TIDMBOKU
RNS Number : 3348K
Boku Inc
10 April 2018
10 April 2018
Boku, Inc.
("Boku" or the "Company" and, together with its subsidiaries,
the "Group")
Final Results
Boku (AIM: BOKU), the world's leading independent direct carrier
billing company, today announces its final audited results for the
year ended 31 December 2017.
Financial Highlights
-- *Adjusting for expenses related to the IPO, Net Loss reduced
by 64% to $7.4 million (2016: $20.6 million)
-- Reported Net Loss including IPO effects $28.1 million
-- Revenue up 42% to $24.4 million (2016: $17.2 million)
-- **Adjusted EBITDA losses improved by 81% at $2.3 million (2016:
$12.3 million)
-- $20.2 million gross cash at year end
Operational Highlights
-- Total Payment Volume (TPV) tripled to over $1.7 billion (2016:
$554 million)
-- 45 new Boku Account connections for major customers such as
Apple, Microsoft and Spotify
-- MTS and EE Google migrations completed, respectively the largest
carriers in Russia and the UK
-- Increase in Monthly Active Users to 8.1m, an increase of 241%
-- Admission to AIM in November 2017
* Adjusted for $18.5 million Financing Charge related to
conversion of Convertible Debt, and $2.2 million of IPO
expenses
**Adjusted EBITDA: Adjusted for IPO costs, stock option
expenses, Forex gains/losses and Exceptional items
Jon Prideaux, Chief Executive of Boku Inc, Commented: "2017 has
been a year of significant growth for Boku , we've achieved growth
across all of our KPIs as well as completing our successful
admission to AIM in November. I look forward to 2018 with
considerable optimism, all of our forward indicators are on green
and the graphs are moving up and to the right. With revenue growth,
a stable cost base and sufficient cash to finance our working
capital and investment needs, we are confident that the Company
will continue to make substantial progress in 2018.
"I wish to thank our new shareholders, customers and carrier
partners for their support and confidence in our business, and our
employees for the extraordinary job that they do every day."
Enquiries:
Boku, Inc.
Jon Prideaux, Chief Executive Officer +44 (0)20
Stuart Neal, Chief Financial Officer 3934 6632
Peel Hunt LLP (Nominated Adviser
and Broker) +44 (0)20
Edward Knight / Nick Prowting 7418 8900
IFC Advisory Limited (Financial
PR & IR)
Tim Metcalfe / Graham Herring / +44 (0)20
Heather Armstrong 3934 6630
Notes to Editors
Incorporated in 2008, Boku is the leading independent direct
carrier billing company in the world. Boku's technology enables
mobile phone users, of which there are more than five billion
worldwide, to buy goods and services and charge them to their
mobile phone bill or pre-pay balance.
Boku's platform connects its customers, including Apple, Google,
Facebook, Microsoft, Spotify and Sony, with billing, identity and
sales systems of mobile network operators. The Group's technology
makes a consumer's mobile phone number a convenient and secure
payment method, providing an alternative to credit and debit cards.
By using Boku, merchants take people with mobile phones and make
them paying users.
Chairman's Statement
Boku has always been a dynamic company, one that has had to
adapt to a rapidly changing market environment and develop and
deliver products that our customers demand. Four years ago, the
Company was primarily engaged in enabling providers of PC games to
monetise their users, but, with the growth of app stores, casual
gamers switched their attention to mobile devices. The Company
needed to retool and rebuild its products to make them appropriate
for this new environment. This was a substantial change and
required significant investment, which has now led to Boku's
emergence as the largest company of its type internationally,
serving many of the world's largest digital merchants and is
successfully allowing them to acquire new paying users
globally.
The Executive Team at Boku implemented a strategy which involved
generating very considerable growth in the number and value of
payments handled. Total Payment Volume increased threefold to more
than $1.7 billion in 2017. This level of increase brings the
potential for scaling challenges, but the management team have
proved equal to the task. The extra processing was handled with
lower overall costs.
From a corporate perspective, 2017 saw Boku achieve two
important milestones:
First, the Company delivered a substantial increase in revenues
off a lower cost base and secondly the Company changed from being a
private company to being a public one. Both of these events are
linked and significant. Without the materially improved financials,
Boku would not have been able to complete the IPO nor have received
such a positive reaction from investors. I would like to take this
opportunity to welcome our new Shareholders in the Company.
The IPO has led to a change in the composition of our Board.
Several Directors who have worked with the Company to help its
development over many years have moved to take on new challenges
and opportunities, I wish to place on record my thanks to David
Weiden, Kevin Harvey and Paul McGuire for their service. In
addition, I would like to welcome Keith Butcher to the Board. He
has a fine track record in the public markets having been CFO of
both Datacash and Optimal Payments (now Paysafe). His experience
will be invaluable to the Board and we look forward to him assuming
the Chairmanship of the Audit Committee.
Notwithstanding the progress that the Company has made in the
past year, there are always new mountains to climb, new territories
to conquer. Boku will continue to invest in new opportunities
leveraging its core capability in connecting together the Mobile
Network Operators of the world who, collectively, reach more than 5
billion people with mobile phones. The Boku Acquire product that
supports bundling was supported by integrating into the carriers
point of sale and provisioning systems and we believe that there is
still considerable value to unlock from our network. The funds
raised in the IPO will provide us with the resources to both
optimize our existing business and to invest in new
capabilities.
I look forward with optimism to 2018 to further progress
commercially and in the launch of new products and improved
financial results.
Mark Britto
Non-Executive Chairman
Chief Executive Officer's Statement
Business description
Boku is a Carrier Commerce company. By connecting to the Boku
platform, our merchants, who include most of the world's biggest
digital companies, enable their users with a mobile phone, to buy
their products and services and charge them to their bills or
pre-paid balances. Boku operates a worldwide network of connections
to Mobile Network Operators and is developing its reach and quality
all the time.
On the surface, Boku operates as a payment company but,
practically speaking, the job our merchants hire us to do is
acquire new paying users. It turns out that paying for stuff with
your phone bill or prepaid balance is a great way to do that. More
people have phones than bank accounts and it's just more convenient
to pay for something on your phone with your phone number -
especially when our technology can discover it automatically.
Millions of people all around the world are now using Boku's
technology to pay and the number of monthly active users has more
doubled over the course of 2017 to over 8 million.
For our merchants, we offer a single connection to many network
operators around the world. It's a tough job to build such a global
network as connections are not standardised. We see considerable
potential to exploit this unique asset, touching as it does more
than 5bn users (essentially the world's adult population) in new
ways to create new products that add value at other parts of the
e-commerce value chain.
In the here and now, today's business is built on the market for
digitally distributed content - a market valued at $153bn in 2017
and growing strongly. It comprises games, music and videos whether
distributed directly, or through mobile app stores. Boku processes
transactions for almost all of the big players in this expanding
industry, including Apple, Facebook, Netflix, Spotify, Blizzard
Activision, Sony and Tencent/Riot Games, mostly as their sole or
main provider.
We make money by taking a small cut of the transaction value
that we process. Broadly speaking, our costs are stable, each extra
transaction costs a minimal amount to process so, once the costs of
the platform have been covered, extra revenue drops straight
through to the bottom line.
Strategy
Size is important. In payments it really is. Scale allows you to
simultaneously carry the cost base that offers the widest array of
services whilst also having the lowest unit cost. Additionally, in
a world of big data, scale allows you to do a better job of
optimising your product: big data requires big datasets. Scale also
allows you to work together with carrier partners who can see
better returns on investment for them from upgrading their
connections to Boku compared with a smaller operator.
Boku has always sought to be the scale player.
Our strategy is not to be geographically broad, to plant more
flags in ever more obscure parts of the map, but rather to work
with the merchants that present the biggest opportunities in the
biggest possible markets. We go to these places because, as Willie
Sutton, the Depression era criminal, when asked why he robbed
banks, said "That's where the money is". Big companies in big
markets generate more revenue than small merchants in peripheral
ones. It is a common misconception that Carrier Billing is a
solution for emerging markets: Boku has demonstrated that the
advanced economies of Europe, Asia and the Middle East offer
fertile territory for our customer acquisition method and payment
mechanism.
Our strategy also seeks to exploit the scale achieved by our
partners, the Mobile Network Operators. Collectively they connect
to more than 5 Billion consumers - potentially the world's largest
connected community; bigger than social networks like Facebook or
other payment networks like Visa. Through those connections they
can present a distinctive range of capabilities. Mobile Network
Operators know customer behaviour, the devices they carry, their
location and their transactions which is not available from any
other source. The problem is that hitherto, those capabilities have
been only accessible one carrier at a time, their collective value
diminished by "Balkanisation". By acting as a middleware player,
providing the connective tissue, Boku can unlock this value and
develop new services reaching beyond the carriers' billing
capabilities to address other parts of the ecommerce value
chain.
Whilst digitally distributed content at $153 billion is a
material market, it represents by most estimates, a mere 5% of
global e-commerce, it is our objective to add value to
registration, verification and location based services across all
types of merchant and not just at the time of the transaction.
Highlights from 2017
2017 has been a significant year for Boku. We achieved growth in
our financial and non-financial KPIs. Total Payment Volume (TPV)
increased by more than 200% to $1.7 billion and monthly active
users more than doubled to over 8 million users, making us the
world's largest independent Carrier Billing company.
We also rolled out 45 Boku Account connections in 2017 for
customers like Apple, Spotify, Microsoft and for Google traffic, a
67% increase on 2016's number; and increased productivity allowed
us to halve the cost of each deployment. These extra connections
drove our growth, as did the application of our Boku Optimise
technology which tunes the operation of app stores and Merchant
Connections so as to yield the maximum amount of revenue from each
connection, without breaching regulatory limits or exposing
carriers to unnecessary risks of bad debt.
Boku Optimise was a key factor in a couple of notable wins of
2017. Two more Mobile Network Operators looked at the alternatives
and decided to switch the connection for their Google traffic over
to Boku. MTS, with more than 78m subscribers is the largest mobile
network operator in Europe, and EE with more than 30 million
connections is the UK's biggest network and Europe's biggest 4G
network. They join amongst others, O2 in Germany and KPN in the
Netherlands, in switching to Boku to process their Google traffic.
Both networks have benefitted from Boku Optimise technology which
has boosted their traffic by double digit amounts in comparison to
their previous providers. Uniquely, Boku can help optimise traffic
by having access to material multi-merchant datasets.
We were also pleased to start the rollout of Blizzard
Activision, the Western world's largest interactive entertainment
company in 2017 and also to take our newest product Boku Acquire
into new countries including South Korea, Portugal, Israel and
Mexico.
Operations
At peak, transactions come flooding into the Boku system at
approaching 200 transactions per second. The number of transactions
that we handle has nearly tripled in the last year.
Boku has about 150 employees based all around the world, the
majority of whom work on our technology. Our team has developed a
system with in-built redundancy, active/active capability and with
the ability to handle both today's volumes and future proofed to
handle the growth anticipated for the coming years. The system has
been tested to more than 400 transactions per second without any
material impact on latency measures.
Together with their non-technical colleagues, Boku's operations
in San Francisco, Mumbai, London, Munich, Dusseldorf, Paris, Riga,
Sao Paulo, Milan, Tokyo, Beijing, Taipei and Singapore provide a
full service offering to our carrier partners and merchant
customers wherever they need it and provide 24x7 support from our
Network Operations Centre.
Strategy for growth
We've grown considerably over the last year and have a plan in
implementation to continue growing into the future, without
materially impacting our cost base. Growth, for Boku, in our core
business comes from three fundamental sources:
-- Growth from new deployments: most of our large customers have
a considerable pipeline - collectively more than 100 - of new
connections that they would like to activate. By connecting
to more mobile phone networks, users who never had the chance
to pay by Boku before are now able to do so.
-- Growth from maturity within connection: but that's not all,
once a Mobile Network Operator goes live, its subscribers have
the opportunity, but not necessarily the reason to use Boku.
That takes time. People discover us gradually as a by-product
of their normal behaviour. Perhaps it comes when they set up
a new device or when they try to pay for something within an
app store or subscribe to a streaming music service. Then they're
presented with the opportunity to buy and charge to their phone
bill or prepaid balance. This phenomenon means that once a new
connection is launched there is a maturity cycle that lasts
for years before the total number of users on a particular connection
stabilises. Put simply, last year's connections will continue
to grow this year.
-- Growth in the underlying market: the market for digitally distributed
content is growing around 10% Compound Annual Growth Rate (CAGR)
on a worldwide basis, which provides a strong wind at our backs
even in mature deployments.
Boku is not content though with simply driving growth through
its carrier network from billing applications, as mentioned above,
we're keen to launch new products in the areas of registration,
verification and location, exploiting our core competence of
connecting at scale to many carriers. At the time of our IPO we
said that we would use some of the funds that we raised make
investments in this area, with a view to making revenues in the
2019/2020 timeframe.
Boku has launched a new division, Boku Mobile Identity, which is
developing these opportunities and I hope to make further
announcements throughout the year, as we come closer to launch
which may be through either organic or inorganic routes.
Current Trading and Outlook
2017 has been a year of extraordinary growth for Boku and 2018
has picked up where 2017 left off. TPV for the first quarter at
$727 million grew by 170% compared with the same period last year
and monthly active users in March 2018 at 9.2 million were 138%
higher than a year earlier. With revenue growth, a stable cost base
and sufficient cash to finance our working capital and investment
needs, we are confident that the Company will continue to make
substantial progress in 2018. We remain confident that we will meet
market expectations for revenue and continue being EBITDA positive
throughout the year.
I wish to thank our new shareholders, customers and carrier
partners for their support and confidence and our employees for the
extraordinary job that they do every day.
Jon Prideaux
Chief Executive Officer
Chief Financial Officer's Report
A Transformational Year
In our first full year results since joining AIM in November
2017, the Company is able to report strong growth across all key
financial metrics, highlights include:
-- Reported Net Loss of $28.1 million includes costs relating to
the IPO
-- When adjusting for IPO related expenses, Net losses were $7.4
million - a 64% reduction from $20.6 million in 2016
-- Revenues increased 42% to $24.4 million (2016: $17.2 million)
-- Gross Profit Margin up to 91% from 81%
-- Adjusted EBITDA* Losses reduced by 81% from $12.3 million to
$2.3 million for the Full Year
-- Cash balances of $20.2 million** as at 31 December 2017 and
debt reduced from $21.0 million to $2.4 million
-- Active Users of the Boku platform increased to more than 8 million
in December 17 from 3.3 million one year ago
-- Total Processed Volume (TPV) rose to $1.7 billion from $0.55
billion (+207%)
*Adjusted EBITDA: Adjusted for IPO costs, stock option expenses,
Forex gains/losses and Exceptional items
** Cash balances include $1.4 million restricted cash items
Net Loss
Net Loss, adjusted for the impact of expenses directly connected
to the IPO were $7.4 million, being $28.1 million less a $18.6
million financing charge emanating from the conversion of the
convertible notes and $2.1 million of direct IPO expenses. This
compares favourably with Net Losses of $20.6 million in 2016.
Leading Indicators
Throughout 2017, we saw a significant increase in Total
Processed Volume (TPV) across our platform, recording a total spend
three times that of 2016 at $1.7 billion (up from $0.55 billion).
This increase was in part driven by new users being attracted to
Boku as a payment method, partly by the geographical roll out of
existing merchants and partly by the secular growth in expenditure
on digitally distributed content.
The number of active users of the Boku platform grew
significantly across the year from 3.3 million to more than 8
million whilst the average transaction value moved upwards
concurrently from $8 to just under $11.
The aggregated impact of these growth curves demonstrates a
business that is growing healthily.
Boku earns revenues by taking a fee for each transaction that is
processed by our platform. We can either be the technical conduit
between the Mobile Network Operator (MNO) and Merchant (as per the
"Transaction" model) or we can provide full service acquiring and
settlement of funds, the "Settlement" model. Under the Settlement
model, Boku earns a higher margin thanks to our broader role in
negotiating aggregate terms with MNOs, the collection of funds
across multiple markets, the conversion of currencies and the
remittance of consolidated payments to Merchants.
Revenue growth is lagging behind the growth in TPV because of a
mix effect in take rates. The Transaction model TPV (mostly
emanating from App Stores) is growing faster but at lower margin
than Settlement model TPV. Average margins within each model are
broadly stable, whilst average margins across the business as a
whole have thereby reduced as the Transaction model TPV continues
to grow. This is fully anticipated by the Company within its
business plan.
Indeed, revenue growth accelerated to +42% for the Full Year to
December 2017 due to the mix effect of Transaction vs Settlement
business.
Revenue and Gross Margin
Boku's revenue performance over previous years reflects a
business that has made an effective transformation - from its
initial focus on supporting social gaming on Desktop to now
supporting the App Economy and the consumption of digital goods and
services (including games) over devices and via App Stores.
During 2017 Boku delivered strong revenues of $24.4 million (42%
growth on 2016) as the Company's strategy of supporting providers
of digital goods and services, by helping them attract new paying
users, really started to bear fruit.
The Company has a diversified portfolio of merchants, whom we
serve either directly, in the case of music subscriptions, games
consoles, online gaming; or indirectly, via our connections to the
App Stores.
2017 revenue increased by 42% on TPV that was up 207%, the
difference being accounted for by the change in average take rates
across the business from 3.1% to 1.4%, for the reasons described
above.
With increased volume and a diversified customer base come the
benefits of scale and the Company has successfully leveraged its
relative buying power to lower our Cost of Goods Sold - both in
unit terms and in absolute terms - down to $2.3 million from $3.2
million on TPV which has trebled.
As a consequence, our Gross Profit Margins have increased to 91%
from 81% and Gross Profit at $22.1 million is 58% higher than
2016.
Operating Expenditure
Total Adjusted Operating Expenditure (Adjusted to exclude IPO
costs, stock option expenses, FX and Exceptional items) of $24.5
million was $1.8 million (7%) lower than 2016 total
expenditure.
Staff costs have reduced 3% over the period to $17.2 million
from $17.8 million. Full Time Employee (FTE) levels have broadly
remained flat in the business overall at 150, whilst the
geographical split has changed with some specific engineering
functions moved to our Mumbai technical centre from San
Francisco.
Efficiencies in the running cost of Boku operations, combined
with a ruthless focus on discretionary expenditure, account for the
remainder of the year on year reduction in expenses.
In 2017, we re-classified the costs associated with MNO
Deductions from Operating Expenditure to Cost of Goods Sold - this
more accurately reflects the nature of these costs which are, for
the most part, passed on to merchants through increased revenue.
The net effect of this change was zero at Adjusted EBITDA level,
but a decrease in both Gross Profit and Adjusted Operating
Expenditure of $0.3 million and $0.4 million in 2017 and 2016
respectively.
The Company capitalised a total of $0.1 million of internally
developed software costs during the year (2016: $1.4m).
Operating Result
Reported operating losses were reduced to $8.4 million in 2017
from $19.9 million in 2016, this improvement can be broken down as
follows:
Adjusted EBITDA continued to improve throughout the second half
of 2017, bringing full year adjusted EBITDA loss down to $2.3
million from GBP12.3 million the year before, reflecting strong
revenue growth combined with lower expenses.
Depreciation and Amortisation were broadly flat ($3.0 million
down from $3.2 million) as we continue to write down intangible
assets; acquired goodwill relating to the Mopay acquisition in 2014
and a small amount of capitalised internally-developed
software.
Foreign Exchange (FX) gains of $0.4 million reverse a $0.2
million loss in 2016 - Boku reports in USD, however many of the
money flows which arise from operating the Settlement model are in
other currencies, most notably GBP, EUR and JPY. A $0.4 million
gain represents just 0.02% of TPV for the year. The Company
operates forward foreign exchange contracts to hedge our foreign
currency exposure.
Exceptional costs of $2.6 million incorporate the costs relating
to the IPO secondary issue ($2.1 million) plus some reorganisation
expenses. Costs relating to the issue of new shares ($1.0 million)
were booked as an offset to shareholder capital.
Stock Option expenses normalised in 2017 at $0.9 million - the
2016 figure of $2.1 million reflected a reprice of the 2009 Stock
Option Plan.
Financing Expenses
Financing costs of $19.6 million include a $18.6 million
non-cash accounting expense relating to the Convertible Note which
converted to Common Stock at the IPO date.
Balance Sheet and Cashflow
Following the IPO the company has significantly strengthened its
Balance Sheet with increased cash balances, less short term debt
and the removal of the convertible note - as promised to investors
during the IPO process. As the company reported positive EBITDA for
H2 2017 cash funding requirements were negligible.
Boku raised GBP15 / $20 million gross (c. GBP13 / $17 million
net) funds from the IPO in November 2017. As stipulated before the
IPO, Boku's intent is to direct 50% of the net funds towards growth
generating activities and 50% towards paying down short term,
working capital facilities as part of a general "tidy up" of the
Company's balance sheet and reduction in cost of funding.
As at December 31st, 2017, our working capital facility with
Silicon Valley Bank was paid down to $2.4 million from $6.0 million
as at 31 December 2016. We also ceased utilising a factoring
arrangement in Boku AG during December (previously employed as a
means of accelerating cash collections) - this had the effect of
increasing our receivables whilst utilising approximately $4
million in cash.
The $15 million convertible note, raised in 2016 was converted
in full to common stock at the point of IPO thus reducing
non-current liabilities. Total Loans and Borrowings were thereby
reduced from $21.0 million (excluding the impact of factoring) to
$2.4 million over the period.
The Company closed the year with $20.2 million cash balances -
cash used to fund operations over the year was $6.8 million
compared with $11.4 million in 2016.
Increases in MNO Receivables and Merchant Payables over the
period ($21.1 million and $17.4 million respectively) reflect
underlying growth within the Settlement model business - whereby
MNO receivables are collected and aggregated shortly prior to
merchant remittances being paid. Receivables have grown faster than
Payables over the year due partly to the impact of the Company
reversing out of factoring in Boku AG.
There was no material movement in the USD value of Intangible
Assets on our balance sheet as amortisation costs for the year
($3.0 million) were offset by a currency revaluation of acquired
goodwill in Boku AG which is held in EUR and converted to USD upon
consolidation.
Looking Ahead
The Company is now in a favourable position to build further
value with growing revenues, positive EBITDA and rapidly
approaching free-cashflow generation. With a stronger balance
sheet, we are also able to make appropriate investments to explore
new areas for growth to fuel new revenues in 2019 and beyond.
Stuart Neal
Chief Financial Officer
BOKU, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2017 2016
Note $'000 $'000
------------------------------------------------------------------------------- ----- ------------- -------------
Revenue 4 24,412 17,193
Cost of sales (2,265) (3,192)
------------- -------------
Gross profit 22,147 14,001
Administrative expenses 5 (30,576) (33,914)
Operating loss analysed as:
Adjusted EBITDA* (2,319) (12,274)
Depreciation and amortisation (2,985) (3,155)
Stock Option expense (909) (2,096)
Foreign exchange gains/(losses) 428 (230)
Exceptional items (included in
administrative expenses) 5 (2,644) (2,158)
------------------------------------------------------------------------------- ----- ------------- -------------
Operating loss (8,429) (19,913)
Finance income 7 18 17
Finance expense 7 (19,558) (1,243)
Loss before tax (27,969) (21,139)
Tax (expense)/credit 8 (129) 542
------------------------------------------------------------------------------- ----- ------------- -------------
Net loss for the period attributable to equity holders of the parent company (28,098) (20,597)
------------------------------------------------------------------------------- ----- ------------- -------------
Other comprehensive income/(losses) net of tax
Items that will or may be reclassified to profit or loss
Foreign currency translation gain 2,269 15
Net decrease in fair value of cash flow hedge derivatives 15 (38) (20)
------------------------------------------------------------------------------- ----- ------------- -------------
Total comprehensive gain (loss) for the period 2,231 (5)
------------------------------------------------------------------------------- ----- ------------- -------------
Total comprehensive loss for the period attributable to equity holders of
the parent company (25,867) (20,602)
------------------------------------------------------------------------------- ----- ------------- -------------
Loss per share for loss attributable to the owners of the parent during the
year
Basic and fully diluted ($) 9 (0.19) (0.15)
------------------------------------------------------------------------------- ----- ------------- -------------
*Earnings before interest, tax, depreciation, amortisation,
share-based payment, foreign exchange gains/(losses), and
exceptional items (which includes IPO costs). Management has
assessed this performance measure as relevant for the user of the
accounts.
BOKU, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 31 December
2017 2016
Note $'000 $'000
--------------------------------- ----- ------------ ------------
Non-current assets
Property, plant and equipment 10 410 515
Intangible assets 11 25,799 25,661
Deferred income tax assets 8 714 647
--------------------------------- ----- ------------ ------------
Total non-current assets 26,923 26,823
--------------------------------- ----- ------------ ------------
Current assets
Trade and other receivables 13 59,115 37,101
Derivative financial instrument 15 - 14
Cash and cash equivalents 14 18,741 11,322
Restricted cash 14 1,439 480
--------------------------------- ----- ------------ ------------
Total current assets 79,295 48,917
--------------------------------- ----- ------------ ------------
Total assets 106,218 75,740
--------------------------------- ----- ------------ ------------
Current liabilities
Trade and other payables 16 74,981 54,891
Derivative financial instrument 15 24 -
Loans and borrowings 17 2,482 6,117
Total current liabilities 77,487 61,008
--------------------------------- ----- ------------ ------------
Non-current liabilities
Other payables 16 86 86
Loans and borrowings 17 43 15,088
--------------------------------- ----- ------------ ------------
Total non-current liabilities 129 15,174
--------------------------------- ----- ------------ ------------
Total liabilities 77,616 76,182
--------------------------------- ----- ------------ ------------
Net assets/ (net liabilities) 28,602 (442)
--------------------------------- ----- ------------ ------------
Equity attributable to
equity holders of the
company
Share capital 18 21 15
Share premium 174,220 119,315
Cash flow hedging reserve (24) 14
Foreign exchange reserve (928) (3,197)
Retained losses (144,687) (116,589)
--------------------------------- ----- ------------ ------------
Total equity 28,602 (442)
--------------------------------- ----- ------------ ------------
BOKU, INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
Cash flow exchange
Share capital Share premium hedging reserve reserve Retained losses Total
$'000 $'000 $'000 $'000 $'000 $'000
---------------- -------------- ---------------- ---------------- ---------------- ---------------- ----------
Equity as at 1
January 2016 15 117,161 34 (3,212) (95,992) 18,006
Loss for the
year - - - - (20,597) (20,597)
Other
comprehensive
income/
(losses) - - (20) 15 - (5)
Issue of share
capital upon
exercise of
203 stock
options - 74 - - - 74
shares
repurchase - (16) - - - (16)
Share-based
payment(1) - 2,096 - - - 2,096
---------------- -------------- ---------------- ---------------- ---------------- ---------------- ----------
Equity as at 31
December 2016 15 119,315 14 (3,197) (116,589) (442)
---------------- -------------- ---------------- ---------------- ---------------- ---------------- ----------
Loss for the
year - - - - (28,098) (28,098)
Other
comprehensive
income/
(losses) - - (38) 2,269 - 2,231
Issue of new
shares on IPO 2 19,023 - - - 19,025
Shares issued
for
convertible
note 4 33,772 - - - 33,776
Shares issued
in respect of
warrants - 462 - - - 462
Share issue
costs - (983) - - - (983)
Issue of share
capital upon
exercise of
3,357 stock
options 1,722 - - - 1,722
Share-based
payment(1) - 909 - - - 909
---------------- -------------- ---------------- ---------------- ---------------- ---------------- ----------
Equity as at 31
December 2017 21 174,220 (24) (928) (144,687) 28,602
---------------- -------------- ---------------- ---------------- ---------------- ---------------- ----------
(1) Share based payment has been credited against share premium
in accordance with the local company law and practice in US.
BOKU, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
31 December 31 December
2017 2016
Note $'000 $'000
-------------------------------------------------------------------- ----- ------------- -------------
Cash used in operations 23 (6,819) (11,430)
Income taxes paid - (39)
-------------------------------------------------------------------- ----- ------------- -------------
Net cash (used in)/from operating activities (6,819) (11,469)
-------------------------------------------------------------------- ----- ------------- -------------
Investing activities
Purchase of property, plant and equipment (223 (80)
Purchased of software development (97) (1,403)
Restricted cash (net) (959) 128
Interest received 18 17
Net cash used in investing activities (1,261) (1,338)
-------------------------------------------------------------------- ----- ------------- -------------
Financing activities
Payments to finance lease creditors (117) (104)
Proceeds from issuance of convertible promissory notes payable - 14,930
Share Issue Costs (983) -
Issue of common stock 20,747 74
Interest paid (937) (366)
Proceeds from line of credit 2,321 1,000
Repayment of line of credit (5,921) -
Repurchase of common stock - (16)
-------------------------------------------------------------------- ----- ------------- -------------
Net cash from financing activities 15,110 15,518
-------------------------------------------------------------------- ----- ------------- -------------
Net increase in cash and cash equivalents 7,030 2,711
Effect of foreign currency translation on cash and cash equivalent 389 (368)
Cash and cash equivalents at beginning of period 11,322 8,979
-------------------------------------------------------------------- ----- ------------- -------------
Cash and cash equivalents at end of period 18,741 11,322
-------------------------------------------------------------------- ----- ------------- -------------
Notes
1. Corporate Information
The consolidated financial information represents the results of
Boku Inc. ("the Company") and its subsidiaries (together referred
to as "the Group").
Boku Inc. is a company incorporated and domiciled in the United
States of America. The registered office of the Company is located
at 735 Battery St., 2nd Floor, and San Francisco, CA 94111, United
States.
On 20(th) November 2017, the Company's shares were listed on the
Alternative Investment Market of the London Stock Exchange
("AIM").
The principal business of the Group is the provision of mobile
billing and payment solutions for mobile network operators and
merchants. These solutions enable consumers to make online payments
using their mobile devices.
2. Accounting policies
The financial information has been prepared using the historical
cost convention, as modified by the revaluation of certain
derivative financial instruments, as stated in the accounting
policies below. These policies have been consistently applied to
all periods presented, unless otherwise stated.
Basis of preparation
The financial information set out in this document does not
constitute the Group's financial statements for the year ended 31
December 2017 or 31 December 2016. The annual report and financial
statements for the year ended 31 December 2017 were approved by the
Board of Directors on 9 April 2018, along with this preliminary
announcement. The financial statements for the year ended 31
December 2017 have been reported on by the Independent Auditor. The
Independent Auditor's report on the financial statements for 2017
was unqualified and did not draw attention to any matters by way of
emphasis.
The financial information set out in these preliminary results
has been prepared using International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board.
The accounting policies adopted in these preliminary results have
been consistently applied to all the years presented and are
consistent with the policies used in the preparation of the
financial statements for the year ended 31 December 2016.
The financial information set out in these results has been
prepared using the recognition and measurement principles of
International Accounting Standards, International Financial
Reporting Standards and Interpretations as issued by the
International Accounting Standards Board (collectively Adopted
IFRSs). The accounting policies adopted in these results have been
consistently applied to all the years presented and are consistent
with the policies used in the preparation of the financial
statements for the period ended 31 December 2016. The principal
accounting policies adopted are unchanged from those used in the
preparation of the financial statements for the period ended 31
December 2016. New standards, amendments and interpretations to
existing standards, which have been adopted by the Group have not
been listed, since they have no material impact on the financial
statements.
The Group's revenue and operating costs are predominantly
denominated in US Dollars and accordingly the Group's financial
statements have been presented in US Dollars.
Going concern
The Directors have prepared a cash flow forecast covering a
period extending beyond 12 months from the date of this financial
information.
The forecast contains certain assumptions about the performance
of the business including growth in future revenue which are deemed
high volume and low value in nature, the cost model and margins;
and importantly the level of cash recovery from trading.
Furthermore, investment in winning customers via marketing
expenditure, remains an important function of the forecasts. The
Group obtained additional funding through the placement of shares
on AIM. Collectively, all will provide working capital to cover
both operating activities and the repayment of existing debt
facilities. The Directors are aware of the risks and uncertainties
facing the business but the assumptions used are the Directors'
best estimate of the future development of the business.
After considering the forecasts and the risks, the Directors
have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future.
For these reasons, they continue to adopt the going concern basis
of accounting in preparing the financial information.
Basis of consolidation
Where the company has control over an investee, it is classified
as a subsidiary. The company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial information presents the results of
the company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial information incorporates the results
of business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
A list of the subsidiary undertakings which, in the opinion of
the Directors, principally affected the amounts of profit or loss
and net assets of the Group is given in note 12 of the financial
information.
Changes in accounting policies and disclosures
(a) New and amended standards adopted by the Group
The Group has applied any applicable new standards, amendments
to standards and interpretations that are mandatory for the
financial year beginning on 1 January 2017. However, none of them
has a material impact on the Group's consolidated financial
information.
(b) New, amended standards, interpretations not yet
effective
The following new standards, interpretations and amendments,
which are not yet effective and have not been adopted early in
these financial information, will or may have an effect on the
Group's future financial statements:
-- IFRS 15 Revenue from Contracts with Customers, effective date
1 January 2018. IFRS 15 is intended to clarify the principles of
revenue recognition and establish a single framework for revenue
recognition. This standard replaces the previous standard IAS 11
Construction Contracts, IAS18 Revenue and revenue related IFRICs.
The core principle is that an entity should recognise revenue to
depict the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
The directors have reviewed the standard and its potential
effects in the context of the Group's revenue policy and have
concluded that, on adoption, there is not expected to be a material
impact on or change to the Group's revenue.
-- IFRS 9 Financial Instruments, effective date 1 January 2018.
IFRS 9 is a replacement for IAS 39 'Financial Instruments' and
covers three distinct areas. Phase 1 contains new requirements for
the classification and measurement of financial assets and
liabilities. Phase 2 relates to the impairment of financial assets
and requires the calculation of impairment on an expected loss
basis rather than the current incurred loss basis. Phase 3 relates
to less stringent requirements for general hedge accounting.
The Group will need to apply an expected credit loss model when
calculating impairment losses on its trade and other receivables
(both current and non-current). This will potentially result in
increased impairment provisions and greater judgement due to the
need to factor in forward looking information when estimating the
appropriate amount of provisions. In applying IFRS 9 the group must
consider the probability of a default occurring over the
contractual life of its trade receivables and contracts asset
balances on initial recognition of those assets. The directors are
in the process of reviewing the potential effects of adopting this
standard, and will provide details of the full financial effect of
the interims results for the period ending 30 June 2018.
-- IFRS 16 Leases, effective date 1 January 2019 sets out the
principles for the recognition, measurement, presentation and
disclosure of leases for both parties to a contract, i.e. the
customer ('lessee') and the supplier ('lessor'). IFRS 16 completes
the IASB's project to improve the financial reporting of leases and
replaces the previous leases Standard, IAS 17 Leases, and related
Interpretations.
If the standard were to be adopted during the current financial
period and applied to the operating leases currently in the Group,
will bring all operating leases onto the balance sheet in line with
the accounting treatment for finance leases. The impact would be an
increase in the assets of the company by the amounts showing in
note 21. It is envisaged that, as the Group expands, the use of
operating leases will increase.
Foreign Currency
The main functional currencies for the Company's subsidiaries
are the United States Dollar, Euro and Great Britain Pound.
Foreign currency transactions and balances
i) Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at the
dates of the transactions.
ii) Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at the
reporting period end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the
income statement.
iii) Share capital, share premium, brought forward earnings are
translated using the exchange rates prevailing at the dates of the
transactions.
Consolidation of foreign entities
On consolidation, results of the foreign entities are translated
from the local functional currency to US$ using average exchange
rates during the period. All asset and liabilities are translated
from the local functional currency to US$ using the reporting
period end exchange rates. These exchange differences arising from
the translation of the net investment in foreign entities are
recognised in other comprehensive income and accumulated in a
separate component of equity.
Exchange differences are recycled to profit or loss as a
reclassification adjustment upon disposal of the foreign
operation.
Revenue Recognition
Revenue for the Group is measured at the fair value of the
consideration received or receivable. The Group recognises revenue
for services provided when the amount of revenue can be reliably
measured and it is probable that future economic benefits will flow
to the entity.
The Group provides a payment platform to facilitate the mobile
payment processing of virtual and digital goods purchases and also
provides a collection service for amounts due to the merchants.
The Group's revenue is principally its service fees. These fees
are received or receivable:
1. Settlement Model: when it acts as an agent between a merchant
and mobile network operators (MNOs) or an aggregator (a middleman
between the Group and the MNO). The service fee recognised is the
difference between amounts collected from the MNOs or the
aggregator and the amounts remitted to merchants; and
2. Transactional Model: from larger virtual and digital
merchants who receive the sale collections directly and pay a
service fee to the Group.
Amounts collected on behalf of merchants
The Group recognises accrued income when mobile device users
purchase virtual goods and digital goods through the Company's
payment platform. Once the Group receives confirmation of payment
information from the Aggregator or the MNO, the Company reverses
the accrued income and records the invoiced amount as trade
receivable. The period from when the mobile device user purchases
the virtual goods or digital goods to when the Group receives
payment from Aggregators, or MNO, ranges from less than one month
to six months or more. On receipt of this payment, the amount is
paid to the merchant for the virtual goods or digital goods
sold.
When an amount due to a merchant is still outstanding, the Group
recognises and includes this as part of trade payables.
Cost of sales
Cost of sales is primarily related to the costs incurred by the
Group to authorise the transactions of mobile device customers with
the associated MNOs.
Operating Segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker has been identified as the
executive management team including the Chief Executive Officer,
Chief Financial Officer, Chief Operating Officer and the Chief
Revenue Officer.
The Board considers that the Group's provision of a payment
platform for the payment processing of virtual goods and digital
goods purchases constitutes one operating and one reporting
segment, as defined under IFRS 8. Management reviews the
performance of the Group by reference to total results against
budget.
Retirement Benefits: Defined contribution schemes
The Company has a 401(k) plan, a type of defined contribution
scheme in the United States in which all employees are eligible to
participate after meeting eligibility requirements. Participants
may elect to have a portion of their salary deferred and
contributed to the scheme up to the limit allowed by applicable
income tax regulations. The Company has made a matching
contribution to the scheme for the year ended 31 December 2017.
Contributions to defined contribution schemes are charged to the
consolidated statement of comprehensive income in the year to which
they relate.
Share-based payments
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated statement of comprehensive income over the vesting
period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of
options that eventually vest.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated statement of comprehensive income over the
remaining vesting period.
Where equity instruments are granted to persons other than
employees, the consolidated statement of comprehensive income is
charged with the fair value of goods and services received.
Intangible assets
(i) Goodwill
The Group uses the acquisition method of accounting for the
acquisition of a subsidiary. The consideration transferred is
measured at the fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of exchange.
Costs directly attributable to the acquisition are expensed in the
period. Identifiable assets acquired, liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date.
In respect of business combinations that have occurred since 1
January 2014, goodwill represents the excess of the cost of the
acquisition and the Group's interest fair value of net identifiable
assets and liabilities acquired. In respect of business
combinations prior to this date, goodwill is included on the basis
of its deemed cost, which represents the amount recorded under US
GAAP. As permitted by IFRS 1, Goodwill arising on acquisitions
prior to 1 January 2014 is stated in accordance with US GAAP and
has not been remeasured on
transition to IFRS. Goodwill is recognised and measured at the acquisition date.
Goodwill is capitalised as an intangible asset at cost less any
accumulated impairment losses. Any impairment in carrying value is
being charged to the consolidated statement of comprehensive
income. An impairment loss recognised for goodwill is not
reversed.
Where the fair value of identifiable assets, liabilities and
contingent liabilities exceed the fair value of consideration paid,
the excess is credited in full to the consolidated statement of
comprehensive income on the acquisition date.
Goodwill is allocated to appropriate cash generating units
(CGUs). Goodwill is not amortised but is tested annually for
impairment or whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. The recoverable
amount is determined based on value in use calculations. The use of
this method requires the estimation of future cash flows and the
determination of a discount rate in order to calculate the present
value of the cash flows. The major assumptions are disclosed in
note 11.
(ii) Intangible assets acquired as part of a business combination
Intangible assets acquired in a business combination are
identified and recognised separately from goodwill where they
satisfy the definition of an intangible asset. The cost of such
intangible assets is their fair value at the acquisition date and
comprises Group's tradenames, merchant relationships and developed
technologies. All intangible assets acquired through business
combination are amortised over their useful lives.
Subsequent to initial recognition, intangible assets acquired in
a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses. The carrying values
are tested for impairment when there is an indication that the
value of the assets might be impaired
(iii) Research and development
Expenditure on research activities as defined in IFRS is
recognised in the income statement as an expense as incurred.
Expenditure on internally developed software products and
substantial enhancements to existing software product is recognised
as intangible assets only when the following criteria are met:
1. it is technically feasible to develop the product to be used or sold;
2. there is an intention to complete and use or sell the product;
3. the Group is able to use or sell the product;
4. use or sale of the product will generate future economic benefits;
5. adequate resources are available to complete the development; and
6. expenditure on the development of the product can be measured reliably.
The capitalised expenditure represents costs directly
attributable to the development of the asset from the point at
which the above criteria are met up to the point at which the
product is ready to use. The costs include external direct costs of
materials and services consumed in developing and obtaining
internal-use computer software, and payroll and payroll-related
costs for employees who are directly associated with and who devote
time to developing the internal-use software. If the qualifying
conditions are not met, such development expenditure is recognised
as an expense in the period in which it is incurred.
(iv) Amortisation rates
The significant intangibles recognised by the Group and their
useful economic lives are as follows:
Intangible asset Useful economic life
Tradenames 10 years
Merchant relationships 5 years
Developed technologies 1 - 7 years
Domain names 5 years
Internally developed 3 - 6.75 years
software
Thee amortisation expense is recognised within administrative
expenses in the consolidated statement of comprehensive income.
Property, plant and equipment
Property, plant and equipment are held under the cost model and
are stated at historical cost less accumulated depreciation and any
accumulated impairment losses. Historical cost includes expenditure
that is directly attributable to bringing the asset to the location
and condition necessary for it to be capable of operating in the
manner intended by management.
Depreciation is charged so as to allocate the cost of assets
less their residual value over their estimated useful lives, using
the straight-line method. The estimated useful lives range as
follows:
Office equipment 3- 5 years on cost
and furniture 3- 5 years on cost
Computer equipment 6.5 years on cost
and software
Leasehold improvement
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short term highly liquid investments with
original maturities of three months or less.
Restricted cash
The restricted cash does not meet the definition of cash and
cash equivalents and is therefore separately disclosed in the
Group's statement of financial position and not part of the cash
and cash equivalents for cash flow purposes. These cash amounts are
restricted as to withdrawal or use under the terms of certain
contractual agreements.
Financial assets
On initial recognition, the Group classifies its financial
assets as either financial assets at fair value through profit or
loss, held-to-maturity investments, loans and receivables financial
assets, or available-for-sale financial assets, as appropriate. The
classification depends on the purpose for which the financial
assets were acquired. At each reporting year-end, the financial
assets of the Group are all classified as loans and receivables or
derivative financial instruments.
The Group has factored certain of its accounts receivable under
agreements which it is not committed to underwrite any of the debts
transferred. Such amounts are derecognised following the receipt of
proceeds from the factoring company.
Loans and receivables
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
arise principally through the provision of goods and services to
customers (trade receivables and accrued income), but also
incorporate other types of contractual monetary assets.
They are initially recognised at fair value and measured
subsequent to initial recognition at amortised cost using the
effective interest rate method, less any impairment loss.
The Group's loans and receivables and financial assets comprise
trade receivables, accrued income, other receivables (excluding
prepayments) and cash and cash equivalents.
Loans and receivables - impairment
A provision for impairment of trade and other receivables is
recognised when there is objective evidence of impairment as a
result of one or more events having an impact on the estimated
future cash flow of these assets.
Financial liabilities
Financial liabilities are recognised when the Group becomes a
party to the contractual agreements of the instrument. The Group's
financial liabilities are categorised as loans and payables or
derivative financial instruments.
At initial recognition,
-- Financial liabilities (trade and other payables, excluding
other taxes and social security costs and deferred income), are
measured at their fair value plus, if appropriate, any transaction
costs that are directly attributable to the issue of the financial
liability. These financial liabilities are subsequently carried at
amortised cost.
-- Bank borrowings which are initially recognised at fair value
net any of transaction costs directly attributable to the issue of
the instrument. Such interest-bearing liabilities are subsequently
measured at amortised cost ensuring the interest element of the
borrowing is expensed over the repayment period at a constant
rate.
Derivative financial instruments
Hedge accounting is applied to financial assets and liabilities
only where all the following criteria are met:
-- At the inception of the hedge there is formal designation and
documentation of the hedging relationship and the Group's risk
management objective and strategy for undertaking the hedge.
-- For cash flow hedges, the hedged item in a forecast
transaction is highly probable and presents an exposure to
variations in cash flows that could ultimately affect profit or
loss.
-- The cumulative change in the fair value of the hedging
instrument is expected to be between 80-125% of the cumulative
change in the fair value or cash flows of the hedged item
attributable to the risk hedged (i.e. it is expected to be highly
effective).
-- The effectiveness of the hedge can be reliably measured.
-- The hedge remains highly effective on each date tested.
Cash flow hedges
The Group from time to time enters into derivative financial
instruments such as forward foreign exchange contracts to reduce
the potential impact of decreases in the value of the U.S. dollar
on receipt payments from Aggregator and MNO.
The effective part of the gain or loss of these forward
contracts designated as a hedge of the variability in cash flows of
foreign currency risk arising from the above firm commitments are
measured at fair value with changes in fair value recognised in
other comprehensive income and accumulated in the cash flow hedge
reserve. The ineffective portion of the gain or loss of these
contracts is recognised in the Group's profit or loss. The
associated gains or losses that were recognised in other
comprehensive income shall be reclassified from the cash flow hedge
reserve to profit or loss as a reclassification adjustment in the
same period during which the hedged forecast cash flows affect
profit or loss.
The value of the forward contracts within one year is disclosed
separately as derivatives under current assets or liabilities in
the Group's statement of financial positions.
Convertible loan notes
The convertible loan notes issued in 2016 are considered to be a
hybrid financial instrument comprising a financial liability (loan)
and an embedded derivative liability (share option). The number of
shares to be issued will vary as it's based on the Company's lowest
share price at conversion date. At the date of issue both elements
were included in the balance sheet as liabilities and held at fair
value. The fair value of the loan element was estimated using the
prevailing market interest rate for similar non - convertible debt.
Subsequently the convertible loan notes were accounted for as a
financial liability at amortised cost.
On conversion of the loan note to equity, any difference between
the fair value of the equity issued and the previous fair value of
the note is charged to finance expense, within the Consolidated
Statement of Comprehensive Income
Fair Value Hierarchy
All financial instruments measured at fair value must be
classified into one of the levels below:
-- Level 1: Quoted prices, in active markets.
-- Level 2: Fair Inputs other than quoted market prices included
within Level 1 that are observable for the asset or liability,
either directly or indirectly.
-- Level 3: Inputs that are not based on observable market data.
Share Capital
Financial instruments issued by the Group are treated as equity
only to the extent that they do not meet the definition of a
financial liability. The Group's ordinary share capital and
preference shares are classified as equity instruments.
Operating leases: lessee
Rentals paid under operating leases are charged to the profit or
loss on a straight-line basis over the period of the lease.
Leased assets: lessee
Where assets are financed by leasing agreements that give rights
approximating to ownership (finance leases), the assets are treated
as if they had been purchased outright. The amount capitalised is
the present value of the minimum lease payments payable over the
term of the lease. The corresponding leasing commitments are shown
as amounts payable to the lessor. Depreciation on the relevant
assets is charged to the income statement over the shorter of
estimated useful economic life and the term of the lease.
Lease payments are analysed between capital and interest
components so that the interest element of the payment is charged
to the income statement over the term of the lease and is
calculated on an effective interest rate basis. The capital part
reduces the amounts payable to the lessor.
Deferred taxation
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except
for differences arising on:
-- the initial recognition of goodwill;
-- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit;
and
-- investments in subsidiaries where the Group is able to
control the timing of the reversal of the difference and it is
probable that the difference will not reverse in the foreseeable
future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
balance sheet date and are expected to apply when the deferred tax
liabilities or assets are settled or recovered. Deferred tax
balances are not discounted.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
-- the same taxable group company; or
-- different company entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
and liabilities are expected to be settled or recovered.
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including the expectations
of future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below.
(a) Goodwill, Intangible assets acquired in a business combination
As set in the accounting policies above, intangible assets
acquired in a business combination are capitalised and amortised
over their useful lives. Both initial valuations and valuations for
subsequent impairment tests are based on risk adjusted future cash
flows discounted using appropriate discount rates. These future
cash flows will be based on forecasts which are inherently
judgemental. Future events could cause the assumptions to change
which could have an adverse effect on the future results of the
Group. Refer to note 11 for a description of the specific estimates
and judgements used and the net book values of intangible
assets.
(b) Share-based payments
The Group measures the cost of equity-settled transactions with
employees by reference to the fair value of the equity instruments
at the date at which they are granted. Estimating fair value for
share-based payment transactions requires determining the most
appropriate valuation model, which is dependent on the terms and
conditions of the grant. This estimate also requires determining
the most appropriate inputs to the valuation model including the
expected life of the share option, volatility and dividend yield
and making assumptions about them.
(c) Taxation
In recognising income tax assets and liabilities, management
makes estimates of the likely outcome of decisions by tax
authorities on transactions and events whose treatment for tax
purposes is uncertain. Where the final outcome of such matters is
different, or expected to be different, from previous assessments
made by management, a change to the carrying value of income tax
assets and liabilities will be recorded in the period in which such
a determination is made. In recognising deferred tax assets and
liabilities management also makes judgements about likely future
taxable profits. The carrying values of current tax and deferred
tax assets and liabilities are disclosed separately in the
consolidated statement of financial position.
3. Financial instruments - Risk Management
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies. The overall
objective of the Board is to set policies that seek to reduce risk
as far as possible without unduly affecting the Group's
competitiveness and flexibility. The Group reports in US$. All
funding requirements and financial risks are managed based on
policies and procedures adopted by the Board of Directors. The
Group does not issue or use financial instruments of a speculative
nature.
The Group is exposed to the following financial risks:
-- Market risk
-- Credit risk
-- Liquidity risk
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. The
principal financial instruments used by the Group, from which
financial instrument risk arises, are as follows:
-- Trade and other receivables
-- Cash and cash equivalents and restricted cash
-- Trade and other payables
-- Bank loans
To the extent financial instruments are not carried at fair
value in the consolidated statement of financial position, book
value approximates to fair value at 31 December 2017 and December
2016.
Trade and other receivables are measured at book value and
amortised cost. Book values and expected cash flows are reviewed by
the Board and any impairment charged to the consolidated statement
of comprehensive income in the relevant period.
Trade and other payables are measured at book value and
amortised cost.
Financial instruments by category
31 December 31 December
Financial assets 2017 2016
$'000 $'000
-------------------------------------- ------------ ------------
Cash and cash equivalents 18,741 11,322
Restricted cash 1,439 480
--------------------------------------- ------------ ------------
Total Cash 20,180 11,802
--------------------------------------- ------------ ------------
Accounts receivable (net) 56,360 35,216
Other receivables 199 107
Note receivable from shareholder 793 793
--------------------------------------- ------------ ------------
Total other financial assets
classified as loans and receivables 57,352 36,116
--------------------------------------- ------------ ------------
Loans and receivables 77,532 47,918
--------------------------------------- ------------ ------------
Derivative financial assets
designated as hedging instrument - 14
--------------------------------------- ------------ ------------
Financial liabilities
31 December 31 December
2017 2016
$'000 $'000
------------------------------------ ------------ ------------
Trade payables 64,275 46,909
Accruals 7,641 6149
Total other financial liabilities 71,916 53,058
------------------------------------- ------------ ------------
Bank loans (secured) 2,400 6,000
Finance lease payables 125 242
Convertible loan - 14,963
------------------------------------- ------------ ------------
Loans and borrowings 2,525 21,205
Financial liabilities at amortised
cost 74,441 74,263
------------------------------------- ------------ ------------
Derivative financial liabilities
designated as hedging instrument 24 -
------------------------------------- ------------ ------------
The management of risk is a fundamental concern of the Group's
management. This note summarises the key risks to the Group and the
policies and procedures put in place by management to manage
them.
a) Market risk
Market risk arises from the Group's use of interest bearing and
foreign currency financial instruments. It is the risk that the
fair value or future cash flows of a financial instrument will
fluctuate because of changes in interest rates (interest rate risk)
or foreign exchange rates (currency risk).
Interest rate risk
The Group is exposed to cash flow interest rate risk from bank
borrowings at variable rates. The Group's bank borrowings and other
borrowings are disclosed in note 17. The Group's exposure to
interest rate risk on the finance leases is considered low as the
outstanding balance at year-end is not significant. The Group
manages the interest rate risk centrally.
The following table demonstrates the sensitivity to a 1 percent
change (lower/higher) to the interest rates of the following
borrowings at 31 December 2017 to the profit before tax and net
assets for the period:
31 December 2017 31 December 2016
Increase/(decrease) of loss before tax and net Increase/(decrease) of loss before tax and net
assets assets
$'000 $'000
------------ ------------------------------------------------- --------------------------------------------------
Bank loans +/-24 +/-60
------------- ------------------------------------------------- --------------------------------------------------
Foreign exchange risk
Foreign exchange risk is the risk that movements in exchange
rates affect the profitability of the business. The company manages
this risk through natural hedging and also forward contracts.
The effect of fluctuations in exchange rates on the Euro and GBP
denominated trade receivables is partially offset through the use
of foreign exchange contracts to the extent that any remaining
impact on profit after tax is not material.
At December 31, 2017, the Company had entered into 31 (2016: 32)
foreign currency forward contracts totalling a notional amount of
$1,004,306 (2016: $3,547,000). These instruments were used to hedge
the variable cash flows predominantly associated with monthly
Aggregator payments. All of the Company's hedges are designated as
cash flow hedges.
The Company's objective in using derivatives is to add stability
to Aggregator payments and to manage its exposure to foreign
currency movements or other identified risks. To accomplish this
objective, the Company primarily uses foreign currency forward
contracts as part of its cash flow hedging strategy which is
managed centrally. The Group aims to fund expenses and investments
in the respective currency and to manage foreign exchange risk at a
local level by matching the currency in which revenue is generated
and expenses are incurred.
As of 31 December, the Group's gross exposure to foreign
exchange risk was as follows:
GBP Euro Other Total
31 December 2017 $'000 $'000 $'000 $'000
-------------------------------- --------- --------- --------- ---------
Trade and other receivables 17,305 24,578 15,046 56,929
Cash and cash equivalents
and restricted cash 10,926 2,002 4,088 17,016
Trade and other payables (23,283) (26,694) (17,459) (67,436)
Financial assets/(liabilities) 4,949 (114) 1,675 6,508
-------------------------------- --------- --------- --------- ---------
10% impact - +/- 550 (13) 186 723
GBP Euro Other Total
31 December 2016 $'000 $'000 $'000 $'000
-------------------------------- --------- --------- -------- ---------
Trade and other receivables 11,017 16,165 6,730 33,912
Cash and cash equivalents 721 4,324 1,284 6,329
Trade and other payables (19,596) (19,542) (9,553) (48,691)
Loans & borrowings - - - -
Financial assets/(liabilities) (7,858) 947 (1,539) (8,450)
-------------------------------- --------- --------- -------- ---------
10% impact - +/- (873) 105 (171) 939
The impact of 10% movement in foreign exchange rate of US$ will
result in an increase/decrease of total comprehensive loss after
tax and financial assets/(liabilities) by $723,151 for December
2017 (2016: $939,000).
b) Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Group is mainly exposed to credit
risk from credit sales. The Group's net trade receivables for the
three reported periods are disclosed in the financial assets table
above.
The Group is exposed to credit risk in respect of these balances
such that, if one or more the aggregators or MNOs encounters
financial difficulties, this could materially and adversely affect
the Group's financial results. The Group attempts to mitigate
credit risk by assessing the credit rating of new customers prior
to entering into contracts and by entering contracts with customers
with agreed credit terms.
In order to minimise this credit risk, the Group endeavours only
to deal with companies which are demonstrably creditworthy and
this, together with the aggregate financial exposure, is
continuously monitored. The maximum exposure to credit risk is the
value of the outstanding amount.
The Company evaluates the collectability of its accounts
receivable and provides an allowance for potential credit losses as
necessary. The Company has factored accounts receivable as a means
of financing and at 31 December 2017, 7% of the Company's accounts
receivable were factored (2016: 5%). The Group can draw down to a
maximum of 85% of the trade receivables and paid factoring,
collection fee and interest on the drawdown. The fee charged during
the year was $542,989 (2016: $170,780) charged to the profit and
loss account, under finance expenses. The Group is not committed to
underwrite any of the debts transferred and therefore continues to
de-recognise the debts sold within trade receivables as the debts
would have been settled, following receipts of proceeds from
factoring company.
Other receivables are considered to be low risk. The management
do not consider that there is any concentration of risk within
other receivables. No other receivables have been impaired.
Credit risk on cash and cash equivalents is considered to be
small as the counterparties are all substantial banks with high
credit ratings. At times, domestic deposits may be in excess of the
amount of insurance provided on such deposits. At December 31 2017,
cash and cash equivalents of $18,740,583 held in foreign
institutions are not insured (2016: $2,766,000). The maximum
exposure is the amount of the deposit. To date, the Company has not
experienced any losses on its cash and cash equivalent
deposits.
c) Liquidity risk
Liquidity risk arises from the Group's management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due. The Group's
policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due. The Group
also uses an invoice discounting facility to help manage this risk.
The table below analyses the Group's financial liabilities by
contractual maturities and all amounts disclosed in the table are
the undiscounted contractual cash flows:
31 December 2017 Within 1 year 1-2 years 2-5 years More than 5 years
$'000 $'000 $'000 $'000
---------------------------------- -------------- ---------- ---------- ------------------
Trade and other payables 74,981 86 - -
Bank loans (secured) 2,400 - - -
Derivative financial liabilities 24 - - -
Finance leases 82 43 - -
---------------------------------- -------------- ---------- ---------- ------------------
Total 77,487 129 - -
---------------------------------- -------------- ---------- ---------- ------------------
31 December 2016 Within 1 year 1-2 years 2-5 years More than 5 years
$'000 $'000 $'000 $'000
----------------------------------- -------------- ---------- ---------- ------------------
Trade and other payables 54,615 - - -
Bank loans (secured) 6,021 - - -
Finance leases and hire purchases 138 91 45 -
Convertible loan - - 19,068 -
----------------------------------- -------------- ---------- ---------- ------------------
Total 60,774 91 19,113 -
----------------------------------- -------------- ---------- ---------- ------------------
Capital Management
The Group's capital is made up of share capital, foreign
exchange reserve and retained losses.
The Group's objectives when maintaining capital are:
-- To safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
-- To provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
The capital structure of the Group consists of shareholders'
equity as set out in the consolidated statement of changes in
equity. All working capital requirements are financed from existing
cash resources and borrowings.
4. Segmental analysis
(a) Revenue from operations
2017 2016
$'000 $'000
----------------------- ------- -------
Revenue arises from:
Provision of services 24,412 17,193
------------------------ ------- -------
In 2017, there were 4 customers with revenue amounting to $16.6m
(2016: 4 ($8.0m)) where each customer revenue represents 10% or
more of the Group's revenue.
(b) Operating segment
For executive management purposes, the Group has one reportable
segment - provision of a payment platform for the payment
processing of virtual goods and digital goods purchases and
categorizes all revenue from operations to this segment.
Operating segment information under the primary reporting format
is disclosed below:
2017 2016
$'000 $'000
---------------------------------- --------- ----------
Revenue 24,412 17,193
Depreciation (221) (238)
Amortisation (2,764) (2,917)
Segment loss before exceptional
items (5,785) (17,755)
Segment loss - exceptional items
(note 5) (2,644) (2,158)
----------------------------------- --------- ----------
Segment loss (8,429) (19,913)
Finance income 18 17
Finance expense (19,558) (1,243)
Group loss before tax (27,969) (21,139)
----------------------------------- --------- ----------
(c) Geographic segment - secondary basis
The Group does not have the geographical analysis of the revenue
by location of the customers and the cost to produce this
information would be excessive.
An analysis of non-current assets by geographical market is
given below:
2017 2016
$'000 $'000
------------------------------------- ------- -------
United States of America 3,786 4,831
Germany 22,747 21,142
Other European countries (including
UK) 162 184
Rest of the World 228 666
-------------------------------------- ------- -------
Total 26,923 26,823
-------------------------------------- ------- -------
5. Administrative expenses (including exceptional items)
2017 2016
$'000 $'000
----------------------------------- ---------- -------
Audit fees 502 437
Non-audit fees - taxation 161 92
Accounting services 145 205
Non-audit fees - consultancy
and compliance services 529 704
Staff costs (excluding stock
option expense - note 6) 17,264 17,843
Travel & entertainment 910 1,152
Rent and occupancy costs 1,869 1,988
Total IT, development and hosting 1,531 1,636
Total banking costs 273 468
Legal fees 651 640
Other costs including marketing,
support & testing and other
administration expenses* 631 1,107
------------------------------------ ---------- -------
Adj. Operating Expenses 24,466 26,272
------------------------------------ ---------- -------
Depreciation of property, plant
and equipment 221 238
Amortisation of intangible assets 2,764 2,917
Loss on disposal of property,
plant and equipment - 3
Foreign exchange losses (428) 230
Exceptional items - impairment
of trademarks - 2,089
Exceptional items - impairment
of developed technology - 69
Exceptional items - restructuring
costs 478 -
Exceptional items - IPO costs 2,166 -
Share - based expenses (note
20) 909 2,096
------------------------------------ ---------- -------
30,576 33,914
----------------------------------- ---------- -------
* Expense recorded previously as bad debt of $309,600 (2016:
$419,000) and has been reclassified to cost of sales to better
represent the fact that they are carrier deductions. This does not
change the group operating loss, comprehensive loss nor total
equity for the previous period.
6. Staff costs
Total staff costs 2017 2016
$'000 $'000
----------------------- ---------------------- --------
Wages and salaries 13,782 14,258
Short-term benefits 785 807
Social security costs 1,467 1,325
Pension costs 140 13
Other staff costs 1,090 1,424
------------------------ ---------------------- --------
Total staff costs 17,264 17,827
------------------------ ---------------------- --------
Other staff costs include contractor costs, relocation,
recruiting and training costs for the group.
Key management personnel compensation was made up as
follows:
2017 2016
$'000 $'000
----------------------- ------ ------
Salaries 1,545 1,848
Short-term benefits 51 104
Social security costs 113 130
Pension costs 1 -
Total 1,710 2,082
------------------------ ------ ------
Directors' remuneration included in staff costs:
2017 2016
$'000 $'000
---------------------------- ------ ------
Salaries including bonuses 708 544
Short-term benefits 28 41
Total 736 585
----------------------------- ------ ------
Information regarding the highest paid director is as
follows:
2017 2016
$'000 $'000
------------------------- ------ ------
Total remuneration paid 388 394
-------------------------- ------ ------
The average monthly number of employees during the period was as
follows:
2017 2016
------------------------------ ----- -----
Management 5 7
Operations & administration 140 146
------------------------------ ----- -----
Total 145 153
------------------------------ ----- -----
7. Finance income and expenses
2017 2016
$'000 $'000
------------------------------------- ------- ------
Finance income
Interest income from bank deposits 18 17
--------------------------------------
Total 18 17
-------------------------------------- ------- ------
Finance expenses
Interest on bank loans & overdrafts 394 417
Interest on finance leases
and hire purchase contracts 21 34
Other interest payable (including
interest paid for factoring) 543 81
Amortisation of debt discount 89 33
Interest on convertible loan
notes (note 17) 18,511 678
Total 19,558 1,243
-------------------------------------- ------- ------
Net finance expenses 19,540 1,226
-------------------------------------- ------- ------
8. Income tax
2017 2016
$'000 $'000
--------------------------------------- ------- ------
Current tax
US tax 28 -
Foreign tax 125 105
Total current tax 153 105
---------------------------------------- ------- ------
Deferred tax expense
Origination and reversal of temporary
differences (24) (647)
---------------------------------------- ------- ------
Total tax expense/(credit) 129 (542)
---------------------------------------- ------- ------
The reasons for the difference between the actual tax charge for
the period and the applicable rate of income tax of the US
reporting entity applied to the result for the period are as
follows:
2017 2016
$'000 $'000
--------------------------------- --------- ---------
Loss before tax (27,969) (21,139)
Tax rate 34% 34%
Loss before tax multiplied by
the applicable rate of tax: (9,509) (7,187)
US state tax 28 -
Overseas tax 22 (727)
Expenses not deductible for tax
purposes 7,084 411
Withholding taxes 34 181
Tax losses 2,470 6,782
Others - (2)
---------------------------------- --------- ---------
Total tax expense/(credit) 129 (542)
---------------------------------- --------- ---------
The Group has carried forward losses and accelerated timing
differences at the reporting date as shown below. In respect of its
UK subsidiary, these can be carried forward and offset against UK
taxable income indefinitely. In respect of its US entities, net
operating loss carryforwards can be carried forward and offset
against taxable income for 20 years for losses incurred up to and
including 31 December 2017. Utilisation of net operating loss or
tax credit carryforwards may be subject to annual limitations if an
ownership change had occurred pursuant to the section 382 Internal
Revenue Code and similar state provisions. Such an annual
limitation could result in the expiration of net operating loss and
tax credit carryforwards before utilisation. As the timing and
extent of taxable profits are uncertain, the deferred tax asset
arising on these losses and accelerated timing differences below
has not been recognised in the financial statements.
2017 2016
$'000 $'000
------------------------------------ -------- --------
US losses and tax credit - federal
and states 144,854 129,339
Foreign losses 15,972 16,533
Total 160,826 145,872
------------------------------------- -------- --------
The deferred tax asset of $713,500 which was recognised in 2017
(2016: $647,000) relates to losses of certain foreign subsidiaries
which will be realised as management is expecting these
subsidiaries to be profitable as a result of intercompany transfer
pricing agreements.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the
"Tax Act") was signed into law making significant changes to the
Internal Revenue Code. Changes include, but are not limited to, a
corporate tax rate decrease from 34% to 21% effective for tax years
beginning after December 31, 2017, the transition of U.S.
international taxation from a worldwide tax system to a territorial
system, and a one-time transition tax on the mandatory deemed
repatriation of cumulative foreign earnings as of December 31,
2017.
The Company has calculated its best estimate of the impact of
the Tax Act in its year end income tax provision in accordance with
its understanding of the Tax Act and guidance available as of the
date of this filing. The provisional amount related to the
remeasurement of certain deferred tax assets and liabilities based
on the rates at which they are expected to reverse in the future
was approximately $15 million with a corresponding and fully
offsetting adjustment to our valuation allowance for the year ended
December 31, 2017. The Company does not expect a material impact
related to the one-time transition tax on the mandatory deemed
repatriation of foreign earnings.
9. Loss per share
2017 2016
----------------------------------- ------------ ------------
Loss attributable to shareholders
on the Company ($'000) (28,098) (20,597)
Weighted average number of
common shares 150,316,262 140,126,251
------------------------------------ ------------ ------------
Basic loss per share (0.19) (0.15)
------------------------------------ ------------ ------------
Loss per share is calculated based on the share capital of Boku,
Inc. and the earnings of the Group.
Due to the loss reporting period the effect of the share options
was considered anti-dilutive and hence diluted loss per share is
the same as the basic loss per share in 2016 and 2017.
10. Property, plant and equipment
Computer Office equipment
equipment and fixtures Leasehold
& software and fittings improvement Total
$'000 $'000 $'000 $'000
--------------------- ------------ ---------------------------------- ------------- -------
COST
At 1 January
2016 599 536 112 1,247
Additions 77 19 - 96
Disposals (6) (4) (11) (21)
Exchange adjustment (5) (21) (8) (34)
--------------------- ------------ ---------------------------------- ------------- -------
At 31 December
2016 665 530 93 1,288
--------------------- ------------ ---------------------------------- ------------- -------
Additions 148 75 - 223
Disposals (36) (1) - (37)
Exchange adjustment - 1 2 3
--------------------- ------------ ---------------------------------- ------------- -------
At 31 December
2017 777 605 95 1,477
--------------------- ------------ ---------------------------------- ------------- -------
DEPRECIATION
At 1 January
2016 420 113 33 566
Charge for the
year 101 113 24 238
Disposals (6) (3) (11) (20)
Exchange adjustment (4) (2) (5) (11)
--------------------- ------------ ---------------------------------- ------------- -------
At 31 December
2016 511 221 41 773
--------------------- ------------ ---------------------------------- ------------- -------
Charge for the
year 110 98 13 221
Disposals (37) - - (37)
Exchange adjustment 33 75 2 110
--------------------- ------------ ---------------------------------- ------------- -------
At 31 December
2017 617 394 56 1,067
--------------------- ------------ ---------------------------------- ------------- -------
NET BOOK VALUE
--------------------- ------------ ---------------------------------- ------------- -------
At 1 January
2016 179 423 79 681
At 31 December
2016 154 309 52 515
At 31 December
2017 160 211 39 410
--------------------- ------------ ---------------------------------- ------------- -------
Assets held under finance leases or hire purchase contracts:
The net book value of assets held under finance leases or hire
purchase contracts, included above, are as follows:
2017 2016
Cost $'000 $'000
Furniture 192 249
Computer Hardware 37 57
--------------------
Total 229 306
-------------------- ------ ------
Depreciation charge
Furniture 57 57
Computer Hardware 20 20
----------------------
Total 77 77
---------------------- -------- ----
Net book Value
Furniture 134 192
Computer Hardware 17 37
----------------------
Total 151 229
---------------------- -------- ----
11. Intangible assets
Internally
Domain Developed Merchant Trade developed
name technology relationships marks Goodwill software Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
---------------- ------- --------------------- ---------------- --------- ----------- ----------- ---------
COST
At 1 January
2016 140 2,192 9,398 2,908 17,153 3,619 35,410
Additions - - - - - 1,379 1,379
Write off - (217) (598) (2,696) - - (3,511)
Exchange
adjustment - (69) (296) (102) (551) (25) (1,043)
----------------
At 31 December
2016 140 1,906 8,504 110 16,602 4,973 32,235
Additions - - - - - 97 97
Exchange
adjustment - (37) 1,101 - 2,013 133 3,210
---------------- ------- --------------------- ---------------- --------- ----------- ----------- ---------
At 31 December
2017 140 1,869 9,605 110 18,615 5,203 35,542
---------------- ------- --------------------- ---------------- --------- ----------- ----------- ---------
AMORTISATION
At 1 January
2016 140 1,813 2,563 350 - 403 5,269
Charge for
period - 234 1,173 270 - 1,240 2,917
Write off - (148) (598) (607) - - (1,353)
Exchange
adjustment - (9) (230) (13) - (7) (259)
----------------
At 31 December
2016 140 1,890 2,908 - - 1,636 6,574
Charge for
period - 27 1,252 - - 1,485 2,764
Exchange
adjustment - (48) 409 - - 44 405
---------------- ------- --------------------- ---------------- --------- ----------- ----------- ---------
At 31 December
2017 140 1,869 4,569 - - 3,165 9,743
---------------- ------- --------------------- ---------------- --------- ----------- ----------- ---------
NET BOOK
VALUE
At 1 January
2016 - 379 6,835 2,558 17,153 3,216 30,141
At 31 December
2016 - 16 5,596 110 16,602 3,337 25,661
At 31 December
2017 - - 5,036 110 18,615 2,038 25,799
---------------- ------- --------------------- ---------------- --------- ----------- ----------- ---------
At the year-end date an impairment test has been undertaken by
comparing the carrying values of goodwill with the recoverable
amount of the Group's one cash generating unit (CGU) which is the
provision of a mobile payment platform for the payment processing
of virtual goods and digital goods purchases to which the goodwill
has been allocated. The recoverable amount of the cash generating
unit is based on value-in-use calculations. These calculations use
cash flow projections covering a three-year period based on
financial budgets and a calculation of the terminal value, for the
period following these formal projections.
The key assumptions used for value-in-use calculations are those
regarding growth rates, increases in costs and discount rates. The
discount rate is reviewed annually to take into account the current
market assessment of the time value of money and the risks specific
to the cash generating units and rates used by comparable
companies. The discount rate has been calculated as the weighted
average cost of capital. The pre-tax discount rate used to
calculate value-in-use is 28.1% (2016: 49.40%). Growth rates for
forecasts take into account historic experience and current market
trends. Costs are reviewed and increased for inflation and other
cost pressures. The terminal value calculation for 2017 was based
on growth rate of post-tax free cashflow of 2% (2016: multiple
EBITDA approach, using multiplier EBITDA of 5) for the CGU.
The cash flows resulted in a decision to impair the intangible
assets at year end 2016. The initial fair value measurement of
Mopay's intangible assets and goodwill arose from the purchase
price allocation which was undertaken on January 21st, 2016. At
31st December 2016, it was determined that the trade names
purchased as part of the transaction have a fair value less than
the carrying amount as these trade names have ceased to be used in
the Group. Therefore, the management have taken the decision to
write off the net book value of the trade names as at 31st December
2016.
The write offs in 2016 were for trademarks of $2.089m and
developed technology of $0.069m and these were recognised as
exceptional expenses within administrative expenses (see note
5).
The cash flows resulted in a decision not to impair the
intangible assets at year end 2017.
Sensitivity to changes in assumptions
Management has identified two key assumptions for which if any
of the following changes were made to these key assumptions
individually, this would cause the carrying amount to equal to the
recoverable amount of the goodwill for the CGU for the year ended
31 December 2017:
2017 2016
------------------------------------- ------- -----------
Projected revenue used
for terminal value reduced 100% to
from N/A 36%
Revenue multiplier for
terminal value reduced
from N/A 5 to 1.79
Projected post tax free cashflow 96% N/A
used for terminal value reduced by
Terminal growth rate reduced from 2% to N/A
-344%
The terminal value calculation for 2017 was based on growth rate
of post-tax free cash flow of 2% (2016: multiple EBITDA approach,
using multiplier EBITDA of 5) for the CGU.
12. Subsidiaries
The principal subsidiaries of the Company, all of which have
been included in the consolidated financial information , are as
follows:
The proportion of share capital directly held by the parent
company in each subsidiary is 100%.
Name Principal activity Parent Location
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Payments Inc. Holding Company Boku Inc. USA
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services Inc. Holding Company Boku Inc. Delaware, USA
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Account Services Inc. Holding Company Boku Inc. Virginia, USA
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services AG Holding Company Boku Inc. Germany
------------------------------------ ------------------------- ------------------------------------- --------------
Paymo Brazil Servicios de
Pagamentos Ltd Mobile payment solutions Boku Network Services Inc.(Delaware) Brazil
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services UK, Ltd Mobile payment solutions Boku Network Services Inc.(Delaware) UK
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services AU Pty Ltd Mobile payment solutions Boku Network Services Inc.(Delaware) Australia
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services IN Privates
Limited Mobile payment solutions Boku Network Services Inc.(Delaware) India
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services Japan Branch
Office Mobile payment solutions Boku Network Services Inc.(Delaware) Japan
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services Taiwan Branch
Office Mobile payment solutions Boku Network Services Inc.(Delaware) Taiwan
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Account Services Inc.
Boku Account Services UK, Ltd. Mobile payment solutions (Virginia) UK
------------------------------------ ------------------------- ------------------------------------- --------------
Boku Network Services Singapore
Branch Office* Mobile payment solutions Boku Network Services Inc.(Delaware) Singapore
------------------------------------ ------------------------- ------------------------------------- --------------
Mindmatics Labs SRL** Mobile payment solutions Boku Network Services AG (Germany) Romania
------------------------------------ ------------------------- ------------------------------------- --------------
Mopay AG Beijing Representative
Branch Mobile payment solutions Boku Network Services AG (Germany) China
------------------------------------ ------------------------- ------------------------------------- --------------
Mocosmos GmbH* Mobile payment solutions Boku Network Services AG (Germany) Germany
------------------------------------ ------------------------- ------------------------------------- --------------
Mobileview Italia S.r.l Mobile payment solutions Boku Network Services AG (Germany) Italy
------------------------------------ ------------------------- ------------------------------------- --------------
* Closed during year to 31 December 2017
** Closed in February 2018
13. Trade and other receivables
31 December 31 December
2017 2016
$'000 $'000
----------------------------------- ------------ ------------
Trade receivables - gross 36,710 18,237
Accrued income 21,060 17,695
------------------------------------ ------------ ------------
Accounts receivable - gross 57,770 35,932
Less: provision for impairment (1,410) (716)
------------------------------------ ------------ ------------
Accounts receivable - net 56,360 35,216
Other receivables 48 -
Deposits held 151 107
Taxes receivable 1,117 72
Note receivable from a
shareholder 793 793
------------------------------------
Total financial assets
classified as loans and
receivables 58,469 36,188
------------------------------------ ------------ ------------
Prepayments 646 913
------------------------------------ ------------ ------------
Total 59,115 37,101
------------------------------------ ------------ ------------
The ageing of trade receivables
and accrued income is as
follows:
31 December 31 December
2017 2016
$'000 $'000
----------------------------------- ------------ ------------
Not past due not impaired** 50,835 22,153
Past due but not impaired**
Up to 30 days 2,748 5,551
31 days - 60 days 1,226 930
61 days - 90 days 318 742
More than 90 days 1,205 413
------------------------------------ ------------ ------------
5,497 7,636
----------------------------------- ------------ ------------
Past due but impaired** 1,438 6,143
Less: Impairment (trade
receivables only) (1,410) (716)
------------------------------------ ------------ ------------
56,360 35,216
----------------------------------- ------------ ------------
** both trade receivables
and accrued income
The Company generally does not require collateral from its
customers. The Company evaluates the collectability of its accounts
receivable and provides an impairment provision for potential
credit losses such as financial difficulty of the customer to pay,
as necessary. Trade receivables that were past due but not impaired
relate to customers with no default history. Trade receivables that
were past due and fully impaired were $1,410,000 for December 2017
(Dec 2016: $716,000).
Provision for impairment
31 December 31 December
2017 2016
$'000 $'000
---------------------------- ------------ ------------
Opening balance 715 1,615
Utilised during the period (111) (1,331)
Increase during the period 806 419
Foreign exchange movement - 13
------------------------------ ------------ ------------
Closing balance 1,410 716
------------------------------ ------------ ------------
Accounts receivable and other receivables have not been
discounted as they are short-term debts.
14. Cash and cash equivalents and restricted cash
31 December 31 December
2017 2016
$'000 $'000
--------------------------- ------------ ------------
Cash and cash equivalents 18,741 11,322
---------------------------- ------------ ------------
Restricted cash 1,439 480
---------------------------- ------------ ------------
The restricted cash primarily includes e-money received but not
yet paid to merchants (in transit), cash held in the form of a
letter of credit to secure a lease agreement for the Company's San
Francisco office facility and a certificate of deposit held at a
financial institution to collateralise Company credit cards.
15. Derivative financial instruments
31 December 31 December
2017 2016
$'000 $'000
----------------------------------------------- ------------ ------------
Derivative financial assets (liabilities)
Derivatives designated as hedging instruments
Forward foreign exchange swaps (24) 14
------------------------------------------------ ------------ ------------
The maximum exposure to credit risk at the reporting date is the
fair value of the derivative assets in the consolidated statement
of financial position
The Group's objective in using derivatives is to hedge the
variability cash flows associated with monthly Aggregator payments
and to manage its exposure to foreign currency movements or other
identified risks. To accomplish this objective, the Company
primarily uses foreign currency contracts as part of its cash flow
hedging strategy.
The notional principal amounts of outstanding forward foreign
exchange rate swaps at 31 December 2017 were $1,004,306 (2016:
$3,547,000). Their fair value in 2017 is $23,865 liability (2016:
$14,000 asset).
The hedged transactions denominated in various foreign
currencies are expected to occur at various dates within the next
12 months. The change in net un-realised gains and losses on the
fair value of these forward foreign exchange swaps are recognised
in the hedging reserve in equity at year ended December 2017 of
$38,000 loss (2016: loss $20,000). The realised gains of these
swaps re-cycled from the hedging reserve to profit or loss were
2017: $56,641 (2016: $34,000).
16. Trade and other payables
31 December 31 December
2017 2016
Current $'000 $'000
-------------------------------------- ------------ ------------
Trade payables 64,275 46,909
Accruals 7,641 6,149
--------------------------------------- ------------ ------------
Total financial liabilities
classified as financial liabilities
measured at amortised cost 71,916 53,058
Other taxes and social security
costs 2,203 1,556
Deferred revenue 862 277
--------------------------------------- ------------ ------------
Total 74,981 54,891
--------------------------------------- ------------ ------------
Non-current
Deferred rent 86 86
--------------------------------------- ------------ ------------
Total 86 86
--------------------------------------- ------------ ------------
The carrying values of trade and other payables approximate to
fair values.
17. Loans and borrowings
31 December 31 December
2017 2016
$'000 $'000
------------------------------------ ------------ ------------
Current
Bank loans (secured) 2,400 6,000
Obligations under finance
lease and hire purchase contracts 82 117
------------------------------------- ------------ ------------
Total 2,482 6,117
------------------------------------- ------------ ------------
Non-current
Obligations under finance
lease and hire purchase 43 125
Convertible promissory notes - 14,963
------------------------------------- ------------ ------------
Total 43 15,088
------------------------------------- ------------ ------------
Principal terms and the debt repayment schedule of the Group's
loan and borrowings are as follows:
In November 2013, the Company entered into a Loan and Security
Agreement (the Agreement) with a financial institution that allows
for borrowings of up to $15,000,000 under a revolving line of
credit through to February 2015. This was extended first, through
to March 2017 and subsequently through to March 2019. However, the
amounts borrowed under this Agreement were partially repaid after
the IPO; the balance outstanding at year end was $2.4m (2016:
$6m).
The line of credit is secured by the Company's trade receivables
and allows for borrowings of up to (a) 80% of outstanding eligible
trade receivables from United States or Western Europe debtors plus
(b) sixty-five percent (65.0%) of outstanding eligible trade
receivables from debtors other than those from the United States or
Western Europe plus (ii) 50% of outstanding eligible accrued income
provided that (a) aggregate advances secured by trade receivables
due from Aggregators does not exceed $7,500,000 at any time and (b)
aggregate advances secured by eligible accrued receivables does not
exceed $7,500,000 at any time. The Agreement requires a minimum
monthly interest payment of $12,500 should interest paid on
outstanding borrowings be less than $12,500 in any given month.
Advances under the line of credit bear interest at prime plus 3.25%
or prime plus 1.75%, depending on the net cash balances held with
the financial institution (2017: 6.50%; 2016: 6.00%). Outstanding
borrowings under the line of credit at each year-end are as
disclosed in the above table.
Subsequent to 2015 year-end, the financial institution waived
its right to accelerate payment and formally amended the line of
credit to extend the maturity date through to January 2017 and
later to March 2017. At December 31 2017, management believes the
Company was in compliance under the terms of the Agreement.
Convertible Promissory notes
In 2016, the Company entered into subordinated convertible note
agreements with investors under which the Company is authorised to
issue notes of up to $20 million. The Company issued convertible
notes totaling $15,053,000 at various dates from July through
November 2016. The notes accrue interest at the rate of 10% per
annum and mature in January 2019.
The notes, plus accrued interest, automatically convert into the
next round of preferred stock financing at the lowest issued price
during a qualified financing of at least $10,000, not including
funds received from the convertible notes. If a qualified financing
does not occur prior to the maturity, the notes plus accrued
interest can be converted into the next round of preferred stock
financing, at the option of the holder; if a holder chooses not to
convert, the notes must be repaid by the Company at a rate of two
times the then outstanding notes and accrued and unpaid interest
balance. If a qualified public offering or other qualified merger
occurs prior to maturity, the conversion stock to be received by
the note holders will be converted at a rate of two times the then
outstanding note and accrued and unpaid interest balance divided by
the applicable conversion price.
Prior to IPO in November 2017, these convertible notes totaling
$17,120,113 (2016: $15,053,000) including accrued interests were
converted to 44,052,101 common shares at GBP0.59 per share. In
accordance with the terms of the note as described above, the note
converted at a rate of two times the outstanding balance and the
resulting costs was recorded in finance expense and amounted to
$17,120,113.
In 2016, $123,000 has been netted off against the outstanding
debt and is being amortised to interest expense over the term of
the convertible promissory notes. The remaining balance of $90,000
(2016: $33,000) was amortised and expensed in 2017, following the
pre-IPO re-organisation.
Reconciliation of liabilities
arising from financing activities
Cash
2016 flows Non-cash changes 2017
----------------------------------
Foreign Fair
Converted Exchange Value
to shares Movement Changes
------- -------- ----------- ---------- --------- ------
Long-term borrowings 14,963 - (32,050) (33) 17,120 -
Short-term borrowings 6,000 (3,600) - 2,400
Lease liabilities 242 (117) 125
------- -------- ----------- ---------- --------- ------
Total liabilities
from financial activities 21,205 (3,717) (32,050) -33 17,120 2,525
18. Share capital
The Company's issued share capital is summarised in the table
below:
31 December 31 December
2017 2016
Number
Number of shares
of shares issued
issued and
and fully fully
paid paid
'000 $'000 '000 $'000
------------------------- --- ----------- ------ ----------- ------
Convertible preferred
shares
of $0.0001 each
Series D-1 - - 2,494 -
Series D - - 13,831 2
Series C - - 18,348 2
Series B - - 19,099 2
Series A-1 - - 16,674 2
Series A - - 23,192 2
Series D-2 - - 18,958 2
------------------------------- ----------- ------ ----------- ------
Closing balance - - 112,596 12
------------------------------- ----------- ------ ----------- ------
Common stock of $0.0001
each
Opening balance 27,559 3 27,503 3
Preference shares
converted to common
shares 112,596 11 - -
New shares issued
on IPO 25,424 3 203 -
Shares issued for
conversion of loan
notes 44,052 4 - -
Shares issued for
warrants 594 - - -
Exercised stock options 3,357 - - -
Re-purchase of shares - - (147) -
------------------------- --- ----------- ------ ----------- ------
Closing balance 213,582 21 27,559 3
------------------------------- ----------- ------ ----------- ------
Common Stock
At December 31, 2017 and 2016 the Company was authorised to
issue 177,000,000 shares of common stock with a par value of
$0.0001 per share. At December 31, 2017, the Company had
213,582,467 (2016: 27,559,000) common shares issued and
outstanding, of which 1,150,000 (2016: 1,150,000) where unpaid.
Convertible preferred shares
At December 31, 2016 the Company was authorised to issue
118,153,000 convertible preferred shares with a par value of
$0.0001 per share. At December 31, 2017, the Company had no (2016:
112,596,000) convertible preferred shares issued or outstanding as
they have all been converted into common stock pari-passu upon the
admission to AIM.
The Company did not repurchase any shares in 2017 (147 in 2016)
which is related to the Company's right to repurchase shares that
were issued following early exercise of options prior to vesting.
There were no shares subject to repurchase at 2017, and 2016.
19. Reserves
The share premium disclosed in the consolidated statement of
financial position represents the difference between the issue
price and nominal value of the shares issued by the Company.
Retained earnings are the cumulative net profits in the
consolidated income statement.
Foreign exchange reserve is foreign exchange translation gains
and losses on the translation of the financial statements from the
functional to the presentation currency.
Cash flow hedging reserve is changes in un-realised gains or
losses on the valuation of derivatives designated as cash flow
hedges at year-end.
Movements on these reserves are set out in the consolidated
statement of changes in equity.
20. Share-based payment
The Group operates the following equity-settled share based
remuneration schemes for employees, directors and
non-employees:
1. 2009 equity incentive plan (2009 Plan} for the granting of
stock options (incentive or non-qualified), restricted stock awards
(RSA) and restricted stock units (RSU). The group has reserved
42,078 (2016: 42,078) shares of common stock for issue under this
plan which lapsed on the IPO date. No options are available to be
issued under this plan as at 31 December 2017. No options are
available to be issued under this plan as at 31 December 2017.
2. 2009 equity UK sub-plan (2009 UK plan) under the terms of the
above plan for the granting of stock options and restricted stock
units for qualifying participants who are resident in the United
Kingdom. No options are available to be issued under this plan as
at 31 December 2017.
3. 2009 non-plan (not part of the above 2009 plan) for the
granting of share options to purchase 897,000 (2016: 897,000)
common shares at $0.022(2016: $0.022) per share. These options vest
with terms ranging from being fully vested at grant date to vesting
over four years with a one year cliff, where 25% of the options
vest. The options expire in April 2019.
4. 2009 BNS options (not part of the above 2009 plan) for the
granting of share options to purchase 182,000 (2016: 182,000)
common shares at $0.207 (2016: $0.207) per share in connection with
the acquisition of BNS in June 2009. The options expire in June
2019.
5. 2017 Equity Incentive Plan (new plan started on the 7(th)
November 2017) for the granting of stock options. The Group has
reserved ten million shares of common stock for issue under the
plan. However, at the balance sheet date no stock options have been
issued nor any service performed which earns options.
Options under the 2009 Plan and 2009 UK plan
Options under the 2009 Plan and UK plan may be outstanding for
periods of up to ten years following the grant date. Outstanding
options generally vest over four years and may contain a one year
cliff, where 25% of the options vest.
Stock options with graded vesting is based on the graded vesting
attribution approach, whereby, each instalment of vesting is
treated as a separate stock option grant, because each instalment
has a different vesting period.
Restricted stock units (RSU)
Performance-based RSUs vest upon the earlier of the completion
of a specified service period and the achievement of certain
performance targets, which may include individual and Company
measures, and are converted into common stock upon vesting,
generally over 18 months.
Share-based expense for RSUs is based on the fair value of the
shares underlying the awards on the grant date and reflects the
estimated probability that the performance and service conditions
will be met. The share-based expense is adjusted in future periods
for subsequent changes in the expected outcome of the performance
related conditions until the vesting date.
Restricted stock awards (RSA)
RSAs are subject to repurchase based upon the terms of the
individual restricted stock purchase agreements. These repurchase
rights lapse over the vesting term of the individual award,
generally over three to four years.
2009 non-plan options
The 2009 non-plan options vest with terms ranging from being
fully vested at grant date to vesting over four years with a
one-year cliff. The options expire in April 2019. Share-based
expense in connection with the grant of Non-Plan options was not
material in 2016 and 2017. In 2017 no options were (2016: 145,800)
cancelled. The outstanding options at 31 December 2017 were 50,000
(2016: 50,000).
BNS plan options
In connection with the acquisition of BNS in June 2009, the
Company granted options to purchase 182,000 common shares at a
weighted-average exercise price of $0.207 per share (BNS Options).
These options granted were separate from the 2009 Plan. The options
expire in June 2019. There was no stock option activity related to
these options in 2016 and 2017. At 31 December 2017 and 2016,
37,029 options were outstanding at a weighted-average exercise
price of $0.203 per share. At December 31, 2017 and 2016, all BNS
Options were fully vested and exercisable.
The options activity under the plan (including RSA and RSU) are
as follows:
Options
available
for grant 2009 Plan (including UK
- All plan, (excluding RSA & Total
plans RSU) RSA RSU Non-plan options BNS plan options
------------ ---------- ------------------------- ------------------ ------------------ ------------------- ------------------ ---------
Number Number Number Number Number Number
Number of of of of of of of
options options WAEP(1) options WAEP(1) options WAEP(1) options WAEP options WAEP(1) options
'000 '000 '000 '000 '000 '000 '000
------------ ---------- -------- --------------- -------- -------- -------- -------- -------- --------- -------- -------- ---------
At 1
January
2016 2,677 18,312 $0.610 7,206 $0.30 4,649 $0.654 196 $0.022 37 $0.203 30,400
Authorised 8,206 - - - - - - - - -
Granted (12,668) 7,599 $0.266 - - 5,068 $0.267 - - - - 12,667
Exercised - (203) $0.367 - - - - - - - - (203)
Cancelled 1,785 (1,619) $0.537 - - (166) $0.550 (146) $(0.022) - - (1,931)
------------ ---------- -------- --------------- -------- -------- -------- -------- -------- --------- -------- -------- ---------
At 31
December
2016 - 24,089 $0.511 7,206 $0.30 9,551 $0.450 50 $0.022 37 $0.203 40,933
Authorised 10,000 - - - - - - - - - - -
Granted - 4,052 $0.370 - - 700 $0.370 - - - - 4,752
Exercised - (3,357) $0.512 (7,206) $0.30 - - - - - - (10,563)
Cancelled - (4,175) $0.298 - - (712) $0.271 - - - - (4,887)
------------ ---------- -------- --------------- -------- -------- -------- -------- -------- --------- -------- -------- ---------
At 31
December
2017 10,000 20,609 $0.470 - - 9,359 $0.434 50 $0.022 37 $0.203 30,235
------------ ---------- -------- --------------- -------- -------- -------- -------- -------- --------- -------- -------- ---------
(1) WAEP - weighted average exercise price
December December
2017 2016
--------------------------------------------------------------------------------------------- --------- ---------
Outstanding options at reporting end date:
- total number of options (including RSA & RSU) 30,238 40,933
- weighted average remaining contractual life - all plans
(excluding RSU and RSA) 6.15 7.17
- weighted average remaining contractual life - RSU 2.68 3.76
- weighted average remaining contractual life - RSA 6.78 6.98
Vested and exercisable ('000): 12,856 14,370
- weighted average exercise price $0.374 $0.556
- weighted average remaining contractual life - all plans
(excluding RSU and RSA) 5.56 6.04
Weighted average share price exercised during the period (excluding RSA and RSA) $0.349 $0.367
Weighted average fair value of each option granted during the period (excluding RSA and RSU) 0.165 0.145
Vested and exercisable - RSU and RSA 8,880 8,880
Share-based expense for the period ('000) $909 $2,096
---------------------------------------------------------------------------------------------- --------- ---------
In October 2016, the Company's Board of Directors repriced the
exercise price of certain outstanding stock options. This repricing
was accounted for as a modification of all outstanding options. The
Company calculated the fair value of the original options
immediately prior to the modification and again after the
modification occurred using the Black-Scholes option pricing model.
The fair value of the modified options, less the fair value of the
original options immediately before the modification, will be
recorded over the remaining vesting period. For options that were
fully vested as of the modification date, the Company recorded all
of the incremental share-based expense as of that date. A total of
14,254,000 options were modified in 2016 resulting in incremental
value of $771,000, of which $665,000 was recognised and included in
share-based expenses in 2016. The remainder will be recognised over
a weighted-average requisite service period of 0.864 years.
The following information is relevant in the determination of
the fair value of options (excluding RSA and RSU) granted during
the period under the equity- settled share based remuneration
schemes operated by the Group.
December December
2017 2016
------------------------------- -------------- ----------------
Option pricing model used Black-Scholes Black-Scholes
------------------------------- -------------- ----------------
Weighted average share price
at grant date (dollar) $0.370 $0.266
-------------------------------- -------------- ----------------
Exercise price $0.370 $0.266
-------------------------------- -------------- ----------------
Weighted average contractual 5.82(E*+ 5.83(E*)
life (years)(1) NE*) and 7.42(NE*)
Weighted expected volatility 45% (E*+ 61%(E*)
(2) NE*) and 52%(NE*)
Expected dividend growth rate 0% 0%
Weighted average Risk-free 1.9% (E*+ 1.42%(E*)
interest rate(3) NE*) and 1.99%(NE*)
-------------------------------- -------------- ----------------
(1) Weighted average contractual life represents the period of
time options are expected to be outstanding and is estimated
considering vesting terms and employees' historical exercise and
post-vesting employment termination behavior.
(2) Expected volatility is based on historical volatilities of
public companies operating in the Company's industry.
(3) The risk-free rate is based on the U.S. Treasury yield curve
in effect at the time of grant.
*E - employees NE - non-employees
The fair value of each RSU has been estimated on the date of
grant using the Black-Scholes option pricing model with the
following assumptions: expected terms ranging from 5.04 to 6.11
years; risk-free interest rates ranging from 1.87% to 1.92%;
expected volatility of 45%; and no dividends during the expected
term (2016: expected terms ranging from 5.75 to 6.08 years;
risk-free interest rates ranging from 1.43% to 1.49%; volatility of
76%; and no dividends during the expected term). The weighted
average values for the assumptions used were: expected term of 5.55
years; risk-free interest rate of 1.92%; expected volatility of
45%; and no dividends during the expected term (2016: expected term
of 6.05 years; risk-free interest rate of 1.48%; expected
volatility of 76%; and no dividends).
The fair value of each RSA granted in December 2013 has been
estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions: expected term of 10
years; risk-free interest rates 2.99%; expected volatility of 60%;
and no dividends during the expected term.
Warrants for ordinary shares
February 2013 Warrant
In February 2013, in connection with a financing arrangement
with SVB bank, the Company issued a warrant to purchase 872,093
common shares at an exercise price of $0.86 per share. The warrant
was immediately exercisable and expires in February 2023. As the
fair value of the warrant cannot be estimated reliably relating to
the financing arrangement, the Company determined the fair value of
the warrant to be $392,000 using the Black-Scholes option pricing
model, assuming a contractual life of 10 years, risk free rate of
1.88%, volatility of 60% and no dividends. The fair value of the
warrant was recorded within other receivables and the corresponding
amount in share premium. The fair value is being amortized to
interest expense over 2 years by 2015, which was the term of the
agreement. The warrants remained outstanding at December 2017 was
872,093 (2016:872,093).
September 2009 Warrant
In September 2009, the Company issued warrants to purchase
1,950,000 of common shares at $0.20 per share to certain holders of
convertible preferred shares. The warrants were immediately
exercisable. 1,150,000 warrants were expired and unexercised and
remaining 800,000 (2016: 800,000) were exercised pre IPO date of
20(th) November 2017 and converted to 594,149 common shares.
21. Commitments
Operating leases
The Company leases office facilities under several
non-cancelable operating lease agreements, which expire at various
dates through 2021. In addition to the base rent, the Company is
responsible for certain maintenance expenses under the leases.
Certain lease agreements contain scheduled net increases over the
lease term. The related rent expenses for these leases are
calculated on a straight-line basis with the difference recorded as
deferred rent. Rent expense was $1,494,593 in 2017 (2016:
$1,481,000).
The total value of minimum lease payments due until the next
lease break is payable as follows:
2017 2016
$'000 $'000
----------------------------- ------ ------
Not later than one year 872 1,120
Later than one year and not
later than five years 2,093 2,965
Later than five years - -
----------------------------- ------ ------
Total 2,965 4,085
------------------------------ ------ ------
Finance leases
During 2015 the Company entered into several capital lease
agreements with leasing companies for the financing of equipment
purchases of $400,000. The lease payments expire at various dates
through December 2019.
Minimum
lease Present
2017 payments Interest value
Within one year 91 9 82
Between one and five years 45 2 43
Total 136 11 125
---------------------------- ---------- --------- --------
Minimum
lease Present
2016 payments Interest value
---------------------------- ---------- --------- --------
Within one year 138 21 117
Between one and five years 136 11 125
Total 274 32 242
---------------------------- ---------- --------- --------
22. Dividends
No dividends were declared or paid in any of the periods.
23. Cash used in from operations
Year ended Year ended
31 December 31 December
2017 2016
$'000 $'000
--------------------------------------------------- ------------- -------------
Loss after tax (28,098) (20,597)
Add back:
Tax expense/(credit) 129 (542)
Amortisation of intangible assets 2,764 2,917
Depreciation of property, plant and equipment 221 238
Amortisation of prepaid warrants - -
Loss on disposal of property, plant and equipment - 3
Finance income (18) (17)
Finance expense 19,558 1,243
Exchange (gain)loss (3,251) 4,440
Impairment of intangible assets - 2,158
Share based payment expense 909 2,096
---------------------------------------------------- ------------- -------------
Operating loss before working capital changes (7,786) (8,061)
Decrease in trade and other receivables (18,750) 3,113
Decrease in trade and other payables 19,717 (6,482)
---------------------------------------------------- ------------- -------------
Cash used in from operations (6,819) (11,430)
---------------------------------------------------- ------------- -------------
24. Related party transactions
In 2017, the Company has been remitted $111,458,148 (2016:
$75,879,000) in net payments from 3 customers who are shareholders
of the Company. At December 31, 2017, the Company had receivables
of $20,899,203 due from these companies.
A director issued a full recourse promissory note in the amount
of $793,000 for the purchase of 1,150,000 common shares at $0.69
per share in Dec 2013. This is disclosed as 'note receivable from a
shareholder' in note 13 - trade and other receivables in 31
December 2017 and 2016.
25. Ultimate controlling party
There is no ultimate controlling party of the Company.
26. Contingent liabilities
In the normal course of business, the Group may receive
inquiries or become involved in legal disputes regarding possible
patent infringements. In the opinion of management, any potential
liabilities resulting from such claims, if any, would not have a
material adverse effect on the Group's consolidated statement of
financial position or results of operations.
From time to time, in its normal course of business, the Group
may indemnify other parties, with whom it enters into contractual
relationships, including customers, Aggregators, MNOs, lessors and
parties to other transactions with the Group. The Company has also
indemnified its directors and executive officers, to the extent
legally permissible, against all liabilities reasonably incurred in
connection with any action in which such individual may be involved
by reason of such individual being or having been a director or
executive officer. The Group believes the estimated fair value of
any obligation from these indemnification agreements is minimal;
therefore, this consolidated financial information do not include a
liability for any potential obligations at 31 December 2017 and
2016.
27. Post balance sheet events
There have been no material post balance sheet events.
28. Cautionary Statement
Boku has made forward-looking statements in this press release,
including statements about the market for and benefits of its
products and services; financial results; product development
plans; the potential benefits of business relationships with third
parties and business strategies. These statements about future
events are subject to risks and uncertainties that could cause
Boku's actual results to differ materially from those that might be
inferred from the forward-looking statements. Boku can make no
assurance that any forward-looking statements will prove
correct.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UKONRWAASRAR
(END) Dow Jones Newswires
April 10, 2018 02:00 ET (06:00 GMT)
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