Half Yearly Report

Optimal Payments Plc

Interim Results for the six months ended 30 June 2013

Exceptional first half results. Investing for future growth

Optimal Payments Plc (LSE: OPAY) ("Optimal Payments", the "Group" or the "Company"), a leading online payments provider, today announces its results for the six months ended 30 June 2013.

Highlights

· Material increases in revenue and profitability:

o EBITDA(1) up 126% to $25.3m (H1 2012: $11.2m).

o Revenues up 50% to $118.4m (H1 2012: $78.9m).

o Net Profit $14.4m (H1 2012: loss of $0.8m).

· Significant turnaround in NETELLER Stored Value ("SV") business:

o Revenues up 74% to $28.3m (H1 2012: $16.2m) as initiatives started in 2012 continue to deliver benefits.

o Gross margin percentage improved to 83% (H1 2012: 77%).

· Strong organic growth from NETBANX Straight Through Processing ("STP") business:

o Revenues up 45% to $89.9m (H1 2012: $61.9m) with continued strong growth in Asia.

o Gross margin percentage of 43% (H1 2012: 42%).

· Well positioned for regulated US gaming opportunities building on partnerships announced with Bally Technologies, Caesars Interactive and Vantiv. More US states considering licensing following recent New Jersey, Delaware and Nevada regulation and public announcements.

· Balance sheet strengthened with total Group cash (net of merchant cash) of $70.8m (31 December 2012: $57.9m).

o Group loans reduced to $9.2m at 30 June 2013 (31 December 2012: $25.8m).

o Free cash at 30 June 2013 of approximately $23.6m(3) (31 December 2012: $15.0m)

· Increasing investment in research and development focusing on new mobile payment functionality, product enhancements, regional growth, and an enhanced US online gaming payments solution.

(1) EBITDA is defined as results of operating activities before depreciation and amortisation and exceptional non-recurring items which are defined as items of income and expense of such size, nature or incidence, that in the view of management their disclosure is relevant to explain the performance of the Group.

(2) Tax charge in the 2012 period relates to expected reassessment of 2004/5 Canadian taxes following a review commenced in 2005 by the Canadian Revenue Agency. The Board has made a full provision for the amount it believes it is likely to be required to pay in respect of withholding taxes and interest.

(3) Free cash is 'own' cash less cash tied up in running the business as working capital. This includes Restricted NETELLER Member and Merchant cash, security deposits with certain acquiring banks and cash in transit. This totals approximately $60.4m at 30 June 2013, leaving free cash of approximately $23.6m at that date (31 December 2012: $15.0m). Contingent consideration of $5.7m relating to the acquisition of OP Inc. was repaid with cash in the 6 months to 30 June 2013.

Commenting on today's results announcement, Joel Leonoff, President & CEO, said:

"We are delighted with our exceptional half year results and remain very optimistic about the future. We are particularly encouraged by the performance of the NETELLER e-wallet with monthly revenues almost doubling from the first half of 2012. Our current focus and investment reflects our excitement about leveraging key opportunities including enhancing our mobile payments functionality, developing new innovative products, continuing with our ongoing geographic expansion and fortifying our payment-related services for the emerging regulated US gaming market. We will continue to assess M&A opportunities that provide a strategic fit at the right valuation to further accelerate our growth. These initiatives also support our continuing efforts to diversify the business and reduce existing customer concentration."

For further information contact:

Optimal Payments Plc

Joel Leonoff President & CEO

Keith Butcher CFO

Jessica Stalley Head of Investor Relations + 44 (0) 207 182 1707

Email:  [email protected]

Citigate Dewe Rogerson + 44 (0) 207 638 9571

Caroline Merrell / Nicola Swift / Priscilla Garcia

Canaccord Genuity + 44 (0) 207 523 8000

Simon Bridges / Cameron Duncan

Analyst meeting and further information

Optimal Payments will hold a briefing for invited UK based analysts at the offices of Citigate Dewe Rogerson, 3 London Wall Buildings, London, EC2M 5SY, at 9.30 am today. From this time, copies of the analyst presentation will be available on the Company's website, www.optimalpayments.com.

* * * * *

About Optimal Payments Plc

Optimal Payments plc is a global provider of online payment solutions. Trusted by businesses and consumers in over 200 countries to move and manage billions of dollars each year, merchants use the NETBANX® processing service to simplify how they accept and settle credit card, direct-from-bank, and cash payments; and the NETELLER® payment service to increase margins, capture new customers and increase their lifetime value. Being an independent provider has allowed the company to support tens-of-thousands of merchants around the globe across a wide range of industries. Optimal Payments Plc is quoted on the London Stock Exchange's AIM market, with a ticker symbol of OPAY. Subsidiary company Optimal Payments Ltd is authorised and regulated as an e-money issuer by the UK's Financial Conduct Authority (FRN: 900015).

For more information on Optimal Payments visit www.optimalpayments.com or subscribe at www.optimalpayments.com/feed or follow us on Twitter @optimalpayments.

* * * * *

CEO'S REVIEW

Introduction

The first half of 2013 saw a continuation of the strong revenue growth we experienced in 2012, which resulted in significantly improved EBITDA of $25.3m, up 126% from $11.2m in the equivalent period in 2012. Revenues for the period are up 50% to $118.4m when compared to the same period in 2012. Strength in all areas, including the impressive turnaround in the NETELLER e-wallet business as well as continued growth in Asia, reflects the efficacy of our technology based offering and the continued expansion of online and mobile payments worldwide.

Increased revenues from existing merchants are evident in both the NETELLER and NETBANX business lines; one merchant continues to represent a significant portion of the revenues in both. While we continue to build and strengthen this customer relationship through a highly personalised service, we are also focused on mitigating the customer concentration risk with initiatives to expand the rest of the business.

Improved business performance, coupled with the rapidly evolving and expanding payments market, presents exciting opportunities to underpin further growth of our Company. A good example of our efforts in this regard is that mobile and smart device payments now represent 30% of our NETBANX transactions. We continue to expand and invest in selected, high potential opportunities which we believe will fortify our business and position it for further growth in the future. We continue to assess M&A opportunities that provide a strategic fit at the right valuation to further accelerate growth. This strategy is supported by a transformed business that is now strongly cash generative and effectively debt free as all of the vendor loans relating to the acquisition of OP Inc. in 2011 have been repaid or converted into equity and we expect the remaining shareholder loans totalling $9.2m to convert into equity in the next six months. M&A activity in the online payments market continues as evidenced by the recent high value acquisitions of Skrill by CVC and of Ogone by Ingenico SA.

The regulatory environment has continued to evolve during 2013 and, while this did not materially impact our revenues, some corresponding uncertainty persists.

Financial summary

Increased revenues and a relatively low cost base resulted in exceptional financial performance, with EBITDA up by 126% to $25.3m (H1 2012: $11.2m).

Revenues increased by 50% to $118.4m (H1 2012: $78.9m) with NETELLER continuing the impressive growth that started in the second half of 2012. Similarly, NETBANX volumes and revenues showed healthy growth levels, especially in Asia.

The overall gross margin percentage improved to 53% (2012: 50%) as a result of minimising costs and introducing higher margin payment options in the NETELLER service.

Fixed costs were up $7.1m on 2012, mainly in salaries and NETELLER marketing costs. The majority of the increase in salaries relates to performance-based LTIP expense that was not present in H1 2012 and we added staff in our call centre and risk operations to handle the higher number of NETELLER member applications. The NETELLER loyalty programme and cashback costs included in 'Marketing and Promotions' were also up, by $2.9m, to support an increase of $12.1m (75%) in NETELLER revenues.

Cash, net of merchant cash, was up $12.9m at $70.8m (31 December 2012: $57.9m) with free cash net of working capital requirements of approximately $23.6m (31 December 2012: $15.0m). Included within these numbers was the repayment of $5.7m of vendor loans (contingent consideration) which will not recur. Robust cash generation from operations is expected to continue, supporting increased investment in new opportunities and R&D to underpin sustained future growth.

Group convertible loans (relating to the acquisition of OP Inc. in 2011) materially reduced from $25.8mat year end to $9.2m at 30 June 2013. Vendor loans of $16.9m at year end have now been cleared in full and only $9.2m of convertible shareholder loans remain, which are repayable by 1 February 2014. These loans are convertible at any time before the repayment date into the Company's shares at a conversion price of 66.248p, so it is expected that this conversion will occur, rendering the company debt free.

NETELLER Stored Value ("SV")

The Group's NETELLER SV business (comprising the NETELLER e-wallet and Net+ prepaid card) continued the strong growth that started in July 2012, which helped drive H1 revenues to $28.3m (H1 2012: $16.2m), a 74% improvement. Key management hires, an improved member loyalty program targeted at higher spending VIPs, a strengthened sales team, an enhanced affiliate program, and numerous changes to deposit options for members have contributed to increased market share, primarily in the European gaming market where NETELLER remains one of the two major e-wallet players. Key lead indicators such as number of member signups and member conversion rates continue to increase.

Gross margins improved from the second half of 2012 due to changes in pricing for member deposits and negotiated improved supplier rates.

NETELLER SV costs increased in H1 to support the 74% jump in revenues, mainly VIP loyalty programme costs and increased call centre and risk headcount. We expect to add further headcount going forward to support ongoing anticipated growth in this sector.

Since achieving Principal Membership issuer status with MasterCard in 2012, we have continued to grow our award winning Net+ programme with more than 530,000 accounts and $30 million processed in annual transaction value. We have also invested in creating the infrastructure to allow us to grow the Prepaid Card business beyond Net+ throughout the EEA through our white label prepaid card programme initiatives.

NETBANX Straight Through Processing ("STP")

The Group's NETBANX STP business delivered robust organic growth, particularly in Asia, with first half revenues up $28.0m to $89.9m (H1 2012: $61.9m). The growth was due to increasing demand from existing customers, including our largest merchant, as well as from new customers won during the first half.

Customer retention remains high as NETBANX provides a wide range of payment and fraud prevention services through a single customer integration as well as access to more than a dozen acquiring banks worldwide. This business model, together with investment in an expanded UK sales team, underpins our confidence that NETBANX can continue to win business in all territories. 

Gross margin in NETBANX improved slightly to 43% in the first half (2012: 42%) with the bulk of the direct processing costs being fees to acquiring banks and other intermediate processors. The underlying platform is scalable, and can accommodate a large number of new customers. We plan to continue investing in our NETBANX STP platform, to deliver ongoing enhancements during the second half of 2013 to provide improved functionality and stability.

US gaming opportunities

The full year results announcement in March provided an update on the Company's positioning for the anticipated regulated market for online gambling in the US and we announced agreements with Caesars Interactive and Vantiv.

In February 2013, New Jersey legalised online poker and casino games following similar legalisation developments in Nevada and Delaware. Other US states including California and Pensylvania appear to be moving in the same direction. In May we announced a deal with Bally Technologies and we are in discussions with other leading land-based gaming operators in the US regarding possible partnerships involving online gaming. We are excited about the opportunities for future growth in this area as the US market opens on a state by state basis and we will be investing significant resources in the second half of 2013 and into 2014 to establish US offices and develop US-based payments infrastructure.

The exact timing and major revenue impact of these developments remain uncertain and we are not expecting material related revenues in 2013. However, the NETELLER brand, which is a dominant player in the regulated European markets and a widely recognised brand in the US, combined with our leadership experience in straight through processing and risk management, positions us well to gain a substantial position in this emerging regulated US market.

Investment

In order to sustain the Company's growth trend, we plan to continue investing in the business to leverage excellent opportunities, such as regulated US online gaming, mobile payment technologies, card issuing and payment acquiring. Seizing some of these opportunities requires investment now to deliver longer term benefits, in particular transaction services for the emerging US online gaming market. Consequently, we will see an increase in development resources and costs in the second half of 2013 and into 2014.

Offices and staff

The Company's significant growth has resulted in increased headcount and consequently changes to our regional offices. In April, we opened a new office in Sofia, Bulgaria as an additional low cost call centre for the NETELLER business to cope with the increase in call volumes (up 60% from mid-2012) related directly to increased member signups.

We have also moved our Calgary operations to new offices and took additional space in our existing London and Montreal offices. We will also be relocating our Cambridge office to larger premises at the end of the year.

As of 31 July the Company had 450 staff in seven office locations.

Recognition

The Group continues to be recognised as a leader in payment solutions through winning a number of awards.

In January 2013, we won "Corporate Services Supplier of the Year" at the International Gaming Awards, recognising our continuing contribution as a provider of outsourced technology solutions to the online gaming industry. At the iGaming Business Affiliate Awards in February, NETELLER won "Best Financial Affiliate Manager" and at the eGaming Review in June, Optimal Payments won Regional Payments Solution of the Year. At the Prepaid 365 awards in June, our Net+ card won Best General Spend Prepaid Card, Best Free Prepaid Card, Best Prepaid Card and Best Gaming Prepaid Card.

Our commercial agreement with Lotus as an Official Partner of the Lotus F1 Team continues to provide strong corporate branding opportunities as well as high level introductions to the International business community.

Current trading and outlook

Exceptional revenue growth and managed cost control resulted in significant increases in EBITDA in the first half of 2013. Trading since 30 June 2013 continues to be robust. We are particularly encouraged by the performance of the NETELLER e-wallet and we are confident that we can continue this improving trend.

Our current focus and investment reflects our excitement about leveraging key opportunities including payment-related services related to mobile payments and the emerging regulated US gaming market. We will continue to assess M&A opportunities that provide a strategic fit at the right valuation to further accelerate growth and diversify our business.

Joel Leonoff

President & CEO

16 September 2013

Disclaimer

Certain statements made in this announcement are forward-looking statements. These forward-looking statements are not historical facts but rather are based on the Company's current expectations, estimates and projections about its industry, its beliefs and assumptions. Words such as 'anticipates,' 'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors, some of which are beyond the Company's control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The Company cautions shareholders and prospective shareholders not to place undue reliance on these forward-looking statements, which reflect the view of the Company only as of the date of this announcement. The forward-looking statements made in this announcement relate only to events as of the date on which the statements are made. The Company will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date of this announcement except as required by law or by any appropriate regulatory authority.

Accompanying notes form part of these condensed interim consolidated financial statements

Accompanying notes form part of these condensed interim consolidated financial statements

Accompanying notes form part of these condensed interim consolidated financial statements

Accompanying notes form part of these condensed interim consolidated financial statements

1. Basis of presentation

The condensed interim consolidated financial statements have been prepared on a going concern basis. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.

The principal operating currency of the Group is US dollars and accordingly the financial statements have been prepared in US dollars. The interim results for the period ended 30 June 2013 are unaudited and do not constitute statutory accounts within the meaning of the Companies Acts 1931 to 2004. The statutory accounts of Optimal Payments Plc for the year ended 31 December 2012 contain an unqualified audit report. Copies can be obtained from the Registered Office of the Company, Audax House, Finch Road, Douglas, Isle of Man, IM1 2PT.

2. Statement of compliance

The condensed interim consolidated financial statements have been prepared in accordance with applicable Isle of Man law and with IAS 34 "Interim Financial Reporting". They do not include all of the information required for the full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2012. The accounting policies and methods of computation used in the condensed interim consolidated financial statements are consistent with the most recent annual financial statements. These condensed interim consolidated financial statements were approved by the Board of Directors on 13 September 2013.

3. Restricted Neteller Merchant Cash

The Group maintains bank accounts with the Group's principal bankers which are segregated from operating funds and which contain funds held on behalf of Neteller Merchants, representing pooled Merchant funds. Balances in the segregated accounts are maintained at a sufficient level to fully offset amounts owing to the Group's Neteller Merchants. A legal right of offset exists between the balances owing to the Merchants and the cash balances segregated in the client accounts. As such, only the net balance of surplus cash is disclosed on the Statement of Financial Position as Restricted Neteller Merchant Cash.

At 30 June 2013, the Group had the following balances:

4. Restricted Neteller Member Cash

In compliance with the Financial Services Authority (FSA) rules and regulations, the Group holds Qualifying Liquid Assets at least equal to the amounts owing to Neteller Members. These amounts are maintained in accounts which are segregated from operating funds.

All Qualifying Liquid assets are held in Optimal Payments Ltd., which is an FSA regulated entity.

The Group had the following balances:

5. Segmented Reporting

The Group has two segments as disclosed below. For each of the segments, the Group's CEO reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the Group's reportable segments.

NETELLER: fees are generated on transactions between Members and Merchants using the NETELLER e-Wallet and Net+ prepaid cards.

NETBANX: fees are generated through the NETBANX and NETBANX Asia straight-through processing platforms where customers send money directly to Merchants.

Information regarding the results of each reportable segment is included below.

Segmented reporting for the six months ended 30 June 2013:

Segmented reporting for the six months ended 30 June 2012:

Processing costs and bad debts are the only two costs which vary directly with revenue, and accordingly have been shown separately as variable costs. For the six months ended 30 June 2013, variable costs for NETELLER and NETBANX were 17% (2012: 23%) and 57% (2012: 58%) of revenue respectively.

Net assets have not been presented in the segmented information since significant assets and resources throughout the Group serve both reporting segments and would not reasonably be allocable between the two.

Major Merchants

The Group has one Merchant who represented 39% of total fee revenue for the six months ended 30 June 2013 (2012: 33%) across all reportable segments and geographies. The majority of this revenue comes from Asia.

6. Property, Plant & Equipment

There were $4,198,201 of additions to property, plant & equipment for the six months ended 30 June 2013 (2012: $1,063,960) related to the expansion of the Group's facilities and data processing equipment. A loss of $445,696 was realized in the period (2012: $4,995) relating to the disposal of obsolete data processing equipment and other property and equipment.

7. Intangible Assets

$1,689,190 was incurred on the ongoing development of the Group's online payment processing platforms (2012: $1,994,312).

The Board have determined that there has not been any indication of impairment in the six month period ended 30 June 2013.

8. Trade and Other Payables

The Group had the following balances:

NetBanx Merchant processing liabilities arise from the operations of the NetBanx division totaling $60,434,400 (31 December 2012: $37,491,317). In addition, included in cash and cash equivalents is an equivalent transient cash balance that relates to Merchant transactions processed via the straight-through processing operations. The operations do not fall within the EU definition of "e-money" nor does a legal right of offset exist between this cash and the corresponding NetBanx Merchant liabilities.

9. Contingent Consideration

During the period, following the publication of the Group's annual results for the financial year ended 31 December 2012, the financial conditions relating to the Group's contingent consideration payable to the Vendors were satisfied and the liability extinguished in full. The details of the extinguishment of the debt are as follows:

i) On completion of the 2011 asset acquisition of the Optimal Payments business, the Group entered into a loan agreement with the selling shareholders ('Vendors') for $20.0 million in cash plus accrued interest which was payable on or about April 2013, subject to any deductions for price adjustments or indemnity claims under the acquisition agreement (the "Loan").

On completion, the Group also entered into a warrant agreement with the Vendors pursuant to which the Vendors had the right to convert the Loan into ordinary shares during prescribed exercise periods which ended on or around April 2013 at a premium of 6% to the issue price of the Consideration Shares of 59.15 pence up to a total subscription price of US$ 10.0 million plus interest, and at a premium of 12% to the issue price of the Consideration Shares of 59.15 pence up to a total subscription price of a further US$ 10.0 million plus interest. The rights under the warrant agreement were only able to be exercised, however, to the extent that the amount of the applicable subscription price had not been reduced due to the failure to meet certain performance conditions or due to indemnity claims or other adjustments under the acquisition agreement.

On 28 February 2013, one of the Vendors, 897032 Alberta Inc., representing 33.78% of the Loan, gave notice to the Group that it wished to convert its portion of the Loan (amounting to $7,710,661 including accrued interest) into Ordinary Shares pursuant to the warrant agreement. As a result, on February 28, 2013 the Company issued 5,585,793 Ordinary Shares to 897032 Alberta Inc. representing 75% of its respective interest in the Loan. In addition, $1,927,665 in cash plus accrued interest was paid to satisfy the total Loan owing to 897032 Alberta Inc.

On 25 April 2013, certain of the Vendors, 7761309 Canada Inc. and 9212-2670 Quebec Inc., representing 9.97% and 12.5% of the Loan respectively, gave notice to the Group that they wished to convert their portion of the Loan (amounting to $5,137,555 including accrued interest) into Ordinary Shares pursuant to the warrant agreement. As a result, on 25 April 2013 the Company issued 1,743,584 Ordinary Shares to 7761309 Canada Inc. and 2,186,038 Ordinary Shares to 9212-2670 Quebec Inc., totalling 3,929,622 Ordinary Shares, representing 75% of their respective interests in the Loan.

Following the conversion on 25 April 2013, $3,796,539 in cash plus accrued interest was paid on 25 April 2013 to satisfy the remaing Loan owing to the remainder of the Vendors.

ii) On 27 March 2013, the balance of $1,800,000 payable relating to the acquisition of certain merchant contracts from 9185-2780 Quebec Inc., a company owned by a related party, Martin Leroux, a shareholder of the Group, was settled via the issuance of 1,893,207 shares based on an exercise price of £0.626990 per share. The amount payable had been included in Contingent Consideration.

10. Restructuring costs

The Group incurred restructuring costs relating the reorganisation of its cost structure. Severance was paid to employees as a result of operational changes to the Group's NETELLER Stored Value business in order to streamline operations and remain competitive in challenging markets. Additional restructuring costs were incurred to reorganise the business.

The Group incurred the following restructuring costs:

11. Share-based payments

The Company's share option plan was adopted pursuant to a resolution passed on 7 April 2004 and amended by the Board on 15 September 2008. The 2008 amendment included the addition of a new 'approved' plan for UK based employees. Under the 'approved' and 'unapproved' plans, the Board of Directors of the Company may grant share options to eligible employees including directors of Group companies to subscribe for ordinary shares of the Company.

No consideration is payable on the grant of an option. Options may generally be exercised to the extent that they have vested. Options vest according to the relevant schedule over the grant period following the date of grant. The exercise price is determined by the Board of Directors of the Company, and shall not be less than the average quoted market price of the Company shares on the three days prior to the date of grant. Subject to the discretion of the Board share options are forfeited if the employee leaves the Group before the options vest. The ESOS options granted in December 2011 vest on the third anniversary of the date of grant and lapse a further six months after vesting.

Changes in the number of ESOS options outstanding are detailed in the table below:

Equity-settled share option plan

The ESOS options outstanding at the end of the period had a weighted average remaining contractual life of 2.74 years (31 December 2012: 2.44 years).

The inputs into the model are as follows:

Expected volatility was determined by calculating the historical volatility of the Company's share price from the time of issue to the date of grant. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

Long Term Incentive Plan

The Company adopted the Long Term Incentive Plan ("LTIP") which took effect from 1 January 2010. These LTIP options vest in one tranche based on future performance related to EBITDA targets determined each year and subject to continued employment over the remaining vesting period. Vested options lapse on the tenth anniversary of the date of grant.

Changes in the number of LTIP options outstanding are detailed in the table below:

The LTIP options outstanding at the end of the period had an exercise price of £0.0001 and a weighted average remaining contractual life of 8.7 years (31 December 2012: 8.7 years).

The weighted average share price of LTIP options exercised in the six month period ended 30 June 2013 based on the date of exercise was £1.56 (31 December 2012: £0.67).

Due to the nominal exercise price of the LTIP options and that option holders are entitled to receive a benefit by reference to the value of dividends that would have been paid on vested shares during the vesting period, the options granted under the 2013 LTIPs were valued based on the share price at the date of grant (£1.19 per share) (2012: £0.62 per share).

For the six month ended 30 June 2013, the Group recognised total expenses of $2,196,805 (2012: $109,176) related to the equity-settled share-based payments transactions.

12. EBITDA

EBITDA is defined as results of operating activities before depreciation and amortisation and exceptional non-recurring items which are defined as items of income and expense of such size, nature or incidence, that in the view of management their disclosure is relevant to explain the performance of the Group for the period.

EBITDA is not a financial measure calculated in accordance with IFRS. The presentation on these financial measures may not be comparable to similarly titled measures reported by other companies due to the differences in the ways the measures are calculated.

13. Share Capital

Holders of the ordinary shares are entitled to receive dividends and other distributions, to attend and vote at any general meeting, and to participate in all returns of capital on winding up or otherwise.

Holders of the deferred shares are not entitled to vote at any annual general meeting of the Company and are only entitled to receive the amount paid up on the shares after the holders of the ordinary shares have received the sum of £1,000,000 for each ordinary share held by them and shall have no other right to participate in assets of the Company.

14. Other expenses

Management includes certain balances in other expenses as identified below: 

15. Income Taxes

In the six month period ended 30 June 2012, a provision for taxation of approximately $2.5m was made in relation to Canadian withholding taxes which are deemed to have arisen on the relocation of assets to the Isle of Man from Canada in the 2004 and 2005 taxation years. Following a seven year investigation, the Canadian Revenue Agency (CRA) claimed that additional withholding taxes are payable by the Group. A total liability of approximately $4,800,000 remains recognized in the accounts as at 30 June 2013 which management estimates to be the maximum amount the Group is likely to be required to pay in respect of such withholding taxes and interest. No additional provision for taxation with respect to this matter has been made in the current period.