31/2024

David Sherriff 1

15,000 - -

15,000 10/16/2013 £4.25 10/16/2017 10/15/2023

15,000 - -

15,000 12/31/2014 £0.66 12/31/2018 12/30/2024 Roger de Peyrecave 1

- 30,000 -

30,000 10/15/2015 £0.30 10/15/2019 10/14/2025

Robert Wirszycz 1

- 30,000 -

30,000 10/15/2015 £0.30 10/15/2019 10/14/2025

1,175,000 460,000

30,000

1,605,000 1 Non-Executive director.

During the year the Directors were awarded a total of 460,000 share options (2014: 1,000,000) at a weighted average exercise price of £0.2739 (2014: £0.66). No share options were received or receivable in respect of qualifying services under a long-term incentive scheme.

No share options were exercised during the year.


Emoluments and compensations paid to Director for the period of their office:

Salary/Fees

Share Based

Payments Bonus Benefits 2015 2014 US$ US$ US$ US$ US$ US$

Philip Letts

304,200

133,194

-

- 437,394

276,406

Kara Cardinale 1

191,646

37,797

-

- 229,443

205,888 Timothy Allen (appointed 16 December 2015)

7,243

952

-

- 8,195

-

Barbara Spurrier (resigned 10 December 2015)

82,136

36,918

-

- 119,054

64,811

Richard Bourne-Arton

30,420

10,983

-

- 41,403

44,437

Robert Brooksbank (resigned 30 June 2015)

15,210 -

-

- 15,210

36,667

David Sherriff

63,853

7,620

-

- 71,473

45,724

Roger de Peyrecave

15,210

294

-

- 15,504

-

Robert Wirszycz

13,631

294

-

- 13,925 -

James Davis (resigned 18 February 2014)

-

-

-

- -

88,756

723,549 228,052

-

- 951,601 762,689

1 These fees were paid to Revviva LLC, a company in which Kara Cardinale has an interest, in relation to her services as a Director.

The number of Directors for whom retirement benefits are accruing under defined contribution schemes amounted to nil (2014: nil).


Substantial shareholdings The Company has been advised of the following interests in more than 3% of its ordinary share capital as at 31 December 2015:

% Philip Letts 30.1 J O Hambro Capital Management Ltd 11.8 River and Mercantile Asset Management 9.9 Majedie Asset Management Ltd

9.1

Research and development The Group undertakes development activities which involve enhancement of its trading platform. Development expenditure is capitalized as an intangible asset, only if the development costs can be measured reliably and the platform being built will be completed and will generate future economic benefits in the form of cash flows to the Group. Expenditure being capitalized includes internal staff time and cost spent directly on developing the trading platform. Going concern and viability The Directors have prepared a cash flow forecast covering a period extending 12 months from the date of approval of these financial statements which shows that the Group will have sufficient cash to meet its debts as they fall due over that period. blur is a disruptive and evolving technology Company and uncertainties exist in the forecast as a result. The forecast contains certain assumptions about the performance of the business including growth in future revenue, both in project revenues and in premium services, the cost model and margins, and the level of cash recovery from trading. In the next 12 months, the most critical assumptions are those concerning the control of costs. The Directors are aware of the risks and uncertainties facing the business as it embarks on its new strategy but the assumptions used are the Directors’ best estimate of the future development of the business. After considering the forecasts and the risks, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence over the period of the forecast. For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements. However, beyond the forecast period the Group will need either to have substantially increased its revenues or take actions to ensure it remains sufficiently funded. As with any disruptive, evolving technology company there is always an inherent risk over the ability of the Group and Company to continue as a going concern if forecasts are not met and cash resources are not adequate. The financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

Political contributions The Group made no political donations or incurred any political expenditure during the year.


The UK Corporate Governance Code Whilst the Company is listed on AIM, it is not required to adopt the provisions of the UK Corporate Governance Code (“the Code”). The Board, however, is committed to the maintenance of high standards of corporate governance and after due consideration it has adopted many, although not all, aspects of the Code as described below. The Board of Directors comprises three Executive and three Non-executive members. This ensures compliance with the Code, which states that a smaller company should have at least two independent directors. On 30 September 2015 the roles of Chairman and Chief Executive were split and David Sherriff, an independent Non-Executive Director, assumed the role of Chairman of the Board. The Board normally meets at least six times per year, with ad hoc meetings also being held. The role of the Board is to provide leadership of the Group and to set strategic aims but within a framework of prudent and effective controls which enable risk to be managed. The Board has agreed the schedule of matters reserved for its decision that includes ensuring that the necessary financial and human resources are in place to meet its obligations to its shareholders and others. It also approves acquisitions and disposals of businesses, major capital expenditure and annual financial budgets and recommends interim and final dividends. It receives recommendations from the Audit Committee in relation to the appointment of the auditor, its remuneration and the policy relating to non-audit services. The Board agrees the framework for Executive Directors’ remuneration with the Remuneration Committee and determines fees paid to Non-Executive Directors. Recommendations for the appointment of new Directors are received from the Nomination Committee. Board papers are circulated before Board meetings in sufficient time to be meaningful. The performance of the Board is evaluated informally on an on-going basis with reference to all aspects of its operation including, but not limited to: the appropriateness of its skill level; the way its meetings are conducted and administered (including the content of those meetings); the effectiveness of the various Committees; whether corporate governance issues are handled in a satisfactory manner; and whether there is a clear strategy and objectives. A new Director, on appointment, is briefed on the activities of the Group. Professional induction training is also given as appropriate. Directors are updated on a frequent and regular basis on the Group’s business and on issues covering employment, social, ethical, environmental and health and safety matters by means of Board presentations. In the furtherance of his duties or in relation to acts carried out by the Board or the Company, each Director has been informed that he is entitled to seek independent professional advice at the expense of the Company. The Company maintains appropriate cover under a Directors’ and Officers’ insurance policy in the event of legal action being taken against any Director. Each Director has access to the services of the Company Secretary if required. The Non-Executive Directors are considered by the Board to be independent of management and are free to exercise independence of judgement. They have never been employees of the Company nor do they participate in the Company’s bonus arrangements.


The Audit Committee The Audit Committee (the Committee) is established by and is responsible to the Board. It has written terms of reference which are available at www.blurgroup.com. Its main responsibilities are:

• to consider and be satisfied with the truth and fairness of the Group’s financial statements before submission to the Board for approval, ensuring their compliance with the appropriate accounting standards, the law and the Listing Rules of the Financial Conduct Authority;

• to monitor and review the effectiveness of the Group’s system of internal control; • to consider areas of accounting judgement; • to make recommendations to the Board in relation to the appointment of the external auditor and its

remuneration, following appointment by the shareholders in general meeting, and to review and be satisfied with the auditor’s independence, objectivity and effectiveness on an ongoing basis; and

• to implement the policy relating to any non-audit services performed by the external auditor. Robert Brooksbank chaired the Committee from 1 January 2015 to 30 June 2015. From 1 September 2015 Robert was replaced as Chairman of the Committee by Roger de Peyrecave. The other members of the Committee throughout the year were Richard Bourne-Arton and David Sherriff. The Board considers Roger de Peyrecave to have relevant and recent financial experience. The Committee meets with the external auditors, without the Executive Directors being present, at least once a year. The Committee is authorized by the Board to seek and obtain any information it requires from any officer or employee of the Group and to obtain external legal or other independent professional advice as is deemed necessary by it. Meetings of the Committee are held at least three times per year to coincide with the review of the scope and plans for the external audit and the publication of the interim and full year financial statements. The external auditor is invited to attend these meetings to present the results of their work including their views on significant accounting policies and judgements. During the year the Committee considered in particular the judgements relating to going concern, the carrying value of the intangible assets, the investment in and receivable from the subsidiary and, particularly in light of the FRC enquiry, the appropriateness and application of the revenue recognition policy. The Committee receives reports from management on the effectiveness of the system of internal controls. It also receives from the external auditor a report of matters arising during the course of the audit that the auditor deems to be of significance for the Committee’s attention. The external auditor is required to give the Committee information about policies and processes for maintaining its independence and compliance regarding the rotation of audit partners and staff. The Committee considers all relationships between the external auditor and the Company to ensure that they do not compromise the auditor’s judgement or independence particularly with the provision of non-audit services. The performance of the external auditor is reviewed at least annually, normally in the Spring. The Nomination Committee The Nomination Committee is chaired by Richard Bourne-Arton and the other members of the Committee are David Sherriff and, from his appointment on 15 September 2015, Rob Wirszycz. Prior to his resignation on 30 June 2015, Robert Brooksbank served on the Nomination Committee. The Nomination Committee meets at least once a year, with the Chief Executive Officer in attendance as appropriate. The Nomination Committee considers appointments to the Board. The Remuneration Committee The Remuneration Committee has been chaired by Rob Wirszycz since his appointment on 15 September 2015 and the other members of the Committee are Richard Bourne-Arton, Roger de Peyrecave and David Sherriff. Robert Brooksbank chaired the Committee until his resignation on 30 June 2015. Roger de Peyrecave has served on the Committee since his appointment on 2 September 2015. The Remuneration Committee meets at least two times a year, with the other Board members in attendance as appropriate. It has written terms of reference. The Remuneration Committee agrees the framework for Executive Directors’ remuneration with the Board. Directors are subject to re-election at the Annual General Meeting following their appointment. In addition, at each Annual General Meeting one-third (or the whole number nearest to one-third) of the Directors will retire by rotation.


Internal controls and risk management The Board is responsible for the Group’s system of internal controls and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. During the year Tim Allen took on the role of Chief Financial Officer and since his appointment he has undertaken a thorough review of internal processes and controls, reporting his findings and recommendations to the Board. Statement of disclosure to the auditors All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Group's auditors for the purposes of their audit and to establish that the auditor is aware of that information. The Directors are not aware of any relevant audit information of which the auditor is unaware. Auditors KPMG LLP were appointed in November 2014 and have expressed their willingness to continue in office. A resolution to reappoint them as auditor will be proposed at the Annual General Meeting.

Philip L Letts Chief Executive Officer blur Group plc Eagle House, 1 Babbage Way, Science Park, Exeter EX5 2FN 26 April 2016


Statement of directors’ responsibilities in respect of the annual report and the financial statements

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare group and parent company financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange they are required to prepare the group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the directors are required to:

• Select suitable accounting policies and then apply them consistently; • Make judgments and estimates that are reasonable and prudent; • State whether they have been prepared in accordance with IFRSs as adopted by the EU; and • Prepare the financial statements on the going concern basis unless it is inappropriate to presume

that the group and the parent company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. Each of the directors confirms that, to the best of their knowledge:

• The Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and • The Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.


Independent auditor’s report to the members of blur Group plc

We have audited the financial statements of blur Group plc for the year ended 31 December 2015 set out on pages 28 to 72. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors’ Responsibilities Statement set out on page 25 the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements

In our opinion: • The financial statements give a true and fair view of the state of the group’s and of the parent

company’s affairs as at 31 December 2015 and of the group’s loss for the year then ended; • The group financial statements have been properly prepared in accordance with IFRSs as adopted by

the EU; • The parent company financial statements have been properly prepared in accordance with IFRSs as

adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and • The financial statements have been prepared in accordance with the requirements of the Companies

Act 2006.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.


Independent auditor’s report to the members of blur Group plc (continued)

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• Adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• The parent company financial statements are not in agreement with the accounting records and returns; or

• Certain disclosures of directors’ remuneration specified by law are not made; or • We have not received all the information and explanations we require for our audit.

Ian Brokenshire (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants Plym House 3 Longbridge Road Plymouth Devon PL6 8LT 26 April 2016


Consolidated Statement of Total Comprehensive Income for the year ended 31 December 2015

The results reflected above relate to continuing activities. The accompanying notes are an integral part of these financial statements.

2015 2014 Note US$ US$

Revenue 4 2,695,970 4,715,208 Cost of sales (2,408,162) (3,069,604) Gross profit 287,808 1,645,604 Total administrative expenses

5

(11,028,740)

(12,624,953)

Loss from operations (10,740,932) (10,979,349) Finance income 7 221,509 93,459 Finance expense 7 (726) (143,660) Loss before tax (10,520,149) (11,029,550) Tax credit 8 430,973 530,487 Loss for the year attributable to equity holders of the parent Company

(10,089,176) (10,499,063)

Consolidated Statement of Total Other comprehensive Income for the Year Ended 31 December 2015

2015 US$

2014 US$

(Loss) for the year

(10,089,176) (10,499,063)

Other comprehensive income

Exchange gains/(losses) arising on the translation of foreign subsidiaries (could subsequently be reclassified to profit and loss)

(740,778) (1,544,473)

Total comprehensive losses attributable to equity holders of the parent Company

(10,829,954) (12,043,536)

Basic and diluted loss per share for losses attributable to the owners of the parent during the year 9 (0.21) (0.27)


Consolidated Statement of Financial Position At 31 December 2015

Note

2015 US$

2014 US$

Non-current assets Property, plant and equipment 10 63,819 129,364 Intangible assets 11 2,715,680 2,269,284 Total non-current assets 2,779,499 2,398,648 Current assets Trade and other receivables 12 840,857 1,740,885 Tax Receivable 955,772 766,631 Cash and cash equivalents 7,144,877 17,401,774 Total current assets 8,941,506 19,909,290 Total assets 11,721,005 22,307,938 Current liabilities Trade and other payables (including derivatives) 13 1,478,137 1,946,046 Social security and other taxes 263,137 75,198 Loans and borrowings 14 14,804 15,632 Total current liabilities 1,756,078 2,036,876 Total liabilities 1,756,078 2,036,876 Net assets 9,964,927 20,271,062 Issued capital and reserves attributable to owners of parents Called up share capital 15 769,179 769,179 Share premium 37,425,856 37,425,856 Equity conversion reserve 8,967 8,967 Merger reserve 1,712,666 1,712,666 Share based payment reserve 20 1,484,879 1,074,046 Foreign exchange reserve (1,971,084) (1,230,306) Retained losses (29,465,536) (19,489,346) 9,964,927 20,271,062 The financial statements were approved and authorized for issue by the Board of Directors on 26 April 2016 and were signed on its behalf by:

Philip Letts Tim Allen CEO CFO Company Registration Number: 08188404

The accompanying notes are an integral part of these financial statements.


Consolidated Statement of Changes in Equity for the Year Ended 31 December 2015

Called Up

Share Capital

Share Premium

Equity Conversion

Reserve

Merger Reserve

Share Based

Payment Reserve

Foreign Exchange

Reserve Retained Loss Total

US$ US$ US$ US$ US$ US$ US$ US$

Equity as at 1 January 2014 475,845 16,765,333 8,967 1,712,666 609,935 314,167 (8,990,283) 10,896,630

Loss for the period (10,499,063) (10,499,063)

Share Based Payments 464,111 464,111 Conversion of convertible debt -

Issue of Ordinary shares 293,334 21,706,681 22,000,015 Issue costs recognized in equity (1,046,158) (1,046,158)

Other comprehensive loss for the year (1,544,473) (1,544,473)

Equity as at 31 December 2014

769,179 37,425,856 8,967 1,712,666 1,074,046 (1,230,306) (19,489,346) 20,271,062

Loss for the period (10,089,176) (10,089,176) Other comprehensive loss for the year (740,778) (740,778)

Total comprehensive income/(loss) - - - - - (740,778) (10,089,176) (10,829,954)

Issue of Ordinary shares - Issue costs recognized in equity -

Share Based Payments 410,833 112,986 523,819 Equity as at 31 December 2015 769,179 37,425,856 8,967 1,712,666 1,484,879 (1,971,084) (29,465,536) 9,964,927


Consolidated Statement of Cashflows for the Year Ended 31 December 2015 The accompanying notes are an integral part of these financial statements.

Note

2015 US$

2014 US$

Loss after taxation (10,089,176) (10,499,063) Interest (income)/expense (net) 7 (220,783) 50,201 Income tax credit (430,973) (530,487) Fair value movement and unrealized FX 170,130 (136,018) Depreciation of property, plant and equipment 10 75,494 77,809 Amortization of intangible assets 11 979,637 561,722 Share-based payments charge 6 525,876 464,111 Loss on disposal of property, plant and equipment 5 6,185 51,414

Cash outflows from operating activities before changes in working capital

(8,983,610)

(9,960,311) (Increase)/decrease in trade and other receivables 900,028 1,866,378 Increase/(decrease) in trade and other payables (144,780) (1,637,635) Cash used in operations (8,228,362) (9,731,567) Interest received 221,509 94,252 Interest paid (726) (7,642) Income tax paid 203,590 (10,846) Net cash used in operations (7,803,989) (9,655,803)

Purchase of property, plant and equipment (20,413) (70,016) Proceeds on disposal of property, plant and equipment - - Investment in intangible assets (1,510,754) (1,910,771) Net cash used in investing activities (1,531,167) (1,980,787) Issue of share capital - 22,000,015 Issue cost of shares - (1,046,158) Proceeds from convertible debts - 15,632 Net cash generated in financing activities - 20,969,489 Net (decrease)/increase in cash and cash equivalents

(9,335,156) 9,332,899

Cash and cash equivalents at beginning of period 17,401,774 9,561,462

Effect of foreign exchange translation on cash and equivalents

(921,741) (1,492,587) Cash and cash equivalents at end of period 7,144,877 17,401,774 The accompanying notes are an integral part of these financial statements.


Notes to the Consolidated Financial Information 1. Accounting policies Basis of preparation The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union (adopted IFRSs). The preparation of financial statements in compliance with adopted IFRSs requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group’s accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effect are disclosed in note 2. The Group financial statements consolidate the financial statements of the Company and its subsidiaries (together referred to as the Group). The parent Company financial statements present information about the Company as a separate entity and not about its Group. Basis of consolidation Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries (the Group) as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated statement of financial position, the acquirees’ identifiable assets, liabilities, and contingent liabilities are initially recognized at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained.

Inter-company transactions, balances and unrealized gains and losses (where they do not provide evidence of impairment of the asset transferred) on transactions between Group companies are eliminated.

Going concern The Directors have prepared a cash flow forecast covering a period extending 12 months from the date of approval of these financial statements which shows that the Group will have sufficient cash to meet its debts as they fall due over that period. blur is a disruptive and evolving technology company and uncertainties exist in the forecast as a result. The forecast contains certain assumptions about the performance of the business including growth in future revenue, both in project revenues and in premium services, the cost model and margins, and the level of cash recovery from trading. In the next 12 months, the most critical assumptions are those concerning the control of costs. The Directors are aware of the risks and uncertainties facing the business as it embarks on its new strategy but the assumptions used are the Directors’ best estimate of the future development of the business. After considering the forecasts and the risks, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence over the period of the forecast. For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements. However, beyond the forecast period the Group will need either to substantially increase its revenues or take actions to ensure it remains sufficiently funded. As with any disruptive, evolving technology company there is always an inherent risk over the ability of the Group and Company to continue


Notes to the Consolidated Financial Information cont’d as a going concern if forecasts are not met and cash resources are not adequate. The financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

Functional and presentation currency The functional currency of the Company is Sterling (£). The presentational currency of the Company is the US Dollar ($). The Directors consider the US Dollar is the most appropriate presentational currency. Changes in accounting policies and disclosures (a) New and amended standards adopted by the Group The Group has applied any applicable new standards, amendments to standards and interpretations that are mandatory for the financial year beginning on or after 1 January 2015. However, none of them has a material impact on the Group’s consolidated financial statements.

(b) New, amended standards, interpretations not adopted by the Group A number of new standards, amendments to standards and interpretations to existing standards have been published that are mandatory for the Group’s accounting periods beginning after 1 January 2016, or later periods, where the Group intends to adopt these standards, if applicable, when they become effective. The Group has disclosed below those standards that are likely to be applicable to the Group and is currently assessing the impact of these standards.

• Annual improvements 2014 cycle (effective date: 1 January 2016) – improvements to various standards.

• IFRS 15, ‘Revenue from contracts with customers’ (effective date:1 January 2016) – this replaces IAS 18 Revenue, IAS 11 Construction Contracts and some revenue-related Interpretations. It establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue.

• IFRS 9 ‘Financial instruments’ (effective date: 1 January 2018) – this replaces most of the guidance of IAS 39 Financial Instruments: Recognition and Measurement. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting.

• IFRS 16 ‘Leases’ (effective date: 1 January 2019) - changes fundamentally the accounting for leases by lessees. It eliminates the current IAS 17 dual accounting model, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases and, instead, introduces a single, on-balance sheet accounting model that is similar to current finance lease accounting.


Notes to the Consolidated Financial Information cont’d Revenue Recognition Revenue represents the gross value of services provided to customers in respect of revenue earned, net of discounts, sales taxes, accrued, and deferred amounts. There are two principal sources of revenue: Project revenue Being revenue from projects that list on blur’s marketplace, where the customer, in conjunction with blur, selects the service provider and a legally binding contract between blur and its customers is established (referred to as ‘’kick-off’’). At this stage blur has assumed the principal contractual responsibility to deliver the agreed services, the delivery of the service has commenced, and project revenue recognition commences. Project revenue is recognized on either a timeline, or milestone basis. Timeline refers to the date the delivery of the service commences to the date it is completed. Milestone refers to specific performance targets within each project until completion. Under the project milestone method, the milestones inserted in the Statement of Work are broadly indicative of the stage of completion and reflect the value of work completed. In the case of milestone projects, the service provider and customer confirms the proportion of costs incurred to date and the resulting cost to completion which gives the indication of the percentage of completion. This is done on the platform collaboration area, Project Space, that is updated by the service provider, supported at period end with additional electronic confirmation. Where a project has regular deliverables and is relatively short in duration, the project timeline is used to determine the stage of completion Where any element of a project is contingent upon either completion or specific milestones or deliverables, the contingent element of the project is separately identified and revenue recognized only when the contingent element is completed. Where a project is delayed or suspended for whatever reason, the revenue recognized on a timeline basis is initially fixed to the date of suspension. Revenue will only be further recognized if the project is deemed to be commercially viable with an expectation that it will be realized in cash. Where the project is delayed and a new completion date established, the revenue is recognized over the longer period associated with the revised completion date. Where the project is suspended, no revenue is recognized during the period of suspension. Where a project is cancelled, the project is assessed as to the stage of completion. Blur will specifically reference the cancelled projects’ Statement of Works, surveys of work performed, and the proportion of costs incurred in order to assess the amount of revenue to recognize.


Notes to the Consolidated Financial Information cont’d Cancellation (previously Listing fee) revenue Being revenue from customers where a commenced project is cancelled and there is an expectation of collection of the cancellation fee. The Cancellation fee is a contractual charge when a customer lists a project that subsequently cancels. Foreign currency The functional currency of blur Group plc and blur Ltd is Pound Sterling, whereas of blur Inc. it is US Dollars. The presentational currency is US Dollars ($), as the Group’s management believe that in the future the majority of revenues and activity will be generated in US Dollars. This is consistent with prior years. The exchange rates used for translating the statement of financial position at 31 December 2015 was at a closing rate of £1 = US$1.4804 (2014: US$1.5632) and the statement of comprehensive income at an average rate of US$1.4804 (2013: US$1.6410). 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 the reporting period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. On consolidation, exchange differences arising from the translation of the net investment in foreign entities are recognized in other comprehensive income and accumulated in a separate component of equity. Exchange differences are recycled to profit or loss as a reclassification adjustment upon disposal of the foreign operation. Derivative instruments The Group uses forward exchange contracts to mitigate exposure to foreign currency risks. Gains or losses from utilizing these instruments are recognized in the income statement in the period in which they occur. Fair value hierarchy All financial instruments measured at fair value must be classified into the levels below: • Level 1: Quoted prices, in active markets. • Level 2: Fair Inputs other than quoted market prices included within Level 1 that are observable for the

asset or liability, either directly or indirectly. • Level 3: Inputs that are not based on observable market data. Trade receivables Trade receivables are amounts due from customers for services provided in the ordinary course of business and are stated net of any provision for impairment. Impairment provisions are recognized when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net of bad debt provision, such provisions are recorded in a separate allowance account with the loss being recognized within administrative expenses in the statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.


Notes to the Consolidated Financial Information cont’d Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and for the purpose of the statement of cash flows – bank overdrafts or outstanding credit card balances. Convertible debt The proceeds received on issue of the Group’s convertible debt are allocated into their liability and equity components. The amount initially recognized and attributed to the debt component equals the discounted redemption value of the financial instrument, discounted at a deemed market rate of interest (the effective interest rate) and not the financial instrument’s coupon rate. The deemed rate of interest utilized in the estimation was compared to the rate of interest that was payable on a similar debt instruments that do not include an option to convert. Subsequently, the debt component is accounted for as a financial liability measured at amortized cost until extinguished on conversion or maturity of the convertible loan. The remainder of the proceeds are allocated to the equity reserve within shareholders’ equity, net of income tax effects. Share capital Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Group only has one class of ordinary shares, denominated as £0.01 (2014: £0.01) ordinary shares, as set out in note 15. The Company’s ordinary shares are classified as equity instruments. Leases Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Rent paid on operating leases is charged to the statement of comprehensive income on a straight line basis over the term of the lease. Property, plant and equipment Items of property, plant and equipment are initially recognized at cost. Depreciation is provided on all items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is provided at the following rates: Furniture, fixtures and fittings - 33% per annum straight line

Computer equipment - 33% per annum straight line External software - 33% per annum straight line


Notes to the Consolidated Financial Information cont’d Intangible assets The development of the trading platform is capitalized as an intangible asset. Development activities involve a planned investment in the development and enhancement of the trading platform. The development expenditure of the platform is recognized as intangible assets when the following criteria are met:

1. It is technically feasible to complete the development of the platform so that it will be available for use;

2. Management intends to complete and use or sell the platform; 3. There is an ability to use or sell the platform; 4. It can be demonstrated how the platform will generate future economic benefits; 5. Adequate technical, financial and other resources to complete the development of the platform and

to use or sell the use of the platform are available; and 6. The expenditure attributable to development of the platform can be measured reliably.

Expenditure being capitalized includes internal staff time and cost spent directly on developing the trading platform. Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment costs. The amortization period is over 48 months on a straight-line basis.

Each version released builds incrementally on the prior release (as opposed to being a completely new platform) so no prior costs are written off.

Taxation Income tax expense represents the sum of the current tax and deferred tax charge for the year. Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantively enacted by the reporting date. During the year, the current tax charge is nil as there are tax losses for the year. R&D credits are recognized as and when eligible, within the tax charge/credit in the financial statements in accordance with IAS 12. Deferred tax is recognized in respect of relevant temporary differences that have originated but not reversed at the balance sheet date. A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilized. Management has elected not to recognize the deferred tax asset due the lack of certainty of future profitability as the Group is still in its early stage of maturity. The deferred tax asset on shares and share option charges is affected by the difference between the grant price of the shares and share options and the market price of the Company’s shares at the accounting year end. If the market value of the shares at the date of exercise were to be lower than the market value at the account year end the amount of tax relief obtained would be less than anticipated in the deferred tax calculations. Share-based payment In accordance with IFRS 2 ‘Share-based payments’, the Group reflects the economic cost of awarding shares and share options to employees and Directors by recording an expense in the statement of comprehensive income equal to the fair value of the benefit awarded. The expense is recognized in the statement of comprehensive income over the vesting period of the award. Fair value is measured by the use of a Black-Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations.


Notes to the Consolidated Financial Information cont’d 2. Critical accounting estimates and judgements In preparing the financial statements, the Directors make certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including the expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year are discussed below. Judgements and accounting estimates and assumptions (a) Going concern As set out in note 1 the Directors have prepared a cash flow forecast covering a period extending 12 months from the date of approval of these financial statements which shows that the Group will have sufficient cash to meet its debts as they fall due over that period. blur is a disruptive and evolving technology company and uncertainties exist in the forecast as a result. The forecast contains certain assumptions about the performance of the business including growth in future revenue, both in project revenues and in premium services, the cost model and margins, and the level of cash recovery from trading. In the next 12 months, the most critical assumptions are those concerning the control of costs. (b) Revenue recognition Revenue is recognized on a gross basis, as our evaluation and assessment of the indicators under IAS 18 supports the fact that blur is acting as principal for the majority of projects. The factors that are considered and prove decisive in the conclusion of this assessment include the following:

• blur has the latitude to agree the fee for each project; • blur has primary responsibility providing the services to a customer. • blur is responsible for the quality of the service delivery, delivered on time, budget and to a

sufficiently high standard. This includes the management of the service delivery of the expert; and • blur facilitates both commercial terms and the project management for each project

Although blur passes on some of the credit risk onto the service provider it engages to deliver the services to its customers, it does not consider this is sufficiently persuasive in light of the other factors noted above to suggest that accounting for the transaction as principal is not appropriate. blur recognizes revenue when the following criteria are satisfied:

a. The amount or value of the revenue recognized can be reliably measured, which occurs when the Customer Success team, customer and service provider have agreed the contract value upon appointment of the service provider. The measurement date for revenue recognition is from the date a service provider is appointed to the point that the performance has been completed.

b. It is probable that the economic benefits associated with the transaction will flow to blur, when the performance obligation is confirmed in the Statement of Works or project brief confirmed between the contracting parties and to the extent that there exists a track record of successful progress of similar projects. The transfer of economic benefits to blur must be fixed, determinable and reasonably assured.

c. The stage of completion of the transaction at the end of the reporting period can be measured reliably, as set out in the detailed measurement guidance in section 5 of this policy

d. The costs incurred for the transaction and the costs to complete the transaction can be measured reliably, with reference to the individual contract terms, Statement of Works and project revenue measurement guidance


Notes to the Consolidated Financial Information cont’d Project revenue Project revenue is recognized on either a timeline, or milestone basis. Timeline refers to the date the delivery of the service commences to the date it is completed. Milestone refers to specific performance targets within each project until completion. There can be judgement required in estimating the stage of completion of a project and hence the value of the revenue to be recognized at a point in time. Cancellation fee (previously listing fee) revenue The Cancellation fee is a mandatory charge when a customer, having listed a project decides to close their trading account or not to select an expert. Judgement may be required to assess the extent to which the project is listed when the customer submits their project brief and opens a trading account. The listing fee covers the customer’s use of their trading account and the cost of time spent developing pitches and running them through the Exchange process. (c) Intangible assets Intangible assets include the capitalized development costs of the trading platform. These costs are assessed based on management’s view of the technology team’s time spent on projects that enhance the trading platform, supported by internal time recording and considering the requirements of IAS 38 ‘Intangible assets’. The development cost of the platform is amortized over the useful life of the asset. The useful life is based on the management’s estimate of the period that the asset will generate revenue, which is reviewed on a project by project basis for continued appropriateness. The carrying value is tested for impairment when there is an indication that the value of the assets might be impaired. The impairment tests require assumptions about future events which require management judgement. (d) Trade receivables – provision for impairment Management has provided for all debts, individually, which are deemed doubtful at their estimated irrecoverable amount. Management apply their judgement on whether there is objective evidence that trade receivables should be impaired. In 2015 the internal process for credit risk monitoring and management was enhanced to include detailed customer credit checks prior to projects being listed. The quality of credit worthy customers has improved over the period being a reflection of both improved credit control process and the transition to Enterprise customers. 3. Financial instruments – Risk Management General objectives, policies and processes The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out below. The Board reviews its monthly reports through which it assesses the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The Group reports in US Dollars. All funding requirements and financial risks are managed based on policies and procedures adopted by the Board of Directors. Forward contracts are used to control foreign exchange risk. The Group’s criteria for entering into a forward currency contract would require that the instrument must:

• be related to anticipated foreign currency receipt; • involve the same currency as the foreign currency receipt; and • reduce the risk of foreign currency exchange movements on the Group’s operations.


Notes to the Consolidated Financial Information cont’d

i) Categories of financial assets and liabilities The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows: • Trade receivables. • Cash and cash equivalents. • Trade and other payables. • Borrowings and convertible loan notes. Trade and other receivables are initially measured at fair value and subsequently at amortized cost. Book values and expected cash flows are reviewed by the Board and any impairment charged to the consolidated statement of comprehensive income in the relevant period. Trade and other payables are measured at book value. The book value of financial assets and liabilities equates to their fair value. A summary of the financial instruments held by category is provided below: Financial assets 2015

2014

US$ US$ Cash and cash equivalents 7,144,877 17,401,774 Trade receivables – due at reporting date 1,261,447 1,453,103

Trade receivables – not due at reporting date -

-

Gross trade receivables 1,261,447 1,453,103 Less: Provision for impairment (1,002,723) (620,001) Trade receivables – net of provision 258,724

833,102

Accrued Income – not due at reporting date 303,343 614,124 R&D Tax Credit – due at reporting date 955,772 766,631 Other receivables 47,745 293,659 Total 1,565,584 2,507,516 Trade receivables principally comprise amounts outstanding for sales to customers and are net of provision for doubtful recoverability. An impairment review of outstanding trade receivables is carried out at the period end and a specific amount provided for. The average debtor days to settle invoices are 60 days (2014: 102 days). Trade receivables that are due at the reporting date and have been reviewed and impaired when the collectability is considered unlikely. R&D Tax Credit of $482,908 was received in January 2016.


Notes to the Consolidated Financial Information cont’d Financial liabilities 2015 2014 US$ US$ Trade payables 660,669 603,616 Expert costs accrual 140,115 837,245 Other accruals 576,323 369,167 Derivative financial liabilities - forward currency contract - 136,018 Convertible loan notes 14,804 15,632 Total trade and other payables 1,391,911 1,961,678

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 38 days (2014 : 31 days). Cash and cash equivalents Cash and cash equivalents are held in Sterling, Euros and US Dollars and placed on deposit in UK banks and US banks. ii) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. At 31 December 2015 the Group has net trade receivables of US$258,724 (2014 – US$833,102). The Group is exposed to credit risk in respect of these balances such that, if one or more customers encounter financial difficulties, this could materially and adversely affect the Group’s financial results. The Group attempts to mitigate credit risk by assessing the credit rating of new customers prior to entering into contracts and by entering contracts with customers with agreed credit terms. The Group also mitigates the credit risk when the customer for a project has not paid for the outstanding debt by withholding payment to the service provider associated with the project At 31 December 2015, the Group had no customers (2014: five customers) that owed the Group more than $100,000 each and accounted for 0% (2014: 51%) of all the net receivables outstanding.


Notes to the Consolidated Financial Information cont’d The analysis below shows the ageing of trade and other receivables and the movement in bad debt provision in the year:

2015

2014

US$

US$

Up to 3 months 2,318,093

2,492,794 3 to 6 months 96,455

82,393

Above 6 months 153,759

552,331 Gross 2,568,307 3,127,518 Less: allowance for impairment (1,002,723) (620,002) Net 1,565,584 2,507,516 Allowance for impairment: 2015

2014

US$

US$

Opening balance 620,002

918,359 Utilized during the year (435,439)

(1,125,242)

Increase during the year 818,160

826,885 Closing balance 1,002,723 620,002

The provision for bad debts increased during the year as the Group’s policy is to provide fully against receivables due for more than 150 days. A corresponding provision is made against the service provider invoice or accrual to reflect the reduced associated liability. (iii) Liquidity risk Short-term liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a period of at least 30 days. The table below analyses the Group’s financial liabilities by contractual maturities. All amounts disclosed in the table are the contractual undiscounted cash flows.

2015

2014

US$

US$

Ageing of trade and other payables:

Up to 3 months 1,183,245

1,860,309 3 to 6 months 157,203

75,950

Above 6 months 36,659

84,985 Gross 1,377,107 2,021,244

Longer term liquidity risk is the ability of the Group to continue as a going concern. This risk is managed by the preparation by the Directors of cash flow forecasts and the close management of expenditure.


Notes to the Consolidated Financial Information cont’d (iv) Foreign exchange risk Functional and presentational currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Company operates (the functional currency) which is considered by the Directors to be Pounds Sterling (£). The financial statements have been presented in US Dollars. The effective exchange rate at 31 December 2015 was £1 = US$1.4804 (2014: £1 = US$1.5632). Foreign exchange risk arises when Group entities enter into transactions denominated in a currency other than their functional currency. The Group’s policy is, where possible, to allow customers to settle liabilities denominated in the customer’s functional currency, being primarily Dollar or Pound Sterling. The Group is predominantly exposed to currency risk on sales and purchases made from customers and service providers based in the USA and the Eurozone. Sales and purchases from customers, experts and suppliers are made on a central basis and the risk is monitored centrally. Apart from these particular cashflows the Group aims to fund expenses and investments in the respective currency and to manage foreign exchange risk at a local level by matching the currency in which revenue is generated and expenses are incurred. Forward contracts are used to control foreign exchange risk. Hedge accounting is not applied in respect of these derivatives. The Group’s criteria for entering into a forward currency contract would require that the instrument must: • be related to anticipated foreign currency receipt; • involve the same currency as the foreign currency receipt; and • reduce the risk of foreign currency exchange movements on the Group’s operations.

At 31 December 2015 the Group had no commitments under forward foreign exchange contracts. Fair value hierarchy All financial instruments measured at fair value must be classified into of the levels below: • Level 1: Quoted prices, in active markets. • Level 2: Fair Inputs other than quoted market prices included within Level 1 that are observable for the

asset or liability, either directly or indirectly. • Level 3: Inputs that are not based on observable market data. The fair value hierarchy of financial instruments held at fair value is shown below:

31 December 31 December

2015 2014

US$ US$

Level 2 Level 2 Financial liabilities

Derivative financial liabilities (fair value through profit or loss) -

136,018


Notes to the Consolidated Financial Information cont’d As at 31 December 2015, the Group’s net exposure to foreign exchange risk was as follows for those entities with Pound Sterling functional currencies: US Dollar Euro Total

US$ US$ US$ As at 31 December 2015 Trade and other receivables 303,337 30,850 334,187 Cash and cash equivalents 4,490 101,540 106,030 Trade and other payables (465,754) (54,273) (520,027)

Net assets (157,927) 78,117 (79,810)

As at 31 December 2014 Trade and other receivables 1,409,073 11,927 1,421,000 Cash and cash equivalents 7,960,729 39,465 8,000,194 Trade and other payables (193,034) (2,714) (195,748) Net assets 9,176,768 48,678 9,225,446 The impact of 10% movement in foreign exchange rate of US$ will result in an increase/decrease of net assets by $15,793 for 2015 (2014: $920,704). The average US$ exchange rate used for 2015 is 1.521 (2014: 1.641), with a closing rate of 1.4804 (2014: 1.5632). (v) Capital management The Group’s capital is made up of share capital, share premium, equity conversion reserve, merger reserve, foreign currency reserve, share-based payment reserve and retained losses totaling at 31 December 2015 US$9,964,927 (2014: US$20,271,062). The Group’s objectives when maintaining capital are: • To safeguard the entity’s ability to continue as a going concern, so that it can continue to

provide returns for shareholders and benefits for other stakeholders; and • To provide an adequate return to shareholders by pricing products and services

commensurately with the level of risk.

To meet these objectives, the Group reviews the budgets and forecasts on at least a quarterly basis to ensure there is sufficient capital to meet the needs of the Group through to profitability and positive cash flow. The capital structure of the Group consists of shareholders’ equity as set out in the consolidated statement of changes in equity. All working capital requirements are financed from existing cash resources.


Notes to the Consolidated Financial Information cont’d (vi) Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in a volatile and tight credit economy.

The Group will also seek to minimize the cost of capital and attempt to optimize the capital structure, which currently means maintaining equity funding and keeping debt levels to insignificant amounts of lease funding. Share capital and premium together amount to $38,195,035 (see note 15).

Whilst the Group does not currently pay dividends it is part of the capital strategy to provide returns for shareholders and benefits for other members in the future. However, the Group is planning growth and it will continue to be important to maintain the Group’s credit rating and ability to borrow should acquisition targets become appropriate and available.

Capital for further development of the Group’s activities will, where possible, be achieved by share issues or other finance as appropriate. 4. Segmental analysis

The Group currently has one reportable segment, provision of services, and categorizes all revenue from operations to this segment.

The Group currently has four reportable categories which are:

1. project revenues - for the provision of services from projects that list on blurs’ marketplace, where the customer accepts the bid from the expert supplier and a legally binding contract between blur and its customers is established;

2. cancellation fees (formerly listing fees) - where the project is cancelled after listing and there is an expectation of collection. The Cancellation fee is a mandatory charge when a customer listed a project and decided to close their trading account or not to select an expert;

3. premium services – comprising wraparound support services for projects, including blur Manage Ultra, blur Protect Advanced, blur Express, and blur Engage; and

4. subscriptions and licenses – for the provision of tiered annual subscriptions to service providers to gain access to high value project opportunities and market insights; the provision of access to blur’s software Platform and for the provision of subscriptions of blur Data, which analyses the business services landscape including category trends, pricing and timeline forecasts.

Project Revenue

Cancellation (formerly Listing Fees) Premium Services

Subscriptions and Licenses

2015 2014 2015 2014 2015 2014 2015 2014

US$ US$ US$ US$ US$ US$ US$ US$

UK 805,798 939,597 20,589 752,458 - - 15,538 -

USA 854,289 1,303,606 259,390 745,811 12,913 - 52,964 - Rest of World 291,195 346,914 371,337 626,822 4,500 - 7,457 -

Total 1,951,282 2,590,117 651,316 2,125,091 17,413 - 75,959 -



The Group operates in three main geographic areas: UK, USA and Rest of the World. Revenue and non-current assets by origin of geographical segment for all entities in the Group is as follows:

Revenue Non-current assets

2015 2014 2015 2014

US$ US$ US$ US$

UK 841,925 1,692,055 2,778,440 2,394,434

USA 1,179,556 2,049,417 1,059 4,214

Rest of World 674,489 973,736 - -

Total 2,695,970 4,715,208 2,779,499 2,398,648

The total loss from operations of $10.7m predominantly relates to project revenue/cancellation fees which make up 97% of revenue. The vast majority of the costs of sales and overheads for 2015 relate to the head office in the UK. Given this, the directors consider the split of costs across geographical segments would be arbitrary and judgmental. Therefore, they consider reporting the loss by geographical segment could be mis-leading in this early phase of blur’s development.

5. Loss from operations

The operating loss as at 31 December 2015 is stated after charging:

2015

2014 US$ US$ Amortization of intangibles 979,637 561,722 Auditors’ remuneration: Audit fees – Subsidiaries - - – Company 88,000 266,843 Non-audit fees – taxation advisory and compliance services – other assurance services - interim review

64,159 8,000

59,443 16,398

Bad debt provision 850,680 826,885 Depreciation of property, plant and equipment 75,494 77,809 Loss on disposal of property, plant and equipment 6,185 51,414 Staff costs (note 6) 4,106,832 4,268,210 Operating lease expense – buildings 445,447 471,260 Foreign exchange losses 265,345 810,910 Other administrative expenses 4,138,961 5,214,059 Total administrative and other expenses 11,028,740 12,624,953


Notes to the Consolidated Financial Information cont’d 6. Staff costs

Staff costs (including Directors emoluments) incurred in the year were as follows:

2015 US$

2014 US$

Wages and salaries 5,175,051 5,761,655 Social security costs 736,187 715,697 Share-based payments 525,876 464,111 Gross staff costs 6,437,114 6,941,463 Less: Amounts capitalized:

Wages and salaries (1,351,391) (1,584,825) Social security costs (139,354) (149,067)

(1,490,745) (1,733,892) Less: Amounts attributable to Cost of Sale Wages and salaries (746,746) (822,636) Social security costs (92,791) (116,725) (839,537) (939,361) 4,106,832 4,268,210 Wages and salaries 3,076,914 3,354,194 Social security costs 504,042 449,905 Share-based payments 525,876 464,111 Net staff costs 4,106,832 4,268,210


Notes to the Consolidated Financial Information cont’d 6. Staff costs cont’d

The average monthly number of permanent employees during the period was as follows:

2015

2014 Number Number Directors 5 6 Staff Administration 6 8 Customer Services 12 15 Marketing 5 6 Sales 11 11 Technology 23 26 62 72

2015 US$

2014 US$

Key management personnel Emoluments and compensation 963,396 756,677 Employers social security 95,909 67,862 1,059,305 824,539 Share-based payments 237,505 109,024 Company pension contributions to defined contribution schemes - - 1,296,810 933,563 Key management personnel comprise of the Board of Directors, as detailed in the table on page 20 and the Chief Financial Officer if he is not a Board member. Details about the composition of the directors’ emoluments and the directors’ interest in share options of the company are set out on pages 20 and 19, respectively. The information on these pages forms part of this note to the financial statements.

During the year the Directors were awarded a total of 460,000 share options (2014: 1,000,000) at a weighted average exercise price of £0.2739 (2014: £0.66). No share options were received or receivable in respect of qualifying services under a long term incentive scheme.

No share options were exercised during the year. Remuneration disclosed above includes the following amounts paid to the highest paid Director:

2015 2014 US$ US$ Highest paid Director

Emoluments and compensation 304,200 270,765 304,200 270,765 Share-based payments 133,194 5,641 Company pension contributions to defined contribution schemes - - 437,394 276,406

In the year ended 31 December 2015 the highest paid Director received nil share options (2014: 500,000). No share options were exercised by this Director in the current financial year (2014: nil).



7. Finance income and expenses

2015

2014

US$ US$ Finance income

Interest from bank

221,048

93,459 Interest from customers 461 - 221,509 93,459

Finance expense

Convertible loan note interest - (872) Fair value loss on foreign exchange contracts - (142,788) Interest Payable (726) -

(726) (143,660)


Notes to the Consolidated Financial Information cont’d 8. Income tax Analysis of the tax credit

No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2015 nor for the year ended 31 December 2014. However, a receivable cash tax credit in respect of the UK R&D activity has been recognized.

The R&D Tax Credit receipt from HMRC is likely to be received within a few months of the submission of the corporate tax return for blur Limited.

A liability for overseas tax has been recognized on ordinary activities for the year ended 31 December 2015 in respect of Blur Inc.

2015 2014 US$ US$ Tax credit - current year 500,491 535,164 - prior year (49,751) 6,168 Overseas tax (19,767) (10,845) 430,973 530,487

Factors affecting the tax charge The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to the result for the year are as follows:

2015 2014 US$ US$ Loss before tax (10,520,149) (11,029,550)

Tax credit at 20.25% (2014: 21.5%) 2,130,330 2,371,353 Non-deductible expenses (107,780) (110,838) Accelerated (depreciation)/capital allowance (14,623) (16,027) Higher tax rates on overseas earnings (9,759) (5,016) Utilization of overseas tax losses - - Losses carried forward (2,017,935) (2,250,317) Prior year R&D tax credit (49,751) 6,168 Current year R&D tax credit 500,491 535,164 Income tax credit 430,973 530,487

The Group has carried forward losses and accelerated temporary differences amounting to US$22,479,579 as of 31 December 2015 (2014: $15,392,810). As the timing and extent of taxable profits are uncertain, the deferred tax asset of US$4,046,324 (2014: $3,078,562) arising on these losses (at 18% future tax rate) and accelerated timing differences has not been recognized in the financial statements.



9. Loss per share

Loss per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The basis for calculating the basic loss per share is as follows:

Due to the loss in the period the effect of the share options was considered anti-dilutive and hence no diluted loss per share information has been provided.

2015

2014

US$

US$

Weighted average number of shares for the purpose of earnings per share 47,092,851 39,391,172 Loss after tax (10,089,176) (10,499,063) Loss per share (0.21) (0.27)



10. Property, plant and equipment

Computer

Equipment Furniture, Fixtures

and Fittings Total US$ US$ US$

COST

At 1 January 2014 178,617 117,036 295,653

Additions 34,460 35,555 70,015

Disposals (73,006) (48,147) (121,153)

Exchange adjustment (5,462) (3,629) (9,091)

At 31 December 2014 134,609 100,815 235,424

Additions 15,786 4,627 20,413

Disposals (40,104) (11,320) (51,424)


At 31 December 2015 103,516 88,946 192,462

DEPRECIATION

At 1 January 2014 73,995 47,608 121,603

Charge for period 45,316 32,493 77,809

Disposals (49,980) (37,811) (87,791)


At 31 December 2014 65,895 40,165 106,060

Charge for period 43,553 31,941 75,494

Disposals (35,788) (9,451) (45,239)


At 31 December 2015 69,057 59,586 128,643 NET BOOK VALUE

At 31 December 2015 34,459 29,360 63,819

At 31 December 2014 68,714 60,650 129,364


Notes to the Consolidated Financial Information cont’d 11. Intangible assets

Trading

Platform Software

Development Total

US$ US$ US$

COST

At 1 January 2014 1,124,948 31,327 1,156,275 Additions – Internal Development - 176,879 176,879 Additions – External Costs 1,651,681 82,211 1,733,892 Disposals - (18,051) (18,051) Exchange adjustment (58,403) (770) (59,173)

At 31 December 2014 2,718,226 271,596 2,989,822 Additions – Internal Development 1,461,605 - 1,461,605 Additions – External Costs - 49,149 49,149 Disposals - - - Exchange adjustment (143,981) (14,386) (158,367)

At 31 December 2015 4,035,850 306,359 4,342,209

AMORTISATION At 1 January 2014 195,602 - 195,602 Charge for period 521,998 39,724 561,722 Exchange adjustment (34,903) (1,883) (36,786)

At 31 December 2014 682,697 37,841 720,538 Charge for period 878,241 101,396 979,637 Exchange adjustment (67,969) (5,677) (73,646)

At 31 December 2015 1,492,969 133,560 1,626,529

NET BOOK VALUE

At 31 December 2015 2,542,881 172,799 2,715,680

At 31 December 2014 2,035,529 233,755 2,269,284


Notes to the Consolidated Financial Information cont’d 12. Trade and other receivables 2015 2014 US$ US$ Trade receivables – gross 1,261,447 1,453,103 Provision for impairment (1,002,723) (620,001) Trade receivables – net 258,724 833,102 Prepayments 231,045 274,164 Accrued Income 303,343 614,124 Other receivables 47,745 19,495

840,857 1,740,885 As at 31 December 2015 trade receivables of US$160,192 (2014: US$1,285,722) were past due but not impaired, see note 3 for the Group’s assessment of the exposure to credit risk. All amounts shown under receivables are due within one year. 13. Trade and other payables (including derivatives)

2015 2014 US$ US$ Current Trade payables – Service Providers 188,753 120,624 Trade payables - Overheads 471,916 482,992 Other payables (8,012) 26,809 Derivative financial liabilities - forward currency contract - 136,018 Deferred revenue 364,167 - Director’s current account (note 19) 19,603 15,228 Accruals – Service Providers 140,115 837,245 Accruals - Overheads 301,595 327,130 1,478,137 1,946,046 Forward rate exchange contracts for derivative financial liabilities are not designed as hedging instruments. The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the consolidated statement of financial position.


Notes to the Consolidated Financial Information cont’d 14. Loans and borrowings

2015

2014

US$ US$

Unsecured convertible loan note Current 14,804 15,632 Total loans and borrowings 14,804 15,632 Book value approximate to fair value for the convertible debt and is stated at fair value at initial recognition and at amortized cost subsequently. The convertible loan notes (referred to as convertible debt II) were issued in 2011 with a coupon rate of 15% at a total face value of US$78,010. The loan notes are either repayable in four years from the issue date at its total face value, with interest accrued and payable as ordinary shares issued in the Company or can be converted at any time within two years into shares at the holder's option. The value of the liability component and the equity conversion component were determined at the date the instrument was issued. During the period to 31 December 2012 loan note holders converted their loan notes into ordinary shares of the Company. Only one convertible loan note remains outstanding relating to Peter Tahany. There is an ongoing claim relating to the provision of Mr Tahany’s consultancy services from September 2009 to early 2010, but the Board considers any risk of incurring costs relating to this claim remote.

Face value

Equity conversion reserve

Fair value of liability

US$ US$ US$ As at 1 January 2015 15,632 8,967 24,599 Accretion in loan note liability value - - - Exchange adjustments (828) (828) As at 31 December 2015 14,804 8,967 23,771


Notes to the Consolidated Financial Information cont’d 15. Share capital Share capital allotted and fully paid up Ordinary shares of £0.01 carry the right to one vote per share at general meetings of the Company and the rights to share in any distribution of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up. The shares are denominated in Pounds Sterling and translated at the historic rate. The table below shows the movements in share capital for the year: Number of shares Share Capital $ Share Premium $ Movement in ordinary share capital 2015 2014 2015 2014 2015 2014 Balance at 1 January 47,092,851 29,632,522 769,179 475,845 37,425,856 16,765,333 Issue of new shares - 17,460,329 - 293,334 21,706,681 Share issue costs - - - - - (1,046,158) Balance at 31 December 47,092,851 47,092,851 769,179 769,179 37,425,856 37,425,856 The Group has not issued any partly paid shares nor any convertible securities, exchangeable securities or securities with warrants. The Group does not hold any treasury shares.

16. Subsidiaries The subsidiaries of the Company, all of which have been included in the consolidated financial information, are as follows:

Name Principal activity Ownership Country of Incorporation blur Inc. Provision of marketing services 100%* United States of America blur Limited Provision of services 100% United Kingdom blur Exchange Limited Dormant company 100%* United Kingdom blur Technology Limited Dormant company 100%* United Kingdom blur Services Limited Dormant company 100%* United Kingdom

* These investments are held by blur Limited.


Notes to the Consolidated Financial Information cont’d 17. Reserves The following describes the nature and purpose of each reserve within equity: Share premium The amount of capital contributed in excess of the nominal value of each

ordinary share

Equity conversion reserve The amount of proceeds on issue of convertible loan notes relating to the equity component

Share-based payment reserve Reserve for share-based payments on options granted during the period not yet exercised

Foreign currency reserve Foreign exchange translation gains and losses arising on the translation of the financial statements from the functional to the presentation currency

Retained earnings All other net gains and losses and transactions with owners (e.g. dividends) not recognized elsewhere

Merger Reserve Amount subscribed for share capital in excess of nominal value when shares are issued in exchange for at least a 90% interest in the shares of another company.

18. Leases The Group’s leases consist only of operating leases for office space. Non-cancellable operating lease rentals are payable as follows:

2015 2014

US$ US$ Not later than one year 117,975 315,893 Above one year but not later than five years 120,159 164,591 238,134 480,484 At 31 December 2015, the Group had no capital commitments in respect of property, plant and equipment.


Notes to the Consolidated Financial Information cont’d 19. Related party transactions

2015

2014

US$ US$

Consultancy fees1

191,646 196,920

Service fees 2 68,822 251,900 Other Consultancy fees3 25,137 9,467 License fees4 5,325 17,231 290,930 475,518 Out of above balances outstanding at year end in trade payables and accruals are $16,390 (2014: $43,906). 1 Consultancy fees of $191,646 (2014: $196,920) were paid to Revviva LLC, a company in which K

Cardinale has an interest. These were paid for K Cardinale’s director services. 2 Service fees of $68,822 (2014: $251,900) were paid to CFPro Limited and Cambridge Financial

Partners LLP for accounting and consultancy support, companies in which Barbara Spurrier has an interest.

3 Other consultancy fees of $25,137 (2014: $9,467) were paid to Meguro LLP, a company in which Robert Wirszycz has an interest prior to him becoming a director.

4 License fees of $5,325 (2014: $17,231) were payable to Philip Letts for the use of blur logo artwork.

Related party transactions are not included in compensation costs to key personnel as set out in note 6, with the exception of payments to Revviva LLC in respect of K Cardinale’s director services. Revenue or other related receipts from key management personnel (including Directors):

2015

2014

US$ US$

Project Revenue1

1,521 -

1,521 -

1 Project revenue includes $1,521 (2014: $nil) in revenue recognized for projects carried out on behalf of Letts Estates Limited, a company in which Philip Letts has an interest. The projects were carried out on an arms-length basis. There are no amounts outstanding to or from the company at the period end.


Notes to the Consolidated Financial Information cont’d 19. Related party transactions cont’d The following loans are due (to)/from Directors:

2015

2014 US$ US$ P Letts:

Opening balance (15,228) 3,797 Expenses incurred on behalf of the Group (5,181) (19,765) Exchange adjustments 806 740 Closing balance (19,603) (15,228) The loans are interest free and repayable on demand. 20. Share-based payments The Company operates two option schemes, namely an unapproved option scheme and an Enterprise Management Incentive (EMI) scheme. The share capital of the Company is denominated in Pounds Sterling. Therefore, disclosures are presented in Sterling.

At 31 December 2015, the following share options have been granted and are outstanding in respect of the ordinary shares:

Exercise Price Range

As at 1 January

2015 Granted Cancelled

As at 31

December 2015

Final exercisable date Contractual life

£0.18-£2.40

3,487,295

1,397,800

843,100

4,041,995

4/2022-12/2025

6.3-10.0 years

£4.25-£4.60

76,000

-

50,000

26,000

9/2013-12/2023

7.7-8.0 years

£5.74-£7.93 59,000 - 47,500 11,500

1/2024

8.0-8.1 years

3,622,295 1,397,800 940,600

4,079,495

Weighted average exercise price £0.78 £0.24 £1.24 £0.49

At the 31 December 2015, 4,079,495 (2014: 3,622,295) options were in existence, 2,087,000 (2014: 1,727,350) under EMI scheme and 1,992,495 (2014: 1,894,945) under unapproved scheme. The options exercisable as at 31 December 2015 were NIL (2014: NIL). The contractual life is ten years and there is no cash settlement of the options. The options vests provided the employees remain in the service of the Company for a period of between two and four years from the grant date.



The fair values of the options are calculated using the Black-Scholes method. Assumptions used in this model for the year ended 31 December were:

EMI Scheme 2015 2014

Fair value at measurement date £0.14 £0.91 Exercise price £0.18 - £0.77 £0.66 - £7.93 Expected volatility 29% - 600% 112% - 600% Expected life 4.00 Years 4.00 Years Weighted Average Share Price at grant £0.24 £0.97 Risk-free rate 1.65%-1.831% 1.5%-2.25% Unapproved Scheme 2015 2014 Fair value at measurement date £0.10 £0.66 Exercise price £0.18-£0.30 £0.66 Expected volatility 29%-99% 600% Expected life 4.00 years 4.00 years Weighted Average Share Price at grant £0.22 £0.66 Risk-free rate 1.65%-1.831% 1.50% The expected volatility of 29%-600% was used for options granted during the year. As the Company has only traded on the AIM market since 5 October 2012, the Company has insufficient historical data to calculate and hence the volatility of 29%-600% is based on the implied volatility of a group of listed entities that have similar characteristics and are in the same industry sector. 21. Events after the reporting date

There are no disclosable events following the reporting date. 22. Control There is no ultimate controlling party.


Company Statement of Financial Position - blur Group plc At 31 December 2015

2015

2014 Note US$ US$ Non-current assets

Investment in subsidiary company 6 1,484,879 1,074,046 Total non-current assets 1,484,879 1,074,046

Current assets Trade and other receivables 7 5,136,662 18,915,482 Cash and cash equivalents 6,804,438 17,148,407 Total current assets 11,941,100 36,063,889 Total assets 13,425,979 37,137,935 Current liabilities Trade and other payables 8 47,262 182,090 Total current liabilities 47,262 182,090 Net assets 13,378,717 36,955,845

Equity attributable to equity holders of the Company Called up share capital 9 769,179 769,179 Share premium 37,425,856 37,425,856 Share-based payment reserve 6 1,484,879 1,074,046 Merger reserve (317,393) (317,393) Foreign exchange reserve (2,974,317) (1,679,467) Retained losses (23,009,487) (316,376) Total equity 13,378,717 36,955,845 The financial statements were approved and authorized for issue by the Board of Directors on 25 April 2016 and were signed on its behalf by:

P Letts T Allen

Director Director

Company Registration Number: 08188404



Company Statement of Changes in Equity – blur Group plc For the Year Ended 31 December 2015

Called up

share capital

Share premium

Foreign exchange

reserve

Share-based

payment reserve

Merger reserve

Retained Earnings/

(losses) Total

US$ US$ US$ US$ US$ US$ US$ Equity as at 31 December 2013 475,845 16,765,333 675,164 609,935 (317,393) (186,066) 18,022,818

Loss for the period - - - - - (130,309) (130,309)

Other comprehensive loss - - (2,354,631) - - - (2,354,631) Total comprehensive Income/(loss) - - (2,354,631) - - (130,309) (2,484,940)

Issue of ordinary shares 293,334 21,706,681 - - - - 22,000,015 Issue costs recognized in equity - (1,046,158) - - - - (1,046,158)

Share-based payments - - - 464,111 - - 464,111 Equity as at 31 December 2014 769,179 37,425,856 (1,679,467) 1,074,046 (317,393) (316,376) 36,955,845

Loss for the period (22,693,111) (22,693,111)

Other comprehensive loss - - (1,294,850) - - - (1,294,850) Total comprehensive Income/(loss) - - (1,294,850) - - (22,693,111) (23,987,961) Issue of ordinary shares - - - - - - - Issue costs recognized in equity - - - - - - - Share-based payments - - - 410,833 - - 410,833 Equity as at 31 December 2015 769,179 37,425,856 (2,974,317) 1,484,879 (317,393) (23,009,487) 13,378,717



Company Statement of Cashflows - blur Group plc For the Year Ended 31 December 2015

2015

2014 US$ US$

Operating activities

Profit/(loss) before interest and taxation (22,693,111) (130,309) Interest income (196,477) (93,349) Fair value movement and unrealized FX (522,546) -

Cash outflows from operating activities before changes in working capital (23,412,134) (223,659) (Increase)/decrease in trade and other receivables 22,914,361 (56,169) Increase in trade and other payables 1,190 159,511 Cash used in operations (496,583) (120,316) Interest received 196,477 93,349 Interest paid - - Net cash generated from operating activities (300,106) (26,967) Investing activities Intercompany – blur Limited and blur Inc. (9,135,542) (10,521,861) Net cash used in investing activities (9,135,542) (10,521,861) Financing activities Issue of share capital - 22,000,015 Issue cost of shares - (1,046,158) Net cash from financing activities - 20,953,857 Net increase in cash and cash equivalents (9,435,648) 10,405,029 Cash and cash equivalents at beginning of period 17,148,407 8,121,700 Effect of foreign exchange rate changes (908,321) (1,378,322) Cash and cash equivalents at end of period 6,804,438 17,148,407 The accompanying notes are an integral part of these financial statements.


Notes to the Company Financial Statements At 31 December 2015 1. Company Statement of Total Comprehensive Income - blur Group plc The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own profit and loss account in the financial statements. The Loss for the period ended 31 December 2015 is US$22,693,111 (2014: US$130,309). 2. Description of business blur Group plc is a public limited company domiciled in the United Kingdom. This Company is incorporated to act as parent Company for the Group. This principal activity of the company is to control the subsidiaries and other entities in the Group. The company was incorporated on 22 August 2012. 3. Accounting policies The Company applies the same accounting policies as the Group in note 1 of the consolidated financial information except for the following: Basis of preparation The principal accounting policies adopted in the preparation of the financial statements are set out below. These financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards (IFRS), International Accounting Standards (IAS) and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union in accordance with the Companies Act 2006. Foreign currencies The Company’s functional currency is Pound Sterling. The presentational currency is US Dollars. Transactions entered into by blur Group plc in a currency other than the functional currency of the Company are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognized immediately in the income statement. Exchange differences arising on the translation of the financial statements into the presentational currency of the entity are recognized in other comprehensive income. Share capital Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability. The Company only has one class of ordinary shares, denominated as £0.01 ordinary shares. Investments in subsidiaries The Company’s investment in its subsidiaries is carried at cost less provision for any impairment.


Notes to the Company Financial Information cont’d 4. Critical accounting estimates and judgements The Company makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including the expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year are discussed below. Investments Carrying value of investments in subsidiaries is judged to be at cost plus the value of the share-based payments, as assessed by the Black-Scholes calculation, less any provision for impairment. The carrying value is tested for impairment when there is an indication that the value of the investment might be impaired. When carrying out impairment tests these are based upon future cash flow forecasts and these forecasts require management judgement. The Board reviews the subsidiary forecasts to determine whether any provision impairment is required and where the forecasts indicate future profitability, no impairment provision is made. The Board has considered the investment and the receivable due from subsidiaries and concludes that the main asset of the Company is blur Limited. The market capitalization of the Group at 31 December 2015 was $12.2m of which $6.8m is represented by the Company’s cash balance. The investment in and receivable due from blur Limited has therefore been provided against leaving a net balance of $5.9m. Share-based payments The fair value of the share options utilizing the Black-Scholes valuation model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations.


Notes to the Company Financial Information cont’d 5. Financial instruments – Risk Management Capital management The Company’s capital is made up of share capital, share premium, Foreign Exchange Reserve, Merger Reserve and retained losses totaling US$13,378,717 at 31 December 2015. The Company’s objectives when maintaining capital are: • To safeguard the entity’s ability to continue as a going concern, so that it can continue to provide

returns for shareholders and benefits for other stakeholders; and • To provide an adequate return to shareholders by pricing products and services commensurately

with the level of risk. The capital structure of the Company consists of shareholders’ equity as set out in the statement of changes in equity. All working capital requirements are financed from existing cash resources. Principal financial instruments The principal financial instruments used by the Company, from which financial instrument risk arises, are as follows: • Trade and other receivables. • Cash and cash equivalents. • Trade and other payables.

To the extent financial instruments are not carried at fair value in the Company statement of financial position, book value approximates to fair value as at 31 December 2015. Trade and other receivables are initially measured at fair value and subsequently at amortized cost. Book values and expected cash flows are reviewed by the Board. Trade and other payables are measured at book value. Cash and cash equivalents Cash and cash equivalents comprise balances on bank accounts, cash in transit and cash floats held in the business. Finance charges are accounted for on an accruals basis and charged to the statement of comprehensive income when payable. Cash and cash equivalents are held in sterling and placed on deposit in UK banks. 2015 2014 Financial assets US$ US$ Cash and cash equivalents 6,804,438 17,148,407 Other receivables 5,136,662 18,915,482 11,941,100 36,063,889

2015

2014 Financial liabilities US$ US$ Trade payables 43,954 21,735 Accruals 3,308 24,337 Derivative financial liabilities - forward currency contract - 136,018 47,262 182,090


Notes to the Company Financial Information cont’d 6. Investments in subsidiary

Equity interest in subsidiaries

US$ Cost At 1 January 2015 1,074,046

Investment in 100% owned subsidiary 410,833

At 31 December 2015 1,484,879 The investment in subsidiary is recognized at the carrying amount of blur Group plc’s share of the equity items shown in the separate financial statements of blur Ltd at the date of investment. However, no investment has been recognized as the subsidiary is in a net liability position. The above investment of $1,484,879 relates to the share-based payment reserve. The share-based payment reserve relates to share options issued to blur Limited's staff. As the shares under option pertain to blur Group plc any expense in the year is recognized as an investment in the subsidiary. 7. Trade and other receivables

2015

2014 US$ US$ Amounts falling due within one year VAT receivable 293 9,412 Other debtors - 12,167 Prepayments 2,832 34,375 Amounts owed by subsidiary undertakings 5,133,537 18,859,528 5,136,662 18,915,482 8. Trade and other payables 2015 2014 US$ US$ Amounts falling due within one year Trade payables 43,954 21,735 Accruals 3,308 24,337 Derivative financial liabilities - forward currency contract - 136,018 47,262 182,090


Notes to the Company Financial Information cont’d 9. Share capital

2015 2014 US$ US$ Share capital issued and fully paid At 1 January 769,179 475,845 Issued in the year - 293,334 At 31 December 769,179 769,179 Number of £0.01 ordinary shares in issue at period end 47,092,851 47,092,851 Ordinary shares carry the right to one vote per share at general meetings of the Company and the rights to share in any distribution of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up. The Group has not issued any partly paid shares nor any convertible securities, exchangeable securities or securities with warrants. The Group does not hold any treasury shares. The shares are denominated in Pounds Sterling and translated at the historic rate. 10. Share-based payments The company operates the same options scheme as set out in note 20 of the notes to consolidated financial information. 11. Foreign exchange risk Foreign exchange risk arises when the Company enter into transactions denominated in a currency other than their functional currency. The Group’s policy including the Company is, where possible, to allow customers to settle liabilities denominated in the customer’s functional currency, being primarily US Dollar or Pound Sterling. In order to monitor the continuing effectiveness of this policy, the Board receives a monthly forecast, analyzed by the major currencies held by the Group, including the Company, of liabilities due for settlement and expected cash reserves.


Notes to the Company Financial Information cont’d 12. Reserves

The following describes the nature and purpose of each reserve within equity: Share premium The amount of capital contributed in excess of the nominal value of each

ordinary share

Foreign exchange reserve

Foreign exchange translation reserve resulting in the translation of the financial statements from the functional to the presentation currency

Retained losses All other net gains and losses and transactions with owners (e.g. dividends) not recognized elsewhere

Share-based payment reserve

Reserve for share-based payments on options granted during the period not yet exercised

Merger reserve Amount subscribed for share capital in excess of nominal value when shares are issued in exchange for at least a 90% interest in the shares of another company.

13. Related party transactions At the reporting date the following related party loan balances were

2015 2014 2015 2014

US$ US$ US$ US$

blur Ltd blur Inc.

At 1 January

18,638,894 9,149,759 220,634 170,634

Provision for Impairment (22,462,158) - - -

Loans made in the year 9,251,733 9,964,161 483,390 58,859

FX movement (987,269) (475,026) (11,687) (8,859)

At 31 December

4,441,200 18,638,894 692,337 220,634

During the period a provision for impairment was made against the loan to blur Ltd (per note 4). 14. Leases The Company has no operating lease commitments. 15. Events after the reporting date There are no disclosable events following the reporting date. 16. Control There is no ultimate controlling party.


Company Information Directors and Officers

Philip Letts - Chairman and Chief Executive Officer Tim Allen – Chief Financial Officer David Sherriff – Vice Chairman and Lead Independent Director Kara Cardinale - Chief Community Officer Richard Bourne-Arton - Non-Executive Director Roger de Peyrecave – Non-Executive Director Robert Wirszycz – Non-Executive Director Barbara Joyce Spurrier – Company Secretary

Office Locations United Kingdom Global HQ Eagle House Exeter Science Park Babbage Way Exeter EX5 2FN Tel: +44 (0) 800 756 1037 United States 3300 Oak Lawn Avenue Studio 430 Dallas, Texas 75219 Tel: +1 (866) 792 8727 Advisers Nomad and broker N+1 Singer One Bartholomew Lane London EC2N 2AX, UK +44 (0) 20 7496 3000 Solicitors Taylor Wessing 5 New Street Square London EC4A 3TW, UK +44 (0) 20 7300 7000

Auditors KPMG LLP 3 Longbridge Road Plymouth PL6 8LT +44 (0) 1752 632100 Registrars Computershare The Pavillions Bridgwater Road Bristol BS13 8AE, UK +44 (0) 870 702 0003

blur group plc - amazon s3 · 2018. 1. 6. · blur group plc annual report and accounts for the...

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