Share Name Share Symbol Market Type Share ISIN Share Description
Veltyco Group Plc LSE:VLTY London Ordinary Share IM00BYT32K14 ORD NPV
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.00p +0.00% 2.625p 2.50p 2.75p - - - 0 01:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Travel & Leisure 10.5 -15.5 -18.2 - 2

Veltyco Group PLC Final Results

28/06/2019 5:34pm

UK Regulatory (RNS & others)


Veltyco (LSE:VLTY)
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RNS Number : 9166D

Veltyco Group PLC

28 June 2019

28 June 2019

VELTYCO GROUP PLC

("Veltyco" or "the Group")

Final Results for the year ended 31 December 2018

Veltyco, the AIM quoted company active in marketing and operating in the gaming sector, announces its final results for the year ended 31 December 2018.

Financial highlights

   --    Revenues from continuing operations increased 18% to EUR4.7 million (2017: EUR4.0 million)(1) 
   --    Revenues from discontinued operations of EUR6.9 million (2017: EUR12.2 million)(2) 
   --    Total Revenues reported of EUR11.7 million (2017: EUR16.2 million) 

-- Operating result amounts to EUR17.3 million loss (2017: EUR7.5 million) impacted by EUR10.7 million impairment charge

Notes:

(1) Revenue derived from the Group's marketing activities in the sportsbook and casino vertical and from Bet90.

(2) Revenue derived from the Group's marketing activities in the online financial trading and lottery verticals, which the Group ceased during 2018

Operational highlights

-- Restructured Group operations, terminating marketing agreements in the online financial trading and lottery verticals

   --        Renewed agreement with Betsson AB to market its Betsafe brand in Germany until May 2021 
   --        Growth in continuing operations driven by sportsbook and casino vertical 

-- Board restructuring undertaken to help streamline Group activities and create a renewed focus

Post year end & Current Trading

-- Raised EUR855,000 in equity and EUR500,000 as a loan from certain Directors for working capital purposes

-- Combined sportsbook and casino revenues marginally ahead of the same period last year however, due to a change in the mix, revenues in the first five months of 2019 are below management expectations

Paul Duffen, Chairman, commented: "This has been a very challenging period for Veltyco, with a number of operational issues to address and a changing dynamic in the markets in which we operate. We have worked hard to restructure our operating costs to match our current operations and believe we now have a more streamlined business.

"We have taken what we believe is a prudent view to provide for the full amount of monies still owed to the Group which has led to the significant loss in 2018

"Current trading has been impacted by a higher proportion of lower margin revenues activities but we remain confident that we can continue to seek attractive opportunities in our chosen markets."

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

The Annual Report and Accounts for the year ended 31 December 2018 will shortly be available on the Company's website.

For further information please contact:

Veltyco Group Plc +44 (0)1624 605 764

Paul Duffen, Chairman

Marcel Noordeloos, Chief Financial Officer

   Strand Hanson Limited (Nominated Adviser)                   +44 (0)20 7409 3494 

James Harris / Richard Tulloch / James Dance

   Whitman Howard Ltd (Broker)                                            +44 (0)20 7659 1234 

Nick Lovering / Christopher Furness

   IFC Advisory (Financial PR & IR)                                       +44 (0)20 3934 6630 

Graham Herring / Miles Nolan / Zach Cohen

About Veltyco

Veltyco is a group of companies focused on the operation of its own online Sportsbook and Casino product as well as marketing activities for other online gaming companies.

Website: www.veltyco.com

Strategic Report

I hereby present our Annual Report for the financial year ended 31 December 2018.

Financial and operational highlights

Revenues from continuing operations: EUR4.7 million (compared to EUR4.0 million in 2017)(1)

Revenues from discontinued operations: EUR6.9 million (compared to EUR12.2 million in 2017)(2)

Total Revenues reported: EUR11.6 million (compared to EUR16.2 million in 2017)

Operating result: EUR17.3 million loss (EUR7.5 million profit in 2017)

Notes:

(3) Revenue derived from the Group's marketing activities in the sportsbook and casino vertical and from Bet90.

(4) Revenue derived from the Group's marketing activities in the online financial trading and lottery verticals, which the Group ceased during 2018.

Operational review

As previously disclosed, the Group faced significant operational challenges during 2018, around the collection of receivables in respect of the Group's online financial trading and lottery marketing activities. Despite reaching agreements on the payment of these receivables, such payments ceased during October 2018. As a consequence of the diminished cash receipts, the Group reduced these marketing activities, with the Board deciding to terminate all marketing activities in the financial trading and lottery verticals in November 2018.

The Group continues to seek to recover the outstanding debts and is progressing various proceedings in this regard, which, as of the date of this report, have not produced any additional receipts. Consequently, whilst all efforts to recover outstanding monies will continue, the Board considers it prudent to provide for the full amount of the outstanding balance in respect of its marketing activities in the online financial trading and lottery verticals, resulting in an impairment charge of EUR10.7 million.

Due to the termination of marketing activities in the online financial trading and lottery verticals, the Company has impaired all intangible assets relating to this activity. This mainly concerned the book value of the intangible assets relating to the Zoomtraderglobal brand (which was acquired in 2016 for consideration comprising issuance of new ordinary shares) as well as the online financial trading customer database acquired in May 2018. The latter, because we currently do not propose to launch our own financial trading brand, which means it is not certain whether we will be able to use the acquired database to its full potential, as the last update of the database was made in September 2018. The Directors continue to consider other options to utilise the database.

Termination of the marketing activities relating to online financial trading brands, as well as termination of lottery related marketing, led to a significant decrease in revenues during the second half of 2018. Revenues for the second half of 2018, which related predominately to revenues from the Group's marketing activities in the sportsbook and casino vertical and from Bet90, amounted to, in aggregate, EUR2.7 million compared to EUR8.9 million in the first half of 2018, which included revenues from the terminated marketing activities for the online financial trading and lottery verticals. As a consequence the full year revenues decreased to EUR11.6 million in 2018 from EUR16.2 million in 2017. The Group's revenues from its ongoing marketing activities in the sportsbook and casino vertical and from Bet90 increased in 2018 to EUR4.7 million (2017: EUR4.0 million).

During 2018, the Company entered into a renewed agreement with Betsson AB group to market Betsson's Betsafe brand in Germany until May 2021, an agreement which was broadly on similar terms as the previous agreement.

Overall, the majority of the 2018 revenues were derived from the Group's online marketing activities, though this moved, during the last quarter of 2018, more towards revenues from the Group's own brand, Bet90, and marketing activities in the sportsbook and casino vertical, which continues to be the focus for the Group's future growth, following the termination of activities in the online financial trading and lottery verticals.

As a result of the above, the Group's cashflow has been significantly impacted by the inability to collect outstanding receivables, requiring the Company to raise additional funds subsequent to the year end, as announced on 22 November 2018, 30 January 2019, 1 April 2019 and 30 May 2019.

On 30 January 2019, the Company announced it had raised GBP500,000 (or EUR555,500) by issuing 3,333,333 new ordinary shares. On 1 April 2019, the Company announced that it had entered into separate loan agreements with three of its Directors, raising a total of EUR500,000 for working capital and on 30 May 2019, the Company announced that it had raised EUR300,000 by issuing 4,000,000 new ordinary shares.

Financial review

2018 was a year of significant challenges for Veltyco. As previously communicated, the Group faced significant difficulties in collecting its trade receivables from its market activities in the online financial trading and lottery verticals. This led to the decision towards the end of 2018 to completely cease these marketing activities and fully focus on the existing marketing agreement with Betsafe, as well as its owned operations of the Bet90 sportsbook and casino brand.

Due to this significant reduction of marketing spend during the second half of 2018, and ultimately completely ceasing all operations, revenues for the full year decreased to EUR11.6 million (2017: EUR16.2 million). This is mainly due to the lower revenues recorded during the second half of 2018. Revenues in the second half of 2018 amounted to EUR2.7 million, whereas the revenues for the first six months amounted to EUR8.9 million. In the first half year, an amount of EUR6.8 million related to revenues recorded for its marketing activities in the online financial trading and lottery verticals. Excluding revenues from these marketing activities, the Group's revenues from its ongoing marketing activities in the sportsbook and casino vertical and from Bet90 increased 18% in 2018 to EUR4.7 million (2017: EUR4.0 million).

The net result for the year amounted to a loss of EUR16.7 million (2017: EUR6.8 million profit). The results for 2018 were significantly impacted by the impairment of receivables from the online financial trading and lottery business of, in aggregate, EUR10.7 million, combined with the impairment of the relating intangible assets of EUR6.1 million. Furthermore, the Group recorded impairment charges of EUR0.4 million on its investments in T4U Marketing Ltd (in which the Group holds 51% and operates an affiliate forum website in Germany), as the results for 2017 and 2018 were lower than expected at time of acquisition. The results were also impacted by the start-up costs of the Bet90 operations, which started in the second half of 2017 and had its first year of full operations in 2018. In order to gain market share and create brand recognition, the Group spent almost EUR3 million in marketing of the Bet90 brand. Furthermore, revenues generated in the sportsbook and casino vertical, which is the revenue recorded in the second half of 2018, are of lower margins than revenues generated in the online financial trading vertical.

The operating EBITDA for the year ended 31 December 2018 was EUR0.5 million (2017: EUR8.1 million).

Details of the operating EBITDA are as follows:

 
                                                    2018        2017 
                                                     EUR         EUR 
 Operating (loss)/profit                    (17,297,953)   7,482,129 
 Depreciation and amortisation expense           404,514     380,173 
 Impairment of intangibles                     6,482,758           - 
 Impairment of uncollectable receivables      10,712,715           - 
 Share based payment (included in 
  salary expense)                                176,744     239,084 
                                           -------------  ---------- 
 Operating EBITDA                                478,778   8,103,386 
                                           -------------  ---------- 
 

Cash Flow

The Group used to be active in three major verticals (sportsbook and casinos, online lotteries and online financial trading) and had revenues and cost centres in numerous locations in Europe. The Group experienced operational difficulties in receiving agreed marketing commissions within the online financial trading and lottery verticals as previously announced, which ultimately led to an impairment of these receivables of EUR10.7 million. There was only limited cash flow from the Group's remaining activities and as a result of the collectability issues, the Group had a negative cash flow from operations of EUR0.1 million for the year ended 31 December 2018.

Post the period end, the Group raised GBP500,000 (EUR555,000) through a subscription with certain existing shareholders in January 2019, entered into a loan agreement with some of the Directors in April 2019 for a further EUR500,000 (GBP440,000)and raised EUR300,000 (GBP264,000) through a subscription with an existing shareholder in May 2019, to provide further working capital to the Group.

Board changes

During and post the year end, the Company made a number of changes to its Board and senior management to reflect the changes in the Group's operations during the year.

In March 2018, the Group announced the appointment of Melissa Blau as the Group's new CEO. At the same time, Uwe Lenhoff and Hans Dahlgren resigned as Executive Directors and Ilan Tzorya resigned as a Non-executive Director. On 12 October 2018, the Group announced that Melissa Blau had resigned from the Board.

Subsequent to the year end, on 30 January 2019 the Company announced the appointment of Paul Duffen as the new Chairman of the Group, replacing Gilles Ohana, who stepped down from the Board at the same time. Paul was subsequently appointed as the Group's Executive Chairman on 7 March 2019.

The Company continues to seek a new CEO and a further independent Non-executive Director in line with the developments of the Company and a further announcement will be made as appropriate.

Principle risks and uncertainties

The Main operational Risk factors are included on page 12 of this report.

Current trading and outlook

The Group's revenue in the current year to 31 May 2019 for the combined sportsbook and casino operations, is marginally ahead of the same period in 2018. However, as the result of a change in the revenue mix, with a larger share of the revenues being generated from lower margin activities and a number of large customer wins across its operations (which are a risk given the nature of the Group's activities), revenue for the first five months of 2019 is below management expectations.

Although the Directors have sought to restructure the operating costs to match the current operations, as a result of the above, the Directors believe that the results for the six months ending 30 June 2019 will show a loss.

In light of the above, the Directors continue to manage the Group's cash resources carefully, and whilst they believe that the Group will be able to continue to manage its creditors, should trading not be in line with expectations going forward and/or the Group is not able to manage its creditors, the Group's ability to meet such liabilities may be impacted. Accordingly, the Directors continue to explore appropriate additional sources of capital.

Dividend

Whereas the Directors paid a maiden dividend for the year ended 31 December 2017, amounting to 0.25p per share in July 2018, the Directors are not proposing a dividend for the year ended 31 December 2018.

Approved by the Board of Directors and signed on behalf of the Board.

Paul J Duffen

Executive Chairman, Veltyco Group plc

28 June 2019

Directors' Report

The Directors present their report and consolidated financial statements for the year ended 31 December 2018.

Principal activities and review of the business

Veltyco is a company focused on generating marketing leads and entering into marketing contracts for the activities of its sportsbook partner in sports betting and casinos games as well as operating its own Bet90 sportsbook and casino games, in which it has a 51% interest. During the fourth quarter of 2018, the Group ceased its marketing activities relating to lottery and online financial trading verticals.

Results and dividends

The Group's result for the year, after taxation, amounted to a loss of EUR16.7 million (2017: profit of EUR6.8 million). The Group's 2018 result is highly impacted by the impairment of receivables and intangible assets relating to the Group's marketing activities and operations across its three verticals. The operating EBITDA (after adjustments for impairments, amortisation and depreciation) for the full year 2018 amounted to EUR0.5 million (2017: EUR8.1 million).

As a result of the above, the Directors are proposing not to pay a dividend for the year ended 31 December 2018.

Future developments

Future developments are discussed in the Strategic Report.

Financial Risk Management

The Board is responsible for setting the objectives and underlying principles of financial risk management for the Group. The Board establishes the detailed policies such as authority levels, oversight responsibilities, risk identification and measurement and exposure limits.

Capital risk management

The Company's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders.

Liquidity risk

Liquidity risk exists where the Group might encounter difficulties in meeting its financial obligations as they become due. The Group monitors its liquidity in order to ensure that sufficient liquid resources are available to allow it to meet its obligations.

Large wins by customers

Inherent to the business is that there is a risk that a few players and customers might win significant amounts of money during the same period thus reducing the earnings of the Group, in particular in regard to its sportsbook partner which has a higher concentration of VIP players. In respect of its marketing activities for its sportsbook partner, negative or highly impacted net revenues in any period are also carried forward and netted off against net revenues in future periods on which commission might otherwise be payable to the Group. Whilst the Group would not have to cover any gaming or gambling losses in the existing marketing agreements, the percentage of earnings retained by the Group might be greatly reduced as a result of this. Any gaming or gambling losses within the Group's own Bet90 operations would though need to be covered by the Group as and when they occur.

Currency risk

The Group is exposed to translation and transaction foreign exchange risk. As the majority of the Group's transactions are denominated in Euros, the Directors deem the Group's exposure to exchange rate fluctuations to be minimal.

Interest rate risk

The Group's exposure to upside interest rate risk is limited. The loans on the balance sheet have a fixed interest rate. The Directors do not consider the impact of possible interest rate changes based on current market conditions to be material to the net result for the year or the equity position at the year-end for either the year ended 31 December 2018 or 31 December 2017.

Credit risk

The Group's credit risk is primarily attributable to trade receivables. Trade receivables consist of:

   --        Customers running the land based operations of Bet90, via Bet90 branded terminals; and 

-- Payment service providers (PSPs). PSPs are third-party companies that facilitate deposits and withdrawals of funds to and from customers' virtual wallets with the Group. These are mainly intermediaries that transact on behalf of credit card companies.

The risk is that a customer or a PSP would fail to discharge its obligation with regard to the balance owed to the Group.

The Group reduces this credit risk by:

   --        Monitoring balances with customers on a regular basis; 
   --        Monitoring balances with PSPs on a regular basis; and 
   --        Arranging for the shortest possible cash settlement intervals in all cases. 

The Group considers that based on the factors above and on past experience, the customers and PSP receivables used in the current businesses are of good credit quality and there is a low level of potential bad debt as at year-end.

A large credit risk that the Group historically faced related to its marketing activities for partners in the online financial trading and the lottery verticals. As a result of the Company not being able to collect such receivables, the Board has decided to provide for these in full, amounting to, in aggregate, EUR10.7 million.

An additional credit risk the Group faces relates to customers in its own operations disputing charges made to their credit cards ("chargebacks") or any other funding method they have used in respect of the services provided by the Group. Customers may fail to fulfil their obligation to pay, which will result in funds not being collected. These chargebacks and uncollected deposits, when occurring, will be deducted at source by the payment service providers from any amount due to the Group. The Group monitors the need for impairment provisions by considering all reasonable and supportable information, including that which is forward-looking. For the year ended 31 December 2018, the Group has not made any provision for this, as any provision would be immaterial.

Going concern

The Group experienced significant operational difficulties during 2018 in respect to receiving agreed marketing commissions from operators within the online financial trading and lottery verticals and as a result, the Group terminated these activities in H2 2018 and they have been fully impaired in 2018. As a result, the Company has commenced procedures to seek to recover these receivables through a legal process, though this has not resulted in further receipts of cash to date.

Following the termination of the Group's marketing activities for the online financial trading and the lottery verticals, the Group is currently focusing its activities on operating in the sports book and casinos vertical and has revenues and cost centres in a number of locations throughout Europe.

As a result of the above, the Group achieved a net loss of EUR16.7 million for the year ended 31 December 2018. Furthermore, the Group had a negative cash flow from operations of EUR0.1 million for the year ended 31 December 2018 and the Directors expect the Group to be loss making for the six months ending 30 June 2019.

The Group has therefore sought to reduce its operating costs to match the current operations and the Directors continue to manage the Group's cash resources carefully. However, whilst they believe that the Group will be able to continue to manage its creditors, which are meaningfully in excess of the Group's current cash resources, should trading not be in line with expectations going forward and/or the Group is not able to manage its creditors, the Group's ability to meet such liabilities may be impacted, in which case the Group will need to raise further funding. In any event the Directors consider that further funding is likely to be required and continue to explore further appropriate sources of capital. Whilst they are confident of being able to raise such funding if required, there is no certainty that such funding will be available and/or the terms of such funding. However, these conditions are necessarily considered to represent a material uncertainty which may cast significant doubt over the Group's ability to continue as a going concern.

Whilst acknowledging this material uncertainty, the Directors remain confident of being able raise additional funding as required and therefore the Directors consider it appropriate to prepare the financial statements on a going concern basis. The financial statements do not include the adjustments that would result if the Group and Company was unable to continue as a going concern.

Post balance sheet events

On 30 January 2019, the Company announced that it had raised EUR555,500 (GBP500,000) through the subscription of 3,333,333 new Ordinary Shares with certain existing investors, at a price of GBP0.15 per share. On the same day, the Board resolved to issue 200,000 new Ordinary Shares to an adviser in lieu of certain fees.

On 15 February 2019, the Company announced that, on 14 February 2019, it granted options over, in aggregate, 2,420,000 Ordinary Shares to the Directors and certain employees of the Company, pursuant to the Company's Long-Term Incentive Plan - May 2016 (as amended).

These options have an exercise price of GBP0.15 per share. Pursuant to the terms of the 2016 Plan, the options will vest in equal instalments over the four years following the first anniversary of the date of grant and any of the options that remain unexercised on the fifth anniversary of the date of grant will lapse. In light of these new options being granted, Mark Rosman and Marcel Noordeloos agreed with the Company to cancel 300,000 options granted to each of them on 5 July 2017. In addition, 109,846 existing warrants that were granted by the Company on 5 October 2017, have had the terms amended, such that they will now be exercisable at a price of GBP0.15 per share.

On 1 April 2019, the Company announced that it had entered into separate loan agreements with three of its Directors, being Paul Duffen, Marcel Noordeloos and Mark Rosman, pursuant to which each Director provided a loan of EUR166,667 (GBP146,667) to the Company, totalling EUR500,000 (GBP440,000) (the "Loans"). The Loans, which are unsecured, are for a term of three years and will accrue interest at 5% per annum over the term of the Loans. The Loans can be repaid on or before 31 March 2022 at the Company's election.

On 30 May 2019, the Company announced that it had raised a further EUR300,000 (GBP264,000) through the subscription of 4,000,000 new Ordinary Shares with a certain existing investor, at a price of GBP0.066 per share.

Directors and their interest

The following Directors held share options as at 31 December 2018:

 
                      Number of options       Exercise   Date of grant     Vesting 
                                           Price (GBP)                      period 
                     ------------------  -------------  --------------  ---------- 
 Marcel Noordeloos              750,000           0.25    30 June 2016   1-4 years 
 Marcel Noordeloos              300,000          0.65*     5 July 2017   1-4 years 
 Mark Rosman                    400,000           0.25    30 June 2016   1-4 years 
 Mark Rosman                    300,000          0.65*     5 July 2017   1-4 years 
 Gilles Ohana                   800,000           0.25     22 May 2017   1-4 years 
 

* The options granted on 5 July 2017 have been cancelled as announced on 30 January 2019.

Directors who served during the year

 
                         Appointed            Resigned 
                    --------------    ---------------- 
 Gilles Ohana          20 November     30 January 2019 
                              2017 
 Mark Rosman         19 March 2014                   - 
 Uwe Lenhoff          30 June 2016       26 March 2018 
 Marcel Noordeloos    30 June 2016                   - 
 Hans Dahlgren        30 June 2016       26 March 2018 
 Ilan Tzorya            16 January       26 March 2018 
                              2017 
 Melissa Blau        26 March 2018     12 October 2018 
 

On 30 January 2019, Paul Duffen was appointed as Chairman, replacing Gilles Ohana and was appointed Executive Chairman on 7 March 2019.

Directors' responsibilities

The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to keep reliable accounting records which allow financial statements to be prepared. In addition, the Directors have elected to prepare group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and applicable law. The financial statements are required to give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that year. In preparing these financial statements, the Directors are required to:

   --        select suitable accounting policies and then apply them consistently; 
   --        make judgments and accounting estimates that are reasonable and prudent; 

-- state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements; and

-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and prepare financial statements. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are also responsible for ensuring that they meet their responsibilities under the AIM Rules.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

In so far as each of the Directors is aware:

   --        there is no relevant audit information of which the Company's auditors are unaware; and 

-- the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

Auditors

The auditors of the Group are Nexia Smith & Williamson, Chartered Accountants.

This report was authorised for issue by the Board on 28 June 2019.

Paul J Duffen

Executive Chairman, Veltyco Group plc

28 June 2019

Risk factors

The Board evaluates the operational risks facing the Group on an ongoing basis to monitor for changes in risks and risk impact and to set guidelines for risk mitigation. The most significant risks identified by the Board are listed below.

Gambling laws and regulations are constantly evolving and increasing

The regulatory framework of online gaming is dynamic and complex. Change in the regulatory regime in a specific jurisdiction can have a material adverse effect on business volume and financial performance in that jurisdiction. In addition, a number of jurisdictions have regulated online gaming, and in several of those jurisdictions the Group, or its operating partner, either holds a licence or is planning to obtain one, if the market is considered interesting. However, in some cases, lack of clarity in the regulations, or conflicting legislative and regulatory developments, mean that the Group may risk failing to obtain an appropriate licence, having existing licences adversely affected, or being subject to other regulatory sanctions, including internet service providers blocking, blocking options to make deposits, black-listing and fines.

The Group is managing this risk by consulting with legal advisers in various jurisdictions where its services are marketed or which generate significant revenue for the Group. Furthermore, the Group obtains regular updates regarding changes in the law that may be applicable to its operations, working with local counsel to assess the impact of any changes on its operations. Furthermore, the Group's owned operations Bet90, blocks players from certain "blocked jurisdictions" using multiple technological methods as appropriate.

Reliance on VIP players

A large percentage of the commission based revenue from the Group's marketing activities in the sportsbook and casino vertical is generated by a small group of high net worth players, described as "VIP Players". These are loyal players that regularly deposit high amounts on the websites. The Group knows these players and makes them feel valued. A VIP player (or also a non-VIP player) can have large winnings, in either the sportsbook or the casino, in a certain period, which can significantly impact the revenues on a monthly basis. A loss of any of the VIP Players could significantly adversely affect the Group's business, financial condition, results or future operations.

In respect of its own sportsbook and casino brand, Bet90, any large wins by VIP players could potentially lead to recording a loss in such cases.

Corporate Governance Report

As an AIM-quoted company, Veltyco and its subsidiaries (together, the "Group") is required to apply a recognised corporate governance code, demonstrating how the Group complies with such corporate governance code and where it departs from it.

The Board of Directors of the Company ("Directors" or "Board") have adopted the QCA Corporate Governance Code (the "QCA Code"). The Board recognises the principles of the QCA Code, which focus on the creation of medium to long-term value for shareholders, without stifling the entrepreneurial spirit in which small to medium sized companies, such as Veltyco, have been created.

Application of the QCA Code

In the spirit of the QCA Code it is the Board's job to ensure that the Group is managed for the long-term benefit of all shareholders and other stakeholders with effective and efficient decision-making. Corporate governance is an important part of that job, reducing risk and adding value to the Group. The Board will continue to monitor the governance framework of the Group as it grows.

Veltyco is an online marketing and operating company that seeks to grow shareholder value through organic growth and acquisitions. Veltyco's aim is to build a portfolio of gaming brands through a combination of strong organic growth as well as strategic acquisitions that complement the current business.

The Board aims to achieve these objectives through the adoption of best working practices and by leveraging its industry knowledge and expertise. We believe that the senior management team as well as the Board, together with their industry leading partners and networks, have the necessary capabilities to achieve organic and external growth in the future, as demonstrated, for example, by the acquisition in 2017 of the 51% interest in online sportsbook and casino gaming company, Bet90.

In accordance with the AIM Rules, Veltyco applies (and in some cases departs from) the QCA Code in the following way:

Principle 1 - Establish a strategy and business model which promote long-term value for shareholders

Veltyco is an online company and its strategy is to create value for its customers and own brand by using state of the art technology and practices to ensure full customer satisfaction both on a B to B as well as on B to C level.

Principle 2 - Seek to understand and meet shareholder needs and expectations.

Veltyco has engaged in active dialogue with shareholders through regular communication including investor events, participation in conferences, and the Company's Annual General Meeting that were held throughout the year and one-on-one discussions. Our Corporate Brokers, Whitman Howard, have also taken an important role in discussions with equity investors throughout the year, as well as offering investor roadshows with the Group's management. New information is released via the regulatory news service (RNS) before anywhere else and the website is update accordingly.

Principle 3 - Take into account wider stakeholder and social responsibilities and their implications for long-term success

The Board recognises the importance of its wider stakeholders - employees, contractors, suppliers, customers, regulators and advisors - to its long-term success. The Board has established expectations that these key resources and relationships are valued and monitored. In particular, the Company's business model of outsourcing some its key activities requires reliable dialogue with contractors to ensure the successful pursuit of its long-term strategic objectives. Furthermore, the Board intends to actively seek to engage regularly with our corporate advisers to ensure proactive communication regarding the Company's activities. In doing so, the Company is able to take any feedback into account and adjust its actions accordingly to ensure it stays focused on long-term performance. The Board recognises that the Company operates within a competitive and fast changing industry and strives to remain alert to developments in a wider industry/society context.

Principle 4 - Embed effective risk management, considering both opportunities and threats, throughout the organisation

Veltyco operates within a complex business environment and an industry that is fundamentally driven by regulatory processes. The Board has set out its understanding of the principal risks and uncertainties in its Annual Report and regularly reviews its strategies for minimising any adverse impact to the Company or its investors.

The Directors acknowledge their responsibility for the Group's system of internal control, which is designed to ensure adherence to the Group's policies whilst safeguarding the assets of the Group, in addition to ensuring the completeness and accuracy of the accounting records. Responsibility for implementing a system of internal financial control is delegated to the CFO.

The essential elements of the Group's internal financial control procedures involve:

   --        Strategic business planning 

The Board regularly reviews and discusses the Group's performance and strategic objectives.

   --        Performance review 

The Directors monitor the Group's performance through the preparation and consideration of monthly management accounts and daily through KPIs and regular reviews of its expenditure and projections. In addition, detailed financial projections for each financial year are prepared and are subject to formal and regular review against actual trading by the Board.

Principle 5 - Maintain the Board as a well-functioning, balanced team led by the Chairman

The Board comprises four Directors of which three are Executives and one is a Non-executive, reflecting a blend of different experience and backgrounds. The Board considers Mark Rosman to be an independent Non-executive Director in terms of the QCA guidelines. Accordingly, the composition of the Board does currently not satisfy the QCA recommendation that there are at least two independent Non-executive Directors on the Board.

The Board meets throughout the year and all major decisions are taken by the Board as a whole. The Group's day-to-day operations are managed by the Executive Directors. All Directors have access to the Company information and any Director needing independent professional advice in the furtherance of his/her duties may obtain this advice at the expense of the Group.

Although the Board is satisfied that it has a suitable balance between independence on the one hand, and knowledge of the Group on the other, to enable it to discharge its duties and responsibilities effectively, and that all Directors have adequate time to fill their roles, the Group intends to appoint an additional independent Non-Executive Director in due course. In addition, the Board has commenced discussions with potential CEO candidates to join the Board. This process has the highest priority for the Board and we will make further announcements in due course as and when appropriate.

The role of the Chairman is to provide leadership of the Board and ensure its effectiveness on all aspects of its remit to maintain control of the Group. In addition, the Chairman is responsible for the implementation and practice of sound corporate governance.

Non-executive directors are expected to devote as much time as is necessary for the proper performance of their duties. Executive directors are full-time employees or services providers and expected to devote as much time as is necessary for the proper performance of their duties.

During 2018 the Board held eight (8) meetings either in person or by call, all of which were attended by all Directors. The Board also passed sixteen (16) unanimous written resolutions.

Principle 6 - Ensure that between them the directors have the necessary up to-date experience, skills and capabilities

The Board considers its current composition to be appropriate and suitable with the adequate and up-to-date experience, skills and capabilities to make informed decisions. Each member of the Board brings a different set of skills, expertise and experience, making the Board a diverse unit equipped with the necessary set of skills required to create maximum value for the Company.

The Board is fully committed to ensuring its members have the right skills. Members of the Board must be re-elected by the shareholders of the Company if they have not been re-elected at the previous two annual general meetings in accordance with the Company's Articles of Association, thereby providing shareholders the ability to decide on the election of the Company's Board.

The biographical details of the Directors are:

Paul J Duffen, Executive Chairman, aged 60, brings 35 years in management experience in various industries and being an entrepreneur. Paul was co-founder and Chief Executive Officer (until 2006) of Catalyst Media Group plc, which specialised in the sports, media and entertainment sectors, including motor racing in the USA and Horse Racing in the UK. He subsequently served as Executive Chairman of Hull City Football Club, securing their first promotion to the Premier League in 2008 and Chairman of Newsdesk Media Ltd, an international publishing Group. He currently serves as a non-executive Director of Animus Associates Ltd, a business intelligence consultancy, and has recently joined the Board of eSports.com Group Ltd.

Marcel Noordeloos, Chief Financial Officer, aged 50, was Group Finance Director at Playlogic International NV between 2006 and 2009 and Chief Financial Officer at Playlogic Entertainment Inc from March 2009 until September 2010 prior to becoming Chief Financial Officer at Velox3 plc (renamed to Veltyco Group plc at time of re-admission on 30 June 2016). Marcel has held several management positions with among others Nike EMEA (2002-2006) and PwC (1992-2001). Marcel holds an RA Degree (Registered Accountant) from the University of Amsterdam.

Rainer Lauffs, Chief Operating Officer, aged 46, is a business graduate from Philipps University of Marburg (Germany) and has been working in the online gaming world since 2006. Among other projects, he was significantly involved in building up PartyGaming's business in German and Dutch territories.

Mark Rosman, Non-Executive Director, aged 52, has 15 years of experience advising on private equity investments and managing private equity portfolios. Mark worked for Galladio Capital Management B.V. for eleven years and held the role of chief operating officer from 2006 until his departure in 2010. Since leaving Galladio, Mark has served as chief executive officer of The Nestegg B.V., a private equity management and advisory firm that advises high net worth individuals on the structuring and management of investments. Mark is a law graduate from VU University Amsterdam and has an MBA from Rotterdam School of Management.

The Board also consults with external advisers, such as it Nominated Adviser and the Company's lawyers, and with executives of the Company on various matters as deemed necessary and appropriate by the Board.

Principle 7 - Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement

Veltyco's Board is small and extremely focussed on implementing the Group's strategy. However, given the size and nature of the Group, the Board does not consider it appropriate to have a formal performance evaluation procedure in place, as described and recommended in Principle 7 of the QCA Code. The Board will closely monitor the situation as it grows.

Principle 8 - Promote a corporate culture that is based on ethical values and behaviours

We are committed to acting ethically and with integrity. We expect all employees, officers, directors and other persons associated with us to conduct their day-to-day business activities in a fair, honest and ethical manner.

For that purpose, we have adopted a Code of Business Conduct and Ethics ("Code") which applies to all our workforce personnel. Pursuant to the Code, employees, directors and other relevant stakeholders are required to comply with all laws, rules and regulations applicable to us. These include, without limitation, laws covering anti-bribery, copyrights, trademarks and trade secrets, data privacy, insider trading, illegal political contributions, antitrust prohibitions, rules regarding the offering or receiving of gratuities, environmental hazards, employment discrimination or harassment, occupational health and safety, false or misleading financial information or misuse of corporate assets. The Code also includes provisions for disclosing, identifying and resolving conflicts of interest of the employees and Board members.

The Code includes provisions requiring all employees to report any known or suspected violation and ensures that all reports of violations of the Code will be handled sensitively and with discretion. We also recognise the benefits of a diverse workforce and are committed to providing a working environment that is free from discrimination.

We have also adopted a share dealing code, regulating trading and confidentiality of inside information by persons discharging managerial responsibility and persons closely associated with them ("PDMRs").

We take all reasonable steps to ensure compliance by PDMRs and any relevant employees with the terms of the Dealing Code.

Principle 9 - Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

Corporate Governance Committees

The Board has established two committees, of which the composition is as follows:

Audit committee

Mark Rosman (Chairman)

Paul J Duffen

Remuneration committee

Mark Rosman (Chairman)

Paul J Duffen

The Audit Committee

The Audit Committee meets twice during the year to review the published financial information, the effectiveness of external audit and internal financial controls including the specific matters set out below.

The terms of reference of the Audit Committee are to assist all the Directors in discharging their individual and collective legal responsibilities and during the meetings to ensure that:

-- The Group's financial and accounting systems provide accurate and up-to-date information on its current financial position, including all significant issues and going concern;

-- The integrity of the Group's financial statements and any formal announcements relating to the Group's financial performance and reviewing significant financial reporting judgments contained therein are monitored;

-- The Group's published financial statements represent a true and fair reflection of this position; and taken as a whole are balanced and understandable, providing the information necessary for shareholders to assess the Group's performance, business model and strategy;

-- The external audit is conducted in an independent, objective, thorough, efficient and effective manner, through discussions with management and the external auditor; and

-- A recommendation is made to the Board for it to put to shareholders at a general meeting, in relation to the reappointment, appointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor.

The Audit Committee does not consider there is a need for an internal audit function given the size and nature of the Group.

Significant issues considered by the Audit Committee during the year have been the Principal Risks and Uncertainties (which are set out in the this annual report) and their effect on the financial statements. The Audit Committee tracked the Principal Risks and Uncertainties through the year and kept in contact with the Group's Management, External Service Providers and Advisers and received regular updates. The Audit Committee is satisfied that there has been appropriate focus and challenge on the high-risk areas.

Nexia Smith & Williamson, our external auditors, have been in office since 2013.

The external auditors are invited to attend the Audit Committee meeting to present their findings and this provides them with a direct line of communication to the Non-executive Directors.

The Remuneration Committee

The terms of reference of the Remuneration Committee are to:

-- recommend to the Board a framework for rewarding senior management, including Executive Directors, bearing in mind the need to attract and retain individuals of the highest calibre and with the appropriate experience to make a significant contribution to the Group; and

-- ensure that the elements of the remuneration package are competitive and help in underpinning the performance-driven culture of the Group.

Principle 10 - Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Board is committed to maintaining good communication with its shareholders and in promoting effective dialogue regarding the Group's strategic objectives and performance. Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback via meetings with the Company. The Annual General Meeting and any other General Meetings that are held throughout the year are for shareholders to attend and question the Directors on the Company's performance. Regular progress reports are also made via RNS announcements and the point of contacts are Paul J. Duffen, Executive Chairman and Marcel Noordeloos, CFO.

Our Audit Committee Report is included on pages 19-20 of this Annual Report. Our Remuneration Committee Report is included on page 21 of this Annual Report.

Audit Committee Report

General and Composition of the Audit Committee

The Audit Committee is a sub-committee of the Board. The Audit Committee chairman reports formally to the Board on all matters within the Committee's duties and responsibilities and on how the Audit Committee discharges its responsibilities. The Audit Committee members are Mark Rosman (Chairman) and Paul Duffen.

The Audit Committee consists of two members, Mark Rosman (Chairman) and Paul Duffen. Mark Rosman is considered to be independent.

The biographies of the Audit Committee members are on pages 15-16 under principle six, as well as on the Company's website at www.veltycogroupplc.com/corporate-info .

The Audit Committee meets at twice a year at appropriate times in the reporting and audit cycle and otherwise as required. The Audit Committee also meets regularly with the Company's external auditors.

Purpose and Responsibilities of Audit Committee

The purpose of the Audit Committee is to assist the Board to carry out the following functions more efficiently and fully:

-- Oversight of the integrity of the Group's formal reports, statements and announcements relating to the Group's financial performance; and

-- Reviewing compliance with internal guidelines, policies and procedures and other prescribed internal standards of behaviour.

To achieve such purposes, the Audit Committee has been assigned with the following responsibilities:

-- Reviewing the half-year and full-year financial statements with management and with the external auditors as necessary prior to their approval by the Board;

-- Reviewing financial results announcements of the Group and any other formal announcements relating to the Group's financial performance and recommending them to the Board for approval;

-- Reviewing recommendations from the CFO and the external auditors on the key financial and accounting principles to be adopted by the Group in the preparation of the financial statements;

   --        Reviewing the Group's systems for internal financial control; 

-- Considering and making recommendations to the Board, to put to shareholders for approval at the AGM, the appointment, re-appointment and removal of the Company's external auditors and oversee the relationship with the external auditors;

   --        Reviewing and approving the external audit plan and regularly monitoring the progress of implementation of the plan; 
   --        Determining and monitoring the effectiveness and independence of the external auditors. 

Main Activities in 2018

On 6 June 2018 the Audit Committee reviewed the financial statements for FY2017.

On 27 September 2018 the Audit Committee reviewed the financial results of the Company for H1 2018.

External Auditors

The external auditors of the Company are Nexia Smith & Williamson ("NS&W"). The appointment of NS&W as auditors by the Audit Committee was based on their performance during past years. The Audit Committee review of the external auditors confirmed the appropriateness of their reappointment and included assessment of their independence, qualification, expertise and resources, and effectiveness of their audit process.

Both the Board and the external auditors have safeguards in place to avoid the possibility that the auditors' objectivity and independence could be compromised. The services provided by the external auditors include the Audit-related services. In recognition of public concern over the effect of consulting services on auditors' independence, the external auditors are not invited to general consulting work which can affect their independence as external auditors.

The total remuneration of the external auditors for 2018 and for 2017 was as listed in the table below:

 
 
              Auditor's remuneration                  2018                    2017 
            Audit services                          EUR65,000              EUR130,000 
            Acquisition and assurance                   -                      - 
             services 
            Taxation compliance                         -                      - 
 

The Audit Committee and the auditors found that the external audit plan for 2018, the work of the external auditors for 2018 and the remuneration of the external auditors for 2018 did not undermine the independence of the external auditors.

Financial Reporting

The Group's trading performance is monitored on an ongoing basis. An annual budget is prepared, and specific objectives and targets are set. The budget is reviewed and approved by the Board. The key trading aspects of the business are monitored daily and internal management and financial accounts are prepared monthly. The results are compared to budget and prior year performance.

The Audit Committee has taken and will continue to take further steps to ensure the Group's control environment is working effectively and efficiently.

--------------------------------

Mark Rosman

Chairman of the Audit Committee

Remuneration Committee Report

GENERAL

The Remuneration Committee is responsible for determining and recommending to the Board the framework for the remuneration of the Board chairman, executive directors and other designated senior executives and, within the terms of the agreed framework, determining the total individual remuneration packages of such persons including, where appropriate, bonuses, incentive payments and share options or other share awards.

The Remuneration Committee consists of two members, Mark Rosman (Chairman) and Paul Duffen. Mark Rosman is considered independent. The Remuneration Committee meets at least once a year and otherwise as required.

Key elements in Remuneration

As an AIM-quoted company, the Company is not required to comply with the remuneration reporting requirements applicable to fully listed companies in the UK. However, set out below are certain disclosures relating to directors' remuneration:

-- The remuneration of executive directors and certain other senior executives is set by comparison to market rates at levels aimed to attract, retain and motivate the best staff, recognising that they are key to the ongoing success of the business.

-- The remuneration of non-executive directors is a matter for the Chairman and the executive directors to determine.

   --        No Director is involved in any decision as to his or her own remuneration. 

-- The remuneration of senior management includes equity-based payments (stock options) vested over time to retain their employment.

Responsibilities of the Remuneration Committee

The responsibilities of the Remuneration Committee include the below and other responsibilities as set forth in the Charter of the Committee:

-- Setting the remuneration policy for all executive directors. Paul Duffen is not involved in setting his own remuneration, this is determined by Mark Rosman only;

-- Recommending and monitoring the level and structure of remuneration for senior management personnel;

-- Reviewing the design of all share incentive plans for approval by the Board and shareholders.

Share option scheme

On 17 May 2016, the Company adopted a "long term incentive senior management and Directors' stock option plan" ("the Plan"). Options granted under the Plan will entitle the participant to acquire Ordinary Shares at a price determined in accordance with the rules of the Plan.

The Directors' interests in the Company's share options for the year ended 31 December 2018 are shown on page 10.

The Committee remains committed to a fair and responsible approach to executive pay whilst ensuring it remains in line with best practice and appropriately incentivises executive directors over the longer term to deliver the Group's strategy.

---------------------------------

Mark Rosman, Chairman of the Remuneration Committee

INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF Veltyco Group PLC

Opinion

We have audited the consolidated financial statements of Veltyco Group PLC (the 'Parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2018 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows, and the notes to the consolidated financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion, the financial statements:

-- give a true and fair view of the state of the Group's affairs as at 31 December 2018 and of its profit for the year then ended;

   --   have been properly prepared in accordance with IFRSs as adopted by the European Union. 

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw attention to note 1 in the financial statements, which indicates that at 31 December 2018 the Group is only able to continue as a going concern if it receives sufficient positive cash flows from its existing operations as projected by the Directors. This is contingent on future marketing activity being successful, players not having large wins, receivables being collected as they fall due and the continued support of creditors. If projected revenues are not achieved in quantum or timing, then the Group will need to raise equity or debt in order to meet its liabilities as they fall due.

The Group has made a loss for the year of EUR16.7m, has net current liabilities of EUR1.2m as at 31 December 2018, has cash outflow of EUR0.1m in 2018 and has made losses to date in the current year.

In any event that the Directors consider that further funding is likely to be required for working capital purposes and whilst they are confident of being able to raise such funding if required, there is no certainty that such funding will be available and/or the terms of such funding. In this instance the other intangible assets held by the Group at EUR1,431,925 and the goodwill held at EUR1,410,931 may be impaired, additional liabilities may arise and assets and liabilities currently classified as non-current may become current.

These conditions represent a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key audit matters

In addition to the matter around going concern described above, we identified the key audit matters described below as those that were of most significance in the audit of the financial statements of the current period. Key audit matters include the most significant assessed risks of material misstatement, including those risks that had the greatest effect on our overall audit strategy, the allocation of resources in the audit and the direction of the efforts of the audit team.

In addressing these matters, we have performed the procedures below which were designed to address the matters in the context of the financial statements as a whole and in forming our opinion thereon. Consequently, we do not provide a separate opinion on these individual matters.

 
                                                      How the matter was addressed 
   Key audit                                           in the audit and key observations 
   matter                Description of risk           arising with respect to 
                                                       that risk 
 Revenue recognition   Revenue is a key performance        The Group's revenue recognition 
                       indicator of the Group.              policies are stated in 
                       Due to the significant               note 3. 
                       difficulty in collecting 
                       revenues from the                    We evaluated the design 
                       online financial trading             and implementation of relevant 
                       and lottery verticals,               internal controls that 
                       these activities were                the Group uses to ensure 
                       ceased during the                    the completeness, accuracy 
                       year, leaving the                    and timing of revenue recognised. 
                       Group reliant on revenues 
                       from its remaining                   In testing revenue recognition 
                       business with Betsson,               we have: 
                       the Bet90 sports and                  *    Reviewed the Group's material contracts with 
                       casino activity and                        customers. 
                       T4U. Revenue expectations 
                       may place pressure 
                       on the Directors to                   *    Performed detailed testing on a sample of revenue 
                       distort revenue recognition.               transactions, including agreement to third party 
                       This may result in                         reports. 
                       overstatement or deferral 
                       of revenues to assist 
                       in meeting current                    *    Where cash has been received it has been agreed to 
                       or future targets                          bank statements and remittance advice. 
                       or expectations. 
 
                                                             *    Agreed that revenue is being recognised correctly in 
                                                                  line with IFRS 15. 
 
 
 
                                                            Where the above are the 
                                                            subject of the work of 
                                                            component auditors we have 
                                                            reviewed their working 
                                                            papers in respect of these 
                                                            items. 
 
                                                            We were unable to agree 
                                                            online financial trading 
                                                            revenue to the gaming platform 
                                                            operator's back office 
                                                            system as we had in previous 
                                                            years. 
 
                                                            We performed alternative 
                                                            procedures to satisfy ourselves 
                                                            that it was appropriate 
                                                            to recognise online financial 
                                                            trading revenue until the 
                                                            Directors considered it 
                                                            no longer probable that 
                                                            consideration would be 
                                                            collected. 
                      -----------------------------  ----------------------------------------------------------------- 
 Carrying              As at 31 December              We challenged the assumptions 
  amount and            2018 the Group holds           used in the impairment 
  impairment            other intangible assets        model for intangible assets, 
  of other              with a net book value          described in note 10. 
  intangible            of EUR1.4m. Of this            As part of our procedures 
  assets                balance, EUR1.1m relates       we: 
                        to the brand and domain         *    considered the impact of ceasing to trade in the 
                        name of Bet90 Sports                 online financial trading and lottery verticals; 
                        Limited and EUR300k 
                        to the domain name 
                        for T4U Marketing               *    considered the impact of the Group's deferral of 
                        Limited.                             launching its own regulated online financial trading 
                                                             brand; 
                        The Group has impaired 
                        EUR6.2m of intangible 
                        assets in the year.             *    considered historical trading performance by 
                                                             comparing both revenue and operating profit of the 
                        The Group's assessment               Group's remaining business with Betsson, the Bet90 
                        of the carrying amount               sports and casino activity and T4U with projected 
                        requires significant                 revenues and operating profits; 
                        judgement, in particular 
                        regarding cash flows, 
                        growth rates, discount          *    assessed the appropriateness of the assumptions 
                        rates and sensitivity                concerning growth rates and inputs to the discount 
                        assumptions.                         rate against latest market expectations; 
 
 
                                                        *    considered the Directors' assertions about the 
                                                             Group's future utilisation of assets by cash 
                                                             generating unit; and 
 
 
                                                        *    considered sensitivity analysis of key variables 
                                                             included within the value in use calculations. 
 
 
 
                                                       In performing our procedures, 
                                                       we used our internal valuation 
                                                       specialists and third party 
                                                       evidence to assess the 
                                                       appropriateness of the 
                                                       discount rate applied. 
 
                                                       The Directors have impaired 
                                                       EUR4m in respect of the 
                                                       player database held by 
                                                       Marsovia Holding Limited 
                                                       ('Marsovia'), EUR2.1m in 
                                                       respect of the domain names 
                                                       for the online financial 
                                                       trading activity and EUR7k 
                                                       of the brand and domain 
                                                       name in T4U Marketing Limited. 
                                                       Based on our procedures 
                                                       we concluded that these 
                                                       impairments were appropriate. 
 
                                                       The Directors have determined 
                                                       that no impairment on the 
                                                       domain name for Bet 90 
                                                       Sports Limited was necessary. 
                                                       Based on our procedures 
                                                       we concluded that no impairment 
                                                       was required. 
                      -----------------------------  ----------------------------------------------------------------- 
 Carrying              As at 31 December                   We challenged the assumptions 
  amount and            2018 the Group holds               used in the impairment 
  impairment            goodwill with a net                model for goodwill, described 
  of goodwill           book value of EUR1.4m.             in note 10. 
                        EUR1.4m of this balance            As part of our procedures 
                        relates to the acquisition         we: 
                        of Bet90 Sports Limited.            *    considered historical trading performance of both 
                                                                 revenue and operating profit in respect of the Bet 90 
                        The Group has impaired                   sports and casino activity and T4U with projected 
                        EUR333k of goodwill                      revenue and operating profits; 
                        in the year relating 
                        to the acquisition 
                        of T4U Marketing Limited.           *    assessed the appropriateness of the assumptions 
                                                                 concerning growth rates and inputs to the discount 
                        The Group's assessment                   rate against latest market expectations; 
                        of carrying amount 
                        requires significant 
                        judgement, in particular            *    considered the Directors' assertions about the 
                        regarding cash flows,                    Group's future utilisation of assets by cash 
                        growth rates, discount                   generating unit; and 
                        rates and sensitivity 
                        assumptions. 
                                                            *    considered sensitivity analysis of key variables 
                                                                 included within the value in use calculations. 
 
 
 
                                                           In performing our procedures, 
                                                           we used our internal valuation 
                                                           specialists and third party 
                                                           evidence to assess the 
                                                           appropriateness of the 
                                                           discount rate applied. 
 
                                                           The Directors have impaired 
                                                           the full goodwill balance 
                                                           in T4U Marketing Limited 
                                                           and have determined that 
                                                           no impairment on the goodwill 
                                                           balance for Bet 90 Sports 
                                                           Limited was necessary. 
                                                           Based on our procedures 
                                                           we concluded that this 
                                                           was appropriate. 
                      -----------------------------  ----------------------------------------------------------------- 
 Completeness          During the 2017 audit          We inquired of the Directors 
  of related           process a material              how their controls over 
  party transaction    related party transaction       related party relationships 
  disclosures          was identified that             and transactions have been 
  in note 30           had not been disclosed          amended so as to identify 
                       in the draft financial          any such transactions. 
                       statements indicating 
                       that the Group's controls       We requested that the Directors 
                       for identifying related         circulate related party 
                       party transactions              declarations to all members 
                       were not operating              of Key Management Personnel 
                       as intended. As such            so that they may be brought 
                       there is a risk that            up to date immediately. 
                       transactions have 
                       taken place with                We reviewed these related 
                       unidentified                    party declarations to ensure 
                       related parties.                that all relevant transactions 
                                                       had been disclosed within 
                                                       the financial statements. 
                                                       For related parties that 
                                                       had been noted but with 
                                                       whom there were no transactions 
                                                       we considered whether we 
                                                       were aware of any transactions 
                                                       with that individual or 
                                                       entity. 
 
                                                       Where possible we have 
                                                       reviewed publicly available 
                                                       information, however due 
                                                       to the countries that the 
                                                       Group, its customers and 
                                                       suppliers operate in there 
                                                       is relatively little information 
                                                       available in this respect. 
 
                                                       We reviewed the minutes 
                                                       of Board meetings for any 
                                                       potential related party 
                                                       transactions. 
 
                                                       We made specific enquires 
                                                       of the Directors in respect 
                                                       of material contracts with 
                                                       customers. 
 
                                                       We have not identified 
                                                       any additional related 
                                                       party transactions as a 
                                                       result of the above procedures. 
                      -----------------------------  ----------------------------------------------------------------- 
 Recoverability        As at 31 December                         We have reviewed the Sale 
  of trade              2017 the Group had                        and Purchase Agreement 
  receivables           a trade receivable                        for Marsovia; verified 
  as described          balance of EUR8.8m                        the existence of the database 
  in note 15            and accrued income                        and of a sample of customers 
                        of EUR2.7m.                               on the database; reviewed 
                                                                  the valuation of the database 
                        Of the EUR11.5m trade                     based on third party customer 
                        receivable and accrued                    acquisition cost data and 
                        income balance, EUR10.8m                  considered the impact of 
                        related to the Group's                    the Group's subsequent 
                        marketing activities                      decision to defer the development 
                        in respect of online                      of their own regulated 
                        financial trading                         online financial trading 
                        operators. EUR8.1m                        brand. 
                        of this EUR10.8m is 
                        due from a single                         We have reviewed the tri-partite 
                        party, Altair Entertainment               set-off agreements in respect 
                        N.V. ("Altair").                          of the related party loan 
                        Part of this balance                      payable and amount due 
                        was settled through                       to a subsidiary of Altair. 
                        the acquisition of 
                        a player database                         All amounts due from Altair 
                        in Marsovia and through                   have been impaired and 
                        a tri partite set                         there has been no cash 
                        off agreement leaving                     recovered to date. 
                        a balance of EUR4.9m 
                        due.                                      We have discussed the relationship 
                                                                  between the Group and Altair 
                        During the year the                       with the Directors and 
                        Group impaired the                        they have confirmed that 
                        receivables from the                      Altair is not a related 
                        online financial trading                  party of the Group. 
                        and lottery business 
                        with a value of EUR10.7 
                        million (including 
                        the balance from 2017 
                        of EUR4.9m). 
 
                        The above factors 
                        represent a material 
                        risk in relation to 
                        the valuation of trade 
                        receivables. 
                      -----------------------------  ----------------------------------------------------------------- 
 

Materiality

The materiality for the financial statements as a whole was set at EUR220,000. This has been determined with reference to the benchmark of the Group's trading expenses, excluding impairment and amortisation charges. Revenue or profit were not deemed appropriate this year due to the impairment of online financial trading receivables.

An overview of the scope of our audit

Of the Group's 14 reporting components, we subjected ten to audit for Group reporting purposes and four to specific audit procedures where the extent of our audit work was based on our assessment of the risk of material misstatement and of the materiality of the Group. The latter have no audit requirements in their countries of incorporation but were still material to the Group.

The components within the scope of our work covered: 100% of the Group's revenue, loss before tax and net assets.

The Group audit team visited two component locations in the Netherlands and Cyprus. The component auditors in Malta sent their working papers electronically to the Group audit team. Telephone conference meetings were held with the component auditors in Cyprus and Malta. At these visits and meetings, the Group audit team discussed the component auditors' risk assessments and planned audit approach. Once the audit work was completed, the findings reported to the Group audit team were discussed in more detail, and any further work required by the Group audit team was then performed by the component auditors. In addition to these planned visits and meetings, the Group audit team sent detailed instructions to the component audit teams and reviewed their audit working papers.

Other information

The other information comprises the information included in the Annual Report and Accounts, other than the financial statements and our auditor's report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Responsibilities of Directors

As explained more fully in the Directors' responsibilities statement set out on page 10, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the Company's members, as a body, in accordance with our engagement letter dated 19 February 2018. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Nexia Smith & Williamson 25 Moorgate

Statutory Auditor London

Chartered Accountants EC2R 6AY

28 June 2019

Consolidated statement of comprehensive income

 
                                                   Year ended     Year ended 
                                                  31 December    31 December 
                                       Notes             2018           2017 
                                                          EUR            EUR 
 
 Revenues                                4         11,634,173     16,194,791 
 Cost of Sales                                    (1,337,518)      (976,763) 
                                               --------------  ------------- 
 Gross Margin                                      10,296,655     15,218,028 
 
 Salary expense                                   (1,402,887)    (1,087,235) 
 Marketing and selling expense                    (5,381,050)    (4,550,529) 
 General administrative expense                   (3,210,684)    (1,717,962) 
 Impairment of receivables              15       (10,712,715)              - 
 Depreciation, amortisation and       10, 11, 
  impairment expense                     13       (6,887,272)      (380,173) 
                                               --------------  ------------- 
 Total administrative expenses                   (27,594,608)    (7,735,899) 
                                               --------------  ------------- 
 Operating (loss)/profit                         (17,297,953)      7,482,129 
 
 Financial income                                      38,851         98,779 
 (Loss)/profit before tax                6       (17,259,102)      7,580,908 
 Taxation                                7            555,800      (801,116) 
 Total comprehensive (loss)/profit               (16,703,302)      6,779,792 
                                               --------------  ------------- 
 
 Attributable to: 
 Equity holders of the Company                   (15,177,112)      7,333,280 
 Non-controlling interests                        (1,526,190)      (553,488) 
                                                 (16,703,302)      6,779,792 
                                               --------------  ------------- 
 
 (Loss)/earnings per share attributable to 
  equity holders of the Company 
 - Basic (in EUR)                        8           (0.2029)         0.1017 
 - Diluted (in EUR)                      8           (0.2029)         0.0944 
 
 

The Notes on pages 33 to 60 form part of these financial statements

Consolidated statement of financial position

 
                                                                31 December                   31 December 
                                      Note                             2018                          2017 
                                                                        EUR                           EUR 
 
 Non-current assets 
 Goodwill                               10                        1,410,931                     1,743,485 
 Other intangible assets                11                        1,431,925                     3,985,347 
 Investments                            12                                -                        25,000 
 Property, plant and equipment          13                            1,238                         2,530 
 Loans receivable                       14                                -                       997,476 
 Total non-current assets                                         2,844,094                     6,753,838 
                                            -------------------------------  ---------------------------- 
 
 Current assets 
 Loans receivable                       14                                -                     1,558,057 
 Trade and other receivables            15                          854,215                    11,881,469 
 Cash and cash equivalents              16                        1,031,071                       700,192 
 Total current assets                                             1,885,286                    14,139,718 
                                            -------------------------------  ---------------------------- 
 Total assets                                                     4,729,380                    20,893,556 
                                            -------------------------------  ---------------------------- 
 
 Equity and liabilities 
 Share capital                          17                               -                              - 
 Additional paid-in capital             18                       14,344,702                    13,665,233 
 Reverse asset acquisition reserve      19                      (6,046,908)                   (6,046,908) 
 Retained earnings                      20                      (5,262,376)                     9,948,904 
 Equity attributable to owners 
  of the parent                                                   3,035,418                    17,567,229 
                                            -------------------------------  ---------------------------- 
 Non-controlling interests                                      (1,411,578)                       182,967 
 Total shareholders' equity                                       1,623,840                    17,750,196 
                                            -------------------------------  ---------------------------- 
 
 Non-current liabilities 
 Borrowings                             22                           27,858                     1,355,223 
 Total non-current liabilities                                       27,858                     1,355,223 
                                            -------------------------------  ---------------------------- 
 
 Current liabilities 
 Trade and other payables               23                        3,077,682                     1,788,137 
 Total current liabilities                                        3,077,682                     1,788,137 
                                            -------------------------------  ---------------------------- 
 Total equity and liabilities                                     4,729,380                    20,893,556 
                                            -------------------------------  ---------------------------- 
 

Approved by the board on 28 June 2019 and signed on its behalf by:

Paul Duffen

Chairman

The Notes on pages 33 to 60 form part of these financial statements

Consolidated statement of changes in equity

 
                                                                      Other 
                                                                   reserves 
                                                                          - 
                                                                    Reverse 
                                                                      asset 
                                                  Additional 
                                  Share              paid in    acquisition       Retained                   Non-controlling          Total 
                                capital              capital        reserve       earnings           Total          interest         Equity 
                                    EUR                  EUR            EUR            EUR             EUR               EUR            EUR 
 
 
 Balance as at 1 
  January 
  2017                                  -          10,614,354    (6,046,908)      2,376,540       6,943,986                 -      6,943,986 
                     --------------------  ------------------  -------------  -------------  --------------  ----------------  ------------- 
 
 Profit for the 
  financial 
  period                                -                   -              -      7,333,280       7,333,280         (553,488)      6,779,792 
 Share based 
  payments                              -             161,000              -        239,084         400,084                 -        400,084 
 Exercise of stock 
  options 
  and warrants                          -             333,416              -              -         333,416                 -        333,416 
 Non-controlling 
  interests 
  acquired                              -                   -              -              -               -           736,455        736,455 
 Issue of share 
  capital                               -           2,556,463              -              -       2,556,463                 -      2,556,463 
 Balance as at 31 
  December 
  2017                                  -          13,665,233    (6,046,908)      9,948,904      17,567,229           182,967     17,750,196 
                     --------------------  ------------------  -------------  -------------  --------------  ----------------  ------------- 
 
 Loss for the 
  financial 
  period                                -                   -              -   (15,177,112)    (15,177,112)       (1,526,190)   (16,703,302) 
 Dividend paid                          -                   -              -      (210,912)       (210,912)          (68,355)      (279,267) 
 Share based 
  payments                              -                   -              -        176,744         176,744                 -        176,744 
 Shares to be 
  issued                                -             555,500              -              -         555,500                 -        555,500 
 Issue of share 
  capital                               -             123,969              -              -         123,969                 -        123,969 
 Balance as at 31 
  December 
  2018                                  -          14,344,702    (6,046,908)    (5,262,376)       3,035,418       (1,411,578)      1,623,840 
                     --------------------  ------------------  -------------  -------------  --------------  ----------------  ------------- 
 

The Notes on pages 33-60 form part of these financial statements

Consolidated statement of cash flows

 
                                                                    31 December                        31 December 
                                                                           2018                               2017 
                                                                            EUR                                EUR 
 
 Cash flows from operating activities 
 Operating (loss)/profit                                           (17,297,953)                          7,482,129 
 Adjustments for: 
 Share based payments                                                   176,744                            239,084 
 Depreciation                                                             1,292                              1,628 
 Amortisation of intangibles                                            403,222                            378,545 
 Impairment of intangibles                                            6,482,752                                  - 
 Impairment of receivables                                           10,737,715                                  - 
                                             ----------------------------------  --------------------------------- 
 Cash flow from operations before 
  working capital changes                                               503,772                          8,101,386 
 
 (Increase) in trade and other receivables                          (1,058,697)                        (9,279,131) 
 (Decrease)/increase in trade and 
  other payables                                                        533,580                            146,894 
                                             ----------------------------------  --------------------------------- 
 Cash flow from operations                                             (21,345)                        (1,030,851) 
 
 Tax paid                                                              (86,823)                           (72,152) 
 Cash flow from operating activities                                  (108,168)                        (1,103,003) 
                                             ----------------------------------  --------------------------------- 
 
 Cash flow from investing activities 
 Acquisitions of subsidiaries                                                 -                        (2,510,000) 
 Acquisitions of intangible assets                                            -                           (75,000) 
 Acquisitions of investments                                                  -                           (25,000) 
 Loans granted                                                                -                          (189,681) 
 Loans repayments received                                                    -                            225,000 
 Interest received                                                       38,851                             15,007 
 Net cash inflow/(outflow) from 
  investing activities                                                   38,851                        (2,559,674) 
                                             ----------------------------------  --------------------------------- 
 
 Cash flow from financing activities 
 Proceeds of issue of new shares                                        679,469                          2,889,879 
 Dividends paid                                                       (279,273)                                  - 
 Loans repaid                                                                 -                          1,328,865 
 Net cash inflow from financing 
  activities                                                            400,196                          4,218,744 
                                             ----------------------------------  --------------------------------- 
 
 Net increase in cash and cash equivalents                              330,879                            556,067 
 Cash and cash equivalents at start 
  of period                                                             700,192                            144,125 
                                             ----------------------------------  --------------------------------- 
 Cash and cash equivalents at end 
  of period                                                           1,031,071                            700,192 
                                             ----------------------------------  --------------------------------- 
 

The Notes on page 33-60 form part of these financial statements

Notes to the Consolidated Financial Statements

For the year ended 31 December 2018

Note 1: General Information

The principal accounting policies as adopted by the Group in the preparation of its consolidated financial statements for the year ended 31 December 2018 are set out below. The accounting policies have been consistently applied, unless otherwise stated.

Basis of preparation

The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and issued by the International Accounting Standards Board ("IASB"). These accounting policies comply with each IFRS that is mandatory for accounting periods ending on or after 31 December 2018. The Consolidated Financial Statements have been prepared under the historical cost convention and on a going concern basis.

The Directors have reviewed the accounting policies used by the Group and consider them to be appropriate. With the exception of any changes relating to the effects of the implementation of IFRS9 ("Financial instruments") and IFRS 15 ("Revenue from contracts with customers"),as mentioned in paragraph 3,the accounting policies are consistent with the prior years.

Basis of consolidation

The Consolidated Financial Statements incorporate the results of Veltyco Group plc (the "Company") and entities controlled by the Company (its subsidiaries) (collectively the "Group"). Control is achieved where the Company has the power to govern the financial and operating policies of an entity.

The results of subsidiaries disposed of are included in the consolidated statement of comprehensive income to the effective date of loss of control and those acquired from the date on which control is transferred to the Group.

Going concern

The Group experienced significant operational difficulties during 2018 in respect to receiving agreed marketing commissions from operators within the online financial trading and lottery verticals and as a result, the Group terminated these activities in H2 2018 and they have been fully impaired in 2018. As a result, the Company has commenced procedures to seek to recover these receivables through a legal process, though this has not resulted in further receipts of cash to date.

Following the termination of the Group's marketing activities for the online financial trading and the lottery verticals, the Group is currently focusing its activities on operating in the sports book and casinos vertical and has revenues and cost centres in a number of locations throughout Europe.

As a result of the above, the Group achieved a net loss of EUR16.7 million for the year ended 31 December 2018. Furthermore, the Group had a negative cash flow from operations of EUR0.1 million for the year ended 31 December 2018 and the Directors expect the Group to be loss making for the six months ending 30 June 2019.

The Group has therefore sought to reduce its operating costs to match the current operations and the Directors continue to manage the Group's cash resources carefully. However, whilst they believe that the Group will be able to continue to manage its creditors, which are meaningfully in excess of the Group's current cash resources, should trading not be in line with expectations going forward and/or the Group is not able to manage its creditors, the Group's ability to meet such liabilities may be impacted, in which case the Group will need to raise further funding. In any event the Directors consider that further funding is likely to be required and continue to explore further appropriate sources of capital. Whilst they are confident of being able to raise such funding if required, there is no certainty that such funding will be available and/or the terms of such funding. However, these conditions are necessarily considered to represent a material uncertainty which may cast significant doubt over the Group's ability to continue as a going concern.

Whilst acknowledging this material uncertainty, the Directors remain confident of being able raise additional funding as required and therefore the Directors consider it appropriate to prepare the financial statements on a going concern basis. The financial statements do not include the adjustments that would result if the Group and Company was unable to continue as a going concern.

Note 2: Critical accounting policies, estimates and judgements

The preparation of the Consolidated Financial Statements requires the Directors to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

Areas of estimation

Impairment of Goodwill and other intangible fixed assets

Determining whether goodwill and other intangible fixed assets with a definite or indefinite useful life are impaired requires an estimation of the value-in-use of the cash-generating units. The value-in-use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and select a suitable discount rate in order to calculate present value together with an assessment as to whether future cash flows are subject to any degree of uncertainty. The work to assess the existence of impairment indicators and, where applicable, to evaluate the impairment of goodwill and intangible assets was conducted internally by the Directors. Further details are provided in Notes 10 and 11 of this report. However, there is a risk of a further impairment next year. There is a risk that there are insufficient future cash flows to support the value in use of these assets.

Standards in issue but not yet effective

The new standards apply to annual reporting periods beginning on or after 1 January 2019. The Group has not early adopted IFRS 16.

IFRS 16 Leases - IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 Leases requires lessees to recognise right-of-use assets and lease liabilities for most leases. A contract is (or contains) a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Right-of-use assets are initially measured at cost and depreciated by the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The cost of right-of-use assets comprises of initial measurement of the lease liability, any lease payments made before or at the commencement date and initial direct costs. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date and subsequently measured at amortised cost with the interest expense recognised within finance income (expense) in the consolidated statement of income.

In accordance with the transition provisions in IFRS 16, the Group is entitled to choose to apply the modified retrospective approach. Under this approach, a lessee does not restate comparative information and recognise the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings at the date of initial application.

During 2018, the Group has performed a detailed impact assessment of IFRS 16. Due to the limited number and the expiration of existing leases the impact on the financial statements will be immaterial.

The following relevant interpretations and amendments to existing standards issued by the IASB, have not been adopted by the Group as they were either not effective for the year or not yet endorsed for use in the EU. The Group is currently assessing the impact of these interpretations and amendments will have on the presentation of, and recognition in, parent company or consolidated results or financial position in future periods:

-- Amendments to IAS28 - Long-term Interests in Associates and Joint Ventures (effective for accounting periods beginning on or after 1 January 2019).

-- Annual Improvements to IFRS Standards 2015-2017 Cycle (issued on 12 December 2017) (effective for accounting periods beginning on or after 1 January 2019).

-- IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments (effective for accounting periods beginning on or after 1 January 2019).

-- Amendments to IAS19: Plan Amendment, Curtailment or Settlement (effective for accounting periods beginning on or after 1 January 2019).

-- Amendments to IFRS 9: Prepayment Features with Negative Compensation (effective for accounting periods beginning on or after 1 January 2019).

Changes in accounting policies

Initial adoption of new financial reporting and accounting standards and amendments to existing financial reporting and accounting standards:

Initial adoption of IFRS 15, "Revenue from Contracts with Customers":

The IASB issued IFRS 15, "Revenue from Contracts with Customers" ("the new Standard") in May 2014. The new Standard replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for the Construction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC-31, "Revenue - Barter Transactions Involving Advertising Services".

The new Standard has been applied for the first time in these consolidated financial statements. The Company elected to adopt the provisions of the new Standard using the modified retrospective approach with the application of certain practical expedients and without restatement of comparative data.

The adoption of IFRS 15 as of 1 January 2018 did not have a material effect on the consolidated financial statements.

Initial adoption of IFRS 9, "Financial Instruments":

In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "Financial Instruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to all assets within the scope of IAS 39.

IFRS 9 has been applied for the first time in these consolidated financial statements retrospectively without restatement of comparative data. The adoption of IFRS 9 as of 1 January 2018 did not have a material effect on the consolidated financial statements.

Note 3: Significant accounting policies

The principal accounting policies applied in the preparation of these Consolidated Financial Statements are set out below. The policies have been consistently applied to all years presented, unless otherwise stated.

Revenue

As detailed in the initial adoption of IFRS 15, "Revenue from Contracts with Customers" ("the Standard"), the Company elected to adopt the provisions of the Standard using the modified retrospective method with the application of certain practical expedients and without restatement of comparative data.

The accounting policy for revenue recognition applied commencing from 1 January 2018 is as follows:

Revenue from contracts with customers is recognised when the control over the services is transferred to the customer. The transaction price is the amount of the consideration that is expected to be received based on the contract terms.

In determining the amount of revenue from contracts with customers, the Group evaluates whether it is a principal or an agent in the arrangement. The Group is principal when the Group controls the promised services before transferring them to the customer. In these circumstances, the Group recognises revenue for the gross amount of the consideration. When the Group is an agent, it recognises revenue for the net amount of the consideration, after deducting the amount due to the principal.

Marketing commission revenue

Revenue from marketing contracts with customers is recognised when the reports are received from the customers on which the Company is basing the amounts to be invoiced. The transaction price is the commission amount of the consideration that is expected to be received based on the contract terms. The performance obligation of a revenue contract is satisfied at the point a player's losses are incurred. Operators typically pay a month in arrears. This gives rise to contract assets on a short term basis.

Sportsbook and casino revenue

Revenue is recognised provided that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is recognised in the accounting periods in which the transactions occurred and after adding the fees and charges applied to customer accounts, and is measured at the fair value of the consideration received or receivable.

Revenue consists of income from activities and income generated on customer deposit and withdrawals and account fees.

Revenue from these activities comprises:

Sportsbook

Sport online gaming revenue comprises bets placed less pay-outs to customers, adjusted for the fair value of open betting positions, adjusted for the fair value of certain promotional bonuses granted to customers.

Casino

Casino and Bingo online gaming revenue is represented by the difference between the amounts of bets placed by customers less amounts won, adjusted for the fair value of certain promotional bonuses granted to customers.

Administrative expenses

Administrative expenses consist primarily of staff costs (including contractors), corporate professional expenses, and depreciation and amortisation. All expenses are recognised on an accruals' basis.

Foreign currencies

Transactions in foreign currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each statement of financial position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the statement of financial position date. Any gains or losses arising on translation are taken to the profit and loss.

Retirement benefit costs and pensions

The Group does not operate any defined benefit pension schemes for employees or Directors. The Group has no payment obligations relating to retirement and pension plans.

Taxation

Current tax

Current tax for each taxable entity in the Group is based on the local taxable income at the local statutory tax rate enacted or substantively enacted at the statement of financial position date and includes adjustments to tax payable or recoverable in respect of previous periods.

Deferred tax

Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. However, if the deferred tax arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax is determined using tax rates and laws that have been enacted (or substantively enacted) by the date of the statement of financial position and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax liabilities are provided in full.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the profit and loss, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

Intangible fixed assets

Acquired intangible assets

Intangible assets acquired separately consist of domain names and customer lists and are capitalised at cost. Those acquired as part of a business combination are recognised separately from goodwill if the fair value can be measured reliably. These intangible assets are amortised over the useful life of the assets, which for domain names is ten years. The useful life of customer lists is 1 to 8 years.

The cost of intangible assets acquired in a business combination is the fair value at acquisition date. The valuation methodology used for each type of identifiable asset category is detailed below:

 
 
 Asset category            Valuation methodology 
----------------------    ---------------------- 
 Customer relationship           Excess earnings 
 Domain names                Relief from royalty 
 Licenses                          Cost approach 
 

Goodwill

Goodwill represents the excess of the fair value of the consideration in a business combination over the Group's interest in the fair value of the identifiable assets, liabilities and contingent liabilities acquired. Consideration comprises the fair value of any assets transferred, liabilities assumed and equity instruments issued.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the profit and loss and not subsequently reversed. Where the fair values of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the profit and loss on the acquisition. Changes in the fair value of the contingent consideration are charged or credited to the profit and loss. In addition, the direct costs of acquisition are charged immediately to the profit and loss.

Non-controlling interests

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholder's share of changes in equity since the date of the combination except where any non-controlling interests have been acquired by the Group. At this point any share of gains or losses are transferred to the Group's retained earnings. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Impairment of non-financial assets

Impairment tests on goodwill are undertaken annually and where applicable an impairment loss is recognised immediately in the profit and loss. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (being the higher of value in use and fair value less costs to sell), the asset is written down accordingly through the profit and loss.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset's cash generating unit (i.e. the smallest group of assets to which the asset belongs for which there are separately identifiable and largely independent cash inflows).

Investments

The Group reports its investments in entities at fair value with movements in fair value being taken directly to equity. The fair value of investments in unquoted equity securities cannot be reliably measured and they are therefore held at cost.

Equity

Equity comprises the following:

   --          "Share capital" represents amounts subscribed for shares at nominal value. 

-- "Additional paid in capital" represents amounts subscribed for share capital in excess of nominal value.

-- The "Reverse asset acquisition reserve" represents the difference in carrying value between the Additional paid in capital of Veltyco and the Share capital of Sheltyco on the acquisition date.

-- "Retained earnings" represents the accumulated profits and losses attributable to equity shareholders.

Financial instruments

Trade and other receivables

Trade receivables are held in order to collect the contractual cash flows and are initially measured at the transaction price as defined in IFRS 15, as the contracts of the Group do not contain significant financing components. Impairment losses are recognised based on lifetime expected credit losses in profit or loss.

Other receivables are held in order to collect the contractual cash flows and accordingly are measured at initial recognition at fair value, which ordinarily equates to cost and are subsequently measured at cost less impairment due to their short term nature. A provision for impairment is established based on 12-month expected credit losses unless there has been a significant increase in credit risk when lifetime expected credit losses are recognised. The amount of any provision is recognised in profit or loss.

Cash and cash equivalents, and finance income

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. Finance income is recognised on bank balances as and when it is receivable.

Trade payables

Trade payables, including customer balances, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Financial liabilities

Financial liabilities are classified as financial liabilities measured at amortised cost. The Group determines the classification of its financial liabilities at initial recognition. The measurement of financial liabilities is initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement. Gains and losses arising on the repurchase, settlement or cancellation of liabilities are recognised respectively in interest and other revenues and finance costs.

Borrowings and finance costs

Borrowings are initially recognised at fair value net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit and loss over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the date of the Statement of Financial Position.

Note 4: Segment reporting

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance. In accordance with IFRS 8, the chief operating decision maker has been identified as the Board. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. The Board considers that the business comprises a single activity, being the marketing and promotion of gaming websites, lottery and online financial trading. Therefore, the Group is organised into one operating segment and there is one primary reporting segment. The segment information is the same as that set out in the Consolidated Statements of Comprehensive Income, Consolidated Statements of Financial Position, Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows.

Revenue originates from:

 
                                   2018         2017 
                                    EUR          EUR 
 
 British Virgin Islands       3,661,574    5,176,399 
 EU Countries                 7,972,599      936,289 
 Other Non - EU Countries             -   10,082,103 
                            -----------  ----------- 
 Total                       11,634,173   16,194,791 
                            -----------  ----------- 
 

The Board evaluates the operations based on the revenues metric. Revenues consist of invoiced commissions for the marketing and player acquisition services provided as well as revenues generated from own operations. Veltyco operates an integrated business model and, therefore, does not allocate operating expenses, assets and liabilities to any of the originating countries.

The Group has three major customers that contribute over 10% of the Group's revenue for 2018. These customers contribute EUR5,632,105 (2017: EUR9,824,543), EUR2,346,429 (2017: EUR3,023,709) and EUR1,315,145 (2017: EUR2,084,569) respectively. The largest customer in 2018 related to the marketing commissions from the online financial trading business, which were discontinued in H2 208 and will not continue in 2019.

As previously communicated, the Group has terminated the marketing agreements relating to the online financial trading and lottery verticals. The revenues recorded were as follows:

 
                                  2018         2017 
                                   EUR          EUR 
 
 Discontinued operations     6,947,250   12,174,793 
 Continuing operations       4,686,923    4,019,998 
 Total                      11,634,173   16,194,791 
                           -----------  ----------- 
 

Note 5: Key management remuneration

Key management remuneration for each period was as follows:

 
                                                 Share           Total           Total 
                                Cash based       based    Remuneration    Remuneration 
                                    salary    payments            2018            2017 
                                       EUR         EUR             EUR             EUR 
 
 Melissa Blau (Appointed 
  26 March 2018 and resigned 
  12 October 2018)                 220,000           -         220,000               - 
 Uwe Lenhoff (Resigned 26 
  March 2018)                      180,000           -         180,000         180,000 
 David Mathewson (Resigned 
  31 January 2018)                   2,500           -           2,500         128,839 
 Marcel Noordeloos                 133,500      31,094         164,594         162,661 
 Hans Dahlgren (Resigned 
  26 March 2018)                     7,500      31,094          38,594          59,161 
 Mark Rosman                       120,000      28,021         148,021          53,852 
 Ilan Tzorya (Resigned 26 
  March 2018)                        2,500           -           2,500          30,000 
 Gilles Ohana (Resigned 30 
  January 2019)                    150,000      32,151         182,151          57,511 
 Rainer Lauffs (Appointed 
  26 March 2018)                   156,000       6,585         162,585               - 
 Total                             972,000     128,945       1,100,945         672,024 
                               -----------  ----------  --------------  -------------- 
 

Note 6: Profit for the year

Profit before taxation is stated after charging/(crediting):

 
                                      Year ended     Year ended 
                                     31 December    31 December 
                                            2018           2017 
                                             EUR            EUR 
 
 Depreciation of property, plant 
  and equipment                            1,292          1,628 
 Amortisation of intangibles             403,222        378,545 
 Impairment of intangibles             6,482,758              - 
 Impairment of receivables            10,712,715              - 
 
 Operating lease expenses                 56,760         44,598 
 Share based payment charge              176,744        239,084 
 Foreign exchange (gains)               (11,113)       (10,988) 
 

Note 7: Taxation

 
                                             Year ended     Year ended 
                                            31 December    31 December 
                                                   2018           2017 
                                                    EUR            EUR 
 
 Profit/(loss) before tax                  (17,259,102)      7,580,908 
                                          -------------  ------------- 
 
 Profit before tax multiplied by the 
  standard rate of corporation tax in 
  Isle of Man of 0%                                   -              - 
 
 Adjustments to tax charge in respect 
  of previous periods                         (608,733)              - 
 Effect of different tax rates in other 
  countries                                      52,933        801,116 
 
 Tax (credit)/charge                          (555,800)        801,116 
                                          -------------  ------------- 
 

Note 8: Earnings per share (basic and diluted)

 
                                             Year ended     Year ended 
                                            31 December    31 December 
                                                   2018           2017 
                                                    EUR            EUR 
 Earnings 
 Earnings for the purposes of basic 
  and diluted earnings per share, being 
  net profit after tax attributable to 
  equity shareholders                      (15,177,112)      7,333,280 
                                          -------------  ------------- 
 
 Number of shares 
 Weighted average number of ordinary 
  shares for the purposes of: 
  Basic earnings per share                   74,819,180     72,128,655 
 Diluted earnings per share                  74,819,180     77,648,727 
                                          -------------  ------------- 
 
 Basic earnings (in EUR)                       (0.2029)         0.1017 
 Diluted earnings (in EUR)                     (0.2029)         0.0944 
                                          -------------  ------------- 
 

The Group has granted share options in respect of equity shares to be issued, the details of which are disclosed in Note 21.

Note 9: Business combinations

Acquisition of Marsovia Holdings Ltd

In May 2018, the Company completed the acquisition of 100% in Marsovia Holding Ltd, a company that holds a database of approximately 43,500 customers from the online trading industry. The consideration of EUR4.0 million was offset against existing indebtedness and receivables due to the Group by Altair, therefore cash neutral. The Company believed that the acquisition would enable the Group to expand its own new regulated trading operations. However, as the launch of the new regulated financial trading brand has been postponed and the short-term focus of the Group's strategy is on sportsbook and casino activities, a full impairment of the value was recorded during the year.

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:

 
                                                  EUR 
Net assets                                  4,000,000 
Total identifiable assets                   4,000,000 
 
Total Consideration                         4,000,000 
                                            --------- 
 
  Satisfied by: 
Settlement of loans and receivables         4,000,000 
Equity instruments                                  - 
                                            --------- 
Total consideration transferred             4,000,000 
                                            --------- 
 
Net cash outflow arising on acquisition: 
Cash consideration                                  - 
Less: cash and cash equivalent balances             - 
 acquired 
                                            --------- 
                                                    - 
                                            --------- 
 

Note 10: Goodwill

 
                         Goodwill 
                              EUR 
 Cost 
 At 1 January 2017              - 
 Additions              1,743,485 
 Disposals                      - 
 At 31 December 2017    1,743,485 
                       ---------- 
 
 Additions                      - 
 Impairments            (332,554) 
                       ---------- 
 At 31 December 2018    (332,554) 
                       ---------- 
 
 Net Book Value 
 At 1 January 2017              - 
                       ---------- 
 
 At 31 December 2017    1,743,485 
                       ---------- 
 
 At 31 December 2018    1,410,931 
                       ---------- 
 

Goodwill

Goodwill arose following the acquisition of 51% in T4U Marketing Ltd and 51% in Quasar Holdings Ltd in 2017.

Key assumptions and inputs used

Cash flow projections have been prepared for a five-year period, following which a long-term growth rate has been assumed. Underlying growth rates have been applied to revenue and are based on past experience, including the results in 2017 and 2018. Key assumptions in preparing these cash flow projections include moderate growth in revenue, a stable level of costs per customer acquisition and the expectation that the Group will continue to operate in the countries currently being covered.

The Directors have performed an impairment review at the end of the year. This is done based on the discounted cash flow methodology, using the 2017 and 2018 results as the basis for the review, for which a weighted average cost of capital ("WACC") rate was used of 26% and no growth rate for the T4U Marketing Ltd acquisition. For the acquisition of Quasar Holdings Ltd the same WACC of 24% was used and a 2.5% long term growth rate after 5 years was used. This impairment review resulted in an impairment to goodwill of EUR332,554 for the year 2018 on the goodwill paid following the acquisition of T4U Marketing Ltd.

In assessing for impairment, the recoverable amount has been based on value in use.

Note 11: Other intangible assets

 
                             Customer     Brand and      Other         Total 
                             database        domain 
                                              names 
                                  EUR           EUR        EUR           EUR 
 Cost 
 At 1 January 2017             37,142     3,076,603          -     3,113,745 
 Additions(1)                  24,600     1,493,500    105,000     1,623,100 
 Disposals                          -             -          -             - 
                         ------------  ------------  ---------  ------------ 
 At 31 December 2017           61,742     4,570,103    105,000     4,736,845 
 Addition                   4,000,000             -          -     4,000,000 
 At 31 December 2018        4,061,742     4,570,103    105,000     8,736,845 
                         ------------  ------------  ---------  ------------ 
 
 Amortisation 
 At 1 January 2017           (16,229)     (356,724)          -     (372,953) 
 Charge for the period       (18,623)     (329,610)   (30,312)     (378,545) 
 Disposals                          -             -          -             - 
 At 31 December 2017         (34,852)     (686,334)   (30,312)     (751,498) 
 Charge for the period        (7,717)     (360,505)   (35,000)     (403,222) 
 Impairment               (4,000,000)   (2,150,201)          -   (6,150,201) 
                                       ------------  ---------  ------------ 
 At 31 December 2018      (4,042,569)   (3,197,039)   (65,312)   (7,304,920) 
                         ------------  ------------  ---------  ------------ 
 
 Net Book Value 
 At 1 January 2017             20,913     2,719,879          -     2,740,792 
                         ------------  ------------  ---------  ------------ 
 
 At 31 December 2017           26,890     3,883,769     74,688     3,985,347 
                         ------------  ------------  ---------  ------------ 
 
 At 31 December 2018           19,173     1,373,064     39,688     1,431,925 
                         ------------  ------------  ---------  ------------ 
 

At year-end, the domain names relating to the online financial trading vertical have been impaired. The book value of these domains amounted to EUR2,143,218. Furthermore, a EUR6,983 impairment charge for the Tippen4you.com domain has been recorded. The remaining book value of the brand and domain names relate to the acquisition of Quasar Holdings Ltd and T4U Marketing ltd in 2017.

   (1)     Material additions during 2017 and 2018 were: 

-- In April 2017, the Company completed the acquisition of 51% in the share capital of T4U Marketing Ltd for a cash consideration of EUR510,000. The domain was valued at EUR328,000 and will be amortised over a period of 20 years. The amortisation charge for the year amounts to EUR16,400 and the remaining book value amounts to EUR304,617. The remaining life is 18.5 years; and

-- In June 2017, the Company completed the acquisition of 51% in the share capital of Quasar Holdings Ltd for a cash consideration of EUR2,000,000. The Bet90 domain was valued at EUR1,165,500 and will be amortised over a period of 20 years. The amortisation charge for the year amounts to EUR55,774 and the remaining book value amounts to EUR1,068,447. The remaining life is 18.5 years.

-- In May 2018, the Company completed the acquisition of 100% in Marsovia Holding Ltd, a company that holds a database of approximately 43,500 customers from the online trading industry. The consideration of EUR4.0 million was offset against existing indebtedness and receivables due to the Group by Altair, therefore cash neutral. The Company believed that the acquisition would enable the Group to expand its own new regulated trading operations, and planned the database to be amortised over the use of the database, or a term of 2 years. However, as the launch of the new regulated financial trading brand has been postponed and the short-term focus of the Group's strategy is on sportsbook and casino activities, a full impairment of the value was recorded during the year.

Further details of the Marsovia acquisition are provided in Note 9.

Note 12: Investments

 
                        Financial assets 
                            held at fair 
                           value through 
                          profit or loss 
 Cost                                EUR 
 At 1 January 2017                     - 
 Additions                        25,000 
 Disposals                             - 
                       ----------------- 
 At 31 December 2017              25,000 
                       ----------------- 
 
 Additions                             - 
 Disposals                             - 
 Impairment                     (25,000) 
                       ----------------- 
 At 31 December 2018                   - 
                       ----------------- 
 

On 10 October 2017, the Group acquired a minority stake in eSports Radar Ltd.

On transition to IFRS 9, this asset was reclassified from available for sale to fair value through profit or loss. As the company has ceased operations in early 2019, the investment has been impaired.

Note 13: Property, plant & equipment

 
                             Furniture 
                           & equipment     Computers     Total 
                                   EUR           EUR       EUR 
 Cost 
 At 1 January 2017               4,500         1,005     5,505 
 Additions                           -             -         - 
 Disposals                           -             -         - 
                         -------------  ------------  -------- 
 At 31 December 2017             4,500         1,005     5,505 
 Additions                           -             -         - 
 Disposals                           -             -         - 
                         -------------  ------------  -------- 
 At 31 December 2018             4,500         1,005     5,505 
                         -------------  ------------  -------- 
 
 Depreciation 
 At 1 January 2017             (1,012)         (335)   (1,347) 
 Charge for the period         (1,125)         (503)   (1,628) 
 Disposals                           -             -         - 
                         -------------  ------------  -------- 
 At 31 December 2017           (2,137)         (838)   (2,975) 
 Charge for the period         (1,125)         (167)   (1,292) 
 Disposals                           -             -         - 
                         -------------  ------------  -------- 
 At 31 December 2018           (3,262)       (1,005)   (4,267) 
                         -------------  ------------  -------- 
 
 Net Book Value 
 At 1 January 2017               3,488           670     4,158 
                         -------------  ------------  -------- 
 
 At 31 December 2017             2,363           167     2,530 
                         -------------  ------------  -------- 
 
 At 31 December 2018             1,238             -     1,238 
                         -------------  ------------  -------- 
 
 

Note 14: Loan receivable

 
                           31 December   31 December 
                                  2018          2017 
                                   EUR           EUR 
 
 Balance at 1 January        2,555,533     2,507,080 
 New loans granted                   -       189,681 
 Repayments *              (2,581,868)     (225,000) 
 Interest charged               26,335        83,772 
                          ------------  ------------ 
 Balance at 31 December              -     2,555,533 
                          ------------  ------------ 
 

*repayment of the loan balance was done by offsetting the purchase price of the shares in Marsovia Holdings Ltd (see Note 11).

The loans are repayable as follows:

 
                                31 December    31 December 
                                       2018           2017 
                                        EUR            EUR 
 
 Within one year                           -     1,558,057 
 Between one and five years                -       997,476 
 Balance at 31 December                    -     2,555,533 
                              --------------  ------------ 
 

The loan receivable had an interest of 3% per annum.

On 25 May 2018, the Group entered into an agreement with Altair to acquire the entire issued share capital of Marsovia, which was the first step in the Group seeking to launch a new regulated brand, active in the online trading vertical. Marsovia holds a database of approximately 43,500 customers, of which approximately 26,000 are considered to be active, in the online trading vertical.

The total consideration for this transaction amounted to EUR4.0 million and was offset against the above existing indebtedness of, in aggregate, EUR2.6 million owed by Altair pursuant to certain loans provided by the Group and certain trade receivables of approximately EUR1.4 million owed by Altair to the Group pursuant to the Group's market activities, resulting in this acquisition being cash neutral for Veltyco. However, as the launch on the new regulated financial trading brand has been postponed and the short-term focus of the Group's strategy is on sportsbook and casino activities, a full impairment of the value was recorded during the year.

Note 15: Trade and other receivables

 
                                        Year ended     Year ended 
                                       31 December    31 December 
                                              2018           2017 
                                               EUR            EUR 
 
 Trade receivables                         132,544      8,801,189 
 VAT receivables                           117,163         37,714 
 Other receivables and prepayments         350,700        299,998 
 Accrued income                            253,808      2,742,568 
 Total                                     854,215     11,881,469 
                                     -------------  ------------- 
 

Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. The Group has policies in place to ensure that provision of services is made to customers with an appropriate credit history and monitors on a continuous basis the ageing profile of its receivables.

Trade and other receivables

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and country in which customers operate. Due to the nature of the Group's operations the Group only has a few customers.

Impairment

A provision for impairment of trade receivables is established using an expected loss model. Expected loss is calculated from a provision matrix based on the expected lifetime default rates and estimates of loss on default. During the year ended 31 December 2018, the Company recorded an impairment charge for potential recoverability problems on the receivables, amounting to EUR10,712,715 (2017: EUR302,431).

As at 31 December 2017 and 2018, the ageing of trade and other receivables that were not impaired are as follows:

 
                                  Year ended     Year ended 
                                 31 December    31 December 
                                        2018           2017 
                                         EUR            EUR 
 
 Not due                              58,270        277,070 
 Past due 1-30 days                   41,167        910,072 
 Past due 31-120 days                 24,117      3,078,926 
 Past due more than 120 days           8,990      4,535,121 
 Total                               132,544      8,801,189 
                               -------------  ------------- 
 

Management believes that the unimpaired amounts that are past due are collectible in full.

Note 16: Cash and cash equivalents

 
                                    Year ended     Year ended 
                                   31 December    31 December 
                                          2018           2017 
                                           EUR            EUR 
 
 Cash held in current accounts       1,031,071        660,192 
 Restricted cash                             -         40,000 
 Total                               1,031,071        700,192 
                                 -------------  ------------- 
 

The restricted cash related to a regulatory amount to cover liabilities to players at year-end.

Note 17: Share capital

 
                                        Year ended       Year ended 
                                       31 December      31 December 
                                              2018             2017 
                                               EUR              EUR 
 Allotted, called up and fully paid 
 74,956,159 (2017: 74,418,659)                   -                - 
                                     -------------    ------------- 
 Ordinary shares 
 
 Par value of the shares                       nil              nil 
                                     -------------    ------------- 
 

During the year a total of 437,500 new Ordinary Shares have been issued on exercising the same number of outstanding and vested options and warrants. 100,000 new Ordinary Shares were issued as part of settlement of consideration to be paid.

Note 18: Additional paid in capital

Additional paid in capital represents amounts subscribed for share capital in excess of nominal value.

Note 19: Reverse asset acquisition reserve

The reverse acquisition completed on 30 June 2016 has been accounted for as a share-based payment transaction which should be accounted for in accordance with IFRS 2. On the basis of the guidance in paragraph 13A of IFRS 2, the difference in the fair value of the consideration shares and the fair value of the identifiable net assets should be considered to be payment for the services to transition to a public company. The excess consideration over fair value of net assets acquired has been recognised in the Statement of Comprehensive Income for 2016.

Note 20: Retained earnings

Retained earnings represents the cumulative net gains and losses recognised in the consolidated statement of comprehensive income and other transactions with equity holders.

Note 21: Share based payments

Equity-settled share option scheme

On 17 May 2016, the Company adopted a "long term incentive senior management and Directors' stock option plan" ("the Plan"). Options granted under the Plan will entitle the participant to acquire Ordinary Shares at a price determined in accordance with the rules of the Plan.

As at 31 December 2018, the following options have been granted under the Plan.

On 21 February 2014, David Mathewson was appointed Executive Chairman of the Board and was granted 240,000 options on Ordinary Shares, with an exercise price of GBP0.75 per share for all of the options. The Board renewed and repriced these options on 30 June 2016 to a new exercise price of GBP0.25 per share. These options vest over 3 equal yearly instalments starting 1 year after the grant date provided that the participant remains a Director or employee of the company during this period. These options expire on 30 June 2019.

A total of 4,150,000 share options have a grant date of 30 June 2016, with an exercise price of GBP0.25 for all of the options. These options expire on its 5(th) anniversary on 30 June 2021. Further to this, 800,000 options have a grant date of 22 May 2017, with an exercise price of GBP0.25 for all of the options. These 800,000 options expire on its 5(th) anniversary on 22 May 2022. These options vest over 4 equal yearly instalments starting 1 year after grant date provided that the participant remains a Director or employee of the Company during this period.

At the time of the AGM in 2017, on 5 July 2017, the Board granted a further 1,200,000 options to certain Directors with an exercise price of GBP0.65 for all of the options. These options expire on its 5(th) anniversary on 5 July 2022. All options vest over 4 equal yearly instalments starting 1 year after the grant date provided that the participant remains a Director or employee of the company during this period.

During 2017, a total of 262,500 of these options were exercised, all with an exercise price of GBP0.25 per share, for which the Company issued new Ordinary Shares. As a result of David Mathewson's resignation per 31 January 2018, a total of 390,000 options with an exercise price of GBP0.25 and 300,000 options with an exercise price of GBP0.65 were cancelled during the year. Mathewson's remaining 250,000 options with an exercise price of GBP0.25 were exercised in February 2018.

Furthermore, during 2018, a total of 437,500 options have been exercised, all with an exercise price of GBP0.25 per share, for which the Company issued new Ordinary Shares.

As a result of the above the total of 5,000,000 options are outstanding at 31 December 2018.

Warrants

On 30 June 2016, the Company issued new Ordinary Shares in relation to funds raised and loans converted as part of the reverse merger and re-admission of the Group. As part of this fundraise and conversion, the Company issued 1 warrant for every 5 new Ordinary Share allotted pursuant to the conversion and subscription agreements, exercisable at GBP0.31 per warrant at any time during the period from the date of issue until the 5(th) anniversary of issue.

As a result of this a total of 758,221 warrants were issued on 30 June 2016. On 2 September 2016, the Company issued a further 175,798 warrants at the same conditions as part of completion of the subscription agreements in relation to the reverse merger.

Furthermore, on 30 June 2016, 500,000 existing warrants were converted into 20,000 warrants as part of the 25 to 1 consolidation of shares. These warrants have an exercise price of GBP0.75. These warrants could be exercised until 17 February 2019 (which did not occur subsequent to year-end, before 17 February 2019, and therefore these warrants have now expired).

On 4 October 2017, the Company issued 109,846 warrants to Strand Hanson Limited, on their appointment of being Nominated Adviser for the Company on 4 October 2017. These warrants have an exercise price of GBP0.895 per warrant and can be exercised during the period from the date of issue until the 5(th) anniversary. Subsequent to year-end, the Company agreed to reprice these options to an exercise price of GBP0.15 per warrant. The other conditions have not changed.

During 2017, a total of 733,521 warrants with an exercise price of GBP0.31 per share were exercised, for which the Company issued new Ordinary Shares.

No warrants have been exercised during 2018.

As a result of the above a total of 330,344 warrants are outstanding at 31 December 2018.

Details of the share options and warrants outstanding during the period are as follows:

 
                                                                 Weighted average 
                                               Number of share     exercise price 
                                       options and warrants(1)              (GBP) 
 
 Outstanding as at 1 January 
  2016                                                 263,120              0.850 
 Exercisable as at 1 January 
  2016                                                  82,080              1.075 
                                     -------------------------  ----------------- 
 
 Forfeited during 2016                               (243,120)              9.625 
 Renewed on 30 June 2016                               240,000              0.250 
 Options granted on 30 June 
  2016                                               4,150,000              0.250 
 Warrants granted on 30 June 
  2016                                                 758,221              0.310 
 Warrants granted on 2 September 
  2016                                                 175,798              0.310 
                                     -------------------------  ----------------- 
 
 Outstanding as at 31 December 
  2016                                               5,344,019              0.262 
 Exercisable as at 31 December 
  2016                                                 954,019              0.319 
 
 Forfeited during 2017                               (690,000)              0.424 
 Options granted on 22 May 
  2017                                                 800,000              0.250 
 Options granted on 5 July 
  2017                                               1,200,000              0.650 
 Warrants granted on 5 October 
  2017                                                 109,846              0.895 
 Warrants exercised on 21 July 
  2017                                               (733,521)              0.310 
 Options exercised on 18 September 
  2017                                               (262,500)              0.250 
                                     -------------------------  ----------------- 
 
 Outstanding as at 31 December 
  2017                                               5,767,844              0.314 
 Exercisable as at 31 December 
  2017                                                 957,999              0.264 
 
 Options exercised on 16 February 
  2018                                               (250,000)              0.250 
 Options exercised on 19 July 
  2018                                               (187,500)              0.250 
                                     -------------------------  ----------------- 
 
 Outstanding as at 31 December 
  2018                                               5,330,344              0.335 
 Exercisable as at 31 December 
  2018                                               1,850,000              0.326 
 
 

(1) The warrants, options and prices in this table have been adjusted to reflect the 25:1 consolidation of shares as executed on 30 June 2016.

The options outstanding as at 31 December 2018 had a weighted average remaining contractual life of 2.9 years. The value of the options has been derived by using a Black Scholes pricing model for the options granted on 22 May 2017 and granted on 5 July 2017. The inputs into the pricing models were as follows:

 
                         Warrants       Warrants       Options        Options    Options 
                          granted     granted on       granted        granted    granted 
                       on 30 June    2 September    on 30 June             on         on 
                             2016           2016          2016    22 May 2017     5 July 
                                                                                    2017 
 
 Share price at           GBP0.20        GBP0.24       GBP0.20        GBP0.52    GBP0.62 
  grant date 
 Exercise price           GBP0.31        GBP0.31       GBP0.25        GBP0.25    GBP0.65 
 Volatility                 26.3%          26.3%         26.3%          34.3%      34.3% 
 Expected life            5 years        5 years       5 years        5 years    5 years 
 Risk free rate              1.1%           1.1%          1.1%          2.51%      2.51% 
 Expected dividend 
  yield                        0%             0%            0%             0%         0% 
 

As the Company has only been trading since 30 June 2016, the expected volatility for all options was determined by taking the average the Company's share price and the historical volatility of a peer group over a 5-year period.

The total value of the warrants granted on 30 June 2016 as calculated above is EUR20,219. Of this amount, nothing has been charged in the financial statements for the year ended 31 December 2018 (2017: EURnil).

The total value of the warrants granted on 2 September 2016 as calculated above is EUR8,097. Of this amount, nothing has been charged in the financial statements for the year ended 31 December 2018 (2017: EURnil).

The total value of the options granted on 30 June 2016 is EUR173,129. Of this amount, EUR32,923 has been charged in the financial statements for the year ended 31 December 2018 (2017: EUR68,214). The remaining balance of EUR21,400 will be charged in the financial statements of the years ending 31 December 2019 and 2020.

The total value of the options renewed on 30 June 2016 is EUR8,000. Of this amount, EURnil has been charged in the financial statements for the year ended 31 December 2018 (2017: EUR4,207). These options were cancelled during 2017 and therefore there is no remaining balance.

The total value of the options granted on 22 May 2017 is EUR287,272. Of this amount, EUR70,492 has been charged in the financial statements for the year ended 31 December 2018 (2017: EUR45,011). The remaining balance of EUR171,769 will be charged in the financial statements of the years ending 31 December 2019, 2020 and 2021.

The total value of the options granted on 5 July 2017 is EUR276,712. Of this amount, EUR73,528 has been charged in the financial statements for the year ended 31 December 2018 (2017: EUR121,653). The remaining balance of EUR81,531 will be charged in the financial statements of the years ending 31 December 2019, 2020 and 2021.

Note 22: Borrowings

 
                              31 December   31 December 
                                     2018          2017 
                                      EUR           EUR 
 
 Other loans                            -       350,000 
 Loan from a shareholder           27,858        27,108 
 Loan from a related party              -       978,115 
                                   27,858     1,355,223 
                             ------------  ------------ 
 

The other loans are unsecured and bear an interest rate of 3% per annum. During the first months of 2018, the Company has settled the other loans in full.

The loan from a shareholder is a long-term loan provided by the Company's main shareholder, Lensing Management Services Ltd ("Lensing"), a related party, indirectly owned and controlled by Uwe Lenhoff, one of the Company's largest shareholders, amounting to EUR27,858 (2017: EUR27,108). This loan bears interest at 3% per annum and remains outstanding.

The loan from related parties in 2017 was a loan to Bet90 Sports Ltd, in which the Group has a 51% interest, provided by Winslet Enterprises Ltd (the "Winslet Loan"), a company controlled by Uwe Lenhoff. The Winslet Loan was for an initial sum of up to EUR1.5 million and was made to the Group to accelerate the launch of www.Bet90.com, the Group's sports book which went live at the end of July 2017. The Winslet Loan was non-interest bearing, unsecured and for a term of two years. The quantum of the Winslet Loan subsequently increased to EUR2,466,806 and on 3 May 2018, the Group entered into a set-off agreement with Winslet (the "Set-off Agreement") pursuant to which the balance of the Winslet Loan was settled in full against a corresponding amount of trade receivables due from operators for whom Veltyco undertakes marketing activities in the online financial trading vertical. As a result, the trade receivables reduced by an equivalent amount, resulting in the Set-off Agreement being cash neutral to the Group.

Note 23: Trade and other payables

 
                             31 December   31 December 
                                    2018          2017 
                                     EUR           EUR 
 
   Trade payables              1,626,884       558,111 
 Accrued expenses                107,077       239,630 
 Liabilities to customers        201,709        62,337 
 Corporation tax payable          96,846       739,470 
 Other creditors               1,045,166       188,589 
                               3,077,682     1,788,137 
                            ------------  ------------ 
 

Note 24: Capital commitments

At 31 December 2018 and 31 December 2017 there were no capital commitments.

Note 25: Contingent liabilities

There were no contingent liabilities at 31 December 2018 or 31 December 2017.

Note 26: Operating Lease Commitments

The future aggregate minimum lease payments under non-cancellable operating leases as at 31 December 2018 and 31 December 2017 are as follows:

 
                                     31 December   31 December 
                                            2018          2017 
                                             EUR           EUR 
 
 No later than 1 year                     34,400        55,350 
 Later than 1 year and no later 5 
  years                                    3,733        84,108 
 Total                                    38,133       139,458 
                                    ------------  ------------ 
 

Subsequent to year-end the Group terminated one of the lease agreements, which now expires June 2019. The table has been adjusted accordingly.

Note 27: Financial instruments - Fair Value and Risk Management

The Group is exposed through its operations to risks that arise from use of its financial instruments. The Board approves specific policies and procedures in order to mitigate these risks.

The main financial instruments used by the Group, on which financial risk arises, are as follows:

   --        Cash and cash equivalents; 
   --        Trade and other receivables; 
   --        Trade and other payables; and 
   --        Customer deposits in case of the Bet90 operations. 

Detailed analysis of these financial instruments is as follows:

 
                                            2018        2017 
Financial assets                             EUR         EUR 
 
Loans receivable (Note 14)                     -   2,555,533 
Trade and other receivables (Note 
 15)                                     854,215  11,881,469 
Cash and cash equivalents (Note 16)    1,031,071     700,191 
                                       ---------  ---------- 
Total                                  1,885,286  15,137,193 
                                       ---------  ---------- 
 

On transition to IFRS 9 all financial assets were reclassified from loans and receivables to amortised cost, except for investments which are now classified as fair value through profit or loss as noted above in note 12.

 
                                          2018       2017 
Financial liabilities                      EUR        EUR 
 
Trade and other payables(1) (Note 
 23)                                 2,873,760    809,037 
Accrued liabilities                    107,077    239,630 
Borrowings (Note 22)                    27,858  1,355,223 
                                     ---------  --------- 
Total                                3,008,695  2,403,890 
                                     ---------  --------- 
 

(1) Excludes taxes payable.

In accordance with IFRS 9, all financial liabilities are held at amortised cost.

Capital

The capital employed by the Group is composed of equity attributable to shareholders. The primary objective of the Group is maximising shareholders' value, which, from the capital perspective, is achieved by maintaining the capital structure most suited to the Group's size, strategy, and underlying business risk. There are no demands or restrictions on the Group's capital.

The main financial risk areas are as follows:

Credit risk

Trade receivables

The Group's credit risk is primarily attributable to trade receivables, most of which are due from the Group's partners for which it operates the marketing activities and player acquisitions. These are third party companies that operate the websites. As the Group operates a limited number of brands the trade receivables are with a limited number of partners.

The risk is that a partner would fail to discharge its obligation with regard to the balance owed to the Group. The Group reduces this credit risk by monitoring the activity for these operations and arranging for the shortest possible cash settlement intervals. As the Group has ongoing relationships with its partners, the Directors have visibility on the activity in its partners' operations.

The Group considers that based on the factors above, recent developments with respect to these partners, to provide for the collectability risk. Due to this, the Company has recorded a charge of EUR10,712,715 in the 2018 accounts.

For the Group's own operations in Bet90, an additional credit risk relates to customers disputing charges made to their credit cards ("chargebacks") or any other funding method they have used in respect of the services provided by the Group. Customers may fail to fulfil their obligation to pay, which will result in funds not being collected. These chargebacks and uncollected deposits, when occurring, will be deducted at source by the payment service providers from any amount due to the Group. The risk for the year 2018 has been assessed by the Board to being immaterial.

Trade receivables are considered in default and subject to additional credit control procedures when they are more than 60 days past due in line with industry practice. Trade receivables are only written off when there is no reasonable expectation of recovery due to insolvency of the debtor.

12 month and lifetime expected credit losses are estimated based on historical loss rates for the relevant country, adjusted where evidence is available that different rates are likely to apply in the future. This is based on changes to the expected insolvency rates in the relevant countries.

Financial assets which are past due but not impaired

 
                                              2018 
                                  Up to 3    Up to 12 
                       Not yet     months      months   Over 1 year 
                           due   over due    over due      over due       Total 
                           EUR        EUR         EUR           EUR         EUR 
 
Loans receivable             -          -           -             -           - 
Trade receivables       68,597     41,167      22,780             -     132,544 
Accrued income         253,808          -           -             -     253,808 
Other receivables      267,863          -     200,000             -     467,863 
Total                  590,268     41,167     222,780             -     854,215 
                     ---------  ---------   ---------  ------------  ---------- 
 
 

For further information, refer to the going concern disclosure in Note 1.

 
                                                  2017 
                                      Up to 3    Up to 12 
                         Not yet       months      months   Over 1 year 
                             due     over due    over due      over due         Total 
                             EUR          EUR         EUR           EUR           EUR 
 
Loans receivable       1,864,336            -           -       691,197     2,555,533 
Trade receivables        277,070    3,988,997   4,400,122       135,000     8,801,189 
Accrued income         2,742,568            -           -             -     2,742,568 
Other receivables        337,712            -           -             -       337,712 
Total                  5,221,686    3,988,997   4,400,122       826,197    14,437,002 
                     -----------  -----------   ---------  ------------  ------------ 
 
 

Liquidity risk

Liquidity risk exists where the Group might encounter difficulties in meeting its financial obligations as they become due. The Group monitors its liquidity in order to ensure that sufficient liquid resources are available to allow it to meet its obligations.

The following table details the contractual maturity analysis of the Group's financial liabilities:

 
                                                     2018 
                                                      Between 
                                                            3 
                                                       months   More than 
                         On demand  In 3 months    and 1 year      1 year        Total 
                               EUR          EUR           EUR         EUR          EUR 
 
Trade and other 
 payables(1)             2,873,760            -             -           -    2,873,760 
Accrued liabilities        107,077            -             -           -      107,077 
Borrowings                       -            -             -      27,858       27,858 
                       -----------  -----------   -----------  ----------  ----------- 
Total                    2,980,837            -             -      27,858    3,008,695 
                       -----------  -----------   -----------  ----------  ----------- 
 
 

(1) Excludes taxes payable.

 
                                                 2017 
                                                      Between 
                                                            3 
                                                       months   More than 
                         On demand  In 3 months    and 1 year      1 year        Total 
                               EUR          EUR           EUR         EUR          EUR 
 
Trade and other 
 payables(1)               809,037            -             -           -      809,037 
Accrued liabilities        239,630            -             -           -      239,630 
Borrowings                       -            -             -   1,355,223    1,355,223 
                       -----------  -----------   -----------  ----------  ----------- 
Total                    1,048,667            -             -   1,355,223    2,403,890 
                       -----------  -----------   -----------  ----------  ----------- 
 
 

(1) Excludes taxes payable.

Note 28: List of subsidiaries

The Company held the issued shares of the following subsidiary undertakings as at 31 December 2018:

 
                                                  Proportion 
                                                  of ownership 
                                                   and voting 
 Name of subsidiary     Place of Incorporation       power       Ownership 
---------------------  -----------------------  --------------  --------------------------- 
 
 Veltyco Ventures       Isle of Man                  100%        Direct 
  Ltd 
 Veltyco Services       The Netherlands              100%        Direct 
  BV 
 Sheltyco Enterprises   British Virgin               100%        Direct 
  Group Ltd              Islands 
 Sheltyco Enterprises   Cyprus                       100%        Indirect, through Sheltyco 
  Ltd                                                             Enterprises Group Ltd 
 Sheltyco Enterprises   Cyprus                       100%        Indirect, through Sheltyco 
  Marketing Ltd                                                   Enterprises Group Ltd 
 Silkline Marketing     Cyprus                       100%        Indirect, through Sheltyco 
  Ltd                                                             Enterprises Group Ltd 
 Tunegames Marketing    Cyprus                       100%        Indirect, through Sheltyco 
  Ltd                                                             Enterprises Group Ltd 
 Tunegames Holding      Cyprus                       100%        Indirect, through Sheltyco 
  Ltd                                                             Enterprises Group Ltd 
 T4U Marketing Ltd      Cyprus                        51%        Indirect, through Sheltyco 
                                                                  Enterprises Group Ltd 
 Marsovia Holding       Cyprus                       100%        Indirect, through Sheltyco 
  ltd                                                             Enterprises Group Ltd 
 Quasar Holdings        Malta                         51%        Indirect, through Veltyco 
  Ltd                                                             Ventures Ltd 
 Bet90 Sports Ltd       Malta                         51%        Indirect, through Quasar 
                                                                  Holdings Ltd 
 Velty Bulgaria         Bulgaria                     100%        Indirect, through Veltyco 
  Ltd                                                             Ventures Ltd 
 Veltyco Licensing      Malta                        100%        Indirect, through Veltyco 
  Ltd                                                             Ventures Ltd 
 

Note 29: Reconciliation of debt

The Group had the following movement in the borrowings:

 
               At 1 January   Cash   Other settlements   At 31 December 
                       2018                                        2018 
                        EUR    EUR                 EUR 
 Borrowings       1,355,223      -         (1,327,365)           27,858 
              -------------  -----  ------------------  --------------- 
                  1,355,223      -         (1,327,365)           27,858 
              -------------  -----  ------------------  --------------- 
 
 
               At 1 January        Cash   Other   At 31 December 
                       2017                                 2017 
                        EUR         EUR     EUR 
 Borrowings          26,358   1,328,865       -        1,355,223 
              -------------  ----------  ------  --------------- 
                     26,358   1,328,865       -        1,355,223 
              -------------  ----------  ------  --------------- 
 

Note 30: Related party transactions

Remuneration of Directors and key employees

Remuneration of Directors and key employees is disclosed in Note 5.

Other related party transactions

The Group has recorded expenses totalling EUR152,039 (2017: EUR241,929) to Softlot Software Services Ltd ("Softlot"), a company controlled by Uwe Lenhoff, one of the main shareholders. Softlot provides B2B services for lottery operations and following the cessation of marketing activities in this vertical, Softlot is currently providing no services to the Group and as 31 December 2018, no amounts were outstanding to be paid to Softlot (2017: EUR755).

Furthermore, the Group has a loan payable to the Company's main shareholder, Lensing, a company indirectly owned and controlled by Uwe Lenhoff, amounting to EUR27,858 (2016: EUR27,108). This loan bears an interest of 3% per annum.

The Group also entered into the Winslet Loan as detailed in Note 22.

Included within other debtors, the Group has a current account balance with certain Directors and Senior

Management, amounting to EURnil at 31 December 2018 (2017: EUR166,590 receivable from Directors). This current account is interest free and has no specific repayment date. The current account existed to advance funds to the Directors for company expenses.

Payables to related parties

The Group had the following amounts payable to related parties:

 
                                  Year ended     Year ended 
                                 31 December    31 December 
                                        2018           2017 
                                         EUR            EUR 
 Softlot                                   -            755 
 Loan from Lensing (Note 22)          27,858         27,108 
 Loan from Winslet (Note 22)               -        978,115 
 Total                                27,858      1,005,978 
                               -------------  ------------- 
 

Intra group transactions

Transactions between Group companies have not been disclosed as these have all been eliminated in the preparation of the Consolidated Financial Statements.

Note 31: Ultimate controlling party

As at 31 December 2018 the Directors do not believe there to be any single controlling party.

Note 32: Post balance sheet events

On 30 January 2019, the Company announced that it had raised EUR555,500 (GBP500,000) through the subscription of 3,333,333 new Ordinary Shares with certain existing investors, at a price of GBP0.15 per share. On the same day, the Board resolved to issue 200,000 new Ordinary Shares to an adviser in lieu of certain fees

On 15 February 2019, the Company announced that on 14 February 2019, it granted options over, in aggregate, 2,420,000 Ordinary Shares to the Directors and certain employees of the Company, pursuant to the Company's Long-Term Incentive Plan - May 2016 (as amended).

These options have an exercise price of GBP0.15 per share. Pursuant to the terms of the 2016 Plan, the options will vest in equal instalments over the four years following the first anniversary of the date of grant and any of the options that remain unexercised on the fifth anniversary of the date of grant will lapse. In light of these new options being granted, Mark Rosman and Marcel Noordeloos agreed with the Company to cancel 300,000 options granted to each of them on 5 July 2017. In addition, 109,846 existing warrants that were granted by the Company on 5 October 2017, have had the terms amended, such that they will now be exercisable at a price of GBP0.15 per share.

On 1 April 2019, the Company announced that it had entered into separate loan agreements with three of its Directors, being Paul Duffen, Marcel Noordeloos and Mark Rosman, pursuant to which each Director provided a loan of EUR166,667 (GBP146,667) to the Company, totalling EUR500,000 (GBP440,000) (the "Loans"). The Loans, which are unsecured, are for a term of three years and will accrue interest at 5% per annum over the term of the Loans. The Loans can be repaid on or before 31 March 2022 at the Company's election.

On 30 May 2019, the Company announced that it had raised a further EUR300,000 (GBP264,000) through the subscription of 4,000,000 new Ordinary Shares with a certain existing investor, at a price of GBP0.066 per share.

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 FPMFTMBTTBRL

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June 28, 2019 12:34 ET (16:34 GMT)

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