Half Yearly Report

12 September 2011

InternetQ plc

('InternetQ', the 'Group' or the 'Company')

unaudited RESULTS FOR THE six months ended 30 June 2011.

InternetQ, one of the leading providers of mobile marketing and digital entertainment solutions for mobile network operators and brands, is pleased to report interim results for the six months ended 30 June 2011.

Financial Highlights

·; Revenue : €21.8 million (€18.8 million in H1-2010)

·; EBITDA : €2.9 million (€2.6 million in H1-2010)

·; Operating profit : €1.6 million (€1.7 million)

·; Profit after tax: €1.4 million (€1 million in H1-2010)

·; Earnings per share: €0.05

Operational Highlights

·; Continuous revenue growth for mobile marketing by 23% to €18.4 million

·; Penetration of new territories in Asia and Africa

·; Acquisition of i-POP, which gives the Company a leading position in Southeast Asia

·; 62% growth to 450K AKAZOO subscribers during this first half 2011

Konstantinos Korletis, Chief Executive Officer of InternetQ commented:

"InternetQ has continued to grow uninterrupted and remains confident of its strategy to tap into new high growth markets of Asia, CIS and Africa, despite persistent unrest across global markets and the economic turmoil that grows strongly in Europe and the US. At the same time, we have fortified our position by raising more cash, which is proving increasingly valuable during this period of high volatility for the capital markets.

We expect to continue growing strong during this second half, particularly in Turkey, Russia and Southeast Asia, where we most recently acquired i-POP, a leading mobile marketer and aggregator based in Singapore. Expanding our footprint further, attracting new talent and keeping abreast with technology developments remain at the center of our efforts."

For further details

Chief Executive Officers Review

Introduction

The first six months of 2011 have seen another period of operational improvement for the Group. Our business continued to grow organically in new territories, including Africa and Asia, while in June we completed the acquisition of i-POP, our first corporate transaction since IPO, closely followed by a successful £12 million placing which settled in July.

Mobile marketing continues to experience global growth, therefore our business is being continually challenged to adapt and respond to these changes. Our ability to meet these demands has resulted in another strong performance, reflected in revenue growth and resilient profit margins. Revenues for the period increased 16% to €21.8 million, EBITDA increased 11.5% to €2.9 million and profits after tax grew by 43% to €1.4 million.

Strategic development

InternetQ intends to continue developing its presence in rapidly growing markets. To match this opportunity, the Group is aligned to achieving the following near-term strategic objectives:

·; Provide additional working capital to finance business development in i-POP, our newly acquired South East Asian operation;

·; Support an ongoing IT and systems overhaul that is expected to be completed in the first quarter of 2012;

·; Actively pursue new acquisition opportunities in growth markets of Latin America and Asia;

·; Successfully launch the new version (2.0) of AKAZOO, our mobile content and social networking platform that drives our subscription business.

Operational update

Our largest traditional markets, Poland and Turkey, continue to perform strongly with InternetQ maintaining its clear market leading position in both. Successful mobile marketing executed in Poland include a cooperation with Orange for the promotion of the European Football Championship of 2012, a mega mobile marketing campaign involving Audi and Orange, the commencement of a promising business cooperation with Bauer Media which is going to use our InternetQ platform to launch interactive services for its readers. Furthermore, we executed the first ever mobile SMS lottery on behalf of the Polish National Lottery Organization. In Turkey, InternetQ has been chosen as a golden partner of TURKCELL and we are currently running multiple mobile marketing initiatives with the network operator. Moreover, we managed to penetrate new markets in sub-Sahara Africa and Asia which have yielded significant business for our group and are expected to grow further in the future.

The acquisition of i-POP has accelerated our expansion into Southeast Asia and we will continue to evaluate a number of opportunities that could further reinforce our position in this rapidly growing territory.

During this first half of 2011, InternetQ continued the successful expansion of AKAZOO, our social content networking service, in key markets like Russia and Spain. In fact, on the 10th of September, we launched the latest version of AKAZOO (2.0) simultaneously in Greece, Poland, Turkey, South Africa, Germany, Austria, Spain and Russia. The full roll-out of this new version includes a series of service releases intended to introduce a more exciting user experience, a new look for the brand, as well as numerous innovative social and content features to help drive monetization on our growing user base and diversification of the service's revenue streams. The roll-out will be completed early in 2012.

Acquisition of i-POP

In June 2011, we announced the acquisition of i-POP, a Singapore based mobile and media services business, which was funded entirely by the issuance of new InternetQ shares. i-POP provides direct connectivity, mobile marketing and innovative media and enterprise solutions to a wide range of clients ranging from mobile network operators, consumer goods companies, advertising agencies and traditional media assets. The company is connected with 69 mobile network operators in Southeast Asia, covering more than 500 million subscribers in 19 countries. Some of its key partners include ESPN, MTV, Freemantle Media, Endemol, Dada Mobile and Weber Shandwick and we are closely working with local management to expand further the client base.

The integration of i-POP is underway and we have already started cross-selling the Group's mobile marketing services to mobile network operators in the region. So far, the results are promising and the integration process is progressing smoothly. We consider that the acquisition will become profit enhancing for the Group as of next year.

We firmly believe that Southeast Asia remains a key market for InternetQ and that this transaction will significantly accelerate our business development in the wider Asian continent.

Placing of New Shares

In June, we announced the successful placing of 4,363,636 new ordinary shares at a price of 275 pence per share, raising gross proceeds of approximately £12 million (€13.6 million) in early July. The proceeds will be used to fund future organic growth and acquisitions.

The placing attracted strong institutional demand predominately from new shareholders from the UK and continental Europe.

People

As a company, InternetQ values and supports the development of our people and their skills. To that end, we have introduced a share incentive plan for senior management and started building up the human resource function in order to better manage the development of our key staff, attract new talent and manage our rapidly growing presence around the world.

In order to mirror our growing business needs and to drive our ambitious agenda forward, we have attracted adept professionals in instrumental operating and supporting functions (marketing, creative, business development, technology and finance). We will continue to build great teams at all levels of expertise, optimizing ways of working, skills development, cultural and operational integration, as well as efficient organizational development.

Outlook

Demand for our services continues to gather momentum from both existing and new customers. Our new business pipeline remains strong, driven by the global demand for mobile value-added services, the strength of our platform and our successful track record. Likewise, our plans to revamp AKAZOO and roll it out in numerous countries around the world are coming to fruition and we anticipate enjoying the fruits of our labour as early as next year.

Following the successful placing of new shares, InternetQ is well funded and well-positioned to take advantage of the different market opportunities. The acquisition of i-POP clearly demonstrates our ability to accelerate our geographic expansion, if the right opportunity presents itself.

The Board therefore believes that trading for the current year will remain in line with market expectations.

Interim Report for period ended 30 June 2011

Unaudited Consolidated Income Statement for the period ended 30 June 2011

(Amounts in Euro, except share information, per share data and unless otherwise stated)

*Certain amounts shown here do not correspond to the interim financial statements for the period ended 30 June 2010 and reflect adjustment made as detailed in Note 2.2

The accompanying notes are an integral part of the interim financial statements.

Unaudited Consolidated Statement of Comprehensive Income for the period ended 30 June 2011

(Amounts in Euro, except share information, per share data and unless otherwise stated)

The accompanying notes are an integral part of the interim financial statements.

Unaudited Consolidated Statement of Financial Position as at 30 June 2011

(Amounts in Euro, except share information, per share data and unless otherwise stated)

The accompanying notes are an integral part of the interim financial statements.

Unaudited Consolidated Statement of Changes in Equity for the period ended 30 June 2011

(Amounts in Euro, except share information, per share data and unless otherwise stated)

The accompanying notes are an integral part of the interim financial statements.

Unaudited Consolidated Cash Flow Statement for the period ended 30 June 2011

(Amounts in Euro, except share information, per share data and unless otherwise stated)

The accompanying notes are an integral part of the interim financial statements.

Notes to the Unaudited Interim Consolidated Financial Statements for the period ended 30 June 2011

(Amounts in Euro, except share information, per share data and unless otherwise stated)

1. CORPORATE INFORMATION

INTERNETQ PLC (hereinafter referred to as "INTERNETQ PLC" or the "Company"), is incorporated in England and Wales following the renaming of INTERNETQ LIMITED on 29 October 2010 (pursuant to a written resolution of the sole shareholder dated 28 October 2010) before the admission to the London Stock Exchange's AIM. The Company's registered office is located in United Dominions House, 51 Eastcheap, London EC3M 1JP United Kingdom and the Registered No. is 5512988.

INTERNETQ PLC and its subsidiaries (hereinafter the "Group") are mainly engaged in trading and development of software and related products and services used in wireless communication and telecommunication.

The activities of the Group are described in Note 4.

2.1 BASIS OF PREPARATION

(a) Basis of preparation and statement of compliance

The accompanying interim consolidated financial statements have been prepared under the historical cost convention except for investment properties and derivative financial instruments that have been measured at fair value. The financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The Directors have assessed the ability of the Company and the Group to continue operating as a going concern and believe that the preparation of these financial statements on the going concern basis is appropriate.

The preparation of interim financial statements, in accordance with IFRS as endorsed by the EU, requires the use of critical accounting estimates. It also requires management to exercise its judgment in the process of applying the accounting policies which have been adopted. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to financial statements are disclosed in Note 3.

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for year ended 31 December 2010.

Certain line items of the previous year financial statements were reclassified in order to conform to the current year's presentation.

2.2 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES

(a) Changes in accounting policies

Up until now, the Group recorded the turnover from the Akazoo business net of revenue share payments to third parties and network operators. As of 2011, the revenue recognition policy changes where as in cases that the Group acts as a principal supplier of mobile phone content, entertainment and other services, the Group records the revenues before the deduction of revenue share to network operators.

Changes have been applied retrospectively in accordance with IAS 8 Accounting policies, Changes in Accounting Estimates and Errors, resulting in the restatement of the prior period financial information.

As a result of the voluntary accounting policy change, the following adjustments were made to the interim financial statements:

·; For the period ended 30 June 2010:

Increase in Revenues: € 859,793

Ιncrease in cost of sales: € 859,793

·; For the period ended 30 June 2011:

Increase in Revenues: € 1,203,509

Ιncrease in cost of sales: € 1,203,509

The change in the accounting policy had no effect on retained earnings and on earnings per share as previously reported.

(b) New and amended standards and interpretations

The accounting policies adopted are consistent with those of the previous financial year except as follows:

The Group has adopted the following new and amended IFRS and IFRIC interpretations as of 1 January 2011. Their adoption has had no effect on the financial statements of the Group:

·; IAS 24 Related Party Transactions (Amendment)

·; IAS 32 Financial Instruments: Presentation (Amendment)

·; IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment)

·; Improvements to IFRSs (May 2008) All amendments issued are effective as at 31 December 2009, apart from IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

·; Improvements to IFRSs (issued May 2010)

·; IFRS 3 Business Combinations

·; IFRS 7 Financial Instruments

·; IAS 1 Presentation of Financial Statements

·; IAS 34 Interim Financial Statements

Other amendments resulting from Improvements to IFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the Group:

·; IFRS 3 Business Combinations

·; IAS 27 Consolidated and Separate Financial Statements

·; IFRIC 13 Customer Loyalty Programmes

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

3. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Group's consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

In the process of applying the Group's accounting policies, management has made the following judgments, key estimates and assumptions that may have a risk of causing a material adjustment and significant effect on the amounts recognised in the consolidated interim financial statements:

Internally generated software

Development Costs relating to internally generated software are capitalised in accordance with the accounting policy in Note 2.3. Initial capitalisation of costs is based on management's judgment that technological and economical feasibility is confirmed. At 30 June 2011, the carrying amount of capitalised development costs was € 1,817,649 (2010: € 1,818,137).

Provision for income taxes and unaudited tax years

Uncertainties exist with respect to certain interpretation of the tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group companies' domicile. As a result of the above the Group has established provisions for unaudited tax years, the carrying amount of which as at 30 June 2011 is € 125,000 (2010: € 125,000).

Allowance for doubtful receivables

The Group's management periodically reassesses the adequacy of the allowance for doubtful receivables in conjunction with its credit policy and taking into consideration reports from its legal advisors, which are prepared following the processing of historical data and recent developments of the cases they are handling.

As further explained in Note 13, Group's management assessed that apart from the amount provided in the consolidated financial statements, no additional provision is required for past due receivables since they are not considered impaired.

Valuation of investment properties

The Group carries its investment properties at fair value, with changes in fair value being recognised in the income statement. The Group engages independent valuation specialists to determine fair value at each year end. For the investment property the valuer used a combination of valuation techniques namely the sales comparison approach and the income capitalization approach.

4. OPERATING SEGMENT INFORMATION

The Group has decided, for management purposes to categorized its business into three segments; (a) Mobile Marketing, (b) Akazoo and (c) Legacy based on their products and services. Consequently the Group has three reportable operating segments as follows:

·; The Mobile Marketing operating segment: Specially designed for campaigns on mobile telecommunications networks.

·; The Akazoo operating segment: Services offering access to digital content (music, games, subscriptions) from the Group's internet site Akazoo.

·; Legacy operating segment: Media Services involving audience through compelling promotions, programs and live shows that draw attention to content.

No operating segments have been aggregated to form the above reportable operating segments.

The Company has decided to split the Mobile Entertainment Segment into two and report Akazoo separately from its Legacy business. During the past year Akazoo revenues have grown while revenues from the Legacy business (mainly Greek based) have decreased, thus to display the segment as a consolidation of the two will not be a fair representation of the business trend.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements.

Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties. Segment income, expenses and results will include those transfers between business segments which will then be eliminated on consolidation.

The following tables represent revenue and profit information regarding the Group's operating segments for the six months ended 30 June 2011 and 2010 respectively.

1. Inter-segment revenues are eliminated on consolidation.

2. Loss for other segment includes income from the investment property rental € 4,800 and operating costs of € 12,254.

The operating assets of other segment include mainly the carrying amount of the investment property (€ 607,000).

3. Segment assets do not include deferred tax asset (€ 327,850), as this asset is managed on a group basis.

4. Segment liabilities do not include deferred tax (€ 136,091), current income tax payable (€ 658,493), and derivatives (€ 6,328) as these liabilities are managed on a group basis.

*Amounts for the period ended 30 June 2010 were restated according to the change of the Group's revenue recognition policy (note 2.2)

1. Inter-segment revenues are eliminated on consolidation.

2. Loss for other segment includes income from the investment property rental €9,000 and fair value loss from investment properties valuation (€24,000). The operating assets of other segment include the carrying amount of the investment property.

3. Segment assets do not include deferred tax asset (€339,089), as this asset is managed on a group basis

4. Segment liabilities do not include deferred tax (€93,563), current income tax payable (€792,614), and derivatives (€33,698) as these liabilities are managed on a group basis.

Geographic information

*Amounts for the period ended 30 June 2010 were restated according to the change of the Group's revenue recognition policy (note 2.2)

The Company being only the holding company of the Group has no operations in the country of domiciliation. 

Non-current assets include property, plant, and equipment, intangible assets, investment properties and other non-current financial assets.

5. INCOME TAX

The amounts of income taxes which are reflected in the accompanying interim financial statements are analysed as follows:

6. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. There were no events or conditions that could result in a dilution effect and accordingly the basic and the diluted earnings per share is the same figure.

7. INTANGIBLE ASSETS

Intangible assets in the accompanying interim financial statements of the Group are analysed as follows:

8. SHARE CAPITAL AND SHARE PREMIUM

On 30 September 2010, the Company's preferred ordinary shares of £0.01 each were converted and re-designated as ordinary shares.

On 27 October 2010, 3,347,161 ordinary shares of £0.01 each were allotted and fully paid in cash (resulting to total proceeds of €38,369).

On 29 October 2010, all Company's ordinary shares were sub-divided into 4 shares of £0.0025 each.

On 10 December 2010, 5,697,435 ordinary shares of £0.0025 each were allotted and fully paid in cash (resulting to total proceeds of €17,015). As regards the placing of 5,641,025 shares at £1.20 per share in relation to admission to trading on AIM, the total proceeds amounted to €8,069,028.

On 27 January 2011, 36.457 ordinary shares 0.25 pence each were issued at a price of £1.20 to the non-executive directors of the Company. These shares were issued under the Non-Executive Directors Incentive Share Plan in consideration of the release of the Company's liability to pay a portion of their annual fee (as set out in paragraphs 12.14 to 12.16 of Part IV of the Company's AIM admission document dated 6 December 2010).

On 27 April 2011, 169.230 ordinary shares of 0.25 pence each were issued and at a price of £1.20 pursuant to the exercise warrants (as described in paragraph 12.8 of Part IV of the Company's AIM Admission document dated 6 December 2010).

On 9 June 2011, 200,000 ordinary shares of 0.25 pence each were issued and allotted to certain eligible employees of the Company. These shares were issued under the Share Incentive Plan (as disclosed in paragraph 10 of Part IV of the Company's AIM admission document dated 6 December 2010) following the achievement of the certain performance targets for the financial year ended 31 December 2010.

As at 30 June 2011, the Company has a total of 26,103,122 ordinary shares of 0.25 pence each.

The movement of the Company's share premium as at 30 June 2011 and 31 December 2010 is analysed as follows:

9. EVENTS AFTER THE REPORTING PERIOD

Completion of I-POP acquisition

On 1 July 2011, the Group has completed the acquisition of I-POP Networks PTE, a Singapore based mobile and media services business, funded entirely by the issue of 914,865 shares.

I-POP was founded in 2001 and become a trusted m-VAS (mobile value added service) provider in the rapidly growing mobile and media industry of Southeast Asia. The company is recognised as an early-entrant and a credible partner in its area of business focus. It operates directly or through subsidiaries in Singapore, Indonesia, Thailand, Vietnam, and the Philippines. The company's technology and data processing centers are located in Singapore and Vietnam and its connectivity agreements include countries like Malaysia, Shri Lanka, Macao, Cambodia, Hong Kong and Taiwan. In total I-POP employs approximately 50 professionals, including sales and marketing staff, software applications engineers, designers and telecom experts.

Successful placement of 4,363,636 new ordinary shares

In July 2011, the Group successfully completed the placement of 4,363,636 new ordinary shares at a price of 275 pence per share. Total net proceeds raised amounted to £11.5 million (approximately €13.15 million).It is anticipated that the net proceeds of the placing will enable management to accelerate a number of key strategic initiatives, including:

·; The expansion of the Group's mobile marketing services into high growth emerging mobile territories

·; Provide additional working capital to InternetQ s newly acquired Southeast Asian operation, I-POP

·; Support ongoing IT and systems maintenance upgrade programme across the Group's operations

·; Strengthen InternetQ's balance sheet whilst providing additional funds for both organic and acquisitive growth

Directors

Stuart Cruickshank

Chairman

Panagiotis Dimitropoulos

President & Founder

Konstantinos Korletis

Chief Executive Officer

Veronica Julia Nocetti

Chief Financial Officer

Iain Barrie Johnston

Non-executive director

Michael Gordon Jolliffe

Non-executive Director

Company Secretary

Philip Rogers

Registered Office

United Dominions House

51 Eastcheap

London, EC3M 1JP

United Kingdom

Registered Company Number

5512988

Nominated Adviser

Grant Thornton Corporate Finance

Solicitors of the Company

Clyde & Co LLP

Financial Public Relations

Buchanan Communications Limited

Registrar

Share Registrar Limited

ISIN Number

GB00B5BJJR09

Tradable instrument

Display mnemonic

INTQ

Website

www.internetq.com