Boku, Inc Annual Report 2020

FY2020 Annual Report · Boku, Inc

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Into the
Big Pond

Boku, Inc.
Annual Report and Accounts
for the year ended 31 December 2020

Welcome

Boku is building the future of mobile
commerce, growing, monetising and
securing transactions for billions of
consumers around the world.

Mobile devices are the most widely distributed consumer

technology in the world today, with over five billion devices

connected to a global network of operators. Boku’s

platform ensures that our over 500 customers, including

six of the seven most valuable companies in the world, can

collect payments for digital goods and secure consumer

transactions and data in every corner of the globe.

Boku has integrated over 220 payment types including

carrier billing and mobile wallets into its M1ST (Mobile

First) Payments Network. Merchants can integrate all of

these payment types through a single connection, gaining

access to the billions of consumers who prefer to pay with

their phone.

Boku provides the most comprehensive network of

mobile identity to streamline and secure valuable online

transactions, delivering superior user experience and

reduced instances of fraud for digital service providers,

including financial institutions.

To learn more about Boku, as well as obtain the latest

information of interest to investors and stakeholders,

please visit our website at www.boku.com

Our customers

Contents

Strategic Report

Governance

Financials

Chairman’s Statement .......................... 2
Strategic Report–
Into the Big Pond .................................. 4
Chief Executive Officer’s Report ...... 10
Chief Financial Officer’s Report ........ 14
Principal Risks and Uncertainties .....20

Board of Directors ..............................24
Senior Management ...........................26
Corporate Governance Report .........28
Audit Committee Report ....................34
Remuneration Report ......................... 37
Directors’ Report .................................44
Directors’ Responsibilities
Statement ............................................ 47

Independent Auditor’s Report ...........48
Consolidated Statement
of Comprehensive Income ................56
Consolidated Statement
of Financial Position .......................... 57
Consolidated Statement
of Changes In Equity ..........................58
Consolidated Statement
of Cash Flows......................................59
Notes to the Consolidated
Financial Statement ...........................60

Highlights

Strong Revenue Growth $USD millions)

Adjusted EBITDA Growth $USD millions)

$56

$50

$35

$24

$17

5

10

15

$2

$12

$15

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

Billable Transactions (millions)

Total Payments Volume, Payments $USD millions)

Payments

Identity

Fortumo

Boku Payments

Fortumo

1,000

800

600

400

200

250

486

319

159

330*

170

682

700

600

500

400

300

200

100

2016

2017

2018

2019

2020

2 0 1 6  0 1

2 0 1 6  0 6

2 0 1 7  0 1

2 0 1 7  0 6

2 0 1 8  0 1

2 0 1 8  0 6

2 0 1 9  0 1

2 0 1 9  0 6

2 0 2 0  0 1

2 0 2 0  0 6

 0 1

2 0 2 1

*data not comparable to prior year due to different data collection methodology

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Strategic Report

Chairman’s Statement

For many organisations 2020 was a
challenging year. Externally events were
dominated by a global pandemic, but
Boku was able to execute on its plan.
At a Group level, revenues exceeded
$56 million and Adjusted EBITDA* more
than doubled to $15.3 million, up from
last year’s figures of $46.8 million** and
$7.4 million respectively. The heart of
our business is the Boku platform. This
year we processed record numbers of
transactions – peaking at more than 400
each second. The platform connects
more than 220 mobile wallets and
network operators for both payment and
identity services to Boku’s customers,
including many of the world’s largest
companies.

The core Direct Carrier Billing (“DCB”)
business performed strongly during the year. As more
people stayed at home during the pandemic, demand
for home entertainment increased and Boku benefited,
pushing up the value processed through the system in
2020 to just under $7 billion, 38% up on 2019. New users
recruited in 2020 reached a new record as well at $25.9
million across our Payments and bundling programmes.
Adjusted EBITDA for the Payments division increased to
$19.2 million.

In 2020, Boku acquired Fortumo, the second most
profitable DCB company behind Boku, which sells on a
global scale. The transaction was well received by the
market and has performed in line with expectations,
contributing $4.5 million of revenue and $1.5 million of
Adjusted EBITDA in the six months to 31 December, during
which their figures were consolidated.

Boku Identity was not able to deliver the
level of progress we had previous expected
but despite negative impacts from the
pandemic and supply issues in the US,
was able to make progress with Adjusted
EBITDA losses reduced to $3.9 million.

We were pleased to welcome Charlotta
Ginman to the Board during the year.
She is an experienced Non-Executive
Director, with executive experience with
Nokia. She is already contributing to
the Board and has joined the Audit and
Remuneration Committees, allowing me
to step back, in line with best corporate
governance practices. I also wish to thank
the other Non-Executive Directors, Stewart
Roberts, who chairs the Audit Committee
and Richard Hargreaves who chairs the
Remuneration committee, for the service on
the Board and contribution to the Company during the year.

In 2021, a key focus of the Company’s management is to
operationalise and scale our mobile wallet business. We have
made a promising start with some big wins with important
customers. Boku is well positioned to leverage these early
successes as we build Boku into a mainstream, fintech
payment platform specialising in next-generation Payments.

Mark Britto
Non-Executive Chairman
15 March 2021

*Adjusted EBITDA Earnings before interest, tax, depreciation and
amortisation, impairment of goodwill, non-recurring payment revenue,
stock option expenses, forex gains/losses and exceptional items – see
Consolidated Statement of Comprehensive Income.

** 2019 comparative revenue excludes $3.3 million of non-recurring
payments revenue to better reflect underlying performance

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Strategic Report

Strategic Report - Into the Big Pond

It’s a feeling that everyone can recognise: the knot in
your stomach the first day that you go to big school.
Excitement mixed with trepidation. In your old school,
you were the top of the tree, the big fish; in the new
school you’re the small fish, trying to make your way
in a bigger pond. Boku too is a company in transition,
building on its market leadership in one sector to enter a
new and bigger market.

In 2020, Boku cemented its leadership in Direct Carrier
Billing (‘DCB’) with 38% organic growth in the value
processed through our platform, supplemented by the
acquisition of Fortumo, the second most profitable
company in the market (after Boku). We also started to
expand beyond the bounds of DCB. We are at an inflection
point: going from being the leading provider in the DCB
niche to become a mainstream Payments fintech which
specialises in mobile-native next-generation payments.

In 2021 and beyond, we will continue in this direction: no
longer constrained by the limits of putting charges onto
phone bills, we will expand out of the 5% of e-commerce
that is digital content into non-digital sectors with a
carefully curated set of local payment methods. In years
to come, if we execute successfully, over time, this new
market will be many times bigger than our existing DCB
business.

The Foundations:
Direct Carrier Billing – Strong and Growing

Because DCB is expensive compared to other payment
methods, it earns its corn by recruiting new users for its
customers. This is an imperative for the biggest digital
companies in the world. As entertainment increasingly
becomes digital, app stores, music, video streaming and
games companies are fighting to acquire new customers

We have
successfully
helped our
merchants to
recruit more
than 50 million
new users

and look to a partner like
Boku to help them do so. Our
super simple, frictionless, one
tap to register products have
built a customer base that
includes all the digital giants:
Apple, Amazon, Microsoft,
Facebook, Sony, Spotify,
Netflix and many more. They
use us because we deliver:
over the past two years we
have successfully helped our
merchants to recruit more
than 50 million new users.

4
4

Boku Inc Annual Report and Accounts for the year ended 31 December 2020
Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com
www.boku.com

Dealing with global companies is a core strength of Boku. It
is hard to think of any other company which simultaneously
serves six of the seven most valuable companies in the
world. This gives us scale and scale is important. Over the
last decade, Boku has established a high-quality network
of connections to more than 200 mobile network operators.
Replicating this network is hard – carriers are choosy
about which companies get the ability to add charges
to their customers’ bills and only grant this privilege to
organisations through which they can make a return. Put
simply, we have the carrier connections because we have
the merchants and we recruit new merchants because we
have the carrier connections.

It is this market position that has allowed Boku to triple its
payment revenues from $17.2 million to $51.2 million over
the last four years. Impressive growth to be sure, but, in the
immortal words of Bachman Turner Overdrive, “You Ain’t
Seen Nothing Yet”.

The average merchant on the Boku platform is connected
to 32 out of the 204 carriers connected to its platform. For
sure, not all carriers are the same size and scale and there
is a tendency to activate the most lucrative connections
first, nevertheless, this raw
statistic gives an accurate
sense that there is a lot
of growth left in the DCB
business. We have plenty of
growth to come, plenty of
white space into which we
can expand.

Boku
simultaneously
serves six
of the seven
most valuable
companies in
the world

This growth is easily
accommodated by the Boku
Platform. During the same
period that payment revenues
tripled, total costs for the

Payments Business Unit (Operating Expenditure and Cost
of Goods Sold) increased by only 15%. Roaring revenue
growth, coupled with modest increases in expenses lead
to extraordinary gearing: looking at the payment segment
alone, Adjusted EBITDA rocketed from a loss of $12.3
million in 2016 to $19.2 million profit this year.

Stock code: BOKU
Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020
Boku Inc Annual Report and Accounts for the year ended 31 December 2020

5
5

Strategic Report

Into the Big Pond

From Facebook to Fridges,
Flights and Furniture

Exploiting the Carrier Connections:
Boku Identity

According to Statista, the digital commerce market was
worth around $120 billion in 2019 and it’s growing at
double digit annual rates as consumers switch to digital
and streaming and away from physical and broadcast. Our
support for those digital merchants is what drives our DCB
business forward.

But $120 billion is the small pond. Digital content is a mere
5% of global e-commerce. People spend more on food,
fashion, fridges and furniture than they do on Facebook.

Boku is investing the money that we make in DCB not only
to sustain that business, but also to grow into non digital
sectors. We are investing to grab our share of the $2.4
trillion dollar e-commerce market.

We are attacking on two fronts: Identity and Wallets.

Boku Identity uses carrier connections to solve problems
in Identity. The magic ingredient is the rather unsurprising
fact that your mobile network operator knows your phone
number without having to ask. We can turn this into a
number of applications: we can confirm the registered
owner of a phone – useful if someone is trying to apply for
a loan in your name, but using their mobile; silently verifying
your phone number, obviating the need to copy the six digit
number from one of those fiddly text messages.

Although COVID-19 has impacted the progress of our
Identity business, it has also primed the world for greater
adoption of digital identity services as we move forward.
COVID-19 has been an accelerant for digital transformation,
especially in sectors like financial services. With the need
to create new accounts as well as operating them moved
almost exclusively to digital channels, digital identity
enables transactions to be executed seamlessly and
securely.

Short term results have disappointed somewhat due to the
impact of COVID-19 and supply issues in the US, the path
to profitability for Identity has extended, requiring a re-
evaluation of its asset value to the Group. However, behind
the numbers, real progress has been made. We enter 2021
with a much wider network of supply internationally and
with significant contract wins such as GDC, LexisNexis
and FIS. The foundations for renewed growth are there.
The challenge in 2021 is to activate the merchants that
we’ve signed, across the network that we have built. Early
signs are promising: Boku helps Americans to fill in their tax
returns electronically, prevents fraud on ridesharing apps in
Indonesia and simplifies the sign up of new users on social
networks in the UK, Canada and Australia.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

But they are fragmented – there are approximately as
many wallets per country in Asia as there are mobile
network operators. Therein lies our opportunity -- wallets
benefit from aggregation in the same way that DCB does.
Moreover their unstandardised nature lends itself to Boku’s
skill set of taking disparate, unstandardised inputs and
coalescing them into a single homogenous API which is
easy to consume for large global merchants.

In 2019 we started to build connections to wallets,
launching Grabpay and Gopay. In 2020 we started to
cross sell them to our existing merchants, where we have
the advantage of already being an incumbent payment
processor. We were able to announce the launches of
a Global Games Console provider in Korea and a Global
Music Streaming service in Indonesia. These connections
were won against significant competition from mainstream
cards-first payment processors. These wins validate the
thesis that Boku can compete and win, when we pick our
battles carefully.

More Payment Methods for
More Merchants

Whilst DCB is effectively confined to digital goods we have
launched and will be adding many new payment methods
that can service digital and non digital merchants. We
are not looking to replicate the work of the many fine,
card-centric, payment processors. Cards, whilst growing
absolutely are losing share in the electronic Payments
market to new payment types like mobile wallets, ‘buy now
pay later’ and real-time bank payment schemes. Boku’s

In Asia, wallets
account for
a greater
proportion of
ecommerce
spending than
credit and
debit cards
combined

strategy is not to implement
the widest possible range
of local payment methods,
rather we seek to work with a
carefully curated set of fast-
growing ones which, will help
our customers to grow.

The payment phenomenon of
the last few years is mobile
wallets. For many people,
especially in Asia, wallets
were their first electronic
payment method. Used face-
to-face with a QR code and
online with one tap access,
mobile wallets are firmly
established in many countries

as the default way to pay. In Asia, it’s brands like Alipay,
Grabpay and Kakaopay that are the go to, not cards. Even
in markets like Japan and South Korea, with some of the
highest payment card penetration rates on earth, mobile
wallets are cementing their status. Cards are seen as
antiquated and inflexible. In Asia, wallets now account for a
greater proportion of ecommerce spending than credit and
debit cards combined.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Strategic Report

Into the Big Pond

Swim Lanes

Diving In

On 1 July 2020, Boku bought Fortumo for a maximum
consideration of $45 million. Fortumo, based in Estonia,
was the second most profitable global DCB company.
Through the acquisition, the Group was able to consolidate
its position as the market leader in DCB. Fortumo brought
some very specific capabilities into the Group: the ability
to deal with large numbers of merchants, a best-in-class
bundling solution, key merchants such as Amazon and Epic
Games, together with some new connections in emerging
markets. Fortumo’s capabilities complement Boku’s existing
business with its focus on a few global merchants and
expansion into new payment types.

Going forward we will focus Fortumo on expanding the DCB
business and exploit its bundling capabilities, whereas Boku
will continue its support for strategic merchants and focus
on the expansion into local payment methods, especially
wallets. We have built a cross connect that allows Fortumo’s
EU Platform and Boku’s US Platform to use the others
carrier and wallet connections.

The US platform will receive investment in 2021 to make
us a better local payment processor, with support for the
features non digital merchants require. The EU platform will
also receive investment to improve our bundling offer.

Although it is not widely recognised, Boku has advantages
over the large cards-first payment companies: we, uniquely,
are an incumbent payment processor with all the world’s
largest digital brands. We can compete with the big players
on level terms and win but there are potentially bigger wins
to be had— wallets in Asia account for 65% of electronic
spending, a multiple of DCB’s market share.

But the real prize lies outside digital. In 2021 we will expand
our reach – supporting wallets and other local payment
methods --and enhance our system and start selling to
merchants who will come to Boku for wallets alone. It will
take some investment, but using our strong cashflow we
are determined to seize this opportunity, determined to
break out of digital, determined to be relevant to more
payments for more merchants and determined to make
Boku a mainstream payment processor. That is the mission
henceforward.

To swim in the Big Pond.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Environmental, Social and Governance

Championing a balanced work force

We are a proactive and enthusiastic promoter of social mobility and inclusion within our workforce; and
support all our staff in their career progression. We value the fact that our colleagues come from a diverse
range of backgrounds and nationalities with our workforce spread across the globe, including the United
Kingdom, Germany, United States, India, Singapore, Japan, Taiwan, France and Estonia.

Our recruitment processes are reviewed regularly and are designed to enhance diversity and social mobility
in our recruitment channels. For example:

• we aim to make our opportunities available to those who can show us that they have the aptitude to join
Boku and the attitude our clients are looking for, regardless of where they grew up or educational path;

• we use competence-based questions during the interview process, ensuring candidates are not

assessed on social capital; and

• all of our staff involved in interviewing applicants undergo training to help mitigate any unconscious bias.

Our inclusive approach to recruitment enables us to strive for balanced representation and a culture of
equality.

Working environments

We continue to invest in improving the working environment for our teams, creating innovative spaces
which encourage collaboration between teams. The Group has a flexible working policy to facilitate those
with families and other needs or commitments outside of work; we also encourage working from home
where possible. In the past year we have moved into new offices in London and we continue to invest in
technologies which ensure that our team members can work productively regardless of where they are.

Well-being during the pandemic

Our primary focus during the Covid-19 pandemic has been on the health and well-being of our team. Boku
was quick to adapt to the changing working environment with our team members working effectively
remotely and with a strong focus on employee engagement. Managers have been encouraged to keep
in regular touch with their teams by video and conference calls, together with using our communication
technologies to share experiences between the regions and offices.

A key factor in our ability to operate our Group business effectively during the pandemic has been our
team members’ ability to work remotely and flexibly as well as the cohesiveness of our global teams. Our
continued strong engagement with customers, suppliers and investors has also led to increased levels of
confidence amongst our stakeholders, reinforcing their confidence in Boku’s ability to operate with strength
and integrity.

Environment

Given the nature of our business and the fact we utilise leased facilities, our environmental impact is
relatively low compared with other sectors. However, we are committed to finding ways to operate the
business in more efficient and environmentally advantageous ways (which can also provide financial
benefits). For instance, we promote recycling of technology and office consumables by providing recycling
points in each of our offices.

We will seek to review and update our initiatives and plans to help to mitigate our environmental footprint
further.

Governance

Boku follows the QCA code. During the year, the Board was expanded to include a further non-executive
director. The Board now comprises four Non-Executives Directors and two Executive Directors. Three of
the Non-Executive Directors are deemed independent; only independent Directors sit on the Audit and
Renumeration Committees. Further details can be seen elsewhere in the report.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Strategic Report

Chief Executive Officer’s Report

Group Performance

Boku performed strongly in 2020 with
revenues up to $56.4 million and Adjusted
EBITDA more than doubled compared to
2019, driven by the performance of Boku
Payments but the central fact of 2020 is
COVID-19. It has changed the way that
we work and live and had an adverse
impact on our Identity business, requiring
its value to be re-assessed. Restrictions
have affected the way that we travel,
communicate and get entertained.
Coronavirus has depressed spending, but
that spikey ball of RNA has also changed
the things we buy and the way we pay.

Industries dependent on face-to-face
contact have been decimated. Some –
hospitality, for example – will bounce back
when restrictions are released, but for others, the pandemic
has accelerated pre-existing trends. It turns out that many
people didn’t really like driving into town to go shopping
and for many types of goods the switch to online will be
permanent.

The way we entertain ourselves has been changing for
a while. CDs have been cleared from the shelves and
DVDs sent to the car boot sale, as we switch to digital
consumption. Games, especially mobile games, were
already growing like crazy pre-COVID-19. The lockdowns
have accelerated these trends and Boku’s customers
have benefited, but since the transition was already
well developed, what we’ve seen is a boost, not a
transformation of our business. Boku has long benefited
from the tailwinds of mobile adoption and digital disruption
and 2020 was no different.

Strong Organic
Performance in Payments

In 2020, we have been able to help our
customers acquire more than 25.9 million
new users across Payment and bundling
programmes; more Payment users are
repeat users too, with that figure hitting
a high of 91% averaged throughout the
year. Value processed through our system
increased to $6.9 billion, a 38.3% increase
since last year. We exited the year on a
run rate which exceeded $8.5 billion. Truly
the lines on the charts are going up and
to the right!

Our growth did not just come from existing
connections in in a particular geography –
new launches have been made for Apple,
Sony, Spotify, Netflix, Tencent, Microsoft,

Google and many other smaller merchants.

Boku takes a percentage of the value processed through
its systems as revenue. We charge different prices
depending on whether we provide a technical connection
only or additionally handle the settlement of the funds.
Over recent years the lower priced technical service has
been growing faster than the higher priced settlement
service, leading to lower reported take rates, despite
stable pricing. This year, those trends stabilised as more
settlement model business was processed through
connections developed in prior years.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Acquisition of Fortumo

Strong Financial Performance in Payments

Scale is important in platform businesses. By being the
largest, Boku is able to offer the most robust and feature-
rich platform at the lowest unit cost in the industry.
Most of our growth has been organic: quality inorganic
opportunities are few and far between. In July 2020, we
were delighted to acquire Fortumo, the second most
profitable company in the DCB business, behind Boku.
The enterprise value associated with the acquisition
was a maximum of $45 million, with $5.4 million being
dependent on the achievement of a demanding Adjusted
EBITDA target in the 12 months ending June 2021. Since
acquisition, the business has performed in line with our
and the markets expectations, which will mean that the full
earnout is unlikely to be payable.

Fortumo has brought impressive new capabilities into the
Group: customer relationships with Amazon, Epic Games
and more than 400 other, mostly settlement model,
merchants, a platform with semi-automated onboarding
capabilities, new carrier connections, especially in some
emerging markets, and the best bundling platform in the
market. Going forward we will concentrate new DCB and
bundling investment in Fortumo’s EU platform, whilst the
original Boku US platform will focus on strategic merchants
and new local payment methods, including wallets.

Taking Boku and Fortumo revenues together, revenue from
the Payments division grew to $51.2 million up 27% from
2019’s figure of $40.2 million*. Fortumo contributed $4.5
million, in line with expectations. Adjusted EBITDA leverage
in the Payments business is impressive with Payments
Adjusted EBITDA up 54% to $19.2 million (including $1.5
million contribution from Fortumo).

Progress on Identity

Boku Identity was able to post narrower adjusted EBITDA
losses of $3.9 million. Revenues at $5.2 million were lower
than the previous year due to carrier supply issues and the
impact of COVID-19. The business is still poised to grow
but from a lower base and at a lower rate, meaning that
the path to break even is longer than previously thought,
resulting in an impairment to the carrying value of goodwill
of $20.8 million.

Turning to non financial measures, the global carrier
network now reaches more than 200 carriers in 60
countries. Contracts have been signed with customers like
GDC, LexisNexis and FIS. The focus for 2021 is to connect
these merchants to international markets and thus increase
revenues.

* Adjusted for the impact of $3.3 million of non-recurring revenue

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020
Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Strategic Report

Chief Executive Officer’s Report

Promise of Wallets

Helping Others During the Pandemic

For Boku, DCB is the starter, the main course is local
payments. We’re using the connections that we have to
all the world’s leading digital merchants as a beachhead
from which we can cross sell other payment methods.
The first of these is mobile wallets. They are the payment
phenomenon of the last five years. Popular with consumers,
in demand from merchants.

Just like DCB, mobile wallets are highly fragmented,
with multiple wallets in individual countries, battling for
consumers, just like mobile operators. For our merchants,
Boku has harmonised this complex, global infrastructure
into a single Payments network. The market is in need of
a similar approach for mobile wallets; the value that Boku
can deliver to merchants through a single mobile Payments
network is immense.

In 2020 we processed transactions from 13 accounts
across 11 wallets in 7 countries. Pleasingly amongst these
were major merchants in console games and streaming
music. These accounts were won in competition with
mainstream cards-first payment processors. We expect to
be able to announce further progress during 2021. The
significance is two-fold.: first with wallets we can process
a larger share of our customers sales and secondly, go
outside digital and serve the general ecommerce market
which is 20 times as big. That is the main course.

Actual experience has also been encouraging: volume
growth has been material, albeit off a small base. Where
wallets and DCB are connected to the same merchant
in the same country we can see faster adoption, higher
average transaction values and more users.

At Boku we recognise that with our good fortune, comes
responsibilities. We have also tried to do our bit to help
those less fortunate than ourselves. We have claimed no
Government money in any of the countries in which we
operate (and have returned it in one instance where it was
automatically credited to us), and we have continued to
employ our office support staff and contractors despite
offices being closed. Now is the time to support the

ln 2020, we’ve
been able to
deliver a record
number of new
connections

support workers. We have
used some of the savings
that we have made from
reduced travel on a “We Not
Me” programme of donations
to local causes nominated by
employees.

Companies are not just
collections of assets and
intellectual property;
technology companies like

Boku are groups of people working towards a common aim,
with belief and conviction. Without our people, without the
right people, we are nothing. We are careful when we hire
and we ensure that all, every single one of our employees
wheresoever located and however senior or junior, gets the
chance to be a shareholder in our company.

Through the crisis, our employees have repaid that trust in
spades. They have been magnificent. The flexible working
practices that we had in place before restrictions hit meant
that we could adapt rapidly and continue to deliver for our
customers. In 2020, we’ve been able to deliver a record
number of new high quality connections: (69 vs. 42 in
2019). I want to place on record my sincere appreciation for
the exceptional contribution that our people have made to
our results.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

13Stock code: BOKUBoku Inc Annual Report and Accounts for the year ended 31 December 2020OutlookBoku can look into 2021 with a great deal of confidence. Boku Identity looks poised to grow as new customers are connected with unrivalled levels of supply. For our Payments division, we expect to cross sell wallets into more of our existing customers. With each launch, revenue will start to build, more materially in 2022. We will invest in our platform so as to be in a position to capture non digital revenues. We expect to board our first wallet-only, non-DCB Payments customers in 2021. This will be an important signal of our ability to gain traction in this important segment. All this is underpinned by a DCB business which is poised to continue its multi-year record of strong growth with exceptional operational gearing. We have made a flying start to 2021, with trading in line with our aggressive plans — I am confident in our ability to meet the market’s expectations.Jon PrideauxChief Executive Office15 March 2021Directors’ Duties As a US incorporated company, Boku is subject to the laws of the State of Delaware such that our Directors are not obliged to comply with the principles of the Companies Act 2006. The Directors nonetheless take pride in following a general set of director duties throughout their engagements. In particular, the Directors act in good faith and in the way that they consider will be most likely to promote the success of the Company for the benefit of its shareholders as a whole. The Directors also act with reasonable care, skill and diligence, taking steps to ensure that they exercise independent judgement at all times and that processes are in place to enable robust decision-making, especially when there are more difficult decisions to be made. Boku recognises the importance and responsibility that lays in continuous engagement with stakeholders and in continuously acting in members’ best interests, Directors have regard (amongst other matters) to:• the likely consequences of any decisions in the long term;• the interests of the Company’s employees;• the need to foster the Company’s business relationships with suppliers, customers and others;• the impact of the Company’s operations on the community and environment;• the desirability of the Company maintaining a reputation for high standards of business conduct; and• the need to act fairly as between shareholders of the Company.Strategic Report

Chief Financial Officer’s Report

Strong growth in
Payments Revenue
and Adjusted EBITDA
and progress in Identity

2020 was another year of significant
achievement for Boku, in challenging
circumstances given the coronavirus
pandemic. Good revenue growth in
Boku Payments drove an increase of
over 100% in group Adjusted EBITDA*
to $15.3 million, proving again the
operational gearing in our model, while
the acquisition of Estonian based carrier
billing company Fortumo Holdings
Inc (‘Fortumo’) on 1 July 2020 for a
maximum enterprise value of $41.0
million consolidated Boku’s market
leading position in Direct Carrier Billing
(‘DCB’) as Fortumo was one of only three international
DCB competitors. We have retained the Fortumo brand
and organisational structure and consolidated Fortumo’s
financial results for the six month period from acquisition on
1 July 2020.

The Boku Payments division, excluding Fortumo,
performed strongly with revenues increasing by $6.7
million (17%) to $46.8 million** which in turn delivered
a substantial 40% increase in Adjusted EBITDA to
$17.7 million (2019 $12.7 million) demonstrating the
powerful operational leverage of our Payments platform
as additional incremental transaction revenues largely
drop through to Adjusted EBITDA. This is most clearly
illustrated by the fact that in 2016 Boku Payments made
an Adjusted EBITDA loss of $12.3 million and in 2020
made an Adjusted EBITDA profit of $17.7 million – a
turnaround of over $30 million in only four years. Newly
acquired Fortumo performed well, with revenues for the
six months to 31 December of $4.5 million and adjusted
EBITDA of $1.5 million, in line with expectations, taking
total Payments division Adjusted EBITDA to $19.2 million.
Fortumo brings primarily settlement model merchants
where merchants are charged a higher percentage
transaction fee, along with a low cost Estonian base.

The Boku Identity division, acquired in
2019, made good progress on building
out its international supply to truly
internationalise the product offering,
signed a number of high-profile customers
and saw its Adjusted EBITDA loss reduce
further to $3.9 million (2019 $5.3 million
loss). However revenues fell in the year
to $5.2 million (2019 $6.7 million) as the
business was impacted by both losing a
major US carrier at the end of 2019 and
from Covid-19 which impacted some
customer activity and the division’s ability
to market and close new sales. As a result
of lower than expected Identity revenues
in 2020, future growth estimates were
modified, which also showed a slower
pathway to breakeven and a diminished
carrying value of this asset, resulting in an
impairment of goodwill of $20.8 million.
As a result the Group, primarily taking account of this
impairment charge, reported a Loss before Tax of $18.9
million compared to a loss of $1.3 million in 2019. This
total includes a net Profit before tax from the Payments
Division of $9.2 million.

Group Revenue and Gross Margins

Group revenues for the year of $56.4 million were up by 27%
on 2019 (2019 $46.8 million**) as the Company saw strong
growth in its Payments business and added Fortumo results
from 1 July 2020, however Identity revenues fell in the year.

Blended gross margins for the group increased to 91.3%
(2019 88.9%) as gross margins for Boku Payments
improved again to 97.2% (96.2%), we added Fortumo gross
margin at 92.4% and Identity gross margins fell slightly to
37% (2019 41.2%).

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Highlights

• Adjusted EBITDA* 107% higher at $15.3 million (2019 $7.4 million)

• Group revenues of $56.4 million up 20% on 2019 (2019 $46.8 million**)

• Net loss before tax of $17.3 million (2019 $1.3 million loss) primarily due

to the goodwill impairment for Identity division of $20.8 million. This total
includes a net Profit before tax from the Payments Division of $9.2 million.

• Closing cash balances increased to $62.7 million at 31 December 2020

up from $35.6 million at 31 December 2019.

• Cash generated from Operations before working capital changes during

the year was $11.5 million (2019 $6.1 million).

• Acquisition of carrier billing company Fortumo Holdings Inc. for maximum

enterprise value of $41.0 million.

• Payments division Adjusted EBITDA of $19.2 million (2019 $12.7 million)

including $1.5 million from Fortumo.

• Monthly Active Users up 48% to 28.8 million (2019 17.8 million) includes

4.6 million MAUs from Fortumo

• Total Payment Volume (TPV) of $6.9 billion in 2020 compared to $5.0

billion in 2019

• Wallet transactions processed from 13 accounts across 11 wallets in 7

countries in 2020. Further investment in 2021 to capture the significant
Wallet opportunity

•

Identity revenue of $5.2 million (2019 $6.7 million) - impacted by
COVID-19 and local US supply headwinds resulting in carrying value
of asset reappraised

•

Identity reduced EBITDA loss of $3.9 million (2019 $5.3 million
EBITDA loss)

•

Identity carrier network expanded now reaching more than 200 carriers

in 60 countries. Contracts wins include GDC, LexisNexis and FIS

* Adjusted EBITDA Earnings before interest, tax, depreciation and amortisation, impairment of goodwill, non-recurring payment
revenue, stock option expenses, forex gains/losses and exceptional items

** 2019 comparative revenue excludes $3.3 million of non-recurring payments revenue to better reflect underlying performance

Strategic Report

Chief Financial Officer’s Report

Group Operating Expenditure

Adjusted Operating Expenditure (Operating Expenditure
adjusted for depreciation, amortisation, foreign exchange,
stock option expense, exceptional items, goodwill impairment
and restructuring costs) increased to $36.2 million (2019
$33.9 million), mainly driven by the Group’s acquisition of
Fortumo in July 2020 which added adjusted operating
expenditure of $2.7 million for the six month period to 31
December. Boku Payments operating expenditure increased
slightly to $27.6 million (2019 $25.9 million) primarily due to
modest payroll increases and some costs incurred in migrating
certain systems into to a cloud based environment, while
technology operations in lower costs locations such as India
were expanded. Identity adjusted operating expenditure fell
materially to $5.8 million (2019 $8.0 million) partly due to
headcount reductions and lower marketing spend.

Both Identity and Payments benefited from material savings
in travel and entertainment due to the impact of COVID-19
which reduced operating expenditure and increased
Adjusted EBITDA, but it is expected that this expenditure
will return when it becomes possible to travel freely again.

Payments Division

The Payments division comprises Boku’s Direct Carrier
Billing (‘DCB’) business (‘Boku Payments’) which enables
customers of Boku’s merchants to charge payments to their
phone bills, and Fortumo Payments which was acquired
during the year.

Boku’s Payments is the sole DCB provider to some of the
world’s largest digital merchants including Apple, Netflix,
Facebook and Sony. It operates two revenue models both
based on a percentage of the processed value: the higher
take rate ‘settlement model’ — where Boku collects funds
from carriers (MNOs) worldwide in multiple currencies
before settling to the merchant, and the lower take rate
‘transaction model’ where we only provide the technical
connectivity between the merchant and carrier.

In 2020, Boku Payments revenues grew by 16% to $46.8
million (2019 $40.2 million**). Growth comes from both
existing merchants and carrier connections and also
from adding new carrier connections to new and existing
merchants.

Total Payments Volume (‘TPV’) for Boku Payments increased
by 35% to $6.8 billion in 2020 from $5.0 billion while
Monthly Active Users grew 48% to $28.8 million (2019
$17.8 million). The majority of growth again came from our
lower margin/higher volume transaction model merchants
and, as a result of this mix effect, the weighted average
take rate reduced to 0.7% in 2020 (2019 0.8%). However
due to good growth from higher take rate settlement
merchants where we made significant efforts to increase
carrier connections, the second half take rate was broadly
similar to the first half. When the additional volumes from
Fortumo are included (see Fortumo section below), the
blended average take rate increased in the second half.

Gross margins for Boku Payments improved from 96% to
97% in the year primarily driven by the volume growth of
our transaction model merchants where there is no cost
of sale (100% gross margin) along with the recovery of a
previously fully provided for bad debt.

Adjusted operating expenditure for Boku Payments was
slightly higher than 2019 at $27.7 million (2019 $25.9
million) mainly due to modest headcount increases and
pay rises. Headcount is the majority of the cost base,
however, as a result of the coronavirus pandemic, travel
and entertainment (‘T&E’) costs were significantly reduced
but are expected to return to previous levels once normal
travel resumes.

We continued to invest in the Boku Payments platform and
in 2020 completed the first phase of migrating our platform
from two physical colocation facilities in the U.S. into a
cloud-based infrastructure (AWS) as we decommissioned
one facility and moved it into the cloud. The second phase
will be completed in 2021. Although the total running costs
are similar in the cloud, the ‘pay as you go’ nature of the
cloud services means that we are able to capitalise less of
the cost and so adjusted operating expense increased as
a result. The Boku Payments Platform has the capacity to
process volumes considerably in excess of today’s peak
message rates.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Acquisition of Fortumo

Boku completed the acquisition of carrier billing company
Fortumo Holdings Inc (‘Fortumo’) on 1 July 2020 for a
total maximum enterprise value of $41.0 million, further
consolidating its market leadership in the niche carrier billing
market. Fortumo is an Estonian based carrier billing business
employing 77 employees and was one of three direct
international competitors to Boku, and the only consistently
profitable one. The majority of Fortumo’s customers operate
under the settlement model where Fortumo collects cash
from carriers on behalf of its merchants and therefore
charges a higher fee.

Total maximum consideration is $45.0 million which included
$4.0 million of net working capital. $5.4 million of the total
consideration is subject to performance conditions as

explained in detail at the time of the acquisition, and in note
26, based on Adjusted EBITDA of Fortumo for the 12 month
period following acquisition (1 July 2020 to 30 June 2021).
Due to challenging earnout targets the maximum earnout
consideration of $5.4 million is not expected to be paid and
the fair value of the consideration was calculated at $3.2
million using the expected returns approach. Please refer to
note 26 of the financial statements.

Boku Payments and Fortumo Payments together now form
the Payments division and from 2021 onwards their results
will be combined for reporting purposes. The separate
results for Boku Payments and Fortumo Payments for 2020
are shown in the table below so that the underlying growth
in Boku Payments can be understood.

Boku Payments division income statement
for the 12 months to 31 December 2020

Fee Revenue

Cost of sales

Gross Profit

Administrative Expenses

Operating gain analysed as:

Adjusted EBITDA*

Payments Revenue Adjustment (non-recurring)

Depreciation and amortisation

Stock Option expense

Foreign exchange gains

Exceptional items (included in administrative expenses)

Operating gain

Finance income

Finance expense

Profit before tax

Tax expense

Net gain for the period attributable to equity holders of the parent company

Boku
Payments
$’000

Fortumo
Payments
$’000

Total
Payments
$’000

46,755

(1,329)

45,426

4,476

(340)

4,136

51,231

(1,669)

49,562

(36,172)

(3,565)

(39,737)

17,694

1,481

19,175

(4,013)

(3,728)

723

(1,422)

9,254

(640)

8,677

(1,301)

7,376

(712)

(282)

571

(9)

569

(168)

401

(4,725)

(4,010)

807

(1,422)

9,825

(649)

9,246

(1,469)

7,777

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Strategic Report

Chief Financial Officer’s Report

Identity Division

Boku’s Identity division was formed in 2019 following
the acquisition of Danal Inc on 1 January 2019 for $25.1
million. Identity revenues for the year were impacted by
the coronavirus pandemic which made new sales difficult
as well as the loss of one of its four US carriers at the
end of 2019 and as a result 2020 revenues fell to $5.2
million (2019 $6.7 million). Identity revenues were mainly
from the US. Gross margins were slightly lower at 37% for
2020 (2019 41%) as some of the costs included in Cost of
Sales have monthly minimums which are fixed as revenues
fell. Identity Cost of Sales is primarily transaction related
fees paid to carriers and other data providers. Adjusted
operating expenses fell sharply in 2020 to $5.9 million
(2019 $8.0 million) as headcount and T&E costs were
reduced. Adjusted EBITDA for the year for the Identity
division was therefore a further reduced Adjusted EBITDA
loss of $3.9 million (2019 $5.3 million loss).

As a result of lower 2020 revenues, lower revenue growth is
now expected in future years. This, together with a slower
pathway to breakeven has resulted in the carrying value of
this asset having diminished, resulting in an impairment of
goodwill of $20.8 million which reduces the carrying value
of goodwill from $23.6 million to $2.8 million.

Group Operating Losses and
Adjusted EBITDA

Adjusted EBITDA increased by more than 100% to $15.3
million (2019 $7.4 million) illustrating the powerful operating
gearing in the Payments business. Adjusted EBITDA is
earnings before interest, tax, depreciation and amortisation,
adjusted for stock option expenses, forex gains/losses and
exceptional items.

Reported Operating Losses for 2020 increased to $16.7
million (2019 $0.9 million) primarily due to the goodwill
impairment for Identity division of $20.8 million. The
Operating Loss can be broken down as follows:

• Depreciation and Amortisation charges increased to $5.9

million (2019 $4.5 million) which included $0.7 million from
Fortumo for the period 1 July to 31 December 2020.

• Foreign Exchange movements resulted in a gain of $1.0

million (2019 $0.1 million gain)

• Stock Option Expenses – stock option expenses fell to

$4.9 million compared to $6.8 million in 2019. The 2020
total includes awards to Fortumo staff following the
acquisition. Boku has a policy of issuing RSUs to all staff
annually. RSU charges are spread over three years from
date of grant based on the Black Scholes method and
the lower charge in 2020 is as a result of fewer shares
being issued to Boku staff partly offset by additional
awards to Fortumo staff. Of the $4.9 million booked in
2020, $0.5 million was paid out cash (via employer’s NI),
the remainder was non-cash and expensed.

• Impairment of goodwill – relating to the write down of the
carrying value of the Identity division of $20.8 million.

• Exceptional Items were $1.4 million (2019 $0.4 million)

mainly costs relating to the acquisition of Fortumo on 1 July
2020.

• Net financing expenses were $0.6 million in 2020 (2019
$0.4 million). These costs relate to Interest on operating
leases and bank loans/overdraft.

Net Loss After Tax

The Company reported a net loss before tax of $17.3
million (2019 $1.3 million loss) primarily due to the
goodwill impairment for Identity division of $20.8 million
and net loss after tax for the year of $18.8 million (2019
$0.4 million profit).

Balance Sheet and Cashflow

• Closing cash balances increased to $62.7 million

(including restricted cash balances of $1.4 million) at the
end of 2020 from $35.6 million on 31 December 2019.

• Monthly average cash balances, which smooth the

impact of intra-month flows of both carrier and merchant
payments, were $46.7 million in December 2020 up from
$22.4 million in December 2019.

• Cash generated from Operations before working capital
changes during the year was $11.5 million (2019 $6.1
million).

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

• To part finance the acquisition of Fortumo, the Group

took on $20 million of debt with Citibank, comprising a
3 year term loan of $10.0 million and a Revolving Credit
Facility (‘RCF’) of £10.0 million. The existing overdraft
facility with Silicon Valley Bank was terminated at the
same time. At year end the RCF had been paid down by
$7.0 million leaving a balance of $3.0 million and the term
loan had been paid down by $0.3 million

• Deferred tax assets of $0.5 million were recognised

at 31 December 2020 (compared to $1.8 million at 31
December 2019). This reflects a re-appraisal of the
usability of certain tax losses and future transaction
volumes through its UK incorporated entities expected
to reduce profitability, as a share of contracted and
future revenues will now likely, taking account of Brexit,
flow into other European companies in the group.

• From a working capital perspective, Current Assets

exceeded Current Liabilities at 31 December 2020 by $15.6
million compared with $7.4 million at the 2019 year end.

• Intangible Assets increased to $65.6 million over

the period, up from $46.8 million at December 2019
reflecting the acquisition of Fortumo Holdings Inc on 1
July 2020. The total includes other historical acquisitions
including the acquisition of Danal Inc (‘Danal’) on 1
January 2019. This total includes $23.8 million of
Goodwill emanating from the acquisition of Fortumo as
well as other assets of $13.3 million, including customer
contracts and the technology platform. Goodwill in
relation to the acquisition of Danal on 1 January 2019
was reviewed for signs of impairment, and following the
challenging year for revenues, an impairment to goodwill
of $20.8 million was made which reduced the value of
goodwill in relation to Danal from $23.6 million to $2.8
million (see Note 11).

Going Concern

Although COVID-19 has not negatively affected Boku’s
Payment business, the Identity division did not deliver the
growth we hoped for and in fact saw some reduction in
volume and found sales more challenging. Net Revenue
since the year-end continues to be in line with our plans
and expectations. It is not yet clear when global economic
activity will return to normal, therefore we must prepare the
business for varying levels of performance. To that end,
we have modelled the effects of differing levels of sales
decline along with the measures we can take to ensure
that the Group remains within its available working capital,
and we have prepared cash flow forecasts for a period in
excess of 12 months.

The Directors have no reason to believe that customer
revenue and receipts will decline to the point that the
Group no longer has sufficient resources to fund its
operations. However, in the unlikely event that this should
occur, the Group will have to manage its working capital
positions, as well as making significant reductions in its
fixed cost expenses.

Keith Butcher
Chief Financial Office
15 March 2021

*Adjusted EBITDA Earnings before interest, tax, depreciation and
amortisation, impairment of goodwill, non-recurring payment revenue, stock
option expenses, forex gains/losses and exceptional items

** 2019 comparative revenue excludes $3.3 million of non-recurring
payments revenue to better reflect underlying performance

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Strategic Report

Principal Risks and Uncertainties

Risk Management in Our Business

Identifying and Managing Our Risks

Our risk identification process is a combination of a “top
down” approach (driven by the Audit Committee and the
Board) and a “bottom up” process (originating from the
business’ operations).

The risk champion of each department shares their most
significant risks after having considered a set of external
factors from the various jurisdictions in which Boku
operates to the internal ways of operating.

All risks are then consolidated into a Group-wide register
which is then presented to our Senior Management and the
Board which in turn will perform their own review and add
further input on the risks before agreeing the Principal Risks.

Effective risk management is critical to achieving the
Group’s objectives. Boku operates a Group-wide risk
management framework across all its lines of business
and covering all departments, ensuring the strategic
and operational risks are identified, evaluated, mitigated,
monitored and reported in a consistent way.

This framework allows us to take a holistic approach to
risk management and to make meaningful analysis and
comparisons of the risks we face and how we manage
them across our footprint, which is essential to achieve our
strategic objectives.

It is an evolving framework as we continuously seek to
improve and enhance our risk management processes.

Responsibility

Risk management at Boku is reviewed at Board level and at
the Audit Committee.

The Board has oversight responsibility for the effective
management of all major risks affecting the Group. In each
area, the Board is supported by members of the Senior
Management team and other managers with key functional
responsibilities to ensure that an effective risk management
is embedded, considering both opportunities and threats,
throughout the organisation.

The Audit Committee continually monitors and promotes
the highest standards of integrity, financial reporting, risk
management and internal control.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Risk

Mitigation

Competitive and rapidly changing environment

• Investing in new products, markets and technologies and improving

The Group operates in rapidly evolving Payments markets
where service provision is subject to rapid technological
change and use is dependent on user behavior. The impact
of changes to the structure of the app store payment
market, competition, pricing pressure, DCB market shrink,
could result in a material loss of revenue and profit for the
Group.

Risk level: High
Risk tolerance: Amber
Risk movement: Unchanged

relationships with key merchants and carriers

• Launching new payment products and developing the Group’s

offerings to meet changing client demands and market preferences

• Develop the necessary expertise and experience to sell and deliver

new products and technologies to new and existing clients

• Analysis of the external environment to understand where the market

is heading

• Attending tech fairs, discussion groups etc. to be up to date with

recent technology, find new sources of ideas to create new products
addressing customers needs

• Experienced sales team that builds close relationship with our

merchants to better understand their needs

• Engage with potentially impacted merchants by potential app store

market changes

Ability to evolve the organisation’s systems and tools to be
fit for today/future goals

• Identify current and future needs of new systems (production, etc.)

• Identify current and future needs of tools to increase efficiencies

As Boku is growing and continuously evolving, systems and
mainly production, should be able to keep up with scaling
demand. Failing to keep up with the growth, could cause
transaction processing failures that could lead to loss of
revenue and even loss of merchants.

• Restructure of the organisation’s key roles on technology - a new COO
has joined the company and a new role to lead technology has been
created (CTO)

• Further team optimisation plans

Risk level: High
Risk tolerance: Amber
Risk movement: New

Changes to the regulatory environment

• Diversifying the range of services available to all types of customers to

Frequent changes in the regulatory arena could have
adverse effects on Group’s existing processes and provision
of services. Examples can be:

• PSD2 and DCB exemption requiring application of new

Payment Institution (PI) licenses

• Privacy (Privacy Shield invalidity)

mitigate the impact of any single regulatory change

• Continuing to invest in solutions that improve the Group’s ability to

manage risks and ensure compliance with regulations

• Attending industry events and associations member meetings to stay

current with any significant changes relevant to our business

• Apply for a Payment Institution license in an EU country to operate

Local Payment Methods (LPM’s) and explore other wider opportunities

• Sanctions (US and UK introducing new ones)

• Apply for a Payment Institution license in other jurisdictions

Risk level: High
Risk tolerance: Amber
Risk movement: Unchanged

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Strategic Report

Risk

Mitigation

Failure of carriers/ intermediaries to pay the amount
due to merchants

• Developing strong relationships with MNOs, aggregators and Local

Payment Methods (LPM’s)

The company is reliant on third parties, including MNOs,
SMS aggregators, Local Payment Methods (LPM’s) to pay
significant amounts due from them in a timely manner as
specified under contract. A large-scale failure to do so
may have an impact on the Group’s financial condition or
operating results.

• Effective credit control and management of receivables

• Creating direct relationships with fewer intermediaries

• Develop a risk sign off process

• Developing well drafted contracts that clearly protect Boku’s position

and contractual obligations

Risk level: Medium
Risk tolerance: Green
Risk movement: Unchanged

Third party over-reliance

• Georedundancy for current provider (Rackspace)

Significant dependency on key technology service provider
can have negative impact to the business in case of third-
party failure.

• Moved to a new cloud service provider - Amazon Web Services (AWS)

• Project prioritisation to ensure speed and quality of move

• Appointed a senior and highly capable team to manage a total move

with support of additional resources if needed

Risk level: Low
Risk tolerance: Green
Risk movement: New

Significant fraud events or social engineering attack

• Regularly review risk rules to ensure they are effectively monitoring

A large fraud incident or social engineering attack could lead
to reputational damage, losses in revenue, costs of dealing
with the fraud, and potential loss of merchant confidence.

Risk level: Medium
Risk tolerance: Green
Risk movement: New

customer behavior

• Recruiting specialised, experienced fraud prevention staff

• Review investment opportunities in solutions that improve the Group’s

ability to manage risk

• Comprehensive internal policies and procedures

Cyber Security and Data Protection

• Ensuring there are systems and experienced staff in place to defend

The Group IT environments may be subject to hacking,
data theft or other cyber security threats which may harm
customer relationships and the market perception of the
effectiveness and resilience of the Group’s products and
services. Such an attack may also have a material adverse
effect on the Group’s financial position.

against potential cyber security threats

• Building resilience within the Platform to mitigate the impact of an

attack in the event of a successful penetration

• Continuous testing and assurance activities (internally and externally)

• Continuous education on and raising awareness of cyber threats and

data theft for staff

Risk level: Medium
Risk tolerance: Amber
Risk movement: Unchanged

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Risk

Mitigation

Ability to effectively integrate newly acquired business

• Being a global company that is growing rapidly, an international

Having acquired Danal Inc in 2019 and Fortumo Holdings,
Inc. in 2020, the period following the merger of two
companies require in-depth analysis and planning around
integration, finding the synergies and ensuring an effective
operational model is in place and focusing on how all
working and individual cultures are intertwined.

Risk level: Low
Risk tolerance: Green
Risk movement: New

environment where we respect our similarities and differences, is in
the core of our values

• Forming working groups to execute the plans following the synergies

identified

• Aligning polices and best practices to be followed by all employees

• Review costs and duplications of activities for a better utilisation of

resources

• Create new management committees covering both entities

Attracting and retaining the best talent

• Developing the skills and capabilities of staff as part of talent

The Group’s success depends on its ability to attract and
retain key management and skilled technical employees. If
the Group is unable to identify, attract, develop, motivate
and adequately compensate and retain well-qualified and
engaged personnel, this could have a material effect on
the Group’s reputation, business, operations and financial
performance.

Risk level: Medium
Risk tolerance: Green
Risk movement: Increased

Effects of the pandemic

An unprecedented global scale pandemic, resulting in
significant restrictions on daily life and activities as we
knew, has impacted our business in two ways:
Positive: people while staying indoors have consumed more
home entertainment digital content resulting in revenue
increase.

Negative:

management

• Creating opportunities within the Group for personal development and

career enhancement

• Recruiting experienced HR staff and working with specialised

recruitment agencies

• Simplified our recruitment approach to attract and provide a better

experience for potential candidates

• Flexible working provides more opportunities of attracting and hiring
employees from new locations, outside of the main office locations

• Created a Covid related committee to manage Group wide

communications following Government updates to ensure continuity of
operations and compliance with new regulations

• Increased the IT equipment order quantities to avoid delivery delays

(e.g. new joiners not getting their laptops)

• Close relationship and regular communication with our partners

• People Ops check-in messages to ensure employees are keeping well

and offering additional support if needed

• Organising virtual social events, games, sport activities, etc. regularly

• minor operational challenges due to third party’s business

to ensure social and mental well being

disruptions

• staff wellbeing

Risk level: Low
Risk tolerance: Green
Risk movement: New

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Governance Report

Board of Directors

Mark Britto

CHAIRMAN

Jon Prideaux

Keith Butcher

CHIEF EXECUTIVE OFFICER

CHIEF FINANCIAL OFFICER

With over 20 years as an entrepreneur,
sales and financial services exec-
utive, Mark Britto is currently EVP,
Chief Product Officer at PayPal. He
also serves as Boku’s Non-Executive
Chairman.

Mark founded Boku after six years as
the CEO of Ingenio, a service market-
place and performance advertising
company, which he led to a 2007 ac-
quisition by AT&T. Prior to Ingenio, Mark
spent 4 years as SVP of worldwide
services and sales at Amazon.com.

Mark’s first start-up, Accept.com, was
bought by Amazon.com in 1999 and
served as the primary backbone of Am-
azon’s global Payments platform. Mark
began his career in senior credit and risk
management roles at leading national
banks FirstUSA and Bank of America.

Jon has more than 25 years of
Payments experience. He was an
early Visa Europe employee and key
contributor to its growth, leaving in
2006 as EVP, Product and Marketing.
He started Visa Europe’s ecommerce
division, was the lead executive on the
introduction of Chip and PIN technol-
ogy and oversaw product launches
such as Visa Electron and V PAY.

He served on the Board of EMVCo,
was the Chairman of the Compli-
ance Committee and was a member
of Visa’s Global Product and Brand
Councils.

Since leaving Visa in 2006, Jon served
as Deputy CEO for SecureTrading,
where he doubled transaction numbers
and quadrupled profitability. He then
led a management buy in at Shopcrea-
tor, the ecommerce software platform.

Keith has had considerable experience
as a listed company CFO and of online
Payments businesses. His experience
includes six years as CFO of AIM
quoted online Payments company
DataCash Group plc during its period
of rapid growth and ultimate sale to
MasterCard. More recently, he was
CFO of LSE listed Payments company
Paysafe Group plc (formerly Optimal
Payments plc), which grew its market
capitalisation from £40 million to £2
billion during his tenure, through a
combination of organic growth and a
number of acquisitions including the
€1.1 billion acquisition of Skrill. Until his
appointment as CFO, Keith was an In-
dependent Non-Executive Director and
Chairman of Boku’s Audit Committee
from Boku’s admission to AIM in 2017.
Keith was awarded Finance Director
of the Year at the Quoted Company
Alliance Awards (QCA) 2014.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Dr Richard Lawrence Hargreaves

Stewart Roberts

Charlotta Ginman

SENIOR NON-EXECUTIVE DIRECTOR

NON-EXECUTIVE DIRECTOR

Stewart has over 30 years of ex-
perience in Payments, banking and
technology, across both start-ups
and institutional employers and is a
recognised Payments industry expert
in both the traditional and emerg-
ing Payments space, as well as the
mobile application sector. Stewart had
previous roles as Global Director of
Innovation for Barclaycard and Head
of International – Merchant Services
for the Royal Bank of Scotland Group.
More recently, Stewart was CFO and
then Executive Vice President of iZet-
tle AB and was a key member of the
team that agreed the sale of iZettle to
PayPal in May 2018 for US$2.2 billion.
Mr. Roberts is the Chairman of Boku’s
Audit Committee and a member of the
Remuneration Committee.

Richard co-founded Endeavour Ventures
in 2006 and has been investing and
advising companies for over 30 years.
He began his career at 3i plc where he
spent ten years before starting Baron-
smead and launched one of the first
VCTs – Baronsmead VCT. He sold this to
Friends Ivory & Sime plc in 1995 (it later
became ISIS Equity Partners).

Richard was MD of their unquoted in-
vestment business at that time which
had £180 million funds under manage-
ment. Richard is a former chairman of
the British Venture Capital and Private
Equity Association (BVCA). He has sig-
nificant experience as a non- execu-
tive director on both public and private
company boards.

He is a graduate of the University of
Cambridge and has an MSc and PhD
from Imperial College, London. Mr.
Hargreaves is the Chairman of Boku’s
Remuneration Committee and member
of the Audit Committee.

Charlotta Ginman, FCA, is a former
Nokia executive who has held a num-
ber of senior positions in investment
banking, technology and telecoms
sectors. Her current Non-Executive
Director positions include companies
in the Video Games (Audit Committee
Chair at Keywords Studios plc) and
Communications (Gamma Communi-
cations plc) sectors. Additionally she
is Non-Executive Director and Chair of
the Audit Committee of two Invest-
ment Trusts; Polar Capital Technology
Trust PLC and Pacific Asset Trust PLC
and a Non-Executive Director of Uni-
corn AIM VCT PLC, a Venture Capital
Trust. As three of Charlotta’s roles are
with investment companies, that have
only 4-5 meetings a year, and the oth-
er companies are all AIM listed, with
less regulatory burden than a premium
listing, Charlotta has sufficient time to
devote to each of her roles. Ms. Gin-
man is a member of Boku’s Audit and
Remuneration Committees.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Governance Report

Senior Management

Adam Lee

Stuart Neal

Chris Newton-Smith

CHIEF PRODUCT OFFICER

GENERAL MANAGER, IDENTITY

COO

Adam has been developing new prod-
ucts and services for startup ventures
for over 20 years. At Boku, Adam
leads product, design, and market-
ing, charged with finding innovative
new applications for the 4B mobile
phones the Boku Platform is currently
connected to.

Stuart was CFO of Boku from June
2017 to October 2019 before moving
into the new role as Chief Business
Officer. Prior to re-joining Boku in 2017,
Stuart was advising new technology
ventures, bringing to market cutting
edge technology in AI Machine Learn-
ing, Crypto Currency and Blockchain.

Before joining Boku, Adam was at
Intuit where he launched the world’s
first consumer medical wallet used
to understand, manage, and pay for
healthcare expenses, distributed by
two of the largest US healthcare net-
works, UnitedHealthcare and CIGNA.

Prior to Intuit, Adam had also worked
for two major industry backed B2B plat-
form companies, Neoforma and more
notably GlobalNetXchange where he
developed technology and services to
drive better supply chain performance
between companies around the world
including Carrefour, Sears, Sainsburys,
Metro AG, Karstadt Quelle, Unilever,
Proctor & Gamble, and Diageo.

Previously, he was Chief Commercial
Officer at Vocalink Zapp (acquired
by Mastercard), building distribution
channels and creating merchant
demand for their Pay by Bank App
product. Stuart was also Commercial
Director at Barclaycard, Europe’s
second largest card acquirer, where
he oversaw the roll out of contactless
payments across the UK market.

He has held senior Commercial and
Finance positions within a number
of blue chip corporations including
GlaxoSmithKline, Worldcom and Virgin
Media. Stuart was previously CFO at
Boku between 2012 and 2014.

Chris has more than 20 years of
experience in B2B software in
mobile and digital. At Boku, he leads
Technology, Operations, and People
Operations.

Prior to Boku, Chris was CEO of iRiS
Software Systems. There, he led the
roll-out of its digital food & beverage
ordering platform to global hotel groups
including Marriott and Four Seasons.

Previously, he was General Manager,
EMEA and Chief Product & Marketing
Officer at Redknee, a global leader in
monetisation software for telecoms,
with more than 200 carriers in 100
countries.

Chris held product management
and business development roles
at LogicaCMG Telecoms and
BlackBerry. He was a mentor for
METRO Accelerator by Techstars and
a Trustee at Emmaus Hertfordshire.
He has a Bachelor of Engineering and
Management from McMaster University.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Mark Stannard

CHIEF BUSINESS OFFICER

Mark has over 20 years’ experience in
mobile, digital and fintech services.

He played a critical role in building
Boku’s market-leading carrier billing
network of nearly 200 carriers, and as
Chief Business Officer – Payments,
has direct responsibility for Boku’s
Worldwide mobile Payments business.
This includes the deployment of new
mobile Alternative Payment Types
onto the Boku Platform, such as digital
eWallets and mobile banking Apps.

Previously, Mark held positions at
Deutsche Telekom & Buongiorno-Vi-
taminic (now part of NTT-DOCOMO)
where he managed BD, and led mar-
keting & licensing for music and digital
entertainment services.

He holds a Masters Degree in Busi-
ness Administration from Cambridge
University, specialising in Strategy, In-
novation and Organisational Behaviour.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Governance Report

Corporate Governance Report
Chairman’s Introduction

Dear Shareholder,

Part of my role as Chairman is to ensure that the highest levels of corporate governance are maintained throughout the
Company and also at Board level.

I recognise the importance of, and we as a Board are committed to, high standards of corporate governance, aligned with
the needs of the Company and the interests of all our stakeholders.

My fellow directors and I fully appreciate the importance of sound governance in the efficient running of the company,
and in particular in the effectiveness and independence of the Board. The following report sets out how we do this. It also
covers how the Board and its committees operated in 2020 and how we have continued to comply with the principles of
the QCA Corporate Governance Code (the “QCA Code”).

Mark Britto
Non-Executive Chairman
15 March 2021

Statement of Compliance
Application of the QCA Corporate Governance Code

Principle

Deliver Growth

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

2. Seek to understand and meet
shareholder needs and expectations

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

Application/Evidence

At Boku we seek to develop an entrepreneurial and supportive culture across
our business so that these values are integral to everything else we do.

An explanation of the Company’s business model and strategy, including key
challenges in their execution (and how those will be addressed) is included
on pages 4 to 9.

The Board engages with shareholders via a variety of channels and activities
including the annual general meeting, updates to shareholders via its
reporting and the regulatory news services, institutional and retail investor
presentations and investor roadshows, all of which provide an opportunity for
shareholders to engage directly with senior management and the Board.

Boku’s culture is very open and this includes reaching out and seeking
feedback on a regular basis through employee opinion surveys. The Board
regularly considers the key stakeholder relationships which give the Company
its competitive advantage and thereby contribute to its long-term success.
The key stakeholders are the skilled people employed by the Company and
its merchant and carrier relationships, together with other service providers.
These relationships are regularly monitored by the Board.

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

The Board retains overall responsibility for identifying the major business
risks faced by the Group by setting both the framework and risk appetite of
the Group, in line with best practice. Our risk management framework and
approach to risk is summarised on pages 20 to 23.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Maintain a Dynamic Management Framework

5. Maintain the Board as a well-
functioning, balanced team led by
the chair

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

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

The QCA Code requires that boards have an appropriate balance between
executive and non-executive directors and that each board should have
at least two independent directors. The Board is currently made up of a
Non-Executive Chairman (Mark Britto), two Executive Directors: the Chief
Executive Officer (Jon Prideaux) and the Chief Financial Officer (Keith
Butcher) and three Non-Executive Directors (Richard Hargreaves, Stewart
Roberts and Charlotta Ginman). Three of these directors are considered
independent.

The Board is supported by an appropriate committee structure, comprising of
separate Audit and Remuneration Committees that have the necessary skills
and knowledge to discharge their duties and responsibilities effectively.

Further details of the current directors and a note of those who are
considered to be independent are set out on page 24.

The Board is satisfied that its directors have an effective and appropriate
balance of skills and experience, and that there is a suitable balance between
independence of character and judgement, and knowledge of the Company,
to enable it to discharge its duties and responsibilities effectively. All directors
are encouraged to use their independent judgement and to constructively
challenge all matters, whether strategic or operational.

The current directors, their background and experience are described
on pages 24 to 25. Collectively, our team has all the necessary skills and
experience, to carry out the Group’s strategy and business model effectively.

Richard Hargreaves is the senior independent director and he is available
to speak with shareholders concerning the corporate governance of the
Company. The Company Secretary, Deepa Kalikiri is responsible for advising
the Board on governance matters and ensuring that decisions of the Board in
relation to governance matters are implemented.

The latest review of Board effectiveness did not highlight any areas of
concern. Additionally, neither the Chairman nor Chief Executive have received
any representations to this effect.

The Board has undertaken a formal annual evaluation of its own performance,
including of the Company’s committees.

The evaluation demonstrated overall positive results of the performance of
the Board and committees, by recognising the strengths and addressing
ways of improvement where appropriate.

Appropriate training is also available to all directors to develop their
knowledge and ensure they stay up to date on matters for which they have
responsibility as a Board member.

Board composition is reviewed regularly, with Charlotta Ginman, Non-
Executive Director, appointed in September 2020.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Governance Report

Corporate Governance Report

Maintain a Dynamic Management Framework (continued)

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

The Company’s culture is guided by many different activities, which include reg-
ular senior management meetings and feedback following the employee surveys.
Such surveys provide an insight to the views of the workforce on the Company.

The Company’s policies set out its zero-tolerance approach towards any
form of discrimination or unethical behaviour relating to bribery, corruption or
business conduct in all jurisdictions in which it operates. A recruitment policy,
used consistently across the business is in place, which together with training
and policies on whistleblowing and anti-bribery assist in embedding a culture
of ethical behaviour for all employees.

An outline of the corporate culture promoted by the Board is set out in the
section of the Company’s website headed Core Values.

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

Formal Board meetings are held every two months to review strategy, man-
agement and performance of the group. Additional meetings between those
dates are convened as necessary. We have two Board committees: the Audit
Committee and the Remuneration Committee.

The terms of reference of both these committees have been revised to reflect
the principles of the QCA Code. The terms of reference can be viewed at
https://www.boku.com/investor-relations/reports-documents/

Due to the current size of the Company, the Board still considers a Nominations
Committee is not appropriate, any decisions relating to appointments to the
Board will be a matter for the consideration of the whole Board.

From time to time, separate committees may be set up by the Board to con-
sider specific issues when the need arises.

The roles and responsibilities of the Chairman, Chief Executive and any other
directors who have specific individual responsibilities or remits (e.g. for engage-
ment with shareholders or other stakeholder groups) are set out on page 32.

The principal responsibilities of Board members are as set out below:

Amongst other things the Chairman is responsible for:

• Promoting the highest standards of corporate governance and ethical

leadership

• Developing effective working relationships with the Executive Directors
• Promoting effective relationships between all Board members
• Setting the agenda for Board meetings and ensuring that sufficient time is
devoted to the consideration of agenda items and that each director can
express their views on matters

• Ensuring that the Board monitors and determines the nature of the signifi-
cant risks the Company embraces in the implementation of its strategy

• Ensuring the Company maintains effective communications with sharehold-
ers and other stakeholders and that the Board as a whole is made aware of
shareholder and stakeholder issues and concerns.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Maintain a Dynamic Management Framework (continued)

9. Maintain governance structures and
processes that are fit for purpose and
support good decision-making by the
Board [continued]

The Chief Executive is responsible for the following matters amongst others:

• Developing and implementing strategy following approval by the Board
• Reporting on a regular basis to the Board of progress in respect of strategy,

Company performance and business matters

• Developing the senior management teams and creating the appropriate

organisational environment to deliver the strategy
• Acting as the principal spokesman for the Company

The Chief Financial Officer is primarily responsible for the delivery of high
quality information to the Board on the financial position of the Company.

The Non-Executive Directors are responsible for providing a challenge to the
Executives where required and to make the Board aware of their views on
matters before Board decisions are made. They must be able to devote suffi-
cient time to develop their knowledge and skills to be able to make a positive
contribution to the Board.

The Board has a schedule of matters reserved for the Board which requires
the following key matters to considered and approved by the Board:

• Strategy and overall management of the Group
• Financial reporting and controls
• Ensuring a sound system of internal controls
• Approval of major capital projects and contractors
• Communication with shareholders
• Board membership and appointments
• The Remuneration Policy
• Delegated authorities
• Corporate governance matters
• Approval of key policies

The Board and its committees receive appropriate and timely information before
each meeting, a formal agenda is produced for each meeting, and Board and
committee papers are distributed several days before meetings take place
allowing all Board members to contribute even if they cannot attend. Any director
can challenge proposals, and decisions are taken democratically after discussion.
Any director who feels that any concern remains unresolved after discussion may
ask for that concern to be noted in the minutes of the meeting, which are then
circulated to all directors. Specific actions arising from such meetings are agreed
by the Board or relevant committee and then followed up by management.

The Board continues to receive departmental ‘deep dives’ during the Board
meetings, which has strengthened the Board’s exposure to the executive
committee and other senior management.

The Board is satisfied that the governance arrangements for the business
remain appropriate and that the delegations in place are effective and with
strong oversight and controls. This is, of course, subject to regular Board and
managerial oversight and review.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Governance Report

Corporate Governance Report

Build Trust

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

Reports on the work of the Board and its committees are set out as follows:

• Board: pages 44

• Audit Committee: pages 34

• Remuneration Committee: pages 37

Information about shareholder voting at the 2020 Annual General Meeting of
the Company is set out on Boku’s website.

The Group’s approach to investor and shareholder engagement is
described under Principle 2 above. Annual Reports, Annual General
Meeting notices, regulatory announcements, trading updates and other
governance related materials for 2020 and retrospective years are
available from the Company’s website.

The Board Composition and Responsibilities

The Board currently consists of a non-executive Chairman, the Chief Executive Officer, the Chief Financial Officer and three
Non-Executive Directors. There is a clear division of responsibilities between the Chairman and the executive officers and
the Board considers three of the non-executive directors to be independent.

The composition of the Board ensures that no single individual or group of individuals is able to dominate the decision-
making process.

On 23 September 2020, Charlotta Ginman was appointed as a Non-Executive Director. Mrs Ginman is also a member of the
Audit Committee and the Remuneration Committee.

By rotation, Directors are subject to reappointment by a shareholder vote at the Company’s Annual General Meeting.
Mr. Butcher and Ms. Ginman are up for re-election at the Annual General Meeting scheduled for 19 May 2021. The directors
evaluate the balance of skills, knowledge and experience of the Board when defining the role and capabilities required for
new appointments.

The Board is responsible for setting the strategic
direction and policies for the business. The Board
meets regularly to attend to any issues which require
its attention and oversees the financial position of the
Company, monitoring performance on behalf of the
shareholders, to whom the Directors are accountable.
The primary duty of the Board is to act in the best
interests of the Company at all times. The Board also
addresses issues relating to internal controls and the
Company’s approach to risk management. The day-to-
day management of the Company’s business is delegated
to the Chief Executive Officer and the senior executives.

Board Composition

EXECUTIVE

33%

Board Tenure

NONEXECUTIVE

66%

03 YEARS

33%

36 YEARS

33%

6 YEARS

33%

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Management Team

The Board meets at least once every two months and Board
meetings are attended by all directors either in person
or over the phone. The Board formulates and approves
the Company’s strategy, budgets, corporate actions and
monitors the Company’s progress towards its goals.

It has established an audit committee and a remuneration
committee with formally delegated duties and
responsibilities and with written terms of reference.

From time to time, separate committees may be set up by
the Board to consider specific issues when the need arises.
Due to the size of the Company, the directors have decided
that issues concerning the nomination of directors will be
dealt with by the Board rather than by a committee.

Audit committee

The Audit Committee is chaired by Stewart Roberts and
its other members are Richard Hargreaves and Charlotta
Ginman, all of whom are Independent, Non-Executive
Directors. The Audit Committee meets formally at
least twice a year and otherwise as required. It has the
responsibility of ensuring that the financial performance of
the Company is properly reported and reviewed and its role
includes monitoring the integrity of the financial statements
of the Company (including annual and interim accounts
and results announcements), reviewing internal controls
and risk management systems, reviewing any changes to
accounting policies, reviewing and monitoring the extent
of the non-audit services undertaken by external auditors,
and advising on the appointment of external auditors. A full
report of the Audit Committee can be found on page 34.

Remuneration committee

The Remuneration Committee is chaired by Richard
Hargreaves and its other members are Charlotta Ginman
and Stewart Roberts, all of whom are Independent,
Non-Executive directors. The Remuneration Committee
meets at least twice a year and at such other times as
required. It has responsibility for determining, within the
agreed terms of reference, the Company’s policy on the

remuneration packages of the Company’s Chief Executive,
Chairman, and the executive directors and such other
members of the executive management as it is designated
to consider. The remuneration of non-executive
directors will be a matter for the Chairman and executive
directors of the Board. No director or manager is allowed
to partake in any discussions relating to their own
remuneration. In addition, the Remuneration Committee
has the responsibility for reviewing the structure, size
and composition (including the skills, knowledge and
experience) of the Board and succession planning. It also
has responsibility for recommending new appointments to
the Board. A full report of the Remuneration Committee
can be found on page 37.

Share Dealing code

The Company has adopted a dealing code for the directors
and all employees, which is appropriate for a company
whose stock is admitted to trading on AIM. The Company
takes all reasonable steps to ensure compliance by the
Directors and employees with the terms of that dealing
code by providing regular training and making the share
dealing code and associated documents readily available at
all times.

Shareholders

The Board is committed to regular, open and effective
communication with shareholders to ensure that the
Company’s strategy and performance are clearly
understood. The Company provides annual and
interim statutory financial reports, investor and analyst
presentations, regular trading and business updates. At
the Annual General Meeting all shareholders have the
opportunity to meet and ask questions of the Board of
Directors. The next Annual General Meeting is scheduled
for 19 May 2021.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Governance Report

Audit Committee Report
Committee Chairman Introduction

Dear Shareholders,

I am pleased to introduce the audit committee report for
the year ended 31 December 2020. In the report below we
explain how the committee discharged its responsibilities
during the year, including the significant issues that we
considered in relation to the financial statements and how
we safeguarded the independence and objectivity of the
external auditors.

Our external auditors are BDO LLP, who were appointed as
our external auditors for the first time in 2017.

Composition of the Committee

The audit committee comprises Stewart Roberts (who
serves as chair), Richard Hargreaves and Charlotta Ginman.
Mr. Roberts joined Boku as the chair of the audit committee
on 1 January 2020 and Mrs Ginman joined the Board
and audit committee on 23 September 2020. Mark Britto
stepped down from the audit committee at the same time.

All members of the committee are non-executive directors
and are independent of management. The Board considers
that the audit committee as a whole has competence
relative to the sector in which the Company operates.
Mr. Roberts and Mrs Ginman have significant accounting,
auditing and other related financial management expertise.

Executive directors and senior executives (the Group
Financial Controller and Company Secretary) attend
meetings by invitation as required, but do not do so as
of right. Representatives of BDO LLP (external auditor)
also attend the committee meetings and meet privately
with committee members, in the absence of executive
management, prior to each committee meeting.

The committee normally meets twice during each financial
year and more frequently as required.

The Role and the Responsibilities
of the Committee

The committee’s principal responsibilities are to:

• monitor the integrity of the financial statements of the

Company and any formal announcements relating to the
Company’s financial performance, reviewing significant
financial reporting judgements contained in them. The
committee also reviews the Group’s Annual Report and
Accounts and Interim Report prior to submission to the
full board for approval.

• monitor the Group’s accounting policies and review

the Company’s internal financial controls and financial
reporting procedures and, on behalf of the board, the
Company’s internal control and risk management systems.

• monitor the adequacy and effectiveness of the

Company’s internal controls and internal financial
controls, risk management systems and insurance
arrangements.

• make recommendations to the board, for it to put

to the shareholders for their approval in the Annual
General Meeting, in relation to the appointment,
reappointment and removal of the external auditor and
to approve the remuneration and terms of engagement
of the external auditor.

• oversee the relationship with the external auditors and
review and monitor their independence and objectivity
and the effectiveness of the audit process, taking into
consideration relevant UK and US professional and
regulatory requirements.

• develop and implement policy on the engagement

of the external auditor to supply non-audit services,
taking into account relevant ethical guidance
regarding the provision of non-audit services by
the external audit firm; and to report to the board,
identifying any matters in respect of which it
considers that action or improvement is needed and
making recommendations as to the steps to be taken;

• provide a forum through which the Group’s auditors
and external tax advisors report to the board; and

• report to the board on how it has discharged its

responsibilities.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

External Audit

Non-Audit Services and Fees

The scope of the audit work undertaken by external
auditors is agreed in partnership with the Audit Committee
and typically covers the following areas:

• the External Auditor’s overall work plan for the

forthcoming year

• the External Auditor’s fee proposal

• the major issues that arose during the course of the

audit and their resolution

• key accounting and audit judgements and estimates

• the levels of errors identified during the audit, and

• recommendations made by the External Auditor in their

management letters and the adequacy of management’s
response.

The Audit Committee meets privately with the External
Auditor in the absence of management to review matters
within their sphere of interest and responsibility.

It can occasionally be more efficient or necessary to
engage the external auditors to provide non-audit services
because of their knowledge and experience and/or for
reasons of confidentiality. However, safeguarding the
objectivity and independence of the external auditors is
an overriding priority. The external auditors would only be
appointed to perform a service when doing so would be
consistent with both the requirements and principles of
the relevant external regulations, and when their skills and
experience make the firm the most suitable supplier.

We classify work that the external auditors might be
permitted to perform into one of two categories and
manage these as follows:

• Audit services – the scope and fees for the statutory

audit are agreed by the committee.

• Audit-related services (including the review of interim
financial information) – the scope of any such services
and the fees must be pre-approved by the committee.

Audit and Other Fees

Audit services – core

Audit services – new subsidiary audit, Fortumo (non-BDO network firm)

Audit services – specific to FY20 and FY19 year ends

Audit - related services (review of interim accounts)

Sub-Total: audit and audit related fees

Other assurance services

Services related to taxation

Sub-Total: fees other assurance and services related to taxation fees

Total group auditor fees

Third party audit fees specific to FY20

Total audit fees

2020
$

232,655

59,733

42,000

26,300

360,688

45,000

405,688

2019
$

198,500

50,000

25,000

273,500

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Governance Report

Audit Committee Report

Internal Audit

Looking Ahead

The company implemented a new Navision accounting
system during 2020 which improved working practices and
enabled the finance team to cross-train across multiple
geographies on one set of systems and processes.
Following the acquisition of Fortumo, which runs on a
standalone accounting package, a project to migrate
Fortumo’s accounting onto Navision is underway and will be
completed in the first half of 2021.

Stewart Roberts
Audit Committee Chairman
15 March 2021

Boku does not currently employ an internal audit function
–as is typical for a company of Boku’s size–however,
the need for an internal audit team was considered
during the year and deemed not necessary at this stage
however this will be reviewed by the Audit Committee on
a periodic basis.

Boku has a small Risk & Compliance Team whose primary
area of focus is to ensure that the company remain
compliant with all relevant regulation, most notably the FCA
in the UK/ EU (issuer of our e-money license) and relevant
local Telecoms regulation within each specific market; in
addition to broader regulatory requirements such as GDPR
and PSD2 within the EU. The company also employs a
dedicated team focused on transaction monitoring and
revenue and reconciliation.

Key Activities in the Year Ended
31 December 2020

Reviewed the Purchase Price Acquisition paper prepared
by PwC for the acquisition of Fortumo Holdings Inc on
1 July 2020.

Reviewed the key business risks of the company and
agreed the subsequent updates to the focus areas. (Please
refer to page 20 for a more detailed review of company’s
principal Risk and Uncertainties).

Reviewed and approved the Impairment review paper
produced by management

Reviewed and approved budgets, forecasts and the group’s
Going Concern paper produced by management.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Remuneration Report
Chairman’s Introduction

Dear Shareholder,

I am pleased to present the Directors’ Remuneration
Report for the 2020 financial year. This letter introduces
the report, outlines the major decisions on Directors’
remuneration during the year and explains the context in
which these decisions have been taken.

Boku is committed to high standards of corporate
governance and our policy and disclosures on Directors’
remuneration is intended to reflect this approach. We
welcome shareholder feedback and will continue our
practice of putting an advisory resolution on remuneration
to shareholders at our AGM.

This report sets out the remuneration policy and the
detailed remuneration for both the Executive and Non-
Executive Directors of the Company for the period to
31 December 2020. The information provided fulfils
the requirements of AIM Rule 19. Boku, Inc, being US
incorporated is not required to comply with the UK’s
Companies Act Schedule 8 of the Large and Medium-
sized Companies and Groups (Accounts and Reports)
Regulations 2008. The information is unaudited.

Remuneration Policy

The Company’s approach to remuneration is that the
overall package should be sufficiently attractive to
recruit, motivate and retain individuals of a high calibre
with significant technical and strategic expertise. The
Company needs to ensure that key personnel can deliver
the Company’s objectives and value for shareholders in a
competitive sector.

The four main elements of the remuneration package
are base salary, benefits, annual performance related
bonuses and long-term share incentives, payable to
Executive Directors, namely the CEO and CFO, and other
executive team members. The policy in each area is
detailed in this report.

Performance and Decisions
on Remuneration Taken

The Company performed well in 2020 and continues
to grow fast. Revenues were slightly ahead of market
expectations and Adjusted EBITDA, which doubled, was
substantially ahead. It was particularly impressive that this
was achieved despite the impact of COVID-19.

Bonuses for 2020 (relating to performance in 2019) were
paid to the two Executive Directors as detailed in note 20.
Awards were made to all employees under the company’s
Equity Plan in January 2020 and comprised time based
restricted stock units.

Additionally, during the year, the company made long
term incentive awards to executives and other employees
in the form of performance restricted stock units. These
stock units have vesting rules which are detailed in note
20. Awards of performance stock units were made to Jon
Prideaux, Keith Butcher, other members of the Executive
Team and various other key employees. These awards
vest after three years, with half subject to an Adjusted
EBITDA performance condition. However the need to meet
the performance condition is subject to Remuneration
Committee discretion.

Decisions for 2021

Annual bonuses payable in 2021 (reflecting performance in
2020) will operate in a very similar way to 2020, reflecting
the core objectives of revenue and Adjusted EBITDA
growth and personal contribution.

I hope that you find the report helpful and informative.

Richard Hargreaves
Remuneration Committee Chairman
15 March 2021

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Governance Report

Remuneration Report

Composition of Committee
The Committee members are Richard Hargreaves (Chairman),
Stewart Roberts and Charlotta Ginman. The Committee
meets at least twice a year to review the remuneration of the
Executive Directors and other executive team members and
to set the overall pay policy. The views of the Chief Executive
Officer are sought in respect of awards to the other Executive
Director and Executive Team members.

Remuneration Policy
The Committee’s overall approach is focused on ensuring the
company’s remuneration policy is aligned with shareholders’
interests whilst also enabling the company to attract, retain
and motivate high quality executive management. Since
the company has expanded considerably both organically
and with the acquisition of Fortumo, in 2020 the Committee
undertook one of its periodic external comparisons to
examine current market trends and practices at equivalent
roles in similar companies. The results of this exercise were
incorporated into revised Executive Remuneration packages

Base Salary
Base salary for each Executive Director is reviewed annually
by the Committee: salary levels paid by companies of a
similar size and nature; the performance of the Group as
a whole and the Director’s performance, experience and
responsibilities are all taken into account. Changes in 2021
will be effective from 1 February 2021 (2020 1 February for
Mr. Prideaux. 1 July for Mr. Butcher).

Annual Bonus
Bonuses are paid at the discretion of the Committee. The
Committee’s general policy is that Executive Directors
should receive a bonus for the achievement of stretching
performance targets. Currently the Company uses revenue,
Adjusted EBITDA and personal performance targets.

Bonuses for achievement of target performance will be paid
in cash on a half-yearly basis. Bonuses for over performance
will only be paid annually. The Committee has discretion to
make adjustments to the level of bonus to avoid unintended
consequences. For 2020, bonuses for the executive directors
were set at 35% of salary for achieving target performance
and capped at 70% of salary for over performance.

The bonus scheme extends to the other executives who
are members of the Executive Management Team.

Long Term Incentives
During 2020, the company made long term incentive
awards to executives and other employees in the form
of performance-based restricted stock units. In general,
restricted stock units vest and convert into common shares
on the vesting date. Details of awards currently held by
directors are set out later in this report.

The Committee sees long term incentives as an important
part of the remuneration of executives, to align them with
shareholders and reward them for strong performance. In
line with its policy of making annual awards, in 2021 the
Committee made further awards to executives. Awards to
Executive Directors and key employees have a minimum
normal vesting period of three years, 50% of the award
is subject to an additional performance condition relating
to long term Adjusted EBITDA performance. However
the performance condition is subject to Remuneration
Committee discretion.

Pension Provision
The Company operates a stakeholder pension scheme for
UK employees. Executive Directors participate on the same
basis as other employees. Mr. Prideaux opted out from the
pension scheme.

Benefits
The Company provides the option for employees to
participate in a private healthcare plan. Mr. Prideaux
participated for the entire year and Mr. Butcher did not
participate in 2020.

Remuneration of Non-Executive Directors
The fees paid to the Non-Executive Directors are
determined by the Executive Directors. They receive
an annual fee and additional fees for chairing board
committees, but they are not entitled to receive any bonus
or other benefits. Non-Executive directors are entitled to
reasonable expenses incurred in the performance of their
duties. Non-Executive Directors become eligible for a
single grant of RSUs after they have served on the Board
for a year.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Service Contracts

The service contracts and letters of appointment of the Directors include the following terms:

Executive Directors

Jonathan Prideaux

Keith Butcher

Non-Executive Directors

Mark Britto

Richard Hargreaves

Stewart Roberts

Charlotta Ginman

Date of contract

Notice period (months)

1 May 2012

1 Oct 2019

30 August 2017

8 August 2017

1 January 2020

24 September 2020

The service contracts of the Executive Directors do not provide for any extra payment on the termination of employment.
The letters of appointment of the Non-Executive Directors have an initial period of 12 months.

Directors are subject to re-election by rotation every third year at the Annual General Meeting. Ms. Ginman and Mr. Butcher
are up for election at the 2021 Annual General Meeting.

Annual Report on Remuneration

The following sections show how remuneration was managed during 2020.

Salaries

Base salaries for Executive Directors at the year ended 31 December 2020 were as follows:

Jonathan Prideaux
Keith Butcher

Chief Executive Officer
Chief Finance Officer

£234,531
£186,559

Fees of non-executive directors

Fees for Non-Executive Directors at the year ended 31 December 2020 were as follows:

Name

Role

Committee Chairman

Base Fee

Committee Chairman Fee

Mark Britto

Chairman

Nomination

$60,000

Richard Hargreaves

Non-Executive Director

Remuneration

£30,000

£5,000

Stewart Roberts

Non-Executive Director

Audit

£30,000

£5,000

Charlotta Ginman1

Non-Executive Director

£30,000

1 Mrs. Ginman joined the Board in September 2020 and received total compensation of £10,000 in 2020

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Governance Report

Remuneration Report

Bonus

The annual bonus targets for 2020 were based on growth in revenue, Adjusted EBITDA and personal performance. Half
of the maximum is payable for the achievement of Board defined targets, with the balance being awarded for over-
performance. The maximum awardable to Mr. Prideaux was £82,086 (35% of salary) for achieving targets, with a maximum
further amount of £82,086 (35% of salary) payable for over performance.

On-target bonus was set at £65,296 (35% of salary) for Mr. Butcher, with a maximum further amount of £65,296 (35% of
salary) payable for over performance.

In 2020 revenue was ahead of the company’s targets and Adjusted EBITDA came in more than double the 2019 figure
(106.2%) and 18.3% ahead of the company’s targets. At the half year on target bonuses were paid to the Executive
Directors. Total bonuses in respect of 2020 will be paid to Mr. Prideaux and Mr. Butcher of £164,172 (2019 £73,417) and
£130,591 (2019 £19,339).

Summary of Directors’ Total Remuneration

Executive Directors

Salary
£

Annual
Bonus
£

Performance
Bonus
£

Pension
£

Benefits
£

Total
2020
£

Total
2020
$

Total
2019
£

Total
2019
$

Jonathan Prideaux

234,717

82,086

2,030

400,918

514,628

301,780

385,399

Keith Butcher

181,534

65,296

1,752

Stuart Neal1

313,878

402,925

63,528

81,136

240,995

307,791

Non-Executive Directors

Mark Britto

Richard Hargreaves

Keith Butcher2

Stewart Roberts

Charlotta Ginman4

Total

Fees 2020
£

Fees 2020
$

Fees 2019
£

Fees 2019
$

46,743

60,000

46,979

60,000

35,000

44,927

35,000

44,701

30,000

38,315

35,000

44,927

10,000

12,836

1,080,249

917,342

1 Mr. Stuart Neal ceased being an Executive Director in January 2020
2 Mr. Butcher became an Executive Director in September 2019
3 Mr. Roberts also received £699.96 ($898.48) in pension contributions from the company
4 Mrs. Ginman joined the Board in September 2020

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Equity Plan and Long-Term Incentive Plan

During 2020 the Company granted 2,092,873 (2019 1,909,766) performance-based restricted stock units (“PRSUs”) and
2,342,189 (2019 3,229,379) restricted stock units (“RSUs”) over common shares to Executive Directors, other executives,
employees, and Non-Executive Directors, under the Company’s 2017 Equity Incentive Plan. An additional 1,694,858 RSUs
were issued to Fortumo employees in exchange for their shareholding in Fortumo and 391,000 Earn-out RSUs were issued
to employees and executives of Fortumo.

The PRSUs granted to the executives and Executive Directors will vest over Common Shares three years from the award
date, in one event, subject to the meeting of a long term Adjusted EBITDA performance target.

Boku also grants RSUs to the Non-Executive Directors of the Company to support retention and align the interests of
these directors with those of the Company’s shareholders. The RSUs are granted to Non-Executive Directors after a year’s
service on the Board and vest two years later, subject to certain conditions. No such grants were made in 2020.

A breakdown of the Directors’ current interests in the long-term incentive awards is set out below.

Market value options

Name

Date of grant

Number

Exercise price

Initial vesting date

Final vesting date

Lapsing date

Jonathan Prideaux

28 Oct 2016

200,000

USD $0.28

12 Dec 2012

12 Dec 2016

23 Dec 2023

28 Oct 2016

1,500,000

USD $0.28

23 Apr 2014

23 Apr 2018

22 Apr 2024

28 Oct 2016

750,000

USD $0.28

23 Sep 2016

23 Sep 2020

27 Oct 2026

Mark Britto

28 Oct 2016

569,930

USD $0.28

23 Jan 2013

23 Dec 2016

23 Dec 2023

28 Oct 2016

424,514

USD $0.28

23 Jan 2013

23 Dec 2017

23 Dec 2023

28 Oct 2016

500,000

USD $0.28

23 Sep 2016

23 Sep 2020

27 Oct 2026

On 26 March 2020, Mark Britto, Non-Executive Chairman, was issued 1,567,110 RSUs over Common Shares (the “Replacement RSUs”). These RSUs were
issued to replace options over 2,052,457 Common Shares which were originally granted on 28 October 2016 and had an exercise price of USD$0.28 (the
“Stock Options”). Mr. Britto was unable to exercise the Stock Options prior to their lapsing date of 15 March 2020 due to the Company being in a closed
period ahead of the announcement of its audited preliminary financial results for the period ended 31 December 2019 (“Closed Period”). Accordingly, in
order to replace the expired Stock Options, the Board, on the recommendation of the Board’s Remuneration Committee, issued the Replacement RSUs on
the expiry of the Closed Period. These Replacement RSUs had, in aggregate, the same economic value as the expired Stock Options

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Governance Report

Remuneration Report

Restricted Stock Units

Name

Date of Issue

Number of RSUs

Initial Vesting Date

Final Vesting Date

Lapsing Date

Jonathan Prideaux

22 July 2020

301,142

01 Apr2023

01 April 2023

31 Jul 2023

15 Jan 2020

150,000

01 Apr 2023

30 Apr 2023

15 Feb 2019

300,000

01 Apr 2022

15 Feb 2024

25 Jul 2018

350,000

01 Apr 2021

04 Sep 2023

Keith Butcher

22 Jul 2020

171,046

01 Apr 2021

01 Apr 2023

31 Jul 2023

01 Jan 2020

125,000

20 Nov 2020

01 Apr 2023

30 Apr 2023

25 Sep 2019

200,000

20 Nov 2020

01 Apr 2021

01 Apr 2024

Directors’ Interests in Shares

The interests of the Directors as at 31 December 2020 in the shares of the company were:

Name

Mark Britto

Jonathan Prideaux

Richard Hargreaves

Keith Butcher

Charlotta Ginman

Number of Common Shares

Percentage of share capital

10,328,145

2,643,829

1,486,289

502,750

12,715

3.591%

0.919%

0.519%

0.175%

0.004%

Jon Prideaux’s interests include 16,949 shares held by his spouse and 1,694 shares held by his family member.

Richard Hargreaves’s interest include 213,342 shares held by his family members.

Stuart Neal was a director until 1 January 2020.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Directors Remuneration for the Year
Commencing 1 February 2021

Executive Director salary levels as at 1 February 2021 were
as follows:

Jon Prideaux
Keith Butcher

£300,000
£210,000

Prior to setting salaries for 2021, as part of its regular
review of Executive and Non-executive compensation,
the Committee reviewed benchmarking data for Executive
Directors at similar companies, in terms of AIM, market
capitalisation and the fintech sector. The survey revealed
that compensation for both Executive and Non-executive
Directors were bottom quartile. Accordingly the Committee
made above inflation adjustments. The salary of the CEO,
Jon Prideaux, was increased from £227,700 to £234,531
from 1 February 2019 and to £300,000 from 1 February
2021. The salary of the CFO, Keith Butcher, increased from
£175,000 to £186,559 from 1 August 2020 and to £210,000
from 1 February 2021.

Non-Executive Director fees in 2021 will be upgraded in
line with the review of competitive rates. The Chairman’s
fee will be increased to $100,000; the rates for other
Non-Executive Directors will be increased to £40,000; the
supplementary fee for chairing a Board Committee will
remain unchanged at £5,000.

The Executive Directors’ annual bonus for the year
commencing 1 January 2021 will be operated within the
policy disclosed in this report. Bonus is paid based on the
achievement of revenue, Adjusted EBITDA and individual
performance targets. Mr. Prideaux’s maximum bonus will
be set at 50% of salary for on-target performance with
amounts above this paid for exceeding targets. Maximum
bonus is capped at 100% of salary. For Mr. Butcher the
equivalent amounts are 40% for on target performance,
with maximum awards capped at 80% of salary.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Governance Report

Directors’ Report

The Directors present their report and the audited
financial statements for Boku Inc. for the year ended
31 December 2020.

The preparation of financial statements is in compliance
with IFRS issued by the International Accounting Standards
Board (IASB) (“IFRS”) and IFRIC Interpretations issued by
the International Accounting Standards Board (IASB).

Principal Activities

The principal activity of Boku Inc. and its subsidiaries
(the “Group”) is the provision of mobile billing, mobile
wallets, payment and identity solutions for mobile
network operators and merchants. These solutions enable
consumers to make online payments and verify their
identities using their mobile devices.

Business Review and Future Developments

The review of the period’s activities, operations, future
developments and key risks is contained in the Strategic
Report on pages 4 to 9.

Directors

The Directors who held office during the period and
subsequently were as follows:

1. Mark Britto
2. Jon Prideaux
3. Richard Hargraves
4. Keith Butcher
5. Stewart Roberts
6. Charlotta Ginman (appointed 23 September 2020)

With regard to the appointment and replacement of
directors, the Company is governed by its Charter (the
US equivalent of the Articles of Association) and related
legislation. The Charter may be amended by special
resolution of the shareholders.

The Remuneration and Audit Committee reports can be
found on pages 37 and 34 respectively.

Directors’ Interests

Directors’ share options and interests in shares can be
found in the remuneration report on page 37.

Directors’ Indemnities

The Company has made qualifying third party indemnity
provisions for the benefit of its directors which were made
during the period and remain in force at the date of this
report. The Company also purchased and maintained
throughout the financial year Directors’ and Officers’ liability
insurance in respect of itself and its Directors.

Dividends

The Directors do not recommend a final ordinary dividend
for the period (2019 £nil).

Post Balance Sheet Events

There were no post balance sheet events.

Financial Risk Management

Details of financial risk management are provided in note 3
to the financial statements.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Internal Control

Going Concern

The Board has overall responsibility for the Group’s system
of internal control and for reviewing its effectiveness. The
processes to identify and manage the key risks of the group
are an integral part of the internal control environment.

Such processes, which are regularly reviewed and improved
as necessary, include strategic planning, approval of annual
budgets, regular monitoring of performance against budget
(including full investigation of significant variances), control
of capital expenditure, ensuring proper accounting records
are maintained, the appointment of senior management
and the setting of high standards for health, safety and
environmental performance. The effectiveness of the
internal control system and procedures is monitored
regularly through a combination of review by management,
the results of which are reported to and considered by the
Audit Committee. The system of internal control comprises
those controls established to provide assurance that the
assets of the Group are safeguarded against unauthorised
use and to ensure the maintenance of proper accounting
records and the reliability of financial information used
within the business or for publication. Any system of
internal control can only provide reasonable, but not
absolute, assurance against material misstatement or loss,
as it is designed to manage rather than eliminate the risk of
failing to achieve the business objectives of the Group.

The Group going concern assessment is based on
forecasts and projections of anticipated trading
performance. The assumptions applied are subjective
and management applies judgement in estimating the
probability, timing and value of underlying cash flows.

The Directors confirm that they have a reasonable
expectation that the Group will have adequate resources
to continue in operational existence for the next 12 months
from approval of these financial statements and accordingly
these financial statements are prepared on a going concern
basis, with no material uncertainty over going concern.

The COVID-19 pandemic impact on our business have
been appropriately managed and the Board believes that
the business is able to navigate through the impact of
COVID-19 due to the strength of its customer proposition,
its statement of financial position and the net cash position
of the Group.

Purchase of Own Shares

The Group does not hold any shares in treasury.

Statement of Disclosure to the Auditors

All of the current directors have taken all the steps that
they ought to have taken to make themselves aware of
any information needed by the Group’s auditors for the
purposes of their audit and to establish that the auditors
are aware of that information. The directors are not aware
of any relevant audit information of which the auditors are
unaware.

Auditors Appointment

BDO were appointed during the period and have
expressed their willingness to continue in office and a
resolution to re-appoint them will be proposed at the
annual general meeting.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Governance Report

Directors’ Report

Substantial Shareholdings

The Company has been advised of the following interests
in more than 3% of its ordinary share capital as at
31 December 2020

Shareholder

Percentage

Build Lux Holdco Sarl (a Vitruvian fund) ........................ 7.36%

Danske Capital Mgt .......................................................... 5.87%

Boku Inc Directors and Related Parties ........................ 5.60%

Danal Co. Ltd ...................................................................... 5.11%

BlackRock Investment Mgt ............................................. 5.01%

NewView Capital .............................................................. 4.77%

Swedbank Robur .............................................................. 4.03%

Schroder Investment Mgt ................................................ 3.21%

River & Mercantile Asset Mgt .......................................... 3.19%

Canaccord Genuity Wealth Mgt ...................................... 3.11%

Total

47.26%

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Directors’ Responsibilities Statement

The directors are responsible for keeping adequate
accounting records that correctly explain the transactions
of the Company, enable the financial position of the
Company to be determined with reasonable accuracy at
any time and allow financial statements to be prepared.
They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Information published on the
website is accessible in many countries and legislation
in the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions. The directors’ responsibility
also extends to the continued integrity of the financial
statements contained therein.

By order of the Board

Jon Prideaux
Chief Executive officer
15 March 2021

The directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.

The Company is incorporated in and subject to the laws
of the State of Delaware, USA, which does not require
the directors to prepare financial statements for each
financial year. However, the Group is required to do so to
satisfy the requirements of the AIM Rules for Companies.
When preparing the financial statements, the directors
are required to prepare the group financial statements in
accordance with an appropriate set of generally accepted
accounting principles or practice. The Directors have
elected to use International Financial Reporting Standards
as issued by the International Accounting Standards Board
(IASB) (“IFRS”).

The directors must not approve the accounts unless they
are satisfied that they give a true and fair view of the
state of affairs of the Company and of the profit or loss of
the Company for that period. In preparing these financial
statements, International Accounting Standard 1 (revised)
requires that directors:

• Properly select and apply accounting policies;

• Present information, including accounting policies, in a

manner that provides relevant, reliable, comparable and
understandable information;

• Provide additional disclosures when compliance with
the specific requirements in IFRS are insufficient to
enable users to understand the impact of particular
transactions, other events and conditions on the entity’s
financial position and financial performance; and

• Make an assessment of the Company’s ability to

continue as a going concern.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Independent Auditor’s Report
to the members of Boku, Inc.

Opinion on the Financial Statements

Conclusions Relating to Going Concern

In auditing the financial statements, we have concluded
that the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements is
appropriate. Our evaluation of the Directors’ assessment of
the Group’s ability to continue to adopt the going concern
basis of accounting included:

The going concern assessment period used by the
Directors was at least 12 months from the date of the
approval of the financial statements. We assessed the
appropriateness of the approach and model used by the
Directors when performing their going concern assessment.

We evaluated the Directors’ assessment of the Group’s
ability to continue as a going concern, including challenging
the underlying data and key assumptions used to make
the assessment. Additionally we reviewed and challenged
the results of Directors’ projections, to assess the
reasonableness of economic assumptions in light of the
impact of COVID19 in terms of their impact on the Group’s
solvency and liquidity position.

Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group’s ability to continue as a
going concern for a period of at least twelve months from
when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.

In our opinion:

• the financial statements give a true and fair view of the

state of the Group’s affairs as at 31 December, 2020 and
of the Group’s loss for the year then ended;

• the financial statements have been properly prepared

in accordance with IFRSs as issued by the International
Accounting Standards Board.;

We have audited the financial statements of Boku Inc,.
(the ‘Parent Company’) and its subsidiaries (the ‘Group’)
for the year ended 31 December, 2020 which comprise
the consolidated statement of comprehensive income,
the consolidated statement of financial position, the
consolidated statement of changes in equity, the
consolidated statement of cash flows and notes to the
financial statements, including a summary of significant
accounting policies.

The financial reporting framework that has been applied
in the preparation of the Group financial statements
is applicable law and International Financial Reporting
Standards (IFRSs) as issued by the International Accounting
Standards Board (IASB.

Basis for Opinion

We conducted our audit in accordance with International
Standards on Auditing (UK ISAs(UK)) and applicable law.
Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of
the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.

Independence

We remain independent of the Group and the Parent
Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Overview

Coverage1

Key audit matters

98% 2019 99% of Group loss before tax
99% 2019 95% of Group revenue
97% 2019 98% of Group total assets

KAM 1

KAM 2

KAM 3

2020

2019

Revenue recognition

Fair values recognised in relation
to the Fortumo Acquisition

Fair values recognised in
relation to the Danal Acquisition

Impairment of Goodwill in the
Identity cash generating unit

We note that KAM 3  Impairment of Goodwill in the Identity cash generating unit - is
new in 2020 as a result of the impairment loss recorded.

Materiality

Group financial statements as a whole

$532,000 2019$462,000 based on 0.9% 2019 0.9% of revenue.

1 These are areas which have been subject to a full scope audit by the group engagement team

An Overview of the Scope of Our Audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system
of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk
of management override of internal controls, including assessing whether there was evidence of bias by the Directors that
may have represented a risk of material misstatement.

We determined the significant components to be those located in Germany, U.K, Estonia and USA. The significant
components in the UK and the US were subject to full scope audits by the Group audit team, as the Group’s finance
team and information for these territories are based within the UK. We instructed our network member firm in Germany
to perform a full scope audit, and determined appropriately scoped risks and agreed responses to those risks with this
component audit team. For the significant component in Estonia, which related to the newly acquired Fortumo business,
we provided instructions to the non-BDO component auditor to perform a full scope audit that included our assessment of
the risks and procedures to be performed as part of their audit reporting to us.

For components of the group not considered to be significant components we performed limited audit procedures
including a combination of analytical procedures and where considered necessary certain specific procedures.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Independent Auditor’s Report

Our involvement with component auditors

For the work performed by component auditors, we determined the level of involvement needed in order to be able
to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group
financial statements as a whole. Our involvement with component auditors included the following:

We held planning meetings with each component team to discuss the component risk assessment including component
materiality, and overall reporting process that was then communicated formally in group audit instructions. Our instructions
required a number of reporting deliverables including the component auditor opinion that was received and reviewed. We
took an active part in reviewing the work performed; for both the Germany and Estonia components this was performed
remotely but with the component auditor in attendance. This, together with the additional procedures performed at Group
level over the consolidation process gave us the evidence we needed for our opinion on the financial statements as a
whole.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.

Key audit matter

Revenue recognition

Details of the group’s
revenue streams and
accounting policies
applied during the
period are given in
note 2.

How the scope of our audit addressed the key audit matter

With regards to the risk of material misstatement related to
accrued revenue around year end, we selected a sample
of carriers included in accrued revenue and performed the
following substantive audit procedures:

• Obtained and tested management’s reconciliation of

accrued revenue to the underlying transaction systems,
ensuring that the amounts recorded agreed with and were
supported by the existence of transactions

• Recomputed the accrued revenue based on the contractual

terms with the carrier

• Obtained the post-year end carrier statement and agreed

the amounts recorded to the amounts subsequently
received and paid

Key observations:

Based on the procedures performed, we noted no material
misstatements.

The Group’s revenue is
earned primarily from services
earned on mobile payment
transactions, integration fees
and identity verification.

The risk of material
misstatement in relation
to revenue recognition
concerns the recognition of
accrued revenue around year
end, specifically related to
settlement revenue for which
the gross receipts from mobile
network operators (‘MNO’s’)
and the associated gross
payables to merchants are
accrued at year end. These
amounts are material and
subject to a higher potential for
management bias.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Key audit matter

Fair values
determined in
relation to the
Fortumo Holdings
Inc.

See accounting
policy in note 2, the
intangible assets
note (note 11
and the business
combinations note
(note 26.

The acquisition of Fortumo
Holdings, Inc., the details of
which are provided in note
26, was completed on 1 July,
2020.

There are risks present as
a result of management’s
requirement to make
significant judgements in
assessing the fair values
of consideration and of the
assets and liabilities acquired.
Management engaged an
external valuations expert to
undertake the purchase price
allocation exercise.

The inherent complexity of
the judgements involved in
assessing the fair values and
related disclosures have led us
to assess this as a key audit
matter.

How the scope of our audit addressed the key audit matter

We obtained the valuation report from management’s expert
and performed the following substantive audit procedures:

• Evaluated the independence and objectivity of

management’s expert

• Involved our internal valuation specialists to challenge the
assumptions underpinning the significant judgements and
estimates provided by management in the assessment of
the fair values of the assets and liabilities acquired and
consideration paid. These assumptions included revenue
and profit forecasts, discount rates, growth rates and
customer attrition rates.

• Tested the accuracy and completeness of the acquired
balance sheet, together with the assessment of the
appropriateness of any fair value adjustments to the
acquired assets and liabilities.

• tested that the valuation methodologies used for each

type of asset were appropriate and consistent with market
practice.

• reviewed underlying cash flow projections and compared

against post-year end outturn,

• considered the appropriateness of discount rates applied

and the long term growth rates against market data.

Further, we evaluated the disclosures provided in the financial
statements and checked that these are consistent with the
terms of the acquisition and amounts disclosed accurately
reflect the value of the assets and liabilities acquired.

Key observations:

Based on the procedures performed, we noted no instances of
material misstatements in the fair values determined in relation
to the acquisition of Fortumo Holdings Inc.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Independent Auditor’s Report

Key audit matter

Impairment of
Goodwill in the
Identity cash
generating unit

See accounting
policy in note 2 and
intangible assets in
note 11.

How the scope of our audit addressed the key audit matter

The Group recorded goodwill
of $23.6 million in 2019 from
its acquisition of Danal. Inc.,
which forms the Identity cash
generating unit (“CGU”).

We obtained management’s projections of future performance
and evaluated the appropriateness of the key inputs and
assumptions used based on previous projections and actual
performance, combined with evidence supporting estimates of
future revenue growth.

Given the performance of
the Identity CGU during the
second half of 2020, the Group
determined that goodwill had
been impaired resulting in an
impairment charge of $20.1
million.

The inherent complexity of
management’s judgements
involved in assessing the fair
value of the CGU together with
the related disclosures has led
us to assess this as a key audit
matter.

We engaged with internal valuation specialists to assist with
testing the appropriateness of the value in use calculations,
including the discount rate applied.

Based on the above, we tested the computation of the
impairment charge recorded including its appropriate
presentation in the financial statements.

We also evaluated the Group’s disclosures relating to the
sensitivities associated with the key judgements applied in
concluding on the amount of the impairment charge.

Key observations:

Based on the procedures performed, no material misstatement
was noted in the impairment charge. Further, no material
findings were noted related to the disclosures being sufficient
to illustrate the associated sensitivity of this to variations in
key inputs and assumptions.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Our Application of Materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence
the economic decisions of reasonable users that are taken on the basis of the financial statements.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a
lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements
below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:

Materiality

Group financial statements

2020

$532,000

2019

$462,000

Basis for determining materiality

0.9% of revenue

Rationale for the benchmark
applied

Revenue was determined to be the most
appropriate benchmark as the basis for
materiality given the growth strategy
of the Group and revenue being the
key performance indicator in measuring
performance against that strategy.

Performance materiality

$399,000

$346,500

Basis for determining
performance materiality

We used 75% of Materiality based
on the degree of aggregation risk
determined, which considered the
number of components in the group,
the history of misstatements and risks
associated with individual components.

We used 75% of Materiality based on the
degree of aggregation risk determined,
which considered the number of
components in the group, the history of
misstatements and risks associated with
individual components.

Component materiality

We set materiality for each component of the Group based on a percentage of between 12% and 55% of Group materiality
dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality
ranged from $65,000 to $292,000. In the audit of each component, we further applied performance materiality levels of
75% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was
appropriately mitigated.

Reporting threshold

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of $26,00
2019 $23,100. We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Independent Auditor’s Report

Other Information

The directors are responsible for the other information. The other information comprises the information included in the
annual report and accounts other than the financial statements and our auditor’s report thereon. Our opinion on the
financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Responsibilities of Directors

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

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

Auditor’s Responsibilities for the Audit of The Financial Statements

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

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud is detailed below:

• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined
that the most significant frameworks which are directly relevant to specific assertions in the financial statements are
those than relate to the reporting framework, AIM Rules for Companies and the relevant tax compliance regulations.

• We considered provisions of other laws and regulations that do not have direct effect on the financial statements but
compliance with which may be fundamental to the Group’s ability to operate. These include compliance with FCA
regulations, Money Laundering Regulations 2007 and Proceeds of Crime Act, and the Data Protection Act.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

• We understood how the Group is complying with those frameworks by making enquiries of management, those

responsible for legal and compliance procedures and the Company Secretary. We corroborated our enquiries through
our review of board minutes and papers provided to the Audit Committee.

• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud

might occur, by meeting with management from across the Group to understand where they considered there was a
susceptibility to fraud.

• Our audit planning identified fraud risks in relation to management override and accrued revenue (the risks associated
with accrued revenue has been assessed as a Key Audit Matter above). We considered the processes and controls
that the Group has established to address risks identified, or that otherwise prevent, deter and detect fraud; and how
management monitors that processes and controls.

• We designed our audit procedures to detect irregularities, including fraud. Our procedures included journal entry

testing, with a focus on large or unusual transactions based on our knowledge of the business; enquiries with Group
Management; and focussed testing as referred to in the Key Audit Matters section above.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising
that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion.
There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial statements, the less likely we are to become
aware of it.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.

Use of Our Report

This report is made solely to the Parent Company’s members, as a body, in accordance with the terms of our engagement
letter dated 30 November, 2020. Our audit work has been undertaken so that we might state to the Parent Company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the
Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

BDO LLP
Chartered Accountants
London
15 March, 2021

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Consolidated Statement
of Comprehensive Income

Revenue*

Cost of sales

Gross profit

Administrative expenses

Operating loss analysed as:

Adjusted EBITDA**

Payment Revenue adjustment (non-recurring)*

Depreciation and amortisation

Stock Option expense

Foreign exchange gains

Impairment of goodwill

Exceptional items (included in administrative expenses)

Operating loss

Finance income

Finance expense

Loss before tax

Tax (expense)/credit

Net (loss)/ profit for the period attributable to equity holders of the parent company

Other comprehensive income/(losses) net of tax

Items that will or may be reclassified to profit or loss

Foreign currency translation profit/(loss)

Net increase/(decrease) in fair value of cash flow hedge derivatives

Total comprehensive profit/(loss) for the period

Total comprehensive loss/(profit) for the period attributable
to equity holders of the parent company

Note

Year ended
31 December
2020

Year ended
31 December
2019

$’000

56,402

4,925

51,477

$’000

50,148

5,563

44,585

68,200

45,469

15,268

5,917

4,925

1,048

20,775

1,422

16,723

662

17,315

1,470

18,785

1,720

17,065

7,403

3,255

4,461

6,771

107

417

884

468

1,296

1,651

355

160

3

163

192

Loss/(profit) per share attributable to the owners of the parent during the year

Basic and fully diluted ($

0.069

0.001

*Includes $3.3 million of non-recurring Payments Revenue in 2019; to better reflect underlying performance, this non-recurring revenue is excluded from
Adjusted EBITDA. Further information on this non-recurring Payment Revenue is detailed in Note 2 and Note 4.

**Earnings before interest, tax, depreciation, amortisation, non-recurring payment revenue, stock option expense, foreign exchange gains/(losses),
impairment of goodwill and exceptional items. Management has assessed this performance measure as relevant for the user of the accounts.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Consolidated Statement
of Financial Position

Non-current assets

Property, plant and equipment

Intangible assets

Deferred income tax assets

Total non-current assets

Current assets

Trade and other receivables

Cash and cash equivalents

Restricted cash

Total current assets

Total assets

Current liabilities

Trade and other payables

Bank loans and overdrafts

Lease liabilities

Total current liabilities

Non-current liabilities

Other payables

Deferred tax liabilities

Loans and borrowings

Lease liabilities

Total non-current liabilities

Total liabilities

Net assets

Equity attributable to equity holders of the company

Share capital

Share premium

Foreign exchange reserve

Retained losses

Total equity

31 December 2020

31 December 2019

Note

$’000

3,771

65,559

483

69,813

92,535

61,290

1,414

155,239

225,052

136,779

1,438

1,436

139,653

862

228

10,813

1,742

13,645

153,298

3,512

46,819

1,826

52,157

53,592

34,747

876

89,215

141,372

77,995

2,098

1,723

81,816

791

449

1,358

2,598

84,414

71,754

56,958

240,053

307

168,021

71,754

208,196

2,027

149,236

56,958

The financial statements were approved by the Board for issue on 15 March 2021

Jon Prideaux
Chief Executive Officer

Keith Butcher
Chief Financial Officer

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Consolidated Statement
of Changes In Equity

Share
capital

Share
premium

Cash flow
hedging
reserve

Foreign
exchange
reserve

Retained
losses

$’000

Total

$’000

Equity as at 1 January 2019

178,079

Profit for the year

Other comprehensive losses

Issue of share capital upon exercise of 4,750,898 stock
options and RSUs

Share-based payment1

Shares issued to Danal Inc shareholders

Other Reserves

571

5,472

21,532

2,542

Equity as at 31 December 2019

208,196

Loss for the year

Other comprehensive income

Issue of share capital upon exercise of
8,906,542 stock options and RSUs

Share-based payment

Shares issued

Issues of RSUs related to Fortumo acquisition

Share issue costs

Other reserves

Share issued for warrant

1,700

4,313

25,159

1,340

654

2,447

2,446

Equity as at 31 December 2020

240,053

3

1,867

149,591

26,646

160

355

163

571

5,472

21,535

2,542

2,027

149,236

56,958

18,785

1,720

32

1,720

1,668

4,313

25,194

1,340

654

2,447

2,447

307

168,021

71,754

 Share based expense has been credited against share premium in accordance with the local company law and practice in US.

 Other reserves include the warrants and held-back shares related to the acquisition of Danal, Inc.. The held back shares were issued during the year
ended 31 December 2020 in the amount of $2,447 and transferred from other reserves to share capital and share premium.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Consolidated Statement
of Cash Flows

Cash generated from operations

Income taxes paid

Net cash from operating activities

Investing activities

Purchase of property, plant and equipment

Purchase of internally developed software

Purchased financial asset

Restricted cash

Investment in subsidiary, net of cash acquired

Interest received

Net cash used in investing activities

Financing activities

Payment of principal to lease creditors

Payment of interest to lease creditors

Issue of common stock to employees

Issue of new ordinary shares

Share issue costs

Repayment of loan to shareholder

Interest paid on borrowings

Proceeds from bank overdraft

Proceeds from bank loan

Repayment of bank loan

Borrowing costs

Repayment of bank overdraft

Net cash from/(used) in financing activities

Net increase in cash and cash equivalents

Effect of foreign currency translation on cash and cash equivalent

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Year ended
31 December
2020

Year ended
31 December
2019

Note

$’000

31,529

269

31,260

489

2,920

2,160

538

34,435

$’000

9,051

131

8,920

477

1,575

375

742

40,472

2,363

2,045

1,868

292

1,700

25,129

654

793

307

20,000

7,313

500

2,092

34,419

25,207

1,336

34,747

61,290

288

571

180

2,098

2,150

1,817

4,742

1,068

31,073

34,747

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the
Consolidated Financial Statement

1. Corporate Information

The consolidated financial information represents the results of Boku Inc. (“the Company”) and its subsidiaries (together
referred to as “the Group”).

Boku Inc. is a company incorporated and domiciled in the United States of America. The registered office of the Company
is 735 Battery Street, 2nd Floor San Francisco, CA 94111, United States.

The principal business of the Group is the provision of mobile billing, payment and identity solutions for mobile network
operators and merchants. These solutions enable consumers to make online payments and verify their identities using their
mobile devices.

2. Accounting Policies

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

Basis of preparation

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

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 and judgements”.

The principal accounting policies adopted by the Group in the preparation of the Consolidated financial statements are set
out below.

The presentation currency of the consolidated financial statements is US Dollars, rounded to the nearest thousands
$’000 unless otherwise indicated. The main functional currencies for the Company’s subsidiaries are the United States
Dollar, Euro and Great Britain Pound.

Going concern

The consolidated financial statements have been prepared on a going concern basis. The ability of the Group to continue
as a going concern is contingent on the ongoing viability of the Group. The Group meets its day-to-day working capital
requirements through its cash balances and also has a bank facility that it can use. The current economic conditions
continue to create uncertainty, particularly over (a) the level of consumer engagement; and (b) the level of new sales
to new customers. 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.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Various sensitivity analyses have been performed to reflect a variety of possible cash flow scenarios, taking into account
the continued Covid-19 pandemic, where the Group achieves significantly reduced revenues for the twelve months
following the date of this Annual Report. Overall, the directors have prepared cash-flow forecasts covering a period of at
least 12 months from the date of approval of the financial statements, which foresee that the Group will be able to operate
within its existing facilities.

The Covid-19 pandemic has so far had limited impact on our business and the Board believes that the business is able
to navigate through the continued impact of Covid-19 due to the strength of its customer proposition and business
partnerships, statement of financial position and the net cash position of the Group.

However, the continued impact of the coronavirus pandemic has caused significant disruption to many businesses where
the implementation of social distancing measures is not practical or is deemed ineffective and this had implication for the
wider global economy and specifically to the supply chain within which we reside, particularly our consumers continued
willingness to use our services in the volumes experienced and planned. The move to remote working and social distancing
has increased the importance of mobile payment solutions to our customers, potential customers and wider consumer
market base. There is however a risk that the Group will be impacted by reductions in consumer confidence. If sales and
settlement of existing debts are not in line with cash flow forecasts, the directors have identified cost savings associated
with the reduction in revenues and have the ability to identify further cost savings if necessary, to help mitigate the impact
on cash outflows .

Having assessed the principal risks and the other matters discussed in connection with the going concern statement, the
Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for
the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting, and deem there
to be no emphasis over going concern, in preparing the financial information.

Basis of consolidation

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

The consolidated financial information presents the results of the Company and its subsidiaries (“the Group”) as if they
formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial information incorporates the results of business combinations using the acquisition method.
In the statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on
which control ceases. 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.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

2. Accounting Policies (continued)

Changes in accounting policies and disclosures

(a) New and amended standards adopted by the Group

The accounting policies adopted in these consolidated financial statements are consistent with those of the annual
financial statements for the 12 months ended 31 December 2019. The Group adopted the amendments to the following
existing standards during 2020

Amendments to Existing Standards

Issued date

IASB effective date

Amendments to References to the Conceptual Framework in IFRS Standards

Amendments to IFRS 3 Business Combinations: Definition of a Business

Amendments to IAS 1 and IAS 8 Definition of Material

29Mar-18

22Oct-18

31Oct-18

Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform

26Sept-19

Amendment to IFRS 16 Leases Covid 19Related Rent Concessions

28May-20

01Jan-20

1 Amendments to References to the Conceptual Framework in IFRS Standards

The International Accounting Standards Board (IASB has issued a revised Conceptual Framework for Financial Reporting
Conceptual Framework)

The revised version introduces a number of new aspects compared to the previous version issued in 2010, specifically
including:

• concepts on measurement, including factors to be considered when selecting a measurement basis
• concepts on presentation and disclosure, including when to classify income and expenses in other comprehensive

income

• guidance on when assets and liabilities are removed from financial statements.

It also updates the definitions of asset and liability and the criteria for recognising assets and liabilities in financial
statements. It has clarified the guidance on prudence, stewardship, measurement uncertainty, and substance over form.
The amendment is effective for periods beginning on or after 1 January 2020.

2 Amendments to IFRS3 Definition of a Business

In October 2018, the International Accounting Standards Board (Board) issued Definition of a Business (Amendments to
IFRS 3 to make it easier for companies to decide whether activities and assets they acquire are a business or merely a
group of assets. The amendments confirmed that:

• that a business must include inputs and a process and clarified that the process must be substantive, and the inputs

and process must together significantly contribute to creating outputs.

• narrowed the definitions of a business by focusing the definition of outputs on goods and services provided to

customers and other income from ordinary activities, rather than on providing dividends or other economic benefits
directly to investors or lowering costs; and

• added a test that makes it easier to conclude that a company has acquired a group of assets, rather than a - business,

if the value of the assets acquired is substantially all concentrated in a single asset or group of similar assets.

The amendment is effective for periods beginning on or after 1 January 2020.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

3 Amendments to IAS 1 and IAS 8 Definition of Material

In October 2018, the International Accounting Standards Board (Board) issued ‘Definition of Material (Amendments to IAS
1 and IAS 8’ to clarify the definition of ‘material’ and to align the definition used in the Conceptual Framework and the
standards themselves. The amendment is effective for periods beginning on or after 1 January 2020.

• The proposed definition now makes reference to ‘obscuring’ information that may influence the decisions of primary

users of general purpose financial statements;

• The existing definition made reference to ‘could influence’ whereas the proposed definition makes reference to ‘could

reasonably be expected to influence’; and

• The existing definition referred to ‘users’ of the financial statements whereas the proposed definition refers to ‘primary

users’ of the financial statements.

The amendment is effective for periods beginning on or after 1 January 2020.

4 Amendments to IFRS 9, IAS 39 and IFRS7 Interest Rate Benchmark Reform

In September 2019, the International Accounting Standards Board (IASB amended IFRS 9, IAS 39 and IFRS 7 in response
to uncertainty arising from the phasing out of interest-rate benchmarks such as interbank offered rates (IBORs).

The amendments modify the requirements relating to hedge accounting in order to provide relief from potential
consequences of IBOR reform. Additionally, the standards were amended to require additional disclosures explaining how
an entity’s hedging relationships are affected by the uncertainties involving IBOR reform.

The amendment is effective for periods beginning on or after 1 January 2020 with early application permitted.

5 Amendment to IFRS 16 Leases Covid 19Related Rent Concessions

On 28 May 2020, the IASB issued final amendments to IFRS 16 related to COVID19 rent concessions for lessees. The
Group did not adopt this standard as no such concessions were applicable.

The amendments modify the requirements of IFRS 16 to permit lessees to not apply modification accounting to certain
leases where the contractual terms have been affected due to COVID19 (e.g. rent holidays or other rent concessions).

The amendments are effective for periods beginning on or after 1 June 2020, with earlier application permitted.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

2. Accounting Policies (continued)

(a) New and amended standards not yet adopted by the Group

Amendments to Existing Standards

Issued date

IASB effective date

Amendments to IAS 1 Classification of Liabilities as Current or Non-current

23Jan-20

01Jan-23

Amendments to:

•
•

•

IFRS 3 Business Combinations
IAS 16 Property, Plant and Equipment

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

Annual Improvements to IFRSs (20182020 Cycle):

•

•
•

•

IFRS 1

IFRS 9
Illustrative Examples accompanying IFRS 16

IAS 41

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Interest Rate Benchmark Reform – Phase 2

14May-20

01Jan-22

14May-20

01Jan-22

27August-20

01Jan-21

Management continues to monitor the issuance of new standards and any further amendments to the existing standards and
considers that the application of the new amendments in the table above will not materially affect the Group after adoption.

Foreign currency translation

The presentation currency for the group is US dollars. Items included in the financial statement of each of the Group’s
entities are measured in the functional currency of each entity.

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions.

ii. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
the reporting period end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement within administrative expenses.

iii. Non-monetary items that are measured in terms of historical costs in a foreign currency are translated using the

exchange rates as at the dates of the initial transactions. 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 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

ii.

at the date of that Consolidated statement of financial position.
Income and expenses for each Consolidated statement of comprehensive income item are translated at average
exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are translated at the dates of the transactions); 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.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Revenue

Boku recognises revenue in accordance with IFRS 15 Revenue from Contracts with Customers by applying the required
five steps: identify the contract(s) with a customer, identify the performance obligations in the contract, determine the
transaction price, allocate the transaction price to the performance obligations in the contract and recognise revenue
when (or as) the entity satisfies a performance obligation. Revenue is allocated to the various performance obligations on a
relative stand-alone selling price (“SSP”) basis.

An analysis of the key considerations that IFRS 15 has on the Group’s revenue streams is summarised below.

1. Payments Segment revenue

Boku’s technology for the Payments segment delivers a low friction way for mobile phone users to buy things and charge
them to their phone bill or pre-paid balance. The Group’s revenue is principally its service fees which are earned from its
merchants.

i) Settlement Model: when it acts as an agent between a merchant and mobile network operators (MNOs) or an aggregator
(a middleman between the Group and the MNO. Management has determined that it is acting as an agent under IFRS 15
because it does not have the primary responsibility for providing the services to the customer. Therefore, there has been
no change in the classification as an agent from the previous assessment that there was no exposure to the risks and
rewards. An additional fee is also earned when a merchant requires settlement in a different currency than the currency
received, at contractual agreed rates, in line with IFRS 15.

ii) Transactional Model: from larger virtual and digital merchants who receive the sale collections directly and pay a service
fee to the Group.

Under both the transactional and settlement model (see point (i) and (ii) above), the Group’s contracts with customers
include one performance obligation only. This relates to an obligation to facilitate the payment for the transaction between
the merchant and their end users. Under IFRS 15 revenues for this service is recognised under this contract at a point in
time as the obligation is fulfilled at time when transaction happens., as the point of delivery of the performance obligation
is the same as when the risks and rewards have been transferred. Payments are due once the Group receives the monthly
statement of information from the Aggregator or the MNO.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

2. Accounting Policies (continued)

iii) Other revenue: from special merchant integrations, subscription services and early settlement of funds.

A contract for special merchant integration was changed during 2019. This resulted in a change of the revenue recognition
for special merchant integrations. Under the new contract after the special integration is performed, tested and approved
by the customer, no further performance obligation is required of Boku. The customer decides whether Boku has to
service further the special integration and keep it live and will pay this further performance obligation separately under a
special obligation: “monthly maintenance obligation”. Payments are due and recognised in full once the integrations are
successfully tested and approved by the customer. The maintenance fees are due monthly and are recognised in full at
each month end, in line with IFRS 15.

Contract assets and contract liabilities are included within ‘trade and other receivables’ and ‘trade and other payables’
respectively on the face of the statement of financial position.

In certain cases, the transaction price includes an estimate of variable consideration. Variable consideration is only
included in the transaction price to the extent that it is highly probably that a significant reversal in the amount of
cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is
subsequently resolved. In such cases, the estimated transaction price is updated each reporting period to reflect changes
in circumstances and the adjustment is reflected in revenue in the period that the change occurs.

The Group’s revenue is principally its service fees earned from its merchants. There are slight differences to contracts
depending on the services provided. All revenue from the Payment segment is recognised at one point in time. Therefore,
for the Payments segment, at 31 December 2019, the Group does not have deferred revenue on the balance sheet.

2. Identity Segment Revenue

Boku’s technology for the Identity segment provides identity services to customers by silently validating a mobile device
using automatic mobile number verification, streamlining the Know Your Client (‘KYC’) processes by validating the name
and address entered by a user against the MNOs data, and reduce fraud on marketing promotions by linking marketing
promotions to secure SIM based user identities instead of email or unverified mobile numbers etc.

Identity merchants are charged either on a per user basis – for monitoring – or a per transaction basis, typically with
monthly minimums.

For the Identity segment, deferred revenue consists of billings processed in advance of revenue recognition generated
by Boku Identity’s Mobile Identification/TCPA services. For these services, Boku bills its customers at the beginning of
the contract term as a pre-payment for services which are billed at a set price per transaction. The revenue is recognised
monthly, at a point in time, based on the amount of transactional volume processed during the month and services will
continue to be performed until the full value of the contract is realised. For the period ended 31 December 2020, deferred
revenue on the balance sheet for the Identity Segment was $443,585 2019 $489,265.

Cost of sales

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

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Operating Segments

In accordance with IFRS 8, “Operating Segments”, the Group has derived the information for its segmental reporting using
the information used by the Chief Operating Decision Maker (“CODM”), defined as the Executive Operating Committee
EOC. The segmental reporting is consistent with those used in internal management reporting and the measure used by
the EOC is Adjusted EBITDA.

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), and the provision
of identity services another operating and reporting segment (Identity segment) as defined under IFRS 8. Management
reviews the performance of the Group by reference to total results against budget as well as for each of the two
operating segments.

Exceptional Items

Exceptional items are those significant items, which are separately disclosed by virtue of their size, nature or incidence to
enable a full understanding of the Group’s financial performance. In setting the policy for exceptional items, judgement is
required to determine what the Group defines as “exceptional”. The Group considers an item to be exceptional in nature if it
is non-recurring or does not reflect the underlying performance of the business. Exceptional items are recorded separately
below Adjusted EBITDA.

Management of the Group evaluates Group strategic projects such as acquisitions, divestitures and integration activities,
Group restructuring and other one-off events such as restructuring programmes. In determining whether an event or
transaction is exceptional, management of the Group considers quantitative and qualitative factors such as its expected
size, precedent for similar items and the commercial context for the particular transaction, while ensuring consistent
treatment between favourable and unfavourable transactions impacting revenue, income and expense. Examples
of transactions which may be considered of an exceptional nature include major restructuring programmes, cost of
acquisitions, the cost of integrating acquired businesses or gains or losses on the disposal of discontinued operations.

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 U.S. the group has a 401(k) plan, a type of defined contribution scheme in the United States in which all employees
are eligible to participate after meeting eligibility requirements. Participants may elect to have a portion of their salary
deferred and contributed to the scheme up to the limit allowed by applicable income tax regulations. The Company has
made a matching contribution to the scheme for the year ended 31 December 2020 and 2019.

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

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

2. Accounting Policies (continued)

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 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.

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 they compensate for service that has been provided pre-
combination. To the extent they relate to the provision of future services they are treated as an expense post-combination.

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

Intangible assets

i) Goodwill

The Group uses the acquisition method of accounting for the acquisition of a subsidiary. The consideration transferred
is measured at the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the
date of exchange. Costs directly attributable to the acquisition are expensed in the period. Identifiable assets acquired,
liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date.

In respect of business combinations that have occurred since January 2014, goodwill represents the excess of the cost of
the acquisition and the Group’s interest fair value of net identifiable assets and liabilities acquired. In respect of business
combinations prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount
recorded under US GAAP. As permitted by IFRS 1, Goodwill arising on acquisitions prior to 1 January 2014 is stated in
accordance with US GAAP and has not been remeasured on transition to IFRS. Goodwill is recognised and measured at the
acquisition date.

Goodwill is capitalised as an intangible asset at cost less any accumulated impairment losses. Any impairment in carrying
value is being charged to the consolidated statement of comprehensive income. An impairment loss recognised for
goodwill is not reversed.

Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid,
the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.

Goodwill is allocated to appropriate cash generating units (CGUs). Goodwill is not amortised but is tested annually for
impairment or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation
of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows. The
major assumptions are disclosed in note 11.

ii) Intangible assets acquired as part of a business combination

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they
satisfy the definition of an intangible asset. 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

iii) Research and development

Expenditure on research activities as defined in IFRS is recognised in the income statement as an expense as incurred.

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

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

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

iv) Amortisation rates

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

Intangible asset

Tradenames

Useful economic life

Indefinite life – not amortised

Acquired intangibles (Fortumo acquisition)

Merchant relationships

Developed technologies

Domain names

10 years

5 years

1  7 years

5 years

Internally developed software

3  6.75 years

The amortisation expense is recognised within administrative expenses in the consolidated statement of
comprehensive income.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

2. Accounting Policies (continued)

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 furniture

3 5 years on cost

Computer equipment and software

3 5 years on cost

Leasehold improvement

Right-of-use assets

6.5 years on cost

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.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short term highly liquid
investments with original maturities of three months or less. Bank overdrafts are shown with borrowings in currently
liabilities on the Consolidated statement of comprehensive income.

Restricted cash

The restricted cash does not meet the definition of cash and cash equivalents and is therefore separately disclosed in the
Group’s statement of financial position and is not part of the cash and cash equivalents for cash flow purposes. These cash
amounts are restricted as to withdrawal or use under the terms of certain contractual agreements.

Financial assets

The Group’s financial assets mainly comprise cash, trade and other receivables.

Trade 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 are 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.

A financial asset has also been recognised for the cash held into a third party escrow account that exceeds the fair
value of contingent consideration expected to be paid and that is therefore expected to be returned to the Company in
connection with the acquisition of Fortumo (see note 26.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Financial liabilities

Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. The
Group’s financial liabilities are categorised as loans and Trade and other payables.

At initial recognition,

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

• Bank borrowings 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.

Leases

IFRS 16 “Leases”’ sets out the principles for the recognition, measurement, presentation and disclosures of leases and
requires lessees to account for most leases under a single on-balance sheet model. The Group has applied IFRS 16
‘Leases’ from 1 January 2019.

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. The lease payments include fixed payments (including in-substance
fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and
amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a
purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if
the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend
on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment
occurs. 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 of machinery and equipment (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.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

2. Accounting Policies (continued)

Incremental borrowing rate

IFRS 16 Leases requires that all the components of the lease liability (as described in section 5.1. Leases) 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 analysis showed that the incremental borrowing rate as at 1 January 2019 was 8.5% which was used as discount rate
for all leases in all subsidiaries, which were acquired before 1 July 2020. The Group borrowed funds from its bankers in
June 2020 and reviewed the incremental borrowing rate to be 4.285% and applied this rate to all leases acquired after
1 July 2020.

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

Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a
financial liability. The Group’s ordinary share capital and share premium are classified as equity instruments.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Taxation

Current tax

Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules,
using tax rates enacted or substantially enacted at the balance sheet date.

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 is restricted to those instances where it is probable that taxable profit will be available
against which the difference can be utilised.

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

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

• the same taxable group company; or
• different company entities which intend either to settle current tax assets and liabilities on a net basis, or to realise

the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax
assets and liabilities are expected to be settled or recovered.

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.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

2. Accounting Policies (continued)

Critical accounting estimates and judgements
In preparing these Consolidated financial statements, the Group has made its best estimates and judgements of certain
amounts included in the financial statements, giving due consideration to materiality. The Group regularly reviews these
estimates and updates them as required. Actual results could differ from these estimates. 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 estimates 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 and matters that are inherently uncertain.

(a) Goodwill, Intangible assets acquired in a business combination

As set out in the accounting policies above, intangible assets acquired in a business combination are capitalised and
amortised over their useful lives. Both initial valuations and valuations for subsequent impairment tests are based on risk
adjusted future cash flows discounted using appropriate discount rates. These future cash flows are based on forecasts
which are inherently judgemental. Future events could cause the assumptions to change which could have an adverse
effect on the future results of the Group. Refer to note 11 for a description of the specific estimates and judgements used
including the critical accounting estimates and judgments used in the calculation of the goodwill impairment.

(b) Share-based payments

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

In recognising income tax assets and liabilities, management makes estimates of the likely outcome of decisions by tax
authorities on transactions and events whose treatment for tax purposes is uncertain. Where the final outcome of such
matters is different, or expected to be different, from previous assessments made by management, a change to the
carrying value of income tax assets and liabilities will be recorded in the period in which such a determination is made. In
recognising deferred tax assets and liabilities management also makes judgements about likely future taxable profits. The
carrying values of current tax and deferred tax assets and liabilities are disclosed separately in the consolidated statement
of financial position.

(d) Impairment of goodwill and other intangible assets

The Group has carried out an impairment review of its Identity cash generating unit (“CGU”) and recognised an impairment
loss on goodwill in the year. The recoverable amount of the CGU is based on estimates of future cash flows discounted
using an appropriate discount rate. Estimates of future cash flows are inherently uncertain as the long-term impact of the
Covid-19 pandemic on the general economy is unclear. To take account of this uncertainty, management have used the
“expected cash flow approach” which involves probability weighting several alternate scenarios.

It is possible that changes in economic conditions or deviations in actual performance from forecast could result in
a material adjustment to the carrying value of the CGU within the next financial year. The key estimates made by
management are set out in note 11. The information in note 11 also provides an indication of the amount of any further
impairment for other reasonably possible outcomes.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

3. Financial Instruments – Risk Management

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

The Group is exposed to the following financial risks:

• Market risk
• Credit risk
• Liquidity risk

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

• Trade and other receivables
• Cash and cash equivalents and restricted cash
• Trade and other payables
• Bank loans

To the extent financial instruments are not carried at fair value in the consolidated statement of financial position, book
value approximates to fair value at 31 December 2020 and 31 December 2019

Trade and other receivables are measured at book value and amortised cost. Book values and expected cash flows are
reviewed by the Board and any impairment charged to the consolidated statement of comprehensive income in the
relevant period

Trade and other payables are measured at book value and amortised cost.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

3. Financial Instruments – Risk Management (continued)

Financial instruments by category

Financial assets

Cash and cash equivalents

Restricted cash

Total Cash

Accounts receivable (net)

Other receivables (including contingent asset)

Note receivable from shareholder

Total other financial assets

31 December 2020
$’000

31 December 2019
$’000

61,290

1,414

62,704

86,360

3,100

89,460

34,747

876

35,623

50,165

373

793

51,331

Cash, and other financial assets

152,164

86,954

Financial liabilities

Trade payables

Accruals

Total other financial liabilities

Bank loans (secured)

Lease liabilities

Loans and borrowings

Financial liabilities at amortised cost

31 December 2020
$’000

31 December 2019
$’000

105,376

28,135

133,511

12,250

3,178

15,428

148,939

68,128

7,799

75,927

2,098

1,723

3,821

79,748

The management of risk is a fundamental concern of the Group’s management. This note summarises the key financial
risks to the Group and the policies and procedures put in place by management to manage them.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

a) 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 is exposed to cash flow interest rate risk from bank borrowings at variable rates but with a lower floor. The
Group’s bank borrowings and other borrowings are disclosed in note 17. The interest rates for the current Boku bank
loan are based on LIBOR. LIBOR is currently expected to be phased out by the end of 2021. Various financial authorities
including the Financial Conduct Authority (“FCA”) announced that it will no longer compel the banks to submit to LIBOR
after 2021. Therefore, the availability of LIBOR post December 31, 2021 is not guaranteed and could have an effect on
the interest rates of the current loan. The management has been in discussion with its bankers and is expecting that the
current contracts will be settled at similar or equivalent rates after transition and does not expect this change to have a
material effect on the Group finances. The Group manages the interest rate risk centrally.

The following table demonstrates the sensitivity to a 1 percent change (higher only due to the fixed lower floor) to the
interest rates of the following borrowings at 31 December 2020 to the profit before tax and net assets for the period:

Bank loans

Foreign exchange risk

31 December 2020

31 December 2019

Increase/(decrease) of loss
before tax and net assets

$’000

124

$’000

+/20

Foreign exchange risk is the risk that movements in exchange rates affect the profitability of the business. The company
manages this risk through natural hedging and spot contracts.

The effect of fluctuations in exchange rates on the Euro and GBP denominated trade receivables is partially offset through
the use of foreign exchange contracts to the extent that any remaining impact on profit after tax is not material.

As at December 31, 2020, the Company had no (2019 nil) foreign currency forward contracts totalling a notional amount of
$Nil (2019 $Nil).

The Group aims to fund expenses and investments in the respective currency and to manage foreign exchange risk at a
local level by matching the currency in which revenue is generated and expenses are incurred. The Group manages all
treasury activities centrally, with the exception of the newly acquired Fortumo entities where treasury processes are in the
process of being aligned with group treasury policies and procedures.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

3. Financial Instruments – Risk Management (continued)

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

31 December 2020

Trade and other receivables

Cash and cash equivalents and restricted cash

Trade and other payables

Financial assets

10% impact - +/-

31 December 2019

Trade and other receivables

Cash and cash equivalents and restricted cash

Trade and other payables

Financial assets

10% impact - +/-

GBP
$’000

11,630

10,083

21,138

575

GBP
$’000

14,856

13,307

22,113

6,050

672

Euro
$’000

25,375

15,912

60,967

19,680

Other
$’000

46,476

21,053

Total
$’000

83,481

47,048

41,542

123,647

25,987

2,187

2,887

Euro
$’000

19,180

8,445

Other
$’000

15,198

10,308

6,882

765

Total
$’000

49,234

32,060

24,684

22,646

69,443

2,941

327

2,860

318

11,851

1,317

The impact of 10% movement in foreign exchange rate of US$ will result in an increase/decrease of total comprehensive
loss after tax and financial assets/(liabilities) of $765 thousand for December 2020 2019 $1,317 thousand).

b) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. The Group is mainly exposed to credit risk from credit sales. The Group’s net trade receivables for
the three reported periods are disclosed in the financial assets table above.

The Group is exposed to credit risk in respect of these balances such that, if one or more the aggregators or MNOs
encounters financial difficulties, this could materially and adversely affect the Group’s financial results. The Group attempts
to mitigate credit risk by assessing the credit rating of new customers prior to entering into contracts and by entering
contracts with customers with agreed credit terms.

To minimise this credit risk, the Group endeavours only to deal with companies which are demonstrably creditworthy and
this, together with the aggregate financial exposure, is continuously monitored. The maximum exposure to credit risk is the
value of the outstanding amount.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

At the reporting date, the largest exposure was represented by the carrying value of trade and other receivables, against
which $1,323 is provided at 31 December 2020 2019 $2,002. The provision represents an estimate of potential bad debt
in respect of the year-end trade receivables, a review having been undertaken of each such year-end receivable. The
Group’s customers are spread across a broad range of sectors and consequently it is not otherwise exposed to significant
concentrations of credit risk on its trade receivables.

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 to measure lifetime expected
credit losses and after taking into account customer sectors with different credit risk profiles and current and forecast
trading conditions.

The Group’s provision matrix is as follows:

31Dec-20

 60 days

61120 days

121150 days

 150 days

Total

Expected credit loss % range

95%100%

Gross debtors ($’000

82,597

1,880

1,883

1,323

87,683

Expected credit loss rate ($’000

1,323

86,360

At 31 December 2019 the Group had a provision for $2 million of which $25 thousands was utilised and $705 thousands
was fully reversed in the year – see Note 13 for full details of the movement in the year. The total provision for trade and
accrued receivable as at 31 December 2020 was $1.3 million.

31Dec-19

 60 days

61120 days

121150 days

 150 days

Total

Expected credit loss % range

Gross debtors ($’000

Expected credit loss rate ($’000

49,265

173

611

95%100%

2,117

52,166

2,002

50,165

At 31 December 2018 the Group had a provision for $1,958 of which $101 was fully written off during 2019. The total
provision of trade and accrued receivables as at 31 December 2019 was $2,002.

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

Credit risk on cash and cash equivalents is considered to be small as the counterparties are all substantial banks with high
credit ratings. The maximum exposure is however the amount of the deposit. To date, the Group has not experienced any
losses on its cash and cash equivalent deposits.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

3. Financial Instruments – Risk Management (continued)

c) Liquidity risk

Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty
in meeting its financial obligations as they fall due. The Group’s policy is to ensure that it will always have sufficient
cash to allow it to meet its liabilities when they become due. The 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 2020

Trade and other payables

Bank loans and overdrafts (secured)*

Leases liabilities

Total

*No material difference between discounted and undiscounted fair value.

31 December 2019

Trade and other payables

Bank loans and overdrafts (secured)

Leases liabilities

Total

Capital Management

Within 1 year
$’000

25 years
$’000

More than 5 years
$’000

136,779

1,438

1,425

139,652

862

10,813

1,937

13,612

Within 1 year
$’000

25 years
$’000

More than 5 years
$’000

77,995

2,098

1,914

80,007

791

1,483

2,274

The Group’s capital is made up of share capital, foreign exchange reserve and retained losses.

The Group’s objectives when maintaining capital are:

• To safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for

shareholders and benefits for other stakeholders; and

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

The capital structure of the Group consists of shareholders’ equity as set out in the consolidated statement of changes in

equity. All working capital requirements are financed from existing cash resources and borrowings.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

4. Segmental Analysis

(a) Operating Segments – primary basis

Prior to 1 Jan 2019, the Group considered that for executive management purposes, the Group had one reportable
segment - provision of a payment platform for processing payments for virtual goods and digital goods purchases.
Following the acquisition of Danal Inc on 1 January 2019, the Group revised its activities into two operating segments as
disclosed below. The segments are based on the Group’s main revenue generating activities. On 1 July 2020, the Group
completed the acquisition of Fortumo Holdings Inc and its subsidiaries. Fortumo was a competitor to Boku and operates in
the same space as the Boku existing Payments business. Therefore, the results of the Fortumo OǗ (the trading subsidiary
of Fortumo Holdings Inc) and its subsidiaries together with the existing Boku Payments business are viewed by the
management as one segment. The Group CEO and CFO review the management reports for both segments monthly
before sending the results to the Board.

The following summary describes the operations in each of the Group’s reportable segments:

Payments Segment - provision of payment platform which enables mobile phone users to buy goods and services and
charge them to their mobile phone or prepaid balance.

Identity Segment - provision of Identity services which are used to simplify transactions or combat fraud.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

4. Segmental Analysis (continued)

Operating segment information under the primary reporting format is disclosed below:

Boku Income Statement by segment for 12 months to 31 December 2020

2020

Total Payments
$’000

Total Identity
$’000

Fee Revenue

Cost of sales

Gross Profit

Administrative Expenses

Operating gain/(loss) analysed as:
Adjusted EBITDA*

Payments Revenue Adjustment (non-recurring)

Depreciation and amortisation

Stock Option expense

Goodwill impairment

Foreign exchange gains

Exceptional items (included in administrative expenses)

Operating gain/(loss)

Finance income

Finance expense

Profit/Loss) before tax

Tax expense

51,231

1,669

49,562

39,737

5,171

3,256

1,915

28,463

68,200

Total
$’000

56,402

4,925

51,477

19,175

3,908

15,267

4,725

4,010

807

1,422

9,825

649

9,246

1,469

1,191

915

5,916

4,925

20,775

241

1,048

1,422

26,548

16,723

13

26,561

1

662

17,315

1,470

Net gain/(loss) for the period attributable to equity holders
of the parent company

7,777

26,562

18,785

*Earnings before interest, tax, depreciation, amortisation, non-recurring payment revenue, stock option expense, foreign exchange gains/(losses),
impairment of goodwill and exceptional items. Management has assessed this performance measure as relevant for the user of the accounts.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Boku Income Statement by segment for 12 months to 31 December 2019

Fee Revenue

Cost of sales

Gross Profit

Administrative Expenses

Operating Profit/(loss) analysed as:
Adjusted EBITDA*

Payment Revenue adjustment (non-recurring)

Depreciation and amortisation

Stock Option expense

Foreign exchange gains/(losses)

Exceptional items (included in administrative expenses)

Operating Profit/(loss)

Finance income

Finance expense

Profit/Loss) before tax

Tax (expense)/credit

Payments
$’000

43,473

1,641

41,832

36,053

2019

Identity
$’000

6,675

3,922

2,753

9,416

12,687

5,284

3,255

3,968

6,013

112

294

5,779

432

5,403

1,653

493

758

5

123

6,663

36

6,699

2

Total
$’000

50,148

5,563

44,585

45,469

7,403

3,255

4,461

6,771

107

417

884

468

1,296

1,651

Net Profit/(loss) for the period attributable to equity holders
of the parent company

7,056

6,701

355

During 2019, an adjustment of $3,255k has been recognised in Payments revenue as a result of a change in the estimate
of transaction price for a specific customer, and for whom the performance obligations were satisfied in a previous year.
As this amount is non-recurring it has been excluded from ‘Adjusted EBITDA’, as noted on the Consolidated Statement of
Comprehensive Income and in the table above.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

4. Segmental Analysis (continued)

The net assets for each segment are disclosed below:

Net Assets by segment

Non-current assets

Property, plant, and equipment

Intangible assets

Deferred tax assets

Total non-current assets

Current Assets

Trade and other receivables

Cash and cash equivalents

Restricted cash

Total current assets

Total assets

Current liabilities

Trade and other payables

Loans and borrowings

Total current liabilities

Non-current liabilities

Trade and other payables

Loans and borrowings

Total non- current liabilities

Total liabilities

2020

Payments
$’000

Identity
$’000

Consolidated
$’000

3,749

60,252

483

64,484

92,122

61,038

1,414

153,574

5,307

5,329

1,413

252

1,665

3,771

65,559

483

69,813

92,535

61,290

1,414

155,239

218,058

6,994

225,052

135,203

2,863

138,066

1,090

12,560

13,650

1,576

1,587

5

136,779

2,874

139,653

1,090

12,555

13,645

151,716

1,582

153,298

Net assets/(liabilities)

66,342

5,412

71,754

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

(b) Geographic segment – secondary basis

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

Group Revenue by Region and Segment

Payments

Identity

Total

$‘000

Americas

APAC

EMEA

Grand Total

Dec-20 YTD

1,556

3.0%

4,847

93.7%

28,398

55.4%

21,277

41.5%

234

1.7%

4.5%

6,403

28,488

21,511

11.4%

50.3%

38.1%

51,231

100.0%

5,171

100.0%

56,402

100.0%

Group Revenue by Region and Segment

Payments

Identity

Total

$‘000

Americas

APAC

EMEA

UK/Ireland

Grand Total

Dec-19 YTD

5,573

12.8%

6,460

96.8%

19,290

44.4%

13,410

30.8%

215

3.2%

5,200

12.0%

12,033

19,290

13,625

5,200

24.0%

38.5%

27.2%

10.4%

43,473

100.0%

6,675

100.0%

50,148

100.0%

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

United States of America

Europe

Rest of the World

Total

2020
$’000

47,613

20,996

721

69,330

2019
$’000

48,841

526

963

50,330

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

5. Administrative Expenses (including exceptional items)

Audit fees - BDO LLP

Third party audit fees specific to FY 2020  EY

Taxation services (not performed by auditor)

Professional services not performed by auditor

Consultancy and compliance services

Staff costs (excluding stock option expense – note 6

Travel & entertainment

Property occupancy costs

Total IT, development and hosting

Total banking costs

Legal fees

Other costs including marketing, support & testing and other administration expenses

Operating Expenses, excluding items in Adjusted EBITDA

Depreciation of property, plant and equipment

Amortisation of intangible assets

Impairment of goodwill (Identity Business)

Foreign exchange gains

Exceptional items – impairment of investments

Exceptional items – restructuring costs

Exceptional items – acquisition costs

Share – based expenses (note 20

Total administrative expenses

2020
$’000

361

289

122

1,005

29,032

343

935

2,721

718

586

36,209

2,446

3,471

20,775

1,048

184

1,238

4,925

2019
$’000

274

318

157

730

25,434

1,859

928

1,917

240

1,120

950

33,927

2,176

2,285

107

404

6,771

68,200

45,469

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

6. Staff Costs

Wages and salaries

Short-term benefits

Social security costs

Pension costs

Other staff costs

Total staff costs

Share-based costs

Total

Other staff costs include contractor costs, relocation, recruiting and training costs for the group.

Key management personnel compensation was made up as follows:

Salaries

Short-term benefits

Social security costs

Stock option expense

Pension costs

Total

Directors’ remuneration included in staff costs:

Salaries including bonuses

Short-term benefits

Total

The information regarding the highest paid director is as follows:

Total remuneration paid

2020
$’000

24,346

1,281

2,570

269

566

29,032

4,925

33,957

2020
$’000

2,431

240

1,464

4,183

2020
$’000

1,077

1,080

2020
$’000

515

2019
$’000

20,664

1,350

1,858

397

1,166

25,434

6,771

25,435

2019
$’000

2,075

298

1,329

3,781

2019
$’000

917

921

2019
$’000

385

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

6. Staff Costs (continued)

The number of employees at the end of the period was as follows:

Management

Operations & administration

Total

7. Finance Income and Expenses

Finance income

Interest income from bank deposits

Total

Finance expenses

Interest on bank loans & overdrafts

Other interest payable (including interest paid for factoring)

Interest on lease liabilities

Amortisation of debt costs

Total

Net finance expenses

8. Income Tax

Current tax

US tax

Foreign tax

Total current tax

Deferred tax expense/(credit)

Origination and reversal of temporary differences

Total tax expense/(credit)

2020

298

305

2019

208

214

2020
$’000

2019
$’000

277

292

662

592

2020
$’000

374

376

1,094

1,470

150

288

468

412

2019
$’000

135

137

1,866

1,651

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

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

Loss before tax

Tax rate

Loss before tax multiplied by the applicable rate of tax:

US state tax

Losses recognised/(not recognised)

Expenses not deductible for tax purposes

Withholding taxes

Tax losses

Others

Total tax expense/(credit)

Deferred Tax

Net opening position

Arising from business combinations

Recognition (de-recognition) / in the year

Foreign exchange revaluation

Net closing position

The net closing position is made up of:

2020
$’000

17,315

21%

3,636

140

4,628

270

1,470

2020
$’000

1,377

1,094

30

2019
$’000

1,296

21%

272

1,498

27

1,651

2019
$’000

417

1,808

14

253

1,377

• A deferred tax liability of $227,956 2019 $448,860 This constitutes tax positions connected with the Group’s German
subsidiary in relation to available losses and the deferred tax liability associated with intangible assets acquired as part
of the legacy business combination with the group’s now German business. The difference is the amount of $260,904
used in 2020.

• The deferred asset of $482,573 2019 $1,826,570. This relates to losses primarily in UK tax jurisdictions. The difference

is the amount reversed in 2020 taking account of management re-appraising the usability of certain tax losses and
future transaction volumes through its UK incorporated entities expected to reduce profitability, as a share of contracted
and future revenues will now likely, taking account of Brexit, flow into other European companies in the group.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

8. Income Tax (continued)

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

Non- deductible Reserves

Accrued Compensation

Stock Based Compensation

Other temporary and deductible differences

Accelerated Capital Allowances

Acquired Intangibles

Unused tax credits

Unused tax losses

2020
$’000

100

161

1,857

648

1,000

245

189

30,816

2019
$’000

229

1,637

829

401

334

189

30,448

Total deferred tax assets

32,526

32,657

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. Such an annual limitation could result in the expiration of net operating loss and
tax credit carry forwards before utilisation. As the timing and extent of taxable profits are uncertain, the deferred tax asset
arising on these losses and accelerated timing differences below has not been recognised in the financial statements.

US losses and tax credit – federal and states

Non-US losses (includes US entities deemed to be under non-US tax jurisdictions)

Total

2020
$’000

181,516

5,021

186,537

2019
$’000

177,843

10,602

188,445

The unused tax losses must be utilised by various dates. German tax losses of $573,466 must be used before 2022. U.S.
federal tax losses of $176,021,081 expire in various dates through 2027. Other unused losses of $5,494,733 do not expire.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

9. Profit / Loss per Share

Loss) / Profit attributable to shareholders of the Company

Weighted average number of common shares

Basic (loss) / profit per share

2020
$’000

18,785

2019
$’000

355

273,836,772

246,752,100

0.069

0.001

Profit or Loss per share is calculated based on the share capital of Boku, Inc. and the earnings of the Group.

In 2020, due to the loss in the reporting period diluted loss per share is the same as basic loss per share. Due to the small
profit during 2019, the effect of the share options is immaterial and hence diluted profit per share is the same as the basic
profit per share in 2019.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

10. Property, Plant and Equipment

Right of use
assets

Computer equipment
& software
$’000

Office equipment and
fixtures and fittings
$’000

Leasehold
improvement
$’000

COST

At 1 January 2019

Additions

Acquisitions

Disposals

Reclassification

Exchange Adjustment

As at 31 December 2019

Additions

Acquisitions

Disposals

Exchange adjustment

At 31 December 2020

DEPRECIATION

At 1 January 2019

Acquisitions

Charge for the year

Disposals

Reclassification

Exchange adjustment

At 31 December 2019

Acquisitions

Charge for the year

Disposals

Exchange adjustment

At 31 December 2020

NET BOOK VALUE

At 1 January 2019

At 31 December 2019

At 31 December 2020

4,327

621

34

4,992

1,526

542

30

192

7,222

1,948

2,009

2,121

30

4,154

2,983

3,068

842

383

10

2

1,213

215

2

1,436

707

110

10

7

800

227

2

1,028

135

413

408

534

1,041

7

78

4

1,525

109

37

1,645

411

1,029

100

7

57

3

1,473

37

1,543

123

102

Total
$’000

1,474

4,804

1,698

22

40

7,914

2,021

566

69

234

5

184

171

363

10,666

5

120

170

193

1,188

1,058

2,176

22

4,402

2,446

69

107

6,895

286

3,512

3,771

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

The Group leases many assets including buildings and IT equipment. The information about leases for which the group is a
lessee is presented below:

Type of right-of-use assets

Balance as at 1 January 2019

Depreciation charge for the year

NBV balance as at 31 December 2019

Additions

Disposals

Depreciation charge for the year

NBV balance as at 31 December2020

Property
$’000

IT Equipment
$’000

3,881

1,578

2,303

2,182

30

1,677

2,778

1,111

431

680

443

290

Total
$’000

4,992

2,009

2,983

2,235

30

2,120

3,068

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

11. Intangible Assets

Domain
name
$’000

Developed
technology
$’000

Merchant
relationships
$’000

Trade
marks
$’000

Goodwill
$’000

Internally
developed
software
$’000

Total
$’000

COST

At 1 January 2019

Additions from acquisitions

Additions

Exchange adjustment

At 31 December 2019

Additions

140

Additions from acquisitions

1,834

Goodwill Impairment

Disposal

Exchange adjustment

At 31 December 2020

1,974

AMORTISATION

At 1 January 2019

Charge for period

Exchange adjustment

At 31 December 2019

Charge for the period

Disposal

Exchange adjustment

At 31 December 2020

NET BOOK VALUE

At 1 January 2019

At 31 December 2019

140

232

At 31 December 2020

1,742

1,856

1,918

3,774

4,343

280

8,397

1,856

384

2,240

556

2,818

1,534

5,579

9,188

110

178

9,010

7,172

794

110

17,853

23,559

327

41,085

25,068

20,775

1,242

5,388

34,535

25,477

1,575

24

6,939

2,920

1,575

529

61,058

2,920

38,417

20,775

257

2,408

16,976

110

46,620

9,694

83,771

5,655

1,193

105

6,743

1,572

672

8,987

3,533

2,267

7,989

4,418

12,069

708

10

5,116

1,252

257

2,285

115

14,239

3,471

257

759

6,175

18,212

110

17,853

41,085

46,620

970

22,466

1,823

3,519

46,819

65,559

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Management has reviewed goodwill and intangible assets on the balance sheet which mainly consist of the assets from
the acquisition of Fortumo Holdings Inc. and Danal Inc (renamed Boku Identity Inc) on 1 January 2019 and with Mopay AG
(“Mopay”) in Oct 2014.

Fortumo Holdings Inc. was acquired by Boku on 1 July 2020 for cash and restricted stock units (RSUs) for a total maximum
consideration of $45.0 million with a fair value of $42.3 million. The fair value measurement of Fortumo Holdings’ Inc.
intangible assets and goodwill arose from the purchase price allocation work which was undertaken in July 2020. As
a result, several assets have been identified and their fair value has been determined in accordance with IFRS 3. The
carrying value of the goodwill and other intangibles from the Fortumo acquisition are therefore assessed in total as part of
the Boku Payments Segment (Payments CGU.

Danal Inc (Renamed Boku Identity Inc on 1 January 2019 was founded 6 June 2006 and was acquired by Boku for a total
value of $25.1 million. The fair value measurement of Danal’s Inc intangible assets and goodwill arose from the purchase
price allocation which was undertaken in January 2019. As a result, the Identity platform and contracts were determined
to be one asset and have a fair value of $1.9 million USD as at 1 January 2019. During 2019 the two platforms (Identity
and Payments platforms) were operated independently and have independent cashflows. The carrying value of goodwill
and the platform has been allocated to the Identity segment and has been assessed against the Identity segment future
cashflows (Identity CGU.

Mopay was founded in 2000 and Boku Inc. acquired Mopay in October 2014 for a total value of $24.2 million in cash
and shares. The initial fair value measurement of Mopay’s intangible assets and goodwill arose from the purchase price
allocation which was undertaken on January 21, 2016. At 31/12/2016, it was determined that the trade names purchased as
part of the transaction have a fair value less than the carrying amount as these trade names have ceased to be used in the
Group, Therefore Management have taken the decision to write off the NBV of the trade names as at 31/12/2016.

After the merger in 2014, the Mopay business was reorganised and the main assets (customer contracts) expertise from
the Boku engineering team and are now being implemented for use by a number of Boku group entities. The carrying
value of the goodwill from the Mopay acquisition and other intangibles are therefore assessed in total as part of the Boku
Payments Segment (Payments CGU.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

11. Intangible Assets (continued)

Impairment of Goodwill

At the year-end date an impairment test has been undertaken by comparing the carrying values with the recoverable
amount of the Group’s two cash generating units (CGUs). The recoverable amount of the cash generating unit is based on
value-in-use calculations. These calculations use cash flow projections covering future periods based on financial budgets
and a calculation of the terminal value, for the period following these formal projections.

The key assumptions used for value-in-use calculations are those regarding projected cash flows, growth rates, increases
in costs and discount rates. The discount rate used was the Weighted Average Cost of Capital. The discount rate is
reviewed annually to take into account the current market assessment of the time value of money and the risks specific
to the cash generating units and rates used by comparable companies. The pre-tax discount rate used for both CGU’s to
calculate value-in-use is the weighted average cost of capital (WACC of 13.8% 2019 14.9%. Growth rates for forecasts
take into account historic experience and current market trends. Costs are reviewed and increased for various cost
pressures. The terminal value calculation for 2020 was based on growth rate of post-tax free cashflow of 2% 20192% for
each CGU.

Identity CGU During the year the Identity business revenues were impacted by Covid, this together with a lower pipeline
conversion has resulted in lower expected revenue in the near term and growth in this business unit will be delayed. As
a result, the Group reassessed the recoverability of goodwill and based on this has recorded an impairment of Goodwill
of $20.8 million. As required by IAS 36, if an impairment is identified in a CGU to which goodwill has been allocated,
the impairment is first attributed to the carrying value of the goodwill before the carrying value of any other assets are
reduced. Therefore, the full amount of the impairment has been allocated to goodwill reducing it from $23.6 million to $2.8
million.

Management analysed various scenarios which projected cash flows over the next 6 years, with a cumulative annual
growth rate of 29%, together with a terminal value using a 2% growth rate (2019 2%. The six-year projections used in the
base scenario are based on the Board approved budget which took into account the anticipated future impact of Covid-19
for FY 2021 performance. In each case a discount rate of 13.8% has been used based on management’s evaluation of the
weighted average cost of capital for the Group.

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

The determination of the recoverable amount and the resulting impairment charge is subject to significant estimates and
judgments including the cumulative average growth rate, the terminal value growth rate and the discount rate. Given the
sensitivity of the resulting impairment charge to changes in these inputs, the following table shows the impact on the
impairment charge that would result from a 2% change in each of these significant assumptions:

Decrease in cumulative annual growth rate by 2%

Increase in the WACC by 2%

Projected post tax free cash flow used for terminal value reduced by 2% to zero

Increase/Decrease)
on Impairment

$3.7 million

$2.8 million

$1.8 million)

Payment CGU Annual impairment test was also performed for the Payments business (Payments CGU which indicated
that no impairment was needed as there were no indicators of impairment for this business unit and the net present
value of future cashflows substantially exceed its carrying value by $210.2 million. Management has identified two key
assumptions for which if any of the following changes were made to these key assumptions individually, this would cause
the carrying amount of the CGU to equal to the recoverable amount of the goodwill for the year ended 31 December 2020

Projected post tax free cashflow used for terminal value reduced by

Terminal growth rate reduced from

2020

130%

2019

68%

2% to 0%

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

12. Subsidiaries

The principal subsidiaries of the Company, all of which have been included in the consolidated financial information,
are as follows:

Name

Boku Payments Inc.

Principal activity

Holding Company

Boku Network Services Inc.

Holding Company

Boku Account Services Inc.

Holding Company

Parent

Boku Inc.

Location

USA

Delaware, USA

Virginia, USA

Boku Account Services UK, Ltd.

Mobile payment solutions

Boku Account Services Inc. Virginia)

Paymo Brazil Servicios
de Pagamentos Ltd

Mobile payment solutions

Boku Network Services Inc. Delaware)

Brazil

Boku Network Services AG

Holding Company

Boku Inc.

Germany

Boku Network Services UK, Ltd

Mobile payment solutions

Boku Network Services Inc. Delaware)

Boku Network Services AU Pty Ltd

Mobile payment solutions

Boku Network Services Inc. Delaware)

Australia

Boku Network Services IN
Privates Limited

Mobile payment solutions

Boku Network Services Inc. Delaware)

India

Boku Network Services SG PTE. LTD

Mobile payment solutions

Boku Network Services Inc. Delaware)

Singapore

Boku Network Services HK LTD

Mobile payment solutions

Boku Network Services Inc. Delaware)

Hong Kong

Boku Network Services Taiwan
Branch Office

Boku Network Services Japan
Branch Office

Mopay AG Beijing Representative
Branch

Mobile payment solutions

Boku Network Services Inc. Delaware)

Taiwan

Mobile payment solutions

Boku Network Services Inc. Delaware)

Japan

Mobile payment solutions

Boku Network Services AG Germany)

China

Boku Identity Inc.

Identity solutions

Boku Inc.

Boku Mobile Solutions Ireland

Identity solutions

Boku Identity Inc.

California, USA

Boku Network Services SG PTE. LTD.

Mobile payment solutions

Boku Network Services Inc. Delaware)

Singapore

Boku Network Services HK LTD

Mobile payment solutions

Boku Network Services Inc. Delaware)

Hong Kong

Boku Network Services IE Limited

Mobile payment solutions

Boku Network Services Inc. Delaware)

Ireland

Boku Network Services Malaysia

Mobile payment solutions

Boku Network Services Inc. Delaware)

Malaysia

Fortumo Holdings Inc

Holding Company

Boku Network Services Inc. Delaware)

USA

Fortumo OU

Mobile payment solutions

Fortumo Holdings Inc

Fortumo Mobile Payments S.L

Mobile payment solutions

Fortumo OU

Fortumo Mobile Services

Mobile payment solutions

Fortumo OU

Fortumo Singapore Pte. Ltd

Mobile payment solutions

Fortumo OU

Estonia

Spain

India

Singapore

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

13. Trade and Other Receivables

Trade receivables - gross

Accrued income

Accounts receivable - gross

Less: provision for impairment

Accounts receivable - net

Other receivables

Deposits held

Sales taxes receivable

Financial asset - Contingent consideration in escrow

Deferred cost of sales

Note receivable from a shareholder

Total financial assets classified as loans and receivables

Prepayments

Total

Provision for impairment

Opening balance

Utilised during the period

Decrease) / Increase during the period

Foreign exchange movement

Closing balance

31 December 2020
$’000

31 December 2019
$’000

28,087

59,596

87,683

1,322

86,361

190

749

1,339

2,160

256

91,055

1,480

92,535

17,623

34,544

52,167

2,001

50,166

316

1,042

270

793

52,644

948

53,592

31 December 2020
$’000

31 December 2019
$’000

2,001

25

705

1,322

1,958

101

170

26

2,001

In adopting IFRS9, the Group now 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. In
adopting IFRS 9, 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. Included in the receivables balance there is a $2.16
million expected to be returned from the escrow account into which the contingent consideration related to the Fortumo
acquisition was paid.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

Financials

Notes to the Consolidated Financial Statement

14. Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents

Restricted cash

31 December 2020
$’000

31 December 2019
$’000

61,290

1,414

34,747

876

The restricted cash primarily includes e-money received but not yet paid to merchants (in transit), cash held in the form of
a letter of credit to secure a lease agreement for the Company’s San Francisco office facility.

15. Lease liabilities

Details of lease liabilities as at 31 December 2020, which includes the addition of two new leases in the year, the main
addition for the Group’s new head office in London:

Lease liabilities

1 Jan 2019

Additions

Interest expense

Payments to lease creditors

Lease liabilities as at 31 Dec 2019

Additions

Interest expense

Payments to lease creditors

Lease liabilities as at 31 Dec 2020

The maturity analysis for lease liabilities is presented below:

Lease liabilities – Maturity analysis (contractual undiscounted cash flows)

Less than one year

One to five years

More than five years

Total undiscounted lease liabilities as at 31 December

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

Property

IT Equipment

2,794

1,009

224

1,650

2,377

2,142

229

1,834

2,914

1,112

472

704

503

264

2020
$’000

1,625

1,937

3,562

Total

3,906

1,009

288

2,122

3,081

2,142

292

2,337

3,178

2019
$’000

1,914

1,482

3,396

100

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Lease liabilities included in the statement of financial position at 31 December

Current

Non-current

Amounts recognised in profit or loss

Interest on lease liabilities

Variable lease payment not included in the measurement of lease payments

Expenses related to short term leases

Expenses related to leases of low-value assets, excluding short-term leases of low-value assets

2020
$’000

1,436

1,742

2020
$’000

292

2019
$’000

1,723

1,358

2019
$’000

288

129

Depreciation of right-of-use assets (Note 10

2,121

2,009

The amounts recognised in the Consolidated Statement of Cashflows are presented below:

Amounts recognised in the statement of cashflows

Payment of principal

Payment of interest

Total cash outflows

2020
$’000

2,045

292

2,337

2019
$’000

1,868

288

2,156

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

101

Financials

Notes to the Consolidated Financial Statement

16. Trade and Other Payables

Current

Trade payables

Accruals

Total financial liabilities classified as financial liabilities
measured at amortised cost

Other taxes and social security costs

Accrued tax on issued stock options

Other payables

Deferred revenue

Total

Non-current

Accrued taxes on issued stock options

Total

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

17. Loans and borrowings

Current

Bank loans and overdrafts (secured)

Lease liabilities

Total

Non-current

Bank loans

Lease liabilities

Total

31 December
2020
$’000

31 December
2019
$’000

105,376

28,135

68,128

7,799

133,511

75,927

1,353

1,466

444

327

1,252

489

136,779

77,995

862

791

31 December
2020
$’000

31 December
2019
$’000

1,438

1,436

2,874

10,813

1,742

12,555

2,098

1,723

3,821

1,358

102

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

www.boku.com

Principal terms and the debt repayment schedule of the Group’s loan and borrowings are as follows:

In December 26, 2019, the Group repaid in full ($2,000,000 the existing Loan and Security Agreement (the Agreement)
and entered into an overdraft agreement for £5,000,000 for 3 years. At 31 December 2019 the Group had drawn
£1,600,000 $2,098,000 USD under the agreement. The agreement has been repaid in full on the 9 January 2020 and has
not been used since.

On 26 June 2020 the Group entered into a loan agreement with its bankers for $20 million to finance the acquisition of
Fortumo Holdings Inc, and its subsidiaries on 1 July 2020. The loan was structured as a $10 million term loan repayable in
4 years and $10 million revolving facility. The revolving facility has been paid down by $7 million by 31 December 2020.
Borrowing costs of $500,000 were incurred and are amortised over the life of the loan.

Reconciliation of liabilities arising from financing activities

2019

Cash flows

Non-cash changes ($'000

Short-term borrowings

Long-term borrowings

Long-term lease liabilities

Short-term lease liabilities

Total liabilities from financial activities

$'000

2,098

1,723

1,358

5,179

563

10,813

2,337

7,913

Reconciliation of liabilities arising from financing activities

Converted
to shares

Foreign
Exchange
Movement

Lease
Liabilities
IFRS 16

2020

$'000

97

18

1,438

10,813

2,068

1,436

384

1,742

115

2,452

15,429

2018

Cash flows

Non-cash changes ($'000

$'000

Converted
to shares

Foreign
Exchange
Movement

Lease
Liabilities
IFRS 16

2019

$'000

Short-term borrowings

2,150

150

Long-term lease liabilities

Short-term lease liabilities

Total liabilities from financial activities

2,193

150

2,098

1,358

1,680

1,358

1,723

3,038

5,179

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

103

Financials

Notes to the Consolidated Financial Statement

18. Share Capital

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

Number of shares
issued and fully
paid
‘000

31 December
2020
$’000

Number of shares
issued and fully
paid
‘000

31 December
2019
$’000

252,335

23,600

2,724

8,907

287,566

223,885

23,699

4,751

252,335

Common stock of $0.0001 each

Opening balance

Issue of new ordinary shares

Shares issued to Danal Shareholders

Exercised stock options

Closing balance

Common Stock

At 31 December 2020, the Company had 287,566,248 2019 252,335,207 common shares issued and outstanding.

19. Reserves

The share premium disclosed in the consolidated statement of financial position represents the difference between the
issue price and nominal value of the shares issued by the Company.

Retained 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.

Cash flow hedging reserve contains changes in un-realised gains or losses on the valuation of derivatives designated as
cash flow hedges at year-end.

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

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20. Share-based Payment

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

1. 2009 equity incentive plan (2009 Plan) for the granting of stock options (incentive or non-qualified), restricted stock

awards (RSA and restricted stock units (RSU. No options are available to be issued under this plan as at 31 December
2020 or 2019.

2. 2009 equity UK sub-plan (2009 UK plan) under the terms of the above plan for the granting of stock options and

restricted stock units for qualifying participants who are resident in the United Kingdom. No options are available to be
issued under this plan as at 31 December 2020 or 2019.

3. 2009 non-plan (not part of the above 2009 plan) for the granting of share options to purchase 897,000 2017 897,000
common shares at $0.022 2016 $0.022 per share. These options vest with terms ranging from being fully vested at
grant date to vesting over four years with a one-year cliff, where 25% of the options vest. The options expired in April
2019. The shares have been exercised in full during the year and there are no options outstanding as at 31 December
2019 for 31 December 2020.

4. 2009 BNS options (not part of the above 2009 plan) for the granting of share options to purchase 182,000 2017

182,000 common shares at $0.207 2016 $0.207 per share in connection with the acquisition of BNS in June 2009.
The options expired in June 2019. There are no options outstanding as at 31 December 2020.

5. 2017 Equity Incentive Plan (new plan started on the 7 November 2017 for the granting of stock options and restricted
stock units (RSUs). The Group has reserved 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. There are 1,112 options (2019 1,281 and 8,962 2019
7,888 RSUs outstanding as at 31 December 2020.

Options under the 2017 Plan

Options under the 2009 Plan and UK plan may be outstanding for periods of up to ten years following the grant date.
Outstanding options generally vest over four years and may contain a one-year cliff, where 25% of the options vest. Stock
options with graded vesting is based on the graded vesting attribution approach, whereby, each instalment of vesting is
treated as a separate stock option grant, because each instalment has a different vesting period.

RSUs under the 2017 Plan

RSUs under the 2017 Plan may be outstanding for periods of up to five years following the grant date. Outstanding RSU
grants generally vest over three years in three equal portions.

Performance-based restricted stock units (RSU

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

Share-based expense for RSUs is based on the fair value of the shares underlying the awards on the grant date and
reflects the estimated probability that the performance and service conditions will be met. The share-based expense is
adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions until
the vesting date. Performance-based RSUs vest after three years of issue, in one 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.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

105

Financials

20. Share-based Payment (continued)

Restricted stock awards (RSA

RSAs are subject to repurchase based upon the terms of the individual restricted stock purchase agreements. These
repurchase rights lapse over the vesting term of the individual award, generally over three to four years. There are no
restricted stock award outstanding.

Options under the 2009 Plan and 2009 UK plan

Stock options with graded vesting is based on the graded vesting attribution approach, whereby, each instalment of
vesting is treated as a separate stock option grant, because each instalment has a different vesting period.

2009 non-plan options

The 2009 non-plan options vest with terms ranging from being fully vested at grant date to vesting over four years with a
one-year cliff. The options expired in April 2019. Share-based expense in connection with the grant of Non-Plan options
was not material in 2016 and 2017. In 2018 all options were exercised. There are no outstanding options at 31 December
2019 or 31 December 2020.

BNS plan options

In connection with the acquisition of BNS in June 2009, the Company granted options to purchase 182,000 common
shares at a weighted-average exercise price of $0.207 per share (BNS Options). These options granted were separate
from the 2009 Plan. The options expired in June 2019. A small amount of options were cancelled in 2018. There was no
stock option activity related to these options in 2017. There are no shares outstanding as at 31 December 2019 or 31
December 2020.

The options activity under the 2009 Plan and its sub- Plans before 2017 (including RSA and RSU are as follows:

Available
2009 Plan

Number of
options
‘000

2009 Plan
(excl RSUs)

Number of
options
‘000

WAEP1

2009 Plan
(only RSUs)

Number of
RSUs
‘000

BNS Plan
Options

Number of
options
‘000

At 1 January 2019

Exercised

Cancelled

At 31 December 2019

Exercised

Cancelled

At 31 December 2020

17,751

1,894

164

15,693

5,224

2,163

8,306

$0.444

1,959

$0.269

1,801

$0.258

$0.268

$0.346

$0.281

$0.327

157

157

3

32

1 WAEP  weighted average exercise price
*RSUs are always granted at zero exercise price

WAEP1

Total

Number of
options
‘000

$0.20

19,745

0.35

3,699

196

$0.35

15,850

5,381

2,163

8,306

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2009 Plan

Outstanding options at reporting end date:

December 2020

December 2019

- total number of options (including RSA & RSU

8,399

15,943

- weighted average remaining contractual life (all except 2017 Plan)
(years) (excluding RSU and RSA

- weighted average remaining contractual life – RSU (years)

Vested and exercisable (‘000

- weighted average exercise price

- weighted average remaining contractual life – all plans (excluding RSU and RSA

Weighted average share price exercised during the period (excluding RSA and RSA

Weighted average fair value of each option granted during the period (excluding RSA and RSU

Vested and exercisable – RSU and RSA

Share-based expense for the period (‘000

4.43

8,275

$0.384

4.40

$0.350

$24

5.05

0.25

15,679

$0.357

4.91

$0.360

157

$242

The following information is relevant in the determination of the fair value of options (excluding RSA and RSU granted
during the period under the equity- settled share-based remuneration schemes operated by the Group.

2009 Plan

Option pricing model used

Weighted average share price at grant date (dollar)

Exercise price (options only)

Weighted average contractual life (years)

Weighted expected volatility 

Expected dividend growth rate

Weighted average Risk-free interest rate

December 2017

Black-Scholes

$0.370

5.82E* NE*)

45% E* NE*)

1.9% E* NE*)

1Weighted average contractual life represents the period of time options are expected to be outstanding and is estimated considering vesting terms and
employees’ historical exercise and post-vesting employment termination behavior.
Expected volatility is based on historical volatilities of public companies operating in the Company’s industry.
The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.
*E  employees NE  non-employees

The fair value of each option 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).

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

107

Financials

20. Share-based Payment (continued)

The options activity under the 2017 Plan (including options and RSU are as follows:

Options available
‘000

4,432

19,766

6,894

2,241

19,545

11,163

6,393

3,402

27,717

Options
‘000

1,386

40

65

1,281

39

130

1,112

WAEP1

$1.205

At 1 January 2019

Authorised

Granted

Exercised

Cancelled

At 31 December 2019

Authorised

Granted

Exercised

Cancelled

At 31 December 2020

2017 Plan

Outstanding options at reporting end date:

- total number of options (excluding RSUs) (‘000

- weighted average remaining contractual life (excluding RSUs) (years)

- weighted average remaining contractual life – RSUs (years)

Vested and exercisable (‘000

- weighted average exercise price

- weighted average remaining contractual life (excluding RSU (years)

Weighted average share price exercised during the period (excluding RSUs)

Weighted average fair value of options granted during the period (excluding RSU

Vested and exercisable – RSUs

Share-based expense for the period (‘000

RSUs
‘000

4,182

6,894

1,012

2,176

7,888

6,393

1,918

3,402

8,961

WAEP1

$2.24

Total
‘000

5,568

6,894

1,052

2,241

9,169

11,163

6,393

1,957

3,532

10,073

December 2020

December 2019

1,112

6.91

6.85

$1.205

6.91

$0.44

793

$4,290

1,281

8.01

6.07

$1.205

8.01

$0.44

1,012

$5,229

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The following information is relevant in the determination of the fair value of options (excluding RSU’s) granted during
the period under the equity- settled share-based remuneration schemes operated by the Group. Only RSUs were
granted in 2020.

2017 Plan

Option pricing model used

Weighted average share price at grant date (dollar)

Exercise price (options only)

Weighted average contractual life (years)

Weighted expected volatility 

Expected dividend growth rate

Weighted average Risk-free interest rate

December 2018

Black-Scholes

$1.205

9.05 years

32.66%

2.49%

Weighted average contractual life represents the period of time options are expected to be outstanding and is estimated considering vesting terms and
employees’ historical exercise and post-vesting employment termination behavior.

Expected volatility is based on historical volatilities of public companies operating in the Company’s industry.

The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.

Warrants for ordinary shares

A 5-year warrant to purchase 1,634,699 Boku shares at an exercise price of $1.8352 USD per share, exercisable at any time
during the 5-year term was issued as part of the Danal acquisition, on 1 January 2019. This warrant was valued using the
Binomial Lattice Model using the following inputs:

a) Term: 5 years
b) Starting share price: $0.8982 USD
c) Expected Annual Volatility: Used 5-year comparable companies equity volatilities from Capital IQ 26.6%
d) Risk Free Rate: Five-year US risk-free rate (2.51%
e) Strike Price: $1.8352 USD.

Using the inputs above the warrant was valued at $94,606 USD and accounted as part of the purchase consideration as
an equity instrument and credited to other reserves until such time when it is exercised when it will be reclassified to the
share premium account.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

109

Financials

20. Share-based Payment (continued)

Reconciliation of share-based payment expense

2009 Plan

Options

RSU’s

2017 Plan

Options

RSU’s

Total share-based expense (excluding national insurance)

National insurance accrued

National insurance paid in the year (see Note 4

Total share-based payment charge

21. Dividends

No dividends were declared or paid in any of the periods.

December 2020
$000’s

December 2019
$000’s

154

4,136

4,313

159

453

4,925

152

5,077

5,471

1,067

233

6,771

110

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22. Cash Generated From Operations

Loss) /profit after tax

Add back:

Tax expense/ (credit)

Amortisation of intangible assets

Depreciation of property, plant and equipment

Restructuring write-offs

Finance income

Finance expense (includes interest on lease liabilities)

Exchange (gain) /loss

Employer taxes on stock option (accrual)

Adjustment for previous year cash items

Impairment of goodwill

Share based payment expense

Cash from operations before working capital changes

Increase)/ Decrease in trade and other receivables

Increase / Decrease) in trade and other payables

Year ended
31 December
2020
$’000

Year ended
31 December
2019
$’000

18,785

355

1,470

3,471

2,446

158

70

662

3,130

159

20,775

4,313

11,469

9,545

29,605

1,651

2,285

2,176

56

468

1,067

4,048

5,471

6,131

11,047

8,127

Cash generated from operations

31,529

9,051

23. Related party transactions

In 2020, the Group has been remitted $100,206,645 2019 $151,336,427  from 4 suppliers) in net payments from 5
suppliers who are shareholders of the Company. At December 31, 2020, the Company had receivables of $12,404,487
2019 $20,459,254 due from these companies.

A director repaid in full a promissory note, issued to him in 2013, in the amount of $793,000.

24. Ultimate controlling party

There is no ultimate controlling party of the Company.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

111

Financials

25. 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 2020 and 2019.

26. Business Acquisition

On 1 July 2020, Boku completed the acquisition of Fortumo Holdings Inc., a United States incorporated private holding
company and its subsidiaries from several investors for a total maximum consideration of $45 million, which included
$4 million of net working capital. Of the $45.0 million purchase price, $5.4 million is subject to Fortumo meeting EBITDA
performance criteria in the 12 months period to 30 June 2021 and this amount has been placed into an escrow account by
Boku. Boku raised $25 million USD in a placing of shares in the UK public markets and borrowed $20 million repayable over
4 years to fund the acquisition (please refer to the CFO report for more details).

Fortumo operates in the Direct Carrier Billing (‘DCB’) market with customers in Europe and Asia, focusing on the emerging
markets. It is headquartered in Estonia, with 77 employees. Since inception, it has enabled user acquisition, monetisation
and retention for digital service merchants through its Payments platform.

The acquisition is a significant step in Boku’s global DCB growth strategy, bringing together the two most profitable
companies in the DCB market with complementary capabilities and customer bases. The acquisition cements the
Group’s positioning as a leading global mobile payment and mobile identity solutions company. Fortumo primarily focuses
on providing mobile payment solutions to over 400 small-to-medium sized enterprises, but also services some larger
merchants including Google, Amazon and Tencent.

The combination of Boku and Fortumo created an enlarged and differentiated customer base. Fortumo benefits from
Boku’s direct connections in the Americas, Europe and Asia and Boku benefits from Fortumo’s direct connections in Asia,
including Vietnam and Indonesia and their wider network. Boku considers this to be key in its strategy of expansion into
key growth markets.

The combination of Boku’s and Fortumo’s platform is expected to drive efficiencies through the utilisation of Fortumo’s
semi-automated onboarding and settlement and their focused platform for small and medium enterprise merchants.

The senior management and wider team within Fortumo have a strong cultural fit with Boku, strengthening Boku’s
management capabilities further. Fortumo has an experienced technical team who complement Boku’s existing technical
team.

112

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The purchase consideration included cash, company restricted stock and contingent consideration, as follows:

Consideration

Maximum consideration per SPA

Cash

Contingent consideration*

Company RSUs**

Total purchase price consideration

Per agreement
$'000

45,000

37,753

5,400

1,847

45,000

Fair value
$'000

n/a

37,753

3,240

1,340

42,333

As part of the merger agreement, Boku settled in cash all fully vested but unexercised options. The unvested Fortumo
options and RSUs were replaced with Boku RSUs representing the same market value of the unvested Fortumo options on
the acquisition date.

*The contingent consideration of $5.4 million was paid on the date of acquisition into an escrow account. A payment from this escrow account will be
made to the shareholders of Fortumo based on EBITDA achieved for 1 year period to 30 June 2021. The amount payable is a percentage of the $5.4 million,
ranging from 0% to 100% for an EBITDA achievement between €2.0 million to €4.3 million. The fair value included the table above was calculated using the
expected returns approach and the difference was recorded as a financial asset. The final value will be calculated at 30 June 2021 at the end of the earn-
out period.

** The RSUs consideration relates to Boku Inc RSUs issued to employees in exchange for the existing options and RSUs in Fortumo Holdings Inc., which
were part-vested as at the acquisition date. Given that these were options and RSUs with a remaining term and exercise price, the total value of these
options at the valuation date was calculated using the Black Scholes model.

Stock code: BOKU

Boku Inc Annual Report and Accounts for the year ended 31 December 2020

113

Financials

26. Business Acquisition (continued)

Details of the fair value of the purchase consideration of Fortumo Holdings Inc., the net assets acquired, and goodwill are
as follows:

Cash consideration

Company (Boku) RSUs

Contingent Consideration

Total purchase price (fair value)

Trade and other receivables

Cash and cash equivalents

Prepaid expenses and other assets

Property, plant and equipment*

Deposits held

Trade and other payables

Lease liabilities

Tax payable

Domain Name - Fortumo

Technology platform (Fortumo)

Customer contracts (Fortumo)

Goodwill

Fair value of net assets acquired

$’000

37,753

1,340

3,240

42,333

25,703

6,558

566

28,260

534

270

1,834

4,343

7,172

25,068

42,333

* The property, plant and equipment include $542,000 right-of-use assets.

Deferred tax was deemed not applicable as in Estonia tax is charge on distributions not on profits. The identified intangible
assets are assumed to reside in Estonia from the perspective of a hypothetical market participant. Tax amortisation benefit
is not applicable for intangible assets residing in Estonia. As a result, no deferred taxes have been included in the fair
valuation of the intangible assets.

The cost of acquisition has been expensed during 2020 and has been included in exceptional costs in the statement of
comprehensive income for the twelve-month ending 31 December 2020. The share issue costs have been recorded in
equity and the cost incurred in obtaining the loan used to pay for the acquisition have been capitalised and amortised over
the life of the loan.

27. Post balance sheet events

There have been no material post balance sheet events.

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Boku, Inc.
Stock Code: BOKU