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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Boku Inc. | LSE:BOKU | London | Ordinary Share | CMN SHS USD0.0001 (DI) REG S CAT 3/144A |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -3.00 | -1.66% | 178.00 | 178.00 | 182.00 | 181.00 | 180.00 | 181.00 | 2,410,716 | 16:35:28 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Cmp Processing,data Prep Svc | 64.52M | 28.9M | 0.0965 | 18.65 | 539.01M |
From Apr 2019 to Apr 2024
TIDMBOKU
RNS Number : 3348K
Boku Inc
10 April 2018
10 April 2018
Boku, Inc.
("Boku" or the "Company" and, together with its subsidiaries, the "Group")
Final Results
Boku (AIM: BOKU), the world's leading independent direct carrier billing company, today announces its final audited results for the year ended 31 December 2017.
Financial Highlights
Hot Features
Premium
-- *Adjusting for expenses related to the IPO, Net Loss reduced
by 64% to $7.4 million (2016: $20.6 million)
-- Reported Net Loss including IPO effects $28.1 million
-- Revenue up 42% to $24.4 million (2016: $17.2 million)
-- **Adjusted EBITDA losses improved by 81% at $2.3 million (2016:
$12.3 million)
-- $20.2 million gross cash at year end
Operational Highlights
-- Total Payment Volume (TPV) tripled to over $1.7 billion (2016:
$554 million)
-- 45 new Boku Account connections for major customers such as
Apple, Microsoft and Spotify
-- MTS and EE Google migrations completed, respectively the largest
carriers in Russia and the UK
-- Increase in Monthly Active Users to 8.1m, an increase of 241%
-- Admission to AIM in November 2017
* Adjusted for $18.5 million Financing Charge related to conversion of Convertible Debt, and $2.2 million of IPO expenses
**Adjusted EBITDA: Adjusted for IPO costs, stock option expenses, Forex gains/losses and Exceptional items
Jon Prideaux, Chief Executive of Boku Inc, Commented: "2017 has been a year of significant growth for Boku , we've achieved growth across all of our KPIs as well as completing our successful admission to AIM in November. I look forward to 2018 with considerable optimism, all of our forward indicators are on green and the graphs are moving up and to the right. With revenue growth, a stable cost base and sufficient cash to finance our working capital and investment needs, we are confident that the Company will continue to make substantial progress in 2018.
"I wish to thank our new shareholders, customers and carrier partners for their support and confidence in our business, and our employees for the extraordinary job that they do every day."
Enquiries:
Boku, Inc. Jon Prideaux, Chief Executive Officer +44 (0)20 Stuart Neal, Chief Financial Officer 3934 6632 Peel Hunt LLP (Nominated Adviser and Broker) +44 (0)20 Edward Knight / Nick Prowting 7418 8900 IFC Advisory Limited (Financial PR & IR) Tim Metcalfe / Graham Herring / +44 (0)20 Heather Armstrong 3934 6630
Notes to Editors
Incorporated in 2008, Boku is the leading independent direct carrier billing company in the world. Boku's technology enables mobile phone users, of which there are more than five billion worldwide, to buy goods and services and charge them to their mobile phone bill or pre-pay balance.
Boku's platform connects its customers, including Apple, Google, Facebook, Microsoft, Spotify and Sony, with billing, identity and sales systems of mobile network operators. The Group's technology makes a consumer's mobile phone number a convenient and secure payment method, providing an alternative to credit and debit cards. By using Boku, merchants take people with mobile phones and make them paying users.
Chairman's Statement
Boku has always been a dynamic company, one that has had to adapt to a rapidly changing market environment and develop and deliver products that our customers demand. Four years ago, the Company was primarily engaged in enabling providers of PC games to monetise their users, but, with the growth of app stores, casual gamers switched their attention to mobile devices. The Company needed to retool and rebuild its products to make them appropriate for this new environment. This was a substantial change and required significant investment, which has now led to Boku's emergence as the largest company of its type internationally, serving many of the world's largest digital merchants and is successfully allowing them to acquire new paying users globally.
The Executive Team at Boku implemented a strategy which involved generating very considerable growth in the number and value of payments handled. Total Payment Volume increased threefold to more than $1.7 billion in 2017. This level of increase brings the potential for scaling challenges, but the management team have proved equal to the task. The extra processing was handled with lower overall costs.
From a corporate perspective, 2017 saw Boku achieve two important milestones:
First, the Company delivered a substantial increase in revenues off a lower cost base and secondly the Company changed from being a private company to being a public one. Both of these events are linked and significant. Without the materially improved financials, Boku would not have been able to complete the IPO nor have received such a positive reaction from investors. I would like to take this opportunity to welcome our new Shareholders in the Company.
The IPO has led to a change in the composition of our Board. Several Directors who have worked with the Company to help its development over many years have moved to take on new challenges and opportunities, I wish to place on record my thanks to David Weiden, Kevin Harvey and Paul McGuire for their service. In addition, I would like to welcome Keith Butcher to the Board. He has a fine track record in the public markets having been CFO of both Datacash and Optimal Payments (now Paysafe). His experience will be invaluable to the Board and we look forward to him assuming the Chairmanship of the Audit Committee.
Notwithstanding the progress that the Company has made in the past year, there are always new mountains to climb, new territories to conquer. Boku will continue to invest in new opportunities leveraging its core capability in connecting together the Mobile Network Operators of the world who, collectively, reach more than 5 billion people with mobile phones. The Boku Acquire product that supports bundling was supported by integrating into the carriers point of sale and provisioning systems and we believe that there is still considerable value to unlock from our network. The funds raised in the IPO will provide us with the resources to both optimize our existing business and to invest in new capabilities.
I look forward with optimism to 2018 to further progress commercially and in the launch of new products and improved financial results.
Mark Britto
Non-Executive Chairman
Chief Executive Officer's Statement
Business description
Boku is a Carrier Commerce company. By connecting to the Boku platform, our merchants, who include most of the world's biggest digital companies, enable their users with a mobile phone, to buy their products and services and charge them to their bills or pre-paid balances. Boku operates a worldwide network of connections to Mobile Network Operators and is developing its reach and quality all the time.
On the surface, Boku operates as a payment company but, practically speaking, the job our merchants hire us to do is acquire new paying users. It turns out that paying for stuff with your phone bill or prepaid balance is a great way to do that. More people have phones than bank accounts and it's just more convenient to pay for something on your phone with your phone number - especially when our technology can discover it automatically. Millions of people all around the world are now using Boku's technology to pay and the number of monthly active users has more doubled over the course of 2017 to over 8 million.
For our merchants, we offer a single connection to many network operators around the world. It's a tough job to build such a global network as connections are not standardised. We see considerable potential to exploit this unique asset, touching as it does more than 5bn users (essentially the world's adult population) in new ways to create new products that add value at other parts of the e-commerce value chain.
In the here and now, today's business is built on the market for digitally distributed content - a market valued at $153bn in 2017 and growing strongly. It comprises games, music and videos whether distributed directly, or through mobile app stores. Boku processes transactions for almost all of the big players in this expanding industry, including Apple, Facebook, Netflix, Spotify, Blizzard Activision, Sony and Tencent/Riot Games, mostly as their sole or main provider.
We make money by taking a small cut of the transaction value that we process. Broadly speaking, our costs are stable, each extra transaction costs a minimal amount to process so, once the costs of the platform have been covered, extra revenue drops straight through to the bottom line.
Strategy
Size is important. In payments it really is. Scale allows you to simultaneously carry the cost base that offers the widest array of services whilst also having the lowest unit cost. Additionally, in a world of big data, scale allows you to do a better job of optimising your product: big data requires big datasets. Scale also allows you to work together with carrier partners who can see better returns on investment for them from upgrading their connections to Boku compared with a smaller operator.
Boku has always sought to be the scale player.
Our strategy is not to be geographically broad, to plant more flags in ever more obscure parts of the map, but rather to work with the merchants that present the biggest opportunities in the biggest possible markets. We go to these places because, as Willie Sutton, the Depression era criminal, when asked why he robbed banks, said "That's where the money is". Big companies in big markets generate more revenue than small merchants in peripheral ones. It is a common misconception that Carrier Billing is a solution for emerging markets: Boku has demonstrated that the advanced economies of Europe, Asia and the Middle East offer fertile territory for our customer acquisition method and payment mechanism.
Our strategy also seeks to exploit the scale achieved by our partners, the Mobile Network Operators. Collectively they connect to more than 5 Billion consumers - potentially the world's largest connected community; bigger than social networks like Facebook or other payment networks like Visa. Through those connections they can present a distinctive range of capabilities. Mobile Network Operators know customer behaviour, the devices they carry, their location and their transactions which is not available from any other source. The problem is that hitherto, those capabilities have been only accessible one carrier at a time, their collective value diminished by "Balkanisation". By acting as a middleware player, providing the connective tissue, Boku can unlock this value and develop new services reaching beyond the carriers' billing capabilities to address other parts of the ecommerce value chain.
Whilst digitally distributed content at $153 billion is a material market, it represents by most estimates, a mere 5% of global e-commerce, it is our objective to add value to registration, verification and location based services across all types of merchant and not just at the time of the transaction.
Highlights from 2017
2017 has been a significant year for Boku. We achieved growth in our financial and non-financial KPIs. Total Payment Volume (TPV) increased by more than 200% to $1.7 billion and monthly active users more than doubled to over 8 million users, making us the world's largest independent Carrier Billing company.
We also rolled out 45 Boku Account connections in 2017 for customers like Apple, Spotify, Microsoft and for Google traffic, a 67% increase on 2016's number; and increased productivity allowed us to halve the cost of each deployment. These extra connections drove our growth, as did the application of our Boku Optimise technology which tunes the operation of app stores and Merchant Connections so as to yield the maximum amount of revenue from each connection, without breaching regulatory limits or exposing carriers to unnecessary risks of bad debt.
Boku Optimise was a key factor in a couple of notable wins of 2017. Two more Mobile Network Operators looked at the alternatives and decided to switch the connection for their Google traffic over to Boku. MTS, with more than 78m subscribers is the largest mobile network operator in Europe, and EE with more than 30 million connections is the UK's biggest network and Europe's biggest 4G network. They join amongst others, O2 in Germany and KPN in the Netherlands, in switching to Boku to process their Google traffic. Both networks have benefitted from Boku Optimise technology which has boosted their traffic by double digit amounts in comparison to their previous providers. Uniquely, Boku can help optimise traffic by having access to material multi-merchant datasets.
We were also pleased to start the rollout of Blizzard Activision, the Western world's largest interactive entertainment company in 2017 and also to take our newest product Boku Acquire into new countries including South Korea, Portugal, Israel and Mexico.
Operations
At peak, transactions come flooding into the Boku system at approaching 200 transactions per second. The number of transactions that we handle has nearly tripled in the last year.
Boku has about 150 employees based all around the world, the majority of whom work on our technology. Our team has developed a system with in-built redundancy, active/active capability and with the ability to handle both today's volumes and future proofed to handle the growth anticipated for the coming years. The system has been tested to more than 400 transactions per second without any material impact on latency measures.
Together with their non-technical colleagues, Boku's operations in San Francisco, Mumbai, London, Munich, Dusseldorf, Paris, Riga, Sao Paulo, Milan, Tokyo, Beijing, Taipei and Singapore provide a full service offering to our carrier partners and merchant customers wherever they need it and provide 24x7 support from our Network Operations Centre.
Strategy for growth
We've grown considerably over the last year and have a plan in implementation to continue growing into the future, without materially impacting our cost base. Growth, for Boku, in our core business comes from three fundamental sources:
-- Growth from new deployments: most of our large customers have
a considerable pipeline - collectively more than 100 - of new
connections that they would like to activate. By connecting
to more mobile phone networks, users who never had the chance
to pay by Boku before are now able to do so.
-- Growth from maturity within connection: but that's not all,
once a Mobile Network Operator goes live, its subscribers have
the opportunity, but not necessarily the reason to use Boku.
That takes time. People discover us gradually as a by-product
of their normal behaviour. Perhaps it comes when they set up
a new device or when they try to pay for something within an
app store or subscribe to a streaming music service. Then they're
presented with the opportunity to buy and charge to their phone
bill or prepaid balance. This phenomenon means that once a new
connection is launched there is a maturity cycle that lasts
for years before the total number of users on a particular connection
stabilises. Put simply, last year's connections will continue
to grow this year.
-- Growth in the underlying market: the market for digitally distributed
content is growing around 10% Compound Annual Growth Rate (CAGR)
on a worldwide basis, which provides a strong wind at our backs
even in mature deployments.
Boku is not content though with simply driving growth through its carrier network from billing applications, as mentioned above, we're keen to launch new products in the areas of registration, verification and location, exploiting our core competence of connecting at scale to many carriers. At the time of our IPO we said that we would use some of the funds that we raised make investments in this area, with a view to making revenues in the 2019/2020 timeframe.
Boku has launched a new division, Boku Mobile Identity, which is developing these opportunities and I hope to make further announcements throughout the year, as we come closer to launch which may be through either organic or inorganic routes.
Current Trading and Outlook
2017 has been a year of extraordinary growth for Boku and 2018 has picked up where 2017 left off. TPV for the first quarter at $727 million grew by 170% compared with the same period last year and monthly active users in March 2018 at 9.2 million were 138% higher than a year earlier. With revenue growth, a stable cost base and sufficient cash to finance our working capital and investment needs, we are confident that the Company will continue to make substantial progress in 2018. We remain confident that we will meet market expectations for revenue and continue being EBITDA positive throughout the year.
I wish to thank our new shareholders, customers and carrier partners for their support and confidence and our employees for the extraordinary job that they do every day.
Jon Prideaux
Chief Executive Officer
Chief Financial Officer's Report
A Transformational Year
In our first full year results since joining AIM in November 2017, the Company is able to report strong growth across all key financial metrics, highlights include:
-- Reported Net Loss of $28.1 million includes costs relating to
the IPO
-- When adjusting for IPO related expenses, Net losses were $7.4
million - a 64% reduction from $20.6 million in 2016
-- Revenues increased 42% to $24.4 million (2016: $17.2 million)
-- Gross Profit Margin up to 91% from 81%
-- Adjusted EBITDA* Losses reduced by 81% from $12.3 million to
$2.3 million for the Full Year
-- Cash balances of $20.2 million** as at 31 December 2017 and
debt reduced from $21.0 million to $2.4 million
-- Active Users of the Boku platform increased to more than 8 million
in December 17 from 3.3 million one year ago
-- Total Processed Volume (TPV) rose to $1.7 billion from $0.55
billion (+207%)
*Adjusted EBITDA: Adjusted for IPO costs, stock option expenses, Forex gains/losses and Exceptional items
** Cash balances include $1.4 million restricted cash items
Net Loss
Net Loss, adjusted for the impact of expenses directly connected to the IPO were $7.4 million, being $28.1 million less a $18.6 million financing charge emanating from the conversion of the convertible notes and $2.1 million of direct IPO expenses. This compares favourably with Net Losses of $20.6 million in 2016.
Leading Indicators
Throughout 2017, we saw a significant increase in Total Processed Volume (TPV) across our platform, recording a total spend three times that of 2016 at $1.7 billion (up from $0.55 billion). This increase was in part driven by new users being attracted to Boku as a payment method, partly by the geographical roll out of existing merchants and partly by the secular growth in expenditure on digitally distributed content.
The number of active users of the Boku platform grew significantly across the year from 3.3 million to more than 8 million whilst the average transaction value moved upwards concurrently from $8 to just under $11.
The aggregated impact of these growth curves demonstrates a business that is growing healthily.
Boku earns revenues by taking a fee for each transaction that is processed by our platform. We can either be the technical conduit between the Mobile Network Operator (MNO) and Merchant (as per the "Transaction" model) or we can provide full service acquiring and settlement of funds, the "Settlement" model. Under the Settlement model, Boku earns a higher margin thanks to our broader role in negotiating aggregate terms with MNOs, the collection of funds across multiple markets, the conversion of currencies and the remittance of consolidated payments to Merchants.
Revenue growth is lagging behind the growth in TPV because of a mix effect in take rates. The Transaction model TPV (mostly emanating from App Stores) is growing faster but at lower margin than Settlement model TPV. Average margins within each model are broadly stable, whilst average margins across the business as a whole have thereby reduced as the Transaction model TPV continues to grow. This is fully anticipated by the Company within its business plan.
Indeed, revenue growth accelerated to +42% for the Full Year to December 2017 due to the mix effect of Transaction vs Settlement business.
Revenue and Gross Margin
Boku's revenue performance over previous years reflects a business that has made an effective transformation - from its initial focus on supporting social gaming on Desktop to now supporting the App Economy and the consumption of digital goods and services (including games) over devices and via App Stores.
During 2017 Boku delivered strong revenues of $24.4 million (42% growth on 2016) as the Company's strategy of supporting providers of digital goods and services, by helping them attract new paying users, really started to bear fruit.
The Company has a diversified portfolio of merchants, whom we serve either directly, in the case of music subscriptions, games consoles, online gaming; or indirectly, via our connections to the App Stores.
2017 revenue increased by 42% on TPV that was up 207%, the difference being accounted for by the change in average take rates across the business from 3.1% to 1.4%, for the reasons described above.
With increased volume and a diversified customer base come the benefits of scale and the Company has successfully leveraged its relative buying power to lower our Cost of Goods Sold - both in unit terms and in absolute terms - down to $2.3 million from $3.2 million on TPV which has trebled.
As a consequence, our Gross Profit Margins have increased to 91% from 81% and Gross Profit at $22.1 million is 58% higher than 2016.
Operating Expenditure
Total Adjusted Operating Expenditure (Adjusted to exclude IPO costs, stock option expenses, FX and Exceptional items) of $24.5 million was $1.8 million (7%) lower than 2016 total expenditure.
Staff costs have reduced 3% over the period to $17.2 million from $17.8 million. Full Time Employee (FTE) levels have broadly remained flat in the business overall at 150, whilst the geographical split has changed with some specific engineering functions moved to our Mumbai technical centre from San Francisco.
Efficiencies in the running cost of Boku operations, combined with a ruthless focus on discretionary expenditure, account for the remainder of the year on year reduction in expenses.
In 2017, we re-classified the costs associated with MNO Deductions from Operating Expenditure to Cost of Goods Sold - this more accurately reflects the nature of these costs which are, for the most part, passed on to merchants through increased revenue. The net effect of this change was zero at Adjusted EBITDA level, but a decrease in both Gross Profit and Adjusted Operating Expenditure of $0.3 million and $0.4 million in 2017 and 2016 respectively.
The Company capitalised a total of $0.1 million of internally developed software costs during the year (2016: $1.4m).
Operating Result
Reported operating losses were reduced to $8.4 million in 2017 from $19.9 million in 2016, this improvement can be broken down as follows:
Adjusted EBITDA continued to improve throughout the second half of 2017, bringing full year adjusted EBITDA loss down to $2.3 million from GBP12.3 million the year before, reflecting strong revenue growth combined with lower expenses.
Depreciation and Amortisation were broadly flat ($3.0 million down from $3.2 million) as we continue to write down intangible assets; acquired goodwill relating to the Mopay acquisition in 2014 and a small amount of capitalised internally-developed software.
Foreign Exchange (FX) gains of $0.4 million reverse a $0.2 million loss in 2016 - Boku reports in USD, however many of the money flows which arise from operating the Settlement model are in other currencies, most notably GBP, EUR and JPY. A $0.4 million gain represents just 0.02% of TPV for the year. The Company operates forward foreign exchange contracts to hedge our foreign currency exposure.
Exceptional costs of $2.6 million incorporate the costs relating to the IPO secondary issue ($2.1 million) plus some reorganisation expenses. Costs relating to the issue of new shares ($1.0 million) were booked as an offset to shareholder capital.
Stock Option expenses normalised in 2017 at $0.9 million - the 2016 figure of $2.1 million reflected a reprice of the 2009 Stock Option Plan.
Financing Expenses
Financing costs of $19.6 million include a $18.6 million non-cash accounting expense relating to the Convertible Note which converted to Common Stock at the IPO date.
Balance Sheet and Cashflow
Following the IPO the company has significantly strengthened its Balance Sheet with increased cash balances, less short term debt and the removal of the convertible note - as promised to investors during the IPO process. As the company reported positive EBITDA for H2 2017 cash funding requirements were negligible.
Boku raised GBP15 / $20 million gross (c. GBP13 / $17 million net) funds from the IPO in November 2017. As stipulated before the IPO, Boku's intent is to direct 50% of the net funds towards growth generating activities and 50% towards paying down short term, working capital facilities as part of a general "tidy up" of the Company's balance sheet and reduction in cost of funding.
As at December 31st, 2017, our working capital facility with Silicon Valley Bank was paid down to $2.4 million from $6.0 million as at 31 December 2016. We also ceased utilising a factoring arrangement in Boku AG during December (previously employed as a means of accelerating cash collections) - this had the effect of increasing our receivables whilst utilising approximately $4 million in cash.
The $15 million convertible note, raised in 2016 was converted in full to common stock at the point of IPO thus reducing non-current liabilities. Total Loans and Borrowings were thereby reduced from $21.0 million (excluding the impact of factoring) to $2.4 million over the period.
The Company closed the year with $20.2 million cash balances - cash used to fund operations over the year was $6.8 million compared with $11.4 million in 2016.
Increases in MNO Receivables and Merchant Payables over the period ($21.1 million and $17.4 million respectively) reflect underlying growth within the Settlement model business - whereby MNO receivables are collected and aggregated shortly prior to merchant remittances being paid. Receivables have grown faster than Payables over the year due partly to the impact of the Company reversing out of factoring in Boku AG.
There was no material movement in the USD value of Intangible Assets on our balance sheet as amortisation costs for the year ($3.0 million) were offset by a currency revaluation of acquired goodwill in Boku AG which is held in EUR and converted to USD upon consolidation.
Looking Ahead
The Company is now in a favourable position to build further value with growing revenues, positive EBITDA and rapidly approaching free-cashflow generation. With a stronger balance sheet, we are also able to make appropriate investments to explore new areas for growth to fuel new revenues in 2019 and beyond.
Stuart Neal
Chief Financial Officer
BOKU, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2017 2016
Note $'000 $'000
------------------------------------------------------------------------------- ----- ------------- -------------
Revenue 4 24,412 17,193
Cost of sales (2,265) (3,192)
------------- -------------
Gross profit 22,147 14,001
Administrative expenses 5 (30,576) (33,914)
Operating loss analysed as: Adjusted EBITDA* (2,319) (12,274) Depreciation and amortisation (2,985) (3,155) Stock Option expense (909) (2,096) Foreign exchange gains/(losses) 428 (230) Exceptional items (included in administrative expenses) 5 (2,644) (2,158) ------------------------------------------------------------------------------- ----- ------------- ------------- Operating loss (8,429) (19,913) Finance income 7 18 17 Finance expense 7 (19,558) (1,243) Loss before tax (27,969) (21,139) Tax (expense)/credit 8 (129) 542 ------------------------------------------------------------------------------- ----- ------------- ------------- Net loss for the period attributable to equity holders of the parent company (28,098) (20,597) ------------------------------------------------------------------------------- ----- ------------- ------------- Other comprehensive income/(losses) net of tax Items that will or may be reclassified to profit or loss Foreign currency translation gain 2,269 15 Net decrease in fair value of cash flow hedge derivatives 15 (38) (20) ------------------------------------------------------------------------------- ----- ------------- ------------- Total comprehensive gain (loss) for the period 2,231 (5) ------------------------------------------------------------------------------- ----- ------------- ------------- Total comprehensive loss for the period attributable to equity holders of the parent company (25,867) (20,602) ------------------------------------------------------------------------------- ----- ------------- ------------- Loss per share for loss attributable to the owners of the parent during the year Basic and fully diluted ($) 9 (0.19) (0.15) ------------------------------------------------------------------------------- ----- ------------- -------------
*Earnings before interest, tax, depreciation, amortisation, share-based payment, foreign exchange gains/(losses), and exceptional items (which includes IPO costs). Management has assessed this performance measure as relevant for the user of the accounts.
BOKU, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 31 December
2017 2016
Note $'000 $'000
--------------------------------- ----- ------------ ------------
Non-current assets
Property, plant and equipment 10 410 515
Intangible assets 11 25,799 25,661
Deferred income tax assets 8 714 647
--------------------------------- ----- ------------ ------------
Total non-current assets 26,923 26,823
--------------------------------- ----- ------------ ------------
Current assets
Trade and other receivables 13 59,115 37,101
Derivative financial instrument 15 - 14
Cash and cash equivalents 14 18,741 11,322
Restricted cash 14 1,439 480
--------------------------------- ----- ------------ ------------
Total current assets 79,295 48,917
--------------------------------- ----- ------------ ------------
Total assets 106,218 75,740
--------------------------------- ----- ------------ ------------
Current liabilities
Trade and other payables 16 74,981 54,891
Derivative financial instrument 15 24 -
Loans and borrowings 17 2,482 6,117
Total current liabilities 77,487 61,008
--------------------------------- ----- ------------ ------------
Non-current liabilities
Other payables 16 86 86
Loans and borrowings 17 43 15,088
--------------------------------- ----- ------------ ------------
Total non-current liabilities 129 15,174
--------------------------------- ----- ------------ ------------
Total liabilities 77,616 76,182
--------------------------------- ----- ------------ ------------
Net assets/ (net liabilities) 28,602 (442)
--------------------------------- ----- ------------ ------------
Equity attributable to
equity holders of the
company
Share capital 18 21 15
Share premium 174,220 119,315
Cash flow hedging reserve (24) 14
Foreign exchange reserve (928) (3,197)
Retained losses (144,687) (116,589)
--------------------------------- ----- ------------ ------------
Total equity 28,602 (442)
--------------------------------- ----- ------------ ------------
BOKU, INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
Cash flow exchange
Share capital Share premium hedging reserve reserve Retained losses Total
$'000 $'000 $'000 $'000 $'000 $'000
---------------- -------------- ---------------- ---------------- ---------------- ---------------- ----------
Equity as at 1
January 2016 15 117,161 34 (3,212) (95,992) 18,006
Loss for the
year - - - - (20,597) (20,597)
Other
comprehensive
income/
(losses) - - (20) 15 - (5)
Issue of share
capital upon
exercise of
203 stock
options - 74 - - - 74
shares
repurchase - (16) - - - (16)
Share-based
payment(1) - 2,096 - - - 2,096
---------------- -------------- ---------------- ---------------- ---------------- ---------------- ----------
Equity as at 31
December 2016 15 119,315 14 (3,197) (116,589) (442)
---------------- -------------- ---------------- ---------------- ---------------- ---------------- ----------
Loss for the
year - - - - (28,098) (28,098)
Other
comprehensive
income/
(losses) - - (38) 2,269 - 2,231
Issue of new
shares on IPO 2 19,023 - - - 19,025
Shares issued
for
convertible
note 4 33,772 - - - 33,776
Shares issued
in respect of
warrants - 462 - - - 462
Share issue
costs - (983) - - - (983)
Issue of share
capital upon
exercise of
3,357 stock
options 1,722 - - - 1,722
Share-based
payment(1) - 909 - - - 909
---------------- -------------- ---------------- ---------------- ---------------- ---------------- ----------
Equity as at 31
December 2017 21 174,220 (24) (928) (144,687) 28,602
---------------- -------------- ---------------- ---------------- ---------------- ---------------- ----------
(1) Share based payment has been credited against share premium in accordance with the local company law and practice in US.
BOKU, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
31 December 31 December
2017 2016
Note $'000 $'000
-------------------------------------------------------------------- ----- ------------- -------------
Cash used in operations 23 (6,819) (11,430)
Income taxes paid - (39)
-------------------------------------------------------------------- ----- ------------- -------------
Net cash (used in)/from operating activities (6,819) (11,469)
-------------------------------------------------------------------- ----- ------------- -------------
Investing activities
Purchase of property, plant and equipment (223 (80)
Purchased of software development (97) (1,403)
Restricted cash (net) (959) 128
Interest received 18 17
Net cash used in investing activities (1,261) (1,338)
-------------------------------------------------------------------- ----- ------------- -------------
Financing activities
Payments to finance lease creditors (117) (104)
Proceeds from issuance of convertible promissory notes payable - 14,930
Share Issue Costs (983) -
Issue of common stock 20,747 74
Interest paid (937) (366)
Proceeds from line of credit 2,321 1,000
Repayment of line of credit (5,921) -
Repurchase of common stock - (16)
-------------------------------------------------------------------- ----- ------------- -------------
Net cash from financing activities 15,110 15,518
-------------------------------------------------------------------- ----- ------------- -------------
Net increase in cash and cash equivalents 7,030 2,711
Effect of foreign currency translation on cash and cash equivalent 389 (368)
Cash and cash equivalents at beginning of period 11,322 8,979
-------------------------------------------------------------------- ----- ------------- -------------
Cash and cash equivalents at end of period 18,741 11,322
-------------------------------------------------------------------- ----- ------------- -------------
Notes
1. Corporate Information
The consolidated financial information represents the results of Boku Inc. ("the Company") and its subsidiaries (together referred to as "the Group").
Boku Inc. is a company incorporated and domiciled in the United States of America. The registered office of the Company is located at 735 Battery St., 2nd Floor, and San Francisco, CA 94111, United States.
On 20(th) November 2017, the Company's shares were listed on the Alternative Investment Market of the London Stock Exchange ("AIM").
The principal business of the Group is the provision of mobile billing and payment solutions for mobile network operators and merchants. These solutions enable consumers to make online payments using their mobile devices.
2. Accounting policies
The financial information has been prepared using the historical cost convention, as modified by the revaluation of certain derivative financial instruments, as stated in the accounting policies below. These policies have been consistently applied to all periods presented, unless otherwise stated.
Basis of preparation
The financial information set out in this document does not constitute the Group's financial statements for the year ended 31 December 2017 or 31 December 2016. The annual report and financial statements for the year ended 31 December 2017 were approved by the Board of Directors on 9 April 2018, along with this preliminary announcement. The financial statements for the year ended 31 December 2017 have been reported on by the Independent Auditor. The Independent Auditor's report on the financial statements for 2017 was unqualified and did not draw attention to any matters by way of emphasis.
The financial information set out in these preliminary results has been prepared using International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board. The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 31 December 2016.
The financial information set out in these results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations as issued by the International Accounting Standards Board (collectively Adopted IFRSs). The accounting policies adopted in these results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the period ended 31 December 2016. The principal accounting policies adopted are unchanged from those used in the preparation of the financial statements for the period ended 31 December 2016. New standards, amendments and interpretations to existing standards, which have been adopted by the Group have not been listed, since they have no material impact on the financial statements.
The Group's revenue and operating costs are predominantly denominated in US Dollars and accordingly the Group's financial statements have been presented in US Dollars.
Going concern
The Directors have prepared a cash flow forecast covering a period extending beyond 12 months from the date of this financial information.
The forecast contains certain assumptions about the performance of the business including growth in future revenue which are deemed high volume and low value in nature, the cost model and margins; and importantly the level of cash recovery from trading. Furthermore, investment in winning customers via marketing expenditure, remains an important function of the forecasts. The Group obtained additional funding through the placement of shares on AIM. Collectively, all will provide working capital to cover both operating activities and the repayment of existing debt facilities. The Directors are aware of the risks and uncertainties facing the business but the assumptions used are the Directors' best estimate of the future development of the business.
After considering the forecasts and the risks, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the financial information.
Basis of consolidation
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
The consolidated financial information presents the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial information incorporates the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.
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 12 of the financial information.
Changes in accounting policies and disclosures
(a) 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 1 January 2017. However, none of them has a material impact on the Group's consolidated financial information.
(b) New, amended standards, interpretations not yet effective
The following new standards, interpretations and amendments, which are not yet effective and have not been adopted early in these financial information, will or may have an effect on the Group's future financial statements:
-- 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.
The directors have reviewed the standard and its potential effects in the context of the Group's revenue policy and have concluded that, on adoption, there is not expected to be a material impact on or change to the Group's revenue.
-- 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.
The Group will need to apply an expected credit loss model when calculating impairment losses on its trade and other receivables (both current and non-current). This will potentially result in increased impairment provisions and greater judgement due to the need to factor in forward looking information when estimating the appropriate amount of provisions. In applying IFRS 9 the group must consider the probability of a default occurring over the contractual life of its trade receivables and contracts asset balances on initial recognition of those assets. The directors are in the process of reviewing the potential effects of adopting this standard, and will provide details of the full financial effect of the interims results for the period ending 30 June 2018.
-- 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.
If the standard were to be adopted during the current financial period and applied to the operating leases currently in the Group, will bring all operating leases onto the balance sheet in line with the accounting treatment for finance leases. The impact would be an increase in the assets of the company by the amounts showing in note 21. It is envisaged that, as the Group expands, the use of operating leases will increase.
Foreign Currency
The main functional currencies for the Company's subsidiaries are the United States Dollar, Euro and Great Britain Pound.
Foreign currency transactions and balances
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, brought forward earnings are translated using the exchange rates prevailing at the dates of the transactions.
Consolidation of foreign entities
On consolidation, results of the foreign entities are translated from the local functional currency to US$ using average exchange rates during the period. All asset and liabilities are translated from the local functional currency to US$ 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.
Exchange differences are recycled to profit or loss as a reclassification adjustment upon disposal of the foreign operation.
Revenue Recognition
Revenue for the Group is measured at the fair value of the consideration received or receivable. The Group recognises revenue for services provided when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity.
The Group provides a payment platform to facilitate the mobile payment processing of virtual and digital goods purchases and also provides a collection service for amounts due to the merchants.
The Group's revenue is principally its service fees. These fees are received or receivable:
1. Settlement Model: when it acts as an agent between a merchant and mobile network operators (MNOs) or an aggregator (a middleman between the Group and the MNO). The service fee recognised is the difference between amounts collected from the MNOs or the aggregator and the amounts remitted to merchants; and
2. Transactional Model: from larger virtual and digital merchants who receive the sale collections directly and pay a service fee to the Group.
Amounts collected on behalf of merchants
The Group recognises accrued income when mobile device users purchase virtual goods and digital goods through the Company's payment platform. Once the Group receives confirmation of payment information from the Aggregator or the MNO, the Company reverses the accrued income and records the invoiced amount as trade receivable. The period from when the mobile device user purchases the virtual goods or digital goods to when the Group receives payment from Aggregators, or MNO, ranges from less than one month to six months or more. On receipt of this payment, the amount is paid to the merchant for the virtual goods or digital goods sold.
When an amount due to a merchant is still outstanding, the Group recognises and includes this as part of trade payables.
Cost of sales
Cost of sales is primarily related to the costs incurred by the Group to authorise the transactions of mobile device customers with the associated MNOs.
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 the executive management team including the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and the Chief Revenue Officer.
The Board considers that the Group's provision of a payment platform for the payment processing of virtual goods and digital goods purchases constitutes one operating and one reporting segment, as defined under IFRS 8. Management reviews the performance of the Group by reference to total results against budget.
Retirement Benefits: Defined contribution schemes
The Company has a 401(k) plan, a type of defined contribution scheme in the United States in which all employees are eligible to participate after meeting eligibility requirements. Participants may elect to have a portion of their salary deferred and contributed to the scheme up to the limit allowed by applicable income tax regulations. The Company has made a matching contribution to the scheme for the year ended 31 December 2017.
Contributions to defined contribution schemes are charged to the consolidated statement of comprehensive income in the year to which they relate.
Share-based payments
Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting period.
Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received.
Intangible assets
(i) Goodwill
The Group uses the acquisition method of accounting for the acquisition of a subsidiary. The consideration transferred is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are expensed in the period. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
In respect of business combinations that have occurred since 1 January 2014, goodwill represents the excess of the cost of the acquisition and the Group's interest fair value of net identifiable assets and liabilities acquired. In respect of business combinations prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount recorded under US GAAP. As permitted by IFRS 1, Goodwill arising on acquisitions prior to 1 January 2014 is stated in accordance with US GAAP and has not been remeasured on
transition to IFRS. Goodwill is recognised and measured at the acquisition date.
Goodwill is capitalised as an intangible asset at cost less any accumulated impairment losses. Any impairment in carrying value is being charged to the consolidated statement of comprehensive income. An impairment loss recognised for goodwill is not reversed.
Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.
Goodwill is allocated to appropriate cash generating units (CGUs). Goodwill is not amortised but is tested annually for impairment or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows. The major assumptions are disclosed in note 11.
(ii) Intangible assets acquired as part of a business combination
Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset. The cost of such intangible assets is their fair value at the acquisition date and comprises Group's tradenames, merchant relationships and developed technologies. All intangible assets acquired through business combination are amortised over their useful lives.
Subsequent to initial recognition, intangible assets acquired in a business combination are 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
(iii) Research and development
Expenditure on research activities as defined in IFRS is recognised in the income statement as an expense as incurred.
Expenditure on internally developed software products and substantial enhancements to existing software product is recognised as intangible assets only when the following criteria are met:
1. it is technically feasible to develop the product to be used or sold; 2. there is an intention to complete and use or sell the product; 3. the Group is able to use or sell the product; 4. use or sale of the product will generate future economic benefits; 5. adequate resources are available to complete the development; and 6. expenditure on the development of the product can be measured reliably.
The capitalised expenditure represents costs directly attributable to the development of the asset from the point at which the above criteria are met up to the point at which the product is ready to use. The costs include external direct costs of materials and services consumed in developing and obtaining internal-use computer software, and payroll and payroll-related costs for employees who are directly associated with and who devote time to developing the internal-use software. If the qualifying conditions are not met, such development expenditure is recognised as an expense in the period in which it is incurred.
(iv) Amortisation rates
The significant intangibles recognised by the Group and their useful economic lives are as follows:
Intangible asset Useful economic life Tradenames 10 years Merchant relationships 5 years Developed technologies 1 - 7 years Domain names 5 years Internally developed 3 - 6.75 years software
Thee amortisation expense is recognised within administrative expenses in the consolidated statement of comprehensive income.
Property, plant and equipment
Property, plant and equipment are held under the cost model and are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method. The estimated useful lives range as follows:
Office equipment 3- 5 years on cost and furniture 3- 5 years on cost Computer equipment 6.5 years on cost and software Leasehold improvement
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less.
Restricted cash
The restricted cash does not meet the definition of cash and cash equivalents and is therefore separately disclosed in the Group's statement of financial position and not part of the cash and cash equivalents for cash flow purposes. These cash amounts are restricted as to withdrawal or use under the terms of certain contractual agreements.
Financial assets
On initial recognition, the Group classifies its financial assets as either financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables financial assets, or available-for-sale financial assets, as appropriate. The classification depends on the purpose for which the financial assets were acquired. At each reporting year-end, the financial assets of the Group are all classified as loans and receivables or derivative financial instruments.
The Group has factored certain of its accounts receivable under agreements which it is not committed to underwrite any of the debts transferred. Such amounts are derecognised following the receipt of proceeds from the factoring company.
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade receivables and accrued income), but also incorporate other types of contractual monetary assets.
They are initially recognised at fair value and measured subsequent to initial recognition at amortised cost using the effective interest rate method, less any impairment loss.
The Group's loans and receivables and financial assets comprise trade receivables, accrued income, other receivables (excluding prepayments) and cash and cash equivalents.
Loans and receivables - impairment
A provision for impairment of trade and other receivables is recognised when there is objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flow of these assets.
Financial liabilities
Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. The Group's financial liabilities are categorised as loans and payables or derivative financial instruments.
At initial recognition,
-- Financial liabilities (trade and other payables, excluding other taxes and social security costs and deferred income), are measured at their fair value plus, if appropriate, any transaction costs that are directly attributable to the issue of the financial liability. These financial liabilities are subsequently carried at amortised cost.
-- Bank borrowings which are initially recognised at fair value net any of transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost ensuring the interest element of the borrowing is expensed over the repayment period at a constant rate.
Derivative financial instruments
Hedge accounting is applied to financial assets and liabilities only where all the following criteria are met:
-- At the inception of the hedge there is formal designation and documentation of the hedging relationship and the Group's risk management objective and strategy for undertaking the hedge.
-- For cash flow hedges, the hedged item in a forecast transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect profit or loss.
-- The cumulative change in the fair value of the hedging instrument is expected to be between 80-125% of the cumulative change in the fair value or cash flows of the hedged item attributable to the risk hedged (i.e. it is expected to be highly effective).
-- The effectiveness of the hedge can be reliably measured. -- The hedge remains highly effective on each date tested.
Cash flow hedges
The Group from time to time enters into derivative financial instruments such as forward foreign exchange contracts to reduce the potential impact of decreases in the value of the U.S. dollar on receipt payments from Aggregator and MNO.
The effective part of the gain or loss of these forward contracts designated as a hedge of the variability in cash flows of foreign currency risk arising from the above firm commitments are measured at fair value with changes in fair value recognised in other comprehensive income and accumulated in the cash flow hedge reserve. The ineffective portion of the gain or loss of these contracts is recognised in the Group's profit or loss. The associated gains or losses that were recognised in other comprehensive income shall be reclassified from the cash flow hedge reserve to profit or loss as a reclassification adjustment in the same period during which the hedged forecast cash flows affect profit or loss.
The value of the forward contracts within one year is disclosed separately as derivatives under current assets or liabilities in the Group's statement of financial positions.
Convertible loan notes
The convertible loan notes issued in 2016 are considered to be a hybrid financial instrument comprising a financial liability (loan) and an embedded derivative liability (share option). The number of shares to be issued will vary as it's based on the Company's lowest share price at conversion date. At the date of issue both elements were included in the balance sheet as liabilities and held at fair value. The fair value of the loan element was estimated using the prevailing market interest rate for similar non - convertible debt. Subsequently the convertible loan notes were accounted for as a financial liability at amortised cost.
On conversion of the loan note to equity, any difference between the fair value of the equity issued and the previous fair value of the note is charged to finance expense, within the Consolidated Statement of Comprehensive Income
Fair Value Hierarchy
All financial instruments measured at fair value must be classified into one of the levels below:
-- Level 1: Quoted prices, in active markets.
-- Level 2: Fair Inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
-- Level 3: Inputs that are not based on observable market data.
Share Capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The Group's ordinary share capital and preference shares are classified as equity instruments.
Operating leases: lessee
Rentals paid under operating leases are charged to the profit or loss on a straight-line basis over the period of the lease.
Leased assets: lessee
Where assets are financed by leasing agreements that give rights approximating to ownership (finance leases), the assets are treated as if they had been purchased outright. The amount capitalised is the present value of the minimum lease payments payable over the term of the lease. The corresponding leasing commitments are shown as amounts payable to the lessor. Depreciation on the relevant assets is charged to the income statement over the shorter of estimated useful economic life and the term of the lease.
Lease payments are analysed between capital and interest components so that the interest element of the payment is charged to the income statement over the term of the lease and is calculated on an effective interest rate basis. The capital part reduces the amounts payable to the lessor.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated 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 Group 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 substantively 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 Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
-- the same taxable group company; or
-- different company entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets and liabilities are expected to be settled or recovered.
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including the expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Goodwill, Intangible assets acquired in a business combination
As set in the accounting policies above, intangible assets acquired in a business combination are capitalised and amortised over their useful lives. Both initial valuations and valuations for subsequent impairment tests are based on risk adjusted future cash flows discounted using appropriate discount rates. These future cash flows will be based on forecasts which are inherently judgemental. Future events could cause the assumptions to change which could have an adverse effect on the future results of the Group. Refer to note 11 for a description of the specific estimates and judgements used and the net book values of intangible assets.
(b) Share-based payments
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. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them.
(c) Taxation
In recognising income tax assets and liabilities, management makes estimates of the likely outcome of decisions by tax authorities on transactions and events whose treatment for tax purposes is uncertain. Where the final outcome of such matters is different, or expected to be different, from previous assessments made by management, a change to the carrying value of income tax assets and liabilities will be recorded in the period in which such a determination is made. In recognising deferred tax assets and liabilities management also makes judgements about likely future taxable profits. The carrying values of current tax and deferred tax assets and liabilities are disclosed separately in the consolidated statement of financial position.
3. Financial instruments - Risk Management
The Board has overall responsibility for the determination of the Group's risk management objectives and policies. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. The Group reports in US$. All funding requirements and financial risks are managed based on policies and procedures adopted by the Board of Directors. The Group does not issue or use financial instruments of a speculative nature.
The Group is exposed to the following financial risks:
-- Market risk -- Credit risk -- Liquidity risk
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
-- Trade and other receivables -- Cash and cash equivalents and restricted cash -- Trade and other payables -- Bank loans
To the extent financial instruments are not carried at fair value in the consolidated statement of financial position, book value approximates to fair value at 31 December 2017 and December 2016.
Trade and other receivables are measured at book value and amortised cost. Book values and expected cash flows are reviewed by the Board and any impairment charged to the consolidated statement of comprehensive income in the relevant period.
Trade and other payables are measured at book value and amortised cost.
Financial instruments by category
31 December 31 December
Financial assets 2017 2016
$'000 $'000
-------------------------------------- ------------ ------------
Cash and cash equivalents 18,741 11,322
Restricted cash 1,439 480
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Total Cash 20,180 11,802
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Accounts receivable (net) 56,360 35,216
Other receivables 199 107
Note receivable from shareholder 793 793
--------------------------------------- ------------ ------------
Total other financial assets
classified as loans and receivables 57,352 36,116
--------------------------------------- ------------ ------------
Loans and receivables 77,532 47,918
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Derivative financial assets
designated as hedging instrument - 14
--------------------------------------- ------------ ------------
Financial liabilities
31 December 31 December
2017 2016
$'000 $'000
------------------------------------ ------------ ------------
Trade payables 64,275 46,909
Accruals 7,641 6149
Total other financial liabilities 71,916 53,058
------------------------------------- ------------ ------------
Bank loans (secured) 2,400 6,000
Finance lease payables 125 242
Convertible loan - 14,963
------------------------------------- ------------ ------------
Loans and borrowings 2,525 21,205
Financial liabilities at amortised
cost 74,441 74,263
------------------------------------- ------------ ------------
Derivative financial liabilities
designated as hedging instrument 24 -
------------------------------------- ------------ ------------
The management of risk is a fundamental concern of the Group's management. This note summarises the key risks to the Group and the policies and procedures put in place by management to manage them.
a) Market risk
Market risk arises from the Group's use of interest bearing and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk) or foreign exchange rates (currency risk).
Interest rate risk
The Group is exposed to cash flow interest rate risk from bank borrowings at variable rates. The Group's bank borrowings and other borrowings are disclosed in note 17. The Group's exposure to interest rate risk on the finance leases is considered low as the outstanding balance at year-end is not significant. The Group manages the interest rate risk centrally.
The following table demonstrates the sensitivity to a 1 percent change (lower/higher) to the interest rates of the following borrowings at 31 December 2017 to the profit before tax and net assets for the period:
31 December 2017 31 December 2016
Increase/(decrease) of loss before tax and net Increase/(decrease) of loss before tax and net
assets assets
$'000 $'000
------------ ------------------------------------------------- --------------------------------------------------
Bank loans +/-24 +/-60
------------- ------------------------------------------------- --------------------------------------------------
Foreign exchange risk
Foreign exchange risk is the risk that movements in exchange rates affect the profitability of the business. The company manages this risk through natural hedging and also forward contracts.
The effect of fluctuations in exchange rates on the Euro and GBP denominated trade receivables is partially offset through the use of foreign exchange contracts to the extent that any remaining impact on profit after tax is not material.
At December 31, 2017, the Company had entered into 31 (2016: 32) foreign currency forward contracts totalling a notional amount of $1,004,306 (2016: $3,547,000). These instruments were used to hedge the variable cash flows predominantly associated with monthly Aggregator payments. All of the Company's hedges are designated as cash flow hedges.
The Company's objective in using derivatives is to add stability to Aggregator payments and to manage its exposure to foreign currency movements or other identified risks. To accomplish this objective, the Company primarily uses foreign currency forward contracts as part of its cash flow hedging strategy which is managed centrally. The Group aims to fund expenses and investments in the respective currency and to manage foreign exchange risk at a local level by matching the currency in which revenue is generated and expenses are incurred.
As of 31 December, the Group's gross exposure to foreign exchange risk was as follows:
GBP Euro Other Total
31 December 2017 $'000 $'000 $'000 $'000
-------------------------------- --------- --------- --------- ---------
Trade and other receivables 17,305 24,578 15,046 56,929
Cash and cash equivalents
and restricted cash 10,926 2,002 4,088 17,016
Trade and other payables (23,283) (26,694) (17,459) (67,436)
Financial assets/(liabilities) 4,949 (114) 1,675 6,508
-------------------------------- --------- --------- --------- ---------
10% impact - +/- 550 (13) 186 723
GBP Euro Other Total
31 December 2016 $'000 $'000 $'000 $'000
-------------------------------- --------- --------- -------- ---------
Trade and other receivables 11,017 16,165 6,730 33,912
Cash and cash equivalents 721 4,324 1,284 6,329
Trade and other payables (19,596) (19,542) (9,553) (48,691)
Loans & borrowings - - - -
Financial assets/(liabilities) (7,858) 947 (1,539) (8,450)
-------------------------------- --------- --------- -------- ---------
10% impact - +/- (873) 105 (171) 939
The impact of 10% movement in foreign exchange rate of US$ will result in an increase/decrease of total comprehensive loss after tax and financial assets/(liabilities) by $723,151 for December 2017 (2016: $939,000).
b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. The Group's net trade receivables for the three reported periods are disclosed in the financial assets table above.
The Group is exposed to credit risk in respect of these balances such that, if one or more the aggregators or MNOs encounters financial difficulties, this could materially and adversely affect the Group's financial results. The Group attempts to mitigate credit risk by assessing the credit rating of new customers prior to entering into contracts and by entering contracts with customers with agreed credit terms.
In order to minimise this credit risk, the Group endeavours only to deal with companies which are demonstrably creditworthy and this, together with the aggregate financial exposure, is continuously monitored. The maximum exposure to credit risk is the value of the outstanding amount.
The Company evaluates the collectability of its accounts receivable and provides an allowance for potential credit losses as necessary. The Company has factored accounts receivable as a means of financing and at 31 December 2017, 7% of the Company's accounts receivable were factored (2016: 5%). The Group can draw down to a maximum of 85% of the trade receivables and paid factoring, collection fee and interest on the drawdown. The fee charged during the year was $542,989 (2016: $170,780) charged to the profit and loss account, under finance expenses. The Group is not committed to underwrite any of the debts transferred and therefore continues to de-recognise the debts sold within trade receivables as the debts would have been settled, following receipts of proceeds from factoring company.
Other receivables are considered to be low risk. The management do not consider that there is any concentration of risk within other receivables. No other receivables have been impaired.
Credit risk on cash and cash equivalents is considered to be small as the counterparties are all substantial banks with high credit ratings. At times, domestic deposits may be in excess of the amount of insurance provided on such deposits. At December 31 2017, cash and cash equivalents of $18,740,583 held in foreign institutions are not insured (2016: $2,766,000). The maximum exposure is the amount of the deposit. To date, the Company has not experienced any losses on its cash and cash equivalent deposits.
c) Liquidity risk
Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The Group also uses an invoice discounting facility to help manage this risk. The table below analyses the Group's financial liabilities by contractual maturities and all amounts disclosed in the table are the undiscounted contractual cash flows:
31 December 2017 Within 1 year 1-2 years 2-5 years More than 5 years
$'000 $'000 $'000 $'000
---------------------------------- -------------- ---------- ---------- ------------------
Trade and other payables 74,981 86 - -
Bank loans (secured) 2,400 - - -
Derivative financial liabilities 24 - - -
Finance leases 82 43 - -
---------------------------------- -------------- ---------- ---------- ------------------
Total 77,487 129 - -
---------------------------------- -------------- ---------- ---------- ------------------
31 December 2016 Within 1 year 1-2 years 2-5 years More than 5 years
$'000 $'000 $'000 $'000
----------------------------------- -------------- ---------- ---------- ------------------
Trade and other payables 54,615 - - -
Bank loans (secured) 6,021 - - -
Finance leases and hire purchases 138 91 45 -
Convertible loan - - 19,068 -
----------------------------------- -------------- ---------- ---------- ------------------
Total 60,774 91 19,113 -
----------------------------------- -------------- ---------- ---------- ------------------
Capital Management
The Group's capital is made up of share capital, foreign exchange reserve and retained losses.
The Group's objectives when maintaining capital are:
-- To safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and
-- To provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The capital structure of the Group consists of shareholders' equity as set out in the consolidated statement of changes in equity. All working capital requirements are financed from existing cash resources and borrowings.
4. Segmental analysis
(a) Revenue from operations
2017 2016
$'000 $'000
----------------------- ------- -------
Revenue arises from:
Provision of services 24,412 17,193
------------------------ ------- -------
In 2017, there were 4 customers with revenue amounting to $16.6m (2016: 4 ($8.0m)) where each customer revenue represents 10% or more of the Group's revenue.
(b) Operating segment
For executive management purposes, the Group has one reportable segment - provision of a payment platform for the payment processing of virtual goods and digital goods purchases and categorizes all revenue from operations to this segment.
Operating segment information under the primary reporting format is disclosed below:
2017 2016
$'000 $'000
---------------------------------- --------- ----------
Revenue 24,412 17,193
Depreciation (221) (238)
Amortisation (2,764) (2,917)
Segment loss before exceptional
items (5,785) (17,755)
Segment loss - exceptional items
(note 5) (2,644) (2,158)
----------------------------------- --------- ----------
Segment loss (8,429) (19,913)
Finance income 18 17
Finance expense (19,558) (1,243)
Group loss before tax (27,969) (21,139)
----------------------------------- --------- ----------
(c) Geographic segment - secondary basis
The Group does not have the geographical analysis of the revenue by location of the customers and the cost to produce this information would be excessive.
An analysis of non-current assets by geographical market is given below:
2017 2016
$'000 $'000
------------------------------------- ------- -------
United States of America 3,786 4,831
Germany 22,747 21,142
Other European countries (including
UK) 162 184
Rest of the World 228 666
-------------------------------------- ------- -------
Total 26,923 26,823
-------------------------------------- ------- -------
5. Administrative expenses (including exceptional items)
2017 2016
$'000 $'000
----------------------------------- ---------- -------
Audit fees 502 437
Non-audit fees - taxation 161 92
Accounting services 145 205
Non-audit fees - consultancy
and compliance services 529 704
Staff costs (excluding stock
option expense - note 6) 17,264 17,843
Travel & entertainment 910 1,152
Rent and occupancy costs 1,869 1,988
Total IT, development and hosting 1,531 1,636
Total banking costs 273 468
Legal fees 651 640
Other costs including marketing,
support & testing and other
administration expenses* 631 1,107
------------------------------------ ---------- -------
Adj. Operating Expenses 24,466 26,272
------------------------------------ ---------- -------
Depreciation of property, plant
and equipment 221 238
Amortisation of intangible assets 2,764 2,917
Loss on disposal of property,
plant and equipment - 3
Foreign exchange losses (428) 230
Exceptional items - impairment
of trademarks - 2,089
Exceptional items - impairment
of developed technology - 69
Exceptional items - restructuring
costs 478 -
Exceptional items - IPO costs 2,166 -
Share - based expenses (note
20) 909 2,096
------------------------------------ ---------- -------
30,576 33,914
----------------------------------- ---------- -------
* Expense recorded previously as bad debt of $309,600 (2016: $419,000) and has been reclassified to cost of sales to better represent the fact that they are carrier deductions. This does not change the group operating loss, comprehensive loss nor total equity for the previous period.
6. Staff costs
Total staff costs 2017 2016
$'000 $'000
----------------------- ---------------------- --------
Wages and salaries 13,782 14,258
Short-term benefits 785 807
Social security costs 1,467 1,325
Pension costs 140 13
Other staff costs 1,090 1,424
------------------------ ---------------------- --------
Total staff costs 17,264 17,827
------------------------ ---------------------- --------
Other staff costs include contractor costs, relocation, recruiting and training costs for the group.
Key management personnel compensation was made up as follows:
2017 2016
$'000 $'000
----------------------- ------ ------
Salaries 1,545 1,848
Short-term benefits 51 104
Social security costs 113 130
Pension costs 1 -
Total 1,710 2,082
------------------------ ------ ------
Directors' remuneration included in staff costs:
2017 2016
$'000 $'000
---------------------------- ------ ------
Salaries including bonuses 708 544
Short-term benefits 28 41
Total 736 585
----------------------------- ------ ------
Information regarding the highest paid director is as follows:
2017 2016
$'000 $'000
------------------------- ------ ------
Total remuneration paid 388 394
-------------------------- ------ ------
The average monthly number of employees during the period was as follows:
2017 2016
------------------------------ ----- -----
Management 5 7
Operations & administration 140 146
------------------------------ ----- -----
Total 145 153
------------------------------ ----- -----
7. Finance income and expenses
2017 2016
$'000 $'000
------------------------------------- ------- ------
Finance income
Interest income from bank deposits 18 17
--------------------------------------
Total 18 17
-------------------------------------- ------- ------
Finance expenses
Interest on bank loans & overdrafts 394 417
Interest on finance leases
and hire purchase contracts 21 34
Other interest payable (including
interest paid for factoring) 543 81
Amortisation of debt discount 89 33
Interest on convertible loan
notes (note 17) 18,511 678
Total 19,558 1,243
-------------------------------------- ------- ------
Net finance expenses 19,540 1,226
-------------------------------------- ------- ------
8. Income tax
2017 2016
$'000 $'000
--------------------------------------- ------- ------
Current tax
US tax 28 -
Foreign tax 125 105
Total current tax 153 105
---------------------------------------- ------- ------
Deferred tax expense
Origination and reversal of temporary
differences (24) (647)
---------------------------------------- ------- ------
Total tax expense/(credit) 129 (542)
---------------------------------------- ------- ------
The reasons for the difference between the actual tax charge for the period and the applicable rate of income tax of the US reporting entity applied to the result for the period are as follows:
2017 2016
$'000 $'000
--------------------------------- --------- ---------
Loss before tax (27,969) (21,139)
Tax rate 34% 34%
Loss before tax multiplied by
the applicable rate of tax: (9,509) (7,187)
US state tax 28 -
Overseas tax 22 (727)
Expenses not deductible for tax
purposes 7,084 411
Withholding taxes 34 181
Tax losses 2,470 6,782
Others - (2)
---------------------------------- --------- ---------
Total tax expense/(credit) 129 (542)
---------------------------------- --------- ---------
The Group has carried forward losses and accelerated timing differences at the reporting date as shown below. In respect of its UK subsidiary, these can be carried forward and offset against UK taxable income indefinitely. In respect of its US entities, net operating loss carryforwards can be carried forward and offset against taxable income for 20 years for losses incurred up to and including 31 December 2017. Utilisation of net operating loss or tax credit carryforwards may be subject to annual limitations if an ownership change had occurred pursuant to the section 382 Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of net operating loss and tax credit carryforwards before utilisation. As the timing and extent of taxable profits are uncertain, the deferred tax asset arising on these losses and accelerated timing differences below has not been recognised in the financial statements.
2017 2016
$'000 $'000
------------------------------------ -------- --------
US losses and tax credit - federal
and states 144,854 129,339
Foreign losses 15,972 16,533
Total 160,826 145,872
------------------------------------- -------- --------
The deferred tax asset of $713,500 which was recognised in 2017 (2016: $647,000) relates to losses of certain foreign subsidiaries which will be realised as management is expecting these subsidiaries to be profitable as a result of intercompany transfer pricing agreements.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Tax Act") was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 34% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.
The Company has calculated its best estimate of the impact of the Tax Act in its year end income tax provision in accordance with its understanding of the Tax Act and guidance available as of the date of this filing. The provisional amount related to the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future was approximately $15 million with a corresponding and fully offsetting adjustment to our valuation allowance for the year ended December 31, 2017. The Company does not expect a material impact related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings.
9. Loss per share
2017 2016
----------------------------------- ------------ ------------
Loss attributable to shareholders
on the Company ($'000) (28,098) (20,597)
Weighted average number of
common shares 150,316,262 140,126,251
------------------------------------ ------------ ------------
Basic loss per share (0.19) (0.15)
------------------------------------ ------------ ------------
Loss per share is calculated based on the share capital of Boku, Inc. and the earnings of the Group.
Due to the loss reporting period the effect of the share options was considered anti-dilutive and hence diluted loss per share is the same as the basic loss per share in 2016 and 2017.
10. Property, plant and equipment
Computer Office equipment
equipment and fixtures Leasehold
& software and fittings improvement Total
$'000 $'000 $'000 $'000
--------------------- ------------ ---------------------------------- ------------- -------
COST
At 1 January
2016 599 536 112 1,247
Additions 77 19 - 96
Disposals (6) (4) (11) (21)
Exchange adjustment (5) (21) (8) (34)
--------------------- ------------ ---------------------------------- ------------- -------
At 31 December
2016 665 530 93 1,288
--------------------- ------------ ---------------------------------- ------------- -------
Additions 148 75 - 223
Disposals (36) (1) - (37)
Exchange adjustment - 1 2 3
--------------------- ------------ ---------------------------------- ------------- -------
At 31 December
2017 777 605 95 1,477
--------------------- ------------ ---------------------------------- ------------- -------
DEPRECIATION
At 1 January
2016 420 113 33 566
Charge for the
year 101 113 24 238
Disposals (6) (3) (11) (20)
Exchange adjustment (4) (2) (5) (11)
--------------------- ------------ ---------------------------------- ------------- -------
At 31 December
2016 511 221 41 773
--------------------- ------------ ---------------------------------- ------------- -------
Charge for the
year 110 98 13 221
Disposals (37) - - (37)
Exchange adjustment 33 75 2 110
--------------------- ------------ ---------------------------------- ------------- -------
At 31 December
2017 617 394 56 1,067
--------------------- ------------ ---------------------------------- ------------- -------
NET BOOK VALUE
--------------------- ------------ ---------------------------------- ------------- -------
At 1 January
2016 179 423 79 681
At 31 December
2016 154 309 52 515
At 31 December
2017 160 211 39 410
--------------------- ------------ ---------------------------------- ------------- -------
Assets held under finance leases or hire purchase contracts:
The net book value of assets held under finance leases or hire purchase contracts, included above, are as follows:
2017 2016
Cost $'000 $'000
Furniture 192 249
Computer Hardware 37 57
--------------------
Total 229 306
-------------------- ------ ------
Depreciation charge
Furniture 57 57
Computer Hardware 20 20
----------------------
Total 77 77
---------------------- -------- ----
Net book Value
Furniture 134 192
Computer Hardware 17 37
----------------------
Total 151 229
---------------------- -------- ----
11. Intangible assets
Internally
Domain Developed Merchant Trade developed
name technology relationships marks Goodwill software Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
---------------- ------- --------------------- ---------------- --------- ----------- ----------- ---------
COST
At 1 January
2016 140 2,192 9,398 2,908 17,153 3,619 35,410
Additions - - - - - 1,379 1,379
Write off - (217) (598) (2,696) - - (3,511)
Exchange
adjustment - (69) (296) (102) (551) (25) (1,043)
----------------
At 31 December
2016 140 1,906 8,504 110 16,602 4,973 32,235
Additions - - - - - 97 97
Exchange
adjustment - (37) 1,101 - 2,013 133 3,210
---------------- ------- --------------------- ---------------- --------- ----------- ----------- ---------
At 31 December
2017 140 1,869 9,605 110 18,615 5,203 35,542
---------------- ------- --------------------- ---------------- --------- ----------- ----------- ---------
AMORTISATION
At 1 January
2016 140 1,813 2,563 350 - 403 5,269
Charge for
period - 234 1,173 270 - 1,240 2,917
Write off - (148) (598) (607) - - (1,353)
Exchange
adjustment - (9) (230) (13) - (7) (259)
----------------
At 31 December
2016 140 1,890 2,908 - - 1,636 6,574
Charge for
period - 27 1,252 - - 1,485 2,764
Exchange
adjustment - (48) 409 - - 44 405
---------------- ------- --------------------- ---------------- --------- ----------- ----------- ---------
At 31 December
2017 140 1,869 4,569 - - 3,165 9,743
---------------- ------- --------------------- ---------------- --------- ----------- ----------- ---------
NET BOOK
VALUE
At 1 January
2016 - 379 6,835 2,558 17,153 3,216 30,141
At 31 December
2016 - 16 5,596 110 16,602 3,337 25,661
At 31 December
2017 - - 5,036 110 18,615 2,038 25,799
---------------- ------- --------------------- ---------------- --------- ----------- ----------- ---------
At the year-end date an impairment test has been undertaken by comparing the carrying values of goodwill with the recoverable amount of the Group's one cash generating unit (CGU) which is the provision of a mobile payment platform for the payment processing of virtual goods and digital goods purchases to which the goodwill has been allocated. The recoverable amount of the cash generating unit is based on value-in-use calculations. These calculations use cash flow projections covering a three-year period based on financial budgets and a calculation of the terminal value, for the period following these formal projections.
The key assumptions used for value-in-use calculations are those regarding growth rates, increases in costs and discount rates. The discount rate is reviewed annually to take into account the current market assessment of the time value of money and the risks specific to the cash generating units and rates used by comparable companies. The discount rate has been calculated as the weighted average cost of capital. The pre-tax discount rate used to calculate value-in-use is 28.1% (2016: 49.40%). Growth rates for forecasts take into account historic experience and current market trends. Costs are reviewed and increased for inflation and other cost pressures. The terminal value calculation for 2017 was based on growth rate of post-tax free cashflow of 2% (2016: multiple EBITDA approach, using multiplier EBITDA of 5) for the CGU.
The cash flows resulted in a decision to impair the intangible assets at year end 2016. The initial fair value measurement of Mopay's intangible assets and goodwill arose from the purchase price allocation which was undertaken on January 21st, 2016. At 31st December 2016, it was determined that the trade names purchased as part of the transaction have a fair value less than the carrying amount as these trade names have ceased to be used in the Group. Therefore, the management have taken the decision to write off the net book value of the trade names as at 31st December 2016.
The write offs in 2016 were for trademarks of $2.089m and developed technology of $0.069m and these were recognised as exceptional expenses within administrative expenses (see note 5).
The cash flows resulted in a decision not to impair the intangible assets at year end 2017.
Sensitivity to changes in assumptions
Management has identified two key assumptions for which if any of the following changes were made to these key assumptions individually, this would cause the carrying amount to equal to the recoverable amount of the goodwill for the CGU for the year ended 31 December 2017:
2017 2016
------------------------------------- ------- -----------
Projected revenue used
for terminal value reduced 100% to
from N/A 36%
Revenue multiplier for
terminal value reduced
from N/A 5 to 1.79
Projected post tax free cashflow 96% N/A
used for terminal value reduced by
Terminal growth rate reduced from 2% to N/A
-344%
The terminal value calculation for 2017 was based on growth rate of post-tax free cash flow of 2% (2016: multiple EBITDA approach, using multiplier EBITDA of 5) for the CGU.
12. Subsidiaries
The principal subsidiaries of the Company, all of which have been included in the consolidated financial information , are as follows:
The proportion of share capital directly held by the parent company in each subsidiary is 100%.
Name Principal activity Parent Location
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Payments Inc. Holding Company Boku Inc. USA
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services Inc. Holding Company Boku Inc. Delaware, USA
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Account Services Inc. Holding Company Boku Inc. Virginia, USA
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services AG Holding Company Boku Inc. Germany
------------------------------------ ------------------------- ------------------------------------- --------------
Paymo Brazil Servicios de
Pagamentos Ltd Mobile payment solutions Boku Network Services Inc.(Delaware) Brazil
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services UK, Ltd Mobile payment solutions Boku Network Services Inc.(Delaware) UK
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services AU Pty Ltd Mobile payment solutions Boku Network Services Inc.(Delaware) Australia
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services IN Privates
Limited Mobile payment solutions Boku Network Services Inc.(Delaware) India
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services Japan Branch
Office Mobile payment solutions Boku Network Services Inc.(Delaware) Japan
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services Taiwan Branch
Office Mobile payment solutions Boku Network Services Inc.(Delaware) Taiwan
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Account Services Inc.
Boku Account Services UK, Ltd. Mobile payment solutions (Virginia) UK
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services Singapore
Branch Office* Mobile payment solutions Boku Network Services Inc.(Delaware) Singapore
------------------------------------ ------------------------- ------------------------------------- --------------
Mindmatics Labs SRL** Mobile payment solutions Boku Network Services AG (Germany) Romania
------------------------------------ ------------------------- ------------------------------------- --------------
Mopay AG Beijing Representative
Branch Mobile payment solutions Boku Network Services AG (Germany) China
------------------------------------ ------------------------- ------------------------------------- --------------
Mocosmos GmbH* Mobile payment solutions Boku Network Services AG (Germany) Germany
------------------------------------ ------------------------- ------------------------------------- --------------
Mobileview Italia S.r.l Mobile payment solutions Boku Network Services AG (Germany) Italy
------------------------------------ ------------------------- ------------------------------------- --------------
* Closed during year to 31 December 2017
** Closed in February 2018
13. Trade and other receivables
31 December 31 December
2017 2016
$'000 $'000
----------------------------------- ------------ ------------
Trade receivables - gross 36,710 18,237
Accrued income 21,060 17,695
------------------------------------ ------------ ------------
Accounts receivable - gross 57,770 35,932
Less: provision for impairment (1,410) (716)
------------------------------------ ------------ ------------
Accounts receivable - net 56,360 35,216
Other receivables 48 -
Deposits held 151 107
Taxes receivable 1,117 72
Note receivable from a
shareholder 793 793
------------------------------------
Total financial assets
classified as loans and
receivables 58,469 36,188
------------------------------------ ------------ ------------
Prepayments 646 913
------------------------------------ ------------ ------------
Total 59,115 37,101
------------------------------------ ------------ ------------
The ageing of trade receivables
and accrued income is as
follows:
31 December 31 December
2017 2016
$'000 $'000
----------------------------------- ------------ ------------
Not past due not impaired** 50,835 22,153
Past due but not impaired**
Up to 30 days 2,748 5,551
31 days - 60 days 1,226 930
61 days - 90 days 318 742
More than 90 days 1,205 413
------------------------------------ ------------ ------------
5,497 7,636
----------------------------------- ------------ ------------
Past due but impaired** 1,438 6,143
Less: Impairment (trade
receivables only) (1,410) (716)
------------------------------------ ------------ ------------
56,360 35,216
----------------------------------- ------------ ------------
** both trade receivables
and accrued income
The Company generally does not require collateral from its customers. The Company evaluates the collectability of its accounts receivable and provides an impairment provision for potential credit losses such as financial difficulty of the customer to pay, as necessary. Trade receivables that were past due but not impaired relate to customers with no default history. Trade receivables that were past due and fully impaired were $1,410,000 for December 2017 (Dec 2016: $716,000).
Provision for impairment
31 December 31 December
2017 2016
$'000 $'000
---------------------------- ------------ ------------
Opening balance 715 1,615
Utilised during the period (111) (1,331)
Increase during the period 806 419
Foreign exchange movement - 13
------------------------------ ------------ ------------
Closing balance 1,410 716
------------------------------ ------------ ------------
Accounts receivable and other receivables have not been discounted as they are short-term debts.
14. Cash and cash equivalents and restricted cash
31 December 31 December
2017 2016
$'000 $'000
--------------------------- ------------ ------------
Cash and cash equivalents 18,741 11,322
---------------------------- ------------ ------------
Restricted cash 1,439 480
---------------------------- ------------ ------------
The restricted cash primarily includes e-money received but not yet paid to merchants (in transit), cash held in the form of a letter of credit to secure a lease agreement for the Company's San Francisco office facility and a certificate of deposit held at a financial institution to collateralise Company credit cards.
15. Derivative financial instruments
31 December 31 December
2017 2016
$'000 $'000
----------------------------------------------- ------------ ------------
Derivative financial assets (liabilities)
Derivatives designated as hedging instruments
Forward foreign exchange swaps (24) 14
------------------------------------------------ ------------ ------------
The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the consolidated statement of financial position
The Group's objective in using derivatives is to hedge the variability cash flows associated with monthly Aggregator payments and to manage its exposure to foreign currency movements or other identified risks. To accomplish this objective, the Company primarily uses foreign currency contracts as part of its cash flow hedging strategy.
The notional principal amounts of outstanding forward foreign exchange rate swaps at 31 December 2017 were $1,004,306 (2016: $3,547,000). Their fair value in 2017 is $23,865 liability (2016: $14,000 asset).
The hedged transactions denominated in various foreign currencies are expected to occur at various dates within the next 12 months. The change in net un-realised gains and losses on the fair value of these forward foreign exchange swaps are recognised in the hedging reserve in equity at year ended December 2017 of $38,000 loss (2016: loss $20,000). The realised gains of these swaps re-cycled from the hedging reserve to profit or loss were 2017: $56,641 (2016: $34,000).
16. Trade and other payables
31 December 31 December
2017 2016
Current $'000 $'000
-------------------------------------- ------------ ------------
Trade payables 64,275 46,909
Accruals 7,641 6,149
--------------------------------------- ------------ ------------
Total financial liabilities
classified as financial liabilities
measured at amortised cost 71,916 53,058
Other taxes and social security
costs 2,203 1,556
Deferred revenue 862 277
--------------------------------------- ------------ ------------
Total 74,981 54,891
--------------------------------------- ------------ ------------
Non-current
Deferred rent 86 86
--------------------------------------- ------------ ------------
Total 86 86
--------------------------------------- ------------ ------------
The carrying values of trade and other payables approximate to fair values.
17. Loans and borrowings
31 December 31 December
2017 2016
$'000 $'000
------------------------------------ ------------ ------------
Current
Bank loans (secured) 2,400 6,000
Obligations under finance
lease and hire purchase contracts 82 117
------------------------------------- ------------ ------------
Total 2,482 6,117
------------------------------------- ------------ ------------
Non-current
Obligations under finance
lease and hire purchase 43 125
Convertible promissory notes - 14,963
------------------------------------- ------------ ------------
Total 43 15,088
------------------------------------- ------------ ------------
Principal terms and the debt repayment schedule of the Group's loan and borrowings are as follows:
In November 2013, the Company entered into a Loan and Security Agreement (the Agreement) with a financial institution that allows for borrowings of up to $15,000,000 under a revolving line of credit through to February 2015. This was extended first, through to March 2017 and subsequently through to March 2019. However, the amounts borrowed under this Agreement were partially repaid after the IPO; the balance outstanding at year end was $2.4m (2016: $6m).
The line of credit is secured by the Company's trade receivables and allows for borrowings of up to (a) 80% of outstanding eligible trade receivables from United States or Western Europe debtors plus (b) sixty-five percent (65.0%) of outstanding eligible trade receivables from debtors other than those from the United States or Western Europe plus (ii) 50% of outstanding eligible accrued income provided that (a) aggregate advances secured by trade receivables due from Aggregators does not exceed $7,500,000 at any time and (b) aggregate advances secured by eligible accrued receivables does not exceed $7,500,000 at any time. The Agreement requires a minimum monthly interest payment of $12,500 should interest paid on outstanding borrowings be less than $12,500 in any given month. Advances under the line of credit bear interest at prime plus 3.25% or prime plus 1.75%, depending on the net cash balances held with the financial institution (2017: 6.50%; 2016: 6.00%). Outstanding borrowings under the line of credit at each year-end are as disclosed in the above table.
Subsequent to 2015 year-end, the financial institution waived its right to accelerate payment and formally amended the line of credit to extend the maturity date through to January 2017 and later to March 2017. At December 31 2017, management believes the Company was in compliance under the terms of the Agreement.
Convertible Promissory notes
In 2016, the Company entered into subordinated convertible note agreements with investors under which the Company is authorised to issue notes of up to $20 million. The Company issued convertible notes totaling $15,053,000 at various dates from July through November 2016. The notes accrue interest at the rate of 10% per annum and mature in January 2019.
The notes, plus accrued interest, automatically convert into the next round of preferred stock financing at the lowest issued price during a qualified financing of at least $10,000, not including funds received from the convertible notes. If a qualified financing does not occur prior to the maturity, the notes plus accrued interest can be converted into the next round of preferred stock financing, at the option of the holder; if a holder chooses not to convert, the notes must be repaid by the Company at a rate of two times the then outstanding notes and accrued and unpaid interest balance. If a qualified public offering or other qualified merger occurs prior to maturity, the conversion stock to be received by the note holders will be converted at a rate of two times the then outstanding note and accrued and unpaid interest balance divided by the applicable conversion price.
Prior to IPO in November 2017, these convertible notes totaling $17,120,113 (2016: $15,053,000) including accrued interests were converted to 44,052,101 common shares at GBP0.59 per share. In accordance with the terms of the note as described above, the note converted at a rate of two times the outstanding balance and the resulting costs was recorded in finance expense and amounted to $17,120,113.
In 2016, $123,000 has been netted off against the outstanding debt and is being amortised to interest expense over the term of the convertible promissory notes. The remaining balance of $90,000 (2016: $33,000) was amortised and expensed in 2017, following the pre-IPO re-organisation.
Reconciliation of liabilities
arising from financing activities
Cash
2016 flows Non-cash changes 2017
----------------------------------
Foreign Fair
Converted Exchange Value
to shares Movement Changes
------- -------- ----------- ---------- --------- ------
Long-term borrowings 14,963 - (32,050) (33) 17,120 -
Short-term borrowings 6,000 (3,600) - 2,400
Lease liabilities 242 (117) 125
------- -------- ----------- ---------- --------- ------
Total liabilities
from financial activities 21,205 (3,717) (32,050) -33 17,120 2,525
18. Share capital
The Company's issued share capital is summarised in the table below:
31 December 31 December
2017 2016
Number
Number of shares
of shares issued
issued and
and fully fully
paid paid
'000 $'000 '000 $'000
------------------------- --- ----------- ------ ----------- ------
Convertible preferred
shares
of $0.0001 each
Series D-1 - - 2,494 -
Series D - - 13,831 2
Series C - - 18,348 2
Series B - - 19,099 2
Series A-1 - - 16,674 2
Series A - - 23,192 2
Series D-2 - - 18,958 2
------------------------------- ----------- ------ ----------- ------
Closing balance - - 112,596 12
------------------------------- ----------- ------ ----------- ------
Common stock of $0.0001
each
Opening balance 27,559 3 27,503 3
Preference shares
converted to common
shares 112,596 11 - -
New shares issued
on IPO 25,424 3 203 -
Shares issued for
conversion of loan
notes 44,052 4 - -
Shares issued for
warrants 594 - - -
Exercised stock options 3,357 - - -
Re-purchase of shares - - (147) -
------------------------- --- ----------- ------ ----------- ------
Closing balance 213,582 21 27,559 3
------------------------------- ----------- ------ ----------- ------
Common Stock
At December 31, 2017 and 2016 the Company was authorised to issue 177,000,000 shares of common stock with a par value of $0.0001 per share. At December 31, 2017, the Company had 213,582,467 (2016: 27,559,000) common shares issued and outstanding, of which 1,150,000 (2016: 1,150,000) where unpaid.
Convertible preferred shares
At December 31, 2016 the Company was authorised to issue 118,153,000 convertible preferred shares with a par value of $0.0001 per share. At December 31, 2017, the Company had no (2016: 112,596,000) convertible preferred shares issued or outstanding as they have all been converted into common stock pari-passu upon the admission to AIM.
The Company did not repurchase any shares in 2017 (147 in 2016) which is related to the Company's right to repurchase shares that were issued following early exercise of options prior to vesting. There were no shares subject to repurchase at 2017, and 2016.
19. Reserves
The share premium disclosed in the consolidated statement of financial position represents the difference between the issue price and nominal value of the shares issued by the Company.
Retained earnings are the cumulative net profits in the consolidated income statement.
Foreign exchange reserve is foreign exchange translation gains and losses on the translation of the financial statements from the functional to the presentation currency.
Cash flow hedging reserve is changes in un-realised gains or losses on the valuation of derivatives designated as cash flow hedges at year-end.
Movements on these reserves are set out in the consolidated statement of changes in equity.
20. Share-based payment
The Group operates the following equity-settled share based remuneration schemes for employees, directors and non-employees:
1. 2009 equity incentive plan (2009 Plan} for the granting of stock options (incentive or non-qualified), restricted stock awards (RSA) and restricted stock units (RSU). The group has reserved 42,078 (2016: 42,078) shares of common stock for issue under this plan which lapsed on the IPO date. No options are available to be issued under this plan as at 31 December 2017. No options are available to be issued under this plan as at 31 December 2017.
2. 2009 equity UK sub-plan (2009 UK plan) under the terms of the above plan for the granting of stock options and restricted stock units for qualifying participants who are resident in the United Kingdom. No options are available to be issued under this plan as at 31 December 2017.
3. 2009 non-plan (not part of the above 2009 plan) for the granting of share options to purchase 897,000 (2016: 897,000) common shares at $0.022(2016: $0.022) per share. These options vest with terms ranging from being fully vested at grant date to vesting over four years with a one year cliff, where 25% of the options vest. The options expire in April 2019.
4. 2009 BNS options (not part of the above 2009 plan) for the granting of share options to purchase 182,000 (2016: 182,000) common shares at $0.207 (2016: $0.207) per share in connection with the acquisition of BNS in June 2009. The options expire in June 2019.
5. 2017 Equity Incentive Plan (new plan started on the 7(th) November 2017) for the granting of stock options. The Group has reserved ten million shares of common stock for issue under the plan. However, at the balance sheet date no stock options have been issued nor any service performed which earns options.
Options under the 2009 Plan and 2009 UK plan
Options under the 2009 Plan and UK plan may be outstanding for periods of up to ten years following the grant date. Outstanding options generally vest over four years and may contain a one year cliff, where 25% of the options vest.
Stock options with graded vesting is based on the graded vesting attribution approach, whereby, each instalment of vesting is treated as a separate stock option grant, because each instalment has a different vesting period.
Restricted stock units (RSU)
Performance-based RSUs vest upon the earlier of the completion of a specified service period and the achievement of certain performance targets, which may include individual and Company measures, and are converted into common stock upon vesting, generally over 18 months.
Share-based expense for RSUs is based on the fair value of the shares underlying the awards on the grant date and reflects the estimated probability that the performance and service conditions will be met. The share-based expense is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions until the vesting date.
Restricted stock awards (RSA)
RSAs are subject to repurchase based upon the terms of the individual restricted stock purchase agreements. These repurchase rights lapse over the vesting term of the individual award, generally over three to four years.
2009 non-plan options
The 2009 non-plan options vest with terms ranging from being fully vested at grant date to vesting over four years with a one-year cliff. The options expire in April 2019. Share-based expense in connection with the grant of Non-Plan options was not material in 2016 and 2017. In 2017 no options were (2016: 145,800) cancelled. The outstanding options at 31 December 2017 were 50,000 (2016: 50,000).
BNS plan options
In connection with the acquisition of BNS in June 2009, the Company granted options to purchase 182,000 common shares at a weighted-average exercise price of $0.207 per share (BNS Options). These options granted were separate from the 2009 Plan. The options expire in June 2019. There was no stock option activity related to these options in 2016 and 2017. At 31 December 2017 and 2016, 37,029 options were outstanding at a weighted-average exercise price of $0.203 per share. At December 31, 2017 and 2016, all BNS Options were fully vested and exercisable.
The options activity under the plan (including RSA and RSU) are as follows:
Options
available
for grant 2009 Plan (including UK
- All plan, (excluding RSA & Total
plans RSU) RSA RSU Non-plan options BNS plan options
------------ ---------- ------------------------- ------------------ ------------------ ------------------- ------------------ ---------
Number Number Number Number Number Number
Number of of of of of of of
options options WAEP(1) options WAEP(1) options WAEP(1) options WAEP options WAEP(1) options
'000 '000 '000 '000 '000 '000 '000
------------ ---------- -------- --------------- -------- -------- -------- -------- -------- --------- -------- -------- ---------
At 1
January
2016 2,677 18,312 $0.610 7,206 $0.30 4,649 $0.654 196 $0.022 37 $0.203 30,400
Authorised 8,206 - - - - - - - - -
Granted (12,668) 7,599 $0.266 - - 5,068 $0.267 - - - - 12,667
Exercised - (203) $0.367 - - - - - - - - (203)
Cancelled 1,785 (1,619) $0.537 - - (166) $0.550 (146) $(0.022) - - (1,931)
------------ ---------- -------- --------------- -------- -------- -------- -------- -------- --------- -------- -------- ---------
At 31
December
2016 - 24,089 $0.511 7,206 $0.30 9,551 $0.450 50 $0.022 37 $0.203 40,933
Authorised 10,000 - - - - - - - - - - -
Granted - 4,052 $0.370 - - 700 $0.370 - - - - 4,752
Exercised - (3,357) $0.512 (7,206) $0.30 - - - - - - (10,563)
Cancelled - (4,175) $0.298 - - (712) $0.271 - - - - (4,887)
------------ ---------- -------- --------------- -------- -------- -------- -------- -------- --------- -------- -------- ---------
At 31
December
2017 10,000 20,609 $0.470 - - 9,359 $0.434 50 $0.022 37 $0.203 30,235
------------ ---------- -------- --------------- -------- -------- -------- -------- -------- --------- -------- -------- ---------
(1) WAEP - weighted average exercise price
December December
2017 2016
--------------------------------------------------------------------------------------------- --------- ---------
Outstanding options at reporting end date:
- total number of options (including RSA & RSU) 30,238 40,933
- weighted average remaining contractual life - all plans
(excluding RSU and RSA) 6.15 7.17
- weighted average remaining contractual life - RSU 2.68 3.76
- weighted average remaining contractual life - RSA 6.78 6.98
Vested and exercisable ('000): 12,856 14,370
- weighted average exercise price $0.374 $0.556
- weighted average remaining contractual life - all plans
(excluding RSU and RSA) 5.56 6.04
Weighted average share price exercised during the period (excluding RSA and RSA) $0.349 $0.367
Weighted average fair value of each option granted during the period (excluding RSA and RSU) 0.165 0.145
Vested and exercisable - RSU and RSA 8,880 8,880
Share-based expense for the period ('000) $909 $2,096
---------------------------------------------------------------------------------------------- --------- ---------
In October 2016, the Company's Board of Directors repriced the exercise price of certain outstanding stock options. This repricing was accounted for as a modification of all outstanding options. The Company calculated the fair value of the original options immediately prior to the modification and again after the modification occurred using the Black-Scholes option pricing model. The fair value of the modified options, less the fair value of the original options immediately before the modification, will be recorded over the remaining vesting period. For options that were fully vested as of the modification date, the Company recorded all of the incremental share-based expense as of that date. A total of 14,254,000 options were modified in 2016 resulting in incremental value of $771,000, of which $665,000 was recognised and included in share-based expenses in 2016. The remainder will be recognised over a weighted-average requisite service period of 0.864 years.
The following information is relevant in the determination of the fair value of options (excluding RSA and RSU) granted during the period under the equity- settled share based remuneration schemes operated by the Group.
December December
2017 2016
------------------------------- -------------- ----------------
Option pricing model used Black-Scholes Black-Scholes
------------------------------- -------------- ----------------
Weighted average share price
at grant date (dollar) $0.370 $0.266
-------------------------------- -------------- ----------------
Exercise price $0.370 $0.266
-------------------------------- -------------- ----------------
Weighted average contractual 5.82(E*+ 5.83(E*)
life (years)(1) NE*) and 7.42(NE*)
Weighted expected volatility 45% (E*+ 61%(E*)
(2) NE*) and 52%(NE*)
Expected dividend growth rate 0% 0%
Weighted average Risk-free 1.9% (E*+ 1.42%(E*)
interest rate(3) NE*) and 1.99%(NE*)
-------------------------------- -------------- ----------------
(1) Weighted average contractual life represents the period of time options are expected to be outstanding and is estimated considering vesting terms and employees' historical exercise and post-vesting employment termination behavior.
(2) Expected volatility is based on historical volatilities of public companies operating in the Company's industry.
(3) The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.
*E - employees NE - non-employees
The fair value of each RSU has been estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: expected terms ranging from 5.04 to 6.11 years; risk-free interest rates ranging from 1.87% to 1.92%; expected volatility of 45%; and no dividends during the expected term (2016: expected terms ranging from 5.75 to 6.08 years; risk-free interest rates ranging from 1.43% to 1.49%; volatility of 76%; and no dividends during the expected term). The weighted average values for the assumptions used were: expected term of 5.55 years; risk-free interest rate of 1.92%; expected volatility of 45%; and no dividends during the expected term (2016: expected term of 6.05 years; risk-free interest rate of 1.48%; expected volatility of 76%; and no dividends).
The fair value of each RSA granted in December 2013 has been estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: expected term of 10 years; risk-free interest rates 2.99%; expected volatility of 60%; and no dividends during the expected term.
Warrants for ordinary shares
February 2013 Warrant
In February 2013, in connection with a financing arrangement with SVB bank, the Company issued a warrant to purchase 872,093 common shares at an exercise price of $0.86 per share. The warrant was immediately exercisable and expires in February 2023. As the fair value of the warrant cannot be estimated reliably relating to the financing arrangement, the Company determined the fair value of the warrant to be $392,000 using the Black-Scholes option pricing model, assuming a contractual life of 10 years, risk free rate of 1.88%, volatility of 60% and no dividends. The fair value of the warrant was recorded within other receivables and the corresponding amount in share premium. The fair value is being amortized to interest expense over 2 years by 2015, which was the term of the agreement. The warrants remained outstanding at December 2017 was 872,093 (2016:872,093).
September 2009 Warrant
In September 2009, the Company issued warrants to purchase 1,950,000 of common shares at $0.20 per share to certain holders of convertible preferred shares. The warrants were immediately exercisable. 1,150,000 warrants were expired and unexercised and remaining 800,000 (2016: 800,000) were exercised pre IPO date of 20(th) November 2017 and converted to 594,149 common shares.
21. Commitments
Operating leases
The Company leases office facilities under several non-cancelable operating lease agreements, which expire at various dates through 2021. In addition to the base rent, the Company is responsible for certain maintenance expenses under the leases. Certain lease agreements contain scheduled net increases over the lease term. The related rent expenses for these leases are calculated on a straight-line basis with the difference recorded as deferred rent. Rent expense was $1,494,593 in 2017 (2016: $1,481,000).
The total value of minimum lease payments due until the next lease break is payable as follows:
2017 2016
$'000 $'000
----------------------------- ------ ------
Not later than one year 872 1,120
Later than one year and not
later than five years 2,093 2,965
Later than five years - -
----------------------------- ------ ------
Total 2,965 4,085
------------------------------ ------ ------
Finance leases
During 2015 the Company entered into several capital lease agreements with leasing companies for the financing of equipment purchases of $400,000. The lease payments expire at various dates through December 2019.
Minimum
lease Present
2017 payments Interest value
Within one year 91 9 82
Between one and five years 45 2 43
Total 136 11 125
---------------------------- ---------- --------- --------
Minimum
lease Present
2016 payments Interest value
---------------------------- ---------- --------- --------
Within one year 138 21 117
Between one and five years 136 11 125
Total 274 32 242
---------------------------- ---------- --------- --------
22. Dividends
No dividends were declared or paid in any of the periods.
23. Cash used in from operations
Year ended Year ended
31 December 31 December
2017 2016
$'000 $'000
--------------------------------------------------- ------------- -------------
Loss after tax (28,098) (20,597)
Add back:
Tax expense/(credit) 129 (542)
Amortisation of intangible assets 2,764 2,917
Depreciation of property, plant and equipment 221 238
Amortisation of prepaid warrants - -
Loss on disposal of property, plant and equipment - 3
Finance income (18) (17)
Finance expense 19,558 1,243
Exchange (gain)loss (3,251) 4,440
Impairment of intangible assets - 2,158
Share based payment expense 909 2,096
---------------------------------------------------- ------------- -------------
Operating loss before working capital changes (7,786) (8,061)
Decrease in trade and other receivables (18,750) 3,113
Decrease in trade and other payables 19,717 (6,482)
---------------------------------------------------- ------------- -------------
Cash used in from operations (6,819) (11,430)
---------------------------------------------------- ------------- -------------
24. Related party transactions
In 2017, the Company has been remitted $111,458,148 (2016: $75,879,000) in net payments from 3 customers who are shareholders of the Company. At December 31, 2017, the Company had receivables of $20,899,203 due from these companies.
A director issued a full recourse promissory note in the amount of $793,000 for the purchase of 1,150,000 common shares at $0.69 per share in Dec 2013. This is disclosed as 'note receivable from a shareholder' in note 13 - trade and other receivables in 31 December 2017 and 2016.
25. Ultimate controlling party
There is no ultimate controlling party of the Company.
26. Contingent liabilities
In the normal course of business, the Group may receive inquiries or become involved in legal disputes regarding possible patent infringements. In the opinion of management, any potential liabilities resulting from such claims, if any, would not have a material adverse effect on the Group's consolidated statement of financial position or results of operations.
From time to time, in its normal course of business, the Group may indemnify other parties, with whom it enters into contractual relationships, including customers, Aggregators, MNOs, lessors and parties to other transactions with the Group. The Company has also indemnified its directors and executive officers, to the extent legally permissible, against all liabilities reasonably incurred in connection with any action in which such individual may be involved by reason of such individual being or having been a director or executive officer. The Group believes the estimated fair value of any obligation from these indemnification agreements is minimal; therefore, this consolidated financial information do not include a liability for any potential obligations at 31 December 2017 and 2016.
27. Post balance sheet events
There have been no material post balance sheet events.
28. Cautionary Statement
Boku has made forward-looking statements in this press release, including statements about the market for and benefits of its products and services; financial results; product development plans; the potential benefits of business relationships with third parties and business strategies. These statements about future events are subject to risks and uncertainties that could cause Boku's actual results to differ materially from those that might be inferred from the forward-looking statements. Boku can make no assurance that any forward-looking statements will prove correct.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UKONRWAASRAR
(END) Dow Jones Newswires
April 10, 2018 02:00 ET (06:00 GMT)
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