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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Location Sciences Group Plc | LSE:LSAI | London | Ordinary Share | GB00BGT36S19 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 134.375 | 0.20 | 0.23 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Mgmt Invt Offices, Open-end | 111k | -758k | -0.1789 | -7.51 | 5.69M |
From Apr 2019 to Apr 2024
TIDMLSAI
RNS Number : 7578U
Location Sciences Group PLC
02 April 2019
Location Sciences Group PLC
("Location Sciences", the "Company" or the "Group")
Final Results for the year ended 31 December 2018
Location Sciences Group PLC, (AIM: LSAI), the pre-eminent global location verification provider to the $106 billion digital advertising industry, is pleased to announce its audited final results for the year ended 31 December 2018.
Key company milestones
* Brought Verify to the UK market, helping customers to detect location ad-fraud and cut ad wastage
* Hired Warren Zenna from Havas Media as president of the Americas to lead Location Sciences' market entrance, strategy, partnerships and growth in North America
* Signed new core customers, including CACI and Talon Outdoor Limited
KPI success
Location Sciences exceeded all published KPIs in 2018. The Board is now committed to delivering updated KPIs it has set for the year ahead:
* 50 new brands to have adopted Verify, following the successful onboarding of nine customers by the end of 2018
* 250 million verified ad impressions for the first six months of 2019 and one billion verified ad impressions by year end. The number of verified ad impressions by 31 December 2018 was 53,658,939
* At least six major suppliers (demand or supply side platforms used to facilitate programmatic advertising) to become Verify-accredited during 2019
Enhanced financial position through funding
* The Group completed two funding rounds in 2018, raising combined gross funds of approximately GBP3.36 million (GBP3.08 million net of expenses)
* As at 31 December 2018, the Group's net assets were GBP4,187,730 (2017: GBP2,551,731)
* Cash and cash equivalents at year end were GBP2,615,455 (2017: GBP1,140,239)
Improved financial performance
* Achieved a 519% increase in like-for-like sales; revenue from location data and Insights delivered GBP697,931 (2017: GBP144,813) and Verify GBP53,922 (2017: GBPNil)
* Reduced administrative costs (excluding amortisation and depreciation and non-recurring items) by 60.6% to GBP1,706,083 (2017: GBP4,333,073)
* Significantly reduced loss per share from continuing operations by 80.1% to 0.98p in 2018 (2017: 4.92p)
Commenting on the results, Mark Slade, Chief Executive of Location Sciences, said:
"With Verify we intend to make significant waves in the ad-tech market. There is a huge market opportunity here and our key differentiators set us apart.
"The Company's independence is extremely important as we strive to become the default choice for location-based ad campaign authentication. Being a highly talented relatively small team means that we can react to our customers' requirements rapidly and always deliver client-oriented outcomes.
"We are also media-agnostic, meaning that we do not sell media or own any media assets. For our customers, this means there is no conflict of interest. Our only purpose is to provide verification services to our clients. We are uniquely positioned to be the kitemark in the location based advertising industry, bringing trust, integrity and transparency back to brands.
"All these things combined set Location Sciences up for a successful 2019. I look forward to delivering significant value to shareholders in the year ahead."
Change of AIM Rule 26 website
Location Sciences has launched its new Verify customer focused website today utilising the existing locationsciences.ai domain, as such it is moving its AIM Rule 26 website to www.locationsciencesgroup.ai with the AIM Rule 26 disclosures being found at https://www.locationsciencesgroup.ai/investor-relations/aim-rule-26/
A copy of this announcement and the Company's report & accounts are available on the Company's website www.locationsciencesgroup.ai
For further information please contact:
Location Sciences Group PLC via Milk and Honey PR
Mark Slade, Chief Executive Officer
David Rae, Chief Financial Officer
Stockdale Securities Limited Tel: +44 (0)20 7601 6100
Tom Griffiths
David Coaten
Milk & Honey PR Tel: +44 (0)20 3637 7310
Kirsty Leighton
Jessica Ballinger
About Location Sciences Group PLC:
Location Sciences is the pre-eminent global location verification provider to the $106 billion digital advertising industry. Working in partnership with brands, media agencies and suppliers to reduce ad-wastage and improve the effectiveness of location-based advertising campaigns.
The digital advertising market place remains unregulated and un-monitored, with an estimated $19 billion wasted on ad-fraud in 2018. Location Sciences has developed Verify, the world's first independent location verification product. Utilising sophisticated machine learning and pattern recognition technologies Verify detects location ad-fraud and shines a light on location data inaccuracy with the aim of bringing back integrity, transparency and trust to the market place.
Chairman's Statement
2018 - A Landmark Year
2018 was a landmark year for Location Sciences Group PLC as it completed its transformation from a digital payments and proximity marketing business into a location intelligence specialist and with the launch of Verify carving a crucial role in the rapidly growing $106 billion global advertising market (Source: Magna 2018).
Last year saw the Company evolve enormously. It started with the name change to Location Sciences Group PLC in February 2018, setting our new focus and direction, and ended with us welcoming some new and key investors to our share register while securing the backing of existing shareholders through an open offer. Critically, we have also added new proven leaders to the team and new platform innovation.
Following the name change, the Company launched Verify, the world's first independent location verification product. With the global location intelligence market anticipated to reach $25.25 billion by 2025(i) , the business took the opportunity to establish a presence in North America, which remains the largest advertising market globally(ii) and a key pillar of growth for the Company.
Location Sciences' new focus and direction led to the following key milestones in 2018:
* The UK launch of Verify in May, helping customers to detect location ad-fraud and verify the authenticity of location data;
* The hiring of Warren Zenna from Havas Media as president of the Americas in late 2018 to lead Location Sciences' market entrance, strategy, partnerships and growth in North America; and
* The signing of new core customers, including CACI and Talon Outdoor Limited.
The Company has been backed by strong support from new and existing shareholders:
* A June placing raised GBP412,272 (before expenses) to launch Verify in the UK; and
* A November placing and open offer raised GBP2.95 million (before expenses) with funds being used to launch Verify in North America.
In addition to the support from existing shareholders in the open offer, we welcomed some important institutional investors. These included Canaccord Genuity Group Inc and Herald Investment Management.
The new funding has already resulted in increasing sales and recurring revenues, delivering value for investors. Having exceeded all published KPIs in 2018, the Board is now committed to delivering new KPIs for 2019, updated to reflect the changes in the business namely:
1. The number of brands which had adopted Verify at the end of 2018 was nine. The Board has set a target for 2019 for 50 new brands.
2. The number of verified ad impressions by year end was 53,658,939. The Board has set a target of 250 million verified ad impressions for the first six months of 2019 and 1 billion by the year end.
3. At least six major suppliers (demand or supply side platforms used to facilitate programmatic advertising) to become Verify accredited during 2019. "Verify Supply" is a significant new product currently being developed by our engineers for customers seeking a hallmark of quality as a differntiator in the location based advertising market.
The Board believes that completion of these targets will deliver significant value to shareholders.
Huge Market Opportunity
The global digital advertising market was expected to reach $106 billion in 2018 and it continues to grow at pace. Mobile is at the heart of this, with ad spend last year surpassing TV(iii) .
With location targeted advertising estimated to be 43% of mobile advertising spend(iv) , spotting inaccurate or fraudulent location data is a huge priority for brands and agencies.
Verify is the solution to this growing problem. The Location Sciences platform verifies the authenticity and quality of location signals, enabling brands and agencies to deliver more impactful advertising campaigns and drive better results.
Location Sciences is the first company to bring an independent and media-agnostic location verification product to the market. Our impartiality is key as we can never be accused of 'marking our own homework'.
The opportunity is for Location Sciences to become the kitemark for location-based advertising and a key player in the large and growing ecosystem.
Mobile Ad Spend Worldwide
Hot Features
Premium
YEAR USD BILLIONS % OF DIGITAL AD SP
2017 143.5 56.7%
2018 189.2 67.6%
2019 232.3 71.0%
2020 279.5 73.5%
2021 318.5 75.8%
2022 354.8 77.5%
Sources: IAB internet advertising revenue report 2017
US Mobile Ad Spend
YEAR USD BILLIONS % OF DIGITAL AD SP
2017 60.70 67.2%
2018 74.97 69.9%
2019 90.34 71.8%
2020 105.25 74.0%
2021 118.93 76.0%
2022 131.41 77.1%
Source: eMarketer US Mobile Ad Spending 2017-2022
Expansion of the Leadership Team
During the course of 2018 and subsequently, the following changes were made to the Board to strengthen various areas of expertise:-
In February 2018, David Rae joined the Board as Chief Financial Officer (CFO) on a part-time basis. He enhanced the Board's financial and strategic capabilities and brought experience in delivering rapid growth for ambitious companies. Since his appointment, David has become full time and taken on the role of Chief Operating Officer (COO), allowing the business to utilise his full set of skills and experience.
In March 2018, Benjamin Chilcott was appointed as a non-executive director. Benjamin co-founded the management consultancy Concise Consultants Limited, which was acquired by Iris Worldwide, the integrated marketing agency, in 2008. Following this, Benjamin became CEO of Iris Concise Limited, the strategy and consulting arm, and served on the board of Iris Worldwide. Benjamin is also non-executive chairman of the electronic receipts company, yReceipts Limited.
In late January 2019, non-executive director Shaun Gregory resigned from the Board with immediate effect. The appointment of a replacement non-executive director is expected to be announced in the first half of this year.
Dan Francis, who played a key role in the transformation of the business as Executive Director, left the Company in June 2018.
The Board would like to thank these individuals, as well our superb sales, technical and operations teams, for their important contribution in building Location Sciences to this stage.
Delivering on the Global Potential of Verify
By exceeding its 2018 KPIs, Location Sciences demonstrated significant commercial traction and evidenced the transformation from a failed venture in digital payments. I am also encouraged by the speed of adoption of Verify, demonstrating a growing awareness of ad-fraud and an urgent need for full transparency across location-based advertising campaigns.
In 2019, Location Sciences will continue to invest in its team and its products to help brands and agencies make the most of the opportunities of location-based mobile advertising.
This will be an exciting year for the Group and its management team. With new markets and new products there will always be challenges to overcome. However, the rewards will be significant if Location Sciences delivers on the early enthusiasm seen for Verify.
I looked back at my report in last year's financial statements and noted that "the Company was in its strongest position yet (at the end of 2017), strategically, financially, operationally and in terms of its market position." I am pleased to advise that since then we have further enhanced our position and look to the future with cautious optimism.
The opportunity for Location Sciences is significant. However, execution is key and I believe that we have assembled a high-performance team to deliver a successful outcome for all stakeholders.
Sources:
(i) https://www.prnewswire.com/news-releases/global-location-intelligence-market-report-2015-2025---market-is-anticipated-to-reach-usd-25-25-billion-300743014.html
(ii) https://www.emarketer.com/content/emarketer-total-media-ad-spending-worldwide-will-rise-7-4-in-2018 (iii) https://www.emarketer.com/content/mobile-advertising-is-expected-to-surpass-tv-ad-spending
(iv) Posterscope, 2017
Kelvin Harrison
Chairman
2 April 2019
Chief Executive's Report
Many significant milestones were achieved in 2018, demonstrating traction and interest in Location Sciences' disruptive technology. This included signing our first significant multi-year contracts and launching Verify, a product with true global potential.
At the same time, we avoided legislative pitfalls which tripped up some of our competitors and successfully re-structured the business, reducing costs without reducing our ability to deliver on the ambitious targets set at the beginning of the year.
This was all achieved thanks to our highly dedicated and experienced team. With our smaller and more focused management team, 2018 was the year Location Sciences established itself as the pre-eminent location specialist in the UK and launched the world's first independent location verification product.
Insights Driving Success
Location Sciences officially launched in September 2017 and now has two core platform products.
The first is the UK Insights platform which draws upon Location Sciences' data lake of more than 40 billion data points, our world class big data infrastructure and the team's location data science expertise. This self-service client dashboard allows clients to query the data, in an aggregated and anonymised way, to gain insights relevant to them and their customers.
Clients are able to use the Insights dashboard for a variety of purposes, including:
1. Transportation: in 2018, Location Sciences designed features to enable a demand-led transportation system, giving the ability to improve the quality of public transport systems.
2. Attribution: this is the measurement and analysis of out-of-home and digital advertising on driving store visits.
3. Competitor analysis: clients can understand the competition through enhanced location insights. This helps them to plan marketing strategies in a more focused and meaningful way.
4. Location planning: the dashboard provides footfall analysis, allowing clients to plan the next location, whether that is a retail unit, bar or restaurant.
5. Audience analysis: clients can create audiences based on locations visited and obtain insights into the behaviour of these audiences.
6. Mergers and acquisitions: the platform can provide insights related to a wide range of corporate activity. For example, if two supermarkets are planning a merger, the M&A team can understand the overall level of customer overlap per region and per store.
The Launch of Verify
Verify is the world's first independent location verification product. This global cloud-based client dashboard is designed to tackle location ad-fraud and provide advertisers with true transparency on their location based advertising campaigns. Ad-fraud cost advertisers $19 billion in 2018 and is a growing issue which Verify has been developed to solve. The GBP3.36 million raised, in aggregate, by the Company in 2018 was, in large part, raised to develop and grow this product.
Seizing the Market Opportunity
According to the Location Based Marketing Association (LBMA) in 2017 "96 per cent. of marketers say they consider location data to be important". This same report also highlights the growing problem of ad-fraud, stating that "65% of marketers have also expressed concern around the quality of location data available in the market and it is widely perceived that up to 80% may be imprecise or fraudulent."
Industry recognition is building, making it the right time for Location Sciences to address this emerging issue. Until Verify was brought to market, there were no companies offering the independent verification of location signals. This first mover advantage is something we are proud of and are seeking to capitalise on for the benefit of our shareholders.
The Science Behind Location Verification
Verify uses machine learning and distribution analysis to identify location ad-fraud and provide advertisers with full transparency throughout ad campaign delivery.
The team's technologists implant a small amount of code into each ad impression served during a digital ad campaign. This code delivers key data to Location Sciences during the campaign. Location Sciences is then able to detect location ad-fraud and inaccuracies in ad campaign delivery.
The Verify platform shows advertisers the real-time performance of their campaign, allowing them to improve the effectiveness of their advertising, in real-time, as well as to cut waste from their digital advertising budgets.
Verify's pattern recognition technology detects a wide range of computer generated "fake" location signals the simplest include centroid's, linear patterns, gaussian and uniform distributions. There are many more sophisticated "fake" location patterns and the Verify platform is being developed to spot these ever more advanced fraudulent location signals.
There is high demand for premium location data to increase the effectiveness of advertising campaigns. However, the economics, and a lack of policing, has resulted in inaccurate and fraudulent location data being poured into the market by bad actors.
Verify does not simply detect fraud, it delivers full transparency of the quality of location signals to the advertiser.
Understanding Location Data
Broadly speaking, you can divide location sources into two categories: GPS data and IP data. GPS data is the latitude/longitude coordinate data from a GPS enabled mobile device. IP-based geo information is derived by taking the internet IP address and using it to infer a location. GPS and IP data have varying degrees of accuracy and different challenges.
Whilst IP targeting is a legitimate form of location advertising, it is inherently less accurate than GPS targeting. If you are an advertiser targeting at a store level - or anything that requires an accuracy under one kilometre - then IP targeting will introduce invalid traffic. An advertiser will be paying for this if they are unaware of what is happening.
The biggest problem with GPS data is that it is open to abuse. Good quality GPS data is only available where the user has consented to share their location with the publisher app. This makes it scarce from an advertising inventory point of view. Due to the value of good quality location data in advertising, location availability is highly valuable to publisher apps.
An additional challenge with GPS data, when it comes to programmatic bidstream data, is the level of data accuracy inherent in the signal. The table below shows the correlation between the number of decimal places received and the targeting accuracy possible. Whilst it is understood that Geo-to-IP location data typically has a signal accurate to one to two decimal places, there is a belief that GPS data is far more accurate. This can be true when the signal has more than four decimal places, however verified bidstream inventory at this level is scarce.
The table below from Maxmind shows how the distance accuracy changes with the number of decimal places present in the latitude/longitude.
Decimal Place Degrees Distance
0 1 111km 1 0.1 11.1km 2 0.01 1.11km 3 0.001 111m 4 0.0001 11.1m 5 0.00001 1.11m
As demonstrated here, location data is not straightforward, and the quality of the location signals is paramount to the advertiser to optimise the effectiveness of their ad campaign. This ensures advertising budgets are deployed wisely.
Tackling ad-fraud and inaccuracy
Verify is the world's first independent global location verification product. It provides advertisers, agencies and suppliers complete transparency on the quality and authenticity of location signals during a digital ad campaign. Results are shown in an intuitive and easy to understand format.
Verify shows the advertiser a point of interest ("POI") health score, combined with the number of ad impressions which were correctly targeted. In addition, Verify visualises a simple location health score. This is the number of impressions which were real and not fraudulent (i.e. computer generated).
The dashboard also maps impressions and POIs, allowing the advertiser to drill down per POI. This gives a clear picture on performance at a glance.
The accuracy of the location signals are displayed in a clear and informative manner, allowing the advertiser and media agency to analyse them in detail optimising the advertising campaign whilst minimising waste.
In summary, Location Sciences provides the tools for advertisers and agencies to succeed in an unregulated and un-monitored location data marketplace.
Becoming the Kitemark for Location Based Advertising
Location Sciences' key differentiators have set the foundations for it to seize a huge market opportunity in the next few years.
The fact that the Company is independent is extremely important as we strive to become the default choice for location-based ad campaign authentication. Being a highly talented relatively small team means that we can react to our customers' requirements rapidly and always deliver client-oriented outcomes.
We are also media-agnostic, meaning that we do not sell media or own any media assets. For our customers, this means there is no conflict of interest. Our only purpose is to provide verification services to our clients. We are uniquely positioned to be the kitemark in the location based advertising industry, bringing back trust, integrity and transparency to brands.
It is our intention to use Verify to make significant waves in the ad-tech market and deliver value to our shareholders.
All these things combined give me confidence in our future and I look forward to an exciting year ahead.
Mark Slade
Chief Executive
2 April 2019
Chief Financial Officer's Report
Introduction
2018 was a year of significant progress for the Company. Raising more than GBP3.1 million in new funds (after expenses) has considerably strengthened the Company's financial position while the launch of Verify, to address the $19 billion ad-fraud market, gives us global market potential.
The launch of Verify in the US in January 2019 has already resulted in commercial test requests from several top brands, agencies and location intelligence data providers. The key to our success will be turning these paid trials into "always-on" contracts, which would significantly increase our recurring revenues. Based on our experience in the UK, we expect trial participants to convert into "always-on" customers in a three to nine-month period. Consequently, the Board anticipates accelerating growth throughout 2019 as more and more Verify customers move to "always-on".
Financial Performance
In 2018, revenue increased to GBP751,853 (2017: GBP471,993) with location data and insights delivering GBP697,931 (2017: GBP144,813) and Verify GBP53,922 (2017: GBPNil), representing approximately five times increase in like-for-like revenues year-on-year.
The Group received GBP157,927 of grant income in 2018 (2017: GBP283,361) and the expectation is for grant income in 2019 to be reduced further with the Group's shift towards commercial sales.
Reflecting the rationalisation of the cost base during the year, administrative costs for continuing operations reduced by 56% to GBP2,160,468 (2017: GBP4,893,319).
The Group also experienced one-off exceptional restructuring costs during the year of GBP99,801, compared to one-off income relating to the write-off of debt in 2017 of GBP637,006.
The business delivered a loss before exceptional items, amortisation and depreciation of GBP1,178,576 (2017:
GBP3,743,438), an operating loss of GBP1,732,762(2017: GBP3,660,000) and a loss after taxation of GBP1,487,534 (2017:
GBP5,374,380).
Loss per share from continuing operations was significantly reduced to 0.98p (2017: 4.92p), a reduction of 80.1%.
Restructuring Impact
Bringing costs under control during the year led to some one-off exceptional costs of GBP99,801 which were predominantly related to staff changes made to refocus the business on sales and product delivery for our two core products.
No restructuring costs are expected in 2019, with the emphasis being on building momentum in the US for Verify and delivering sales growth.
Fundraisings
The Company completed two funding rounds in 2018, raising combined gross funds of approximately GBP3.36 million (GBP3.08 million net of expenses).
On 14 June 2018, Location Sciences completed a fundraising of GBP412,372 (before expenses) by way of an equity placing. On 26 November 2018, the Company completed a second equity placing raising approximately GBP2.76 million (before expenses) and a further GBP188,748 (before expenses) in an open offer which was very well supported by shareholders.
The funds are being used to commercialise Verify and, in particular, to penetrate the US market, where a significant investment is being made in business development.
Costs Under Control
At the beginning of the year, the task for the Board was to bring the cost base fully under control. This involved a comprehensive rationalisation of resources in every department and led to our headcount being reduced to 14 (2017: 23).
Excluding amortisation and depreciation and non-recurring items, administrative costs were reduced by 60.6% to GBP1,706,083 (2017: GBP4,333,073).
With the investment into Verify and, in particular, the spend on new business development in the US market, the Board expects administrative costs to increase during 2019. There will also be an increase in product development costs during the year to ensure the Group maintains its first mover advantage in the location verification market place.
The Board expects the investment in the US and in the Company's products to realise significant sales during the year, with meaningful cash flow generation and long-term contracts.
Statement of Financial Position
Following the cost base rationalisation and the funding rounds during the year, the Group's financial position has significantly improved.
As at 31 December 2018, the Group's net assets were GBP4,187,730 (2017: GBP2,551,731) of which GBP2,615,455 (2017: GBP1,140,239) were cash and cash equivalents.
Net current assets were GBP2,839,916 as at 31 December 2018, compared to net current liabilities of GBP1,155,979 as at 31 December 2017. The main impact on net current assets was the new funding secured by the Group.
Group borrowings were GBP152 (representing finance lease agreements) as at 31 December 2018 (2017: GBP4,756). The Group's improved financial position is a reflection of its new management team and strategy.
Enhancing Shareholder Value
The Board's aim is to deliver increasing and sustainable shareholder value. As such, we have focused the Group's resources into the areas which the Board believes will give the Group its greatest chance of success.
David Rae
Chief Financial Officer
2 April 2019
Consolidated Income Statement
2018 2017
Continuing Operations Note GBP GBP
Revenue 4 751,853 471,993
Cost of sales (382,273) (165,719)
--------------------- -------------------------
Gross profit 369,580 306,274
Administrative expenses (1,706,083) (4,333,073)
Other operating income 5 157,927 283,361
Other income - 6,678
--------------------- -------------------------
Operating loss before exceptional administative
expenses, amortisation and depreciation (1,178,576) (3,743,438)
Amortisation and depreciation (454,385) (560,246)
Administrative expenses - non-recurring
items 7 (99,801) 637,006
--------------------- -------------------------
Operating loss (1,732,762) (3,660,000)
Finance income 8 246 1,498
Finance costs 8 - (143,279)
--------------------- -------------------------
Loss before tax (1,732,516) (3,801,781)
Income tax receipt 12 244,982 280,113
Discontinued operations
Discontinued operations - (1,852,712)
--------------------- -------------------------
Loss for the year attributable to owners
of parent (1,487,534) (5,374,380)
--------------------- -------------------------
Earnings per share
Loss per share - basic and diluted (0.98p) (7.51p)
Loss per share from continued operations
- basic and diluted (0.98p) (4.92p)
Loss per share from discontinued operations
- basic and diluted 0.00p (2.59p)
2018 2017
Note GBP GBP
Loss for the year (1,487,534) (5,374,380)
Items that may be reclassified subsequently
to profit or loss
Foreign currency translation gains - 111,043
--------------------- -----------------------
Total comprehensive income for the
year attributable to owners of the
parent (1,487,534) (5,263,337)
--------------------- -----------------------
Consolidated Statement of Financial Position as at 31 December 2018
31 December 31 December
2018 2017
Note GBP GBP
Assets
Non-current assets
Intangible assets 14 1,332,915 1,379,902
Property, plant and equipment 15 14,899 16,437
------------ ------------
1,347,814 1,396,339
------------ ------------
Current assets
Trade and other receivables 17 359,264 233,387
Tax asset 12 235,723 269,428
Cash and cash equivalents 18 2,615,455 1,140,239
------------ ------------
3,210,442 1,643,054
------------ ------------
Current liabilities
Trade and other payables 19 (370,374) (482,906)
Loans and borrowings 20 (152) (4,169)
------------ ------------
(370,526) (487,075)
------------ ------------
Net current assets 2,839,916 1,155,979
------------ ------------
Total assets less current liabilities 4,187,730 2,552,318
------------ ------------
Non-current liabilities
Loans and borrowings 20 - (587)
Net assets 4,187,730 2,551,731
------------ ------------
Equity
Share capital 23 13,713,498 11,677,628
Share premium 18,168,965 15,189,919
Merger relief reserve 11,605,556 11,605,556
Capital reserve 209,791 209,791
Equity reserve - 1,934,797
Reverse acquisition reserve (9,225,108) (9,225,108)
Retained earnings (30,284,972) (28,840,852)
------------ ------------
Equity attributable to owners of the company 4,187,730 2,551,731
------------ ------------
Statement of Financial Position as at 31 December 2018
31 December 31 December
2018 2017
Note GBP GBP
Assets
Non-current assets
Investments 16 3,443,414 3,400,000
-------------- ------------
Current assets
Trade and other receivables 17 31,932 50,342
Cash and cash equivalents 18 - 594,388
-------------- ------------
31,932 644,730
-------------- ------------
Current liabilities
Trade and other payables 19 (44,507) (84,507)
-------------- ------------
Net current assets (12,575) 560,223
-------------- ------------
Total assets less current liabilities 3,430,839 3,960,223
-------------- ------------
Net assets 3,430,839 3,960,223
-------------- ------------
Equity
Share capital 23 13,713,498 11,677,628
Share premium 18,168,965 15,189,919
Equity reserve - 1,934,797
Merger relief reserve 11,605,556 11,605,556
Retained earnings (40,057,180) (36,447,677)
-------------- ------------
Total equity 3,430,839 3,960,223
-------------- ------------
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own statement of comprehensive income in these financial statements. The loss after tax for the parent Company for the year was GBP3,652,917 (2017: GBP8,987,313)
Consolidated Statement of Changes in Equity for the Year Ended 31 December 2018
Merger
Share Share relief Translation Capital Equity Other Retained
capital premium reserve reserve reserve reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP GBP GBP GBP
At 1 January
2017 10,475,177 10,991,445 11,605,556 (44,679) 209,791 44,160 (9,225,108) (23,620,582) 435,760
Loss for the
year - - - - - - - (5,374,380) (5,374,380)
Other
comprehensive
income - - - 111,043 - - - - 111,043
------------- ------------- ---------- ---------------- ------------ ----------- ----------- -------------- --------------
Total
comprehensive
income - - - 111,043 - - - (5,374,380) (5,263,337)
New share
capital
subscribed 1,202,451 4,198,474 - - - - - - 5,400,925
Translation
transfer - - - (66,364) - - - 66,364 -
Share-based
payments - - - - - - - 87,746 87,746
Equity element
of
convertible
loan - - - - - 1,934,797 - - 1,934,797
Equity
transfer - - - - - (44,160) - - (44,160)
------------- ------------- ---------- ---------------- ------------ ----------- ----------- -------------- --------------
At 31 December
2017 11,677,628 15,189,919 11,605,556 - 209,791 1,934,797 (9,225,108) (28,840,852) 2,551,731
------------- ------------- ---------- ---------------- ------------ ----------- ----------- -------------- --------------
Merger
Share Share relief Translation Capital Equity Other Retained Total
capital premium reserve Reserve reserve reserve reserve earnings equity
GBP GBP GBP GBP GBP GBP GBP GBP GBP
At 1 January
2018 11,677,628 15,189,919 11,605,556 - 209,791 1,934,797 (9,225,108) (28,840,852) 2,551,731
Loss for the
year - - - - - - - (1,487,534) (1,487,534)
------------- ------------- ---------- ----------- ----------- -------------- ---------------
Total
comprehensive
income - - - - - - - (1,487,534) (1,487,534)
New share
capital
subscribed 2,035,870 2,979,046 - - - (1,934,797) - - 3,080,119
Share-based
payments - - - - - - - 43,414 43,414
------------- ------------- ---------- ----------- ----------- -------------- ---------------
At 31 December
2018 13,713,498 18,168,965 11,605,556 - 209,791 - (9,225,108) (30,284,972) 4,187,730
------------- ------------- ---------- ----------- ----------- -------------- ---------------
Statement of Changes in Equity for the Year Ended 31 December 2018
Share Merger Retained
Share premium relief Equity earnings Total
capital reserve reserve
GBP GBP GBP GBP GBP GBP
At 1 January
2017 10,475,177 10,991,445 11,605,556 44,160 (27,548,110) 5,568,228
Loss for the
year - - - - (8,987,313) (8,987,313)
------------- --------------- ------------- ------------- ----------------- -----------
Total
comprehensive
income - - - - (8,987,313) (8,987,313)
New share
capital
subscribed 1,202,451 4,198,474 - - - 5,400,925
Share-based
payments - - - - 87,746 87,746
Equity
transfer - - - (44,160) - (44,160)
Equity element
of
convertible
loan - - - 1,934,797 - 1,934,797
------------- --------------- ------------- ------------- ----------------- -----------
At 31 December
2017 11,677,628 15,189,919 11,605,556 1,934,797 (36,447,677) 3,960,223
------------- --------------- ------------- ------------- ----------------- -----------
Share Merger Retained
Share premium relief Equity earnings Total
capital reserve reserve
GBP GBP GBP GBP GBP GBP
At 1 January
2018 11,677,628 15,189,919 11,605,556 1,934,797 (36,447,677) 3,960,223
Loss for the
year - - - - (3,652,917) (3,652,917)
------------- --------------- ------------- ------------- ----------------- -----------
Total
comprehensive
income - - - - (3,652,917) (3,652,917)
New share
capital
subscribed 2,035,870 2,979,046 - (1,934,797) - 3,080,119
Increase in
capital
contribution
of investment - - - - 43,414 43,414
------------- --------------- ------------- ------------- ----------------- -----------
At 31 December
2018 13,713,498 18,168,965 11,605,556 - (40,057,180) 3,430,839
------------- --------------- ------------- ------------- ----------------- -----------
Consolidated Statement of Cash Flows 2018 2017
for the Year Ended 31 December 2018 Note GBP GBP
Cash flows from operating activities
Loss for the year
Adjustments to cash flows from non-cash
items (1,487,534) (5,374,380)
Depreciation and amortisation 454,385 1,113,245
Impairment of intangible assets - 350,431
Loss from disposals of assets - 1,388,196
Foreign exchange loss 7,739 8,065
Finance income 8 (246) (1,498)
Finance costs 8 - 143,279
Share based payment transactions 43,414 87,746
Income tax expense 12 (244,982) (280,113)
---------------- -------------
Working capital adjustments (1,227,224) (2,565,029)
(Increase)/decrease in trade and
other receivables 17 (133,615) 842,068
Decrease in trade and other payables 19 (36,217) (1,826,315)
---------------- -------------
Cash generated from operations (1,397,056) (3,549,276)
Income taxes received 12 202,372 456,260
---------------- -------------
Net cash flow from operating activities (1,194,684) (3,093,016)
---------------- -------------
Cash flows from investing activities
Interest received 8 246 1,498
Acquisitions of property plant and
equipment (12,421) (6,316)
Acquisition of intangible assets 14 (393,440) (687,639)
Proceeds from disposal of subsidiary - 773,106
---------------- -------------
Net cash flows from investing activities (405,615) 80,649
---------------- -------------
Cash flows from financing activities
Interest paid 8 - (143,279)
Proceeds from issue of ordinary shares,
net of issue costs 3,080,119 5,400,925
Repayment of bank borrowing - (2,500,000)
Convertible loan note redeemed - (738,775)
Payments to finance lease creditors (4,604) (4,072)
---------------- -------------
Net cash flows from financing activities 3,075,515 2,014,799
---------------- -------------
Net increase/(decrease) in cash and
cash equivalents 1,475,216 (997,568)
Cash and cash equivalents at 1 January 1,140,239 2,026,764
Effect of exchange rate fluctuations
on cash held - 111,043
---------------- -------------
Cash and cash equivalents at 31 December 2,615,455 1,140,239
---------------- -------------
2018 2017
Note GBP GBP
Net Cash Flows
Net cash flow from continuing activities 1,475,216 (1,052,817)
---------------- -----------
Net cash flow from discontinued activities - 55,249
---------------- -----------
Non-cash financing activities:
Discount on share options - 190,203
Loans written-off - 482,935
Share warrants granted on release of
bank loan - 1,934,797
Share warrants exercised in year 1,934,797 -
Statement of Cash Flows for the 2018 2017
Year Ended 31 December 2018 Note GBP GBP
Cash flows from operating activities
Loss for the year
Adjustments to cash flows from
non-cash items (3,652,917) (8,987,313)
Loss on disposal of assets - 855,081
Impairment to investments - 2,321,236
Finance income (42) (1,495)
Finance costs - 132,272
Share based payment transactions - 15,446
----------- -----------
Working capital adjustments (3,652,959) (5,664,773)
Decrease in trade and other receivables 17 18,410 1,860,024
Decrease in trade and other payables 19 (40,000) (8,763)
----------- -----------
Net cash flow from operating activities (3,674,549) (3,813,512)
----------- -----------
Cash flows from investing activities
Interest received 42 1,495
Proceeds from sale of investments - 758,586
----------- -----------
Net cash flows from investing
activities 42 760,081
----------- -----------
Cash flows from financing activities
Interest paid - (132,272)
Proceeds from issue of ordinary
shares 1,449,567 1,202,451
Share premium raised 1,630,552 4,198,474
Repayment of bank borrowing - (2,500,000)
Convertible loan note redeemed - (738,775)
----------- -----------
Net cash flows from financing
activities 3,080,119 2,029,878
----------- -----------
Net decrease in cash and cash
equivalents (594,388) (1,023,553)
Cash and cash equivalents at 1
January 594,388 1,617,941
----------- -----------
Cash and cash equivalents at 31
December - 594,388
----------- -----------
Notes to the Financial Statements for the Year Ended 31 December 2018
1 General information
The company is a public company limited by share capital, incorporated and domiciled in England. The address of its registered office is:
20 Eastbourne Terrace Paddington
London W2 6LG
The company's ordinary shares are traded on the Alternative Investment Market (AIM) of the London Stock Exchange.
Principal activity
Location Sciences has two distinct products. Firstly, its UK Data and Insights platform, which gives customers access to its data lake of over 36 billion location data points. This helps customers in a variety of ways, for example, competitor and footfall analysis, attribution services for advertisers, and even the ability to enhance the sustainability of transport systems. Secondly, Location Sciences has developed a global platform called Verify, which brings transparency to the location based mobile advertising market. Verify allows marketeers to authenticate where their adverts have been viewed and uses proprietary technology to detect location ad-fraud, which would otherwise go unnoticed.
2 Accounting policies Statement of compliance
The group financial statements have been prepared in accordance with International Financial Reporting Standards and its interpretations adopted by the EU ("adopted IFRS's") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared under the historical cost convention basis as discussed in the accounting policies below.
Summary of significant accounting policies and key accounting estimates
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Going concern
The directors have taken a view of the Group as a whole.
The Group made significant strides forward during the year, including nearly quintupling Location Data and Insights sales and more than halving administrative costs compared to 2017. The launch of Verify was also a significant milestone for the Group, opening up the global ad-fraud verification market. However, the Group continued to operate with a trading loss during the year and the same is expected throughout 2019. The Group raised an additional GBP3.36 million in new investment during the year, which will be utilised for the growth of Verify and for working capital purposes. The Group also remains debt free.
Notwithstanding the positive progress in 2018, there remains a sensitivity to the timing and forecast pipeline of sales. Consequently, near term cash resources will continue to be closely monitored and controlled due to the associated working capital requirements of the Group in delivering its growing order pipeline and winning new business. To deliver its growth plans, the Board may also consider raising additional capital in 2019.
Based on the current status, after making enquiries and considering the progress of the Group during 2018, the directors have a reasonable expectation that the Group will be able to execute its plans in the medium term such that the Group will have adequate resources to continue in operational existence for the foreseeable future. This provides the directors assurance on the Group's ability to continue as a going concern, and therefore adopt the going concern basis of accounting in preparing the annual financial statements.
Basis of consolidation
The group financial statements consolidate the financial statements of the company and its subsidiary undertakings drawn up to 31 December 2018.
A subsidiary is an entity controlled by the company. Control is achieved where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the group.
The purchase method of accounting is used to account for business combinations that result in the acquisition of subsidiaries by the group. The cost of a business combination is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the business combination. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Any excess of the cost of the business combination over the acquirer's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised is recorded as goodwill. If the cost of acquisition is less than fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the Income Statement. Acquisition costs are expensed as incurred.
Inter-company transactions, balances and unrealised gains on transactions between the company and its subsidiaries, which are related parties, are eliminated in full.
Intra-group losses are also eliminated but may indicate an impairment that requires recognition in the consolidated financial statements.
Changes in accounting policy
For the purpose of the preparation of these consolidated financial statements, the Group has applied all standards and interpretations that are effective for accounting periods beginning on or after 1 January 2018. The adoption of new standards and interpretations in the year has not had a material impact on The Group's financial statements.
IFRS 15
The Group has adopted IFRS 15 retrospectively in its consolidated financial statements for the year ended 31 December 2018. IFRS 15 replaces all existing revenue requirements in IFRS and sets out principles for recognising revenue that must be applied using a 5-step model. Revenue should only be recognised when (or as) control of goods or services is passed to the customer, when distinct 'performance obligations' are met, at the amount to which the entity expects to be entitled. The Group has completed its assessment of IFRS 15 and has not identified any material differences between the Group's current revenue recognition policy and the requirements of IFRS 15.
New standards, interpretations and amendments not yet effective
No new standards, amendments or interpretations to existing standards that have been published and that are mandatory for the Group's accounting periods beginning on or after 1 January 2019, or later periods, have been adopted early. The following standards are not yet applied:
IFRS 9 Financial Instruments (effective 1 January 2019)
IFRS 16 Leasing (effective 1 January 2019)
IAS 12 Income Taxes (effective 1 January 2019)
Other than IFRS 16 Leasing, none of the other standards, interpretations and amendments which are effective for periods beginning after 1 January 2019 and which have not been adopted early, are expected to have a material effect on the financial statements.
The adoption of IFRS 16 Leasing will require the Group to recognise in its Statement of Financial position the asset and financial commitment associated with properties under operating leases. As at 31 December 2018 this would increase the asset and the liabilities of the Group by GBP187,635, with GBPnil overall effect on the net liabilities of the Group.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker for the use in strategic decision making and monitoring of performance. The Group considers the chief operating decision maker to be the Executive Board.
Revenue recognition
Revenue represents the invoice value of services and software licences provided to external customers in the period, stated exclusive of value added tax.
Consideration received from customers in respect of services is only recorded as revenue to the extent that the Group has performed its contractual obligations in respect of that consideration. Management assess the performance of the Group's contractual obligations against project milestones and work performed to date.
Revenue from software licences sold in conjunction with services is invoiced separately from those services and recognised over the period of the license.
Revenue from software licences for the use of the technology platform is recognised over the period of the license.
Revenue from software development is recognised to the extent that the Group has obtained the right to consideration through its performance.
The IFRS 15 Practical expedient has been applied whereby the promised amount of consideration has not been amended for the effects of a significant financing component as at the contract inception there are no contracts where the period between transfers of promised goods or services and customer payment is expected to exceed one year.
Grants
Grants received on capital expenditure are initially recognised within accrued income on the Group's Statement of Financial position and are subsequently recognised in the Income Statement on a systematic basis over the useful life of the related capital expenditure.
Grants for revenue expenditure are presented as part of the Income Statement in the periods in which the expenditure is recognised.
Foreign currency transactions and balances
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in sterling, which is the Parent's presentational currency.
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date.
The results and financial position of all Group entities that have a functional currency different from the presentational currency of the Group are translated into sterling follows:
-- Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;
-- Income and expenses for each income statement are translated at the average exchange rate for the month where these approximate the exchange rate at the date of the transaction; and
-- All resulting exchange differences are recognised within other comprehensive income and taken to the foreign exchange reserve.
Tax
The tax expense for the period comprises current tax. Tax is recognised in profit or loss, except that a change attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the group operates and generates taxable income.
Deferred tax is provided for using the liability method on temporary differences at the balance sheet date between tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised in full for all temporary differences other than those relating to goodwill on investments in subsidiaries. Deferred tax assets are recognised for all deductible temporary differences carried forward of unused tax credits and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carry-forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is assessed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it is probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised, or the liability settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.
The tax currently receivable is based on the taxable loss for the period and relates to R&D tax credits. Taxable loss differs from net loss as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductable in other periods and it further excludes items that are never taxable or deductible. This is calculated using rates and laws enacted or substantively enacted at the reporting date
Financial instruments
The Company recognises financial instruments when it becomes a party to the contractual arrangements of the instrument. Financial instruments are de-recognised when they are discharged or when the contractual terms expire. The Company's accounting policies in respect of financial instruments transactions are explained below:
Financial assets
The Company classifies all of its financial assets as loans and receivables. Loans and receivables 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 (e.g. trade receivables), but also incorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterpart or default or significant delay in payment) that the company will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the Income Statement. On confirmation that the trade receivable will not be collected, the gross carrying value of the asset is written off against the associated provision.
Financial liabilities
The Company classifies all of its financial liabilities as liabilities at amortised cost. Liabilities are classified as
current liabilities when the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
Intangible assets Goodwill
Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not subject to amortisation but is tested for impairment annually. Goodwill is held in the currency of the acquired entity and revalued to the closing rate at each reporting period date.
For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Goodwill is allocated to those cash-generating units that are expected to benefit from the synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows. the recoverable amount is tested annually or when events or changes in circumstances indicate that it may be impaired. The recoverable amount is higher of the fair value less costs and the value in use in the Group. An impairment loss is recognised to the extent that the carrying value exceeds the recoverable amount. In determining a value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the cash generating unit that have not already been included in the estimate of future cash flows.
Internally developed software
Intangible assets are predominantly internally generated software development costs for Location Sciences technologies. Development costs are capitalised when certain criteria are met. The product must be technically feasible, sale is intended, a market exists, expenditure can be measured reliably, and sufficient resources are available to complete the project. The extent of capitalisation is limited to the amount, which taken together with further related costs, will be recovered from the future economic benfits related to the asset. When the Board is sufficiently confident that all of the criteria for capitalisation are met, development costs are amortised over the expected useful life, currently 5 years, from the date the asset is available for use. Development costs that have been capitalised, but where amortisation has not yet commenced are reviewed annually for impairment. If no intangible asset can be recognised based on the above then development costs are recognised within administrative expenses in the Consolidated Income Statement.
Other intangibles
Acquired trademarks and intellectual property rights are recognised as an asset at cost, or deemed cost, less accumulated amortisation and any recognised impairment loss.
Amortisation
Amortisation is provided on intangible assets so as to write off the cost, less any estimated residual value, over their expected useful economic life as follows:
Asset class Amortisation method and rate
Development costs 20% straight line
Trademarks and intellectual property rights 10% straight line
Amortisation is recognised within administrative expenses and disclosed separately on the consolidated Income Statement.
Property, plant and equipment
Property, plant and equipment is stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
The cost of property, plant and equipment includes directly attributable incremental costs incurred in their acquisition and installation.
Depreciation
Depreciation is charged so as to write off the cost of assets, other than land and properties under construction over their estimated useful lives, as follows:
Asset class Depreciation method and rate
Computer equipment 33.33% straight line
Office equipment 33.33% straight line
Depreciation is recognised within administrative expenses and disclosed separately on the Consolidated Income Statement
Impairment of non-financial assets
At each Statement of Financial Position date, the Group performs an impairment review in respect of goodwill and any intangible assets not yet ready for use and reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered any impairment. If any such indication exists, the recoverable amount of the asset (being the higher of fair value less costs to sell and value in use) is estimated in order to determine the extent of any impairment. Any impairment loss is recognised as an expense in the Income Statement in the period in which it was identified.
Investments
Investments are carried at cost, less any impairment in value.
The Company grants options over its equity investments to the employees of its subsidiaries. The carrying value of the investment in this subsidiary is increased by an amount equal to the value of the share-based payment charge attributable to the option holder in the subsidiary.
Dividends on equity securities are recognised in income when receivable.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value, and have a maturity of less than 3 months from the date of acquisition. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash in hand and bank deposits.
Trade receivables
Trade receivables are amounts due from customers for licences sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at the transaction price. They are subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for the impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at the transaction price and subsequently measured at amortised cost using the effective interest method.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.
Assets held under finance leases are recognised as non-current assets of the group at the lower of their fair value at the date of commencement of the lease and at the present value of the minimum lease payments. These assets are depreciated on a straight-line basis over the shorter of the useful life of the asset and the lease term. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance costs in the income statement and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability
Leases in which a significant proportion of the risks and rewards are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Income Statement on a straight-line basis over the period of the lease.
Equity
Equity comprises:
Share capital - the nominal value of ordinary share is classified as equity.
Share premium - represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.
Merger relief reserve - the difference between cost or fair value and the nominal value of shares issued on the exchange of shares with Location Sciences AI Limited and on acquisition of subsidiaries where shares are issued as part of the consideration.
Translation reserve - the foreign exchange difference arising on consolidation. Capital reserve - represents a capital contribution to the Company.
Equity reserve - represents the fair value of warrants over shares issued to Barclays in return for debt waiver in 2017. During the year the equity reserve has been transferred to share premium upon exercise of the warrants.
Reverse acquisition reserve - the balance of the amount recognised as issued equity instruments arising on restatement of Location Sciences AI Limited to reflect the parent equity structure, further to the reverse acquisition basis of accounting adopted in 2013 on the share exchange by Location Sciences Group Plc for 100% of the shares of Location Sciences AI Limited.
Retained earnings - includes all current and prior period retained profits/(losses).
Equity instuments issued by the Group are recorded as the proceeds received, net of direct issue costs.
Share capital
Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis.
Defined contribution pension obligation
A defined contribution plan is a pension plan under which fixed contributions are paid into a separate entity and has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
For defined contribution plans contributions are paid publicly or privately administered pension insurance plans on a mandatory or contractual basis. The contributions are recognised as employee benefit expense when they are due. If contribution payments exceed the contribution due for service, the excess is recognised as an asset.
Share based payments
The Group operates an equity-settled, share-based compensation plan. Equity-settled share-based payements are measured at fair value at date of grant. The fair value determined at the grant date of the equity -settled share based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured by use of the Black Scholes or a binomial options valuation model as appropriate depending on the terms of the options.
3 Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial information in conformity with IFRS requires the directors to make critical accounting estimates and judgements that affect the application of policies and reported amounts of assets and liabilities, income and expenses. An assessment of the impact of these estimates and judgesments on the financial staements is set out below,
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results could differ from these estimates and any subsequent changes are accounted for with an effect on income at the time such updated information is available.
Fair values for employee share schemes
The establishment of fair values in respect of employee services received in exchange for share options require the exercise of judgement and estimation in respect of the life of the option, the expected dividend yield and, in particular, the volatility of the underlying shares. A calculated value for the latter may not accurately reflect the future share price movements given the Group's stage of development.
Assessing whether development costs meet the criteria for capitalisation
The point at which development costs meet the criteria for capitalisation is critically dependent on management's judgement of the point at which technical feasibility is demonstrable. Commercial success of the development projects remains uncertain at the time of recognition and therefore impairment reviews are undertaken based on current estimates of future revenues streams. This assessment has resulted in the impairment of GBPnil (2017: GBP359,431) of development costs, previously capitalised for which the underlying projects are no longer being pursued.
Classification and valuation of financial instruments
The Group previously issued financial instruments including conversion features and warrants. The valuation of these financial instruments, including Level 3 fair values where there are no observable market inputs, are performed in consultation with third party valuation specialists, with the overall aim of maximising the use of market based information.
Impairment of goodwill and other intangible assets
There are a number of assumptions management have considered in performing impairment reviews of goodwill and intangible assets, as determining whether such assets are impaired requires an estimation of the value in use of the cash generating units to which goodwill and other intangible assets have been allocated. The value in use calcualtion requires the directors to estimate the future cash flows expected to arise from the the cash generating unit and a suitable discount rate in order to calculate the present value. An impairment of goodwill of GBPnil has been recognised in the year.
Assessing whether revenue meets the criteria for recognition
Contracts can include both the sale of licences and provision of services including integration and development. Revenue is recognised based on the analysis of individual contracts and the point at which significant risks and reward of ownership transfer is dependent on the contractual terms. In respect of a licence, this would usually be on delivery of the software. Software development and other consulting services generally recognised on the basis of work done but where issues of client acceptance are identified, then revenue is deferred until issues are resolved.
4 Segmental analysis
Operating segments are based on internal reports about components of the Group, which are regularly reviewed and used by the Board for strategic decision making, to allocate resources across segments and to assess performance by segment.
During 2018, the Group maintained a holding company structure with one operating subsidiary. For financial reporting, Location Sciences segments the Group based on its two distinct products. Firstly, its UK Data and Insights platform, which gives customers access to its data lake of over 36 billion location data points. This helps customers in a variety of ways, for example, competitor and footfall analysis, attribution services for advertisers, and even the ability to enhance the sustainability of transport systems. Secondly, Location Sciences has developed a global platform called Verify, which brings transparency to the location based mobile advertising market. Verify allows marketeers to authenticate where their adverts have been viewed and uses proprietary technology to detect location ad-fraud, which would otherwise go unnoticed.
Note, the location aspects of the proximity marketing product have been absorbed into the Location Sciences UK Data and Insights platform, and as such, proximity marketing is no longer reported on as an individual segment.
It should be noted that a segmental analysis of the Balance Sheet is not part of routine management reporting and consequently no segmental analysis of assets is shown here.
The analysis of the Group's revenue from contracts with customers for the year from continuing operations is as follows:
2018 2017
GBP GBP
Verify 53,922 -
Location Data and Insights 697,931 144,813
Proximity Marketing - 327,180
-------- ---------
751,853 471,993
-------- ---------
An analysis of the Group's revenue by geographical
segment is as follows:
2018 2017
GBP GBP
UK 481,530 34,077
Europe 20,166 -
Rest of World 250,157 437,916
-------- --------
751,853 471,993
-------- --------
During the year there was revenue from individual customers that represented more than 10% of revenue totalling GBP303,793 (2017: GBP330,372).
Average payments terms are set out in Note 17. There are no significant financing components, nor variable consideration elements in customers' contracts.
An analysis of EBITDA is as follows: 2018 2017
GBP GBP
Proximity Marketing - (2,932,139)
Location Data and Insights (1,186,464) (1,297,795)
Verify (91,666) -
----------- -----------
Total EBITDA for continuing operations (1,278,130) (4,229,934)
Total EBITDA for discontinued operations - (464,516)
----------- -----------
Total EBITDA (1,278,130) (4,694,450)
----------- -----------
An analysis of loss before tax is as follows:
2018 2017
GBP GBP
Proximity Marketing - (2,512,966)
Location Data and Insights (1,608,262) (1,288,815)
Verify (124,254) -
----------- -----------
Total loss before tax for continuing operations (1,732,516) (3,801,781)
Total loss before tax for discontinued operations - (1,852,712)
----------- -----------
Total loss before tax (1,732,516) (5,654,493)
----------- -----------
The impairment in 2017 of GBP350,431 is associated with the sale of the Digital Payments segment within discontinued operations.
5 Other operating income
The analysis of the group's other operating income for the year is as follows:
2018 2017
GBP GBP
Government grants 157,927 283,361
Other operating income - 6,678
-------- -------
157,927 290,039
-------- -------
6 Loss before taxation
Arrived at after charging/(crediting)
2018 2017
GBP GBP
Depreciation expense 13,959 34,449
Amortisation expense 440,426 1,078,797
Impairment loss - 350,431
Research and development expenditure 313,375 65,127
Government grants (157,927) (283,361)
Operating lease rentals 79,702 96,027
Share based payments 43,414 87,746
Net foreign exchange losses 7,739 8,065
Auditors remuneration
- Company audit 15,000 15,000
- Subsidiary audit 10,000 15,000
Non-audit services:
- Compliance services 7,500 -
- Other non-audit services 11,000 -
--------- ----------
7 Exceptional items
2018 2017
GBP GBP
Irrecoverable VAT 10,467 -
Restructuring costs 89,334 36,132
Discount on settlement of bank loan - (190,203)
Discount on settlement of convertible loan - (482,935)
99,801 (637,006)
--------- ----------
8 Finance income and costs
Finance income
2018 2017
GBP GBP
Interest income on bank deposits
246 1,498
Finance costs
Interest on bank overdrafts and borrowings
- (11,069)
Interest on obligations under finance leases and hire purchase contracts
- (500)
Finance cost on convertible loan note
- (131,710)
Total finance
- (143,279)
Net finance income/(costs) 246 (141,781)
9 Staff costs
The aggregate payroll costs (including directors' remuneration) were as follows:
2018 2017
GBP GBP
Wages and salaries
1,162,981 2,657,101
Social security costs
132,378 303,854
Pension costs, defined contribution scheme
16,119 14,801
Share-based payment expenses
43,414 87,746
1,354,892 3,063,502
Included within the above totals, GBPnil (2017: GBP1,198,869) relates to the discontinued operation.
The average number of persons employed by the group (including directors) during the year, analysed by category was as follows:
2018 2017
No. No.
Finance and Operations 4 8
Research and development 8 29
Commercial and client services 2 10
---- ----
14 47
---- ----
Included within the above totals, 0 (2017: 10) research and development staff relate to the discontinued operation.
10 Key management compensation and directors remuneration
Details of aggregate key management emoluments for
the year are as follows:
2018 2017
GBP GBP
Salaries and other short-term employee benefits 448,043 734,761
Pension costs 2,303 773
Expense of share-based payments 15,987 17,134
Redundancy payment 27,625 -
-------
493,958 752,668
-------
The directors are of the opinion that the key management of the Group comprises the executive and the non-executive directors of Location Sciences Group Plc. These persons have authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly.
11 Auditors' remuneration
2018 2017
GBP GBP
Audit of the financial statements of subsidiaries
of the company pursuant to legislation 7,500 15,000
12 Income tax
Tax charged/(credited) in the income statement
2018 2017
GBP GBP
Current taxation
UK R&D tax credit (235,723) (193,113)
UK R&D tax credit adjustment to prior periods (9,259) -
---------- ---------
(244,982) (193,113)
Deferred taxation
Arising from origination and reversal of
temporary differences - (87,000)
---------- ---------
Tax receipt in the income statement (244,982) (280,113)
---------- ---------
The tax on profit before tax for the year is higher than the standard rate of corporation tax in the UK (2017 - higher than the standard rate of corporation tax in the UK) of 19% (2017 - 19.25%).
The differences are reconciled below:
2018 2017
GBP GBP
Loss before tax (1,732,516) (3,801,781)
------------ -----------
Corporation tax at standard rate (329,178) (731,843)
Decrease in current tax from adjustment
for prior periods (9,259) -
Effect of expenses not deductible 41,039 215,069
Unrecognised deferrred tax asset 209,940 346,477
Surrender of tax losses for R&D tax credit 73,155 66,247
Other differences (56,096) 62,765
Additional deduction for Research development
expenditure (174,583) (151,828)
------------ -----------
Total tax credit (244,982) (193,113)
------------ -----------
Subject to the UK tax authority's agreement, the Group has UK tax losses of approximately GBP18,750,000 (2017:
GBP19,200,000) available to carry forward and offset against future taxable profits arising from the same trade. The Group has a potential deferred tax asset of GBP3,190,000 (2017: GBP3,260,000) which will not be recognised until it is regarded as more likely than not that there will be sufficient taxable profits from which the tax losses can be deducted. In addition, no deferred tax asset is recognised in respect of future tax deductions on exercise of share options.
13 Loss per share
The calculation of loss per share is based on the loss of GBP1,487,533 (2017: GBP5,374,380) and on the number of shares in issue, being the weighted average number of equity shares in issue during the period of 151,100,816 1p ordinary shares (2017: 7,157,915,871 0.01p ordinary shares, 71,579,159 1p shares after consolidation). A separate adjusted loss per share calculation has been prepared related to the loss before exceptional items.
Note prior year loss per share is reported assuming the share consolidation that took place during the year to facilitate comparability.
2018 2017
GBP GBP
(1,487,533) (5,374,380)
Loss for year Add back:
Exceptional items 99,801 (637,006)
------------------------ --------------------
Adjusted loss (1,387,732) (6,011,386)
------------------------ --------------------
Loss per share - basic and diluted Adjusted (0.98p) (7.51p)
loss per share - basic and diluted
Loss per share from continued operations (0.92p) (8.40p)
- basic and diluted
Loss per share from discontinued operations (0.98p) (4.92p)
- basic and diluted
- (2.59p)
Dilutive instruments
Instruments that could potentially dilute basic loss per share in the future but are not included in the calculation of diluted loss per share because they are anti-dilutive, related to share options in the period. See note 24 for further details of the share options.
14 Intangible assets
Group
Goodwill Trademarks Customer Internally Intellectual Total
GBP GBP relationships generated property GBP
GBP software rightsGBP
develop.
costsGBP
Cost or valuation
At 1 January 2017 659,289 5,102 1,000,000 5,560,590 6,001 7,230,982
Additions - - - 687,639 - 687,639
Disposals (659,289) - (1,000,000) (4,011,399) - (5,670,688)
----------- ---------- --------------- ------------- ------------ -------------
At 31 December 2017 - 5,102 - 2,236,830 6,001 2,247,933
----------- ---------- --------------- ------------- ------------ -------------
At 1 January 2018 - 5,102 - 2,236,830 6,001 2,247,933
Additions - - - 393,440 - 393,440
Disposals - (5,102) - (137,524) (6,001) (148,627)
----------- ---------- --------------- ------------- ------------ -------------
At 31 December 2018 - - - 2,492,746 - 2,492,746
----------- ---------- --------------- ------------- ------------ -------------
Amortisation
At 1 January 2017 399,394 2,384 500,000 1,573,996 3,600 2,479,374
Amortisation charge - 603 200,000 877,544 - 1,078,147
Amortisation
eliminated
on disposals (399,394) - (700,000) (1,941,177) 650 (3,039,921)
Impairment - - - 350,431 - 350,431
----------- ---------- --------------- ------------- ------------ -------------
At 31 December 2017 - 2,987 - 860,794 4,250 868,031
----------- ---------- --------------- ------------- ------------ -------------
At 1 January 2018 - 2,987 - 860,794 4,250 868,031
Amortisation charge - 2,115 - 436,561 1,751 440,427
Amortisation
eliminated
on disposals - (5,102) - (137,524) (6,001) (148,627)
----------- ---------- --------------- ------------- ------------ -------------
At 31 December 2018 - - - 1,159,831 - 1,159,831
----------- ---------- --------------- ------------- ------------ -------------
Carrying amount
At 31 December 2018 - - - 1,332,915 - 1,332,915
----------- ---------- --------------- ------------- ------------ -------------
At 31 December 2017 - 2,115 - 1,376,036 1,751 1,379,902
----------- ---------- --------------- ------------- ------------ -------------
At 1 January 2017 259,895 2,718 500,000 3,986,594 2,401 4,751,608
----------- ---------- --------------- ------------- ------------ -------------
Internal development represents the cost incurred in developing the Group's DaaS platform and software development, split between the two distinct products UK Data and Insights and Verify, with net book value of
GBP1,146,550 and GBP186,365 respectively. These internal costs have been capitalised in accordance with the Group's accounting policies where all the conditions for capitalisation have been met.
The Verify and Location Data and Insights intangible assets have on average a remaining amortisation period of 5 and 3 years respectively.
Impairment of research and development is considered within the conditions of capitalisation. Amortisation charges are included in administrative expenses, disclosed separately on the Consolidated Income Statement.
Other intangible assets represent amounts paid to third parties for acquiring trademarks and intellectual property rights.
In the prior year the directors identified a number of R&D projects related to the Digital Payments business (reported within Proximity Marketing segmental analysis) sitting within Location Sciences AI Limited that were not transferred as part of the disposal. Due to the fact that the directors see the likelihood of future revenues attributable to these products as low, a decision was made to fully impair the value of these products.
The amount of impairment loss included in profit and loss is GBPNil (2017 - GBP350,341)
15 Property, plant and equipment
Group
Computer Office Equipment
Equipment Total
GBP GBP GBP
Cost or valuation
At 1 January 2017 178,617 83,951 262,568
Additions 6,316 - 6,316
Disposals (5,944) (4,435) (10,379)
------------------ ------------------------------- ---------
At 31 December 2017 178,989 79,516 258,505
------------------ ------------------------------- ---------
At 1 January 2018 178,989 79,516 258,505
Additions 12,421 - 12,421
Disposals (157,734) (79,516) (237,250)
------------------ ------------------------------- ---------
At 31 December 2018 33,676 - 33,676
------------------ ------------------------------- ---------
Depreciation
At 1 January 2017 156,515 61,128 217,643
Charge for year 11,775 22,674 34,449
Eliminated on disposal (4,080) (5,944) (10,024)
------------------ ------------------------------- ---------
At 31 December 2017 164,210 77,858 242,068
------------------ ------------------------------- ---------
At 1 January 2018 164,210 77,858 242,068
Charge for the year 12,301 1,658 13,959
Eliminated on disposal (157,734) (79,516) (237,250)
------------------ ------------------------------- ---------
At 31 December 2018 18,777 - 18,777
------------------ ------------------------------- ---------
Carrying amount
At 31 December 2018 14,899 - 14,899
------------------ ------------------------------- ---------
At 31 December 2017 14,779 1,658 16,437
------------------ ------------------------------- ---------
At 1 January 2017 22,102 22,823 44,925
------------------ ------------------------------- ---------
Assets held under finance leases and hire purchase contracts
The net carrying amount of property, plant and equipment includes the following amounts in respect of assets held under finance leases and hire purchase contracts:
31 December 31 December
2018 2017
GBP GBP
1,265 5,524
16 Investments
Group subsidiaries
Details of the group subsidiaries as at 31 December 2018 are as follows:
Proportion of ownership interest and voting rights held
2018 2017
Name of subsidiary
Location Sciences AI Limited* 100% 100%
Principal activity Location Data and Insights and Verify
Registered office Same registered office address as group
* indicates direct investment of the company
Summary of the company investments
31 December 31 December
2018 2017
GBP GBP
Investments in subsidiaries 3,443,414 3,400,000
2018 2017
GBP GBP
Investment in Location Sciences AI Limited 2,414,043 2,414,043
Capital contributions arising from IFRS2
share based payments charge 1,029,371 985,957
------------------ -------------------
3,443,414 3,400,000
------------------ -------------------
Subsidiaries GBP
Cost or valuation
At 1 January 2017 3,400,000
-------------------
At 31 December 2017 3,400,000
-------------------
At 1 January 2018 3,400,000
Capital contributions from share based payments 43,414
-------------------
At 31 December 2018 3,443,414
-------------------
Carrying amount
At 31 December 2018 3,443,414
-------------------
At 1 January 2017 3,400,000
-------------------
17 Trade and other receivables
Group Company
31 December 31 December 31 December 31 December
2018 2017 2018 2017
GBP GBP GBP GBP
Trade receivables 138,511 34,095 - -
Accrued income 124,702 - - -
Prepayments 45,125 14,217 - 1,875
Other receivables 50,926 185,075 31,932 48,467
359,264 233,387 31,932 50,342
Trade receivables comprise amounts due from customers for services provided. All amounts are short term. The net carrying amount of trade receivables is considered a reasonable approximation of fair value. Average credit terms were 30 days (2017: 30) and average debtor days outstanding were 69 (2017: 26).
All of the Group's trade and other receivables have been reviewed for impairment. An impairment provision of
GBP5,340 (2017: GBP9,065) has been recognised in the year.
The group's exposure to credit and market risks, including impairments and allowances for credit losses, relating to trade and other receivables is disclosed in the financial risk management and impairment note.
Trade receivables above include amounts (detailed below) that are past due at the end of the reporting period and which an allowance for doubtful debts has not been recognised as the amounts are still considered recoverable and there hasn't been a significant change in credit quality.
Age of trade receivables that are past due but not impaired Group
31 December 31 December
2018 2017
GBP GBP
7 to 30 days 6,771 -
31 to 60 days 61,358 4,035
61 to 90 days (141) -
91 to 120 days 11,760 -
---------------- ---------------
79,748 4,035
----------------
18 Cash and cash equivalents
Group 31 December Company
31 December 31 December 31 December
2018 2017 2018 2017
GBP GBP GBP GBP
Cash at bank 2,615,455 1,140,239 - 594,388
19 Trade and other
payables Group 31 December Company
31 December 31 December 31 December
2018 2017 2018 2017
GBP GBP GBP GBP
Trade payables 91,543 152,394 - -
Accrued expenses 106,569 155,405 19,000 59,000
Social security and
other taxes 125,061 33,048 - -
Other payables 47,201 142,059 25,507 25,507
370,374 482,906 44,507 84,507
The directors consider that the carrying amount of trade and other payables approximated their fair value. Trade payables are paid between 30 and 60 days of receipt of the invoice.
The group's exposure to market and liquidity risks, including maturity analysis, related to trade and other
payables is disclosed in the financial risk management and impairment note.
20 Loans and borrowings
Group Company
31 December 31 December 31 December 31 December
2018 2017 2018 2017
GBP GBP GBP GBP
Finance lease liabilities 152 4,169 - -
Group Company
Non-current loans and borrowings
Group Company
31 December 31 December 31 December 31 December
2018 2017 2018 2017
GBP GBP GBP GBP
Finance lease liabilities - 587 - -
The group's exposure to market and liquidity risk; including maturity analysis, in respect of loans and borrowings is disclosed in the financial risk management and impairment note.
Finance lease agreements are secured on the assets concerned. Interest rates are fixed for the term of the agreements which are payable by equal fixed monthly amounts where applicable.
21 Obligations under operating leases
Group
Operating leases
The total future value of minimum lease
payments is as follows:
31 December 31 December
2018 2017
GBP GBP
Within one year 107,220 11,347
In two to five years 80,415 -
----------- -----------
187,635 11,347
----------- -----------
The amount of non-cancellable operating lease payments recognised as an expense during the year was GBP79,702 (2017 - GBP299,913)
22 Financial risk management and impairment of financial assets Treasury risk management
The Group manages a variety of market risks, including the effect of changes in foreign exchange rates, liquidity and counterparty risks.
Credit risk
The Group's principal financial assets are bank balances, cash, trade and other receivables.
The credit risk on liquid funds is limited because the counterparties are UK banks or "Blue Chip" companies with high credit ratings assigned by international credit rating agencies.
As a result, investment returns and credit risk to the Group in this regard are not material to the financial statements.
The Group's maxiumum exposure to credit risk is limited to the carrying amount of financial assets at the reporting date. No collateral is held in respect of these amounts which are expected to be received in full. In order to manage credit risk, credit limits are reviewed on a regular basis in conjuction with debt ageing and collection history.
Currency risks
The Group's operations are primarily located in the United Kingdom, with an increasing investment into the United States. The Group's transactions during 2018 were predominantly denominated in sterling, with consequently little exposure to foreign currency risks. Due to the limited risks to the Group, forward exchange contracts are not considered necessary and are not used. At the year end, the Group operated sterling bank accounts only. Going forward the Directors will monitor the currency risk and monitor the potential impact of increasing trade and investment into the United States.
The translation risk on the Group's foreign exchange payables and receivables is considered to be immaterial due to their short-term nature.
Liquidity risk
The Group has sufficient capital resources to meet its external current liabilities as they fall due in 2019.
Operational cash flow represents on going trading revenue and costs, administrative costs and research and development activities. The Group manages its liquidity requirements by the use of both short-term and long-term cash flow forecasts. The Group's policy is to ensure facilities are available as required or to issue equity share capital to ensure cash resources available are in accordance with long-term cash flow forecasts. The Group currently has no overdrawn committed facilities as at 31 December 2018.
The Group actively manages its working capital to ensure it has sufficient funds for operations and planned research and development activities.
The Group's main financial liabilities include trade payables and operational costs. All amounts for trade and other payables are due for payment in accordance with agreed settlement terms with suppliers or statuatory deadlines. All such payment terms are within six months.
Capital management
The Group's activities are of a type and at a stage of development where the most suitable capital structure is that of one primarily financed by equity. The directors will reassess the future capital structure when projects under development are sufficiently advanced.
The Group's financial strategy is to utilise its resources and current trading revenue streams to commercialise its products and grow revenues. The Group keeps investors informed of its progress with its projects through regular announcements and raises additional equity finance at appropriate times.
The Group manages capital on the basis of the carrying amount of equity, and debt with regard to maintaining sufficient liquidity to enable the Group to continue to trade and invest in commercialisation. As at the year end the equity to overall financing ratio is 1 (2017:1).
Categories of financial instruments
All of the Group's financial assets are classified as loans and receivables; see note 17. The directors consider that the carrying amount of trade and other receivables approximates their fair value.
All of the Group's financial liabilities are classified as liabilities at amortised cost: see note 19. The directors consider that the carrying amount of trade and other payables approximates their fair value. The contractual maturity of financial liabilties is set out in notes and 19.
The accounting policies applied are set out in note 2.
22 Share capital
Allotted, called up and fully paid shares
31 December
2018
31 December
2017
No. GBP No. GBP
Ordinary shares of GBP0.01
(2017 -
GBP0.0001) each 341,044,439 3,410,444 13,745,747,069 1,374,575
Deferred shares of GBP0.01
each 1,040,712,398 10,303,053 1,040,712,398 10,303,053
1,381,756,837 13,713,497 14,786,459,467 11,677,627
Reconciliation of shares
Number of
shares
Total number of shares as at 1 January 2018
14,786,459,467
19 June 2018 1,374,574,705
12 September 2018 5,863,021,931
21 November 2018 95
Total shares pre-consolidation 22,024,056,198
Number of shares after consolidation
209,833,438
29 November 2018 122,822,221
13 December 2018 8,388,780
Total number of shares as at 31 December 2018 341,044,439
New shares allotted
* On the 19th June 1,374,574,705 new shares were allotted with a nominal value of GBP137,457 for aggregate consideration of GBP412,372.
* On the 12th September 5,863,021,931 new shares were allotted further to Barclays exercising their warrants, with a nominal value of GBP586,302. No consideration was received for them, further to waiver of a loan in the prior year. The fair value of the warrants was determined to be GBP1,934,797, which is the deemed value of the shares issued.
* On the 21st November there was a share consolidation, whereby every 100 existing Ordinary shares of 0.001p was consolidated into one new Ordinary share of 1p. As a result of the consolidation 95 fragment shares were allotted.
* On the 29th November 122,822,221 new shares were allotted with a nominal value of GBP1,228,222 for aggregate consideration of GBP2,763,500.
* On the 13th December 8,388,780 shares were alloteted under an open offer, with a nominal value of GBP83,888 for aggregate consideration of GBP188,748.
Share rights
Ordinary shares have attached to them full voting, dividend and capital distribution (including on winding up) rights; they do not confer any rights of redemption.
Deferred shares have attached to them no voting, dividend or capital distribution (including on winding up) rights; they do not confer any rights of redemption.
Share Warrants
Mike Staten (formerly held by Darwin Capital Limited) holds 5,583,522 share warrants at the year end with an
exercise price of 16.92 pence per share. These warrants are exerciseable at 16.92 pence per share. For
comparison the closing share price on 29 March 2019 was 2.4 pence per share. The fair value of the warrants is
not material for adjustment.
23 Share-based payments
The share option scheme was originally adopted by the company on 29 September 2011. It was established to attract and retain the best available personnel for positions of responsibility, to provide additional incentive to employees, officers or consultants of the company and to promote the success of the company's business. Further to the acquisition of the business by Location Sciences Group plc (formerly Proxama plc), the options were granted over shares in the parent entity. The share option scheme was and continues to be administered by the directors.
All outstanding options as at 1 January 2018 and outstanding options issued in March 2018 and May 2018 were surrendered and replaced by options issued in November 2018. Share options surrendered are accounted for as modified options under IFRS 2. The incremental value of the modified share options is not material.
Share options issued in November 2018 are to be settled by way of issues of Ordinary Shares. The options have no vesting period, but cannot be exercised until target share prices are achieved and have a maximum term of 10 years.
Further, Location Sciences Group plc consolidated its shares during the year whereby every 100 existing ordinary shares of 0.01 pence was consolidated into one new ordinary share of 1 pence each. As a result the number of shares subject to any option held under share options decreased to one hundredth. This consolidation is reflected in the comparative information below to facilitate comparability.
The target share prices are as follows:
Target A: GBP0.048 Target B: GBP0.073 Target C: GBP0.097
The movements in the number of share options during the year were as follows:
31 December 31 December
2018 2017
Number Number
Outstanding, start of period 15,664,210 388,653
Granted during the period 39,177,222 15,537,237
Forfeited during the period (3,081,372) (261,680)
Surrendered during the period (17,537,838) -
Outstanding, end of period 34,222,222 15,664,210
None of the options outstanding at the end of the period are yet exercisable as the target share prices have not yet been achieved.
The movements in the weighted average exercise price of share options during the year were as follows:
31 December 31 December
2018 2017
GBP GBP
Outstanding, start of period 0.40 1.70
Granted during the period 2.25 0.40
Forfeited during the period 2.15 1.60
Surrendered during the period 2.80 -
Outstanding, end of period 2.25 0.40
The weighted average contractual life of options outstanding at the year end is 3 years (2017: 6.6 years). The weighted average share price as at the date of grant is 2.35p (2017: 0.48p).
The fair value of the equity instruments granted was determined using the Black Scholes Model. This model was selected as it is an industry standard model. The exercise price of all the options in issue is 2.35p per ordinary share. The performance condition includes three target share prices, as set out above. The inputs into the model for options granted in November 2018 were as follows:
Average share price 2.35p Exercise price 2.25p Expected volatility 53%
Risk-free interest rate 2% Probability of achieving criteria 50%
The expected volatility was determined with reference to historic volatility. The expected life used in the model has been adjusted, based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural consideration and is estimated at 3 years.
The share-remuneration expense for the year recognised in the Profit and Loss is GBP43,414 (2017 - GBP84,000). Expenses are allocated to Location Sciences AI Limited, the company that receives the employee services.
24 Pension and other schemes
The group operates a defined contribution pension scheme. The pension cost charge for the year represents contributions payable by the group to the scheme and amounted to GBP16,119 (2017: GBP9,570). Contributions totaling GBP1,835 (2017: GBPNil) were payable to the scheme at the end of 2018 and are included in creditors.
25 Commitments
No capital expenditure was committed to as at 31 December 2018 (2017: GBPNil).
26 Related party transactions
As at 31 December 2018, S Gregory (a director), was owed GBPNil (2017: GBP2,000) by the Company.
During the year sales of GBP15,000 were made to Concise Consultants Limited, a company in which B Chilcott is a director. As at 31 December 2018, the balance owed by Concise Consultants Limited was GBPNil.
27 Discontinued operations Disposal of Aconite Group
On 31 October 2017, the group entered into a sale agreement to dispose of Aconite Technology Limited, Aconite Solutions Limited and Aconite Consulting Limited, which carried out all of the group's digital payments operations. The disposal was affected in order to generate cash flow for the expansion of the group's other businesses. The disposal was completed on 31 October 2017, on which date control of Aconite Technology Limited, Aconite Solutions Limited and Aconite Consulting Limited passed to the acquirer.
The results of the discontinued operations, which have been included in the consolidated income statement, were as follows:
2017
GBP
Revenue
1,056,935
Expenses
(1,521,451)
Loss before tax
(464,516)
Loss on sale of discontinued operation
(1,388,196)
Net loss attributable to discontinued operations
(1,852,712)
The discontinued operations results contributed the following to the group cash flow:
2017
GBP
Net cash inflows from operating activities
195,779
Net cash outflows from investing activities
(301,826)
Net cash outflows from financing activities
(2)
Net cash outflows arising on disposal (106,049)
Details of the sale of the subsidiary
Period ended 31 October
2017
Consideration received or receivable:
GBP
Cash
758,586
Total disposal consideration
758,856
Carrying amount of net assets sold
(2,146,782)
Loss on sale
(1,388,196)
The carrying amounts of assets and liabilities as at the date of sale (31 October 2017) were:
Period ended
31 October
2017
GBP
Intangible assets
2,630,621
Trade and other receivables
195,854
Cash and cash equivalents
10,455
Total assets
2,836,930
Trade and other payables
(422,748)
Deferred tax
(267,400)
Total liabilities
(690,148)
Net assets
2,146,782
28. Publication of non-statutory accounts
The financial information set out in this announcement does not constitute statutory accounts as defined in the Companies Act 2006.
The Group Statement of Comprehensive Income, Group Statement of Financial Position, Group Statement of Changes in Equity, Group Statement of Cash Flows and associated notes have been extracted from the Group's 2018 statutory financial statements upon which the auditor's opinion is unqualified, which includes an emphasis of matter paragraph for going concern and does not include any statement under section 498 of the Companies Act 2006.
Those financial statements will be delivered to the Registrar of Companies following the release of this announcement.
This announcement and the annual report and accounts are available on the Company's website www.locationsciences.ai . A copy of the report and accounts will be sent to shareholders who have elected to receive a printed copy with details of the annual general meeting in due course.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR UAOKRKNASRAR
(END) Dow Jones Newswires
April 02, 2019 02:01 ET (06:01 GMT)
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