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