Annual Report and 
Accounts 2016
Corero Network Security plc
Corero Network Security plc
Registered Office
Regus House
Highbridge 
Oxford Road
Uxbridge
Middlesex 
UB8 1HR
Annual Report and Accounts 2016 Corero Network Security plc Annual Report & Accounts 2016
What is a DDoS attack? 
A Distributed Denial of Service (DDoS) attack is a 
cyber threat, in which multiple compromised 
computer systems attack a target, such as a server, 
website or other network asset, and cause a denial of 
service for users of the targeted resource. The flood 
of incoming messages, connection requests or 
malformed packets to the target system, forces it to 
slow down or shut down, thereby denying service to 
legitimate users or systems. DDoS attacks are a 
threat to service availability, network security, brand 
reputation and ultimately lead to lost revenues. 
Attackers are continuing to leverage DDoS attacks as 
part of their cyber threat arsenal to either disrupt 
business operations or access sensitive corporate 
information, and they are doing it in increasingly 
creative ways that circumvent traditional security 
solutions or nullify the previous effectiveness of 
DDoS scrubbing centres. 
Corero Network Security is the leader in real-time, high-
performance DDoS defence solutions. Service providers, 
hosting providers and online enterprises rely on Corero’s 
award winning SmartWall technology to eliminate the 
DDoS threat to their environment through automatic 
attack detection and mitigation, coupled with complete 
network visibility, analytics and reporting. 
53
%
of attacked organisations suffered a 
breach as a result of a DDoS attack
(Source: Neustar)
85
%
of enterprise end users want their 
Internet Service Providers (ISPs) to 
offer more comprehensive DDoS 
Protection-as-a-Service
(Source: Corero research)
US$40,000
per hour is the cost of a DDoS attack
(Source: Incapsula)
84
%
of DDoS attacks combatted 
by Corero last less than  
10 minutes in duration 
(Source: Corero SecureWatch customer data) Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
01 Corero Network Security plc Annual Report & Accounts 2016
Operating highlights 
• Customer wins across the 
SmartWall target markets – 
Internet service providers, hosting 
providers and online enterprises, 
providing real-time DDoS 
protection
 –  At 31 December 2016, Corero 
had 64 SmartWall customers
 –   Growing number of customers 
now public references for Corero
 –  100% support renewal rate for 
SmartWall deployed customers 
(2016 being the first full annual 
cycle of renewals)
• Technology validation from  
NSS Labs, the world’s leading 
independent product test 
laboratory
 – SmartWall received NSS Labs  
  “Recommended” rating 
• Launched SmartProtect program 
to enable DDoS Protection 
as-a-Service (“DDPaaS”) 
• Entered into a technology alliance 
partnership with Juniper Networks 
(NASDAQ:JNPR)
• Appointed Andrew Lloyd as 
President and Executive Vice 
President Sales & Marketing
Highlights
Customer wins across the SmartWall target  
markets – service providers, hosting providers  
and online enterprises
Financial highlights 
Revenue
$8.8m
(2015: $8.3 million)
SmartWall revenue up 
62% 
over the prior year
Reduced EBITDA loss*
$5.1m
(2015: $6.4 million)
Loss per share
9.0c
(2015: 8.5 cents)
Net Cash
$2.9m
at 31 December 2016 
(2015: $2.7 million)
Strategic Report
Highlights 01
At a glance 02
Chief Executive’s strategic update 04 
Our proposition 06
Market overview 08
Our business model  10
Financial review 12
Our strategy 14
 
Governance
Board of Directors 16
Chairman’s introduction 18
Corporate Governance Report 19
Directors’ Report 22
Statement of Directors’ Responsibilities 25
Financial Statements
Independent Auditor’s Report 26
Consolidated Statement of  
Comprehensive Income 27
Consolidated Statement of  
Financial Position 28
Company Statement of Financial Position 29
Consolidated Statement of Cash Flow 30
Consolidated Statement  
of Changes in Equity 31
Company Statement of Changes in Equity 32
Notes to the Financial Statements 33
Notice of AGM 58
Corporate Directory 61
Our proposition
Market overview
Our business  
model
10
08
06
* before depreciation, amortisation, impairment of goodwill and financing (and comprises the 
operating loss less depreciation, amortisation and impairment of goodwill)
Discover more online at:
www.corero.com/investors/ 02 Corero Network Security plc Annual Report & Accounts 2016
Target markets:
PROTECT AND OPTIMIZE your 
critical infrastructure and  
online services
Service providers 
Hosting providers  
and data centres
Online enterprises
DDoS attacks continue to rise in size, frequency, and complexity, impacting 
the security and availability of the Internet. Service providers and Internet 
connected businesses require real-time protection against this evolving 
threat landscape.
Corero is dedicated to improving the 
security and availability of the Internet 
through the deployment of innovative  
DDoS mitigation solutions. The Corero 
SmartWall® Threat Defense System 
(“SmartWall”) family of products can be 
deployed in various topologies (in-line or 
scrubbing). The SmartWall family of 
solutions utilises modern DDoS mitigation 
architecture to automatically and surgically 
remove DDoS attack traffic, while allowing 
good user traffic to flow uninterrupted.
Corero’s key operational centres are in 
Marlborough, Massachusetts in the USA 
and Edinburgh in the UK, with the 
Company’s registered office in Uxbridge  
in the UK.
• The goal of the Corero real-time DDoS 
mitigation solution is to protect the 
customer’s service availability and 
ultimately revenues and brand 
reputations from harmful DDoS attacks. 
• The Corero solutions are the highest 
performing in the industry, while 
providing the most automated DDoS 
protection at unprecedented scale with 
the lowest total cost of ownership to  
the customer. 
• These solutions are designed to provide 
real-time attack mitigation with 
continuous threat visibility, enabling  
the monetisation of DDPaaS offerings. 
• The Corero SmartWall protects against 
the latest breed of DDoS attacks in 
seconds not minutes, including network 
and application layer attacks, volumetric 
and multi-vector attacks.
64
active global 
SmartWall 
customers
Real-time
Protection 
Against DDoS 
attacks and  
cyber threats
At a glance
Find out more at:
www.corero.com Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
03 Corero Network Security plc Annual Report & Accounts 2016
 North America   59%
 EMEA   41%
 Product engineering  
 & management   42%
 Sales & marketing 28%
 Support & services 18%
 Management &  
 administration  12%
Geographic order 
intake analysis *
Corero has a team of 
talented employees who are 
focused on delivering the 
Company’s strategy
 Service Providers  35%
 Hosting Providers 35%
 Online enterprises 30%
Sector order intake 
analysis *
“Protecting the security of our network and delivering peace of mind to our customers is a critical 
focus for Liquid Web. It’s one of the reasons we have such an admired brand and earned loyalty from 
our customers. Investing in the Corero SmartWall solution enables us to deliver on that security 
promise by significantly reducing the impact of DDoS attacks, while lessening the need for human 
intervention, which allows us to focus on other technology initiatives.”
Joe Oesterling
CTO, Liquid Web
* order intake (as opposed to revenue) 04 Corero Network Security plc Annual Report & Accounts 2016
“Our goal is to grow 
faster than the 
market by taking 
share from others. 
Head to head trials 
are proving we 
are the number 
one solution for 
real-time DDoS 
mitigation.”
 
Ashley Stephenson
Chief Executive Officer
Results
Corero revenue for the year ended 31 
December 2016 was $8.8 million (2015: $8.3 
million) with SmartWall revenue up 62% 
over the prior year whilst legacy product 
revenues declined as expected. The EBITDA 
loss was $5.1 million (2015: EBITDA loss  
$6.4 million). 
The 2016 revenue was lower than expected, 
impacted by extended sales cycles for the 
large Tier 1 service provider customer 
segment and the new as-a-service 
customers signed in the fourth quarter of 
2016, where the revenue is recognised 
monthly over the term of the contract.
Market dynamics
2016 marked a turning point for DDoS, as 
attacks reached new heights in terms of 
both size and complexity. The Mirai botnet 
showed us just how powerful an Internet of 
Things (IoT) powered DDoS attack could 
really be, with the unprecedented onslaught 
against DNS provider Dyn in September 
2016. Overnight, the security considerations 
around connected devices went from being 
something that security consultants have 
long warned about, into a hot button issue 
that could no longer be ignored. This will 
only increase with the first Terabit-scale 
DDoS attack likely to occur in the year 
ahead, with far-reaching implications and 
the potential to impact the Internet 
backbone itself.
With DDoS attacks costing large enterprises 
an average of US$500,000 per incident in 
lost business and IT spending, these 
increased threats will mean that defending 
against DDoS attacks will become a top 
security priority for any organisation that 
relies on the Internet to conduct business. 
Our entire digital economy depends upon 
access to the internet, and so organisations 
will need to think carefully about business 
continuity in the wake of such events. 
In preparing a robust defence against 
botnets like Mirai, it is important to 
consider how they work. Effectively acting 
like a giant cloud computer, botnet-driven 
attacks are launched and then disappear 
without leaving enough information for 
victims to trace its origins. This leaves 
organisations really no choice but to defend 
themselves at the edges of the network. 
Legacy out-of-band scrubbing solutions, 
which require human intervention and 
reactive countermeasures to remove the 
attack, will not be successful, and using such 
systems will also allow hackers to 
experiment on networks undetected, 
finding vulnerabilities and testing new 
methods through smaller, hidden attacks 
that don’t meet the threshold for scrubbing.
The only proper defence is to use an 
automatic, always-on, in-line DDoS 
mitigation system, which can monitor all 
traffic in real-time, negate the flood of 
attack traffic at the internet edge, eliminate 
service outages and allow security 
personnel to focus on uncovering any 
subsequent malicious activity, such as data 
breaches or malware deposits. This type of 
in-line, always-on protection can come in 
various forms – either on-premises, or 
purchased as a security service from an 
upstream provider. It is only through 
deploying these real-time solutions that 
organisations will be able to identify and 
mitigate the most serious botnet-driven 
DDoS attacks on their networks in the  
years ahead.
Chief Executive’s strategic update
Corero is well positioned to deliver on its goal of being the leading 
player in the real-time DDoS mitigation market with SmartWall solution 
validation from over 60 customers and technology validation from NSS 
Labs, the world’s leading independent security product test laboratory.  Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
05 Corero Network Security plc Annual Report & Accounts 2016
Operating performance 
against strategy
Our customer wins in the last year have 
validated the Corero target market for 
real-time, automatic DDoS mitigation 
solutions – namely service providers, 
hosting providers and online enterprises. 
We have also expanded our addressable 
market with an as-a-service pricing model 
targeting emerging companies in this 
target market who wish to acquire our 
technology on the more modern pay-as-
you-grow model rather than larger up-front 
capital expenditures. Our recently launched 
SmartProtect program enables customers 
to monetise DDoS Protection as-a-Service.
Corero has an increasing number of 
satisfied customers who are willing to be 
industry references for the breakthrough 
levels of automation, security and service 
that Corero delivers.
We have delivered on our strategic goals of 
adding new DDoS attack defences to the 
SmartWall product and additional forensics 
and analytics capability. In addition, we 
announced at the RSA security show in San 
Francisco in February 2017 the availability of 
a 100G SmartWall product and we have plans 
to launch a Cloud enabled product in 2017.
Corero’s strategy is to work with leading IT 
and network technology vendors to make 
DDoS mitigation an integral component of 
any well-engineered Internet facing 
network design thereby increasing our 
go-to-market opportunities. The recently 
announced technology alliance 
partnership with Juniper Networks, a US 
based multinational corporation that 
develops and markets networking and 
security products, is the first of such 
partnerships, and will enable Corero to 
expand its market reach by leveraging 
Juniper Networks’ global footprint. 
Fund raise
The proposed equity fund raise to be 
announced on 6 April 2017 will provide the 
funding required to execute the Company’s 
strategy and get to the position of being 
cash generating. 
Outlook
We have strengthened our sales leadership 
with the recent appointment of Andrew 
Lloyd as President and Executive Vice 
President Sales. We have also expanded  
our addressable market via the recently 
introduced as-a-service purchase model  
and are encouraged by the potential for 
strategic go-to-market partnerships such  
as the alliance with Juniper Networks. 
The 2017 financial year is off to a good start 
with Corero’s largest SmartWall contract 
win to date with a leading Cloud services 
provider. We expect an increasing number 
of corporations will see the value of 
investing in DDoS protection to protect 
their revenue streams and defend their 
brand reputations.
This gives us confidence Corero will deliver 
revenue growth in 2017.
Ashley Stephenson
Chief Executive Officer
5 April 2017
“We specifically value the automated attack mitigation functionality. Corero’s SOC monitors 
conditions for us and responds accordingly. Our team monitors traffic but we don’t have to  
worry about it. We set it and forget it.”
Stephen Clark
Director of IP Networks, BCI Commercial Telecom Systems
Technology validation
Corero received 
“Recommended” 
rating in NSS Labs DDoS test  
(March 2016)
Customer validation
100% 
Smartwall support renewal rate for 
Smartwall deployed customers 06 Corero Network Security plc Annual Report & Accounts 2016
Corero is the leader in real-time, high-performance, 
scalable DDoS defence solutions for Service Providers, 
Hosting Providers and the On-line Enterprise.
What we do
How we do it
Our proposition
Corero provides dedicated technology for 
real-time mitigation of DDoS attacks in  
seconds versus minutes, allowing good  
user traffic to flow uninterrupted.
Corero enables revenue protection, customer 
retention, and competitive differentiation in 
the face of DDoS attacks, for Internet Service 
Provider and Hosting Provider customers.
With varied deployment topologies (in-line or scrubbing) the SmartWall family of solutions 
utilises modern DDoS mitigation architecture to automatically, and surgically remove  
DDoS attack traffic. 
   Blocked       Allowed
3:00pm
Mon Jan 11 2016
4:00pm 5:00pm
100,000
75,000
50,000
25,000
Mbps
Inbound Traffic
• Inspect every packet for suspicious intent
• Built-in algorithms instantaneously detect and mitigate 
known DDoS attacks
• Packets that are determined to be malicious are blocked 
• Avoid disrupting good user traffic 
 
• Only proven in-line, scalable DDoS solution in the market
 – Competitors solutions out-of-band 
• Performance leader with linear line-rate scaling to  
any capacity
Automatic Real-time DDoS Protection
Corero Hosting Provider customer Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
07 Corero Network Security plc Annual Report & Accounts 2016
Find out more at: 
www.corero.com
The Corero solutions are the highest performing in the 
industry, while providing the most automatic security 
coverage at unprecedented scale with the lowest total 
cost of ownership to the customer.
Protection is provided in cost effective scaling increments 
from 10Gbps to 100Gbps, to support bandwidth and 
inspection requirements. 
This technology provides configurable policies to selectively 
enable a broad range of specific protection mechanisms to 
defend critical network assets against DDoS attack traffic.
Corero enables Service Providers and Hosting Providers to 
deliver high value DDPaaS to their customers, allowing for 
incremental services revenue. 
The Corero SmartProtect program allows for monthly 
subscription procurement options to acquire 
SmartWall technology.
The Corero Service Portal allows for provider and tenant 
visibility for traffic and attack dashboards. Providers can 
assign subscriber/tenant service levels, and distribute 
reporting and analytics to showcase the value of the 
protection they are receiving. 
Robust reporting and analytics, powered by Splunk,  
transform sophisticated DDoS event data into easily 
consumable dashboards.
The Corero SecureWatch® Service is a tiered offering 
comprised of configuration optimisation, monitoring and 
mitigation response services. These services, delivered by  
the Corero Security Operations Centre are customised to 
meet the security policy requirements and business goals  
of each SmartWall customer that engages in a SecureWatch 
service plan.
“Our objective was to maintain system and service availability in the face of a DDoS attack with the 
assistance of the new technology. The system should impact htp’s networking processes as little as 
possible and above all, we didn’t want to have to keep implementing changes along the way. Today, 
with the Corero SmartWall solution deployed in-line, we are protecting all transit connections and 
thereby the entire infrastructure behind it in a very convenient way. The solution is unparalleled with 
regard to sophisticated and automated protection from DDoS attacks. It is extremely easy to manage 
when in operation and the intuitive user interface additionally simplifies handling.”
Robert Remenyi
Internet Backbone Planning, htp GmbH
Protected customers
& Infrastructure Assets
Internet traffic, both good and bad are targeting customers and infrastructure 
assets. The Corero SmartWall Network Threat Defense device inspects all traffic, 
and surgically removes DDoS attack traffic from the flow, allowing those 
customers and infrastructure assets to receive uninterrupted good user traffic. 
ISP1
ISP2 ISP3
ISP4 08 Corero Network Security plc Annual Report & Accounts 2016
DDoS attacks are accelerating in purpose, sophistication,  
complexity, scale and frequency.
Market overview
A wide range of critical cybersecurity 
issues face every Internet connected 
enterprise. These threats include denial  
of service (DoS/DDoS), hacking, breach, 
phishing, fraud, data theft or exfiltration. 
These threat vectors present themselves 
via the essential Internet connections that 
are required to support the enterprise’s 
online business.
Today, the vast majority of the leading 
Internet Service Providers sell raw Internet 
transit capacity. This capacity, usually sold 
via 1G or 10G transport connections, carries 
good customer traffic and malicious bad 
traffic without discrimination. If an 
enterprise data centre or hosting facility 
connects to these raw transit providers 
they will be exposed to Internet borne 
cyber threats and the corporation’s 
information security posture should be 
prepared to detect and protect against  
the associated malicious intent.
Corero has focused on one specific category 
of these cyber threats encompassing denial 
of service and has developed a real time 
DDoS detection and mitigation solution 
that can provide automatic detection and 
protection against DDoS attacks. In 
contrast to legacy approaches to DDoS 
mitigation which often require tens of 
minutes to detect and react, the Corero 
solution can block DDoS attack traffic in 
seconds eliminating critical service latency 
and downtime. 
Corero is targeting a high growth security 
market; the market for DDoS prevention 
appliances is forecast by IHS Technology, a 
leading industry analyst, to reach more 
than $1.0 billion by 2020 with a CAGR of 
11.0% in the period 2016 to 2020 (Source: 
IHS Technology, DDoS Prevention 
Appliances Market Tracker H2 2016).  
This growth is driven by a growing 
awareness of the threat of DDoS attacks 
and the increased focus and resourcing of 
governments (most notably in the US and 
UK) on national security strategies and 
policies on cyber security.
“Cyber attacks 
are growing 
more frequent, 
sophisticated and 
damaging when  
they succeed. So we 
are taking decisive 
action to protect 
both our economy 
and the privacy of  
UK citizens.”
 
Rt Hon Philip Hammond
Chancellor of the Exchequer Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
09 Corero Network Security plc Annual Report & Accounts 2016
73
%
of organisations suffered  
a DDoS attack in 2016 
(Source: Neustar Worldwide DDoS Attacks 
& Protection Report – October 2016)
85
%
 
of attacked organisations  
were subjected to multiple 
DDoS attacks in 2016 
(Source: Neustar Worldwide DDoS Attacks 
& Protection Report – October 2016)
US$40,000 
per hour cost of a DDoS attack 
(Source: Incapsula Survey: What DDoS 
Attacks Really Cost Businesses)
53
%
 
of attacked organisations 
suffered a breach as a result 
of a DDoS attack 
(Source: Neustar Worldwide DDoS Attacks 
& Protection Report – October 2016)
85
%
 
want their Internet Service 
Provider to take responsibility 
and provide DDoS protection 
(Source: Corero research – February 2017)
IoT landscape continues 
to grow: 
6.4bn 
connected things will be in use worldwide 
in 2016, up 30% from 2015, and will reach 
20.8 billion by 2020 
(Source: Gartner research)
5.5m 
new IoT devices connected 
every day In 2016
(Source: Gartner research)
Major cloud, hosting, large 
service provider, and major 
internet brands continue to 
invest in high-performance 
DDoS mitigation to protect 
their data centres from 
escalating attacks and deliver 
customised solutions to their 
hosting and cloud customers. 
(Source: IHS Technology Research: DDoS 
Prevention Appliances Biannual Worldwide 
and Regional Market Share and Forecasts)
DDoS attacks ranked as the 
second most costly form of 
cyber attack (behind malicious 
insiders) 
(Source: Ponemon Institute 2016 Cost of 
Cyber Crime report)
56
%
 
view DDoS as more of a concern 
than it has been in the past 
(Source: Corero research – February 2017)
Statistics which support the DDoS mitigation 
opportunity for Corero:
“By combining Corero’s real-time DDoS mitigation solutions with our Juniper Networks MX router 
IP infrastructure we were able to implement a DDoS protected provider edge with unprecedented 
response time and price/performance.” 
Paul Pintiliescu
European Director, M247 Limited
“Tier 2 and Tier 3 
Service Providers and 
Hosting Providers now 
have access to DDoS 
protection at the price 
and performance that 
makes sense to their 
business, whereas 
five years ago, this 
wasn’t a possibility. 
Traditional DDoS 
solutions historically 
have not given way to 
enabling additional 
service offerings that 
service providers 
could use to generate 
incremental revenue. 
This combination 
now provides a game 
changing opportunity 
for the service provider 
community.” 
 
Jeff Wilson
Senior Research Director and Advisor, 
IHS Technology Research 10 Corero Network Security plc Annual Report & Accounts 2016
The Corero business model comprises the development, marketing  
and sale of network security products and services to provide  
customers with protection from DDoS attacks.
Our business model
Automatic mitigation
• Goal 99% no customer intervention required
• Corero protects organisations’ online 
systems, information, data, revenues and 
brand reputations against the growing 
cyber threat of DDoS attacks with 
dedicated technology for real-time 
mitigation of DDoS attacks in seconds 
vs minutes, allowing good user traffic to 
flow uninterrupted. 
• When an organisation selects Corero to 
protect their assets in the face of DDoS 
attacks they strengthen their Internet 
facing security defences and ensure 
service availability. 
• Corero customers can utilise this DDoS 
protection for their own business needs 
and Service Provider customers can 
monetise a DDoS protection service to 
their customers enabled through the 
Corero ServicePortal (read more –  
https://www.corero.com/programs/
smartprotect-program.html)
Corero goes to market directly with its sales force 
and indirectly with valued added distributor and 
reseller partners in its chosen markets of North 
America and Europe. 
Proposition
Routes to Market
Real-time
• Immediate protection – seconds vs minutes
Price
• Cost effective entry point, leadership price/performance
Scalability
• Modular and distributed, pay as you grow
Accuracy
• Lowest false positive rates, eliminate collateral damage
We apply our sources of  
competitive advantage...
...to our chosen business  
and markets... Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
11 Corero Network Security plc Annual Report & Accounts 2016
Corero’s strategy is to work with leading IT and 
network technology vendors to make DDoS 
mitigation an integral component of any well-
engineered Internet network design thereby 
increasing go-to-market opportunities. 
Routes to Market
Target Markets Corero sells the SmartWall technology to customers in the 
form of either (a) an appliance sale and perpetual software 
license plus annual SecureWatch services or (b) as-a-service 
which enables the customer to utilise the technology on a 
subscription or revenue share basis (without owning the 
appliance and software).
SecureWatch services include:
Updates delivered to 
the Corero appliances 
in customer networks 
to provide proactive on-
going protection from the 
latest DDoS threats. 
24x7x365 monitoring and 
support services including 
DDoS attack mitigation 
services delivered by 
the Corero Security 
Operations Centre.
Service Providers
 
 
Find out more at: www.corero.com/solutions/
for-service-providers.html
Hosting Providers
 
 
Find out more at: www.corero.com/solutions/
for-hosting-providers-and-datacenters.html
Online enterprises
 
 
Find out more at: www.corero.com/solutions/
for-the-enterprise.html
...to our chosen business  
and markets...
...to create value
“Protecting the security of our network and delivering value added service has always been a prime 
focus of CNI-Independents. Investing in the Corero SmartWall system is the best solution to more 
effectively monitor and mitigate DDoS threats automatically, in-line and in real-time. We plan to use 
the new DDoS mitigation capabilities to create new service offerings that would benefit customers 
with enhanced service level agreements supported by further secured Core networks.” 
Tim Berelsman
CEO, CNI-Independents Fiber Network 12 Corero Network Security plc Annual Report & Accounts 2016
“SmartWall revenue 
increased 62% 
over the prior 
year, whilst legacy 
product revenue 
reduced as 
expected.”
 
Andrew Miller
Chief Financial Officer
Financial review
The loss for the year after taxation amounted to 
$17.2 million (2015: $11.2 million) and includes: 
• Unrealised exchange gain of $1.2 million (2015: gain $0.4 million) arising  
on an intercompany loan;
• An impairment to goodwill acquired of $9.0 million (2015: $nil) relating  
to the 2011 acquisition of Top Layer Networks, Inc. (see note 8 to the 
financial statements);
• Finance costs of $0.006 million (2015: $0.02 million). 
Financial highlights 
Revenue
$8.8m
(2015: $8.3 million)
EBITDA loss before 
depreciation, amortisation, 
impairment of goodwill 
and financing 
$5.1m
(2015: $6.4 million)
SmartWall revenue 
 62
%
over the prior year, whilst 
legacy product revenues 
declined as expected.
The 2016 revenue was lower than 
expected, impacted by extended 
sales cycles for the large Tier 1 
service provider customer segment 
and the new as-a-service customers 
signed in the fourth quarter of 2016, 
where the revenue is recognised 
monthly over the term of the 
contract. The offsetting benefit is 
that these contract wins will add to 
the recurring revenue recognised  
in 2017 and beyond.
Group’s net assets at  
31 December 2016
$18.2m
(2015: $26.3 million).
Loss per share 
8.1c
(2015: 8.5 cents) Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
13 Corero Network Security plc Annual Report & Accounts 2016
Review of the Group’s 
business
Highlights of 2016 include:
• Customer wins across the SmartWall 
target markets – Internet Service 
Providers, Hosting Providers and  
online enterprises, providing real- 
time DDoS protection
 – At 31 December 2016, Corero  
had 64 SmartWall customers
 – Growing number of customers  
now public references for Corero. 
• Launched as-a-service offering in the 
fourth quarter of 2016
• Entered in a technology alliance 
partnership with Juniper Networks 
(NASDAQ:JNPR)
• Appointed Andrew Lloyd as President 
and Executive Vice President 
Sales & Marketing
Review of performance & 
performance indicators
The Directors monitor a number of 
metrics, both financial and non-financial, 
on a monthly basis.
The most important financial metrics are  
as follows:
• Order intake: $7.1 million for the year 
ended 31 December 2016 (2015: 
$7.9 million);
• Gross margin: 76% for the year ended  
31 December 2016 (2015: 75%); 
• Operating expenses (gross of research 
and development costs capitalised and 
before depreciation, amortisation and 
impairment of goodwill): $14.4 million 
for the year ended 31 December 2016 
(2015: $15.0 million); and
• Cash and cash equivalents: $2.9 million 
at 31 December 2016 (2015: $2.7 million)
The order intake in 2016 included $6.7 
million of SmartWall orders, an increase of 
58% over the prior year (2015: $4.3 million), 
to 35 service providers, hosting providers 
and enterprises, providing real-time DDoS 
and cyber threat protection. As expected 
the order intake for the previous generation 
products declined to $0.4 million (2015:  
$3.6 million) with Corero having announced 
the end of life of the previous generation 
products in 2015. 
In the fourth quarter of 2016, Corero 
introduced an as-a-service pricing model,  
an offering introduced in response to 
increasing customer interest in 
subscription-based contracts in contrast  
to the purchase of equipment under a 
traditional perpetual license model. This 
offering is expected to expand Corero’s 
addressable market with fast-growing 
Cloud hosting providers and regional 
service providers who can enter the market 
more rapidly by offsetting the costs of 
operating a DDoS protection solution with 
the monthly revenues derived from selling 
these high margin security services to their 
customers. Under the as-a-service offering, 
recognised revenue at the time of the initial 
customer order is reduced but the contract 
value and recurring revenues increase over 
the life of the customer relationship. 
The average perpetual license order value in 
2016 was in excess of $200,000, in line with 
the prior year, and the average as-a-service 
year one contract value was $40,000.
Operating expenses, gross of research  
and development costs capitalised of 
$2.5 million (2015: $2.3 million), of  
$14.4 million were below the prior year 
(2015: $15.0 million).
The 2016 operating loss of $17.3 million 
(2015: $11.6 million) includes amortisation of 
capitalised development expenditure of 
$2.3 million (2015: $2.4 million) and an 
impairment to goodwill of $9.0 million 
(2015: $nil). The goodwill arose on the 
acquisition of Top Layer Networks, Inc. (“Top 
Layer”). Since the acquisition of Top Layer, 
Corero has made significant investment in 
its products with the launch of SmartWall in 
2014 and the end of life of the previous 
generation products acquired as part of the 
Top Layer acquisition announced in 2015. 
The Corero go-to-market is now exclusively 
focused on products and services 
developed by Corero since the Top Layer 
acquisition. In addition, the ability to 
accurately forecast revenue growth for the 
business has resulted in prior year forecasts 
not being achieved by the company. As a 
result, a more conservative approach has 
been adopted in the forecasts which 
underpin the intangible assets impairment 
review as required by IFRS. The Board have 
therefore assessed that an impairment of 
the goodwill of $9.0 million is appropriate 
(see note 8 of the financial statements).
Cash and Treasury
The closing cash balance was $2.9 
million (2015: $2.7 million). Corero had 
no debt at 31 December 2016 (2015: $0).
The net reduction in cash from operating 
activities in the year ended 31 December 
2016 was $5.5 million (2015: $7.7 million). In 
the year ending 31 December 2016, the 
Company raised $12.0 million (before 
expenses), of which the Chairman 
contributed $1.2 million, to fund the further 
development of the SmartWall product and 
sales and marketing activities.
“Corero is combining its real-time DDOS mitigation solutions with Juniper’s MX routers 
and QFX switches to construct and operate a DDoS protected provider edge with superior 
response time, price and performance.” 
Vinod Sundarraj
Senior Director of Product Management, Juniper Networks 14 Corero Network Security plc Annual Report & Accounts 2016
The Corero strategy is to protect against a continuously evolving  
DDoS threat landscape that threatens any Internet connected business, 
or the providers that serve them.
Our strategy
The Company’s strategic objectives and plans are  
summarised below:
Establish SmartWall as the  
leading solution for real-time 
DDoS protection 
• Scale and grow installed base (revenue) 
• Referenceable customers
• Raise Corero profile with analysts and press
Prioritise markets – Geographic 
and provider segments 
• US, UK and Europe sales focus
• Target service providers, hosting/Cloud 
providers and on-line enterprises
Product Go to Market
Improve Corero DDoS defence 
technology 
• Continuous improvement approach to 
development
• New DDoS attack defences
• Additional forensics and analysis capability
Expand routes to market 
• Pursue go-to-market partner channels  
through alliances
• Engage system integrator partners for  
key verticals and geographies
Corero products address the 
evolving requirements of the 
target market 
• Launch 100G SmartWall product 
• Support Cloud deployment model
Develop sales models to attract 
new target customer markets 
• Launch of subscription based sales model 
• Launch of ServicePortal as a turnkey solution 
for customers to manage the delivery of DDPaaS 
to their customers Governance Financial Statements Notice of AGM Corporate Directory
15 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report
Corero is dependent on revenue growth to deliver on its strategy. Lower sales growth will reduce the Company’s cash resources which 
could impact the investment in product development.
The Strategic Report on pages 1 to 15 is signed by order of the Board.
Duncan Swallow 
Company Secretary 
5 April 2017
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties for Corero are:
Corero’s business success 
depends on growing 
SmartWall product sales to 
new customers in its target 
market of hosting and 
service providers and on-line 
enterprises. To be successful 
Corero will focus its lead 
generation and sales 
resources, and product 
development, on these 
markets. If Corero is not 
successful in identifying 
customer prospects with a 
business need Corero can 
solve, this will compromise 
growth plans and success. 
The DDoS mitigation  
market is competitive and 
characterised by constant 
changes in technology, 
customer requirements and 
frequent new product 
introductions and 
improvements. Cyber security 
and DDoS attacks are 
constantly evolving and 
changing as attackers 
develop new methods and 
tools to evade defences. To be 
a market leader and to grow, 
Corero needs to be focused 
on its chosen market and 
deliver continuous innovation 
by adding new DDoS attack 
defences, developing higher 
performance solutions for 
higher speed Internet 
connectivity and address new 
IT deployment models such 
as the Cloud and software 
enabled routing and 
switching network 
infrastructure. 
Corero is an emerging player 
in the DDoS prevention 
market and competes with 
much larger organisations. 
To raise market awareness of 
Corero and its DDoS 
mitigation solutions, the 
Company will invest in 
targeted public relations and 
marketing. If Corero is not 
successful in connecting with 
the market and raising its 
profile this will compromise 
growth plans.
Retaining and recruiting 
people with the necessary 
skills and experience. 
Revenue growth requires a 
strong sales and business 
development capability. To 
address the challenges 
resulting from technology 
change and innovation in the 
DDoS mitigation market, the 
Company needs to retain 
and recruit the required 
technical product 
development skills. Corero 
operates in a high growth 
market with new players 
emerging. If Corero is unable 
to recruit and retain the 
right skills this will 
compromise growth plans.
Sales  
growth
Market  
awareness
 T echnolog y  
change and 
innovation People
“The OTT network, like any other, is not immune to DDoS attacks. By investing in the Corero 
SmartWall, we are bringing the value-added service of Internet security and peace of mind to 
our business and residential customers across the entire OTT network.” 
Ed Tisdale
Vice President of New England Operations, OTT Communications Corero Network Security plc Annual Report & Accounts 2016 16
Board of Directors
 
Jens Montanana 
Non-Executive Chairman 
Age: 56 
Appointed: 9 August 2010
Jens is the founder and CEO of Datatec 
Limited, established in 1986. Between 1989 
and 1993 Jens served as Managing Director 
and Vice-President of US Robotics (UK) 
Limited, a wholly owned subsidiary of US 
Robotics Inc., which was acquired by 
3Com. In 1993, he co-founded US start-up 
Xedia Corporation in Boston, an early 
pioneer of network switching and one  
of the market leaders in IP bandwidth 
management, which was subsequently 
sold to Lucent Corporation in 1999 for 
$246 million. In 1994, Jens became CEO  
of Datatec Limited which listed on the 
Johannesburg Stock Exchange in 1994 and 
on AIM in 2006. He has previously served 
on the boards and sub-committees of 
various public companies.
AC
 
RC
 
Ashley Stephenson
Chief Executive Officer 
Age: 57
Appointed: 6 September 2013 
Ashley first joined Corero Network Security 
as Executive Vice President of the Network 
Security division, with responsibility for 
product and solution strategy in March 
2012, and was appointed Chief Executive 
Officer of the division in January 2013. An IT 
industry executive and Internet technology 
entrepreneur, Ashley has operating 
experience in the United States, Europe 
and Asia. Previously, he was CEO of Reva 
Systems, acquired by ODIN, and Xedia 
Corporation, acquired by Lucent. He has 
provided strategic advisory services to a 
number of leading multi-national IT 
companies including technology vendors, 
distributors and services companies. Ashley 
began his career at IBM Research & 
Development in the UK. He is a graduate of 
Imperial College, London with a degree in 
Physics and an Associate of the Royal 
College of Science.
Andrew Lloyd
President and Executive Vice  
President Sales & Marketing
Age: 51
Appointed: 3 January 2017
Andrew has been involved in the IT 
software and systems sector for more than 
25 years. His career has included roles in 
early stage companies, high-growth 
pre-IPO ventures as well as large 
corporations such as Computer Associates 
and Oracle. Andrew joined Corero in an 
executive capacity on 3 January 2017 having 
previously been a Non-Executive Director 
since 19 November 2012. Prior to joining 
Corero in early 2017, Andrew, was Chief 
Customer Officer at Workplace Systems 
and part of the leadership team which 
subsequently sold the business to US-based 
WorkForce Software in June 2016. Andrew 
has a BSc (Hons), Electronic and Electrical 
Engineering from Heriot-Watt University, 
Scotland. Prior to his appointment as 
President, Andrew was Chairman of the 
Corero Remuneration Committee.  Financial Statements Notice of AGM Corporate Directory Strategic Report Governance
Corero Network Security plc Annual Report & Accounts 2016 17
Richard Last
Independent Non-Executive Director
Age: 59
Appointed: 22 May 2008 
Richard is Chairman of Servelec Group plc 
and the British Smaller Technology 
Companies VCT 2 plc both of which are 
quoted on the London Stock Exchange. He 
is also Chairman of a number of AIM listed 
companies including: Gamma 
Communications plc, a UK 
telecommunications service provider; Tribal 
Group plc, a technology group; Arcontech 
Group plc, a provider of IT solutions for the 
financial services sector; Lighthouse Group 
plc, a financial services group. Richard is 
also a Director of a number of private 
companies. Richard is a Fellow of the 
Institute of Chartered Accountants in 
England and Wales (FCA). Richard is 
Chairman of the Corero Audit Committee. 
AC
 
RC
 RC
 
Andrew Miller
Chief Financial Officer
Age: 53
Appointed: 9 August 2010
Prior to joining the Company, Andrew was 
with the Datatec Limited group in a 
number of roles between 2000 and 2009 
including the Logicalis Group Operations 
Director and Corporate Finance and 
Strategy Director. He led the Logicalis 
acquisition strategy, acquiring and 
integrating 12 companies in the US, UK, 
Europe and South America. Prior to this, 
Andrew gained considerable corporate 
finance experience in London with 
Standard Bank, West Deutsche Landesbank 
and Coopers & Lybrand. He trained and 
qualified as a Chartered Accountant and 
has a bachelor’s degree in Commerce from 
the University of Natal, South Africa. 
 
Duncan Swallow
Company Secretary
Age: 52
Appointed: 1 November 2007
Duncan is responsible for the Company 
secretarial function and is also the Group 
Financial Controller. Prior to joining the 
Company, Duncan was Divisional Financial 
Controller for CCH, a Wolters Kluwer 
business, specialising in providing books, 
online information, software, CPD and fee 
protection to tax and accounting 
professionals. He is a fellow of the 
Association of Chartered Certified 
Accountants.
Committee membership key
AC
  Audit Committee member         
RC
  Remuneration Committee member   Committee Chair
“Organisations that once had DDoS protection projects on the back burner are now re-prioritizing  
their security strategies to place DDoS mitigation at the forefront in 2017. As new, large scale attacks  
have come online leveraging IoT devices, the DDoS threat has become top of mind for CISOs. This shift  
in precedence puts increased pressure on Internet and cloud providers to enable this protection for  
their customers, and eliminate DDoS threats closer to the source.” 
Rob Ayoub 
Research Director, IDC.  Corero Network Security plc Annual Report & Accounts 2016 18
Overview
We have made significant progress in the 
year to 31 December 2016 with increasing 
confidence that we have a market leading 
product in SmartWall and an organisation 
focused on delighting customers. The 
market opportunity is significant and 
developing as the DDoS threat landscape 
evolves. We have continued to invest in the 
technology roadmap with the introduction 
of a 100G SmartWall product and plans to 
launch a Cloud enabled product in 2017. We 
have also expanded our addressable market 
with the as-a-service offering and plan to 
leverage go-to-market partnerships with 
other network and security companies.
Board changes
Andrew Lloyd, previously a Non-Executive 
Director of the Company, was appointed 
President and Executive Vice President 
Sales and Marketing in January 2017. 
Andrew will be responsible for leading 
Corero’s commercial expansion and sales 
growth. I am delighted that Andrew has 
agreed to join Corero in an executive role. 
His skillset and experience of both growth 
companies and large multinationals will be 
invaluable as we drive our revenue growth 
and establish Corero as a leading player in 
the DDoS mitigation market. 
With Andrew Lloyd’s appointment, we have 
deliberated on the balance of the Board 
between executives and non-executives.  
We will keep the composition of the Board 
under review.
The notice of AGM includes a resolution to 
reappoint Ashley Stephenson who retires by 
rotation in accordance with the Company’s 
articles of association and a resolution to 
reappoint Andrew Lloyd who was appointed 
an Executive Director in the period since 
the last AGM.
Looking ahead
I am confident with the progress made in 
2016 and the focus on expanding Corero’s 
routes to market with new sales models and 
partnerships such as the Juniper Networks 
relationship announced in February 2017, 
that the business will deliver on its strategic 
goals and become a leading player in the 
DDoS mitigation market.
Finally, I would like to thank all our employees 
for their hard work and commitment.
Jens Montanana
Chairman
5 April 2017
Chairman’s introduction
“I am confident the 
business will deliver 
on its strategic 
goals and become  
a leading player  
in the DDoS 
mitigation market.”
 
Jens Montanana
Chairman
We have made significant progress in the last year with increasing 
confidence that SmartWall is a market leading product. Financial Statements Notice of AGM Corporate Directory Strategic Report Governance
Corero Network Security plc Annual Report & Accounts 2016 19
Corporate Governance Report
Corero has taken note of the UK Corporate Governance Code  
(‘the UK Code’) published in September 2014. The UK Code and 
associated guidance can be found on the Financial Reporting 
Council website at www.frc.org.uk/corporate/ukcgcode.cfm. The 
rules of the London Stock Exchange do not require companies that 
have securities traded on AIM to formally comply with the UK Code 
and the Company does not seek to formally comply nor give a 
statement of compliance. However, the Board is accountable to the 
Company’s shareholders for good governance and has sought to 
apply those principles of corporate governance commensurate 
with the Company’s size. The Company’s approach is set out below.
The Board
Corero recognises its responsibility to provide entrepreneurial and 
responsible leadership to the Group within a framework of prudent 
and effective controls (described below) allowing assessment and 
management of the key issues and risks impacting the business. 
The Board sets Corero’s overall strategic direction, reviews 
management performance and ensures that the Group has the 
necessary financial and human resources in place to meet its 
objectives. The Board is satisfied that the necessary controls and 
resources exist within the Group to enable these responsibilities 
to be met.
Operational management of the Group is delegated to the Chief 
Executive Officer.
The Board of Directors comprises the Non-Executive Chairman, 
three executive Directors and one Non-Executive Director whose 
Board and Committee responsibilities as at 5 April 2017 are set 
out below:
Board Audit Remuneration
Jens Montanana Chairman Member Chairman
Ashley Stephenson Member
Andrew Lloyd Member
Andrew Miller Member
Richard Last Member Chairman Member
The composition of the Board of Directors is reviewed regularly. 
Appropriate training, briefings, and induction are available to all 
Directors on appointment and subsequently as necessary, taking 
into account existing qualifications and experience.
Executive Directors’ normal retirement age is 60 and Non-
Executive Directors’ normal retirement age is 65. One third of all 
Directors are subject to annual reappointment by shareholders as 
well as any Director appointed by the Board in the period since the 
last AGM. Ashley Stephenson and Andrew Lloyd will be offering 
themselves for re-election at the forthcoming AGM.
The Board of Directors meets on average once a quarter and 
additional meetings are held each year to review and approve the 
Group’s strategy and financial plans for the coming year. Each 
Director is provided with sufficient information to enable them to 
consider matters in good time for meetings and enable them to 
discharge their duties properly.
All Directors have access to the advice and services of the Company 
Secretary. There is also a procedure in place for any Director to 
take independent professional advice if necessary, at the 
Company’s expense.
The Board also ensures that the principal goal of the Company is to 
create shareholder value, while having regard to other stakeholder 
interests and takes responsibility for setting the Company’s values 
and standards. 
There is a documented schedule of matters reserved for the  
Board, the most significant of which are:
• responsibility for the overall strategy and management of  
the Group;
• approval of strategic plans and budgets and any material 
changes to them;
• approval of the acquisition or disposal of subsidiaries and  
major investments, projects and contracts;
• oversight of the Group’s operations ensuring competent and 
prudent management, sound planning and management of 
adequate accounting and other records;
• changes relating to the Group’s capital structure;
• final approval of the annual and interim financial statements 
and accounting policies;
• approval of the dividend policy;
• ensuring an appropriate system of internal control and risk 
management is in place;
• approval of changes to the structure, size and composition of 
the Board;
• review of the management structure and senior management 
responsibilities;
• with the assistance of the Remuneration Committee, approval 
of remuneration policies across the Group;
• delegation of the Board’s powers and authorities;
• consideration of the independence of the Non-Executive 
Directors; and
• receiving reports on the views of the Company’s shareholders Corero Network Security plc Annual Report & Accounts 2016 20
Corporate Governance Report continued
In the year ended 31 December 2016, the Board received monthly 
briefings on the Group’s performance (including detailed 
commentary and analysis), key issues and risks affecting the 
Group’s business. 
The Company maintains liability insurance for its Directors and 
Officers. The Company has also entered into indemnity agreements 
with the Directors, in terms of which the Company has indemnified 
its Directors, subject to the Companies Act limitations, against any 
liability arising out of the exercise of the Directors’ powers, duties 
and responsibilities as a Director or Officer.
In the year ended 31 December 2016 the Board met on nine 
scheduled occasions; further meetings and conference calls were 
held as and when necessary. Details of Directors’ attendance at 
scheduled meetings in the year to 31 December 2016 is shown in 
the table below: 
Meetings attended
Jens Montanana 9/9
Ashley Stephenson 9/9
Andrew Miller 9/9
Richard Last 9/9
Andrew Lloyd 9/9
Board Committees
The Company has an Audit Committee and Remuneration 
Committee, details of which are set out below.
Audit Committee
The Audit Committee members comprise Richard Last, who is the 
Committee Chairman, and Jens Montanana, and meets twice a year. 
The Group Chief Financial Officer and Group Financial Controller, and 
the Company’s external auditors attend the meetings. The Audit 
Committee considers the adequacy and effectiveness of the risk 
management and control systems of the Group. It reviews the scope 
and results of the external audit, its cost effectiveness and the 
objectivity of the auditors. It also reviews, prior to publication, the 
interim financial statements, preliminary results announcement, the 
annual financial statements and the other information included in 
the annual report. 
The Audit Committee met twice in the year ended 31 December 
2016. The attendance of individual Committee members at Audit 
Committee meetings in the year to 31 December 2016 is shown in 
the table below: 
Meetings attended
Richard Last 2/2
Jens Montanana 2/2
Remuneration Committee
The Remuneration Committee comprises Jens Montanana, who is 
the Committee Chairman, and Richard Last. Jens Montanana was 
appointed Chairman of the Remuneration Committee on 2 January 
2017 following Andrew Lloyd’s appointment as an Executive 
Director. The Remuneration Committee meets at least twice a year 
and reviews and advises upon the remuneration and benefits 
packages of the Executive Directors. The remuneration of the 
Chairman and Non-Executive Directors is decided upon by the 
Board of Directors. 
In the year ended 31 December 2016, the Remuneration Committee 
Board met on three scheduled occasions; further meetings and 
conference calls were held as and when necessary. The attendance 
of individual Committee members at Remuneration Committee 
meetings in the year to 31 December 2016 is shown in the 
table below: 
Meetings attended
Andrew Lloyd 3/3
Jens Montanana 3/3
Richard Last 3/3
Nominations Committee
Due to the size of the Board of Directors, the Directors do not 
consider there to be any need for a nominations committee. Issues 
that would normally be dealt with by a nominations committee are 
handled by the Board of Directors. The Board of Directors will 
review the need for a nominations committee on a regular basis. Financial Statements Notice of AGM Corporate Directory Strategic Report Governance
Corero Network Security plc Annual Report & Accounts 2016 21
Internal controls
The Directors are responsible for the Group’s system of internal 
control and for reviewing its effectiveness whilst the role of 
management is to implement policies on risk management and 
control. The Group’s system of internal control is designed to 
manage, rather than eliminate, the risk of failure to achieve the 
Group’s business objectives and can only provide reasonable, and 
not absolute, assurance against material misstatement or loss.
The Board continually reviews the effectiveness of other internal 
controls, including financial, operational, compliance controls and 
risk management. There were no specific reports tabled during the 
year ended 31 December 2016. 
The Group operates a risk management process, which is 
embedded in normal management and governance processes. As 
part of the annual and budgeting process, the Group documents 
the significant risks identified, the probability of those risks 
occurring, their potential impact and the plans for managing and 
mitigating each of those risks. 
The Group operates a series of controls to meet its needs. These 
controls include, but are not limited to, the annual strategic 
planning and budgeting process, a clearly defined organisational 
structure with authorisation limits, reviews by senior management 
of monthly financial and operating information including 
comparisons with budgets, monthly treasury and cash flow 
reports and forecasts to the Board. 
The Audit Committee receives reports from management and 
observations from the external auditors concerning the system of 
internal control and any material control weaknesses. Significant risk 
issues, if any, are referred to the Board of Directors for consideration.
The Board of Directors makes an annual assessment of the 
effectiveness of the Group’s internal control system, including 
financial, operational and compliance controls, before making 
this statement. The Board of Directors also considers issues 
included in reports received during the year, how the risks have 
changed during the year and reviews any reports prepared on 
internal controls by management and any issues identified by 
external auditors. 
The Board of Directors does not believe it is currently appropriate 
to establish a separate, independent internal audit function given 
the size of the Group.
Remuneration report
The Remuneration Committee’s principal function is to set 
remuneration of the Group’s Executive Directors and management 
to ensure they are fairly compensated. 
Basic salaries are set to ensure high quality Executive Directors 
and management are attracted and retained by the Group. They 
reflect the knowledge, skill and experience of each individual 
Director. Bonuses are non-pensionable and only payable if the 
Remuneration Committee assesses the Director’s achievements 
as worthy of the award.
The Remuneration Committee is also responsible for ensuring the 
Group’s share option schemes are operated properly. Details of 
Directors’ share options at 31 December 2016 are disclosed in note 
26 of the financial statements.
Details of Directors’ remuneration for the year ended 31 December 
2016 is set out in note 23 of the financial statements. Jens 
Montanana has elected to waive the fees payable to him for the 
financial year ended 31 December 2016.
Ashley Stephenson, Executive Director, has a service agreement 
which provides for the payment of six months’ base salary if the 
agreement is terminated by the Company without cause. 
Andrew Lloyd, Executive Director, has an employment agreement 
which can be terminated by either party on not less than three 
months’ written notice increasing by one month at the end of each 
complete 12 month period of continuous employment provided 
that the notice period shall not exceed six months in total. The 
agreement contains provisions for early termination in 
certain circumstances.
Andrew Miller, Executive Director, has an employment agreement 
which can be terminated by either party on not less than three 
months’ written notice increasing by one month at the end of each 
complete 12 month period of continuous employment provided 
that the notice period shall not exceed six months in total. The 
agreement contains provisions for early termination in 
certain circumstances.
None of the Non-Executive Directors has a service agreement. 
Letters of appointment for Jens Montanana and Richard Last are 
for 12 month terms and provide that the appointment may be 
terminated by either party giving to the other not less than three 
months’ notice.  Corero Network Security plc Annual Report & Accounts 2016 22
Directors’ Report
for the year ended 31 December 2016
Group results
The Group’s Statement of Comprehensive Income on page 27 
shows a loss for the year of $17.2 million (2015: $11.2 million).
Going concern
The financial position and cash flows are described in the Financial 
Review on pages 12 and 13. An indication of likely future 
developments affecting the Company is included in the Strategic 
Report on pages 8 and 14. 
The Directors are satisfied, in view of the cash reserves of  
$2.9 million (2015: $2.7 million) held on the balance sheet at  
31 December 2016 and the cash of £5.6 million ($7.0 million) to be 
raised by the proposed fund raise to be announced by the Company 
on 6 April 2017 (‘Equity Fund Raise’), that the Company and the Group 
have adequate resources to continue operating for the foreseeable 
future. A circular containing a notice of General Meeting will be sent 
to shareholders on 6 April 2017. In the notice of General Meeting 
Independent Shareholders will be asked to consider and vote on the 
Whitewash resolution for Jens Montanana’s proposed participation 
in the Equity Fund Raise, and the Shareholders as a whole will be 
asked to approve the Placing. In the event that a Rule 9 Waiver is not 
obtained or the authorities necessary to authorise the Directors to 
complete the Placing are not approved by the requisite majorities, 
the Placing will not proceed and the Company will be required to 
seek further working capital funding in short order.
The Directors are of the opinion that the Group has adequate 
working capital to continue as a going concern for the foreseeable 
future and, in particular, for a period of at least 12 months from  
the date of approval of these financial statements. 
The Board are confident that the Equity Fund Raise will be 
completed successfully.
For this reason, the going concern basis has been adopted in 
preparing the accounts.
Dividends
The Directors have not recommended a dividend (2015: $nil).
Share capital
The issued share capital of the Company, together with details  
of movements in the Company’s issued share capital during the 
financial period are shown in note 21 to the financial statements.  
As at the date of this report, 203,417,642 ordinary shares of 1p each 
(‘ordinary shares’) were in issue and fully paid with an aggregate 
nominal value of $3.1 million.
The market price of the ordinary shares at 31 December 2016 was 8.75p 
and the shares traded in the range 8.375p to 30.0p during the year.
Issue of shares
At the AGM held on 15 June 2016, shareholders granted authority to 
the Board under the Articles and section 551 of the Companies Act 
2006 (the ‘Act’) to exercise all powers of the Company to allot 
relevant securities up to an aggregate nominal amount of £552,125. 
It is proposed at the forthcoming AGM to renew the authority to 
allot relevant securities up to an aggregate nominal amount of 
£678,058, being one-third of the nominal value of the current 
issued share capital.
Also at the AGM held on 15 June 2016, shareholders granted 
authority to the Board under the Articles and section 570(1) of the 
Act to exercise all powers of the Company to allot equity securities 
wholly for cash up to an aggregate nominal amount of £165,637 
without application of the statutory pre-emption rights contained 
in section 561 (1) of the Act. It is proposed at the forthcoming AGM 
to renew the authority to allot relevant securities wholly for cash 
up to an aggregate nominal amount of £203,418 being 10% of the 
current nominal value of the issued share capital, without 
application of the statutory pre-emption rights.
Substantial shareholdings
The Company has been notified of the following holdings that are 
3% or more of the Group’s ordinary share capital as at 5 April 2017:
Ordinary shares of 1 pence each Number %
Jens Montanana* 69,303,990 34.1
Richard John Koch 26,370,500 13.0
Herald Investment Management 16,288,241 8.0
Sabvest Capital Holdings Limited 16,500,000 8.1
Peter Kennedy Gain** 10,733,333 5.3
* of which 21,700,181 are held in the name of JPM International Limited, which is wholly  
owned by Jens Montanana, and 29,850,000 are held in the name of The New  
Millennium Technology Trust of which Jens Montanana is a beneficiary. 
**of which 4,900,000 shares are held in the name of Draper Gain Investments Ltd
Directors’ indemnities
The Company has qualifying third party indemnity provisions in 
place for the benefit of its Directors. These remain in force at the 
date of this report. Financial Statements Notice of AGM Corporate Directory Strategic Report Governance
Corero Network Security plc Annual Report & Accounts 2016 23
Financial risk management objectives  
and policies
The Group’s business activities expose it to a variety of financial 
risks. The policies for managing these risks are described below:
• Liquidity risk – arises from the Group’s management of working 
capital and finance charges. It is the risk that the Group will 
encounter difficulty in meeting its financial obligations as they 
fall due. Liquidity risk is managed by the finance function. 
Budgets are agreed by the Board annually in advance enabling 
the Group’s cash flow requirements to be anticipated.
• Credit risk – arises from cash and cash equivalents and from 
credit exposures to the Group’s customers including 
outstanding receivables and committed transactions. Credit risk 
is managed with regular reports of exposures reviewed by 
management. The Group does not set individual credit limits 
but will seek to ensure that customers enter into legally 
enforceable contracts that include settlement terms that 
demonstrate the customers’ commitment to the transaction 
and minimise this risk exposure.
The amounts of trade receivables presented in the Statement of 
Financial Position are shown net of allowances for doubtful 
accounts estimated by management based on prior experience and 
their assessment of the current economic environment (note 14).
The Group has no significant concentration of credit risk, with 
exposure spread over a number of customers. 
The credit risk on liquid funds and financial instruments is limited 
because the counterparties are banks with acceptable credit 
ratings assigned by international credit rating agencies.
• Cash flow interest rate risk – the Group’s policy is to minimise 
interest rate cash flow risk exposure on its financing. The 
Group’s policy is to balance the risk in relation to cash balances 
held by spreading these across a number of financial institutions 
as opposed to maximising interest income
• Currency risk – there is no material impact on the Group’s profit 
or loss for the year from exchange rate movements, as foreign 
currency transactions are entered into by Group companies 
whose functional currency is aligned with the currencies in 
which it transacts. An exchange rate risk does arise in relation 
to equity fund raises which are in GBP, given the Company’s AIM 
listing, to the extent these funds are required to support US 
Dollar denominated funding requirements. The Group has not 
hedged such GBP fund raises in the past but will review this 
policy based on the expected timing of US Dollar and GBP 
operational funding requirements.
The principal risk which applies to the parent Company’s financial 
statements is the risk that the returns generated by the 
subsidiaries might not support the carrying value of the cost  
of the investments in subsidiaries. The carrying value is tested  
at least annually for impairment and if necessary impaired. 
Directors and Directors’ interests
The Directors who served in office during the year and up to the date of this report and their interests in the Company’s  
shares were as follows:
5 April 2017 31 December 2016 31 December 2015
Number % Number % Number %
Jens Montanana 69,303,990 34.1 69,303,990 34.1 65,440,354 39.5
Ashley Stephenson 38,000 0.0 38,000 0.0 38,000 0.0
Andrew Miller 891,437 0.4 891,437 0.4 823,255 0.5
Richard Last 1,316,667 0.7 1,316,667 0.7 1,316,667 0.8
Andrew Lloyd – – – – – –
The biographical details of the current Directors of the Company are given on pages 16 and 17.
Jens Montanana, Ashley Stephenson, Andrew Miller, Richard Last and Andrew Lloyd hold share options, details of which are shown in note 
26 to the financial statements.  Corero Network Security plc Annual Report & Accounts 2016 24
Directors’ Report continued
for the year ended 31 December 2016
Capital management
The Group monitors its available capital, which it considers to be all 
components of equity against its expected requirements. 
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 ensure that sufficient funds can be raised for 
investing activities. In order to maintain or adjust the capital 
structure, the Company may return capital to shareholders, issue 
new shares, or sell assets. The Group does not review its capital 
requirements according to any specified targets or ratios.
Treasury management
The objectives of Group treasury policies are to ensure that 
adequate financial resources are available for development of the 
business while at the same time managing financial risks. Financial 
instruments are used to reduce financial risk exposures arising from 
the Group’s business activities and not for speculative purposes.
The Group’s treasury activities are managed by the Group finance 
function under the direction of the Group Financial Controller. The 
Group Financial Controller reports to the Board on the 
implementation of Group treasury policy.
Environment
The Group’s activities are primarily office based and as such the 
Directors believe that there is no significant environmental impact 
arising from the Group’s activities. The Group complies with local 
WEEE regulations. No environmental performance indicators are 
therefore included within this report. The Group’s environmental 
policy states: “We endeavour to recycle appropriate materials 
where possible and to efficiently use natural resources and energy 
supplies so as to minimise our environmental impact. We will 
comply with the relevant statutes and legislation. Furthermore, 
employees are encouraged to be environmentally aware. Company 
cars are not provided.”
Research and development
The development of computer software is an integral part of the 
Group’s business and the Group continues to develop its core 
software in response to user demand, and particularly the 
changing IT security threat landscape, and changes in software 
technology. During the year the Group enhanced its existing 
products and developed new products. A capital investment of $2.5 
million (2015: $2.3 million) was made during the year. Amortisation 
of $2.3 million (2015: $3.3 million) and costs not capitalised of $2.4 
million (2015: £2.4 million) were charged to the Statement of 
Comprehensive Income during the year. 
Employees
The quality and commitment of the Group’s employees has  
played a major role in the Company’s progress. This has been 
demonstrated in many ways, including strong customer 
satisfaction, the development of new product offerings and the 
flexibility employees have shown in adapting to changing business 
requirements. The Group operates sales commission, incentive 
bonus plans and share option plans to provide incentives for 
achievements which add value to the business.
Post balance sheet event
On 6 April 2017 Corero will announce a conditional placing and 
subscription to raise $7.0 million before expenses. This Equity Fund 
Raise is subject to shareholder approval at a general meeting of the 
Company on 24 April 2017.
Annual General Meeting
The AGM will be held at the offices of Redleaf Communications, 
First Floor, 4 London Wall Buildings, London, EC2M 5NT, on 20 June 
2017 at 10.00 a.m. The notice convening the meeting is on page 58 
together with details of the business to be considered. 
Auditors
In so far as each Director is aware:
• there is no relevant audit information of which the Company’s 
auditors are unaware; and
• the Directors have taken all the steps that they ought to have 
taken to make themselves aware of any relevant audit 
information and to establish that the Company’s auditors are 
aware of that information.
A resolution to re-appoint BDO LLP for the ensuing year will be 
proposed at the AGM.
By order of the Board
Duncan Swallow
Company Secretary
5 April 2017 Financial Statements Notice of AGM Corporate Directory Strategic Report Governance
Corero Network Security plc Annual Report & Accounts 2016 25
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and Financial Statements 
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial 
statements for each financial year. Under that law the Directors 
have elected to prepare the Group and Company financial 
statements in accordance with International Financial Reporting 
Standards as adopted by the European Union (IFRSs). Under 
company law the Directors must not approve the financial 
statements unless they give a true and fair view of the state of 
affairs of the Group and parent company and of the profit or loss of 
the Group for that period. The Directors are also required to 
prepare financial statements in accordance with the rules of the 
London Stock Exchange for companies trading securities on the 
AIM. In preparing these financial statements, the Directors are 
required to:
• select suitable accounting policies and then apply them 
consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with 
IFRSs as adopted by the European union, subject to any 
material departures disclosed and explained in the financial 
statements; and
• prepare the financial statements on the going concern basis 
unless it is inappropriate to presume that the Group will 
continue in business.
The Directors are responsible for keeping adequate accounting 
records that are sufficient to show and explain the Group’s 
transactions and disclose with reasonable accuracy at any time the 
financial position of the Group and enable them to ensure that the 
financial statements comply with the Companies Act 2006. They 
are also responsible for safeguarding the assets of the Group and 
hence for taking reasonable steps for the prevention and detection 
of fraud and other irregularities. 
The Directors are responsible for ensuring the annual report and 
the financial statements are made available on a website. Financial 
statements are published on the Company’s website in accordance 
with legislation in the United Kingdom governing the preparation 
and dissemination of financial statements, which may vary from 
legislation in other jurisdictions. The maintenance and integrity of 
the Company’s website is the responsibility of the Directors. The 
Directors’ responsibility also extends to the ongoing integrity of 
the financial statements contained therein. 26 Corero Network Security plc Annual Report & Accounts 2016
Independent Auditor’s Report to the members  
of Corero Network Security plc
We have audited the financial statements of Corero Network Security plc for the year ended 31 December 2016 which comprise the 
Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated 
Statement of Cash Flow, the Consolidated and Company Statements of Changes in Equity and the related notes.  The financial reporting 
framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial 
Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the 
preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom 
Generally Accepted Accounting Practice). 
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 auditors
As explained more fully in the statement of Directors’ responsibilities, 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 Financial Reporting Council’s (FRC’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 FRC’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 the parent Company’s affairs as at 31 December 2016 
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 European Union;
• the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union 
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, based on the work undertaken in the course of the audit:
• the information given in the strategic report and directors’ report for the financial year for which the financial statements are 
prepared is consistent with the financial statements; and
• the strategic report and directors’ report have been prepared in accordance with applicable legal requirements. 
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of the audit, 
we have not identified material misstatements in the strategic report or the directors’ report.
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.
Julian Frost (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London 
 
5 April 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 27 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2016
Note
Total 
2016 
$’000
Total 
2015
$’000
Revenue 8,772 8,340
Cost of sales (2,071) (2,073)
Gross profit 6,701 6,267
Operating expenses before highlighted items (11,847) (12,699)
Depreciation and amortisation of intangible assets 9,10,11 (3,128) (5,174)
Impairment of goodwill 8 (8,992) –
Operating expenses (23,967) (17,873)
Operating loss (17,266) (11,606)
Finance income 9 11
Finance costs (6) (20)
Loss before taxation (17,263) (11,615)
Taxation 6 85 382
Loss for the year (17,178) (11,233)
Other comprehensive expense
Difference on translation of UK functional currency entities (2,355) (482)
Total comprehensive expense for the year (19,533) (11,715)
Total loss for the year attributable to: 
Equity holders of the parent (17,178) (11,233)
Total (17,178) (11,233)
Total comprehensive expense for the year attributable to:
Equity holders of the parent (19,533) (11,715)
Total (19,533) (11,715)
 
Basic and diluted loss per share
2016 
Cents
2015
Cents
Basic and diluted loss per share 7 (9.0) (8.5) 
The notes on pages 33 to 57 form part of these financial statements. 28 Corero Network Security plc Annual Report & Accounts 2016
Consolidated Statement of Financial Position
as at 31 December 2016
Note
2016
 $’000
2015 
$’000
Assets
Non-current assets
Goodwill 8 8,991 17,983
Acquired intangible assets 9 82 375
Capitalised development expenditure 10 7,901 7,620
Property, plant and equipment 11 970 893
Trade and other receivables 14 80 228
18,024 27,099
Current assets
Inventories 13 65 661
Trade and other receivables 14 2,227 3,738
Cash and cash equivalents 2,940 2,706
5,232 7,105
Liabilities
Current Liabilities
Trade and other payables 15 (1,728) (2,551)
Deferred income 18 (2,457) (3,791)
(4,185) (6,342)
Net current assets 1,047 763
Non-current liabilities
Deferred income 18 (855) (1,439)
Deferred taxation 19 - (85)
(855) (1,524)
Net assets 18,216 26,338
Total equity attributable to owners of the parent
Ordinary share capital 21 3,119 2,573
Capital redemption reserve 7,051 7,051
Share premium 22 67,681 56,835
Share options reserve 301 282
Translation reserve (2,123) 232
Retained earnings (57,813) (40,635)
Total equity 18,216 26,338
These financial statements were approved by the Board of Directors on 5 April 2017 and signed on their behalf.
Andrew Miller
Director
The notes on pages 33 to 57 form part of these financial statements. 29 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
Company Statement of Financial Position
as at 31 December 2016
Note
2016 
$’000
2015 
$’000
Assets
Non-current assets
Investments in subsidiaries 12 21,137 28,797
Trade and other receivables 14 5,409 15,958
26,546 44,755
Current assets
Cash and cash equivalents 2,504 2,463
Liabilities
Current Liabilities
Trade and other payables 15 – (202)
Net current assets 2,504 2,261
Net assets 29,050 47,016
Equity
Ordinary share capital 21 3,119 2,573
Capital redemption reserve 7,051 7,051
Share premium 22 67,681 56,835
Share options reserve 301 282
Translation reserve (13,157) (3,755)
Retained earnings (35,945) (15,970)
Total equity 29,050 47,016
The Company financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework. 
the Company has taken advantage of the following disclosure exemptions:
The requirements of IAS 7 Statement of Cash Flows, IFRS 7 Financial Instruments: Disclosures and IAS 24 Related Party Disclosures.
The Company has taken advantage of section 408 of the Companies Act 2006 and has not included an income statement in these 
financial statements. The parent Company’s loss for the year was $20.0 million (2015: loss $17.5 million).
These financial statements were approved by the Board of Directors on 5 April 2017 and signed on their behalf.
Andrew Miller
Director
The notes on pages 33 to 57 form part of these financial statements.  30 Corero Network Security plc Annual Report & Accounts 2016
Consolidated Statement of Cash Flow
for the year ended 31 December 2016
Cash flows from operating activities Note
Group
2016 
$’000
2015
 $’000
Loss for the year (17,178) (11,233)
Adjustments for non-cash movements:
Amortisation of acquired intangible assets 9 325 1,210
Impairment loss on intangible assets 8 8,992 –
Amortisation and impairment of capitalised development expenditure 10 2,252 3,289
Depreciation 11 551 675
Loss on sale of property, plant and equipment 9 –
Finance income (9) (11)
Finance expense 6 20
Taxation 6 (85) (382)
Share-based payment charge/(credit) 26 19 (3)
Decrease in inventories 596 88
Decrease/(increase) in trade and other receivables 1,605 (1,167)
Decrease in payables (2,623) (168)
Net cash used in operating activities (5,540) (7,682)
Cash flows from investing activities
Purchase of intangible assets 9 (32) (37)
Capitalised development expenditure 10 (2,533) (2,285)
Purchase of property, plant and equipment 11 (644) (392)
Net cash used in investing activities (3,209) (2,714)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 11,392 7,604
Finance income 9 11
Finance expense (6) (20)
Repayment of credit facility – (20)
Net cash from financing activities 11,395 7,575
Effects of exchange rates on cash and cash equivalents (2,412) (509)
Net increase/(decrease) in cash and cash equivalents 234 (3,330)
Cash and cash equivalents at 1 January 2,706 6,036
Cash and cash equivalents at 31 December 2,940 2,706
The notes on pages 33 to 57 form part of these financial statements. 31 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
Consolidated Statement of Changes in Equity
for the year ended 31 December 2016
Share 
capital 
$’000
Capital 
redemption 
reserve
$’000
Share 
premium 
account 
$’000
Share 
options 
reserve
 $’000
Translation 
reserve 
$’000
Retained 
earnings 
$’000
Total 
attributable 
to equity 
holders of 
the parent 
$’000
1 January 2015 8,855 – 50,000 285 714 (29,402) 30,452
Loss for the year – – – – – (11,233) (11,233)
Other comprehensive income – – – – (482) – (482)
Total comprehensive expense  
for the year – – – – (482) (11,233) (11,715)
Contributions by and distributions 
to owners
Share-based payments – – – (3) – – (3)
Issue of share capital 769 – 6,835 – – – 7,604
Shares purchased for cancellation (7,051) 7,051 – – – – –
Total contributions by and 
distributions to owners (6,282) 7,051 6,835 (3) – – 7,601
31 December 2015 and  
1 January 2016 2,573 7,051 56,835 282 232 (40,635) 26,338
Loss for the year – – – – – (17,178) (17,178)
Other comprehensive income – – – – (2,355) – (2,355)
Total comprehensive expense  
for the year – – – – (2,355) (17,178) (19,533)
Contributions by and distributions 
to owners
Share-based payments – – – 19 – – 19
Issue of share capital 546 – 10,846 – – – 11,392
Total contributions by and 
distributions to owners 546 - 10,846 19 – – 11,411
31 December 2016 3,119 7,051 67,681 301 (2,123) (57,813) 18,216
The share capital comprises the nominal values of all shares issued.
The capital redemption reserve comprises the amount transferred from deferred shares on redemption of the deferred shares.
The share premium account comprises the amounts subscribed for share capital in excess of the nominal value.
The share options reserve represents the cost to the Group of share options. 
The translation reserve arises on retranslating the net assets of UK operations into US dollars.
The retained earnings are all other net gains and losses and transactions with owners not recognised elsewhere.
The notes on pages 33 to 57 form part of these financial statements. 32 Corero Network Security plc Annual Report & Accounts 2016
Company Statement of Changes in Equity
for the year ended 31 December 2016
Share 
capital 
$’000
Capital 
redemption 
reserve
$’000
Share 
premium 
account 
$’000
Share 
options 
reserve 
$’000
Translation 
reserve 
$’000
Retained 
earnings 
$’000
Total 
equity 
$’000
1 January 2015 8,855 - 50,000 285 (219) 1,487 60,408
Loss for the year – - – – – (17,457) (17,457)
Other comprehensive income – - – – (3,536) – (3,536)
Total comprehensive expense  
for the year – - – – (3,536) (17,457) (20,993)
Contributions by and 
distributions to owners
Share-based payments – – – (3) – – (3)
Issue of share capital 769 – 6,835 – – – 7,604
Shares purchased for cancellation (7,051) 7,051 – – – – –
Total contributions by and 
distributions to owners (6,282) 7,051 6,835 (3) – – 7,601
31 December 2015 and 1 January 
2016 2,573 7,051 56,835 282 (3,755) (15,970) 47,016
Loss for the year – - – – – (19,975) (19,975)
Other comprehensive income – - – – (9,402) – (9,402)
Total comprehensive expense  
for the year – - – – (9,402) (19,975) (29,377)
Contributions by and 
distributions to owners
Share-based payments – – – 19 – – 19
Issue of share capital 546 – 10,846 – – – 11,392
Total contributions by and 
distributions to owners 546 – 10,846 19 – – 11,411
31 December 2016 3,119 7,051 67,681 301 (13,157) (35,945) 29,050
The notes on pages 33 to 57 form part of these financial statements.  33 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
Notes to the Financial Statements
1. General information
Presentation currency
These consolidated financial statements are presented in US Dollars (“$”) which represents the presentation currency of the Group.  
The average $-GBP sterling (“GBP”) exchange rate, used for the conversion of the Statement of Comprehensive Income, for the 12 months 
ended 31 December 2016 was 1.36 (2015: 1.53). The closing $-GBP exchange rate, used for the conversion of the Group’s assets and 
liabilities, at 31 December 2016 was 1.23 (2015: 1.48). 
Corero Network Security plc is a public limited company incorporated in the United Kingdom under the Companies Act 2006 and 
registered in England and Wales. The functional currency of the Company is GBP.
2. Significant accounting policies
2.1 Basis of preparation
The Group financial statements have been prepared in accordance with EU endorsed International Financial Reporting Standards (IFRS), 
International Financial Reporting Interpretations Committee (IFRIC) interpretations and those parts of the Companies Act 2006 
applicable to companies reporting under IFRS. The parent Company financial statements have been prepared in accordance with FRS 101 
(Financial Reporting Standard 101) ‘Reduced Disclosure Framework’ for the first time this year.  The Directors do not consider this change 
to have had a material effect on the financial statements. 
2.2 Going Concern
The financial statements have been prepared on a going concern basis. 
The Directors have prepared detailed income statement, balance sheet and cash flow projections for the period to 31 December 2018. 
These include cash of £5.6 million to be raised by the proposed Equity Fund Raise to be announced by the Company on 6 April 2017. The 
cash flow projections have been subjected to sensitivity analysis at the revenue, cost and combined revenue and cost levels. The cash flow 
projections show that the Group will maintain a positive cash balance until at least December 2018. 
A circular containing a notice of General Meeting will be sent to shareholders on 6 April 2017. In the notice of General Meeting, 
Independent Shareholders will be asked to consider and vote on the Whitewash resolution for Jens Montanana’s proposed participation  
in the Equity Fund Raise as required by the Takeover Code (due to the fact that Jens Montanana’s equity interest exceeds 30% and will 
increase as a result of the proposed Equity Fund Raise), and the Shareholders as a whole will be asked to approve the Placing. In the event 
the Placing (including the Whitewash resolution) is not approved by the requisite majorities, the Placing will not proceed and the 
Company will be required to seek further working capital funding in short order. The Board is confident that the Equity Fund Raise will  
be completed successfully.
As a result, the Directors are of the opinion that the Group will have access to adequate working capital to continue as a going concern 
for the foreseeable future and, in particular, for a period of at least 12 months from the date of approval of these financial statements. 
2.3 Basis of consolidation
The consolidated financial statements incorporate the results, assets, liabilities and cash flows of the Company and each of its 
subsidiaries for the financial year ended 31 December 2016. 
Subsidiaries are entities controlled by the Group. Control is deemed to exist when the Group has all of the following elements a) power over 
the subsidiary, b) exposure or rights to variable returns from that subsidiary, c) ability to use its power to affect the amount of the return 
from the subsidiary. The results, assets, liabilities and cash flows of subsidiaries are included in the consolidated financial statements from the 
date control commences until the date that control ceases.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with 
those used by the Group.
Intra-group balances and transactions are eliminated on consolidation.
2.4 Business combinations
The acquisition method is used to account for all acquisitions. The cost of an acquisition is measured at the fair values, on the date of 
exchange, of assets given, liabilities incurred or assumed, and equity instruments issued. 
At the date of acquisition, the identifiable assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values. 
Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. 34 Corero Network Security plc Annual Report & Accounts 2016
Notes to the Financial Statements continued
2. Significant accounting policies continued
2.5 Revenue
Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for services 
provided in the normal course of business, net of all related discounts and sales tax.
The Group has adopted the following policy in respect of revenue recognition:
1. Hardware and Software Products
When a sales arrangement contains multiple elements, such as hardware and software products, licenses and/or services, the Group 
allocates revenue to each element based on a selling price hierarchy, having evaluated each deliverable in an arrangement to determine 
whether they represent separate units of accounting. A deliverable constitutes a separate unit of accounting when it has standalone value.
The selling price for a deliverable is based on its vendor specific objective evidence (“VSOE”) if available, third party evidence (“TPE”)  
if VSOE is not available, or best estimated selling price (“BESP”) if neither VSOE nor TPE is available. In multiple element arrangements 
where more-than-incidental software deliverables are included, revenue is allocated to each separate unit, accounting for each of the 
non-software deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the 
arrangement based on the aforementioned selling price hierarchy.
The Group establishes the VSOE of selling price using the price charged for a deliverable when sold separately. The TPE of selling price  
is established by evaluating similar and interchangeable competitor products or services in standalone sales to similarly situated 
customers. As Corero’s hardware product with embedded software is generally not sold on a standalone basis, the Company determined 
that VSOE cannot be obtained.  Management has also determined that third party pricing for similar products sold separately is not 
obtainable or reliable so TPE cannot be used, therefore BESP is used (note 3). 
2. Consulting and Professional Services
Revenue from the provision of consultancy and professional services is recognised as the work is performed.
3. Maintenance and Support Services
Revenue is recognised on a straight line basis over the life of the agreement.
2.6 Government grants
Government grants are recognised at fair value when there is reasonable assurance that the Group will comply with the conditions 
attaching to them and the grant will be received. Grants related to purchase of assets are treated as deferred income and allocated to 
Statement of Comprehensive Income over the useful lives of the related assets while grants related to expenses are netted off against 
the related item of expenditure in the Statement of Comprehensive Income - Profit and Loss. 
2.7 Cost of sales
Cost of sales includes all direct costs associated with revenue generation, including services delivery, operation costs and amounts 
charged by external third parties for services and goods directly related to revenue. Examples of such costs would include, but not be 
limited to, royalties and third party hardware and software costs. 
2.8 Foreign currencies
Transactions in foreign currencies are translated at the exchange rate ruling at the date of each transaction. Foreign currency monetary 
assets and liabilities are retranslated using the exchange rates at the reporting date. Gains and losses arising from changes in exchange 
rates after the date of the transaction are recognised in profit or loss in the Statement of Comprehensive Income. 
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated at the exchange rate 
at the date of the original transaction.
In the consolidated financial statements, the net assets of the Group’s UK operations are translated from GBP into US dollars at the 
exchange rate at the reporting date. Income and expense items are translated into US dollars at the average exchange rates for the 
period. The resulting exchange differences are recognised in the translation reserve.  35 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
2.9 Intangible assets
Internally generated intangible assets
The Group’s internally generated intangible asset relates to its development expenditure.
Development expenditure is capitalised only when it is probable that future economic benefit will result from the project and the 
following criteria are met:
• the technical feasibility of the product has been ascertained;
• adequate, technical, financial and other resources are available to complete and sell or use the intangible asset;
• the Group can demonstrate how the intangible asset will generate future economic benefits and the ability to use or sell the 
intangible asset can be demonstrated;
• it is the intention of management to complete the intangible asset and use it or sell it; and 
• the development costs can be measured reliably.
Expenditure not meeting these criteria is expensed in the Statement of Comprehensive Income – Profit and Loss.
After initial recognition, internally generated intangible assets are carried at cost less accumulated amortisation and any impairment 
losses. Amortisation is charged once the asset is capable of generating economic benefits. 
Acquired intangible assets
Identifiable intangible assets acquired as part of a business combination are initially recognised separately from goodwill, irrespective of 
whether the assets have been recognised by the acquiree before the business combination. An intangible asset is considered identifiable 
only if it is separable or if it arises from contractual or other legal rights, regardless of whether those rights are transferable or separable 
from the entity or from other rights and obligations.
Intangible assets acquired as part of a business combination and recognised by the Group are computer software, customer contracts 
and the related customer relationships.
Purchased computer software is carried at cost less accumulated amortisation and any impairment losses.
Customer contracts and the related customer relationships are carried at cost less accumulated amortisation and any impairment losses.
Amortisation
Intangible assets are amortised on a straight line basis, to reduce their carrying value to zero over their estimated useful lives. The 
following useful lives were applied during the year:
• Computer software acquired – 3 years straight line
• Customer contracts and the related customer relationships – 7 years straight line
• Capitalised development expenditure – 5 years straight line
Amortisation costs are included within operating expenses in the Statement of Comprehensive Income.
Methods of amortisation and useful lives are reviewed, and if necessary adjusted, at each reporting date. 36 Corero Network Security plc Annual Report & Accounts 2016
Notes to the Financial Statements continued
2. Significant accounting policies continued 
2.10 Property, plant and equipment
Depreciation commences when an asset is available for use. Depreciation is calculated so as to write off the cost or value of an asset,  
net of anticipated disposal proceeds, over the useful life of that asset as follows:
• Leasehold improvements – period of the lease straight line
• Computer equipment including evaluation units – 3 years straight line
• Fixtures and fittings – 5 years straight line
• Office equipment – 5 years straight line
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment losses. Cost comprises the purchase 
cost of property, plant and equipment together with any directly attributable costs. Computer equipment includes evaluation units used 
by customers during proof of concept trials. Evaluation units are stated at cost less accumulated depreciation. When an evaluation unit is 
retained by a customer as part of a sale the cumulative depreciation is reversed and the evaluation unit cost charged to cost of sales.
Subsequent costs are included in an assets carrying value or are recognised as a separate asset when it is probable that future economic 
benefits associated with the additional expenditure will flow to the Group and the cost of the item can be measured reliably. All other 
costs are charged to the Statement of Comprehensive Income – Profit and Loss as incurred.
Methods of depreciation, residual values and useful lives are reviewed, and if necessary adjusted, at each balance sheet date.
The gain or loss arising from the disposal or retirement of an item of property, plant and equipment is determined as the difference between 
the net disposal proceeds and the carrying amount of the item, and is included in the Statement of Comprehensive Income – Profit and Loss.
2.11 Inventory
Inventory is stated at the lower of cost or net realisable value. Cost is computed using standard cost, which approximates actual cost, on a first-in, 
first-out basis. Rapid technological change and new product introductions and enhancements could result in excess or obsolete inventory the 
value of which may not be recoverable. 
To minimise this risk, the Group evaluates inventory levels and expected usage on a periodic basis and records valuation allowances  
as required.
2.12 Impairment
At each reporting date, the Group assesses whether there is any indication that its assets have been impaired. If any such indication exists, 
the recoverable amount of the asset is estimated in order to determine the extent of any impairment. If it is not possible to estimate the 
recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined.
The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. The 
recoverable amount is calculated using the present value of the future cash flows expected to be derived from an asset or cash-
generating unit. This present value is derived using a cost of capital rate that reflects current market assessments of the time value of 
money and of the risks specific to the asset for which future cash flow estimates have not been adjusted. If the recoverable amount of an 
asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is 
recognised as an impairment loss.
An impairment loss relating to assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in the 
Statement of Comprehensive Income – Profit and Loss.
Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units or groups of 
cash-generating units that are expected to benefit from the synergies of the combination.
Goodwill is tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the carrying amount of the 
unit. The impairment loss is allocated to reduce the carrying amount of the assets of the unit by first reducing the carrying amount of 
any goodwill allocated to the cash-generating unit, and then reducing the carrying amounts of the other assets of the unit pro rata.
If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable 
amount but limited to the carrying amount that would have been determined had no impairment loss been recognised in prior years.  
A reversal of an impairment loss is recognised in the Statement of Comprehensive Income - Profit and Loss. Impairment losses on 
goodwill are not subsequently reversed. 37 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
2.13 Leases
Where substantially all of the risks and rewards incidental to ownership of a leased asset are transferred to the Company (a “finance 
lease”), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value 
of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease 
commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the 
Statement of Comprehensive Income – Profit and Loss over the period of the lease and is calculated so that it represents a constant 
proportion of the lease liability. The capital element reduces the balance owed to the lessor.
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Company (an “operating lease”), the 
total rentals payable under the lease are charged to the Statement of Comprehensive Income – Profit and Loss on a straight-line basis 
over the lease term. The aggregate benefit of lease incentives are recognised as a reduction of the rental expense over the lease term on 
a straight-line basis.
2.14 Investments in subsidiaries
In the Company’s separate financial statements, investments in subsidiaries are carried at cost less any impairment provisions.
2.15 Taxation
The tax expense represents the sum of current tax and deferred tax.
Current tax
Current tax is based on taxable profit for the year and is calculated using tax rates enacted or substantively enacted at the reporting 
date. Taxable profit differs from accounting profit either because items are taxable or deductible in periods different to those in 
which they are recognised in the financial statements, or because they are never taxable or deductible.
Deferred tax
Deferred tax on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts 
for financial reporting purposes is accounted for using the balance sheet liability method.
Using the balance sheet liability method, deferred tax liabilities are recognised in full for all taxable temporary differences and deferred 
tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary 
differences can be utilised. However, if the temporary difference arises from the initial recognition of goodwill or the initial recognition of 
an asset or liability in a transaction other than a business combination, that at the time of the transaction affects neither accounting nor 
taxable profit, it is not recognised as deferred tax asset or liability.
Deferred taxation is measured at the tax rates that are expected to apply when the asset is realised, or the liability settled, based on tax 
rates and laws enacted or substantively enacted at the reporting date.
2.16 Provisions
A provision is recognised when, as a result of a past event, the Group has a legal or constructive obligation, it is probable that an outflow 
of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of such an 
obligation can be made.
Provisions are measured at the best estimate of the expenditure required to settle the obligation at the reporting date. When the effect 
is material, the expected future cash flows required to settle the obligation are discounted at the pre-tax rate that reflects the current 
market assessments of the time value of money and the risks specific to the obligation.
2.17 Post-retirement benefits
The Group makes contributions in respect of certain employees to defined contribution pension plans under which it is required to pay 
fixed contributions to group and personal pension funds. 
Contributions to the schemes are based on a proportion of the employees’ earnings and are charged to the Statement of Comprehensive 
Income – Profit and Loss when incurred. The Group has no obligation beyond these contributions. 38 Corero Network Security plc Annual Report & Accounts 2016
Notes to the Financial Statements continued
2. Significant accounting policies continued
2.18 Financial instruments
The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an 
equity instrument in accordance with the substance of the contractual arrangement.
Financial assets and financial liabilities are recognised in the Group’s Statement of Financial Position when the Group becomes party to 
the contractual provisions of the instrument.
The particular recognition and measurement methods adopted for the Group’s financial instruments are disclosed below:
Trade and other receivables
Trade and other receivables are stated at their fair value at time of initial recognition, reflecting where material the time value of money. 
A provision for impairment of trade receivables is established when there is evidence that the Group will not be able to collect all 
amounts due according to the original terms of these receivables. The amount of the provision is the difference between the carrying 
value and the present value of estimated future cash flows, discounted at the original effective interest rate. 
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits on call with banks.
Trade and other payables
Trade and other payables are not interest bearing and are stated at their fair value at time of initial recognition. Thereafter they are 
accounted for at amortised cost.
2.19 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all its liabilities. 
Equity instruments issued by the Company are recorded at the proceeds received, net of directly attributable issue costs.
2.20 Employee share option schemes
The Group operates an equity-settled share-based compensation plan. The fair value of the employees’ services received in exchange for the 
grant of share options is measured at grant date and recognised as an expense on a straight line basis over the vesting period, based on 
the Group’s estimate of shares that will eventually vest. Fair value is determined by reference to the Black-Scholes option pricing model.
At each reporting date, the Group revises its estimate of the number of options that are expected to become exercisable. When share 
options are exercised, the proceeds received, net of any transaction costs, are credited to share capital (nominal value) and share premium.
2.21 Receivables-backed working capital facility
The Group has use of a receivables-backed working capital facility. Trade receivables are recognised as the Group retains the significant 
risks and benefits. The related funding is shown as a financial liability and accounted for on an amortised cost basis.
2.22 Standards and Interpretations not yet effective
There are no standards and interpretations other than IFRS 15 and 16 that are issued but not yet effective at the date of authorisation of 
these financial statements that the Group reasonably expects will have an impact on disclosures, financial position or performance when 
applied at a future date. IFRS 16 – Leases will change the way the Group currently accounts for property operating leases. None of the 
standards that became effective during the year had a material impact on the preparation of the financial statements. 
3. Critical accounting judgements and key sources of estimation uncertainty
3.1 Critical judgements in applying the Group’s accounting policies
In the process of applying the Group accounting policies, the following judgements have had a significant effect on the amounts 
recognised in the financial statements:
Internally generated research and development costs
Management monitors progress of internal research and development projects. Judgement is required in distinguishing the research 
phase from the development phase. Development costs are recognised as an asset when all criteria are met and a project has passed the 
feasibility phase, whereas research costs are expensed as incurred. Management monitors whether the recognition requirements for 
development costs continue to be met. This is necessary as the economic success of any product development is uncertain. 39 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
3.2 Key accounting estimates and assumptions
Key assumptions concerning the future and other key sources of estimation uncertainty that have a significant risk of causing a material 
adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:
Impairment of intangible assets and property, plant and equipment
The Group tests goodwill at least annually for impairment, and whenever there is an indication that the asset may be impaired. All other 
intangible assets and property, plant and equipment are tested for impairment when indicators of impairment exist. Impairment is 
determined with reference to the higher of fair value less costs to sell and value in use. Value in use is estimated using discounted future 
cash flows. Significant assumptions are made in estimating future cash flows about future events including future market conditions, 
future growth rates and appropriate discount rates. Changes in these assumptions could affect the outcome of impairment reviews. 
Details of the main assumptions used in the assessment of the carrying value of the Group’s cash generating unit is set out in note 11.
Impairment of investments and intercompany balances (applies to the Company Financial Statements only)
The Directors have reviewed the carrying value of the intercompany balances and cost of investments in subsidiaries of the Company with 
reference to current and future trading conditions. The investment and intercompany balances between the Company and Corero Network 
Security, Inc. and Corero Network Security (UK) Limited have been reviewed with reference to a valuation based on a discounted free cash 
flow which the Directors consider to be an appropriate valuation methodology, in conjunction with the goodwill impairment review. 
Going Concern
The Directors have reviewed the future profit and cash flow projections in conjunction with the current economic climate in order to 
express an opinion on the adequacy of working capital and the ability to continue as a going concern for the foreseeable future. The 
methodology contained in the projections is detailed in the note 2.2. 
Best Estimated Selling Price – Revenue Recognition
On a quarterly basis the Group analyses the selling prices for each deal compared to the current BESP.  Analysis includes grouping similar 
deals based on qualitative factors such as customer profile, size, and region followed by quantitative comparison to the then current 
BESP.  BESP fair value prices are adjusted for future quarters if management identifies a pattern of variances, greater than 10%, between 
actual selling prices versus the then current BESP.
4. Segment reporting
Business segments
The Group is managed according to one business unit Corero Network Security which makes up the Group’s reportable operating 
segment. This business unit forms the basis on which the Group reports its primary segment information to the Board, which 
management consider to be the Chief Operating Decision maker for the purposes of IFRS 8 Operating Segments. 
The Group’s revenues from external customers and its non-current assets are divided into the following countries:
2016
Revenue
$’000
2016
Non-current 
assets
$’000
2015
Revenue
$’000
2015
Non-current 
assets
$’000
USA 5,151 17,890 3,668 27,099
UK 2,135 134 3,491 –
Belgium 507 – – –
Other European countries 788 – 803 –
APAC 45 – 297 –
UAE 146 – 81 –
Total 8,772 18,024 8,340 27,099
Revenues from external customers are identified on the basis of invoicing systems and adjusted to take into account the difference 
between invoiced amounts and deferred revenue adjustments required by IFRS. The 2015 UK revenues include a significant contribution 
from the previous generation products which were announced as end of life in 2015.  40 Corero Network Security plc Annual Report & Accounts 2016
Notes to the Financial Statements continued
4. Segment reporting continued
The revenue is analysed as follows for each revenue category:
 2016
 $’000
 2015
 $’000
Hardware and licence revenue 4,019 2,879
Maintenance and support services revenue 4,753 5,461
Total 8,772 8,340
5. Loss for the year
The following items have been included in arriving at the loss for the year before taxation:
2016 
$’000
2015 
$’000
Impairment of goodwill (note 8) 8,992 –
Amortisation of acquired intangible assets (note 9) 325 1,210
Amortisation of capitalised development  expenditure (note 10) 2,252 2,446
Impairment of capitalised development expenditure (note 10) – 843
Depreciation of property, plant and equipment (note 11) 551 675
Operating lease rentals payable 325 384
Auditor’s remuneration
2016
$’000
 2015
 $’000
Remuneration received by the Company’s auditor for the audit of these Financial Statements 76 84
The audit of the accounts of other group companies 18 15
Fees payable to the Company’s auditor for corporate services 9 –
Fees payable to the Company’s auditor for taxation compliance services 24 21
127 120 41 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
6. Tax on loss on ordinary activities
2016 
$’000
2015 
$’000
Deferred tax credit for the year 85 382
The tax assessed on the loss on ordinary activities for the year differs from the weighted average UK corporate rate of tax of 20% (2015: 
20.25%). The differences are reconciled below:
Total tax reconciliation
Loss before taxation (17,263) (11,615)
Theoretical tax credit at UK Corporation tax rate 20% (2015: 20.25%) (3,453) (2,352)
Effect of:
– expenditure that is not tax deductible 1,806 428
– R&D tax credits (35) (130)
– accelerated capital allowances (11) (6)
– other timing differences (1) –
– losses not utilised 1,694 2,060
– deferred tax credit 85 382
Actual taxation credit 85 382
Factors affecting future tax charges
As at 31 December 2016, the Group’s cumulative fixed asset timing differences were $62,000 (2015: $12,000) and no deferred tax asset 
has been recognised in respect of these items.
In addition, the tax losses at that date amounted to $72.8 million (2015: $65.3 million). This comprised UK tax losses of $12.1 million and US 
tax losses of $60.7 million. $9.0 million of the tax losses relate to pre-acquisition US tax losses which can be offset against taxable profits 
over 15 years (there is a limit on the utilisation of pre-acquisition tax losses of $0.7 million per annum and any unused loss may be carried 
forward to subsequent periods). All other US tax losses will expire in 20 years from the end of the accounting period in which the loss 
arose. UK tax losses do not expire.
The deferred tax assets of $2.1 million (2015: $2.0 million) at a rate of 17.1% relating to the UK tax losses and the deferred tax assets of 
$21.3 million (2015: $19.0 million) at a rate of 35% relating to the US tax losses and taxable temporary fixed asset differences have not 
been recognised due to uncertainties as to the extent and timing of their future recovery.
7. Loss per share
Loss per share is calculated by dividing the earnings attributable to ordinary shareholders of the Company by the weighted average 
number of ordinary shares in issue during the year. The effects of anti-dilutive ordinary shares resulting from the exercise of share 
options are excluded from the calculation of the loss per share. Therefore the diluted loss per share is equal to the loss per share.
2016  
loss 
$’000
2016 
weighted 
average 
number of 1p 
shares 
Thousand
2016 
 loss per  
share 
Cents
2015 
loss 
$’000
2015 
weighted 
average 
number of 1p 
shares 
Thousand
2015 
loss per 
share 
Cents
Basic and diluted loss per share (17,178) 189,959 (9.0) (11,233) 132,761 (8.5) 42 Corero Network Security plc Annual Report & Accounts 2016
Notes to the Financial Statements continued
8. Goodwill
Group
$’000 
Cost
At 1 January 2015 17,983
At 31 December 2015 17,983
At 31 December 2016 17,983
Impairment
At 1 January 2015 –
At 31 December 2015 –
Impairment (8,992)
At 31 December 2016 (8,992)
Carrying amount
At 31 December 2016 8,991
At 31 December 2015 17,983
At 1 January 2015 17,983
Goodwill is tested at least annually for impairment and whenever there are indications that goodwill might be impaired.
Goodwill is allocated to the Group’s single cash-generating unit (CGU) Corero Network Security (“CNS”).
The recoverable amount for the CNS CGU was determined based on a discounted cash flow calculation using cash flow projections over a 
10 year period (2015: 10 year period). The key assumptions for the discounted cash flow calculation are those regarding revenue growth 
and discount rates as summarised in the table below and commented on below: 
2016 2015
Forecast cash flow period Years 1–2 Years 1–2
Extrapolated cash flow period Years 3–10 Years 3–10
Cumulative annual growth rate (CAGR) for revenue used for the forecast/extrapolated periods 19.6% 21.8%
Average revenue growth rates used for the forecast/extrapolated periods:
Year 1–2 (forecast period) 33.1% 89.1%
Years 3–5 (extrapolated period) 28.2% 18.2%
Years 6–10 (extrapolated period) 9.9% 4.0%
Revenue growth rate used beyond the extrapolated period 2.5% 1.5%
Discount rate 16.5% 18.0% 43 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
The pre-tax cash flows for the forecast period are derived from the most recent financial budget for the year ending 31 December 2017 
and the plan for the year ending 31 December 2018 approved by the Board, with a sensitivity to reflect prior years forecast inaccuracies 
(25% applied to the 2017 budget and 35% to the 2018 plan). The extrapolation for the period 2019 to 2026 is based on management 
estimates (with the key assumptions set out below).
The future pre-tax cash flows are discounted by a WACC of 16.5%.
The key assumptions underlying the cash flow projections and which the recoverable amount is most sensitive to are (i) the revenue 
growth rates forecast and extrapolated for the period 2019 to 2023 and (ii) the discount rate. 
The cash flow forecasts assume a CAGR revenue growth of 30.2% in the period 2016 to 2021 (33.1% for the period 2016 to 2018) and 9.9% 
for the period 2021 to 2026 (a CAGR of 19.6% for 10 year forecast period). These growth rates reflect a sensitivity of 25% applied to the 
CNS 2017 budget revenues and a sensitivity of 35% applied to the 2018 plan revenues (and a sensitivity of 12.5% to 2017 operating costs) 
and a sensitivity of 17.5% to 2018 operating costs) to reflect risk associated with historic forecast accuracy. 
The management of the Group believe these growth rates are appropriate for the forecasts given the expected impact from the 
SmartWall sales traction in 2016, the expected addition of go-to-market partners to expand the opportunities Corero can sell into and 
the “as-a-service” model introduced in late 2016, all of which are expected to deliver a step change in revenue in the forecast period. 
These growth rates are supported by the fact that the IT security market is forecast to grow strongly for the foreseeable future. 
Worldwide spending on information security will reach $81.6 billion in 2016, an increase of 7.9 %  over 2015, according to an August 2016 
published forecast from Gartner (compared to an overall forecast for IT spend in 2016 of $3.4 trillion, a decrease of 0.3% over 2015).  
The global cybersecurity market is expected to be worth $202.4 billion by 2021 at a compound annual growth rate (CAGR) of 10.6% from 
2015 to 2021, according to a report from Markets and Markets (report dated July 2016). 
The DDoS appliance market is expected to reach $1.03bn by 2020 (Source: IHS Technology Research - DDoS Prevention Appliances 
Worldwide, Biannual Market Tracker (December 2016) – a CAGR or 14.9% in the period 2015 to 2020.
The above market growth rates used in the future cash flow assumptions reflect that CNS is in the early stages of the commercial 
exploitation of its intellectual property. In addition, the business’ strategy is to continue to develop its product and solution offerings to 
remain a market leader in its chosen markets thereby providing the opportunity to generate above market average growth rates.
The growth rate assumed in the period beyond the 10-year extrapolation period of 2.5% is considered reasonable as historically IT spend 
has exceeded GDP growth.
The discount rate is based on a cost of equity using the Capital Asset Pricing Model with the key inputs being a risk-free interest rate 
estimate of 2.44% (based on 10 year US government bonds) (2015: 3.0%), comparable company betas, an equity risk premium of 7.4% 
(2015: 7.4%), and small company risk premium of 4.5% (2015: 4.5%). The WACC has been assessed based on that fact that the Company 
had no gearing at 31 December 2016. The WACC used in the valuation reflects current market assessments of the time value of money 
and the risks specific to CNS.
As stated above, the valuation to support the value in use of the CNS CGU is highly sensitive to changes in cash flow forecasts and 
discount rate assumptions, and there is no guarantee that the expected growth will be achieved.  If the discount rate is increased by 50%, 
which in the assessment of management is reasonably possible, from 16.5% to 24.8%, this would result in a further impairment of 
goodwill with the result that the goodwill would be fully impaired.  If the sensitivity of 25% applied to the CNS 2017 budget revenues and 
35% applied to the 2018 plan revenues (and a sensitivity of 12.5% to operating costs) was increased to 40% for revenue (and a sensitivity 
of 20% to operating costs), which in the assessment of management is reasonably possible, this would result in a further impairment of 
goodwill with the result that the goodwill would be fully impaired.  
Apart from the considerations in determining the value in use of the CNS CGU described above, the management of the Group is not 
currently aware of any other reasonably possible changes that would necessitate changes in its key estimates. 44 Corero Network Security plc Annual Report & Accounts 2016
Notes to the Financial Statements continued
9. Acquired intangible assets
Group
Computer 
software 
$’000
Customer 
relationships 
$’000
Total  
$’000
Cost
At 1 January 2015 5,924 197 6,121
Additions 37 – 37
At 31 December 2015 and at 1 January 2016 5,961 197 6,158
Additions 32 – 32
At 31 December 2016 5,993 197 6,190
Amortisation
At 1 January 2015 (4,466) (107) (4,573)
Charge for year (1,182) (28) (1,210)
At 31 December 2015 and at 1 January 2016 (5,648) (135) (5,783)
Charge for year (263) (62) (325)
At 31 December 2016 (5,911) (197) (6,108)
Net book value
At 31 December 2016 82 – 82
At 31 December 2015 313 62 375
At 1 January 2015 1,458 90 1,548
Company
The Company has no intangible fixed assets (2015: $nil). 45 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
10. Capitalised development expenditure
Group
Total  
$’000
Cost
At 1 January 2015 10,850
Additions 2,285
At 31 December 2015 and at 1 January 2016 13,135
Additions 2,533
At 31 December 2016 15,668
Amortisation
At 1 January 2015 (2,226)
Charge for year (2,446)
Impairment (843)
At 31 December 2015 and at 1 January 2016 (5,515)
Charge for year (2,252)
At 31 December 2016 (7,767)
Net book value
At 31 December 2016 7,901
At 31 December 2015 7,620
At 1 January 2015 8,624
The impairment recorded during 2015 of $843,000 related to expenditure on previous generation products. Corero announced the 
previous generation products end of life in mid-2015 which allowed customers to purchase products and support up to 31 December 2015 
and on an exception basis in 2016. Having identified that these products would no longer generate cash inflows in the future sufficient to 
support their carrying value, management determined an impairment should be recorded.
Company
The Company has no capitalised development expenditure (2015: $nil). 46 Corero Network Security plc Annual Report & Accounts 2016
Notes to the Financial Statements continued
11. Property, plant and equipment
Group
Computer 
Equipment 
$’000
Fixtures and 
Fittings
 $’000
Office 
Equipment 
$’000
Leasehold 
Improvements 
$’000
Total
 $’000
Cost
At 1 January 2015 3,682 94 126 77 3,979
Additions 387 – 5 – 392
Disposals (835) – – – (835)
At 31 December 2015 and at 1 January 2016 3,234 94 131 77 3,536
Additions 578 43 – 23 644
Disposals (841) (67) (131) (77) (1,116)
Foreign currency translation (6) (1) – (1) (8)
At 31 December 2016 2,965 69 – 22 3,056
Depreciation
At 1 January 2015 (2,534) (78) (126) (66) (2,804)
Charge for year (657) (6) (1) (11) (675)
Disposals 835 – – – 835
Foreign currency translation 1 – – – 1
At 31 December 2015 and at 1 January 2016 (2,355) (84) (127) (77) (2,643)
Charge for year (539) (8) (1) (3) (551)
Disposals 835 67 128 77 1,107
Foreign currency translation 1 – – – 1
At 31 December 2016 (2,058) (25) – (3) (2,086)
Net book value
At 31 December 2016 907 44 – 19 970
At 31 December 2015 879 10 4 – 893
At 1 January 2015 1,148 16 – 11 1,175
Company
The Company has no property, plant and equipment (2015: $nil).
12. Investments in subsidiaries
Company
2016 
$’000
2015 
$’000
Net book value
At 1 January 28,797 42,747
Additional investment in Corero Network Security, Inc. 5,576 6,197
Investment in Corero Network Security (UK) Limited 12,038 –
Provision against investment in subsidiaries (20,565) (17,835)
Foreign currency translation (4,709) (2,312)
At 31 December 21,137 28,797 47 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
The Directors have reviewed the carrying value of the cost of investments in subsidiaries of the Company with reference to current and 
future trading conditions and a valuation based on a discounted free cash flow which the Directors consider to be an appropriate valuation 
methodology, in conjunction with the goodwill impairment review (note 8) and concluded that an impairment of the investment balances 
was required. As at 31 December 2016 the provision against investment in subsidiaries was $36.0 million (2015: $18.5 million). 
Included in the Company’s investment in Corero Network Security, Inc. is a loan note instrument. These loan notes bear interest at 5% per 
annum that at the election of Corero Network Security, Inc. is payable quarterly or added to the principal amount. In November 2016 the 
loan notes repayment date was amended to 31 October 2021, previously 31 October 2016. 
2016 
$’000
2015 
$’000
Loan note instrument 6,378 7,265
The Company owns:
100% of the issued share capital of Corero Network Security, Inc., a company incorporated in Delaware, USA.  The company’s business 
address is 225 Cedar Hill Street, Marlborough, MA 01752, USA. The principal business of the company consists of the development and 
sale of hardware and software security products.
100% of the issued share capital of Corero Group Services Limited, a company incorporated and registered in England and Wales. The 
company’s business address is Regus House, Highbridge, Oxford Road, Uxbridge, Middlesex, UB8 1HR. The principal business of the 
company consists of providing administration services to the Group.
100% of the issued share capital of Corero Network Security (UK) Limited, a company incorporated and registered in England and Wales. 
The company’s business address is 3rd Floor, 53 Hanover Street, Edinburgh, EH2 2PJ. The principal business of the company consists of 
providing development and sales and marketing services on behalf of Corero Network Security, Inc.
13. Inventories
Group 
2016 
$’000
Group 
2015 
$’000
Gross inventory 232 795
Less: provision for impairment (167) (134)
Net inventory 65 661
Net inventory comprises finished goods and raw materials.
Company
The Company holds no inventory (2015: $nil).
14. Trade and other receivables
Group 
2016 
$’000
Group 
2015
 $’000
Company  
2016 
$’000
Company  
2015 
$’000
Trade receivables 1,495 2,973 – –
Less: provision for impairment – – – –
Net trade receivables 1,495 2,973 – –
Amounts owed by subsidiaries – – 5,340 15,875
Other debtors 138 275 69 83
Prepayments and accrued income 674 718 – –
2,307 3,966 5,409 15,958 48 Corero Network Security plc Annual Report & Accounts 2016
Notes to the Financial Statements continued
14. Trade and other receivables continued 
The banking facility of the Group, summarised in note 16, is secured by assets of Corero Network Security, Inc. Up to 80% of the trade 
receivables of Corero Network Security, Inc., included under ‘Group’, can be financed and are therefore secured for credit enhancements.
None of the Company’s trade and other receivables are secured by collateral or credit enhancements.
Amounts due from Group undertakings are recoverable after more than one year from the reporting date. 
The age of trade receivables not impaired but past due are as follows:
Group 
2016
 $’000
Group 
2015 
$’000
Not more than 3 months 345 125
345 125
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
The maturity profile of trade and other receivables is set out in the table below:
Group 
2016 
$’000
Group 
2015 
$’000
Company 
2016 
$’000
Company 
2015 
$’000
In one year or less, or on demand 2,227 3,738 – –
In more than one year, but not more than five years 80 228 5,409 15,958
2,307 3,966 5,409 15,958
Balances due in more than one year, but not more than five years, are presented as non-current in the Statement of Financial Position.
The analysis of trade and other receivables by foreign currency is set out in the table below:
Group
 2016 
$’000
Group 
2015 
$’000
Company  
2016
 $’000
Company  
2015
 $’000
US dollars 2,023 3,652 – –
UK pound 284 314 5,409 15,958
2,307 3,966 5,409 15,958
The Group’s foreign currency receivables are denominated in the functional currency of the subsidiaries in which they arise. There is no 
impact on the loss for the year from exchange rate movements on such financial instruments.  49 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
15. Trade and other payables
Group 
2016 
$’000
Group
 2015 
$’000
Company 
2016 
$’000
Company 
2015 
$’000
Trade payables 767 1,006 – –
Other payables 23 7 – –
Accruals 938 1,538 – 202
1,728 2,551 – 202
None of the Group or Company’s trade and other payables are secured by collateral or credit enhancements.
The Directors consider that the carrying amount of trade and other payables approximates its fair value.
76% (2015: 67%) of the trade and other payables are due in less than 3 months.
The analysis of trade and other payables by foreign currency is set out in the table below:
Group 
2016 
$’000
Group
 2015 
$’000
US dollars 1,178 1,784
UK pound 550 767
1,728 2,551
The Group’s foreign currency payables are denominated in the functional currency of the subsidiaries in which they arise. There is no 
impact on the loss for the year from exchange rate movements on such financial instruments.
16. Borrowings
The Group and Company borrowings were $nil (2015: $nil).
The accounts receivable financing facility was not utilised at the year end. The facility bears interest at c.16.8% of the financed value with 
a limit of US$1.5 million or 80% of the eligible accounts receivable balance. The funding is secured by a first lien on the corporate assets of 
Corero Network Security, Inc. and is guaranteed by Corero Network Security plc.
All receipts for financed assets are payable to a lockbox account held with the provider of the financing facility. The accounts receivable 
assets are exposed to the risk of non or late payment by customers. There are no restrictions on the use of the financed accounts 
receivable assets.
At 31 December 2016, the Group’s liabilities have contractual maturities which are summarised below. These contractual maturities 
reflect the payment obligations which may differ from the carrying values of the liabilities at the balance sheet date.
Group
In one year or less,  
or on demand
2016 
$’000
2015 
$’000
Trade and other payables 1,728 2,551
Total 1,728 2,551 50 Corero Network Security plc Annual Report & Accounts 2016
Notes to the Financial Statements continued
17. Financial instruments
The Group’s financial instruments are categorised as shown below:
Group
Book Value
 2016 
$’000
Book Value 
2015 
$’000
Financial assets
Loans and Receivables:
Trade and other receivables 2,307 3,248
Cash 2,940 2,706
5,247 5,954
Group
Book Value 
2016 
$’000
Book Value 
2015 
$’000
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables 1,728 2,551
1,728 2,551
The Group manages liquidity and credit risk in line with the Financial risk management objectives and policies on page 23.
There are no differences between the fair values and book values held by the Group.
18. Deferred income
Group
2016 
$’000
2015 
$’000
Current 2,457 3,791
More than one year but less than five years 855 1,439
3,312 5,230
The Group’s deferred income balance will be recognised as revenue evenly over the remaining term of the support agreements in place. 
Support agreements expire at various times throughout the year with no particular seasonality. 
Company
The Company has no deferred income (2015: $nil). 51 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
19. Deferred tax liability
Group
$’000
1 January 2015 467
Credit to income statement (382)
31 December 2015 and at 1 January 2016 85
Credit to income statement (85)
31 December 2016 –
The deferred tax liability relates to the software and customer relationships acquired as part of the Top Layer Networks, Inc. acquisition in 
March 2011. The deferred tax liability has been calculated using a US Federal tax rate of 35%. The liability is released to the Statement of 
Comprehensive Income - Profit and Loss as the intangible software and customer relationship assets are amortised.
20. Pensions
The Group’s pension arrangements are operated through defined contribution schemes. 
Defined contribution schemes
2016 
$’000
2015 
$’000
Defined contribution pension costs 93 101
21. Share capital
Authorised share capital
The authorised share capital comprises 745,821,970 (2015: 745,821,970) ordinary shares of 1p (1.23c) each.
Issued ordinary share capital 
$’000
1 January 2015
115,637,416 ordinary shares of 1p each 1,804
Issued
50,000,000 ordinary shares of 1p each (1.54c) 769
31 December 2015 and at 1 January 2016
165,637,416 ordinary shares of 1p each 2,573
Issued
37,773,560 ordinary shares of 1p each (1.54c) 546
6,666 ordinary shares of 1p each (1.32c) –
31 December 2016
203,417,642 ordinary shares of 1p each 3,119
On 28 August 2015, 50,000,000 ordinary shares with a nominal value of 1p were issued at 10p (15c) per share by way of a subscription.
On 17 June 2015 the Company purchased the entire deferred share capital of 1,518,000 £2.99 shares for a consideration of 1p (1.57c). The 
deferred shares were subsequently cancelled on 22 June 2015.
On 10 May 2016, 37,773,560 ordinary shares with a nominal value of 1p were issued at 22p (34c) per share by way of a subscription, placing and 
open offer. On 15 September 2016, 6,666 ordinary shares with a nominal value of 1p were issued at 15p (20c) per share as the result of the 
exercise of an option.
On 6 April 2017 Corero will announce a conditional placing and subscription. This Equity Fund Raise is subject to shareholder approval at a 
general meeting of the Company on 24 April 2017. 52 Corero Network Security plc Annual Report & Accounts 2016
Notes to the Financial Statements continued
22. Share premium
$’000
1 January 2015 50,000
50,000,000 ordinary shares of 10p each (15c) less issue costs 6,835
31 December 2015 and at 1 January 2016 56,835
37,773,560 ordinary shares of 22p each (34c) less issue costs 10,845
6,666 ordinary shares of 15p each (20c) 1
31 December 2016 67,681
Consideration received in excess of the nominal value of the 37,773,560 shares issued on 10 May 2016 as a result of the subscription, 
placing and open offer has been included in share premium, less registration, commission and professional fees of $622,000. The amount 
of such directly attributable costs deducted from share premium in 2015 was $78,000. 
23. Employees and Directors
Employee expenses during the period
Group
Total 
2016 
$’000
Total 
2015 
$’000
Wages and salaries 9,337 9,377
Social security costs 840 764
Other pension costs (note 20) 93 101
Cost of employee share scheme (note 26) 19 (3)
10,289 10,239
Average monthly numbers of employees (including Directors) employed
2016
Number
2015
Number
Sales and marketing 19 19
Technical, support and services 38 30
Management, operations and administration 11 12
68 61
Company
The Company has no employees (2015: nil).  53 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
Directors, being the Key Management personnel
Salary 
& fees 
$’000
Bonus 
$’000
Benefits 
$’000
Pension 
$’000
Options
$’000
Company 
National 
Insurance 
Contributions
$’000
Total 
2016 
$’000
Total 
2015 
$’000
Executive Directors
Ashley Stephenson 270 36 13 – 19 13 351 426
Andrew Miller 216 27 8 22 14 42 329 409
Non-Executive Directors
Andrew Lloyd 27 – – – 3 2 32 34
Jens Montanana 35 – – – 4 – 39 40
Richard Last 27 – – – 3 2 32 31
575 63 21 22 43 59 783 940
Bonus payments of $63,000 were awarded during the period to 31 December 2016 (2015: $255,000). 
Richard Last was paid $nil during the period to 31 December 2016 (2015: $1,500) as a contribution to office and secretarial costs.
Andrew Miller has a service contract with a 6 month notice period. A subsidiary company provides for pension contributions (included in 
the table above) of 10% of basic salary payable to a personal pension plan. 
No Directors were accruing benefits from the Group’s defined contribution pension arrangements (2015: $nil). The Company makes 
contributions to Andrew Miller’s personal pension scheme.
Post the year end, Jens Montanana notified the Company that he wished to waive his Non-Executive Director fees for the year ended 
31 December 2016 of $35,000. Jens Montanana waived his Non-Executive Director fees for the year ended 31 December 2015 of $40,000. 
24. Operating lease commitments
The Group has total future minimum lease payments under non-cancellable operating leases totalling $593,000 (2015: $285,000) 
analysed by year of expiry as follows:
 
2016
 $’000
2015
$’000
Land and building agreements expiring:
Within one year 21 216
Within two to five years 215 62
Other agreements expiring:
Within one year 1 7
Within two to five years 356 –
593 285
Other operating leases agreements relate to the costs of a co-location provider.
Company
The Company has no operating lease commitments (2015: $nil). 54 Corero Network Security plc Annual Report & Accounts 2016
Notes to the Financial Statements continued
25. Contingent liabilities
Corero Network Security (UK) Limited was in December 2015 awarded a grant of up to £600,000 for a development project over three 
years from Scottish Enterprise. Any monies becoming repayable by Corero Network Security (UK) Limited under the terms typical for 
such a grant, including not complying with the grant conditions which include requirements to hire employees in Scotland, progress on 
the project is not satisfactory, a change of control, are guaranteed by the Company.
26. Share options
The Company has the following share option schemes:
• Enterprise Management Incentive Scheme for its employees, which has been approved by HMRC, 2010 Executive Enterprise 
Management Incentive Scheme, which has been approved by HMRC, 2010 Unapproved Share Option Scheme, and
• Deferred Payment Share Plan
In August 2010, 1,257,000 options were granted to certain Directors and employees under the 2010 Executive Enterprise Management 
Incentive scheme and 2010 Unapproved Share Option Scheme. The options granted vested immediately upon grant. 
All other options granted in 2010–2016 have a three year vesting period, vesting one third on the first anniversary of grant, one third on 
the second anniversary of grant and one third on the third anniversary of grant. There are no vesting conditions. Shares acquired on the 
exercise of an option may not be sold until the expiry of the second anniversary following the date of option grant.
If an option holder ceases to be in employment or hold office within the Group, options granted shall immediately lapse unless such 
cessation is because of the option holder’s death; the option holder’s ill health or disability; the company that employs the option holder 
ceasing to be under the control of the Company or such company ceasing to be within the Group; the transfer of sale of the undertaking 
or part-undertaking in which the option holder is employed to a person who is neither under the control of the Company nor within the 
Group; or any other reason that the Board in its absolute discretion shall determine.
On a cessation of employment or office as set out above, options shall be exercisable to the extent they have vested according to the 
terms of the option agreement and the provisions of the relevant share option scheme and must be exercised within 30 days following 
such cessation unless it is by reason of death whereby the option holder’s personal representatives must exercise the option within 
12 months following the date of the option holder’s death.
On the 18 March 2014, the Enterprise Management Incentive Scheme was extended by ten years to 20 April 2021. 
Share options granted at 31 December 2016 were as follows:
Option Holders
Date  
granted
Expiry 
 date
Exercise 
price
At 
1 January 
2016 Granted Exercised Forfeit
At  
31 December 
2016
Enterprise Management Incentive Scheme
Other Holders March 2011 March 2021 36p (59c) 7,000 – – (7,000) –
March 2011 March 2021 40p (65c) 40,000 – – – 40,000
March 2012 March 2022 54.5p (89c) 30,000 – – (5,000) 25,000
September 2012 September 2022 43p (70c) 110,000 – – – 110,000
April 2013 April 2023 25p (38c) 95,000 – – (10,000) 85,000
May 2014 May 2024 25p (42c) 48,000 – – (8,000) 40,000
September 2014 September 2024 25p (41c) 10,000 – – – 10,000
April 2015 April 2025 15p (23c) 750,000 – – – 750,000
October 2015 September 2025 15p (23c) 57,000 – – – 57,000
January 2016 January 2026 20p (29c) – 500,000 – (500,000) –
May 2016 May 2026 22.5p (33c) – 1,072,000 – (5,000) 1,067,000
September 2016 September 2026 15p (20c) – 31,305 – – 31,305 55 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
Option Holders
Date  
granted
Expiry 
 date
Exercise 
price
At 
1 January 
2016 Granted Exercised Forfeit
At  
31 December 
2016
2010 Executive Enterprise Management Incentive Scheme
Andrew Miller August 2010 August 2020 25p (41c) 476,000 – – – 476,000
September 2012 March 2022 54.5p (89c) 80,000 – – – 80,000
April 2013 April 2023 25p (38c) 250,000 – – – 250,000
May 2014 May 2024 25p (42c) 362,570 – – – 362,570
2010 Unapproved Share Option Scheme
Jens Montanana August 2010 August 2020 25p (41c) 165,000 – – – 165,000
March 2012 March 2022 54.5p (89c) 30,000 – – – 30,000
April 2013 April 2023 25p (38c) 80,000 – – – 80,000
January 2016 January 2026 20p (29c) – 150,000 – – 150,000
Richard Last March 2012 March 2022 54.5p (89c) 20,000 – – – 20,000
April 2013 April 2023 25p (38c) 60,000 – – – 60,000
January 2016 January 2026 20p (29c) – 100,000 – – 100,000
Andrew Lloyd April 2013 April 2023 25p (38c) 60,000 – – – 60,000
May 2014 May 2024 25p (42c) 40,000 – – – 40,000
January 2016 January 2026 20p (29c) – 100,000 – – 100,000
Ashley Stephenson March 2012 March 2022 54.5p (89c) 180,000 – – – 180,000
April 2013 April 2023 25p (38c) 400,000 – – – 400,000
May 2014 May 2024 25p (42c) 1,720,000 – – – 1,720,000
April 2015 April 2025 15p (23c) 200,000 – – – 200,000
January 2016 January 2026 20p (29c) – 700,000 – – 700,000
Andrew Miller May 2014 May 2024 25p (42c) 387,430 – – – 387,430
April 2015 April 2025 15p (23c) 300,000 – – – 300,000
January 2016 January 2026 20p (29c) – 500,000 – – 500,000
Other holders August 2010 August 2020 31p (50c) 308,000 – – – 308,000
March 2011 March 2021 36p (59c) 54,750 – – – 54,750
March 2011 March 2021 40p (65c) 290,000 – – – 290,000
September 2011 September 2021 37.5p (61c) 163,500 – – – 163,500
March 2012 March 2022 54.5p (89c) 216,250 – – (10,000) 206,250
September 2012 September 2022 43p (70c) 14,500 – – (7,500) 7,000
April 2013 April 2023 25p (38c) 307,000 – – (20,000) 287,000
September 2013 September 2023 25p (40c) 40,000 – – – 40,000
May 2014 May 2024 25p (42c) 1,432,750 – – (378,334) 1,054,416
September 2014 September 2024 25p (41c) 440,000 – – (320,000) 120,000
April 2015 April 2025 15p (23c) 1,803,000 – (6,666) (1,453,334) 343,000
October 2015 September 2025 15p (23c) 352,000 – (75,000) 277,000
January 2016 January 2026 20p (29c) – 700,000 – (700,000) –
May 2016 May 2026 22.5p (33c) – 1,073,000 – – 1,073,000
September 2016 September 2026 15p (20c) – 470,500 – – 470,500
11,379,750 5,396,805 (6,666) (3,499,168) 13,270,721 56 Corero Network Security plc Annual Report & Accounts 2016
Notes to the Financial Statements continued
26. Share options continued
The closing mid-market price for the Company’s shares at 31 December 2016 was 8.75p (11c) and the high and low for the year was 30.0p 
(42c) and 8.375p (10c). There are no performance conditions to be met before share options are exercisable. No options were exercised 
and 691,250 options were forfeited in the 12 months to 31 December 2015.
Andrew Miller has a contractual right (granted in March 2011) to purchase 140,000 ordinary shares in the Company from the Employee 
Share Ownership Trust at 40p per share pursuant to a grant made to him under the Deferred Payment Share Plan.
None of the Directors holding office at the balance sheet date exercised options during the year.
Share-based payments
The Remuneration Committee can grant options to employees of the Group under the Group’s share option schemes. 
Options are granted with a fixed exercise price which is equal to the market price at the date of the grant or higher price determined by 
the Remuneration Committee. The contracted life is ten years from the date of grant. 
Options are valued using the Black-Scholes option-pricing model.
Options granted
The value of options granted during the year was calculated using the Black-Scholes option pricing model. The following variables and 
ranges were used:
2016 2015
Share price at date of grants 13p–21.5p (17c–31c) 13p–14p (20c)
Exercise price 15p–22.5p (20c–33c) 15p (23c)
Expected volatility 0.2–0.26% 0.2%
Years to maturity 9.0–9.7 9.3–9.8
Risk free interest rate 0.35–1.18% 1.12–1.17%
The following table provides information on all options outstanding at the end of the year:
Weighted average remaining contractual life 7.5 years
Average remaining contractual life 6.5 years
Options exercisable 6,549,444
Exercise price range 15p–55p (18c–68c)
Weighted average share price 21p (26c)
Weighted average exercise price 24p (30c)
Expected volatility 0.2%–6.4%
Risk free rate – 5 year gilt rate 0.35%–2.6%
Expected dividend yield Nil
Volatility is calculated as the standard deviation of the closing daily share price over a period of 24 months prior to the grant date.
Operating expenses in the Statement of Comprehensive Income included a charge of $19,000 (2015: credit $3,000) relating to employee 
share-based payments. 57 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Financial Statements Notice of AGM Corporate Directory
27. Related parties and transactions
As part of the subscription and placing on 10 May 2016, Jens Montanana contributed $1.2 million and Andrew Miller contributed $22,000 
(note 21).
On 30 July 2015, Jens Montanana lent the Company £500,000 pursuant to a share subscription advance by way of a loan agreement  
(“the Loan”). The Loan was non–interest bearing if repaid within 60 days, and was repayable on the earlier of (i) the day immediately 
following the date upon which the resolution proposed at the general meeting of the Company’s shareholders on 27 August 2015 to 
approve the subscription was passed and (ii) 31 July 2016. Part of the subscription monies owed by Jens Montanana to the Company 
pursuant to a subscription agreement dated 7 August 2015 was satisfied by the release of the Company of its obligation to repay the  
Loan in full on 28 August 2015.
As part of the subscription on 28 August 2015, Jens Montanana contributed $3.0 million gross of the Loan repayment. Andrew Miller 
contributed $15,000 and Richard Last contributed $38,000 (note 21).
The Directors consider the Group’s key management personnel to be the Board of Directors of the Company whose compensation is 
detailed in note 23.
Company key management compensation was $nil (2015: $nil) as the key management are employed by subsidiaries. 58 Corero Network Security plc Annual Report & Accounts 2016
Notice of AGM
Notice is hereby given that the annual general meeting (the “AGM”) of Corero Network Security plc (the “Company”) will be held at  
the offices of Redleaf Communications, First Floor, 4 London Wall Buildings, London, EC2M 5NT on 20 June 2017 at 10.00 a.m. for the 
following purposes:
Ordinary Business
To consider and, if thought fit, pass the following resolutions which will be proposed as ordinary resolutions:
1. Report and accounts
To receive the audited annual accounts of the Company for the year ended 31 December 2016, together with the Directors’ report  
and the Auditor’s report on those annual accounts. 
2. Re-election of Director
To re-elect Mr Ashley Stephenson, who retires by rotation in accordance with the Company’s articles of association, as a Director of 
the Company. 
3.  Re-election of Director
To re-elect Mr Andrew Lloyd, who retires by rotation in accordance with the Company’s articles of association, as a Director of 
the Company.
4.  Re-appointment of auditors
To re-appoint BDO LLP as auditors of the Company to hold office from the conclusion of this AGM until the conclusion of the next 
annual general meeting at which accounts are laid before the Company.
5.  Auditors’ remuneration
To authorise the Directors to determine the remuneration of the auditors.
Special Business 
To consider and, if thought fit, pass the following resolutions of which resolution 6 will be proposed as an ordinary resolution and 
resolutions 7 and 8 will be proposed as special resolutions:
6.  Directors’ authority to allot shares
THAT, in substitution for all existing and unexercised authorities and powers granted to the Directors prior to the date of this 
resolution in accordance with section 551 of the Companies Act 2006 (“Act”), the Directors be generally and unconditionally 
authorised for the purposes of section 551 of the Act to exercise all the powers of the Company to allot shares in the Company and 
grant rights to subscribe for or to convert any security into shares of the Company (such shares and rights to subscribe for or to 
convert any security into shares of the Company being “relevant securities”) up to a maximum nominal amount of £678,058.81 on 
such terms and conditions as the Directors may determine provided that, unless previously revoked, varied or extended, this 
authority shall expire on the earlier of the date falling 15 months after the date of the passing of this resolution and the conclusion  
of the next annual general meeting of the Company except that the Company may at any time before such expiry make an offer or 
agreement which would or might require relevant securities to be allotted after such expiry and the Directors may allot relevant 
securities in pursuance of such an offer or agreement as if this authority had not expired.
7.  Disapplication of pre-emption rights
THAT, in substitution for all existing and unexercised authorities and powers granted to the Directors prior to the date of this 
resolution in accordance with section 570(1) of the Act and subject to and conditional on the passing of resolution 6, the Directors be 
and are hereby empowered to allot equity securities (as defined in section 560(1) of the Act) of the Company for cash, pursuant to the 
authority of the Directors under section 551 of the Act conferred by resolution 6 above, and/or by way of a sale of treasury shares for 
cash (by virtue of section 573 of the Act), in each case as if section 561(1) of the Act did not apply to such allotment, provided that this 
power shall be limited to:
(a) the allotment of equity securities in connection with an offer by way of a rights issue or an offer of equity securities open for 
acceptance for a period fixed by the Directors (i) to the holders of ordinary shares in proportion (as nearly as may be practicable) 
to their respective holdings and (ii) to holders of other equity securities as required by the rights of those securities or as the 
Directors otherwise consider necessary, but subject to such exclusions or other arrangements as the Directors may deem 
necessary or expedient in relation to treasury shares, fractional entitlements, record dates, legal or practical problems in or 
under the laws of any territory or the requirements of any regulatory body or stock exchange; and 59 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Corporate Directory Notice of AGM Financial Statements
(b) the allotment and/or sale of treasury shares for cash (otherwise than pursuant to resolution 7(a) above) of equity securities up to 
a maximum nominal amount of £203,417.64, 
and that, unless previously revoked, varied or extended, this power shall expire on the earlier of the date falling 15 months after the 
date of the passing of this resolution and the conclusion of the next annual general meeting of the Company except that the 
Company may before the expiry of this power make an offer or agreement which would or might require equity securities to be 
allotted (and treasury shares to be sold) after such expiry and the Directors may allot equity securities (and sell treasury shares) in 
pursuance of such an offer or agreement as if this power had not expired.
8.  Authority to purchase Company’s own shares
THAT the Company be generally and unconditionally authorised for the purposes of section 701 of the Act to make market purchases 
(as defined in section 693(4) of the Act) on a recognised investment exchange (as defined in section 693(5) of the Act) of ordinary 
shares of £0.01 each in the capital of the Company (“Ordinary Shares”) and to hold such shares as treasury shares (as defined in 
section 724(3) of the Act) and/or on such terms and in such manner as the Directors may from time to time determine provided that:
(a) this authority shall be limited to the purchase of Ordinary Shares up to a maximum aggregate nominal value equal to £203,417.64 
representing approximately 10 per cent. of the nominal value of the current issued ordinary share capital of the Company;
(b) the minimum price which may be paid for such Ordinary Shares is £0.01 (exclusive of expenses);
(c) the maximum price (exclusive of expenses) which may be paid for an Ordinary Share shall not be more than 5 per cent. above the 
average middle market quotations for an Ordinary Share on the relevant recognised investment exchange on which Ordinary 
Shares are traded for the five business days immediately preceding the date on which the Ordinary Share is purchased;
(d) unless previously revoked, varied or extended, the authority hereby conferred shall expire at the earlier of the date which is 15 months  
from the date of the passing of this resolution and the conclusion of the next annual general meeting of the Company; and
(e) the Company may make a contract or contracts to purchase Ordinary Shares under the authority hereby conferred prior to the 
expiry of such authority which will or may be executed wholly or partly after the expiry of such authority and may make a 
purchase of Ordinary Shares in pursuance of any such contract or contracts.
Registered Office: 
Regus House 
Highbridge 
Oxford Road 
Uxbridge 
Middlesex 
UB8 1HR
By order of the Board
Duncan Swallow
Company Secretary 
5 April 2017 60 Corero Network Security plc Annual Report & Accounts 2016
The following notes explain your general rights as a shareholder and your rights to attend and vote at the AGM or to appoint someone 
else to vote on your behalf:
Notes:
1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), only those members registered in the register of members of the 
Company as at Close of Business on 16 June 2017 (or if the AGM is adjourned, on the day which is two business days before the time fixed for the adjourned AGM) 
shall be entitled to attend and vote at the AGM in respect of the number of shares registered in their name at that time. Any changes to the register of members 
after such time shall be disregarded in determining the rights of any person to attend or vote at the AGM.
2. Information regarding the annual general meeting, including information required by section 311A of the Act, is available from www.corero.com.
3.  CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the AGM to be held at 10.00 a.m. 
on 20 June 2017 and any adjournment(s) thereof by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored 
members, and those CREST members who have appointed a voting service provider should refer to their CREST sponsors or voting service provider(s), who will  
be able to take the appropriate action on their behalf.
 In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be 
properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required for such instructions, as 
described in the CREST Manual. The message must be transmitted so as to be received by the Company’s agent, Capita Asset Services (CREST Participant ID: RA10), 
no later than 10.00 a.m. on 16 June 2017. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message 
by the CREST Application Host) from which the Company’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
 CREST members and, where applicable, their CREST sponsor or voting service provider should note that Euroclear UK & Ireland Limited does not make available 
special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy 
Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has 
appointed a voting service provider, to procure that his CREST sponsor or voting service provider takes) such action as shall be necessary to ensure that a message 
is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsor or voting 
service provider are referred in particular to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
 The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
4. If you wish to attend the AGM in person, you should make sure that you arrive at the venue for the AGM in good time before the commencement of the meeting. 
You may be asked to prove your identity in order to gain admission.
5. A member who is entitled to attend, speak and vote at the AGM may appoint a proxy to attend, speak and vote instead of him. A member may appoint more than 
one proxy provided each proxy is appointed to exercise rights attached to different shares (so a member must have more than one share to be able to appoint 
more than one proxy). A proxy need not be a member of the Company but must attend the AGM in order to represent you. A proxy must vote in accordance with 
any instructions given by the member by whom the proxy is appointed. Appointing a proxy will not prevent a member from attending in person and voting at the 
AGM (although voting in person at the AGM will terminate the proxy appointment). A proxy form is enclosed. The notes to the proxy form include instructions on 
how to appoint the Chairman of the AGM or another person as a proxy. You can only appoint a proxy using the procedures set out in these Notes and in the notes 
to the proxy form.
6. To be valid, a proxy form, and the original or duly certified copy of the power of attorney or other authority (if any) under which it is signed or authenticated, 
should reach the Company’s registrar, Capita Asset Services, PXS, 34 Beckenham Road, Beckenham BR3 4TU, by no later than 10.00 a.m. on 16 June 2017.
7. In the case of joint holders of shares, the vote of the first named in the register of members who tenders a vote, whether in person or by proxy, shall be accepted 
to the exclusion of the votes of other joint holders.
8. A member that is a company or other organisation not having a physical presence cannot attend in person but can appoint someone to represent it. This can be 
done in one of two ways: either by the appointment of a proxy (described in Notes 1 and 3 to 5 above) or of a corporate representative. Members considering the 
appointment of a corporate representative should check their own legal position, the Company’s articles of association and the relevant provision of the 
Companies Act 2006.
9. The following documents are available for inspection at the registered office of the Company during usual business hours on any weekday (Saturday,  
Sunday or public holidays excluded) from the date of this notice until the conclusion of the AGM and will also be available for inspection at the place of the  
AGM from 9.00 a.m. on the day of the AGM until its conclusion:
 (a) copies of the Executive Directors’ service contracts with the Company and any of its subsidiary undertakings; and
 (b) letters of appointment of the Non-Executive Directors.
Notice of AGM continued 61 Corero Network Security plc Annual Report & Accounts 2016
Strategic Report Governance Corporate Directory Notice of AGM Financial Statements
Corporate Directory
Directors
Jens Montanana (Non-Executive Chairman) 
Ashley Stephenson (CEO) 
Andrew Lloyd (President and EVP Sales & Marketing)
Andrew Miller (CFO)  
Richard Last (Non-Executive Director)
Secretary and Registered Office
Duncan Swallow 
Regus House 
Highbridge  
Oxford Road 
Uxbridge 
Middlesex  
UB8 1HR 
Nominated Adviser and Broker
Cenkos Securities plc 
6.7.8 Tokenhouse Yard 
London 
EC2R 7AS
Auditor
BDO LLP 
55 Baker Street 
London 
W1U 7EU
Solicitors
Dorsey and Whitney LLP 
199 Bishopsgate 
London  
EC2M 3UT
Bankers
Santander 
2 The Forbury 
Reading  
RG1 3EU
Square 1 Bank 
406 Blackwell Street 
Suite 240 
Durham 
North Carolina  
27701 
USA
Registrars
Capita Asset Services 
The Registry 
34 Beckenham Road 
Beckenham 
Kent  
BR3 4TU 
Website address
www.corero.com Annual Report and 
Accounts 2016
Corero Network Security plc
Corero Network Security plc
Registered Office
Regus House
Highbridge 
Oxford Road
Uxbridge
Middlesex 
UB8 1HR
 Annual Report and Accounts 2016