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.