Consolidated Statement of Financial Position

		31 December	31 December
	Note	2018	2017
		£	£
Non-current assets
Intangible assets	9	10,822,443	1,444,349
Goodwill	10	2,105,179	-
Total non-current assets		12,927,622	1,444,349
Current assets
Trade & other receivables	12	1,397,645	3,464,229
Cash & cash equivalents		83,402	3,781,109
Total current assets		1,481,047	7,245,338
Total assets		14,408,669	8,689,687
Share capital	15	4,550,808	3,158,907
Share premium		11,832,991	6,672,740
Share option reserve	17	1,068,222	528,876
Merger reserve		26,693,792	18,494,869
Reverse acquisition reserve		(4,422,859)	(4,422,859)
Foreign exchange reserve		(52,166)	(78,827)
Retained earnings		(27,660,983)	(17,170,468)
Total equity		12,009,805	7,183,238
Current liabilities
Trade & other payables	13	2,217,579	1,506,449
Loans & borrowings	14	61,800	-
Total current liabilities		2,279,379	1,506,449
Non-current liabilities
Loans & borrowings	14	119,485	-
Total current liabilities		119,485	-
Total liabilities		2,398,864	1,506,449
Total equity & liabilities		14,408,669	8,689,687

 

The accompanying notes on page 41 to 61 form an integral part of these financial statements.

These financial statements were approved by the Board of Directors and authorised for issue on 1 August 2019 and are signed on its behalf by:

 

 

Clive Carver

Director
 

Company Statement of Financial Position

 

		31 December	31 December
	Note	2018	2017
		£	£
Non-current assets
Investment in subsidiaries	11	15,127,128	3,131,139
Intercompany receivables	11	8,793,793	3,815,922
Total non-current assets		23,920,921	6,947,061
Current assets
Trade & other receivables	12	92,023	70,215
Cash & cash equivalents		12,035	3,200,654
Total current assets		104,058	3,270,869
Total assets		24,024,979	10,217,930
Share capital	15	4,550,808	3,158,907
Share premium		11,832,991	6,672,740
Share option reserve	17	1,068,222	528,876
Merger reserve		8,863,463	664,540
Retained earnings		(2,945,183)	(891,942)
Total equity		23,370,301	10,133,121
Current liabilities
Trade & other payables	13	654,678	84,809
Total current liabilities		654,678	84,809
Total liabilities		654,678	84,809
Total equity & liabilities		24,024,979	10,217,930

 

The accompanying notes on page 41 to 61 form an integral part of these financial statements.

As permitted by Section 408 Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income. The Company's loss and comprehensive loss for the financial year was £2,053,241.

These financial statements were approved by the Board of Directors and authorised for issue on 1 August 2019 and are signed on its behalf by:

 

 

Clive Carver

Director

Company number: 09786498

 

 

Consolidated Statement of Cash flows

		Year ended 31 December	Year ended 31 December
		2018	2017
Cash flows from operating activities
Operating loss before taxation		(11,010,910)	(6,340,562)
Adjustments for:
Finance costs		5,417	48,326
Finance income		(118)	(397)
Amortisation		2,282,286	729,202
Share based payments charge		539,346	528,876
Tax Credit		600,395	-
Exchange differences		9,984	12,324
Operating loss before working capital changes		(7,573,601)	(5,022,231)
Changes in working capital
Decrease / (increase) in trade & other receivables		2,121,902	(1,773,058)
(Decrease) in trade & other payables		(731,645)	(1,392,659)
Net cash used in operations		(6,183,344)	(8,187,948)
Investing activities
Capitalised R&D Costs		(1,037,350)	(1,282,178)
Interest received		118	397
Acquisition of business (net of cash)		(2,108,136)	-
Net cash flows used in investing activities		(3,145,369)	(1,281,781)
Financing activities
Finance costs		(5,411)	(48,326)
Issue of ordinary shares (net of expenses)		5,636,417	13,298,938
Net cash flows from financing activities		5,631,006	13,250,612
Net change in cash and cash equivalents		(3,697,707)	3,780,883
Cash and cash equivalents at the beginning of the period		3,781,109	226
Cash and cash equivalents at the end of the period		83,402	3,781,109

 

The accompanying notes on page 41 to 61 form an integral part of these financial statements.

 

 

 

 

Company Statement of Cash flows

		Year ended 31 December	Year ended 31 December
		2018	2017
Cash flows from operating activities
Operating loss before taxation		(2,053,241)	(891,942)
Adjustments for:
Finance income		(117)	(397)
Finance costs		729	-
Share-based payment charge		539,346	528,876
Unrealised foreign exchange gain		790	13
Operating loss before working capital changes		(1,512,493)	(363,450)
Changes in working capital
(Increase) in trade & other receivables		(21,808)	(70,217)
(Increase) in intercompany receivables		(4,903,892)	(3,815,922)
Increase in trade & other payables		269,871	84,809
Net cash used in operations		(6,168,322)	(4,164,780)
Investing activities
Acquisition of business (net of cash)		(2,644,101)	-
Interest received		(729)	397
Net cash flows used in investing activities		(2,644,830)	397
Financing activities
Finance income		117	-
Issue of ordinary shares (net of expenses)		5,624,416	7,365,037
Net cash flows from financing activities		5,624,533	7,365,037
Net change in cash and cash equivalents		(3,188,619)	3,200,654
Cash and cash equivalents at the beginning of the period		3,200,654	-
Cash and cash equivalents at the end of the period		12,035	3,200,654

 

The accompanying notes on page 41 to 61 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 Group financial statements of appScatter Group Plc for the year ended 31 December 2018 were authorised for issue by the Board on 1 August 2019 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.

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 and the review for impairment of goodwill, 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, appScatter Limited and Abilott Limited's functional currency is Pound Sterling (£) and its other subsidiaries' functional currencies are US Dollar (US$) and Euro (€).

Year ended 31 December 2018

The financial information for 2018 reporting year is that of appScatter Group, headed by appScatter Group PLC.

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.

1.3.  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 2018, including the comparative financials the year ended 31 December 2017 represent the 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 1.9.

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

-      Priori Data GmbH German limited liability company (Gesellschaft mit beschränkter Haftung, GmbH) incorporated in Berlin under no. HRB 150508 B

-      Abilott Limited registered in England and Wales with the registration number 6203799

1.4.  Changes in accounting policies and disclosures

The Group adopted IFRS 15 during the year which is described in more detail below.  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.  The Group no longer recognises any accrued revenue for work carried out, where a contract or purchase order is not in place.  Previously revenue had been accrued on long term projects where work had been carried out and invoicing for this work was expected to occur in a subsequent period.

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 2018. However, none of them has a material impact on the Group's consolidated financial statements, except as explained 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.

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.

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 2018 have been published but are not yet effective and have not been adopted early by the Company. These are listed below:

●         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.

●         IFRIC 23 Uncertainty over income tax treatments - effective date 1 January 2019

●         IFRIC 22 Foreign currency, transactions and advance consideration - 1 January 2019

●         IFRS 9 Prepayment features with negative compensation - effective 1 January 2019

1.7.  Going concern

The consolidated entity has incurred a loss after tax of £10,490,515 for the year (2017: £5,840,562) and had a net cash outflow from operations of £6,183,344 (2017: £8,187,948).

 

The Financial Statements of the Group are 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 Company has raised £1.6 million in new equity since the balance sheet date from new and existing investors.

 

Under the Company's forecasts, based on the Group as currently constituted, the funds raised do not provide sufficient funding for at least the next twelve months based on anticipated outgoings and the receipt of revenues from production. In the event of a completed Reverse Takeover with Airpush the Directors expect the combined Group would on the basis of forecast prepared have sufficient funding for at least the next twelve months, based on anticipated outgoings and revenues. In the event the proposed reverse takeover with Airpush does not complete, or completes later than currently expected, the Group as currently constituted, would require additional funding. The extent of the additional funding required could to some extent be mitigated by management action to reduce costs, but this alone would not bridge any funding gap.

 

While there is no guarantee that future funding will be available, based on recent support from new and existing investors the Board believes that such funding, if required, would be obtained through debt or equity to enable the company to trade and meet its liabilities as they fall due for at least twelve months from the date of approval of the financial statements and consequently the financial statements have been prepared on a going concern basis and do not include the adjustments that would result if the Company was unable to continue as a going concern.

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 Priori Data GmbH by appScatter Group plc

On 3 July 2018 appScatter Group plc completed the purchase of Priori Data GmbH ("Priori") for a reported consideration of £13.5 million, satisfied by the issue of up to 16,667,157 new appScatter shares at an agreed issue price of 70p.  16,290,325 shares were issued on completion on 3 July 2019. The balance of up to 376,832 shares was due once completion accounts confirmed the net assets at the date of completion.  Following the preparation of the completion accounts a total of 357,698 shares were issued on 30 August 2019.  The market price per share on the completion date was 53.15 pence and the market price on the date the retention shares were issued was 36.5 pence making the fair value of the shares issued £8.8 million.  In addition, there was a payment of approximately £1.8 million in cash consideration.  The total fair value of the consideration was £10.6 million. The acquisition of Priori was approved by appScatter shareholders in July 2018.

 

On acquisition, the assets, liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of acquisition.  Any excess of cost of acquisition over net fair values of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill.  Any deficiency of the cost of acquisition below the net fair values of the identifiable assets, liabilities and contingent liabilities acquired (i.e. discount on acquisition) is credited to profit and loss in the period of acquisition.

 

The fair value of the acquired business comprised the platform which the company had developed, and the 775 billion historic data records which Priori held.  On acquisition we assigned a value of £4 million to the platform based on the estimated cost to rebuild the platform and the balance was assigned to the data.  This implies a cost per thousand records of less than £0.01 which is prudent in relation to industry standards.

Acquisition of Abilott Limited by appScatter Group plc

On 17 December 2018 appScatter Group plc acquired 100% of the issued share capital of Abilott Limited.  Further detail on the acquisition is included in the Strategic Report and CEO Statement.  Initial consideration was £0.825 million, consisting of £0.5 million in cash (of which £0.2m was on completion and £0.3m was deferred) and £0.325 million in shares by way of the issue of 1,666,666 new ordinary shares at an effective issue price of 19.5 pence.  Directors loans not repayable of £245,000 were deducted from the net asset value on acquisition.

For several years Abilott was our security partner of choice. In particular, Abilott had been working closely with appScatter for the previous two years providing security and regulatory compliance for the Group and supporting appScatter threat analysis products for appScatter customers.

The maximum consideration is £1.85 million, comprising £0.825 million of initial consideration and £1 million deferred consideration.

Initial consideration consisted of:

·    £200,000 cash consideration on completion

·    £300,000 deferred cash consideration due post completion, 

·    1,666,667 shares at an agreed issue price of 30 pence valuing the shares at £500,000, the market price of appScatter shares on the date of completion was 19.5pence making the fair value of the share element £325,000.

A further £1 million payable by the award of up to a maximum of 3,333,333 deferred consideration shares.  The deferred consideration is dependent on Abilott achieving revenue criteria in connection with sales to certain customers for the year ending 31 December 2019 and the corresponding shares would not be issued until January 2020. Based on trading to date we do not expect that the deferred consideration shares will be payable.

On acquisition, the assets, liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of acquisition.  Any excess of cost of acquisition over net fair values of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill.  Any deficiency of the cost of acquisition below the net fair values of the identifiable assets, liabilities and contingent liabilities acquired (i.e. discount on acquisition) is credited to profit and loss in the period of acquisition.

Acquisition of appScatter LLC by appScatter Limited

On 18 May 2017 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 2018 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 using guidance available in the UK Accounting standard FRS102.  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 flows of all the combining entities have been brought into the financial statements of the combined entity from the beginning of the financial 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 2018 and thus figures reported in the Admission document represent the Group in 2017.

1.10.              Goodwill

The Group has recognised goodwill on companies acquired during the period. 

On acquisition, the assets, liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of acquisition.  Any excess of cost of acquisition over net fair values of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill.  Any deficiency of the cost of acquisition below the net fair values of the identifiable assets, liabilities and contingent liabilities acquired (i.e. discount on acquisition) is credited to profit and loss in the period of acquisition.

1.11.              Investments in subsidiaries

Investments in subsidiaries are initially recognised at cost and include any directly-attributable costs associated with each acquisition.

The carrying amounts of investment in subsidiaries is reviewed at each reporting date to determine whether there is any indication of impairment.  An impairment loss is recognised when the carrying amount exceeds its recoverable amount.  Impairment losses are recognised in the Statement of Comprehensive Income.

An impairment loss is reversed if there has been a change in estimates used to determine the recoverable amount.  This loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised.

The Company carried out an impairment review on the carrying value of investments in subsidiaries at the balance sheet date and has not recognised any impairment charge.

1.12.              Foreign Currency

The functional currency for the Company's US registered subsidiaries are US$ and the functional currency of Priori Data GmbH is Euro.

(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.

1.13.              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.

1.14.              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. 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. The Group also carries out non-recurring work under contracts or statements of work.

Revenue from contracts is recognised in accordance with IFRS 15 as follows:

a)    Identify the contract or statement of works with the customer

b)    Identify the performance obligations

c)    Determine the transaction price

d)    Allocate the transaction price to performance obligations

e)    Recognise revenue when an entity satisfies a performance obligation

The above criteria have been applied for the year ended 31 December 2018. 

Annual contracts for services are recognised on a monthly basis.  Where advanced payments are made, these amounts are transferred to deferred revenue and recognised over the length of the contract.

Contracts for non-recurring services are invoiced and recognised when the performance obligations in a contract or statement of work has been completed.

This has not impacted the way in which revenue has been accounted for and the comparatives have not changed.

1.15.              Intangible assets

Acquired IP

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.  During the period the Company acquired the assets of Priori Data GmbH and has recorded a fair value in the accounts for its platform and its accumulated data records.

Developed IP

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.  £1.0m has met recognition criteria and been capitalised in 2018 (2017: £1.2m).  This expenditure is being amortised over an expected useful economic life of three years.

Acquired Data

The accumulated data records in Priori Data GmbH were assigned a fair value of £6.6m on completion of the transaction.  The accumulated data records have a long-term value as they are used to create extrapolations.  The useful economic life of the data has been assessed at five years.

 

Impairment

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.

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 profit or loss account with a corresponding increase in equity 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 Group's activity constitutes one reporting segment, as defined under IFRS 8 and reviews the performance of the Group 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 Group 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 ‎1.9 above).

-      Treatment of research & development expenditure (see note ‎1.15 above).

-      Fair value of intangible assets (see note 1.9 above).

-      Impairment (see note 1.11 above).

In assessing whether any impairment is required on Group intangible assets and goodwill and the Company investments and intercompany receivables, the Group have reviewed discounted cash flow models for the assets and the expected terminal value, if those assets were to be sold in the future.  These forecasts assume a fourfold growth in annual revenues over the next five years.  This will be more likely to occur if the Airpush transaction completes as planned.

 

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 ‎17 below).

-      R&D tax credit recoverable.

In assessing the amount recoverable in R&D tax credits the Group have used the calculations prepared to submit the claim to HMRC which are consistent to the methodology used in previous periods.

 

1.26.              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	Company	Company
		2018	2017	2018	2017
Financial assets
Cash & equivalents		83,402	3,781,109	12,035	3,200,654
Trade receivables		631,615	1,204,330	-	-
Other receivables		519,617	1,325,966	10,940	20,150
Shares issued for prepaid services		-	502,509	-	-
Loans due from related parties		136,123	60,664	-	-
Loans and receivables		1,370,757	6,874,578	22,975	3,220,804
Financial liabilities
Trade payables		1,233,183	1,097,168	241,395	17,810
Other payables		320,083	5	300,825	-
Accruals		391,496	145,882	100,550	34,340
Loans and borrowings - current		61,800	-	-	-
Loans and borrowings - non-current		119,485	-	-	-
Loans and payables		2,126,047	1,243,055	644,770	52,150

 

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.

 

The table below shows the aging of accounts receivable at the balance sheet date.

 

		Current	Less than 30 days	30 to 60 days	60 to 90 days	Over 90 days
		£	£	£	£	£
31 December 2018	Group: trade receivables gross	129,840	102,945	25,090	2,058	478,682
	Group: trade receivables provision	-	-	-	-	(107,000)
	Group: trade receivables	129,840	102,945	25,090	2,058	371,682
	Company: trade receivables	-	-	-	-	-
31 December 2017	Group: trade receivables	352,810	245,810	245,810	121,900	238,000
	Company: trade receivables	-	-	-	-	-

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$ and in Euro. 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	Company	Company
US Dollar		2018	2017	2018	2017
		£	£	£	£
Cash & equivalents		1,693	2,288	-	-
Trade & other receivables		-	60	-	-
Other payables and accruals		(296,812)	(54,764)	-	-
		(295,119)	(52,416)	-	-

 

Euro		2018	2017	2018	2017
		£	£	£	£
Cash & equivalents		60,149	-	-	-
Trade & other receivables		178,729	-	-	-
Other payables and accruals		(234,879)	-	-	-
		3,999	-	-	-

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$ and Euro 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 2018	Year ended 31 December 2017
Group
Profit or loss	£	£
10% strengthening of sterling	70,890	49,897
10% weakening of sterling	(86,643)	(60,985)
Equity
10% strengthening of sterling	190,145	86,630
10% weakening of sterling	(232,400)	(105,881)
EURO Currency change	Year ended 31 December 2018	Year ended 31 December 2017
Group
Profit or loss	£	£
10% strengthening of sterling	49,182	-
10% weakening of sterling	(60,111)	-
Equity
10% strengthening of sterling	49,482	-
10% weakening of sterling	(60,477)	-
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 - 2018
Trade & other payables	2,217,578	-	-
Loans & borrowings	-	-	-
	2,217,578	-	-
Group - 2017
Trade & other payables	1,506,449	-	-
	1,506,449	-	-
Company - 2018
Trade & other payables	654,680	-	-
Loans & borrowings	61,800	119,485	-
	716,480	119,485	-
Company - 2017
Trade & other payables	84,809	-	-
Loans & borrowings	-	-	-
	84,809	-	-

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

	2018	2017
	£	£
The Group operating loss is stated after charging
Auditor's remuneration
- fees payable to the Company's auditors for the audit of the Group and company	30,000	18,000
- fees payable to the Company's auditor for the audit of subsidiaries	12,500	12,000
- fees payable to the Company's auditor for tax advice	29,479	13,683
- fees payable to the Company's auditor for corporate finance advice	-	95,500
Research & development expenses	951,770	1,217,062
Legal & professional fees	295,959	379,254
Staff costs (note 4)	2,834,813	2,397,395
Foreign exchange losses	5,417	12,324
Amortisation of intangible assets	2,282,286	729,202

 

4.    Staff costs

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

	2018	2017
	£	£
Wages & salaries	1,903,871	1,659,241
Pension	37,763	6,768
Social security costs	353,833	184,510
Employee share-based payment charge	539,346	528,876
Total staff costs	2,834,813	2,379,395

 

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

The average number of employees in the period was:	2018	2017
Executives	5	5
Administration	1	1
Other	33	24
	39	30

 

5.    Directors' emoluments

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

 

	Fees	Consulting fees	Termination payments	Bonus	Pension	Total
2018	£	£	£	£	£	£
Executive directors
Philip Marcella	124,167	93,750	-	-	3,725	221,642
Manish Kotecha	64,584	-	142,083	-	5,388	212,055
Jason Hill	146,667	-	-	-	900	147,567
	335,418	93,750	142,083	-	10,013	581,264
Non-executive directors
Clive Carver	40,000	42,000	-	-	-	82,000
Andy Bushby	6,250	-	-	-	-	6,250
Michael Buchen	20,833	43,596	-	-	-	64,429
	67,083	85,596	-	-	-	152,679

 

	Fees	Consulting fees	Bonus	Pension	Total
2017	£	£	£	£	£
Executive directors
Philip Marcella	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

 

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

 

6.    Finance costs

	2018	2017
	£	£
Interest paid on loans	-	41,938
Foreign exchange loss	5,417	-
Finance arrangement fees	-	6,388
	5,417	48,326

 

7.    Taxation

	2018	2017
The tax credit is as follows:	£	£
UK Corporation tax	-	-
Total current tax	520,395	500,000
Origination and reversal of timing differences	-	-
	520,395	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:

	2018	2017
	£	£
Loss on ordinary activities before income tax	(11,010,910)	(5,572,650)
Standard rate of corporation tax	19.00%	19.25%
Loss before tax multiplied by the standard rate of corporation tax	2,092,073	1,220,558
Adjustments
R&D enhancement	520,395	500,000
Losses carried forward	(2,092,073)	(1,220,558)
Tax credit	520,395	500,000

Changes in tax rates for the two periods

The UK corporation tax rate for small company profit has reduced to 19% from 1 April 2017. Accordingly, the deferred tax asset or liability would have been calculated based on the rate of 19% at the balance sheet date. Future enacted tax rates of 17% 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 Group is still in an early stage.

 

8.    Loss per share

	2018	2017
	£	£
Loss for the year and earnings used in basic & diluted EPS	(10,490,515)	(5,840,562)
Weighted number of average shares	42,740,711	50,904,125
Loss per share £	(0.25)	(0.11)
Weighted number of fully diluted shares	47,176,943	55,340,477
Loss per share £	(0.25)	(0.11)

 

Fully diluted shares include the number of outstanding share options, details of which are included in note 17.  These options are anti-dilutive and therefore basic and diluted loss per share are the same.

 

9.    Intangible assets

	Acquired IP	Developed IP	Acquired Data	Total
Cost	£	£	£	£
At 1 January 2016	798,196	-	-	798,196
Additions	-	-	-	-
Exchange adjustment	160,905	-	-	160,905
At 31 December 2016 & 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 January 2018	891,373	1,282,178	-	2,173,551
Additions	4,020,000	1,037,350	6,581,662	11,639,012
Exchange adjustment	33,570	-	-	33,570
At 31 December 2018	4,944,943	2,319,528	6,581,662	13,846,133
Amortisation	£	£	£	£
At 1 January 2016 & 31 December 2016	-	-	-	-
At 1 January 2017	-	-	-	-
Charge for the year	(729,202)	-	-	(729,202)
At 31 December 2017 & 1 January 2018	(729,202)	-	-	(729,202)
Charge for the year	(972,616)	(651,503)	(658,166)	(2,282,286)
Exchange adjustment	(12,202)	-	0	(12,202)
At 31 December 2018	(1,714,020)	(651,503)	(658,166)	(3,023,690)
Carrying value
At 31 December 2018	3,230,922	1,668,025	5,923,496	10,822,443
At 31 December 2017	162,171	1,282,178	-	1,444,349
At 1 January 2017	-	-	-	-

 

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).

 

On 2 July 2018, appScatter Group acquired Priori Data GmbH.  On acquisition the fair value of the assets, being the platform and the underlying data records was assessed. 

The estimated cost to rebuild the Priori platform was assessed at £4,020,000 and the carrying value of the platform has been increased to this amount in the accounts.  This expenditure is being amortised over three years.

The fair value of the data is estimated to be at least £6,581,662 being the balance between the purchase consideration and the remaining net asset value.  The company possessed 775 billion data records and this approach values each record at less than £0.01 CPM.  The standard valuation for such data is typically above £0.03 CPM so the valuation assigned above is believed to be prudent.  Based on the estimated future cash flows from the asset's management believe that no impairment is required at the balance sheet date.  This expenditure is being amortised over five years.

During 2017 and 2018 the Group has capitalised research and development expenditure directly related to products which have been implemented in the appScatter platform.  This expenditure is being amortised over three years.

 

The fair value of intangible assets have been assessed with reference to the future cash flows anticipated from the assets at a discount rate of 10% and assuming a terminal value of the business which is greater than the value paid.  Based on these calculations no impairment is due at the reporting date (2017: nil). 

In carrying out their impairment review management have also taken additional assurance from the proposed transaction with Airpush Inc, which was not in existence at year end.  This transaction places a third-party valuation on the combined assets of appScatter Group plc which is in excess of the current carrying values.

 

10.  Goodwill

	Goodwill
Cost	£
At 1 January 2016	-
Additions	-
At 31 December 2016 & 1 January 2017	-
Additions	-
At 31 December 2017 & 1 January 2018	-
Additions	2,105,179
At 31 December 2018	2,105,179

 

Goodwill arose on the acquisition of Abilott Limited as discussed in note 1.9 above, where net liabilities of £1.3m were acquired for consideration of £825,000 as shown in note 11.

The fair value of the goodwill has been assessed by preparing discounted cash flow forecasts using a discount rate of 10%.  Based on the estimated future cashflows from Abilott Limited management believe that no impairment is required at the balance sheet date.

 

11.  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%
Priori Data GmbH	SaaS platform for mobile app intelligence	appScatter Group Plc	100%
Abilott Limited	Digital security solutions	appScatter Group Plc	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.

On 3 July 2018 appScatter Group plc acquired 100% of the issued share capital of Priori Data GmbH.  Further detail on the acquisition is included in the Strategic Report and CEO Statement.  Total consideration was £10.6 million, consisting of £1.8 million in cash and £8.8 million in shares by way of the issue of 16,667,157 new ordinary shares at an effective issue price of 53.15 pence.  The issue of a further 357,698 shares were issued on 05 September 2018 once the completion accounts and net assets statement had been finalised. 

On 17 December 2018 appScatter Group plc acquired 100% of the issued share capital of Abilott Limited.  Further detail on the acquisition is included in the Strategic Report and CEO Statement.  Initial consideration was £825,000, consisting of £0.5 million in cash (of which £0.2m was on completion and £0.3m was deferred), and £0.325 million in shares by way of the issue of 1,666,666 new ordinary shares at an effective issue price of 19.5 pence.

Investment in subsidiaries continued

	2018	2017
	£	£
Opening balance	3,131,139	-
Acquisition of appScatter Limited	-	3,131,139
Acquisition of Priori Data Gmbh	10,623,024	-
Acquisition of Abilott Limited	825,000	-
Directly-attributable acquisition costs	547,965	-
Closing balance	15,127,128	3,131,139
Intercompany receivables
From appScatter Limited	8,700,043	3,815,922
From Priori Data GmbH	93,750	-
	8,793,793	3,815,922

 

	Book value of assets acquired	Fair value adjustments	Fair value of assets acquired
	£	£	£
Priori Data
IP - platform	1,346,061	2,673,939	4,020,000
Data	-	6,581,662	6,581,662
Debtors	39,487	-	39,487
Cash	201,877	-	201,877
Creditors	(220,002)	-	(220,002)
Total consideration	1,367,423	9,255,601	10,623,024
Satisfied by
Cash			1,834,157
Shares			8,788,867
			10,623,024
Abilott
Fixed assets	10,107	-	10,107
Debtors	95,831	-	95,831
Cash	24,143	-	24,143
Creditors	(169,264)	-	(169,264)
Intercompany	(1,053,508)	-	(1,053,508)
Loans	(187,488)	-	(187,488)
Goodwill	-	2,105,179	2,105,179
Total consideration	(1,280,179)	2,105,179	825,000
Satisfied by
Cash			500,000
Shares			325,000
			825,000

 

Priori Data GmbH	Shares	Share Price	Fair value
On completion	16,290,325	0.532	8,658,307
Deferred consideration	357,698	0.365	130,560
Fair value of shares			8,788,867
Cash			1,834,157
Total consideration			10,623,024
Abilott Limited	Shares	Share Price	Fair value
On completion	1,666,667	0.195	325,000
Cash			500,000
Total consideration			825,000

 

The fair values of the assets acquired is discussed in note 9 above.

 

12.  Trade and other receivables

	Group	Group	Company	Company
	2018	2017	2018	2017
	£	£	£	£
Trade receivables	631,615	1,204,330	-	-
Prepayments	110,290	107,310	64,053	41,044
Other receivables	519,617	1,325,966	10,940	20,150
Shares issued for prepaid services	-	502,509	-	-
Other taxes receivable	-	263,450	17,030	9,021
Loans due from related parties	136,123	60,664	-	-
	1,397,645	3,464,229	92,023	70,215

 

13.  Trade and other payables

	Group	Group	Company	Company
	2018	2017	2018	2017
	£	£	£	£
Trade payables	1,233,183	1,097,168	241,395	17,810
Accruals & Deferred income	391,496	145,882	102,550	34,340
Social security & other taxes	272,817	263,394	9,908	32,659
Other payables	320,083	5	300,825	-
Loans due to related parties	-	-	-	-
	2,217,579	1,506,449	654,678	84,809

 

14.  Loans and borrowings

	Group	Group		Company	Company
	2018	2017		2018	2017
Current	61,800	-		-
Non-current	119,485	-		-	-

 

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

 

 

15.  Share Capital                                                                                                            

	Number	£
At incorporation on 3 April 2017	2	0.10
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 & 1 January 2018	63,178,142	3,158,907
Acquisition of Priori Data GmbH	16,648,023	832,401
Acquisition of Abilott Limited	1,666,666	83,333
Placings	9,523,326	476,166
At 31 December 2018	91,016,157	4,550,808

 

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. 

On 21 June 2018, appScatter Group plc raised £3,074,623 through the issuing of 4,392,319 ordinary shares of £0.05 each were issued at a price of £0.70 per ordinary share.  On 26 June 2018, appScatter Group plc raised £1,623,050 through the issuing of 2,318,643 ordinary shares of £0.05 each were issued at a price of £0.70 per ordinary share.  On 3 July 2018, appScatter Group plc acquired the entire issued share capital of Priori Data GmbH, which was satisfied, in part, by the issuance of 16,648,023 ordinary shares of £0.05 each.  On 22 August 2018, appScatter Group plc raised £1,000,210 through the issuing of 1,428,871 ordinary shares of £0.05 each were issued at a price of £0.70 per ordinary share.  On 16 October 2018, appScatter Group plc raised £968,445 through the issuing of 1,383,493 ordinary shares of £0.05 each were issued at a price of £0.70 per ordinary share.  On 17 December 2018, appScatter Group plc acquired the entire issued share capital of Abilott Limited which was satisfied, in part, by the issuance of 1,666,666 ordinary shares of £0.05 each.

16.  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 and the acquisitions during the year of Priori Data GmbH and Abilott Limited as discussed in note 1.9.

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.

17.  Share-based payments

Shortly after incorporation in April 2018, 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.

At 31 December 2018, the Company had outstanding options to subscribe for Ordinary shares as follows:

 

Company & Group	2018	2018
	Options	Weighted average exercise price
	No.	£
Outstanding at the beginning of the period	4,436,232	0.583
Granted during the period	2,222,492	0.621
Forfeited during the period	(442,247)	0.650
Outstanding at the end of the period	6,216,477	0.684
Exercisable at the end of the period	4,899,248	0.585

 

The weighted average contractual life of the options outstanding at 31 December 2018 was 10 years. Of the total number of options outstanding at 31 December 2018, 4,899,248 had vested and were exercisable (2017: 1,321,367).  The weighted average share price (at the date of exercise) of options exercised during the year was nil as no options were exercised.

In October 2018 2,222,492 Options were issued to staff at an average option price of £0.621 pence per Ordinary share.  

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 2018, 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 2018 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.

On 31 July 2018 we issued 1,047,949 share options over ordinary shares in appscatter Group plc at 70 pence options to staff in Priori Data GmbH and 1,174,543 options over ordinary shares in appscatter Group plc at 55 pence to staff in appScatter Limited.  These options are exercisable until the tenth anniversary of the date of issue and vest in three equal annual instalments commencing on the first anniversary of the start of the employee's date.

The value of the options is measured by the use of a Black-Scholes pricing model.  The inputs into the model made in 2018 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 £539,346.

 

18.  Commitments

Operating lease commitments

The commitment under non-cancellable operating leases as at 31 December 2018 was £123,279 (2017: £163,944).  This was all due within one year.

Capital commitments

There were no amounts contracted for but not provided as at 31 December 2018 (2017: nil).

Related Party Transactions

Group companies

During 2018 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 to 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 £8,793,793.

Directors

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

Related party	Type	2018	2018	2017	2017
		Transactions	Balance due (from)/ to	Transactions	Balance due (from)/ to
Philip Marcella (1)	Fees	93,750	-	132,167	23,966
Elk Associates LLC (2)	Fees	42,000	-	100,833	-
Polar Lights 2 Ltd (3)	Fees	43,596	-	10,902	-
Manish Kotecha	Fees	-	-	90,126	-

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 2017 and 2018 included fees £168,329 and £nil respectively.  Included within loans due from related parties is £23,966 in relation to reimbursable expenses incurred in relation to travel on company business.

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

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

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 9 April 2019 the Company announced its intention to acquire Airpush Inc., a technology company specialising in app monetisation which, if approved and completed would constitute a reverse takeover for the purposes of the AIM Rules for Companies (the "Proposed Acquisition"). Accordingly, trading in the Company's shares was suspended on AIM until such time as the Company is able to publish an admission document in relation to the Proposed Acquisition or confirms that the Proposed Acquisition is no longer in contemplation. 

On 9 April 2019, the Company announced it had raised £2.2 million fundraising. Of this £2.2 million, £1.6m million has been received to date with further cash expected.

20.  Exceptional items

Investment costs

During the year the Group acquired two companies, Priori Data GmbH and Abilott Limited.  The costs associated with these investments have been expensed to the P&L during the period in line with IFRS3 on consolidation. The costs that are classed as directly attributable to the acquisitions had been capitalised as part of the investment cost in the Company financial statements.