RNS Number : 5751Q
appScatter Group PLC
07 June 2018
 

7 June 2018

 

appScatter Group PLC

("appScatter" or the "Company")

 

Final Results

 

appScatter Group plc (AIM: APPS) , the scalable business-to-business ('B2B') Software as a Service ('SaaS') platform that allows users to distribute and manage their apps on multiple app stores around the world, today announces its audited final results for the year ended 31 December 2017. These results are the first annual results for appScatter as a public company and demonstrate good progress against our stated strategy.

 

Financial Highlights

 

·     Successful IPO completed in September 2017

·     Formal launch of appScatter platform in November 2017

·     First paying customers welcomed during the period and maiden revenues reported in H1 2017

·     Group revenue for the year ended 31 December 2017 was £1.9m

·     Investment in our business remains a priority with loss after tax for the period at £5.8m (2016: £8.8m)

·     Year-end cash balance at £3.8m (2016: £226)

 

Operational Highlights

 

·    Platform now supports 75 mobile app stores for distribution and reporting whilst tracking and collecting data daily from 25 app stores in 150 countries

·    Launch of App Store Data API service (the 'API Service') to provide licensed users with access to the Company's wealth of raw historical app store data

·    Launch of in-app billing software developer kit (SDK), allowing developers to integrate in-app billing to multiple Android app stores worldwide, including Amazon, Samsung and the Google Play Store

·     appScatter now tracks 1 billion unique app URLs from 10 million apps by 2.2 million active app publishers

 

Post period end progress

 

·     As at 31 May 2018, the Company had 16,835 registered users, of which 2,238 were licensed users of the appScatter platform (comprising free users, trial users and paying users)

·    Growth in appScatter user base particularly from blue chip enterprise users including Allianz, Deloitte and Rank Group

·     Key partnerships agreed with Airpush and IronSource announced in March and April 2018 significantly broadens our channel to market

·     Conditional agreement to acquire Priori Data GmbH announced in April 2018 designed to help Group monetise its market-leading data-set

 

Philip Marcella, appScatter CEO, commented:

 

"I am pleased to report our first set of full year results after what has been a successful year leading appScatter. Following our successful IPO in September 2017, we have been busy improving our platform and investing for growth. We are confident the steps we've made to this point will prepare us well to make the most of the significant opportunity we see before us, and we look forward to the future with confidence.

 

Alongside investing in our core platform, we have also been successful in agreeing important partnerships with Airpush and IronSource, leaders in our industry who will broaden our horizons and increase our brand-awareness as we continue to focus on expanding our user base. Beyond the commercial benefits, these agreements represent a significant show of faith and recognition in our young business.

 

Finally, we believe our conditional agreement to acquire Priori Data GmbH will enhance our ability to deliver on another of our stated aims, the expansion and monetisation of our data intelligence capability".

 

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

 

For enquiries, please contact:

 

appScatter Group plc

Philip Marcella, Chief Executive Officer

Manish Kotecha, Finance Director

 

Tel: 020 7466 5000

www.appscatter.com

FTI Consulting

Financial Public Relations

Matt Dixon / Adam Davidson / Niamh Fogarty

Tel: 020 3727 1000

appScatter@fticonsulting.com

 

 

Smith & Williamson Corporate Finance Limited

Nominated Adviser and Joint Broker

Azhic Basirov / Ben Jeynes / David Jones

 

Stifel

Joint Broker

Fred Walsh / Neil Shah / Ben Maddison

 

Tel: +44 (0)20 7131 4000

www.smithandwilliamson.com

 

 

 

Tel: +44 (0)20 7710 7600

www.stifel.com

 

About appScatter Group plc

 

appScatter is a scalable B2B SaaS platform that allows paying users to distribute their apps to, and manage their apps on, multiple app stores. Additionally, the centralised platform enables app developers and publishers to manage and track performance of their own and competing apps across all of the app stores on the platform.

 

Chairman's statement

 

I am pleased to present appScatter Group plc's first full-year results as a public company.

 

The Company's shares were admitted to trading on AIM, the junior market operated by the London Stock Exchange, in September 2017, raising £9 million for the Group's development. Since then we have launched the appScatter platform, agreed partnerships and have almost completed our first acquisition.

 

Our stated objective is to generate sustainable growth for shareholders by broadening the licensed user base for the appScatter platform through product development, targeted sales campaigns and partnerships. This remains the central focus of our activity.

 

As the usage of our platform by the developer community increases it is becoming clear that in addition to the income expected from app developers, a major source of revenue will be from blue chip multinational organisations, "enterprise customers", seeking to manage their international portfolio of apps to ensure compliance with group policy and external regulations.

 

A further meaningful source of income is expected to be generated by the use of appScatter's technology by organisations seeking to comply with the GDPR regulations, which were introduced across the EU towards the end of May 2018.

 

The partnerships agreed with Airpush and IronSource announced after the period end in March and April 2018 respectively, who between them will open access to the appScatter platform to their 300,000 registered customers, mark significant steps in broadening our channels to market.

 

The management of large quantities of data is the key to our business. In the future, appScatter aims to monetise the billions of app data points it has been collecting on a daily basis since 2014. While it is not yet possible to assess the quantum of the income likely to arise from the future monetisation of data, given the extent and commerciality of that asset we believe it could ultimately exceed revenues generated from licence payments.

 

In this regard, in April 2018 we made a significant step by announcing our conditional agreement to acquire Priori Data GmbH, a Berlin based B2B SaaS platform provider of mobile app intelligence for a consideration of £13.5 million. We see an exciting opportunity to expand our data intelligence capability by combining with Priori Data and we look forward to completing the acquisition in the near future.

 

We believe we have a first-mover advantage in a market poised for dramatic growth. Much remains to be done to execute successfully on our plans, but our progress so far and the momentum we are generating in our business enable me to look forward to the future with confidence.

 

Clive Carver

Non-executive Chairman

6 June 2018

 

CEO Statement

 

2017 Highlights

 

2017 was an exciting year for the Group, with appScatter welcoming its first paying customers and reporting maiden revenues in the first half, being admitted to the AIM Market in September and unveiling the full appScatter platform for public use in November. For the year ended 31 December 2017, the Group reported revenue of £1.9 million.

 

Following the successful completion of the IPO and admission to AIM, the Group has made good on a range of commitments to enhance the platform and improve the range of services it can offer to customers. First, we released an in-app billing SDK, which allows developers to conveniently integrate in-app billing to multiple Android app stores worldwide, including Amazon,  Samsung and the Google Play Store. By using either each store's native in-app billing service or integrating with third-parties, it enables developers to monetise their apps across a wider market, including the 75 app stores appScatter supports.

 

During the period we also launched appScatter's App Store Data API service (the 'API Service') to provide licensed users with access to the Group's wealth of raw historical app store data. This includes app intelligence from the Apple App Store, the Google Play store and all major alternative app stores worldwide. The Company believes this data will be a valuable forecasting and planning tool for app developers and app designers across all business sectors.

 

Operational performance of the business

 

During 2017 the business worked hard to improve the technology at the heart of its core proposition. Firstly, we began developing our marketplace. This ongoing process will enable users to access a range of add-on products and drive incremental revenue for the business. The work done during the second half of the year laid the foundation for the launch of the first new products on the marketplace in Q1 2018.  We also successfully integrated the powerful Statful telemetry system into the platform, which enables us to measure and understand performance and ensure quality. In future, Statful will also be offered to our clients as part of the appScatter marketplace.

 

Beyond our core platform, we continued to strengthen our sales and marketing departments which, alongside the partnerships we have formed in the first part of 2018, form a marketing strategy that we expect to deliver quality user growth whilst reducing the user acquisition cost.  Whilst our sales team are relatively new they have already had a number of significant successes, including the introduction of household names to the Group's customer list.

 

Operational key performance indicators

 

As at 31 May 2018, the Company had 16,835 registered users, of which 2,238 were licensed users of the appScatter platform (comprising free users, trial users and paying users).

 

As at 31 December 2017, appScatter supported 75 mobile app stores for distribution and reporting whilst tracking and collecting data daily from 25 app stores in 150 countries. This amounts to over 1 billion unique app URLs from 10 million apps by 2.2 million active app publishers.  

 

Financial key performance indicators

 

During 2017 we reported our first revenues, following the launch of the appScatter platform, of £1,937,020 (2016: £nil).  The loss after tax was £5,840,562 (2016: £8,790,222) as the Group continued to invest in the development of the platform. The cash balance at the end of the year was £3,781,109 (2016: £226).

 

Development since the balance sheet date

 

2018 has started in a promising manner, with many new products being released, new partners coming on board and new users joining daily.

 

Airpush Inc

 

In March 2018 we announced our first major partnership with Airpush Inc., a leading mobile advertising network, which is intended to significantly broaden the reach of the appScatter platform. 

 

Airpush helps advertisers improve campaign performance with powerful platforms integrated into over 250,000 mobile app, mobile web, and virtual reality properties, as well as one of the world's largest consumer data marketplaces. Airpush provides amongst the most diverse and high performing monetisation and advertising solutions in its industry, providing a reliable route to a vital revenue stream for app developers. 

 

IronSource Ltd

 

In April 2018 we announced our strategic partnership with IronSource Ltd the leading mobile monetisation and marketing platform including one of the industry's largest in-app video ad networks.

 

appScatter and IronSource have agreed to implement a co-marketing initiative to introduce the appScatter platform to IronSource's large global developer community. 

 

App Security Scanning Service

 

In May 2018 we launched the appScatter app Scanning Service.  This service can be used, in conjunction with the wider appScatter platform, by appScatter users to identify and highlight areas of potential vulnerability in their app portfolios (such as security of underlying app users' personal data) and enabling appScatter users to address any potential security issues as part of app maintenance.  The Scanning Service application is part of the Company's planned wider platform development programme and is being made available to existing and new customers for an additional subscription fee.

 

A key feature of the new Scanning Service is that it can be used by appScatter customers as part of their programme to assess and ensure their compliance with certain key aspects of the EU General Data Protection Regulation ("GDPR"), which came into force on 25 May 2018. 

 

GDPR requires all organisations operating in the EU to protect the personal data and privacy of European citizens and violation of the requirements of the GDPR can have severe financial consequences for organisations, with potential fines for severe data breaches of up to €20 million or four percent of global revenues.

 

Acquisition of Priori Data

 

We announced signature of a conditional sale and purchase agreement to acquire Priori Data in April 2018, and we expect to complete this transaction shortly after the publication of this report. Priori Data will add extra expertise to our team as well as new products and customers.

 

We believe that the acquisition, if completed, will allow the enlarged group to provide signi?cantly enhanced, market leading, data-led app insights. The Directors believe that these insights, when combined with Priori's data intelligence software, will enhance the Group's ability to meet the increasing data demands of existing and prospective customers. The combined range of the appScatter and Priori datasets will be available to the Group's targeted customers such as brands, app publishers, advertising agencies and mobile networks to conduct more targeted demographic campaigns.

 

Once completed, the associated fundraise will fund the cash element of the consideration for the acquisition and provide additional working capital resources for the enlarged group.

 

I wish to thank our shareholders, customers, users and partners for their support and our employees for their hard work and dedication to the project.

 

Philip Marcella

Chief Executive Officer

6 June 2018

 

 

 

Consolidated Income Statement & Statement of Comprehensive Income

For the year ended 31 December 2017

 

 

Group

Group

 

Note

2017

2016

 

 

£

£

Revenue

 

1,937,020

-

Cost of sales

 

(856,101)

 -

Gross profit

 

1,080,919

-

 

 

 

 

Administrative expenses

 

(7,373,552)

(3,535,818)

Deemed cost on reverse takeover

 

-

(5,167,128)

Operating loss

3

(6,292,633)

(8,702,946)

 

 

 

 

Finance income

 

397

 

Finance expenses

6

(48,326)

(87,276)

Loss before income tax

 

(6,340,562)

(8,790,222)

 

 

 

 

Tax credit

7

500,000

-

Loss for the year

 

(5,840,562)

(8,790,222)

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

Exchange losses arising on the translation of foreign subsidiaries

 

(55,405)

(31,352)

 

 

 

 

Total comprehensive loss for the period attributable to the owners

 

(5,895,967)

(8,821,574)

Loss per share from continuing and total operations - basic & diluted

? 8

0.11

0.70

 

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

Consolidated Statement of Changes in Equity

For the year ended 31 December 2017

 

Share Capital

Share Premium

Shares to be issued

Other Reserves

Share Option Reserve

Merger reserve

Reverse acquisition reserve

Foreign exchange reserve

Retained earnings

Total

 

£

£

£

£

£

£

£

£

£

£

At 1 January 2016

-

-

-

-

-

-

-

7,930

(2,539,684)

(2,531,754)

Loss for the period

-

-

-

-

-

-

-

-

(8,790,222)

(8,790,222)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

FX Gains / (Losses)

-

-

-

-

-

-

-

(31,352)

-

(31,352)

Shares issued - appScatter LLC

616,195

-

-

(17,313)

(17,312)

-

-

-

-

581,570

Transfer to reverse acquisition reserve

(616,195)

-

-

17,313

17,312

-

598,882

-

-

17,312

Issue of share capital (net of expenses)

-

-

-

-

-

14,113,765

-

-

-

14,113,765

Unpaid shares to be issued

-

-

4,824,227

-

-

-

-

-

-

4,824,227

Reverse acquisition reserve

-

-

-

-

-

-

(5,021,741)

-

-

(5,021,741)

At 31 December 2016 and 1 January 2017

-

-

4,824,227

-

-

14,113,765

(4,422,859)

(23,422)

(11,329,906)

3,161,805

Loss for the period

-

-

-

-

-

-

-

-

(5,840,562)

(5,840,562)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

FX Gains / (Losses)

-

-

-

-

-

-

-

(55,405)

-

(55,405)

Unpaid shares paid for

-

-

(4,824,227)

-

-

4,824,227

-

-

-

-

Shares issued pre-IPO

-

-

-

-

-

2,023,476

-

-

-

2,023,476

Shares issued - appScatter Ltd acquired by PLC

2,466,599

-

-

-

-

(2,466,599)

-

-

-

-

Issue of share capital on IPO

692,308

8,307,692

-

-

-

-

-

-

-

9,000,000

Expenses associated with Placing

-

(1,634,952)

-

-

-

-

-

-

-

(1,634,952)

Share options issued

 -

-

-

-

528,876

-

-

-

-

528,876

At 31 December 2017

3,158,907

6,672,740

-

-

528,876

18,494,869

(4,222,859)

(78,827)

(17,170,468)

7,183,238

 

 

 

 

 

 

 

 

 

 

 

See note 15 for a description of each reserve included above.

Consolidated Statement of Financial Position

At 31 December 2017

 

 

Group

Group

 

 

Note

2017

2016

 

 

 

£

£

 

Non-current assets

 

 

 

 

Intangible assets

9

1,444,349

959,101

 

Investment in subsidiaries

10

-

-

 

Intercompany receivables

10

-

-

 

Total non-current assets

 

1,444,349

959,101

 

 

 

 

 

 

Current assets

 

 

 

 

Trade & other receivables

11

3,464,229

5,101,587

 

Cash & cash equivalents

 

3,781,109

226

 

Total current assets

 

7,245,338

5,101,813

 

Total assets

 

8,689,687

6,060,914

 

 

 

 

 

 

Equity

 

 

 

 

Share capital

14

3,158,907

-

 

Share premium

 

6,672,740

-

 

Shares to be issued

 

-

4,824,227

 

Share option reserve

16

528,876

-

 

Merger reserve

 

18,494,869

14,113,765

 

Reverse acquisition reserve

 

(4,422,859)

(4,422,859)

 

Foreign exchange reserve

 

(78,827)

(23,422)

 

Retained earnings

 

(17,170,468)

(11,329,906)

 

Total equity

 

7,183,238

3,161,805

 

 

 

 

 

 

Current liabilities

 

 

 

 

Trade & other payables

12

1,506,449

2,613,614

 

Loans & borrowings

13

-

285,495

 

Total current liabilities

 

1,506,449

2,899,109

 

Total liabilities

 

1,506,449

2,899,109

 

Total equity & liabilities

 

8,689,687

6,060,914

 

 

 

 

 

 

 

 

Clive Carver

 6 June 2018

 

 

Consolidated Statement of Cash flows

For the year ended 31 December 2017

 

 

Group

Group

 

 

2017

2016

Cash flows from operating activities

 

£

£

Operating loss after taxation

 

(5,840,562)

(8,790,222)

Adjustments for:

 

 

 

Finance expenses

 

48,326

87,276

Finance income

 

(397)

-

Amortisation

 

729,202

-

Deemed costs on reverse takeover

 

-

5,167,128

Share-based payments charge

 

528,876

-

Tax credit

 

500,000

-

Exchange differences

 

12,324

-

Unrealised gain

 

-

10,027

Operating loss before working capital changes

 

(4,022,231)

(3,525,791)

 

 

 

 

Changes in working capital

 

 

 

(Increase) / decrease in trade & other receivables

(2,773,058)

(241,035)

Increase / (decrease) in trade & other payables

 

(1,392,659)

2,083,891

Net cash used in operations

 

(8,187,948)

(1,682,935)

 

 

 

 

Investing activities

 

 

 

Purchase of intangible assets

 

(1,282,178)

-

Interest received

 

397

-

Acquisition of business (net of cash)

 

-

3,487

Net cash flows used in investing activities

 

(1,282,781)

3,487

 

 

 

 

Financing activities

 

 

 

Net proceeds from loans

 

-

230,025

Interest paid

 

(48,326)

(55,029)

Issue of ordinary shares (net of expenses)

 

13,298,938

1,296,599

Issue of common stocks (appScatter LLC)

 

-

204,872

Net cash flows from financing activities

 

13,250,612

1,676,467

 

 

 

 

Net change in cash and equivalents

 

3,780,883

(2,981)

Cash and equivalents at the beginning of the period

226

3,207

Cash and equivalents at the end of the period

 

3,781,109

226

 

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

 

 

 

 

Notes to financial statements

1.     Accounting policies

1.1.    Authorisation of financial statements and statement of compliance with IFRS

The financial information contained in this announcement does not constitute the Company's statutory financial statements for the years ended 31 December 2017 and 31 December 2016 but has been extracted from them. The Group financial statements of appScatter Group Plc for the year ended 31 December 2017 were authorised for issue by the Board on 6 June 2018 and signed on the Board's behalf by Clive Carver.

appScatter Group Plc is a public limited company incorporated and domiciled in England and Wales with its registered office at Salisbury House, London Wall, London EC2M 5PS. It was incorporated on 3 April 2017. The Company's ordinary shares are traded on AIM.

1.2.    Basis of preparation

The principal accounting policies applied in the preparation of the financial information are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated below.

The financial information has been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs), as adopted by the European Union. This is the first financial information of the Company prepared in accordance with IFRS and the Company has applied IFRS 1 'First time adoption of IFRS'.

The preparation of financial statements in compliance with adopted IFRSs requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The key estimates and underlying assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The Company does not believe there were any areas where significant judgments and estimates have been made in preparing the financial statements except for the intangible assets, which is discussed in the accounting policy below.

The presentation currency of the financial information is Pound Sterling (£) rounded to the nearest pound. The Company, and appScatter Limited's functional currency is Pound Sterling (£) and its other subsidiaries' functional currency is US Dollar (US$).

appScatter Group PLC was incorporated on 3 April 2017. The Company acquired the share capital of the trading entity, appScatter Limited, on 21 August 2017.  Therefore, at 31 December 2017, appScatter Group PLC had no comparative year information to report.

1.3.    Composition of the group

appScatter Group PLC was incorporated on 3 April 2017. The Company acquired the share capital of the trading entity, appScatter Limited, on 21 August 2017.Therefore, these consolidated financial statements for the year ended 31 December 2017, including the comparative financials the year ended 31 December 2016 representthe trading results of appScatter Limited (a company with the same registered address as the appScatter Group PLC) and its subsidiaries (appScatter LLC and DSH Labs LLC) and the Company's results from the date of incorporation see note 1.6.

 

A list of the subsidiary undertakings which, in the opinion of the Directors, principally affected the amounts of profit or loss and net assets of the Group is given in note ?10 of the financial information.

The Company's subsidiaries are:

-       appScatter Limited registered in England and Wales with the registration number 09786498

-       appScatter LLC registered in Delaware with the federal ID number 46-3445738

-       DSH Labs LLC registered in Delaware with the federal ID number 46- 3918193

1.4.    Changes in accounting policies and disclosures

As this is the first set of IFRS accounts being prepared, all relevant standards have been adopted for the first time.

1.5.    New and amended standards adopted by the Group

The Group has applied any applicable new standards, amendments to standards and interpretations that are mandatory for the financial year beginning on or after 1 January 2016. However, none of them has a material impact on the Group's consolidated financial statements.

1.6.    New, amended standards, interpretations not adopted by the Group

At the date of authorisation of this financial information, certain new standards, amendments and interpretations to existing standards applicable to the Company's accounting period beginning after 1 January 2017 have been published but are not yet effective and have not been adopted early by the Company. These are listed below:

?         IFRS 15 Revenue from Contracts with Customers, effective date 1 January 2018. IFRS 15 is intended to clarify the principles of revenue recognition and establish a single framework for revenue recognition. This standard replaces the previous standard IAS 11 Construction Contracts, IAS18 Revenue and revenue related IFRICs. The core principle is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard is not expected to affect the reported figures.

?         IFRS 9 Financial Instruments, effective date 1 January 2018. IFRS 9 is a replacement for IAS 39 'Financial Instruments' and covers three distinct areas. Phase 1 contains new requirements for the classification and measurement of financial assets and liabilities. Phase 2 relates to the impairment of financial assets and requires the calculation of impairment on an expected loss basis rather than the current incurred loss basis. Phase 3 relates to less stringent requirements for general hedge accounting. This standard is not expected to affect the reported figures.

?         IFRS 16 Leases, effective date 1 January 2019 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer ('lessee') and the supplier ('lessor'). IFRS 16 completes the IASB's project to improve the financial reporting of leases and replaces the previous leases Standard, IAS 17 Leases, and related Interpretations. This standard is not expected to have a material impact on the reported figures given the value of leases to which the Company is party to.

?         Annual Improvements to IFRSs (2014-2016 cycle) (issued on 8 December 2016), effective for the periods beginning on or after 1 January 2017 (not yet endorsed by EU);

?         Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions (issued on 20 June 2016 ), effective for the accounting periods beginning on or after 1 January 2018 (not yet endorsed in the EU).

1.7.    Going concern

The consolidated entity has incurred a loss after tax of £5,840,562 for the year ended 31 December 2017 (2016: loss of £8,790,222) and had a net cash outflow from operations of £8,187,948 (2016: £1,682,935).

 

The accounts have been prepared on a going concern basis.  The loss and cash outflow have been incurred as the Group is currently in a growth phase as it develops its platform and launches its initial customer propositions.   Further detail on the trading prospects of the Group are included in the Strategic Report above. 

 

The Group has commitments from investors including certain existing shareholders to invest in new equity independent of the Priori transaction completing.  The Board have prepared cash flow forecasts under various scenarios including those with conservative growth projections and where costs are reduced accordingly.  Whilst revenue growth is expected in the coming year, the commitments from investors, once taken up by the Company, provide sufficient funding even with no sales growth.  The Directors consider that the Group has sufficient cash to fund operations for at least the next twelve months from the date of this report.

1.8.    Basis of consolidation

The consolidated financial statements include the results of the Company and its subsidiaries ("the Group") as if they formed a single entity for the full period or, in the case of acquisitions, from the date control is transferred to the Group.  The Company controls an entity when the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities. The entity which it controls it is classified as a subsidiary. Intercompany transactions and balances between Group companies are therefore eliminated in full.

1.9.    Business combinations

Acquisition of appScatter LLC by appScatter Limited

On 18 May 2016 appScatter Merger Sub LLC, a subsidiary of appScatter Limited was merged with and into appScatter LLC, with the latter company continuing as the surviving entity. The entire issued share capital of appScatter LLC was for acquired for a consideration of £12,659,030 and this was satisfied by the issue of 9,967,740 shares in appScatter Limited.

The Board have treated the acquisition as a reverse takeover, after identifying appScatter LLC (the accounting acquirer or "appScatter") as the acquirer under IFRS 3 'Business Combinations'. In addition, this transaction cannot be considered a business combination, as appScatter Limited did not meet the definition of a business, under IFRS 3 'Business Combinations'.  Based on available guidance, the difference on consolidation arising on such transactions should be treated as a share-based payment transaction and therefore accounted for under IFRS 2 'Share-based payment'. Any difference between the consideration transferred, which is the fair value of the shares deemed to have been issued by appScatter and the fair value of appScatter Limited's identifiable net assets represents service received by the accounting acquirer. This deemed cost on reverse takeover is expensed to profit or loss.

The fair value of the consideration transferred is calculated using the number of appScatter's shares that would have been issued to the owners of appScatter Limited on the acquisition date to give them an equivalent ownership interest in appScatter as it has in the combined company at the share price of the Company at the acquisition date. The fair value of each share of the Company is deemed to have been issued by appScatter is based on the fair value of the share price of appScatter Limited at the time of the acquisition, which was the market price third party investors were subscribing for new shares at shortly before the transaction.

Although the consolidated financial information has been issued in the name of the Company, the legal parent, it represents in substance continuation of the financial information of appScatter LLC and DSH LLC, its subsidiary ("appScatter subgroup").

The assets and liabilities of appScatter subgroup are recognised and measured in the Group financial statements at the pre-combination carrying amounts and not re-stated at fair value.

Acquisition of appScatter Limited by appScatter Group PLC

On 21 August 2017 appScatter Limited was acquired by appScatter Group PLC.  The entire issued share capital of appScatter Limited was acquired for a consideration of £32,065,792 and this was satisfied by the issue of 49,331,988 shares in appScatter Group PLC in a share for share exchange. 

The Board have treated the acquisition as a group reconstruction under FRS 102.  IFRS does not contain requirements for accounting for common control transactions and an accounting policy for accounting for the transaction therefore needs to be formulated based on other available guidance. Management has chosen to use FRS102 as a reference.  appScatter group PLC was incorporated a short time before the combination with an identical ownership structure to appScatter Limited with the sole purpose of completing the acquisition of appScatter Limited to facilitate the initial public offering and listing on AIM.

Group reconstructions can be accounted for using merger accounting where the use of merger accounting is not prohibited by law, where the ultimate equity holders remain the same and no non-controlling interest is altered by the transaction.  The combination of appScatter Group plc and appScatter Limited meets all three of these criteria.

The carrying values of assets and liabilities are not adjusted to fair value and the difference between the nominal value of the shares issued and the nominal value of the shares received has been transferred to the merger reserve and is shown in the statement of changes in equity.

The results and cash ?ows of all the combining entities have been brought into the ?nancial statements of the combined entity from the beginning of the ?nancial year in which the combination occurred, adjusted so as to achieve uniformity of accounting policies. The comparative information did not need to be restated as appScatter Group plc was incorporated during 2017 and thus figures reported in the Admission document represent the Group in 2016.

1.10.  Basis of preparation

Year ended 31 December 2016

The financial information for 2016 reporting year is that of appScatter subgroup, headed by appScatter Limited as explained above, and the post-acquisition results of appScatter Limited from 18 May 2016 (date of reverse takeover) to 31 December 2016. The appScatter Limited's pre-acquisition results from 1 January 2016 to 18 May 2016 have been transferred and included in the reverse takeover reserve as permitted by IFRS.

Year ended 31 December 2017

The financial information for 2017 reporting year is that of appScatter Group, headed by appScatter Group PLC as explained above, and the results of appScatter Group PLC from incorporation to 31 December 2017. appScatter Group PLC had carried out no transactions prior to the date of the combination.

1.11.  Foreign Currency

The main functional currencies for the Company's US registered subsidiaries are US$.

(i)      Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions.

(ii)     Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the reporting period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(iii)    Share capital, share premium and brought forward earnings are translated using the exchange rates prevailing at the dates of the transactions.

1.12.  Consolidation of foreign entities

On consolidation, results of the foreign entities are translated from the local functional currency to Pound Sterling using average exchange rates during the period. All asset and liabilities are translated from the local functional currency to Pound Sterling using the reporting period end exchange rates. These exchange differences arising from the translation of the net investment in foreign entities are recognised in other comprehensive income and accumulated in a separate component of equity.

Post transition exchange differences are recycled to profit or loss as a reclassification adjustment upon disposal of the foreign operation.

1.13.  Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group's activities. Revenue is shown net of Value Added Tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group's activities as described below.

1.14.  Sale of software licences

The Group sells licences to use its software products either on a rental basis for a fixed period of time. Revenue from licenses sold on a rental or subscription basis is recognised over the period for which the Group has obligations under the contract.

1.15.  Intangible assets

Externally acquired: developed technologies

The externally acquired developed technologies which are the distribution platform for mobile applications are initially recognised at cost.  This asset will be amortised over its useful life when it is being sold or used. Subsequent to initial recognition, this intangible asset is reported at cost less accumulated amortisation and accumulated impairment losses. The carrying values are tested for impairment when there is an indication that the value of the assets might be impaired during the period. The amortisation period and amortisation method with a finite useful life are reviewed annually at year end. The assets are being amortised over three reporting years.

The assessment of the future economic benefits generated by the above intangible asset involves a significant degree of judgement based on management estimation of future potential revenue and profit and the useful life of the assets. Reviews are performed regularly to ensure the recoverability of this intangible asset.

Research and development

Research expenditure is recognised in income statement in the period in which it is incurred.

Internal development expenditure is capitalised only if it meets the recognition criteria of IAS 38 'Intangible Assets'. Where the criteria are not met, the expenditure is expensed to income statement. At each reporting year, £1.2m has met recognition criteria and been capitalised in 2017.  This expenditure is being amortised over an expected useful economic life of three years.

1.16.  Employee benefits

Short-term benefits

Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the period in which the associated services are rendered by employees of the Company.

Share-based payments

The Group operates an equity-settled share-based payment arrangement whereby the fair value of services provided is determined indirectly by reference to the fair value of the instrument granted. The fair value of options granted to Directors and other employees in respect of services provided is recognised as an expense in the income statement with a corresponding increase in equity reserves - the share-based payment reserve until the award has been settled and then make a transfer to reserves.

On exercise or lapse of share options, the proportion of the share-based payment reserve relevant to those options is transferred to retained earnings. On exercise, equity is also increased by the amount of the proceeds received.

The fair value is measured at grant date and charged over the vesting period during which the option becomes unconditional.

The fair value of options is calculated using the Black-Scholes model taking into account the terms and conditions upon which the options were granted. The exercise price is fixed at the date of grant.

Non-market conditions are performance conditions that are not related to the market price of the entity's equity instruments. They are not considered when estimating the fair value of a share-based payment. Where the vesting period is linked to a non-market performance condition, the Group recognises the goods and services it has acquired during the vesting period based on the best available estimate of the number of equity instruments expected to vest. The estimate is reconsidered at each reporting date based on factors such as a shortened vesting period, and the cumulative expense is 'trued up' for both the change in the number expected to vest and any change in the expected vesting period.

Market conditions are performance conditions that relate to the market price of the entity's equity instruments. These conditions are included in the estimate of the fair value of a share-based payment. They are not taken into account for the purpose of estimating the number of equity instruments that will vest. Where the vesting period is linked to a market performance condition, the Group estimates the expected vesting period. If the actual vesting period is shorter than estimated, the charge is being accelerated in the period that the entity delivers the cash or equity instruments to the counterparty. When the vesting period is longer, the expense is recognised over the originally estimated vesting period.

1.17.  Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs from its tax base, except for differences arising on:

-       the initial recognition of goodwill;

-       the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

-       investments in subsidiaries where the Company is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the deferred tax liabilities or assets are settled or recovered. Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to offset current tax assets and liabilities.

1.18.  Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as Philip Marcella.

The Board considers that the Company's activity constitutes one reporting segment, as defined under IFRS 8 and reviews the performance of the Company against forecasts.

The profit measures are operating profit and profit for the period, both disclosed on the face of the income statement. No differences exist between the basis of preparation of the performance measures used by management and the figures in the Company financial information.

1.19.  Equity instruments

Ordinary shares are classified as equity. Costs, net of VAT, directly attributable to the issue of new shares or options are shown in equity as a deduction from share premium.

1.20.  Financial assets

The Group classifies its financial assets into the categories, discussed below, based upon the purpose for which the asset was acquired. Financial assets are recognised when the Group becomes party to the provisions of a contract.

1.21.  Loans and receivables

The Group classifies all its financial assets other than cash and cash equivalents as trade and other receivables (excluding prepayments). The classification depends on the nature of the financial assets.

1.22.  Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held on call, together with other short-term highly liquid investments which are not subject to significant changes in value and have original maturities of less than three months.

1.23.  Trade and other Receivables

Trade and other receivables are classified as loans and receivables under financial assets where they have fixed or determined payments and are not quoted in an active market. Loans and receivables included in financial assets are measured at amortised cost using the effective interest method, less any impairment loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

1.24.  Financial liabilities

Financial liabilities are recognised when the Group becomes party to the provisions of a contract. The Group's financial liabilities are all categorised as loans and payables. The loans and payables are made up of:

-       Trade payables and other short-term monetary liabilities excluding other taxes and social security costs and deferred income which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

-       Bank and other borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument and, if interest-bearing, are subsequently measured at amortised cost using the effective interest rate method.

A financial liability is no longer recognised when the obligation under the liability is discharged, cancelled or expires.

1.25.  Significant accounting judgements, estimates and assumptions

The preparation of the consolidated financial statements in conformity with IFRSs requires management to make estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income, expenses and related disclosures.  The estimates and underlying assumptions are based on practical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.  Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new information.  Such changes are recorded in the period in which the estimate is revised.

The application of the Group's accounting policies may require management to make judgements, apart from those involving estimates, which can have a significant effect on the amounts amortised in the financial statements.  Management judgement is particularly required when assessing the substance of transactions that have a complicated structure or legal form.

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements:

-       Accounting for the business combination of appScatter Limited and appScatter Group PLC (see note ? 1.10 above).

-       Treatment of research & development expenditure (see note ? 1.16 above).

In the process of applying the Group's accounting policies, management has made the following estimates, which have the most significant effect on the amounts recognised in the consolidated financial statements:

-       Accounting for share-based payments (see note ? 1.27 below).

-       R&D tax credit recoverable.

1.26.  Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of share options is determined using the Black-Scholes model.

1.27.  Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

-       In the principal market for the asset or liability; or

-       In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

-       Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities;

-       Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and

-       Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

2.     Financial Risk Management

2.1.    Financial instruments by category

 

 

Group

Group

 

 

 

2017

2016

 

Financial assets

 

£

£

 

Cash & equivalents

 

3,781,109

226

 

Trade receivables

 

1,204,330

-

 

Other receivables

 

1,325,966

106,355

 

Shares issued for prepaid services

 

502,509

-

 

Amounts receivable on shares to be issued

 

-

4,824,228

 

Loans due from related parties

 

60,664

-

 

Loans and receivables

 

6,874,578

4,930,809

 

 

 

 

 

 

Financial liabilities

 

 

 

 

Trade payables

 

1,097,168

510,604

 

Other payables

 

5

196,792

 

Accruals

 

145,882

1,299,299

 

Loans due to related parties

 

-

298,212

 

Loans and borrowings - current

 

-

285,495

 

Loans and payables

 

1,243,055

2,590,402

 

 

2.2.    Fair value hierarchy

All the financial assets and financial liabilities recognised in the financial statements which are short-term in nature are shown at the carrying value which also approximates the fair values of those financial instruments. Therefore, no separate disclosure for fair value hierarchy is required.

2.3.    Risk and sensitivity analysis

The Group's activities expose it to a variety of financial risks, mainly credit risk, interest risk, foreign exchange risk and liquidity risk.

The Group's overall risk management programme focuses on unpredictability and seeks to minimise the potential adverse effects on the Group's financial performance. The Group's Board, on a regular basis, reviews key risks and, where appropriate, takes actions to mitigate the key risks identified.

2.4.    Credit risk

The aggregate financial exposure is continuously monitored. The maximum exposure to credit risk is the value of the outstanding amount of other receivables and bank balances.  The Group does not consider that there is any concentration of risk within other receivables, therefore, no impairment was required. The Group's exposure to credit risk on cash and cash equivalents is considered low as the bank accounts are with banks with high credit ratings.

2.5.    Interest risk

The Group's exposure in these areas as at the financial position date was minimal.

2.6.    Foreign exchange risk

The Group's exposure to foreign currency risk related primarily to cash and cash equivalents, trade and other payables that are denominated in US$ other than the functional currency of the relevant group entities.

2.7.    Exposure to currency risk

The following table details the Group's exposure at the end of the reporting period to currency risk arising from recognised assets or liabilities denominated in US$. Differences resulting from the translation of the financial statements of the entity within the Group into the Group's presentation currency are excluded.

 

 

Group

Group

 

 

 

2017

2016

 

 

 

£

£

 

Cash & equivalents

 

2,288

186

 

Trade & other receivables

 

60

83,470

 

Other payables and accruals

 

(54,764)

(833,988)

 

 

 

(52,416)

(750,332)

 

2.8.    Sensitivity analysis

The following table indicates the change in the Group's loss for the period and accumulated losses that would arise if foreign exchange rates in US$ to which the Group has significant exposure at the end of each reporting period had changed at that date, assuming all other risk variables remained constant.

 

USD Currency change

 

Year ended 31 December 2017

Year ended 31 December 2016

Group

Profit or loss

£ 

£ 

10% strengthening of sterling

49,897

98,237

10% weakening of sterling

(60,985)

(120,068)

 

 

 

Equity

 

 

10% strengthening of sterling

86,630

39,592

10% weakening of sterling

(105,881)

(48,390)

 

 

 

There is no foreign exchange impact on the Company.

 

 

2.9.    Liquidity risk

The Group and the Company currently hold cash balances to provide funding for normal trading activity. Trade and other payables are monitored as part of normal management routine.

 

Borrowings and other liabilities mature according to the following schedule:

 

 

Within 1yr

1-2 years

2-5 years

Group - 2017

£

£

£

Trade & other payables

1,097,168

-

-

Loans & borrowings

-

-

-

 

1,097,168

-

-

Group - 2016

 

 

 

Trade & other payables

2,304,907

-

-

Loans & borrowings

285,495

-

-

 

2,590,402

-

-

Company - 2017

 

 

 

Trade & other payables

17,810

-

-

Loans & borrowings

-

-

-

 

17,810

-

-

 

 

 

 

2.10.  Capital risk management

The Group's capital management objectives are to ensure its ability to continue as a going concern by pricing products and services commensurate with the level of risk; and to provide an adequate return to shareholders.

 

To meet these objectives, the Board reviews the budgets and forecasts on a regular basis to ensure there is sufficient capital to meet the needs of the Group through to profitability and positive cash flow. All working capital requirements have been financed to date through fundraising and borrowings.

3.     Loss from operations

 

2017

2016

 

£

£

The Group operating loss is stated after charging

 

 

 

 

 

Auditors remuneration

 

 

- fees payable to the Company's auditors for the audit of the Group and Company

18,000

-

- fees payable to the Company's auditor for the audit of subsidiaries

12,000

-

- fee's payable to the Company's auditor for tax advice

13,683

5,240

- fee's payable to the Company's auditor for corporate finance advice (prior to their appointment as auditor)

95,500

-

Research & development expenses

1,217,062

935,579

Legal & professional fees

379,254

156,891

Acquisition related costs

-

14,795

Staff costs (note 4 )

2,397,395

998,059

Foreign exchange losses

12,324

15,002

Deemed cost on reverse takeover

-

5,167,128

Amortisation

729,202

-

 

 

 

 

4.     Staff costs

The aggregate employment costs of staff (including Directors) for the year was:

 

2017

2016

 

£

£

Wages & salaries

1,659,241

988,023

Pension

6,768

-

Social security costs

184,510

10,036

Employee share-based payment charge

528,876

-

Total staff costs

2,379,395

998,059

 

The average number of employees (including directors) during the period was made up as follows:

 

The average number of employees in the period was:

2017

2016

Executives

5

5

Administration

1

5

Other

 24

0

 

30

10

 

5.     Directors' emoluments

Key management personnel compensation included in the loss for the following periods were as follows:

 

 

Fees

Consulting fees

Bonus

Pension

Total

2017

£

£

£

£

£

Executive directors

 

 

 

 

 

Philip Marcela

195,619

-

97,500

975

294,094

Manish Kotecha

125,542

70,000

-

196

195,738

Jason Hill

110,206

-

83,880

391

194,477

 

431,367

70,000

181,380

1,562

684,309

Non-executive directors

 

 

 

 

 

Clive Carver

30,000

83,849

-

-

113,849

Michael Buchen

25,000

10,704

-

-

35,704

 

55,000

94,553

-

-

149,553

 

 

Directors Fees

Consulting fees

Bonus

Pension

Total

2016

£

£

£

£

£

Executive directors

 

 

 

 

 

Philip Marcela

168,328

-

180,000

-

348,328

Manish Kotecha

74,909

-

-

-

74,909

Jason Hill

42,339

115,000

-

-

157,339

 

285,576

115,000

180,000

-

580,576

Non-executive directors

 

 

 

 

 

Clive Carver

12,500

-

-

-

12,500

Michael Buchen

14,583

-

-

-

14,583

 

27,083

-

-

-

27,083

 

The majority of remuneration to directors in 2016 & 2017 was paid in shares.

6.     Finance expenses

 

2017

2016

 

£

£

Bank interest

-

2,115

Interest paid on loans

41,938

72,257

Other interest

-

2,004

Finance arrangement fees

6,388

10,900

 

48,326

87,276

 

7.     Taxation

 

2017

2016

 

£

£

The tax credit is as follows:

 

 

 

 

 

UK Corporation tax

-

-

Total current tax

500,000

-

 

 

 

Origination and reversal of timing differences

-

-

Total tax credit

500,000

-

 
Factors affecting the tax credit

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

 

2017

2016

£

£

Loss on ordinary activities before income tax

(6,340,562)

(8,790,222)

Standard rate of corporation tax

19.25%

20%

Loss before tax multiplied by the standard rate of corporation tax

1,220,558

1,758,044

Adjustments

 

 

Deemed reverse takeover costs

-

(1,033,426)

R&D enhancement related to 2016

125,000

-

R&D enhancement related to 2017

375,000

-

Losses carried forward

(1,220,558)

(724,618)

Tax credit

500,000

-

Changes in tax rates for the two periods

The UK corporation tax rate for small company profit has reduced to 19 per cent from 1 April 2017. Accordingly, the deferred tax asset or liability would have been calculated based on the rate of 19 per cent. at the balance sheet date. Future enacted tax rates of 18 per cent. will apply from 1 April 2020.

 

Deferred tax assets have not been recognised in respect of tax losses due to lack of certainty of future profitability as the Company is still in its early start-up stage.

 

8.     Earnings per share

 

2017

2016

 

£

£

Loss for the year and earnings used in basic & diluted EPS

(5,572,650)

(8,790,222)

Weighted number of average shares for basic EPS

50,904,215

12,574,169

Basic loss per share £

(0.11)

(0.70)

 

 

 

Weighted number of average shares for diluted EPS

55,340,447

12,574,169

Fully diluted loss per share £

(0.11)

(0.70)

 

9.     Intangible assets

Intangible assets

Capitalised R&D

Developed Technology

Total

Cost

£

£

£

At 1 January 2015

-

5,041

5,041

Additions

-

765,793

765,793

Exchange adjustment

-

27,362

27,362

At 31 December 2015 and 1 January 2016

-

798,196

798,196

Additions

-

-

-

Exchange adjustment

-

160,905

160,905

At 31 December 2016 and 1 January 2017

-

959,101

959,101

Additions

1,282,178

-

1,282,178

Exchange adjustment

-

(67,728)

(67,728)

At 31 December 2017

1,282,178

891,373

2,173,551

 

 

 

 

Amortisation

£

£

£

At 1 January 2015 & 31 December 2015

-

-

-

At 1 January 2016 & 31 December 2016

-

-

-

 

 

 

 

At 1 January 2017

-

-

-

Charge for the year

427,392

301,810

729,202

At 31 December 2017

427,392

301,810

729,202

 

 

 

 

Carrying value

 

 

 

At 31 December 2017

854,786

589,563

1,444,349

At 31 December 2016

-

959,101

959,101

At 1 January 2016

-

798,196

798,196

 

During 2017 the Company has capitalised research and development expenditure directly related to products which have been implemented in the platform.  This expenditure is being amortised over three years.

 

On 1 October 2013 appScatter LLC entered into a conditional agreement to purchase the intellectual property of the developed technologies of the application distribution platform from Digital Software House Limited (a related party because Mr Philip Marcella and Mr William Booth were directors of this entity) for a consideration of £488,537 ($800,000). However, as the conditions were not met, this transaction only took place in October 2015 when the purchase consideration was revised up to £765,793 ($1,170,000). This was satisfied by the issue of shares in appScatter LLC of £654,524 ($1,000,000) and cash of £111,269 ($170,000).

 

Management believes that no impairment of the developed technology asset is required at the reporting date (2016: nil).

10.  Investments in subsidiaries

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

Name

Principal activity

Parent

% of ordinary shares directly held by parent

appScatter Limited

Software development

appScatter Group Plc

100%

appScatter LLC (Delaware)

Software development

appScatter Limited

100%

DSH Labs LLC (Delaware)

Software development

appScatter LLC

100%

 

On 18 May 2016 appScatter Limited acquired the entire issued share capital of appScatter LLC and its subsidiary for a consideration of £12,659,030 satisfied by the issue of 9,967,740 shares.

 

On 21 August 2017 appScatter Group Plc acquired the share capital of the trading entity appScatter Limited for the consideration of £32,065,792 satisfied by the issue of 49,331,988 shares.  This has been written down to reflect the fair value of the net assets acquired.

11.  Trade and other receivables

 

Group

Group

 

 

2017

2016

 

 

£

£

 

Trade receivables

1,204,330

-

 

Prepayments

107,310

20,285

 

Other receivables

825,966

106,355

 

Shares issued for prepaid services

502,509

-

 

R&D Tax Credit receivable

500,000

 

 

Amounts receivable on shares to be issued

-

4,824,228

 

Other taxes receivable

263,450

150,719

 

Loans due from related parties

60,664

-

 

 

3,464,229

5,101,587

 

 

In 2016, amounts receivable on shares to be issued included £2.9 million related to cash consideration receivables from shareholders, £0.4 million for accrued staff bonus and £1.6 million for services to be provided by suppliers in 2017.  The total shares to be issued to satisfy the amounts receivable on shares to be issued was 2,996,414.

 

 

12.  Trade and other payables

 

Group

Group

 

 

2017

2016

 

 

 

 

 

Trade payables

1,097,168

510,604

 

Accruals

145,882

1,299,299

 

Social security & other taxes

263,394

308,707

 

Other payables

5

196,792

 

Loans due to related parties

-

298,212

 

 

1,506,449

2,613,614

 

13.  Loans and borrowings

 

Group

Group

 

 

2017

2016

 

 

 

 

 

Current

-

285,495

 

 

The carrying value of the loans and borrowings approximates to their fair value.

The interest-bearing loan in 2016 of £285,495 was due to Kuflink Bridging Ltd and was repaid in 2017.

14.  Share Capital

 

Shares

£

 

At incorporation on 3 April 2017

2

-

 

Shares issued to shareholders of appScatter Ltd

49,331,986

2,466,599

 

Shares issued on IPO

13,846,154

692,308

 

At 31 December 2017

63,178,142

3,158,907

 

 

appScatter Group plc was incorporated on 3 April 2017 with 2 ordinary shares of £0.05 allotted.

On 21 August 2017 appScatter Group plc acquired the entire issued share capital of appScatter Ltd which was satisfied by the issuance of 49,331,986 ordinary shares of £0.05 each, issued to the shareholders of appScatter Ltd at the ratio of 2.5 shares for every 1 held.

On 5 September 2017, appScatter Group plc completed the initial public offering and admission to AIM; 13,846,154 ordinary shares of £0.05 each were issued at a price of £0.65 per ordinary share.

15.  Reserves

The following describes the nature and purpose of each reserve within equity:

Share premium                                              Amount subscribed for share capital in excess of nominal value less any issue or fundraising costs related to shares issued, written off against this account.

Shares to be issued                                      Amount subscribed for share capital that has been committed to but not yet issued in excess of nominal value.

Share option reserve                                    Value of share options granted and calculated with reference to a binomial pricing model.  When options lapse or are exercised, amounts are transferred from this account to retained earnings.

Merger reserve                                               Effect on equity as a result of the group reconstruction of appScatter Limited and appScatter Group plc as discussed in note1.9.

Reverse acquisition reserve                       Effect on equity of the reverse acquisition of appScatter LLC.

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

Retained earnings                                        Retained earnings represents all other net gains and losses and transactions with shareholders (for example dividends) not recognised elsewhere.

16.  Share-based payments

Shortly after incorporation in April 2017, the Company has established an employee share option plan to enable the issue of options as part of the remuneration Directors and employees to enable them to purchase ordinary shares in the Company. Under IFRS 2 "Share-based Payments", the Company determines the fair value of the options issued to Directors and employees as remuneration and recognises the amount as an expense in the Profit or Loss account with a corresponding increase in equity. No comparative information is presented for share-based payments.

At 31 December 2017, the Company had outstanding options to subscribe for Ordinary shares as follows:

 

 Group

2017

2017

 

Options

Weighted average exercise price

 

No.

£

Outstanding at the beginning of the period

-

-

Granted during the period

4,436,232

0.583

Outstanding at the end of the period

4,436,232

0.583

Exercisable at the end of the period

1,321,367

0.523

 

The weighted average contractual life of the options outstanding at 31 December 2017 was 10 years. Of the total number of options outstanding at 31 December 2017, 1,321,367 had vested and were exercisable.  The weighted average share price (at the date of exercise) of options exercised during the year was nil as no options were exercised.

On 15 May 2017 options were granted to employees of the Group to subscribe for a total of 891,472 shares in appScatter Limited at £1.29 per share (of which 193,798 were granted to Jason Hill, a Director of the Company). Following the Company's acquisition of the entire issued share capital of appScatter Limited on 21 August 2017, invitations were made to each grantee, in accordance with the terms of their original option agreements, to release their options in appScatter Limited in exchange for the grant to them of options to subscribe for Ordinary Shares. All such holders agreed to do so and accordingly on 22 August 2017 options were granted to these employees to subscribe for up to 2,228,680 Ordinary Shares in the Company at a price of £0.516 per Ordinary Share (of which 484,495 were granted to Jason Hill). These options are exercisable until 15 May 2027.  With the exception of Jason Hill and one other employee, one half of each holder's options vest on the first anniversary of the commencement of their employment start date and the balance vest in 24 equal instalments over a two-year period. In the case of Jason Hill and one other employee, the initial 50 per cent. of the Options granted to them vested immediately on grant.

On 21 August 2017 the Company granted to Ruffena Capital Limited warrants to subscribe for up to 70,156 new Ordinary Shares at £0.644 per Ordinary Share. These warrants expire in tranches on a range of dates between 24 August 2023 and 4 May 2024 and were issued by way of replacement of a warrant of equivalent value and duration granted on 26 July 2017 which had entitled Ruffena Capital Limited to subscribe for up to 28,060 ordinary shares in appScatter Limited at £1.61 per appScatter Limited share.

On 24 August 2017 options were granted to the Directors, subject to Admission, over a total of 2,137,396 new Ordinary Shares, representing an aggregate of 3.38 per cent. of the Enlarged Share Capital on Admission, at an exercise price equal to the Placing Price. These options are exercisable until the tenth anniversary of Admission and vest in three equal annual instalments commencing on the first anniversary of Admission.

The value of the options is measured by the use of a binomial pricing model.  The inputs into the binomial model made in 2017 were as follows:

 

EMI Options

Directors Options

Warrants

Weighted average shares price at grant date, pence

64.4

65.0

65.0

Exercise price, pence

51.6

65.0

65.0

Weighted average contractual life, months

10.0

10.0

10.0

Expected volatility %

50.00%

50.00%

50.00%

Expected dividend growth rate %

0.00%

0.00%

0.00%

Risk-free interest rate %

0.51%

0.51%

0.51%

 

Share based remuneration expense related to the share options grant is included into the Administrative expenses line in the Consolidated Income Statement in the amount of £528,876.

17.  Commitments

Operating lease commitments

The commitment under non-cancellable operating leases as at 31 December 2017 was £163,944.  This was all due within one year.

Capital commitments

There were no amounts contracted for but not provided as at 31 December 2017 (2016: nil).

18.  Related Party Transactions

Group companies

During 2017 appScatter Group plc invoiced appScatter Limited for £216,202 in Management charges and recharged £31,255 of costs.  appScatter Group plc also advanced £4,172,000 in cash appScatter Limited.  appScatter Limited invoiced appScatter Group plc for £646,697 in recharged costs.  At the 31 December the net intercompany balance owed by appScatter Limited to appScatter Group plc was £3,815,922.

Directors

During the year the Company entered into the following transactions with related parties:

Related party

Type

2017

2017

2016

2016

 

 

Transactions

Balance due (from)/ to

Transactions

Balance due (from)/ to

Mobile Software House LLC (1)

Funding

-

-

(386)

-

Philip Marcella (1)

Fees & expenses

132,167

23,966

(180,856)

(856)

Philip Marcella (1)

Shares to be issued

-

-

180,000

180,000

William Booth (2)

Funding & expenses

-

-

38,094

47,334

William Booth (2)

Fees

-

-

85,675

85,675

Manish Kotecha (3)

Fees

90,126

-

68,117

68,117

Elk Associates LLC (4)

Fees

100,833

-

12,500

-

Polar Lights 2 Ltd (5)

Fees

10,902

-

14,483

-

R Malhotra (6)

Consultancy

-

-

106,500

30,000

R Teideman (6)

Consultancy

-

-

216,106

148,441

High Value Partners (7)

Consultancy

-

-

30,689

26,522

High Value Partners (7)

Fees

-

-

14,583

-

Notes

1.     Philip Marcella is a director of appScatter Group plc as well as the sole shareholder of Mobile Software House LLC.  Philip Marcella's current account for 2016 and 2017 included fees £168,329 and £nil respectively.  Included within loans due from related parties is £23,966 in relation to expenses.

2.     William Booth was a director of appScatter Group plc during the period, his current account for 2016 and 2017 included fees of £73,150 and £nil respectively. William Booth provided services to the company as a self-employed consultant. His services were partly paid in shares and cash. William Booth's services in 2016 and 2017 includes £25,700 and £45,407 respectively of fees which will are included in the pre-acquisition losses as they are between September 2015 and April 2016.

3.     Manish Kotecha is a director of appScatter Group plc; during 2016 he invoiced £48,131 through MMDN LLP, a company where he has an interest. This is included in the above transaction amount.

4.     Clive Carver is a non-executive director of appScatter Group plc and has an interest in ELK Associates LLP.

5.     Michael Buchen is a non-executive director of appScatter Group plc and has an interest in Polar Lights 2 Limited.

6.     There were current accounts with R Malhotra and R Teideman who were former directors of appScatter Limited. Both were appointed as directors on 1 June 2016 and both resigned on 31 July 2016.

7.     As at 31 December 2016, Priyanka Lilaramani was a non-executive director of appScatter Limited and is the sole shareholder of High Value Partners Limited. Her service was paid in shares.

 

The amounts due from/(to) for the above parties are non-interest-bearing balances and included under trade and other receivables and trade and other payables notes.

19.  Events after the reporting date

On 5 March 2018 the Company announced the partnership with Airpush Inc. a leading mobile advertising network.  Further details can be found in the CEO Review above. 

On 17 April 2018 the Company announced the partnership with IronSource Ltd the leading mobile monetization and marketing platform. Further details can be found in the CEO Review above. 

On 15 May 2018, the Company announced the launch of the appScatter app security scanning service.  Further details can be found in the CEO Review above. 

On 16 May 2018, the Company announced the conditional agreement to acquire 100% of the entire issued share capital of Priori Data GmbH for a consideration of £13.5 million of which £9.45 million is payable in cash and the balance of £4.05 million by the issue of 5,785,714 new ordinary shares at an effective price of 70p per share. The Board of appScatter believes the acquisition will allow the enlarged group to provide signi?cantly enhanced, market leading, data-led app insights.

At a general meeting on 31 May 2018, all resolutions were passed by shareholders proving the directors with authority to issue the consideration shares and the shares to be issued in connection with associated fundraise.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
FR SSDESMFASEIM