CONSOLIDATED STATEMENT OF CASH FLOWS

 

		Year ended	Year ended
		31 December	31 December
		2023	2022
	Note(s)	$'000	$'000
Operating activities
Cash generated from operations	22	40,935	49,966
Income taxes paid		(338)	(314)
Net cash from operating activities		40,597	49,652
Investing activities
Purchase of property, plant and equipment	10	(434)	(470)
Payments for internally developed software	11	(5,430)	(4,866)
Proceeds from discontinued operations (net of cash disposed)	8	5,600	26,545
Proceeds from sale of assets		-	1
Interest received	6	1,887	201
Net cash (used in)/ from investing activities		1,623	21,411
Financing activities
Principal elements of lease payments	16	(1,478)	(1,556)
Interest paid on leases	16	(171)	(235)
Issue of share capital on exercise of options and RSUs		406	470
Purchase of treasury shares		(9,802)	(1,835)
Cash received on sale of treasury shares		2,333	-
Interest paid on loan	6	(78)	(127)
Loan settlement costs		-	(25)
Repayment of bank loan		-	(8,125)
Net cash used in financing activities		(8,790)	(11,433)
Net increase in cash and cash equivalents		33,430	59,630
Effect of foreign currency translation on cash and cash equivalent		916	(5,557)
Cash and cash equivalents at beginning of year		116,513	62,440
Cash and cash equivalents at end of year	14	150,859	116,513

 

The accompanying notes form an integral part of these consolidated financial statements.

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1.  General Information

 

Boku, Inc. is a public company incorporated and domiciled in the United States of America. The shares of the Company are traded on AIM, a market of the London Stock Exchange Group plc. The registered office of the Company is located at 660 Market Street, Suite 400, San Francisco, CA 94104, United States.

These consolidated financial statements comprise the Company (Boku, Inc.) and its subsidiaries (together referred to as the "Group").

The principal business of the Group is the provision of local payment solutions for its merchants.

Boku's payments network provides multiple mobile payment methods, including via digital mobile wallets, direct carrier billing and real-time account to account payment schemes.

Going concern

The consolidated financial statements have been prepared on a going concern basis. The Group meets its day-to-day working capital requirements through its cash balances and also has a revolving credit facility that it can use. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group expects to be able to operate within the level of its current cash resources and bank facilities. Further information on the Group's borrowings and available facilities is given in Note 17 to these consolidated financial statements.

 

The Directors have prepared cash-flow forecasts covering a period of at least 12 months from the date of approval of the financial statements to December 2024, to which they foresee that the Group will be able to operate within its existing facilities.

 

Furthermore, in carrying out the going concern assessment, the Directors considered a number of scenarios, including revenue falling between 29% and 9% over the forecast, which would bring profit before tax in 2024 to break-even. This is a severe but plausible scenario and it was concluded that the business would still have adequate resources to continue in operational existence for at least 12 months from the approval of the accounts. Management also has the ability to identify cost savings, if necessary, to help mitigate any impact on cash outflows.

 

The ongoing Russia/Ukraine conflict has not had a material impact on Group revenues.

 

The Directors confirm that they have a reasonable expectation that the Group will have adequate resources to continue in operational existence for at least the next 12 months from approval of these financial statements and meet its financial obligations as they fall due for at least the next 12 months from the date of signing these financial statements. Accordingly, these financial statements are prepared on a going concern basis.

 

2.  Accounting policies

 

Basis of preparation

The financial information has been prepared using the historical cost convention, except for derivative financial liabilities recognised, as stated in the accounting policies below. These policies have been consistently applied to all years presented, unless otherwise stated.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") as issued by the International Accounting Standards Board ("IASB"). 

The consolidated financial statements have been prepared on a going concern basis. These financial statements have been prepared for a 12-month calendar year.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Consolidated financial statements are disclosed below in, "critical accounting estimates, assumptions and judgements". There are deemed to be no new standards, amendments and interpretations to existing standards, which have been adopted by the Group, that have had a material impact on the financial statements effective from 1^st January 2023.

The Group's consolidated financial statements are presented in US Dollars, rounded to the nearest thousands (expressed as $'000) unless otherwise indicated. The main functional currencies for the Company's subsidiaries are US Dollar, Euro and Pounds Sterling.

Basis of consolidation

The consolidated financial statements presents the results of the Company and its entities controlled by the Company ("the Group") made up to 31 December 2023.

 

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are achieved: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Intercompany transactions and balances between Group companies are eliminated in full on consolidation.

The consolidated financial information incorporates the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. A list of the subsidiary undertakings is given in Note 12 of the financial information.

There were no business transaction costs accounted for as a deduction from equity in the current or prior year.

Business combinations

The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree.  Costs related to acquisitions, other than those directly attributable to the issue of debt or equity, are expensed as incurred.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the profit or loss.

Restatement

During the change in auditors, an error in application of deferred tax recognition was identified relating to the look forward period for future taxable profits. As a result, it was identified, that the Group had under-recognised deferred tax assets from prior years. Accordingly, the opening consolidated statement of financial position as at 1 January 2022 and year ended 31 December 2022 has been restated. The opening balances at 1 January 2022 had increased deferred tax assets recognised from $3,105k to $15,981k and the year ended 31 December 2022 had increased deferred tax assets recognised from $3,383k to $15,518k. The net deferred tax asset recognised as at the 31 December 2023 balance sheet date is $15,124k (FY22: $15,518k).

The consolidated statement of comprehensive income in the year end 31 December 2022 has been restated to move the fair value gain/(loss) on warrants from administrative expenses to a separate line below operating profit, to more appropriately reflect the accounting judgement.

Additionally, for the year ended 31 December 2022 and opening balances as at 1 January 2022 amounts previously accounted for under IFRS 16 as right-of-use assets of $429k and $340k respectively, were restated to prepayments in the consolidated statement of financial position. In 2022, notes 4, 10 and 13 have also been restated to reflect the movement to prepayments and the reduction in depreciation of $226k.

None of these adjustments have had any impact on the consolidated statement of cash flows.

Deferred tax		As originally reported	Effect of restatement	Group restated amounts
1 January 2022		$'000	$'000	$'000
Consolidated statement of Financial Position (extract)
Deferred tax asset		3,105	12,876	15,981
Accumulated losses		161,752	(12,876)	148,876
Consolidated Statement of Changes in Equity (extract)
Total equity		82,446	12,876	95,322
Deferred Tax
Net opening position		253	-	253
Net recognition in the year		2,396	12,876	15,272
P&L		2,359	-	2,359
Equity		-	12,876	12,876
Foreign exchange revaluation		37	-	37
Net closing position		2,649	12,876	15,525
A deferred tax asset (liability) has not been recognised for the following (Gross):
Non-deductible Reserves		39	(39)	-
Accrued Compensation		84	(84)	-
Stock Based Compensation		1,819	227	2,046
Other temporary and deductible differences		527	(527)	-
Unused tax credits		189	(189)	-
Unused tax losses		27,952	94,840	122,792
Total deferred tax assets (not recognised)		30,610	94,228	124,838

 

 

		As originally reported	Effect of restatement	Group restated amounts
31 December 2022		$'000	$'000	$'000
Consolidated Statement of Financial Position (extract)
Deferred tax asset		3,383	12,135	15,518
Accumulated losses		132,848	(12,135)	120,713
Consolidated Statement of Changes in Equity (extract)
Opening balance (Total equity)		82,446	12,876	95,322
Profit for the year		28,904	-	28,904
Other comprehensive loss		(3,576)	-	(3,576)
Correction of error		3,667	(741)	2,926
Closing balance (Total equity)		111,441	12,135	123,576
Deferred Tax
Net opening position		2,649	12,876	15,525
Net recognition in the year		734	(741)	(7)
P&L		733	-	733
Equity		-	(741)	(741)
Foreign exchange revaluation		1	-	1
Net closing position		3,383	12,135	15,518
A deferred tax asset (liability) has not been recognised for the following (Gross):
Non-deductible Reserves		60	(60)	-
Accrued Compensation		56	(56)	-
Stock Based Compensation		1,939	(1,698)	241
Other temporary and deductible differences		321	(321)	-
Unused tax credits		189	(189)	-
Unused tax losses		11,082	17,976	29,058
Total deferred tax assets (not recognised)		13,647	15,652	29,299

 

Fair value gain or loss on warrants

The prior year consolidated statement of comprehensive Income has been restated to exclude fair value loss on warrants of $3,470k from administrative expenses. The impact on operating profit is detailed below:

	As originally reported	Effect of restatement	Group restated amounts
31 December 2022	$'000	$'000	$'000
Consolidated Statement of Comprehensive Income (extract)
Gross profit	61,993	-	61,993
Administrative expenses	(58,212)	3,470	(54,742)
Other Income	755	-	755
Operating profit	4,536	3,470	8,006
Fair value loss on warrants	-	(3,470)	(3,470)
Finance income	201	-	201
Finance expense	(675)	-	(675)
Profit before tax from continuing operations	4,062	-	4,062

 

Right-of-use assets

		As originally reported (after restatement from FV g/l warrants)*	Effect of restatement	Group restated amounts
31 December 2022		$'000	$'000	$'000
Consolidated Statement of Financial Position (extract)
Non-current assets
Right-of-use assets		3,662	(429)	3,233
Current assets
Trade and other receivables		90,080	429	90,509
Alternative performance measures (extract)
Adjusted EBITDA		20,464	(226)	20,238

 

 

		As originally reported	Effect of restatement	Group restated amounts
1 January 2022		$'000	$'000	$'000
Consolidated Statement of Financial Position (extract)
Non-current assets
Right-of-use assets		5,001	(340)	4,661
Current assets
Trade and other receivables		82,557	340	82,897

 

Adoption of new and revised standards

New and amended standards that are effective for the current year

A number of new or amended standards became applicable from 1 January 2023 and as a result the Group has applied the following standards:

-       Amendments to IFRS 16: Property, Plant and Equipment - Proceeds before Intended Use

-       Amendments to IFRS 3: Reference to Conceptual Framework

-       Amendments to IAS 1: Presentation of Financial Statements - Classification of Liabilities

-       Amendments to IAS 37: Onerous Contracts - Cost

The above requirements did not have a material impact on the consolidated financial statements. There are no other new or revised standards or interpretations that are effective for the first time for the financial year beginning on or after 1 January 2023 that would be expected to have a material impact on the Group.

New standards, interpretations and amendments not yet effective

Name	Description	Effective date
IAS 1 (amendments)	Non-current liabilities with covenants	1 January 2024

The Directors do not expect the adoption of these standards and amendments to have a material impact on the consolidated financial statements.

 

Critical accounting estimates, assumptions and judgements

In preparing these consolidated financial statements, the Group has made its best estimates and judgements of certain amounts, giving due consideration to materiality. Actual results may differ from those reported.

 

The Group regularly reviews these estimates and judgements and updates them as required. Unless otherwise indicated, the Group does not believe that there is a significant risk of a material change to the carrying value of assets and liabilities within the next financial year related to the accounting judgements and assumptions described below.

The Group considers the following to be a description of the most significant estimates and judgements, which require the Group to make subjective and complex judgements related to matters that are inherently uncertain.

Judgements

Goodwill, Intangible assets acquired in a business combination

The useful economic lives of intangible assets (other than goodwill) acquired in a business combination are estimated in order to calculate the appropriate amortisation charge. Goodwill is subject to an annual impairment review which is performed by comparing the balance value with the recoverable amount of the asset or CGU.

Annually for Goodwill, or where an indication of impairment exists, value in use calculations are performed to determine the appropriate carrying value of the asset. The value in use calculation requires the estimations of the future cash flows expected to arise for the CGU and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. See note 11 for specific judgements and assumptions used to calculate the value in use of the CGU.

It is necessary to consider the forecasted cashflow of the Group when comparing against the carrying value and why it has been considered that there is only one payments CGU. This is since the contracts in place with a merchant, regardless of whether they have been acquired will generally follow the same cashflow for that specific merchant.

Discontinued operations

The Identity business was sold on 28^th February 2022 and the result of the sale is presented in Note 8 Discontinued operations.

Capitalised internally generated intangible assets

Other intangible assets include acquired merchant relationships, IT Platforms and Domain names as well as internally developed intangibles (capitalised development costs). Acquired intangible assets are recognised at fair value at the acquisition date and are amortised on a straight-line basis over their estimated useful lives. Initial capitalisation cost for internally generated intangibles is based on the developer estimate of the time spent on development projects.

Deferred tax

In recognising income and deferred tax assets, management makes judgements of the likely outcome of future taxable profits for certain jurisdictions. Judgements are also made regarding the probability of these forecasts.

Critical accounting Estimates

Share-based payments

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. Where such a model is required, the Group uses the Black Scholes model to calculate its share-based payments expense (please refer to Note 20 for full details).

Taxation

In recognising income and deferred tax assets, management makes estimates of the likely outcome of future taxable profits for certain jurisdictions. Where the outcome of such matters is different or expected to be different from previous assessments made by management, a change to the carrying value of income tax assets and liabilities will be recorded in the period in which such a determination is made.

Fair value measurement - Amazon warrants

The Group's accounting for warrants issued to Amazon is determined in accordance with accounting standards for financial instruments and revenue recognition. The initial fair value of the warrants issued were recognised as a contract asset and liability respectively (see note 3 for more details). The contract asset is amortised to revenue (reducing revenue) over the 7-year vesting period based on Amazon revenue earned to date as a proportion of total estimated Amazon revenue over the 7-year vesting period. The derivative financial liability is remeasured to fair value at each reporting date.  The fair value movement attributable to the change in the number of shares expected to vest due to a change in estimated Amazon revenues over the 7-year vesting period is recorded as an equal and opposite increase to the financial liability and contract asset, based on the fair value of the warrant at inception.  The fair value movement attributable to the change in the fair value of the underlying warrants is recorded as gains or losses in profit or loss. The determination of fair values involves assumptions and estimates of revenue and share price volatility, risk-free rate, and future Amazon revenues.  Due to the long-term nature of the warrants, such estimates involve significant estimation uncertainty.

Revenue from contracts with customers

Boku builds custom digital payment connections between many payment methods (LPMs) and merchants.

The merchant's end users will make an online purchase via a LPM, Boku will provide the reconciliation, connection and often transfer of these funds from the LPM to the Merchant. Revenue generated is the service fee from this connection. In this regard, Boku acts as the agent between the merchant and LPMs.

For each connection with a merchant, a contract is agreed. It is determined that there is one performance obligation for each contract, being the facilitation of the payment connection between the merchant and their end users.  This service fee is recognised at a point in time as the obligation is fulfilled when the transaction occurs, since the risks and rewards have been transferred on completion of the transaction. Therefore, there is no deferred revenue recognised in the current or prior year.

Revenue is initially recorded as accrued income prior to receiving a statement of information from the LPMs. Accrued income is recognised as a contract asset within trade and other receivables.

Collection of service fees will vary depending on the nature and agreement between each merchant.

The different types of service fees can be categorised as follows:

i.   Settlement

For each purchase a merchant's end user makes, Boku will collect the funds from the LPM, deduct a service fee and pass the net funds on to the merchant. On initial receipt of a statement of information from the LPM, accrued revenue is recognised as a percentage of the underlying transaction and a corresponding payable is recognised as a contract liability within trade and other payables, representing the amount owed from the LPM.

Amounts become due to the merchant on receipt of funds from the LPM and are settled in the original currency of the transaction. 

Additional settlement fees may arise under the following circumstances:

a)	Foreign currency translation fees
	An additional foreign exchange fee is charged when settlement is required by the merchant in another currency.
b)	Advanced payment service fees
	An additional fee is charged when the merchant requires early settlement, prior to Boku receiving funds from the LPM.

 

ii.  Transactional

Boku will provide the connection between the merchant and their end user and the LPM will pay the funds directly to the merchant. A service fee is then due from the merchant to Boku.

 

Identity Revenue (discontinued)

On 28 February 2022, the Group sold its entire Identity business (Boku Identity Inc. and its 100% subsidiary Boku Mobile Solution Ireland Ltd) to Twilio (see Note 8 for full details).

Discontinued operations

A discontinued operation is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:
? represents a separate major line of business or geographical area of operations;
? is part of a single co?ordinated plan to dispose of a separate major line of business or geographical area of operations; or
? is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held for sale (see Note 8 for details).

When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is re?presented as if the operation had been discontinued from the start of the comparative year.

Cost of sales

Cost of sales is primarily related to the monthly fees and some service charges from MNOs and other providers, customer services fees, some marketing expenses and bad debt.

Operating Segments

The Group determines and presents operating segments-based information provided internally to the Group's operating decision makers, defined in the Group as the General Management Committee ("GMC").

The Board considers that the Group's provision of a payment platform for the payment processing of virtual goods and digital goods purchases constitutes one operating and one reporting segment (Payments segment). Management reviews the performance of the Group by reference to total results of a segment against budget on a monthly basis.

Retirement Benefits: Defined contribution schemes

The Group operates various pension schemes in various jurisdictions, all being defined contribution schemes (pension plans). A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group 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, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due.

In the United States, the Group has a 401(k) plan, a type of defined contribution scheme in which all United States employees can participate after meeting eligibility requirements. Participants may elect to have a portion of their salary deferred and contributed to the scheme up to the limit allowed by applicable income tax regulations. The Company has made a matching contribution to the scheme for the years ended 31 December 2023 and 31 December 2022.

Contributions to defined contribution schemes are charged to the consolidated statement of comprehensive income in the year to which they relate.

Intangible assets and Goodwill

Goodwill

Goodwill arising on consolidation represents the excess of the cost of a business combination over the Group's interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired from the business combination, at the date of acquisition. Costs directly attributable to the acquisition are expensed in the period. Goodwill is initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

An impairment in carrying value is charged to the consolidated statement of comprehensive income.  An impairment loss recognised for goodwill is not reversed.

For the purposes of impairment testing, Goodwill is allocated to the Group's cash generating unit (CGU). Goodwill is not amortised but is tested annually for impairment or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows. The major assumptions are disclosed in note 11.

Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.

Intangible assets acquired as part of a business combination

Intangible assets acquired in a business combination are identified, valued and recognised separately from goodwill where they satisfy the definition of an intangible asset. All intangible assets acquired through business combinations are amortised over their useful lives.

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses.  The carrying values are tested for impairment when there is an indication that the value of the assets might be impaired.

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives.

Internally generated intangible assets (development costs)

Expenditure on internally developed software products and substantial enhancements to existing software product is recognised as intangible assets only when the following criteria are met:

1.	it is technically feasible to develop the product to be used or sold;
2.	there is an intention to complete and use or sell the product;
3.	the Group is able to use or sell the product;
4.	use or sale of the product will generate future economic benefits;
5.	adequate resources are available to complete the development; and
6.	expenditure on the development of the product can be measured reliably.

 

The capitalised expenditure represents costs directly attributable to the development of the asset from the point at which the above criteria are met up to the point at which the product is ready to use. The costs include external direct costs of materials and services consumed in developing and obtaining internal-use computer software, and payroll and payroll-related costs for employees who are directly associated with and who devote time to developing the internal-use software.  If the qualifying conditions are not met, such development expenditure is recognised as an expense in the period in which it is incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in the statement of comprehensive income as incurred.

Amortisation rates

Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives and is recognised in the statement of comprehensive income within administrative expenses. Goodwill is not amortised.

The significant intangibles recognised by the Group and their useful economic lives are as follows:

Intangible asset Trademarks Merchant relationships Developed technologies Domain names Internally developed software

Useful economic life Indefinite life - not amortised 5 -10 years 2-10 years 10 years 3 years

Trademarks do not expire after a period of time (unlike patents and copyrights). They exist as long as the owner continues to use the trademark. Therefore, trademarks are considered to have an indefinite life, and are not amortised, as trademarks can retain their value forever, and contribute to net cash inflows indefinitely. Trademarks will not be amortised as their useful life is determined to be infinite.

Property, plant and equipment

Property, plant and equipment are held under the cost model and are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance expenditures are charged to the consolidated statement of comprehensive income during the financial year in which they are incurred.

Depreciation is calculated using the straight-line method to write off the cost of each asset to its residual value over its estimated useful life as follows:

Office equipment and fixtures and fittings Computer equipment and software Leasehold improvement Right-of-use assets	3-5 years 3 years 3-5 years Shorter of useful life of the asset or lease term

Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the consolidated statement of comprehensive income.

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Carrying amounts are reviewed on each reporting date for impairment. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, Restricted Cash (see below and note 14) and other short term highly liquid investments with original maturities of three months or less.

Restricted cash

The Group holds merchants' cash in transit and in segregated accounts of some of its regulated subsidiaries and discloses restricted cash separately from own cash. Other funds not available to the Group are also classified as restricted and presented as restricted cash.

Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets

Financial assets are classified on initial recognition at fair value and then subsequently measured at amortised costs, fair value through other comprehensive income and fair value through profit or loss.

i.     Financial assets at amortised cost

The Group's financial assets mainly comprise of cash, trade and other receivables. These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market (trade receivables), but also incorporate other types of contractual monetary asset.

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost less provisions for impairment based upon an expected credit loss methodology. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance matrix for all trade receivables (including accrued receivables). A provision of the lifetime expected credit loss is established upon initial recognition of the underlying asset and is calculated using historical account payment profiles along with historical credit losses experienced. The loss allowance is adjusted for forward looking factors specific to the debtor and the economic environment. The amount of the provision is recognised in the consolidated statement of comprehensive income.

ii.    Financial assets at fair value through profit and loss

The holdback receivable asset outstanding from the sale of the Identity business in the prior year and the Amazon warrant contract asset are held at fair value through profit and loss.

Financial liabilities

The Group classifies its financial liabilities into two categories, depending on the purpose for which the liability was acquired.

Fair value through profit and loss ("FVTPL"):

The warrant liability is classified as a financial liability at FVTPL and valued using a combination of the Black-Scholes Model and Monte Carlo simulation. Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement (due to changes in the fair value of the warrant) recognised in profit or loss.

 

Financial liabilities at amortised cost:

The Group includes in this category loans, trade and other payables and liabilities to related parties.

Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument.

Trade and other payables (excluding other taxes, social security costs and deferred income) and other short-term monetary liabilities, are initially measured at their fair value plus, if appropriate, any transaction costs that are directly attributable to the issue of the financial liability. These financial liabilities are subsequently carried at amortised cost.

Bank borrowings and other interest-bearing liabilities are initially recognised at fair value net any of transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost ensuring the interest element of the borrowing is expensed over the repayment period at a constant rate.

 

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of comprehensive income.

 

The gain or loss for fair value changes should be classified based on the classification of the underlying instruments. As the fair value changes of the Amazon warrant liability are highly dependent on the share price of Boku, Inc. rather than the business performance in the reporting year these gains and losses have been classified as exceptional items and this policy will be applied consistently going forward.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

 

Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The provision for employer taxes on future employee share instruments are not discounted as it is not considered material.

 

Leases

The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made on or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. Break clauses may be provided in the lease agreements, calculations are prepared up to the end of the lease term. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below $5,000). Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

Incremental borrowing rate

IFRS 16 Leases requires that all the components of the lease liability are required to be discounted to reflect the present value of the payments. The discount rate to use is the rate implicit in the lease, unless this cannot readily be determined, in which case the lessee's incremental borrowing rate is used instead.

The definition of the lessee's incremental borrowing rate states that the rate should represent what the lessee 'would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment.' In applying the concept of 'similar security', a lessee uses the right-of-use asset granted by the lease and not the fair value of the underlying asset. This is because the rate should represent the amount that would be charged to acquire an asset of similar value for a similar period.

In practice, judgement may be needed to estimate an incremental borrowing rate in the context of a right-of-use asset, especially when the value of the underlying asset differs significantly from the value of the right-of-use asset.

The discount rate will be revised, in line with IFRS 16, and the lease liability remeasured only when:

-       there is a change in the lease term,

-       a change in the assessment of whether the lessee is reasonably certain to exercise an option to purchase the underlying asset or

-       a change in floating interest rates, resulting in a change in the future lease payments (this approach is consistent with IFRS 9's requirement for the measurement of a floating rate financial liabilities subsequently measured at amortised cost)

A lessee is not required to reassess the discount rate when there is a change in future lease payments due to a change in an index. - e.g. the consumer price index.

 

Share Capital

Ordinary shares are classified as equity and are stated at the proceeds received net of direct issue costs.

Share buyback

On 7^th July 2022 the Group announced the share buyback programme to repurchase common stock in the capital of the Company (Boku, Inc.) up to a maximum aggregate consideration of £8 million and up to a maximum of five million Common Stock.

The purpose of the Buyback Programme is to hold the Common Stock in treasury for the purpose of satisfying future obligations in relation to the staff equity remuneration programme.

The Buyback Programme will operate within certain pre-set parameters, including that the maximum price paid per Common Stock shall be 105 per cent of the trailing 5-day average mid-market price, and in accordance with the authority granted by the Company's Board.

The Buyback Programme became effective from 7^th July 2022 with an expiry date of 30 June 2023, or earlier, if either the maximum aggregate number of Common Stock have been purchased or the maximum aggregate consideration had been reached. On 8 June 2023 it was announced that the Buyback Programme was to be extended for a further 12 months (the "Extended Buyback Programme") and will expire on 30 June 2024, or earlier, if either the maximum aggregate number of Common Stock have been purchased or the maximum aggregate consideration has been reached. The extended programme will involve the repurchasing of common stock with par value of $0.0001 per share in the capital of the Company ("Common Stock") up to an additional maximum aggregate consideration of £10.5 million and up to an additional maximum of 5.25 million Common Stock.

Due to the limited liquidity in the issued Common Stock, a buy-back of Common Stock pursuant to the Authority on any trading day may represent a significant proportion of the daily trading volume in the Common Stock on AIM and may exceed 25 per cent of the average daily trading volume. Accordingly, the Company will not benefit from the exemption contained in Article 5(1) of the UK version of the Market Abuse Regulation (Regulation (EU) No 596/2014) (as in force in the UK and as amended by the Market Abuse (Amendment) (EU Exit) Regulations 2019 and the Financial Services Act 2021).

The cost of treasury shares held is presented as a separate reserve (the "treasury share reserve") and recorded in equity. Any excess of the consideration received on the sale of treasury shares over the weighted average cost of the shares sold is credited to other reserves.

Share-based payments

Where equity settled share options and Restricted Stock Units ('RSUs') are awarded to employees, the fair value of the options or RSUs at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options or RSUs that eventually vest.

Where the terms and conditions of options or RSUs are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting period.

Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received.

Where options are cancelled within the vesting period, the remaining cost of the options is accelerated and charged to the statement of comprehensive income in the year. When an employee leaves the Group, unvested grants are forfeited and the cumulative share-based payment expense is reversed on the leaving date. Unvested RSUs are forfeited on leaving the Group for any reason including as part of discontinued operations.

The Group's scheme, which awards shares in the parent entity, includes recipients who are employees in the parent company and subsidiaries. In the consolidated financial statements, the transaction is treated as an equity-settled share-based payment, as the subsidiary has received services in consideration for Boku, Inc's equity instruments. An expense is recognised in the consolidated Group Income statement for the fair value of share-based payment over the vesting year, with a credit recognised in equity. In the subsidiaries' financial statements, the awards, in proportion to the recipients who are employees in said subsidiary, are treated as an equity-settled share-based payment, as the subsidiaries do not have an obligation to settle the award. An expense for the grant date fair value of the award is recognised over the vesting period, with a credit recognised in equity. The credit is treated as a capital contribution, as the parent company is compensating the subsidiaries' employees with no cost to the subsidiaries where there is no expectation to recharge the cost. In the parent Company's financial statements, there is no share-based payment charge where the recipients are employed by a subsidiary, with the parent company recognising an increase in the investment in the subsidiaries as a capital contribution from the parent and a credit to equity.

RSU's issued in connection with business combinations as replacements for instruments held by employees are treated as part of the consideration transferred to the extent that the Company is obliged to issue the replacement awards and that they compensate for service that has been provided pre-combination. To the extent awards are voluntary or that they relate to the provision of future services they are treated as a post-combination expense.

Share options and RSUs which will incur future employer payroll taxes on exercise, are accrued for the future cost of Employer's National Insurance from the point the options are granted over their vesting period. This liability is then amended at each subsequent reporting date under IFRS 2.

Taxation

The income tax expense represents the sum of the tax currently payable and deferred tax. Deferred tax relating to the timing differences arising on share-based payments recognised in equity, is also recognised in equity and not as a tax expense.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Current taxes are calculated according to local tax rules, using tax rates enacted or substantially enacted at the reporting date.

A provision is recognised for those matters for which the tax determination is uncertain, but it is considered probable that there will be a future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become payable. The Group's method for calculating the tax provision under IFRS on an individual entity basis for the year ending 31 December 2023, involves the following approach.

Entities are categorised according to a materiality threshold, considering current tax impacts and deferred tax effects from categories such as share-based payments, carried forward losses, and PPE. Tax provisioning calculations for immaterial entities utilise profit/(loss) before tax figures multiplied by foreign tax rates. Material entities include corporations in the UK and USA. These entities undergo a more detailed calculation process, with US and UK group entities preparing the tax provision closely aligned with their actual tax return. This approach ensures that the Group's tax provision aligns accurately with its tax obligations under IFRS on an individual entity basis.

Deferred tax

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:

·	the initial recognition of goodwill;
·	the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
·	investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and unused tax loses can be utilised.

The amount of the deferred asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities or assets are settled or recovered. Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

·	the same taxable group company; or
·	different company entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets and liabilities are expected to be settled or recovered.

Presentational currency

The presentational currency for the Group is US dollars, as the company is incorporated in the USA which is the currency of its primary economic environment in line with IAS 21. Boku Group has its main contracts, assets, intellectual property.

Functional currency

The functional currency for subsidiaries is the local currency of the entity's country of incorporation. Items included in the financial statement of each of the Group's entities are measured in the functional currency of each entity.

Foreign currency

Foreign currency transactions and balances

i)	Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
ii)	Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date.
iii)	Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate.
iv)	Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.
v)	Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the reporting period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement within administrative expenses.
vi)	Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments (including purchased intangible assets) to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Consolidation of foreign entities

On consolidation, the results and financial position of all the Group entities that have a functional currency different from the presentation currency of the Group are translated into the presentation currency as follows:

i)	Assets and liabilities for each Consolidated statement of financial position presented are translated at the closing rate at the date of that Consolidated statement of financial position.
ii)	Income and expenses for each Consolidated statement of comprehensive income item are translated at average exchange rates; and
iii)	All resulting exchange differences are recognised as a separate component of equity.

Exchange differences are recycled to profit or loss as a reclassification adjustment upon disposal of the foreign operation.

 

3.  Revenue from contracts with customers and other segmental disclosures

 

The Group's revenue is principally service fees earned from merchants. All revenue is earned at the time the transactions is processed and as a result, all revenue is recognised at one point in time. Therefore, at 31 December 2023 and 31 December 2022, the Group does not have deferred revenue on the Consolidated statement of financial position.

Fees are calculated as a percentage of the value of transaction.  Additional fees are also earned when a merchant requires settlement in a foreign currency from the currency received, or before the funds are received from LPMs:

	2023	2022
	$'000	$'000
Revenue	82,720	63,764

The geographical analysis of the revenue by location of the users is presented below:  

Group Revenue by Region	Continuing Operations Payments
'$ 000 USD	2023	%
Americas	3,204	3.9%
APAC	47,230	57.1%
EMEA	32,286	39.0%
Grand Total	82,720	100.0%

 

Group Revenue by Region	Continuing Operations Payments
' $000 USD	2022	%
Americas	628	1.0%
APAC	36,167	56.7%
EMEA	26,969	42.3%
Grand Total	63,764	100.0%

An analysis of non-current assets by geographical market is given below:

			restated*
		2023	2022
		$'000	$'000
United States of America (continuing operations)		50,240	48,502
Europe		11,504	12,724
Rest of the World		258	452
Total		62,002	61,678

*Right-of-use assets in the prior year were restated to prepayments, see note 2 for further details.

In FY23 there were four customers (FY22: one customer), with revenue amounting to more than 10% of the payments segment revenue, contributing $57.6m (FY22: $30.9m).

 

Amazon warrants

On 16 September 2022, the Group entered into a stock warrant agreement with Amazon in conjunction with a commercial service level agreement for the Group to provide payment processing services to Amazon.

Under the agreement, the Group issued warrants to Amazon allowing them to purchase common stock that will vest incrementally, based on the amount of revenue earned by the Group from Amazon via Boku payment processing methods. The warrant agreement grants Amazon the right to acquire up to 11,215,142 shares of common stock in the Group (equivalent to 3.75% of the Group's total common stock as at the inception of the warrant agreement). 747,676 shares of common stock vested immediately on the signing of the warrant agreement on 16 September 2022. 209,350 additional shares of common stock will vest for every $1 million of revenue generated by the Group under its service level agreement with Amazon over a 7-year vesting period ending 15 September 2029.  No further warrants will vest if $50 million of revenue is generated under the service level agreement, which results in a final vesting increment of 209,316 shares of common stock.  The exercise price of vested warrants is 81.20p per share, based on the 30-day volume weighted average trading price as at 16 September 2022.

The Group has determined that the 747,676 warrants of common stock that vested immediately on signing of the warrants are equity instruments under IAS 32, as they represented a fixed number of shares that will be exercised at a fixed price. The warrants are therefore not accounted for until they are exercised and paid, at which point share capital and other reserves will be recorded.

The Group has determined that the remaining warrants linked to revenue under the service level agreement are within the scope and revenue recognition and financial instruments accounting standards.  The warrants represent a derivative financial instrument classified as a financial liability in accordance with IAS 32 and IFRS 9, remeasured to fair value with gains and losses recorded in profit or loss. The warrants also represent non-cash consideration payable to a customer under IFRS 15, which is recorded as a reduction to revenue and measured at fair value, but not subsequently remeasured.

At inception of the warrant, an equal and opposite derivative financial liability and corresponding contract asset were recorded at fair value, based on the total number of warrants expected to vest (linked to forecasted Amazon revenues under the service level agreement) and the fair value a single warrant.

The contract asset, which effectively represents a prepaid or deferred volume rebate, is amortised to revenue based on Amazon revenues to date as a proportion of total expected Amazon revenues over the 7-year vesting period.

The derivative financial liability is remeasured to fair value at each reporting date.  The fair value movement attributable to the change in the number of shares expected to vest due to a change in estimated Amazon revenues over the 7-year vesting period is recorded as an equal and opposite increase to the financial liability and contract asset, based on the fair value of the warrant at inception.  The fair value movement attributable to the change in the fair value of the underlying warrants is recorded as gains or losses in profit or loss within operating profit.

The initial fair value of the warrants at inception was $1,755,640, based on a fair value of 1 warrant of $0.348 and a total number of warrants expected to vest over the 7-year vesting period of 5,049,288.  As at 31 December 2022, the total number of warrants expected to vest decreased to 4,992,086, resulting in a decrease to the contract asset and financial liability of $19,862, and the fair value of 1 warrant increased to $1.043, resulting in a loss of $3,470,333.  As at 31 December 2023, the total number of warrants expected to vest increased to 5,333,781, resulting in an increase to the contract asset and financial liability of $358,774, and the fair value of 1 warrant decreased to $1.033, resulting in a gain of $53,476.  The fair value of the warrants was determined using a combination of Monte Carlo Simulation and Black-Scholes Model valuation methods and are classified within Level 3 of the fair value hierarchy, see Note 23 for further details.

Amounts recognised from amortisation of the warrant contract assets in the year were as follows:

 

	31-Dec-23	31-Dec-22
	$'000	$'000
Amortisation to revenue	108	25

 

On 28 February 2022, the Group sold the entire Identity business segment. As a result, from 1^st March 2022, the Group reported its financial statements on a single segment basis: "Payments segment". The Identity segment results for the two months of 2022 are presented below under 'discontinued operations'. The Group operated with only one operating segment through financial year 2023, the Payments Segment. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the management team including the Chief Executive Officer and the Chief Financial Officer. The Group CEO and CFO review the monthly management reports for both segments before sending the results to the Board.

4.  Administrative expenses

 

Operating profit from continuing operations is stated after charging:

		restated*
	2023	2022
	$'000	$'000
Staff costs (excluding share-based payments expense - Note 5)	39,981	30,946
Depreciation of property, plant and equipment (Note 10)	385	395
Right-of-use asset depreciation (Note 10)	1,430	1,411
Amortisation of intangible assets (Note 11)	5,742	3,631
Impairment of intangible assets (Note 11)	-	1,264
Share-based payments expense (Note 20)	7,595	5,165
Foreign exchange loss	1,034	796

 *Right-of-use assets in the prior year were restated to prepayments, see note 2 for further details.

5.  Employee information

 

Included in administrative expenses are costs related to employee benefits, analysed as follows:

 

	2023	2022
Payroll costs	$'000	$'000
Salaries	32,536	24,805
Short-term benefits	1,767	1,390
Social security costs	4,293	3,339
Pension costs	249	236
Other staff costs	1,136	1,176
Staff costs excluding share-based payments	39,981	30,946
Share-based payments	7,595	5,165
Total staff costs	47,576	36,111

Key management personnel compensation was made up as follows:

	2023	2022
	$'000	$'000
Salaries	5,104	3,847
Short-term benefits	101	95
Social security costs	1,108	497
Share-based payments	3,402	2,952
Long-term employee benefits	18	16
Total compensation	9,733	7,407

 

6.  Finance income and expense

 

	2023	2022
	$'000	$'000
Finance income
Interest income from bank deposits	(1,887)	(201)
Total finance income	(1,887)	(201)
Finance expenses
Interest on bank loans	76	121
Other interest payables	2	6
Interest on operating leases	171	235
Amortisation of debt discount	-	313
Total finance expenses	249	675
Net finance (income)/ expense	(1,638)	474

 

7.  Taxation

	2023	2022
	$'000	$'000
Current tax
Current tax on profits for the year	427	239
Foreign tax	903	257
Adjustments in respect of prior years	(7)	-
Total current tax	1,323	496
Deferred tax
Origination and reversal of temporary differences	355	(1,870)
Adjustments in respect of prior years	(357)	1,137
Total deferred tax	(2)	(733)
Total tax expense/(credit)	1,321	(237)

The reasons for the difference between the actual tax charge for the period and the applicable rate of income tax of the US reporting entity applied to the results for the period are as follows:

	2023	2022 (restated)*
	$'000	$'000
Profit before tax	11,407	4,062
Tax rate (US income tax rate)	21%	21%
Profit before tax multiplied by the applicable rate of tax:	2,395	853
Variance in overseas tax rates	28	1,182
Impact of change in tax rates	(204)	-
Impact of difference between CT & DT rate	1,010	-
Expenses not deductible for tax purposes	1,003	1,143
Utilisation of tax losses	(3,532)	(6,429)
Non qualifying depreciation	7	-
Adjustments in respect of prior years	(364)	1,137
Foreign tax	249	77
Other differences	288	-
US state taxes/ Withholding taxes	441	1,800
Total tax (credit)/ expense	1,321	(237)

*Deferred tax positions in the prior years ended 31 December 2022 and opening balances as at 1 January 2022 have been restated, further details can be found in note 2.

 

	2023	2022 (restated)*
Deferred Tax	$'000	$'000
Net opening position	15,518	15,525
Net recognition in the year	(394)	(7)
P&L	2	733
Equity	(396)	(741)
Foreign exchange revaluation	-	1
Net closing position	15,124	15,518

 

*Deferred tax positions in the prior years ended 31 December 2022 and opening balances as at 1 January 2022 have been restated, further details can be found in note 2.

The net closing position is made up of:

·	The deferred tax liability at 31 December 2023 is $182k (2022: $NIL Restated). The current year deferred tax liability relates to tax positions connected with the Boku, Inc. UK fixed temporary differences.
·	The deferred asset of $15,306k (2022: $15,518k restated) relates primarily to the recognition of the US and UK available losses which management believe can be utilised within the next eight years. Each year management assess the usability of the deferred assets

A deferred tax asset/ (liability) has not been recognised for the following items:

	2023	2022 (restated)*
	$'000	$'000
Stock Based Compensation	-	241
Other temporary and deductible differences	(7,925)	-
Unused tax losses	6,197	29,058
Total deferred tax assets	(1,728)	29,299

*Deferred tax positions in the prior years ended 31 December 2022 and opening balances as at 1 January 2022 have been restated, further details can be found in note 2.

The Group has carried forward losses and accelerated timing differences at the reporting date as shown below. In respect of its UK subsidiary, these can be carried forward and offset against UK taxable income indefinitely. In respect of its US entities, net operating loss carry forwards can be carried forward and offset against taxable income for 20 years for losses incurred up to and including 31 December 2017. All net operating loss carry forwards incurred after 31 December 2017 can be carried forward and offset against US taxable income indefinitely. Utilisation of net operating loss or tax credit carry forwards may be subject to annual limitations if an ownership change had occurred pursuant to the section 382 Internal Revenue Code and similar state provisions.

The unused tax losses must be utilised by various dates. U.S. federal tax losses expire in various dates through to 2037.

At the reporting date, undistributed reserves on non-US subsidiaries $7,115k which would attract withholding tax and $810k undistributed Estonian subsidiary profits for which deferred tax liabilities have not been recognised. No liability has been recognised in respect of these differences because the timing of any distribution is under the Group's control and no distribution which gives rise to taxation is contemplated.

UK corporation tax rates increased from 19% to 25% with effect from 1 April 2023, in accordance with the Finance Act 2021. Current taxes have been calculated using a blended rate, while deferred taxes have been computed at 25%, aligning with the substantively enacted rate as of 31 December 2023. There have been no significant changes in tax rates enacted or effective in the current or prior year that are expected to have a material impact on the financial statements. The company will continue to monitor any potential changes in tax legislation that may impact its future financial performance.

8. Discontinued operations

On 28 February 2022, the Group sold its entire Identity business (Boku Identity Inc and its 100% subsidiary Boku Mobile Solutions Ireland Ltd).

 

As required, at 31 December 2022, discontinued operations were excluded from the results of continuing operations and were presented as a single entry in the Income Statement as 'Profit from discontinued operations' in the income statement.

 

The financial results related to the discontinued operations for the period to the date of disposal are presented below:

 

2022 (2 months)
	$'000
Fee Revenue	1,153
Cost of sales	(719)
Gross Profit	434
Administrative Expenses	(1,541)
Operating loss analysed as:
Adjusted EBITDA	(652)
Depreciation and amortisation	(238)
Share based payments expense	(163)
Foreign exchange losses	(54)
Operating loss	(1,107)
Profit on disposal	26,614
Disposal costs	(1,408)
Share based payments expense reversed	506
Total Profit before tax on disposal of Identity business	24,605
Tax	-
Net profit for the period attributable to equity holders of the parent company	24,605

The net cashflows used in the Identity business disposed in the prior period are as follows:

	31-Dec
	2022
	$'000
Net cash used in operating activities	(1,106)
Net cash used in investing activities	(178)
Net cash from financing activities	570
Net cash used in discontinued operations	(714)

 

Reconciliation of consideration received with the total profit and loss from discontinued operations:

		31 Dec 2022 $'000
Total consideration received in the prior year		26,761
Financial asset through profit and loss - holdback receivable		5,600
Working capital adjustment		156
Total consideration		32,517

The holdback receivable of $5.6m was received during the year.

Assets and liabilities of disposal

The assets and liabilities relating to the Identity business were reclassified as held for sale at 31 December 2021. As at 31 December 2022, these values were nil as the sale completed in February 2022.

9.  Earnings per share

 

Basic EPS is calculated by dividing the profit or loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, excluding shares purchased by the Company (Note 18). As at 31 December 2023 there were 4,007,868 shares held in treasury (FY22: 1,500,000).

Diluted EPS represents the basic EPS, adjusted for the effect of the dilutive shares issuable on exercise from employee share options under the Group's share-based payment schemes, weighted for the relevant period.

The weighted average number of shares in issue during the year was as follows:

 

	2023	2022
Weighted average number of shares in issue	297,942,357	298,275,521
Effect of dilutive share options, RSU's and warrants	15,337,750	11,254,745
Diluted weighted average number of shares in issue	313,280,107	309,530,266
Total
Profit for the year attributable to shareholders of the Company ($,000)	10,086	28,904
Basic earnings per share ($)	0.0339	0.0969
Diluted earnings per share ($)	0.0322	0.0934
From continuing operations
Profit for the year attributable to shareholders of the Company ($,000)	10,086	4,299
Basic earnings per share ($)	0.0339	0.0144
Diluted earnings per share ($)	0.0322	0.0139
From discontinuing operations
Profit for the year attributable to shareholders of the Company ($,000)	-	24,605
Basic earnings per share ($)	-	0.0825
Diluted earnings per share ($)	-	0.0795

 

The Amazon Warrants increase the number of diluted shares reported, which has an effect on our fully diluted earnings per share. Further, the Amazon Warrants are presented as an asset and derivative financial liability in the audited consolidated statement of financial position The liability is subject to fair value measurement adjustments during the periods that it is outstanding. Accordingly, future fluctuations in the fair value of the Amazon Warrant could adversely impact our results of operations. If Amazon exercises its right to acquire Boku common shares pursuant to the Amazon Warrant, it will dilute the ownership interests of then-existing shareholders and reduce earnings per share.

10.     Property, plant and equipment

 

						*restated
	Computer equipment & software	Office equipment and fixtures and fittings	Leasehold improvement	Property, plant and equipment Total		Right-of-use assets
	$'000	$'000	$'000	$'000		$'000
Cost
At 1 January 2022	1,214	276	255	1,745		6,789
Restatement of right-of-use asset	-	-	-	-		(305)
At 1 January 2022 (restated*)	1,214	276	255	1,745		6,484
Additions (restated*)	422	48	-	470		129
Disposals	(41)	(16)	-	(57)		(144)
Exchange adjustment	(49)	(22)	(27)	(98)		(291)
At 31 December 2022 (restated*)	1,546	286	228	2,060		6,178
Additions	372	62	-	434		957
Disposals	(37)	(4)	-	(41)		(975)
Exchange adjustment	20	12	9	41		89
At 31 December 2023	1,901	356	237	2,494		6,249
Accumulated depreciation
At 1 January 2022	744	216	116	1,076		1,788
Restatement of right-of-use assets	-	-	-	-		35
At 1 January 2022 (restated*)	744	216	116	1,076		1,823
Charge for period (restated*)	313	41	41	395		1,411
Disposals	(34)	(16)	-	(50)		(144)
Exchange adjustment	(31)	(14)	(12)	(57)		(145)
At 31 December 2022	992	227	145	1,364		2,945
Charge for period	305	38	42	385		1,430
Disposals	-	-	-	-		(971)
Exchange adjustment	(25)	6	6	(13)		61
At 31 December 2023	1,272	271	193	1,736		3,465
Net book value
At 1 January 2022 (restated*)	470	60	139	669		4,661
At 31 December 2022 (restated*)	554	59	83	696		3,233
At 31 December 2023	629	85	44	758		2,784

*Right-of-use assets in the prior year were restated to prepayments, see note 2 for further details.

The additions related to the renewal of the Estonia office, together with the 1-year renewal of the office lease for Ireland, Germany, Japan and Singapore. Additions in the prior year (FY22) related to the 1-year renewal of the office lease for Ireland and Singapore. The Group had no contractual commitments for the acquisition of property, plant and equipment in the current or prior year.

Impairment of Property and Equipment

The carrying amounts of the Group's assets including right-of-use assets are reviewed at the end of each reporting period to determine whether there is any indication of impairment loss. If any such indication exists, the asset's recoverable amount is estimated in order to determine the extent of the impairment loss, if any. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less cost to sell and value in use. Impairment losses are charged to the profit and loss in other operating expenses. During the years ended 31 December 2023 and 2022, no impairments have been recorded.

 

11.     Intangible assets

 

	Domain name	Developed technology	Merchant relationships	Trade-marks	Goodwill	Internally developed software	Total
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Cost
At 1 January 2022	1,836	8,001	15,750	110	45,379	14,621	85,697
Additions	-	-	-	-	-	4,866	4,866
Disposals	(1,562)	(19)	-	-	-	(3)	(1,584)
Disposals (discontinued operations)	-	(1,918)	-	-	(2,784)	(2,996)	(7,698)
Exchange adjustment	(134)	(271)	(851)	-	(862)	(87)	(2,205)
At 31 December 2022	140	5,793	14,899	110	41,733	16,401	79,076
Additions	-	-	-	-	-	5,430	5,430
Exchange adjustment	-	389	444	-	450	(167)	1,116
At 31 December 2023	140	6,182	15,343	110	42,183	21,664	85,622
Accumulated amortisation
At 1 January 2022	395	3,600	10,111	-	-	8,474	22,580
Charge for period	81	494	616	-	-	2,677	3,868
Impairment	1,264	-	-	-	-	-	1,264
Disposals	(1,562)	-	-	-	-	-	(1,562)
Disposals (discontinued operations)	-	(1,217)	-	-	-	(1,419)	(2,636)
Exchange adjustment	(38)	(60)	(523)	-	-	(47)	(668)
At 31 December 2022	140	2,817	10,204	-	-	9,685	22,846
Charge for period	-	1,276	904	-	-	3,562	5,742
Exchange adjustment	-	383	(15)	-	-	46	414
At 31 December 2023	140	4,476	11,093	-	-	13,293	29,002
Net book value
At 31 December 2021	1,441	4,401	5,639	110	45,379	6,147	63,117
At 31 December 2022	-	2,976	4,695	110	41,733	6,716	56,230
At 31 December 2023	-	1,706	4,250	110	42,183	8,371	56,620

The amortisation charge of intangible assets is recognised in administrative expenses in the consolidated statement of comprehensive income.

Goodwill

Goodwill acquired in a business combination is allocated to the cash generating units ("CGU's") that expect to benefit from that business combination.

Goodwill mainly consists of the assets from the acquisition of Mopay AG ("Mopay") in October 2014 and Fortumo Holdings Inc. on 1^st July 2020, absorbed into the payment CGU.

Goodwill is reviewed annually for impairment and at the year-end an impairment test was undertaken by comparing the carrying value with the recoverable amount of the Group's CGU. The recoverable amount of the cash generating unit is based on value-in-use calculations. These calculations have been calculated using pre-tax discounted cash flow projections based on financial budgets and forecasts approved the Board of Directors. The projections cover a five-year period and a calculation of the terminal value, for the period following these projections.

The recoverable amount of the Payments CGU was calculated to be in excess of the carrying value, indicating there is no impairment required. The key underlying assumptions used in the calculations are those regarding projected cash flows, growth rates, increases in costs and discount rates.

Growth rates consider historic experience and current market trends:

-       Revenue growth ranges from 19.2% to 24.9% (FY22: 15.4% to 23.8%).

-       Take rate growth rate of 0.1% (FY22: 0.1%)

-       Gross profit ranging from 97% to 99% (FY22: 97% to 99%)

The pre-tax discount rate was calculated at 15% (FY22: 15.5%). This is based on the Group's assessment of risk-free interest rates and the risks specific to the CGU. The terminal value calculation for 2023 was based on growth rate of post-tax free cashflow of 2% (FY22: 2%) for the CGU.

Sensitivity analysis has been performed and the net present value of the cashflows would need to fall by a factor of 9.5 to equal the carrying value of the CGU (FY22: 3.4).

 

Fortumo domain name

During the prior year management decided to discontinue the Fortumo domain name and to rebrand all the Fortumo products and rename the acquired entities of Fortumo group to Boku's name. As a result, the Fortumo domain which was separately valued as part of the PPA work at the time of the acquisition of Fortumo in July 2020 and included in intangibles, was impaired in full by $1.26 million ($1.44 million at 31 December 2021 less amortisation $0.18 million) as the Fortumo domain name is no longer being used internally or externally.

 

The Group had no contractual commitments for the acquisition of intangible assets in the current or prior year.

Developed technology

During the year it was agreed to begin a project to migrate the merchants purchased under the Fortumo acquisition from the Fortumo platform to the Boku platform, after which the Fortumo platform would become obsolete. The project is expected to complete in 2025 and as a result the amortisation has been accelerated to align with the expected remaining useful life of the platform.

12.     Subsidiaries

 

The subsidiaries of the Company, all of which have been included in the consolidated financial information, are presented below.

Name	Ownership	Principal activity	Place of Incorporation
Boku Payments, Inc.	100% owned by Boku, Inc.	Holding Company	United States
Boku Network Services, Inc.	100% owned by Boku, Inc.	Holding Company	United States
Boku Account Services, Inc.	100% owned by Boku, Inc.	Holding Company	United Stated
Boku Account Services UK Ltd.	100% owned by Boku Account Services, Inc.	Mobile payment solutions	United Kingdom
Boku Brasil Participações Ltda.	100% owned by Boku Network Services, Inc.	Holding company	Brazil
Boku Network Brasil Instituição De Pagamento Ltda.	100% owned by Boku Brasil Participações Ltda.	Mobile payment solutions	Brazil
Boku Network Services GmbH	100% owned by Boku, Inc.	Mobile payment solutions	Germany
Boku Network Services UK Ltd	100% owned by Boku Network Services, Inc.	Mobile payment solutions	United Kingdom
Boku Network Services AU Pty Ltd	100% owned by Boku Network Services, Inc.	Mobile payment solutions	Australia
Boku Network Services IN Pvt. Ltd.	100% owned by Boku Network Services, Inc.	Mobile payment solutions	India
Boku Network Services SG Pte. Ltd.	100% owned by Boku Network Services, Inc.	Mobile payment solutions	Singapore
Boku Network Services HK Limited	100% owned by Boku Network Services, Inc.	Mobile payment solutions	Hong Kong
Boku Network Services Taiwan Branch Office	100% owned by Boku Network Services, Inc.	Mobile payment solutions	Taiwan
Boku Network Services Japan Branch Office	100% owned by Boku Network Services, Inc.	Mobile payment solutions	Japan
Mopay AG Beijing Representative Branch	100% owned by Boku Network Services AG (Germany)	Mobile payment solutions	China

 

Boku Network Services IE Limited	100% owned by Boku Network Services, Inc.	Mobile payment solutions	Ireland
Boku Network Services MY Sdn. Bhd.	100% owned by Boku Network Services, Inc.	Mobile payment solutions	Malaysia
Boku Network Services EE Holdings, Inc.	100% owned by Boku Network Services, Inc.	Holding Company	United States
Boku Network Services TH Co Ltd.	100% owned by Boku Network Services, Inc.	Dormant	Thailand
Boku Network Services PH, Inc.	100% owned by Boku Network Services, Inc.	Mobile payment solutions	Philippines
Boku Network Services MX S. de R.L. de C.V.	50% owned by Boku Network Services, Inc.  50% owned by Boku, Inc.	Dormant	Mexico
Boku Network Services Estonia OÜ (previously Fortumo OÜ)	100% owned by Boku Network Services EE Holdings, Inc.	Mobile payment solutions	Estonia
Boku Network Services ES S.L.	100% owned by Boku Network Services Estonia OÜ	Mobile payment solutions	Spain
Fortumo Mobile Services Pvt. Ltd.	100% owned by Boku Network Services Estonia OÜ	Mobile payment solutions	India
Fortumo Singapore Pte. Ltd.	100% owned by Boku Network Services Estonia OÜ	Mobile payment solutions	Singapore
Boku Network Services PE S.A.C.	100% owned by Boku Network Services, Inc.	Dormant	Peru
Boku Network Services CO S.A.S.	100% owned by Boku Network Services, Inc.	Dormant	Colombia
Boku Network Services CL S.P.A.	100% owned by Boku Network Services, Inc.	Dormant	Chile
Boku Network Services ZA (Pty) Ltd	100% owned by Boku Network Services, Inc.	Dormant	South Africa
Boku Network Services KE Limited	100% owned by Boku Network Services, Inc.	Dormant	Kenya
Boku Network Services TZ Limited	99.999% owned by Boku Network Services, Inc.  0.001% owned by Boku, Inc.	Dormant	Tanzania
Boku Network Services AR S.R.L.	95% owned by Boku Network Services, Inc.  5% owned by Boku, Inc.	Dormant	Argentina
Boku Network Services UG Limited	99.95% owned by Boku Network Services, Inc.  0.05% owned by Boku, Inc.	Dormant	Uganda
Boku Network Services UY S.A.	100% owned by Boku Network Services, Inc.	Dormant	Uruguay

 

13.     Trade and other receivables

		restated*
	31 December	31 December
	2023	2022
	$'000	$'000
Trade receivables	53,117	27,898
Accrued income	92,527	59,550
Accounts receivable	145,644	87,448
Less: provision for impairment	(2,047)	(1,238)
Net accounts receivable	143,597	86,210
Other receivables	281	100
Deposits held	448	426
Sales taxes receivable	1,011	938
Prepayments (restated*)	3,185	2,835
Total current trade and other receivables	148,522	90,509
Financial assets at fair value through profit and loss	-	5,600
*Right-of-use assets in the prior year were restated to prepayments, see note 2 for further details.

Accrued income relates to expected revenue generated from settlement and transaction fees. On receipt of statements from carriers and eWallets the accrued income is reversed, and actual receivable balances are recognised accordingly.

$5.6m was received in the current year relating to the final settlement from the sale of the Identity business. See note 8 for further details.

Provision for receivables:

	31 December	31 December
	2023	2022
	$'000	$'000
Opening balance	1,238	756
Utilised during the period	(208)	(19)
Increase/(decrease) during the period	1,017	501
Closing balance	2,047	1,238

In accordance with IFRS9, the Group reviews the amount of credit loss associated with its trade receivables based on forward looking estimates that take into account and forecast credit conditions as opposed to relaying on past default rates. The Group has applied the Simplified Approach, applying a provision matrix based on the number of days past due to measure lifetime expected credit losses and after taking into account customer sectors with different credit risk profiles and current and forecast trading conditions.

14.       Cash and cash equivalents and restricted cash

 

	31 December	31 December
	2023	2022
	$'000	$'000
Cash and cash equivalents	117,360	99,551
Restricted cash	33,499	16,962
	150,859	116,513

The restricted cash primarily includes segregated client funds and other client money received but not yet paid to merchants (in transit) for Boku's licenced entities, cash held at bank to secure a lease agreement for the Company's San Francisco office and monies held at a financial institution to collateralise Company credit cards.

15.     Trade and other payables

 

	31 December	31 December
	2023	2022
Current	$'000	$'000
Trade payables	182,397	118,829
Accruals	48,678	35,550
Total financial liabilities classified as financial liabilities	231,075	154,379
Other taxes and social security costs	1,386	1,024
Provision for social security costs on issued stock options	588	860
Total current trade and other payables	233,049	156,263
Non-current
Accrued taxes on issued stock options	979	1,194
Total non-current trade and other payables	979	1,194

The carrying values of trade and other payables and accruals approximate to fair values.

16.         Lease liabilities

 

The table below shows a reconciliation for discounted lease liabilities included in the statement of financial position:

	Property (office leases)	IT Equipment	Total
	$'000	$'000	$'000
Lease liabilities as at 1 January 2022	4,833	-	4,833
Additions	129	315	444
Interest expense	235	-	235
Payments to lease creditors	(1,476)	(315)	(1,791)
Exchange adjustment	(172)	-	(172)
Lease liabilities as at 31 December 2022	3,549	-	3,549
Additions	937	-	937
Interest expense	171	-	171
Payments to lease creditors	(1,649)	-	(1,649)
Exchange adjustment	44	-	44
Lease liabilities as at 31 December 2023	3,052	-	3,052

 

The table below represents the maturity analysis of contractual undiscounted lease payments:

	2023	2022
	£'000	£'000
Less than one year	1,294	1,427
One to five years	1,768	2,407
Total undiscounted lease liabilities as at 31 December 2023	3,062	3,834

There are no leases with a term of more than 5 years.

Lease liabilities included in the statement of financial position:

	2023	2022
	£'000	£'000
Current	1,370	1,277
Non-current	1,682	2,272

The following represents the lease expenses and depreciation of right-of-use assets in relation to leases charged to the Consolidated statement of comprehensive income:

		restated*
	2023	2022
	£'000	£'000
Interest on lease liabilities	171	235
Expenses related to short term leases	329	238
Depreciation of right-of-use assets (Note 10) (restated*)	1,430	1,411

*Right-of-use assets in the prior year were restated to prepayments, see note 2 for further details.

 

The amounts recognised in the consolidated statement of cashflows are presented below:

 

	2023	2022
	£'000	£'000
Payment of principal	1,478	1,556
Payment of interest	171	235
Total cash outflows	1,649	1,791

 

17.     Loans and borrowings

 

On 26 June 2020 the Group entered into a loan agreement with its bankers for $20.0m to part finance the acquisition of Fortumo Holdings Inc, and its subsidiaries on 1^st July 2020. The loan was structured as a $10.0m term loan repayable in 4 years and $10.0m revolving facility. Associated costs of $500k were incurred and are amortised over the life of the loan.

 

On the sale of the Identity division, the outstanding term loan with Citibank of $8.125m was repaid from the consideration. As at 31 December 2023 the Group has no bank loans (FY22: Nil). The Group retains the $10m revolver facility (RCF) which is currently not drawn upon (FY22: $10m facility, $nil drawn upon). This revolver facility expires on 1 July 2024.

 

	2022		Non-cash changes			2023
		Cash flows	Borrowing costs expensed in the year	Foreign Exchange Movement	Lease Liabilities (IFRS 16)
	$'000	$'000	$'000	$'000	$'000	$'000
Short-term lease liabilities	1,277	(1,649)	-	44	1,698	1,370
Long-term lease liabilities	2,272	-	-	-	(590)	1,682
Total liabilities from financial activities	3,549	(1,649)	-	44	1,108	3,052

 

	2021	Cash flows	Non-cash changes			2022
			Borrowing costs expensed in the year	Foreign Exchange Movement	Lease Liabilities (IFRS 16)
	$'000	$'000	$'000	$'000	$'000	$'000
Short-term borrowings	1,125	(1,125)	-	-	-	-
Long-term borrowings	6,688	(7,000)	312	-	-	-
Short-term lease liabilities	1,335	(1,791)	-	(129)	1,862	1,277
Long-term lease liabilities	3,498	-	-	(43)	(1,183)	2,272
Total liabilities from financial activities	12,646	(9,916)	312	(172)	679	3,549

 

18.     Share capital

 

The Company's issued share capital is summarised in the table below:

		31 December				31 December
		2023				2022
Common shares of $0.0001 each		Number of shares issued and fully paid				Number of shares issued and fully paid
		'000		$'000	'000		$'000
Opening balance		299,270		29	295,876		29
Exercise of options and RSUs		1,797		-	3,394		-
Closing balance		301,067		29	299,270		29

Common Shares

At 31 December 2023, the Company had 301,066,914 (FY22: 299,270,021) common shares issued and fully paid. The Company has only one class of shares with par value of $0.0001 each. The authorised share capital is 500,000,000 shares. The Company holds 4,007,868 shares in treasury (FY22: 1,500,000 shares held in treasury).

19.     Reserves

 

The other reserves disclosed in the consolidated statement of financial position includes share premium representing the difference between the issue price and nominal value of the shares issued by the Company. It includes all stock options expenses reserves.

Retained losses are the cumulative net profits / (losses) in the consolidated income statement.

Foreign exchange reserve stores the foreign exchange translation gains and losses on the translation of the financial statements from the functional to the presentation currency.

Movements on these reserves are set out in the consolidated statement of changes in equity.

Treasury reserve relates to the amounts paid to buy back shares in Boku, Inc. from the market.

20.     Share-based payment

 

The Group operates the following equity-settled share-based remuneration schemes for employees, Directors and non-employees:

1.   2009 equity incentive plan (2009 Plan) for the granting of stock options, restricted stock awards (RSA) and restricted stock units (RSU). No options were available to be issued under this plan as at 31 December 2023 or 2022. There are 2,218k options vested but not exercised under this plan as at 31 December 2023 (FY22: 3,771k).

 

2.   2017 Equity Incentive Plan (2017 Plan) for the granting of stock options and restricted stock units (RSUs). The Group reserved an initial ten million shares of common stock for issue under the plan. The activity under this plan is presented separately from the rest of the plans, as explained below. There are 836k options (FY22: 837k) and 11,597k (FY22: 10,069k) RSUs outstanding as at 31 December 2023.

2009 Equity Incentive Plan

The options activity under the 2009 Plan (including RSUs) are as follows:

	2009 Plan (Options)
	Number of options	WAEP1
	'000
At 1 January 2022	4,736	$0.34
Exercised	(965)	$0.34
At 31 December 2022	3,771	$0.34
Exercised	(1,513)	$0.31
Cancelled	(40)	$0.28
At 31 December 2023	2,218	$0.30

¹WAEP - weighted average exercise price

A summary of other information related to the options granted under this plan is presented in the table below:

2009 Plan		December 2023	December 2022
Outstanding options at reporting end date:
- total number of options		2,218	3,771
- weighted average remaining contractual life excluding RSUs (years)		2.43	2.49
Vested and exercisable ('000):		2,218	3,771
- weighted average exercise price		$0.30	$0.44
Weighted average share price exercised during the period (excluding RSUs)		$0.31	$0.34
Share-based payment expense for the period ('000)		-	-

 The fair value of each option (excluding RSUs) has been estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: expected terms ranging from 4.99 to 6.89 years; risk-free interest rates ranging from 0.73% to 3.05%; expected volatility of 58%; and no dividends during the expected term (2017: expected terms ranging from 5.04 to 6.01 years; risk-free interest rates ranging from 1.87% to 1.92%; volatility of 45%; and no dividends during the expected term).

 

2017 Equity Incentive Plan

Options were granted under the 2017 Equity Incentive Plan only in January 2018. Since then, only RSUs have been granted under the plan. The options granted under this plan vest over 3 years and contain a one-year cliff. Therefore, 25% of the options vest at the end of one year and from year two a graded quarterly vesting takes place, where each instalment of vesting is treated as a separate stock option grant.

 

RSUs under the 2017 Plan may be outstanding for periods of up to three years following the grant date.  Outstanding RSU grants generally vest over three years in three equal portions or one third after two years and two thirds in the third-year anniversary from the grant date. Options under the 2017 Plan may be outstanding for periods of up to ten years from the grant date.

 

Performance-based restricted stock units (RSUs)

Performance-based RSUs vest on the completion of a specified service period and the achievement of certain performance targets, which may include individual performance measures as well as Company measures, and are converted into common stock upon vesting.

Share based payments expense for RSUs is based on the fair value of the shares underlying the awards on the grant date and reflects the estimated probability that the performance and service conditions will be met; specifically, where the restricted stock units are nil-cost awards with a non-market performance condition, so they are valued at the share price as at the day of grant. The share-based payments expense is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions until the vesting date. Performance-based RSUs vest after three years of issue, in one vesting event, if the performance conditions are met, however these may also vest at the discretion of the Board in the event that underlying performance conditions are not met.

The activity under the 2017 Plan for both options and RSU are as follows:

	Available1	Options	WAEP	RSUs	WAEP2	Total
	'000	'000		'000		'000
At 1 January 2022	35,228	969	$1.205	10,663	-	11,632
Authorised	12,565	-	-	-	-	-
Granted	(3,914)	-	-	3,914	-	3,914
Exercised	-	(132)	$1.205	(2,292)	-	(2,424)
Cancelled	2,216	-	$1.205	(2,216)	-	(2,216)
At 31 December 2022	46,095	837	$1.205	10,069	-	10,906
Authorised	12,982	-	-	-	-	-
Granted	(5,832)	-	-	5,832	-	5,832
Exercised	-	(1)	$1.205	(3,290)	-	(3,291)
Cancelled	1,014	-	-	(1,014)	-	(1,014)
At 31 December 2023	54,259	836	$1.205	11,597	-	12,433

1-   The number of available RSUs available for future use in the plan.

2-   RSUs are issued with a zero-exercise price and therefore the WAEP is Nil.

 

A summary of other information related to the options and RSUs granted under this plan is presented in the table below:

2017 Plan		31 December 2023	31 December 2022
Outstanding options at reporting end date:
- total number of options (excluding RSUs) ('000)		836	837
- weighted average remaining contractual life (years)             (excluding RSUs) (years)		4.0	5.0
Vested and exercisable ('000):
- weighted average exercise price		$1.205	$1.205
Weighted average fair value of options granted during the period (excluding RSU)		$0.44	$0.44
Total number of RSUs outstanding		11,597	10,069
Vested and exercisable - Options		836	837
Share-based payment expense for the period ('000)		$7,595	$5,165

Reconciliation of share-based payment expense (continuing operations)

	December 2023 $'000	December 2022 $'000
2009 Plan
Options	-	-
2017 Plan
Options	-	-
RSUs	7,467	5,553
Total share-based expense (excluding national insurance)	7,467	5,553
National insurance reversal accrued	(435)	(639)
National insurance paid in the year (see Note 4)	563	251
Total share-based payment charge	7,595	5,165

21.     Dividends

 

No dividends were declared or paid in the current year (FY22: Nil).

22.     Cash generated from operations

 

		Year-ended 31 December	Year-ended 31 December
		2023	2022
		$'000	$'000
Profit after tax		10,086	28,904
Add back:
Tax charge/ (credit)		1,321	(237)
Amortisation of intangible assets		5,742	3,868
Depreciation of property, plant and equipment		1,815	2,032
Gain on discontinued operations after tax		-	(26,614)
Loss on disposal of property, plant and equipment		1	6
Loss on disposal of intangible assets		-	22
Finance income		(1,887)	(201)
Finance expense (includes interest on lease liabilities)		249	675
Foreign exchange loss (unrealised)		(1,352)	4,407
Employer taxes on stock option and restricted stock units (accrual) charge		(435)	(639)
Fair value adjustment on warrants valuation		(53)	3,470
Amortisation of warrant asset		108	25
Impairment of intangible asset		-	1,264
Share based payment expense		7,467	5,045
Cash from operations before working capital changes		23,062	22,027
Increase in trade and other receivables		(53,004)	(12,328)
Increase in trade and other payables		70,877	40,267
Cash generated from operations		40,935	49,966

The share-based payment expense has been split between the charge using the Black Scholes method for the period $7,467k (FY22: $5,553k) and the change in the accrual for employer taxes on stock option and restricted stock units $-435k (FY22: -$639k). The total share-based payment expense in the consolidated statement of comprehensive income includes $563k (FY22: $251k) employer taxes paid via payroll to tax authorities.

 

The impairment of intangible assets in 2022 relates to the full impairment of the Fortumo domain name which was discontinued in the comparative period.

 

23.     Financial Risk Management

 

The Board has overall responsibility for the determination of the Group's risk management objectives and policies. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. The Group reports in US$. All funding requirements and financial risks are managed based on policies and procedures adopted by the Board of Directors. The Group does not issue or use financial instruments of a speculative nature.

The Group is exposed to the following financial risks:

·      Market risk (Interest rate risk & Foreign Exchange risk)

·      Credit risk

·      Liquidity risk

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

·      Trade and other receivables

·      Cash and cash equivalents and restricted cash

·      Trade and other payables

·      Bank loans

 

Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

? Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities

? Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and

? Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data. The Group has classified the warrant liabilities in this category.

 

The following tables present the Group's assets and liabilities that are measured at fair value by the level in the fair value hierarchy as at the reporting date:

Financial instruments by category

	31 December	31 December
	2023	2022
Measurement level 1   Financial assets	$'000	$'000
Cash and cash equivalents	117,360	99,551
Restricted cash	33,499	16,962
Total Cash	150,859	116,513
Other financial assets at amortised cost
Net accounts receivable	143,597	86,210
Other receivables	729	526
Total other financial assets	144,326	86,736
Cash and other financial assets at amortised cost	295,185	203,249

 

Measurement level 3

Financial assets at fair value through profit and loss
Holdback receivable asset	-		5,600

 

	31 December	31-Dec-22
	2023	2022
Measurement level 1   Financial liabilities	$'000	$'000
Trade payables	182,397	118,829
Current tax payable	509	222
Total other financial liabilities	182,906	119,051
Lease liabilities	3,052	3,549
Financial liabilities at amortised cost	185,958	122,600
Measurement level 3
Financial liabilities at fair value through profit or loss
Derivative financial liability (Amazon warrant liability)	5,511	5,206

Amazon warrants

The fair value of the warrant obligations was $5,511k as at 31 December 2023, $5,206k as at 31 December 2022 and $1,756k at the inception of the warrants on 16 September 2022. The increase in fair value from inception to 31 December 2022 was primarily due to an increase in the spot price from $0.77 to $1.395. The increase in fair value from 31 December 2022 to 31 December 2023 was primarily due to an increase in the number of warrants expected to vest from 4,992k to 5,334k.

 

The warrants are classified as Level 3 derivative liabilities as there is no current market for the warrants, such that the determination of fair value requires significant judgment or estimation. The Group values the warrants using a combination of Monte Carlo Simulation and Black-Scholes Model valuation methods. 

 

Significant unobservable inputs as at the inception of the warrant agreement on 16 September 2022 included volatility of the Company's common stock of 40%, revenue volatility of 30%, a risk-free rate of 3.39%, and forecasted revenue from Amazon over the 7-year vesting period. Significant unobservable inputs as at 31 December 2022 and 31 December 2023 included volatility of the Company's common stock of 40%, revenue volatility of 30%, a risk-free rate of 3.81%, and forecasted revenue from Amazon over the 7-year vesting period.

 

A significant increase in volatilities in isolation would result in a significant change in fair value as at 31 December 2023.  If equity volatility and revenue volatility were both to decrease by 5% to 35% and 25% respectively, the total fair value of warrants would decrease to $5,281k, representing a decrease in fair value of $230k. If equity volatility and revenue volatility were both to increase by 5% to 45% and 35% respectively, the total fair value of warrants would increase to $5,771k, representing an increase in fair value of $259k. 

 

Movement of the contract asset for Amazon and warrant liabilities as at 16 September 2022 (inception) to 31 December 2023

Warrant contract asset	$'000
Initial recognition of warrant contract asset	1,756
Change in number of warrants expected to vest	(20)
Amortisation to revenue	(25)
Balance as at 31 December 2022	1,711
Change in number of warrants expected to vest	359
Amortisation to revenue	(108)
Balance as at 31 December 2023	1,962

 

Financial liability	$'000
Initial recognition of contract liability	(1,756)
Change in number of warrants expected to vest	20
Change in fair value of warrants	(3,470)
Balance as at 31 December 2022	(5,206)
Change in number of warrants expected to vest	(358)
Amortisation to revenue	53
Balance as at 31 December 2023	(5,511)

Market risk

Market risk arises from the Group's use of interest bearing and foreign currency financial instruments.  There is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk) or foreign exchange rates (currency risk).

Interest rate risk

The Group has a $10m revolving facility, which can be used if needed (FY22: $10m). Interest rates for the current Boku revolving facility loan were based on LIBOR, however LIBOR was phased out by the end of 2021. Current rates are based on the Secured Overnight Financing Rate. The Group manages the interest rate risk centrally. The term loan taken out to part fund the acquisition of Fortumo in 2020 was repaid in full on 28^th February 2022 following the disposal of the Identity division to Twilio. As at 31 December 2023 the Group has no loans (FY22: Nil). The Group's borrowings are disclosed in note 18.

During the year to 31 December 2023 interest rates increased in many jurisdictions as governments tried to control inflation. The Group has cash balances in many jurisdictions and the increase in interest rates had a positive effect on the Group cash position. The bank interest earned during 2023 was $1,887k (FY22: $189k).

Foreign currency risk

Foreign exchange risk is the risk that movements in exchange rates affect the profitability of the business.

The Group serves many of our U.S. based clients with global operations using the Group subsidiaries in Singapore, Ireland, UK, Japan and Hong Kong. Although contracts with these clients are typically priced in U.S. dollars a substantial portion of client funds receivable and related costs and revenues are denominated in the local currency of the country where services are provided, resulting in foreign currency exposure which have an impact on our results of operations.

 

Our primary foreign currency exposures are in Japanese Yen, EURO, GBP, Turkish lira, Thai Baht, Korean Won, Taiwanese dollar and Philippines Peso. There can be no assurance that we can take actions to mitigate such exposure in the future, and if taken, that such actions will be successful or that future changes in currency exchange rates will not have a material adverse impact on our future operating results.  A significant change in the value of the U.S. Dollar against the currency of any one or more of these currencies mentioned above may have a material adverse effect on our financial condition and results of operations. A 10% impact on foreign currency balances is detailed further in this note.

 

Foreign currency exchange risk arises mainly where receivables and payables exist in different currencies due to transactions entered into in foreign currencies. As such, management believe that the Group is exposed to the following foreign currency exchange risks:

 

a)	Transaction foreign currency risk is the exchange risk associated with the time delay between entering into a contract and settling it. Greater time differences exacerbate transaction foreign currency risk, as there is more time for the two exchange rates to fluctuate. The Group manages this risk in various ways:
·		by implementing procedures to receive funds faster (daily where possible) and settle the funds to merchants daily by shortening the settlement times.
·		By implementing a mark-up fee to cover the FX fluctuations when the settlement currency is different from the transaction currency
·		by contractual agreement to convert the funds at the foreign exchange rate received from the aggregators or other suppliers.
·		by using foreign exchange contracts timely to the extent that any remaining impact on profit after tax is not material.

 

b)	Translation foreign currency risk is the risk that the Group's non-U.S. Dollar assets and liabilities, revenues and costs will change in value as a result of exchange rate changes on converting them to US Dollars, which is the reporting currency of the Group. Monetary assets and liabilities are valued and translated into U.S. Dollars at the applicable exchange rate prevailing at the applicable date. Any adverse valuation moves due to exchange rate changes at such time are charged directly and could impact our financial position and results of operations.
	For the purposes of preparing the consolidated financial statements, the Group convert subsidiaries' financial statements as follows:
	Statements of financial position are translated into U.S. Dollars from local currencies at the period-end exchange rate, shareholders' equity is translated at historical exchange rates prevailing on the transaction date and income and cash flow statements are translated at average exchange rates for the period. The Group manages all treasury activities centrally, with the exception of the acquired Fortumo entities where treasury processes are in the process of being aligned with Group treasury policies and procedures.

 

As of 31 December 2023, the Group's gross exposure to foreign exchange risk was as follows:

	Euro	GBP	Other Currency	Total
31 December 2023	$'000	$'000	$'000	$'000
Trade and other receivables	41,076	15,933	75,150	132,159
Cash and cash equivalents and restricted cash	25,220	8,379	37,631	71,230
Trade and other payables	(54,702)	(19,074)	(109,554)	(183,330)
Net financial assets	11,594	5,238	3,227	20,059
10 % impact +/-	1,288	582	358	2,228

 

	Euro	GBP	Other Currency	Total
As at 31 December 2022	$'000	$'000	$'000	$'000
Trade and other receivables	23,113	12,242	46,900	82,255
Cash and cash equivalents	21,284	8,521	32,225	62,030
Trade and other payables	(49,100)	(16,877)	(68,917)	(134,894)
Net financial (liabilities)/ assets	(4,703)	3,886	10,208	9,391
10% impact +/-	(523)	432	1,135	1,044

The Group operates in 60 currencies (FY22: 48 currencies). We have identified Euro and GBP as the main affected currencies by fluctuations in exchange rates for 2023. In 2022 the main currencies were GBP and EUR. Other currencies are included in the 'Other' column. The impact of 10% movement in foreign exchange rate of US$ will result in an increase/decrease of total comprehensive profit/loss after tax and financial assets/(liabilities) of $2,228k for December 2023 (FY22: $1,044k).

c) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations.

The Group is exposed to credit risk in respect of these balances such that, if one or more the aggregators, MNOs or wallet providers encounters financial difficulties, this could impact the Group's financial results. The Group mitigates its credit risk by assessing the credit rating of new customers and MNOs prior to entering into contracts, by entering contracts with customers with agreed credit terms and also primarily by limiting its liability contractually to its customers/merchants in the event of non-payment from wallet providers, MNOs or aggregators.

To minimise this credit risk, the Group endeavours only to deal with companies that are demonstrably creditworthy and this, together with the aggregate financial exposure, is continuously monitored. The maximum exposure to credit risk is the value of the outstanding receivables amount from carriers/aggregators less the value of corresponding outstanding amounts payable to merchants, which equals the revenue amount recorded in the financial statements in respect of the uncollected funds. An APS fee is also charged to merchants for early settlement.

At the reporting date, the exposure was represented by the carrying value of trade and other receivables, against which $2,047k was provided at 31 December 2023 (FY22: $138k). The provision amounts represent an estimate of potential bad debt in respect of the year-end Group trade receivables. The Group's customers are concentrated to certain sectors, however the concentration of credit risk from trade receivables relating to carriers and aggregators is mitigated by a corresponding trade payable to merchants. Boku only settles merchant payable balances after corresponding funds are collected from carriers and wallets, mitigating credit risk.

A debt is considered to be bad when it is deemed irrecoverable, for example when the debtor goes into liquidation, or when a credit or partial credit is issued to the customer for goodwill or commercial reasons. The Group has applied the simplified approach applying a provision matrix based on number of days past due being greater than 150 days to measure expected credit losses and after taking into account customer sectors with different credit risk profiles, history of collections and current and forecast trading conditions.

The Group's receivable provision matrix is as follows:

31 December 2023	< 60 days	61-90 days	91-150 days	> 150 days	Total
Expected credit loss % range	0%	0.30%	0.72%	59.7%
Gross carrier receipts ($'000)	130,844	7,395	4,066	3,339	145,644
Expected credit loss rate ($'000)	-	(22)	(30)	(1,995)	(2,047)

 

31 December 2022	< 60 days	61-90 days	91-150 days	> 150 days	Total
Expected credit loss % range	0%	0%	0%	95%-100%
Gross carrier receipts ($'000)	84,792	1,384	34	1,238	87,448
Expected credit loss rate ($'000)	-	-	-	(1,238)	(1,238)

At 31 December 2023 the Group had a net provision for $1,712k (FY22: $138k) of which $1,574k was provided for in the year (FY22: $11k was reversed in the year). The Company revenue is recorded as the net between the amounts received from carriers and aggregators less the amounts payable to merchants. This represents management's best estimate of the potential revenue loss for the Group if the $2,047k (FY22: $1,238k) old receivables were not received from carriers.

Other receivables are considered to be low risk. Management do not consider that there is any concentration of risk within other receivables. No other receivables have been impaired.

The maximum credit risk exposure is the amount of cash held with at the bank (cash and cash equivalents). To date, the Group has not experienced any losses on its cash and cash equivalent deposits. $122.4m (FY22: $89.6m) of cash and cash equivalents were held in A⁺ rated bank accounts.

d) Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.

The statement of financial positions related to merchant funds flows are considered to be neutral from a liquidity perspective as these cash balances and related payables are interrelated from a liquidity perspective. This is due to the fact that Boku only settles merchant payables after cash is collected from carriers and wallets.

The table below analyses the Group's financial liabilities by contractual maturities (all amounts disclosed in the table are the undiscounted contractual cash flows):

31 December 2023	Within 1 year	2-5 years	More than 5 years	Total
	$'000	$'000	$'000	$'000
Trade and other payables	233,049	-	-	233,049
Financial liability (Amazon warrant liability)	-	-	5,511	5,511
Leases liabilities	1,294	1,768	-	3,062
Total*	234,343	1,768	5,511	241,622

*No material difference between discounted and undiscounted fair value.

31 December 2022	Within 1 year	2-5 years	More than 5 years	Total
	$'000	$'000	$'000	$'000
Trade and other payables	154,379	-	-	154,379
Financial liability (Amazon warrant liability)	-	-	5,206	5,206
Lease liabilities	1,427	2,407	-	3,834
Total*	155,806	2,407	5,206	163,419

*No material difference between discounted and undiscounted fair value.

The Board receives financial reports on a monthly basis as well as information regarding cash balances and investments. The liquidity risk of each group entity is managed by the Group treasury team at the entity level to meet any liquidity obligations. Where facilities of group entities need to be increased, approval must be sought by the entity's CFO. Where the amount of the facility is above a certain level, agreement of the Group CFO and the Board is needed.

Capital Management

The Group's capital is made up of share capital, other reserves, treasury shares, foreign exchange reserve and retained losses.

The Group's objectives when maintaining capital are:

·      To safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

·      To provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

 

The capital structure of the Group consists of shareholders' equity as set out in the consolidated statement of changes in equity. All working capital requirements are financed from existing cash resources and borrowings.

The Group manages its capital structure and makes the necessary adjustments in the light of changes of economic circumstances, the risk characteristics of underlying assets and the projected cash needs of the current and prospective operational / financing / investment activities. The adequacy of the Group's capital structure will depend on many factors, including capital expenditures, market developments and any future acquisition.

 

24.     Related party transactions

 

In 2023, the Group was remitted $119,711,637 in net payments from 2 suppliers who are shareholders of the Company (FY22: $132,800,653 - from 3 suppliers). At 31 December 2023, the Company had receivables of $23,853,885 (FY22: $13,594,020) due from these companies.

25.     Ultimate controlling party

 

There is no ultimate controlling party of the Company.

26.     Contingent liabilities

 

In the normal course of business, the Group may receive inquiries or become involved in legal disputes regarding possible patent infringements. In the opinion of management, any potential liabilities resulting from such claims, if any, would not have a material adverse effect on the Group's consolidated statement of financial position or results of operations.

From time to time, in its normal course of business, the Group may indemnify other parties, with whom it enters into contractual relationships, including customers, aggregators, MNOs, lessors and parties to other transactions with the Group. The Company has also indemnified its Directors and executive officers, to the extent legally permissible, against all liabilities reasonably incurred in connection with any action in which such individual may be involved by reason of such individual being or having been a Director or executive officer. The Group believes the estimated fair value of any obligation from these indemnification agreements is minimal; therefore, this consolidated financial information do not include a liability for any potential obligations at 31 December 2023 and 2022.

27.     Events after the reporting date

 

Stuart Neal was appointed CEO on 1 January 2024 and appointed as a Director of the Company on 17 January 2024.