Loop Industries, Inc. Annual Report 2017

FY2017 Annual Report · Loop Industries, Inc.

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Annual Report &
Accounts 2017

We remain focused
on helping our
customers have a
fundamentally better
experience on their
important, day-to-
day remote meetings.

Contents

Meet better. Meet LoopUp.

02-17

Strategic Report

18-29

Governance

30-67

Financial Statements

02 Performance Highlights and Key Performance Indicators
04 Why We Exist
05 Product Attributes and Overview
08 Our Pods
09 Our People and Culture
10 Chief Executive Officers’ Statement and

Strategic Performance
Strategic Priorities

12
14 CFO’s Review
16 Principal Risks and Uncertainties

18 Board of Directors
20 Chairman’s Statement
21 Corporate Governance Report
23 Audit Committee Report
24 Nomination Committee Report
25 Remuneration Committee and Remuneration Report
27 Directors’ Report

Independent Auditor’s Report

30
36 Consolidated Statement of Comprehensive Income
37 Consolidated Statement of Financial Position
38 Company Statement of Financial Position
39 Consolidated Statement of Changes in Equity
40 Company Statement of Changes in Equity
41 Consolidated Statement of Cash Flows
42 Company Statement of Cash Flows
43 Notes to the Financial Statements
67 Company Information and Corporate Advisers

LoopUp Group plc | Annual Report & Accounts 201702

Strategic Report
Performance Highlights and
Key Performance Indicators

Strong, efficient growth

Strategic Report
Performance Highlights and
Key Performance Indicators

Financial highlights

Adjusted* revenue growth

36%

FY2016: 39%

Adjusted* gross margin growth

220BPS

FY2016: 250BPS

Adjusted* EBITDA growth

Net cash

161%

FY2016: 1015%

£2.9m

FY2016: £2.2m

Adjusted* revenue (£m)(1)

Adjusted* Gross margins (%)(2)

Adjusted* EBITDA (£m)(3)

Adjusted* operating profit (£m)(4)

5
7
1

8
2
1

2
9

8
6

9
4

0
0
7

2
.
1
7

0
2
7

5
4
7

7
6
7

5
3

3
.
1

1
.
0

8
.
1
-

7
0

3
0

3
.
1
-

8
.
1
-

8
2
-

* Adjusted to exclude discontinued technology licensing (BT) line of business

(since November 2016).

1. Total 2017 revenue £17.5m (2016: £13.6m)
2. Total 2017 gross margin 76.7% (2016: 75.9%)

3. Total 2017 EBITDA £3.5m (2016: £2.0m)
4. Total 2017 operating profit £0.7m (2016: £0.4m)

Business economics KPIs

Net negative churn

5.3%

FY2016: 8.3%

New ARR per Pod

£472k

FY2016: £509k

LoopUp experienced negative net churn – i.e. net growth –
in our established base of customers that are at least
one year old. Negative net churn is the combination of our
5% gross revenue loss rate with our ‘upsell’ rate of
approximately 10% in retained customers.

Pods are LoopUp’s business acquisition teams (for more,
see: Our Pods). In 2017, LoopUp had an average of eight
Pods. Each Pod cost £483k on a fully loaded basis (FY2016:
£490k) and delivered £472k in new annual recurring revenue
(ARR), which while maintained, implies a circa 20-year
expected lifetime over which this revenue would recur.

Product KPIs

LoopUp’s streamlined and intuitive design ensures that
people actually use its carefully selected features, without
the need for any training.

Our users are now no longer dialling in to their remote
meetings 75% of the time, and 78% are leveraging LoopUp
for Outlook, our Microsoft Outlook® add-in, and/or the
LoopUp mobile app.

Percentage of meetings
where LoopUp users no
longer dial in

Percentage of LoopUp
users utilising LoopUp for
Outlook and/or LoopUp
for iOS or Android

75%

78%

Source: 2016 and 2017 new user cohorts.

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 2017
04

Strategic Report
Why We Exist

Strategic Report
Product Attributes and Overview

Fixing the fundamental problems
of remote meetings

Giving the everyday user a premium
meetings experience

Conference calls have
become an important
facet of everyday business,
now accounting for 50%(1)
of all voice communication.
And yet after 30 years
of innovation, nearly
70% of enterprise users
are still dialling in with
phone numbers and
access codes(2). They’re
not using any software at
all for a better experience.

The time-wasting frustrations of
dial-in are all too familiar: “That
access code isn’t recognised.”
“Who just joined?” “Who is it with
all the background noise?” Not to
mention the security connotations.
Research shows that people waste
an average of 15 minutes on a typical
conference call getting things started
or dealing with distractions throughout.
That equates to more than £26bn of
time wasted(3) in the UK and US alone.

So why does dial-in prevail? Certainly,
it’s not because dial-in provides a
better experience. The answer lies in
the way people tend to adopt software.
For most, this is a process of trial and
error over time. As host of a remote
meeting, however, you’re live in the ’hot
seat’ with multiple guests. The situation
simply isn’t conducive to trial-and-
error-based learning. The last thing
you want is for anything to go wrong.

Dial-in may well be a poor experience,
but it’s the safe bet. Plenty of feature-
rich software products have tried
to drag conferencing out of the
‘dark ages’. And they’ve had some
success with tech-savvy early
adopters and specialist user groups,
such as IT and Training teams.

But, none have ‘crossed the chasm’
into the majority of professionals who
are intimidated rather than impressed
by their bells and whistles. As a result,
most users continue to play it safe,
trudging on with the poorer experience
of dial-in. IT decision-makers
remain frustrated as well, paying for
software licences that go unused.

Rather than trying to
wow early adopters with
a myriad of features,
LoopUp takes a
minimalist and
prescriptive approach
to its product strategy
and design.

LoopUp is a premium remote meetings
solution specifically designed for
the majority of professionals – the
risk-averse mainstream, who need
something that just works. We
think this is essential if you’re to
entice the 70% away from dial-in.

LoopUp doesn’t overwhelm users
with features and believes ‘less
is more’ when it comes to remote
meetings. Our minimalist interface is
designed to guide users through an
intuitive experience, with no training
required. We focus on delivering
a reliable, high quality experience
on every call, in terms of both
audio quality and visual context.

Our users are now foregoing dial-in
75%(1) of the time. Instead, LoopUp
calls out to them on a phone of their
choice and then naturally guides them
to a helpful visual interface where

they can see ‘who just joined’ and
‘who’s speaking.’ Whether you’re
creating a first impression, negotiating
a deal, or connecting with colleagues,
LoopUp keeps you focused on the
business at hand, not the meeting.

LoopUp is a software-as-a-service
product offered on both pay-as-you-
go (PAYG) and monthly subscription
licence basis. LoopUp targets
mid-to-large enterprises across a
broad variety of industries, as well
as SMEs in professional services
sectors including law, banking,
private equity, consulting and PR.

Our online fulfilment capability
also allows interested parties to
sign up for a free trial and ongoing
payment by credit card via our
corporate website. Our customers
predominantly favour PAYG, as do we.

15minutes wasted

(out of 38-minute average
conference call)

50%

of conference callers
consider it the norm
not to know who is on
their conference calls

An exceptional experience
Streamlined and intuitive,
no training required

For the enterprise
Quality, security, and
reliability come first

That works where you work
Easily integrates with
everyday collaboration tools

1. Wainhouse Research survey of IT decision makers and end users, 2017.
2. Sapio Research survey to 1,000 frequent conference callers, commissioned by LoopUp, 2017. Users are deemed ‘enterprise’ in companies with >1,000 employees (n = 520)
3. Estimate derived from overlaying data from Office of National Statistics and Bureau of Labor Statics.

1. Based on new LoopUp users provisioned during both FY2016 and FY2017.

LoopUp Group plc | Annual Report & Accounts 2017

Strategic Report
Product Attributes and Overview

LoopUp was an obvious
choice for us for a
number of reasons, most
importantly, we’re getting
a better product for the
price. It’s simple to use,
and the visual interface is
clean and user-friendly.
Hilary Grieve
Corporate Administration Manager,
Kia Motors America

LoopUp has done to
conferencing what Nest
did to thermostats. It’s
conferencing reimagined
– exactly how you want
it to be, without knowing
what you wanted.
Robin Murray
Partner, Adams Street Partners Inc.

LoopUp has far exceeded
my expectations, a
global service that is
convenient, quick and
intuitive, this has made
conferencing a whole
lot easier for all users.
Ian Stewart
Telecommunications Specialist,
Travelex

LoopUp has changed
our organisation’s mind
on conference calls. It is
simple to use yet slick,
stable with fantastic
customer service.
Michael Walsh
Global Markets COO,
Allied World Assurance

Strategic Report
Our Pods

Strategic Report
Our People and Culture

Our innovative Pod structure

The DNA of LoopUp

LoopUp ‘Pods’ structure
is central to the way
in which we conduct
our new business
acquisition activities.
Each Pod is comprised
of a six-person team,
working as one unit
toward a common
goal: three business
development associates,
two sales executives,
and one account
management executive.

It drives a collaborative ‘best
foot forward’ culture and is also
relatively self-policing. Pods are
highly scalable and, along with our
product differentiation, underpin our
consistency and predictable growth.

They work to shared processes and
metrics and are incentivised solely as
a team on the basis of new recurring
revenue brought into the business.
Pod members are recruited exclusively
with no prior sales experience and
are trained intensively to LoopUp
methods and promoted up through
the team as they perform.

Unlike traditional commercial structures,
the Pod make-up promotes efficiency
between business development, sales
and account management activities.

LoopUp is headquartered
in London, with offices in
San Francisco, New York,
Boston, Sydney, Hong
Kong and Barbados. We
have regional round-the-
clock customer support
teams and data centres in
Europe, North America
and Asia-Pacific.

For more than 15 years, we have been
working to ease the common frustrations
of the everyday dial-in conference call.

Andrew Birch

In the world of remote meetings, adding
value usually means slashing prices or
introducing a laundry list of specialist
features. At LoopUp, it means delivering
an experience that exceeds expectations
and that you can count on without fail.

And, we look to deliver this experience
throughout every aspect of our service,
in every department, across every region.

We are a team of self-starting individuals,
who strive to make a positive impact on
the everyday business that the majority
of users conduct. Most of our staff join
as graduates, entering both commercial
and technical roles. While some people
will move up in the classic sales role,
others move on to become account
managers and helping to rollout
LoopUp once a sale is closed, and
some move into operations roles.

Sr. Director, Global Sales
London
Eight years

Andrew joined LoopUp as a
Business Development Associate
in September 2010, a new graduate
from university. He quickly progressed
through the pod structure into Sales
Executive, then Pod Lead, where he
coordinated all aspects of the sales
process from initial prospect contact
to new customer on-boarding. He now
oversees sales operations in both
the UK and Australia Pods, out of the
company’s London headquarters.

He has also taken on a mentorship
role as global lead for sales training
standards, ensuring consistency
across teams in all of the LoopUp
regional offices.

Business
Development
Book

Sales

Account
Management
On-board

Pod responsibilities
Appointment setting for
customer meetings; prospect
research, vetting and follow-up.

Pod responsibilities
Product demonstrations, understanding
key challenges and initiatives for
potential buyers, negotiations, order
form completions.

Pod responsibilities
Client on-boarding, customer
relationship management;
referrals; optimising product
adoption and usage.

LoopUp has been a great place of growth for me on both a
professional and personal level. They truly invest in individuals
and have helped me develop not just an employee, but also as
a team leader and mentor. I’m excited for what’s on the horizon.
Andrew Birch

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 201710

Strategic Report
Chief Executive Officers’ Statement
and Strategic Performance

Continued, strong and efficient growth

We are pleased to report
another period of robust
business performance
during financial year 2017,
maintaining our track
record of consistently
strong and efficient
revenue growth.

On a constant currency basis, LoopUp
Revenue (excluding the discontinued
BT technology licensing revenues
of £0.7m in FY2016) grew by 33.5%
in FY2017, compared to 31% in each
of FY2016 and FY2015. Like-for-like
gross margin improved by 220 basis
points to 76.7%, and profitability has
developed well further down the
P&L, with LoopUp EBITDA growing
by 161% to £3.5m, and diluted EPS
growing by 722% to 4.4 pence.

Our performance continues to be
driven by both our differentiated
competitive positioning and our
efficient and scalable team-based
‘Pods’ organisational structure for new
business acquisition, each of which
is discussed in greater detail below.

Market positioning and
competitive strategy
At the heart of the Group’s consistent
and efficient growth is our market
positioning and competitive strategy.
A recent survey of 1,000 frequent
conference callers, commissioned
by LoopUp, showed that 68 percent
of enterprise conference callers are
still ‘dialling in’ to calls with phone

Looking ahead into 2018, we continue to see
strong demand for the LoopUp product and
we remain confident in our ability to deliver
future growth.
Steve Flavell and Michael Hughes

numbers and access codes. They’re
not using any software at all for
a better meeting experience.

This seems to fly in the face of the all
too common time-wasting frustrations
associated with dial-in conferencing:
“That access code isn’t recognised.”
“Who just joined?” “Who is it with
all the background noise?”

We don’t overwhelm
users with features
and believe ‘less is
more’ when it comes
to remote meetings.

Respondents thought that 15 minutes
were wasted on a typical call getting
the meeting started and dealing
with distractions. That’s more
than a third of the time the world
spends on conference calls.

The security connotations are arguably
more concerning still. Over half of the
respondents considered it quite normal
not to know exactly who’s on their
conference calls. With the experience
clearly so far from perfect, why do
the majority persist with dial-in rather
than embracing software alternatives
that might offer a better experience?

The answer, LoopUp believes, lies
in the way people tend to adopt
software. For most, this is a process of
trial and error over time. As host of a
remote meeting, however, you’re live
in the ’hot seat’ with multiple guests.
It simply isn’t conducive to trial-and-
error-based learning. The last thing
you want is for anything to go wrong,
and while dial-in may well be a poor
experience, at least people are used to
it. Everyone can dial a phone number
and punch in an access code.

Plenty of software companies have
introduced feature-rich products to
try and drag conferencing out of the
dial-in dark ages. And they’ve had
some success with tech-savvy early
adopters and specialist user groups,
such as IT and Training teams. But,
none has ‘crossed the chasm’ into the
mainstream majority, where bells and
whistles can be intimidating rather than
impressive. The majority continue to
play it safe with dial-in; their meeting
experience remains poor; and IT
decision-makers remain frustrated by
the meagre adoption of ‘better’ options.

LoopUp takes a contrarian approach.
Rather than trying to wow early
adopters, LoopUp is specifically
designed for the mainstream majority
but with a significantly better experience
than dial-in. In the risk-averse world
of remote meetings, we believe this
is essential if we’re to entice the
majority away from dial-in. We don’t
overwhelm users with features and
believe ‘less is more’ when it comes
to remote meetings. Our minimalist
interface is designed to guide users
through an intuitive experience,
with no training required. We focus
on delivering a reliable, high quality
experience on every call, in terms of
both audio quality and visual context.

And it’s working. Our users are now
foregoing dial-in 75%(1) of the time.
Instead, LoopUp calls out to them
on a phone of their choice and then
naturally guides them to a helpful
visual interface where you can see
‘who just joined’ and ‘who’s speaking.’
Finally, dial-in can fade into the
background, bringing a new level
of visibility and security to light.

Continued efficient growth
Our Pods have continued to operate
to highly efficient unit economics.
Each Pod delivered on average £472,000
of new annual recurring revenue
(or £362,000 of new annual recurring

gross margin) at an average fully-loaded
non-recurring cost of £483,000.

The Group has maintained its low gross
revenue churn rate at 5% (FY2016:
5% and FY2015: 6%), which while
maintained, implies a 20-year expected
lifetime over which this annual gross
margin would recur. These economics
mean that every £1 invested into
our Pods has a present value gross
margin return of £6(2) (FY2016: £6).

Our customer base remains well
diversified, with the largest single
customer representing just 3.6%
of total LoopUp Revenue. Our top
100 customers accounted for 62%
of LoopUp Revenue, and the top
500 accounted for 91%. The Group
generated 40% of LoopUp Revenue
from the United Kingdom, 51% from
the United States, 7% from continental
Europe and 2% from the rest of the
world. Our established revenue base
in the United States is an important
foundation for future growth as this
geographic market accounts for
approximately 60% of global demand.

Progressing with our
strategic priorities
We continue to progress well against
our strategic priorities and expect
2018 to continue further in this vein.
Organic growth and investment in
internally established capabilities
remains central to our growth plan
and the Group remains open to
other routes to growth, should
opportunities present themselves.
Whatever the route, however, during
2018 our pursuit of growth will be
focused on three key areas:

‘Pod’ investment: We have

continued investment into our
team-based ‘Pods’ organisational
structure for new business
acquisition. We have increased the
average number of Pods to eight
during FY2017 (FY2016: six) and plan

to increase the number to 11 during
FY2018. We will also be introducing
lead generation marketing and
exploring new geographic markets
for the Group to enter in addition to
our core UK and US markets.

Product development: We continue
to invest in developing the LoopUp
product. This year we have
introduced support for enterprise
Single Sign-On (SSO) and inter-
connected multi-site bridging for
premium international voice quality.
This will remain at the heart of our
corporate strategy during 2018 as
we continue to enhance the
customer experience.

Grow existing base: Several

customers acquired during FY2016
have developed into major revenue
contributors during FY2017, including
the Group’s 1st, 4th and 9th largest
accounts. This is a reflection of the
value our customers place in the
intuitive and streamlined user
experience. As we on-board new
customers, we will continue to focus
on growing them into marquee
accounts over time.

Positive Outlook
We continue to see strong demand
for our product from our target
market of mid-to-large enterprise
and professional services firms. Our
highly differentiated market positioning
and competitive strategy, combined
with our efficient new business unit
economics, make for an exciting
outlook and we remain confident in
our ability to deliver further growth.

Steve Flavell
Co-CEO

Michael Hughes
Co-CEO

1. Based on new LoopUp users provisioned

during both FY2016 and FY2017

2. Based on 5% gross revenue churn, adjusting
for resource allocated to new market testing,
and using a risk-based discount rate of 12%

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 201712

Strategic Report
Strategic Priorities

Our strategic priorities and targets

Strategic Report

Priority

Explanation

Achievements

Outlook

More of the proven
same in new business
acquisition.

Grew to eight
Pods in 2017.

Expect to grow to
11 Pods in 2018.

Increase
number
of Pods

Introduce
marketing

Continue to
innovate our
product

In 2016, we hired
an experienced
four-person team in
London with skills in
digital and content
marketing, corporate
communications
and design to
drive new inbound
marketing efforts.

We compete first
and foremost on our
differentiated and
premium product
experience. We aim to
solve problems with
important day-to-day
remote meetings and
delight our users.

Delivered foundational
corporate branding,
messaging,
communications
and website
design projects.

Conducted experimental
campaign activities
to design workflows
and develop tracking
tools to measure the
return on investment of
future lead generation
campaigns.

We have introduced
support for Single
Sign-On (SSO) and
inter-connected
multi-site bridging for
premium international
voice quality.

Introduce lead
generation marketing
to drive more enterprise
and mid-market
leads to LoopUp.

Explore new
geographic markets to
enter in addition to core
UK and US markets.

Introduce new features
without compromising
the simple core
flow of the LoopUp
product experience.

Extend our focused,
best-in-class remote
meetings product to
play well with other
best-in-class enterprise
collaboration solutions.

LoopUp stands out
above other remote
meeting and UCaaS
providers. Its business
strategy defies in
many ways the
‘conventional wisdom’
in the industry.

Raúl Castañón-Martínez, Senior Analyst at 451 Research

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 201714

Strategic Report
CFO’s Review

A year of excellent progress

Strategic Report
CFO’s Review

2017 was a year of
excellent progress for
LoopUp. The continued
strong growth of our
business combined with
improved profitability has
ensured that the business
is in a strong position
as we go into 2018.

LoopUp revenue growth

+36%

FY2017: £17.5m

LoopUp Revenue (excluding the
discontinued BT technology licensing
revenues of £0.7m in FY2016) grew
by 36% in FY2017 to £17.5m, which
was ahead of market expectations
despite a second half currency
headwind which saw sterling average
$1.32, up from $1.23 at the start of
the year. Constant currency revenue
growth was 33.5% (H117: 37%; H217
30%), ahead of the 31% recorded
in each of FY2016 and FY2015.

Operating results
The Group has continued to leverage
its growth and improved buying power
to drive down the cost of purchased
telephony, which makes up the majority
of cost of goods sold. As a result, the
gross margin percentage improved
from 74.5% in FY2016 to 76.7% in
FY2017 (adjusted for discontinued
BT technology licensing revenues).

Administrative expenses grew by 28%
in the year, significantly lower than
the rate of revenue growth. The main
areas of increase in spending were
sales and engineering headcount,
both of which are important
underpinnings of future growth.
Consequently, LoopUp EBITDA rose
161% from £1.3m in FY2016 to £3.5m
in FY2017 (adjusted for discounted
BT licensing revenues). Unadjusted
EBITDA for FY2016 was £2.0m.

Year end net cash

£2.9m

FY2016: £2.2m

The Group’s spend on development
costs rose from £3.2m in 2016 to
£3.8m in FY2017. The increase
largely represents the full year
impact of investments made in
engineering headcount during 2016.

The Group continues to receive a
tax benefit from its research and
development activity, and we expect
to submit a claim for £0.9m of tax cash
credit for FY2017, in addition to the
£0.8m successfully claimed for FY2016.

These costs are allocated to specific
development projects, which are
then amortised once the project
is deemed complete. Due to the
timing of completion of the various
development projects worked on in
recent years, the amortisation charge
at £2.1m lags the level of spend for
FY2017 (FY2016: £1.4m). As we have
guided previously, this charge is
expected to increase and broadly
equalise with the level of spend over
the next few years. In addition, £0.3m
of cost was deemed to be impaired
at the end of FY2017 (FY2016: £nil),
relating to small projects which were
no longer core to the LoopUp product.

The Group achieved an operating
profit of £0.7m in FY2017, compared
to a loss of £0.3m in FY2016 (adjusted
for discontinued BT technology
licensing revenues), or an unadjusted
profit of £0.4m for the same period.

Assets and cash flows
Net cashflow before financing for
the full year was (£0.1m) (FY2016:
(£0.2m). The second half of the year
showed a positive net cashflow
before financing of £0.5m.

The Group’s much improved balance
sheet showed £10.5m of net assets
and £2.9m of net cash at the end of
FY2017. The Group paid down a final
debt instalment of £0.3m on 31 January
2017 and ended the year debt free.

In addition, the Group has over £12m
of accumulated tax losses at the end
of FY2017, which it expects to be
able to utilise against future profits.

Simon Healey
CFO
27 April 2018

Looking ahead into 2018, we continue to see
strong demand for the LoopUp product and
we remain confident in our ability to deliver
future growth.

Simon Healey

EBITDA

£3.5m

FY2016: £2.1m

2017 gross margins

76.7%

+220 BPS over 2016

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 201716

Strategic Report
Principal Risks and Uncertainties

As with any business, the Group is subject to a number of
risks and uncertainties, some of which are outside of our
control. The Board confirms that there are ongoing processes
for identifying, evaluating and mitigating the significant risks
facing the Group. The processes are considered to be
appropriate given the size and nature of the business.

Below, we have identified the principal risks and uncertainties
which could have an adverse material impact on the Group.
This list is not exhaustive and it should be noted that
additional risks, which the Group does not consider material,
or of which it is not aware, could have an adverse impact.

Key

Increased

Decreased

Unchanged

Since the 2016 Annual Report

Principal risk

Impact

Mitigation

Principal risk

Impact

Mitigation

Competition
and
technological
change

The Group’s primary competitors
are, in many cases, significantly
larger enterprises with greater
financial and marketing resources.
There can be no guarantee that the
Group’s current competitors or new
entrants to the market will not bring
new or superior technologies,
products or services at similar or
lower prices.

We maintain and promote a
differentiated value proposition.
While other remote meeting
vendors claim to deliver value by
adding specialist features and
capabilities, or by cutting prices,
LoopUp delivers value, and
competes successfully, by providing
a superior user experience for
non-specialist users.

The Group’s senior management
team regularly devotes time to
reviewing product releases by
potential competitors and gaining
insight from industry analysts and
customers.

Product
development

Intellectual
property

People

Difficulties encountered in retaining
senior staff and recruiting
appropriate employees, and the
failure to do so, or a change in
market conditions that renders
current incentivisation structures
lacking, may hinder the Group’s
ability to grow.

The Group believes it has the
appropriate incentivisation
structures in place to attract and
retain the calibre of employees
necessary to ensure the efficient
management, operation and growth
of the business.

New capabilities and enhancements
introduced into the Group’s product
may contain undetected defects that
fail to meet customers’ performance
expectations or satisfy contract
specifications, and this may impact
the Group’s results and reputation.

All product releases are put through
rigorous quality assurance cycles,
followed by internal user acceptance
testing before release to customers
in a considered and organised rollout
strategy. Care is also taken to be
able to ‘roll back’ to previous
versions of the product whenever
practically possible.

Challenges to the Group’s
intellectual property or alleged
infringements of others’ intellectual
property, by either competitors or
other third parties, could result in
costs, liabilities and operational
uncertainties for the Group, and
there can be no guarantee as to the
outcome of any such challenge or
associated litigation.

The Group also licenses software
from third parties and the Group’s
continuing rights to do so cannot
be guaranteed.

The Group is aware neither of any
challenges to its intellectual
property, including its three granted
patents, nor of any infringements to
others’ intellectual property. We
maintain an active policy regarding
patents and trademarks as
appropriate.

We maintain robust contracts with
any key software licensed from third
parties, and are aware of and
informed about alternative sources
of supply as necessary.

Key system
failure or
disruption

Any malfunctioning of the Group’s
technology and systems, or those of
key third parties, even for a short
period of time, could result in a lack
of confidence in the Group’s
services, with a consequential
material adverse effect on
operations and results.

The Group regularly reviews the
appropriate redundancy and
resiliency in its network operations,
is ISO 27001 certified across its
global operations, and has
implemented a sophisticated
Service Event Response Team
(SERT) with detailed processes and
procedures for responding to any
size or type of service outage
or disruption.

Members of the SERT are located
around the world, enabling 24x365
coverage.

Foreign
exchange

Given the Group’s material US sales
and operations, fluctuations in
foreign currency exchange rates
could have a material effect on the
Group’s revenue and profitability, and
there can be no guarantee that the
Group would be able to compensate
or hedge against such effects.

Our percentage of revenue
denominated in US Dollars is
currently broadly aligned with our
percentage of costs denominated in
US Dollars, and we closely monitor
both that alignment and foreign
exchange movements on an
ongoing basis.

This report was approved by the Board of Directors and authorised for issue on 27 April 2018. It was signed on their behalf by:

Steve Flavell
Director

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 201718

Governance
Board of Directors

Non-Executives

Governance
Board of Directors

Executives

Lady Barbara Judge CBE
Independent Non-Executive Chairman

Mike Reynolds
Independent Non-Executive Director

Steve Flavell
Co-CEO

Michael Hughes MBE
Co-CEO

Lady Judge is a trained commercial lawyer with both British
and American citizenship.

Early in her career she was a commissioner of the US Securities
& Exchange Commission and subsequently Deputy Chairman
of the UK Financial Reporting Council. She was also Chairman
of the Pension Protection Fund and the UK Atomic Energy
Authority. Currently she is Chairman of Cifas, the UK membership
organisation specialising in the prevention of fraud and financial
crime. She is best known to UK tech investors for chairing the
board of IT company Axon Group plc prior to its successful sale.

In June 2010 she was awarded Commander of the British
Empire in the Queen’s Birthday Honours for her contribution
to the financial services and nuclear industries. In April 2015
she received the Times Non-Executive Director award for her
chairmanship of the UK Pension Protection Fund.

Mike most recently held the position of EVP at Syniverse
Technologies, before which he served as CEO of 2degrees
Mobile. Prior to 2degrees Mobile, Mike spent more than
seven years in a variety of senior positions, including
President at Singapore listed network operator, StarHub.
As President, he was responsible for the day-to-day
operations of 2,800 employees and US$1.4bn of revenue.

Previously, Mike spent 24 years at BellSouth, which included
appointments as President of BellSouth China and CEO of
BellSouth International Wireless Services.

Barmak Meftah
Independent Non-Executive Director

Nico Goulet
Non-Executive Director

Barmak is a 20-year technology industry veteran and
currently President and CEO of AlienVault. Prior to AlienVault,
Barmak served as Vice President of the Enterprise Security
Products division at HP, which acquired Fortify Software,
an information security provider where Barmak was Chief
Products Officer.

Barmak has also served in several senior management roles
at Sychron and Oracle Corporation. He also serves on various
technical advisory boards and is a limited partner and adviser
to a number of venture capital funds.

Nico is a managing partner at Adara Ventures where he has
managed venture capital funds for the last 18 years. Nico has
been actively involved with more than 30 early-stage
ventures and served on the boards of 23 companies.

Prior to Adara, Nico was a partner at Monitor Company. Nico
has a BSc degree in Aerospace Engineering from the École
Centrale de Paris, an MSc in Aeronautics & Astronautics from
MIT, and an MBA from INSEAD.

Michael co-founded LoopUp alongside co-CEO Steve Flavell.
Based in San Francisco, Michael oversees the Group’s product
development, engineering and network operations worldwide.
Prior to LoopUp, Michael was a founding member and CEO of
Pagoo, a pioneering VoIP company, overseeing the company’s
expansion into Europe and Asia.

Prior to Pagoo, Michael was a strategy consultant with Monitor.
Michael has an MEng from Imperial College, an MBA from
Stanford as an Arjay Miller Scholar, and was awarded a
Sainsbury Management Fellowship by the Royal Academy
of Engineering.

Michael was made a Member of the Order of the British Empire
(MBE) in Her Majesty’s 2017 New Year’s Honours List for
services to graduate development via the Silicon Valley
Internship Programme.

Steve co-founded LoopUp alongside co-CEO Michael Hughes.
Based in London, Steve oversees global commercial and
investor relations activities, and is accountable for setting and
delivering the Group’s financial plan. Prior to LoopUp, Steve
was EVP and main board director at GoIndustry, an online
industrial auctioneering platform, where as part of its founding
team, Steve was involved in the company’s organic growth
and several acquisitions.

Previously, Steve spent time at Monitor Company, Mars & Co,
and Mobil Oil.

Steve has an MBA from Stanford and an MEng/BA Hons from
St. John’s College, Cambridge.

Simon Healey
CFO

Based in London, Simon oversees all global financial
operations. Prior to LoopUp, Simon was Financial Controller
at Streetcar, which sold to Zipcar in 2011. Previously, he was
Financial Controller at Research Now and was involved in the
company’s listing on AIM. Simon is a Chartered Accountant
who trained with KPMG, and holds a degree in Accountancy
from the University of Birmingham.

Key to Committees

Audit

Remuneration

Nomination

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 2017

Governance
Chairman’s Statement

Excellent momentum

Governance
Corporate Governance Report

Committed to high standards
of corporate governance

As our co-CEOs noted
in their statement,
LoopUp has had another
strong year, maintaining
its track record of
consistent, efficient
growth and continued
product innovation.

Since joining the board at IPO in 2016,
I have been pleased to be a part of
LoopUp’s excellent momentum in the
market and look forward to the
Company maintaining this trend during
2018 and beyond.

LoopUp addresses a significant problem
that businesses face – the proliferation
of painful, time-wasting conference calls
that frustrate busy professionals and
diminish their productivity every day.
Having experienced these very issues
myself, I have found LoopUp’s approach
an innovative alternative. Its business
model and growing adoption among
demanding enterprises is further proof
of the value LoopUp delivers to its
customers and shareholders.

The Company continues to experience
strong demand for its differentiated
product, which combined with its
innovative and efficient Pods
organisational strategy, makes for
an exciting outlook, and we remain
confident in our ability to deliver
further growth.

The Directors and executive team have
demonstrated their continued ability to
take the business forward as a public
company and maintain its upward
momentum. I remain confident that the
Company is well positioned to grow in
line with market expectations and
deliver against our strategic priorities in
the year to come.

I look forward to seeing you, our
shareholders, at our AGM on
15 June 2018.

A note on corporate governance
LoopUp Group plc, as an AIM company,
is not required to comply (and does not
claim to comply) with the UK Corporate
Governance Code (‘the Code’). The
Board, however, recognizes the
importance of the principles set out in
the Code and remains committed to the
maintenance of high standards of
corporate governance.

After due consideration, the Board
seeks to apply those aspects of the
Code as far as it considers appropriate
for a business of this size and nature.

The composition of the Group’s Board
was considered carefully prior to AIM
admission, and no changes to the
Board or its Committees have taken
place since admission.

The Board holds its strategic decision-
making meetings in various Group
offices, taking the opportunity to meet
with members of both the Executive
team and the wider senior management
team, building their knowledge of
the business.

In my opinion, LoopUp offers a superior
service to clients and customers. It is my
honour and pleasure to be its Chairman,
and to have the opportunity to work with
such an effective and impressive
management team and Board.

Lady Barbara Judge
Chairman
27 April 2018

LoopUp offers a superior service to clients
and customers.

Lady Barbara Judge CBE

Board meetings and attendance
The Board aims to meet at least quarterly, with at least two meetings held in person (once during the budget-setting process
and once mid-year). The remaining meetings are held remotely on LoopUp’s platform. Two in-person Board meetings were held
during 2017. The table below shows the number of and attendance at both Board and Committee meetings during the year.

Board meetings

Audit

Remuneration

Nomination

Possible

Attended

Possible

Attended

Possible

Attended

Possible

Attended

Committee meetings

Executive Directors
Steve Flavell
Michael Hughes
Simon Healey
Non-Executive Directors
Lady Barbara Judge
Mike Reynolds
Nico Goulet
Barmak Meftah

7
7
7

7
7
7
7

7
7
7

7
7
7
3

3
–
3

–
3
3
3

2
–
3

–
3
3
2

3
3
–

–
3
–
3

3
3
–

–
3
–
2

–
–
–

–
–
–
–

–
–
–

–
–
–
–

Board papers are circulated before Board meetings
in sufficient time to enable their review and consideration
in advance of meetings.

Board effectiveness
The performance of the Board is evaluated on an ongoing
basis with reference to all aspects of its operation including,
but not limited to: the appropriateness of its skill level; the way
its meetings are conducted and administered (including the
content of those meetings); the effectiveness of the various
Committees; whether corporate governance issues are
handled satisfactorily; and whether there is a clear strategy
and objectives.

The Co-Chief Executives’ and Chief Financial Officer’s
performance is appraised by the Chairman. The Chairman
is appraised by the other Non-Executive Directors, and the
other Non-Executive Directors are appraised by the Chairman.

Board composition
The Board comprises three Executive and four Non-Executive
Directors (including the Chairman). The Group appointed Lady
Barbara Judge as Chairman and Senior Independent
Non-Executive Director at the time of the IPO.

Mike Reynolds, Barmak Meftah and Nico Goulet remain in
place from the previous Ring2 Communications Board, with
the former two Directors being considered independent.

Simon Healey, who has served as CFO to the Group since 2011,
was formally appointed to the Board on IPO in August 2016.

Board responsibilities
The Board is responsible for the long-term success of the
Group. It sets strategic aims and oversees implementation
within a framework of prudent and effective controls, ensuring
that only acceptable risks are taken. It provides leadership and
direction and is also responsible for corporate governance
and the overall financial performance of the Group.

The Board has agreed the schedule of matters reserved for
its decision, which includes ensuring that the necessary
financial and human resources are in place to meet
obligations to shareholders and others. It also approves any
acquisitions and disposals, major capital expenditure,
annual budgets and dividend policy.

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 201722

Governance
Corporate Governance Report

Governance
Audit Committee Report

Directors’ independence
Three of the Non-Executive Directors are considered
by the Board to be independent and are free to exercise
independence of judgement. They have never been
employed by the Group nor do they participate in the Group
bonus scheme. They receive no remuneration apart from
their fees and, in some cases, limited share options.

Board appointments
On appointment, a new Director is briefed on the activities of
the Group. Ongoing training is provided as needed. Directors
are updated on a regular basis on the Group’s business.

Directors are subject to re-election at the Annual General
Meeting following their appointment. In addition, at each
Annual General Meeting, one-third (or the nearest whole
number) of the Directors retire by rotation.

Access to independent advice and support
In the furtherance of his or her duties or in relation to acts
carried out by the Board or the Group, each Director is aware
that he or she is entitled to seek independent professional
advice at the expense of the Group. The Group maintains
appropriate Directors’ and Officers’ insurance in the event of
legal action being taken against any Director. Each Director
has access to the advice and services of the Company
Secretary, if required, who is responsible for ensuring that
Board procedures are properly followed and that applicable
rules and regulations are complied with.

Internal controls and risk management
The Board is responsible for the Group’s system of internal
controls and for reviewing its effectiveness. Such a system is
designed to mitigate against and manage, rather than
eliminate, the risk of failure to achieve business objectives
and can only provide reasonable and not absolute assurance
against material misstatement or loss.

The Board confirms that there are ongoing processes for
identifying, evaluating and mitigating the significant risks
facing the Group. The processes are considered to be
appropriate given the size and nature of the business.

The Group’s internal financial control and monitoring
procedures include:

Clear responsibility for the maintenance of good financial

controls and the production of accurate and timely
financial information.

The control of key financial risks through appropriate

authorisation levels and senior management oversight.
Detailed monthly reporting of trading results and financial

position, including variances against budget.

Reporting of any non-compliance with internal financial

controls.

Review of reports issued by external auditors.

The Audit Committee, on behalf of the Board, reviews reports
from the external auditor together with management’s
response. In this matter, it has reviewed the effectiveness
of the system of internal controls for the period.

Shareholder communications
Executive Directors regularly meet with institutional
shareholders to foster a mutual understanding of objectives.
In particular, an extensive programme of meetings with
analysts and institutional shareholders is held following the
interim and preliminary results announcements. Feedback
from these meetings is presented to the Board. The Chairman
and other Non-Executives are available to shareholders
to discuss strategy and governance.

All Directors encourage the participation of all shareholders,
including private investors, at the Annual General Meeting
and as a matter of policy the level of proxy votes lodged
on each resolution is declared at the meeting and published
by announcement to the London Stock Exchange and on the
Group’s website.

The Group’s Annual Report and Accounts is published on the
Group’s website and can be accessed by shareholders.

Committee composition
The Audit Committee (‘the Committee’) was established in
August 2016, although a similar committee did operate under
Ring2 Communications Limited prior to the establishment of
the Group as it currently stands. Mike Reynolds is Chair of the
Audit Committee and the other members are Barmak Meftah
and Nico Goulet. The Board considers the members to have
relevant and recent financial experience, given their
biographies as set out on pages 18 and 19.

Committee responsibilities
The Committee is appointed by and responsible to the Board.
It has written terms of reference. Its main responsibilities are:

Monitoring its satisfaction with the truth and fairness of the

Group’s financial statements before submission to the
Board for approval, ensuring their compliance with
appropriate accounting standards, the law and AIM rules.
Monitoring and reviewing the effectiveness of the Group’s

systems of internal control.

Making recommendations to the Board in relation to the

appointment and remuneration of the external auditor, and
reviewing the auditor’s objectivity and independence on
an ongoing basis.

Implementing a policy relating to any non-audit services

performed by the external auditor.

The Committee is authorised by the Board to seek and obtain
information from any officer or employee of the Group and
obtain external advice as it deems necessary.

Committee meetings
The Committee aims to meet at least three times per year.
These meetings are scheduled to coincide with the review of
the interim statement, the scope and planning of the external
audit and, finally, the results and observations upon
completion of the external audit.

Three meetings were held during the year which the external
auditor, co-CEO and CFO attended. The Committee also has
the opportunity to meet with the external auditor without any
Executive Directors present if it wishes to do so.

The Committee carried out a full review of the year end
results and of the audit, using as a basis the reports to the
Committee prepared by the CFO and the external auditor.
Questions were asked of senior management around any
significant or unusual transactions where the accounting
treatment could be open to different interpretations.

The Committee received from the external auditor a report
of matters arising during the audit which the auditor deemed
to be of significance.

Significant matters considered by the Committee in relation
to the financial statements and areas of judgement routinely
considered and challenged were as follows:

Revenue recognition
Capitalisation of development costs

The Committee is satisfied that the judgements made by
management are reasonable and that appropriate disclosures
in relation to key judgements and estimates have been
included in the financial statements. In reaching this conclusion
the Committee has considered reports and analysis prepared
by management and has also constructively challenged
assumptions. The Committee has also considered reports
prepared by the external auditor.

Committee performance
The Committee regularly reviews its own performance and
has concluded that it is performing as expected.

External auditor
Grant Thornton UK LLP has been the external auditor
since 2014.

As required, the external auditor provided the Committee
with information for review about policies and processes
for maintaining its independence and compliance regarding
the rotation of audit partners and staff. The Committee
considered all relationships between the external auditor
and the Group and was satisfied that they did not compromise
the auditor’s judgement or independence, particularly around
the provision of non-audit services.

Management reviewed the effectiveness of the external audit
process and were satisfied with the external auditor’s
knowledge of the business and that the scope of the audit
was appropriate and the audit process effective.

Following these processes, the Committee recommended
to the Board that Grant Thornton UK LLP be proposed for
re-election at the AGM.

Internal audit function
Given the size and nature of the Group, the Board did not
consider it necessary to have an internal audit function during
the year, though this need will be reviewed regularly.

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 201724

Governance
Nomination Committee Report

Governance
Remuneration Committee and Remuneration Report

Committee composition
The Nomination Committee was established in August 2016.
Mike Reynolds is Chair of the Nomination Committee and the
other members are Barmak Meftah and Steve Flavell.

Committee responsibilities
The primary purpose of the Committee is to lead the process
for Board appointments and to make recommendations to the
Board to achieve the optimal composition of the Board,
having regard to:

its size and composition;
the extent to which required skills, experience or attributes

are represented;

the need to maintain the highest appropriate standard

of corporate governance; and

ensuring that it consists of individuals who are best able

to discharge the responsibilities of Directors.

It has written terms of reference.

Committee meetings
The Nomination Committee did not meet during 2016 or 2017.
With the Board only reaching its current format in August 2016,
there was no reason for the Committee to meet in the year.

The Board has considered diversity in broader terms than
gender and believes it is also important to reach the correct
balance of skills, experience, independence and knowledge
on the Board. All Board appointments will be made on merit
and with the aim of achieving a correct balance. The Group
has formal policies in place to promote equality of opportunity
across the whole organisation, and training is provided
to assist this.

The Remuneration Committee
The Remuneration Committee was established in August
2016. It is chaired by Mike Reynolds and the other Committee
members are Steve Flavell and Barmak Meftah.

The Committee’s primary purpose is to assist the Board in
determining the Company’s remuneration policies and, in so
doing, agree the framework for Executive Directors’
remuneration with the Board. It has written terms of reference.

The Committee met three times during the year, with other
Board members in attendance as appropriate.

Remuneration Committee report
As an AIM-listed company, LoopUp Group plc is not required
to comply with Schedule 8 to the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations
2008. The content of this report is unaudited unless
stated otherwise.

Membership of the Remuneration Committee
During the year, the Remuneration Committee comprised two
Non-Executive Directors (Mike Reynolds as Chair and Barmak
Meftah) and one Executive Director (Steve Flavell).

The Remuneration Committee reviews the performance of
the Executive Directors and makes recommendations to the
Board on matters relating to remuneration, terms of service,
granting of share options and other equity incentives.

Remuneration policy
The objectives of the remuneration policy are to ensure that
the overall remuneration of Executive Directors is aligned with
the performance of the Group and preserves an appropriate
balance of income and shareholder value.

Non-Executive Directors
Remuneration of Non-Executive Directors is negotiated by the
Executive Directors and agreed by the Board. Non-Executive
Directors are not permitted to participate in pensions, annual
bonuses or employee benefits. They are entitled to participate
in share option agreements relating to the Company’s shares.
Each of the Non-Executive Directors has a letter of
appointment stating his or her annual fee and that their
appointment is initially for a period of three years, renewable
for a further period of three years. Their appointment may be
terminated with three months’ written notice at any time.

Directors’ remuneration
The normal remuneration arrangements for Executive
Directors consist of basic salary, annual performance-related
bonuses and participation in share options schemes.
In addition, they receive private healthcare benefits, and
UK Executives participate in a company pension scheme.

Annual bonuses
The 2017 annual bonus plan comprised a target bonus of
50% of salary for Steve Flavell and Michael Hughes and 25%
of salary for Simon Healey. Executive Directors are rewarded
based on the performance of the Group versus predefined
targets as well as the achievement of personal objectives.

Based on the 2017 performance targets set at in late 2016,
the Group either achieved or exceeded the targets set
for revenue, gross margin and EBITDA. As a result of this
performance, the Remuneration Committee resolved to
pay bonuses as set out in this report.

Similar bonus principles will be adopted for future years.
Performance targets around revenue, gross margin and
EBITDA have been set by the Board. Meeting these targets
and achieving personal objectives will result in payouts in
line with those for 2017. Payouts can exceed these amounts
should performance exceed these targets, and are capped.

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 201726

Governance
Remuneration Committee and Remuneration Report

Governance
Directors’ Report
For the year ended 31 December 2017

Bonuses paid in 2016 included additional bonus payments in relation to the successful IPO. The cost of these bonuses were
considered to be a cost of the transaction and were set against share premium during that year.

The Directors present their report and the audited financial
statements for the year ended 31 December 2017.

Audited

Executive
Steve Flavell
Michael Hughes
Simon Healey (since appointment in 2016)
Non-Executive
Lady Barbara Judge
Mike Reynolds
Nico Goulet
Barmak Meftah

Payment
currency

Salary/fees
£000

Annual
bonus
£000

Benefits
£000

GBP
USD
GBP

GBP
USD
–
USD

200
233
120

50
23
–
6

100
116
30

–
–
–
–

5
6
4

–
–
–
–

2017
total
£000

305
355
154

50
23
–
6

2016
total
£000

298
345
89

17
22
–
–

Directors’ interests
Details of the Directors’ shareholdings are included in the Directors’ Report on page 27.

Directors’ share options
Aggregate emoluments disclosed below do not include any amounts for the value of options to acquire ordinary shares in the
Company granted to or held by the Directors. Details of options for Directors who served during the year are as follows:

Number of
options at
31 December
2017

–
880,000
100,000

–
75,000
75,000
–
75,000
31,250

Exercise
price

–
£0.75
£0.50

–
£0.75
£0.0128
–
£0.75
£0.0128

Executive
Steve Flavell
Michael Hughes
Simon Healey
Non-Executive
Lady Barbara Judge
Mike Reynolds

Nico Goulet
Barmak Meftah

During the year, the following options were exercised by Directors:

Steve Flavell exercised and sold 880,000 options at an exercise price of £0.75.
Simon Healey exercised and sold 30,275 options at an exercise price of £0.75.

By order of the Board

Mike Reynolds
Chairman of the Remuneration Committee
27 April 2018

As noted in note 1.01 on page 43, the Company was
incorporated during 2016, and became the Parent Company of
the Group during the year following a share-for-share exchange.
As explained in note 1.01, these financial statements present
information as if the Group had been in existence in its current
format for the whole of the current and previous years.

Principal activity
The principal activity of the Group is the provision of a ‘software-
as-a-service’ (SaaS) platform for remote business meetings.

Business review and future developments
A review of the Group’s operations and future developments
is covered in the Strategic Report section of the Annual
Report and Accounts on pages 2 to 17. This report includes
sections on strategy and markets and considers key risks and
key performance indicators.

Financial results
Details of the Group’s financial results are set out in the
consolidated statement of comprehensive income, other
statements and related notes on pages 36 to 66.

Dividends
The Directors do not recommend the payment of a dividend.

Going concern
After making enquiries, the Directors have confidence that the
Group has adequate resources to continue in operational
existence for the foreseeable future. For this reason they continue
to adopt the going concern basis in preparing the Annual Report
and Accounts. This is described in more detail in note 1.03.

Annual General Meeting
Enclosed with this report is the Notice of the Company’s
second Annual General Meeting, to be held at 2.30pm on
15 June 2018 at the offices of Panmure Gordon.

Directors
The Directors who served on the Board and on Board
Committees during the year are set out on pages 21.
One-third of the Directors are required to retire at the Annual
General Meeting and can offer themselves for re-election.

The Directors benefitted from qualifying third party indemnity
provisions in place during the financial year and at the date of
this Annual Report.

Information on Directors’ remuneration and share option rights
is given in the Remuneration Committee Report on page 25.

The middle market price of the Company’s shares on
31 December 2017 was 355.0 pence and the range during the
year was 112.5 pence to 355.0 pence with an average price
of 195.7 pence.

Directors’ shareholdings
The beneficial interests of the Directors in the share capital of the Company at 31 December 2017 and 2016 were as follows:

Executive
Steve Flavell
Michael Hughes
Simon Healey
Non-Executive
Lady Barbara Judge
Mike Reynolds
Nico Goulet (as Managing Partner of shareholder,

Adara Ventures SICAR)

Barmak Meftah

31 December 2017

31 December 2016

Number of
shares

% of issued
ordinary
share capital

Number of
shares

% of issued
ordinary
share capital

2,527,294
2,457,294
–

6.0% 2,727,294
5.8% 2,707,294
30,275

–

33,754
–

0.1%
–

15,754
–

6.6%
6.6%
0.1%

0.0%
–

6,964,548
43,750

16.6% 8,039,548
43,750

0.1%

19.7%
0.1%

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 201728

Governance
Directors’ Report
For the year ended 31 December 2017

Significant shareholders
The Company is informed that, at 17 April 2018, individual registered shareholdings of more than 3% of the Company’s issued
share capital were as follows:

Andrew Scott(1)
Adara Ventures SICAR
Hargreave Hale Limited
Steve Flavell
Michael Hughes
Herald Investment Management Limited
Octopus Investments Nominees Limited

Number of
shares

% of issued
ordinary
share capital

10,088,919
6,964,548
3,314,199
2,527,294
2,457,294
2,042,000
1,693,331

23.9%
16.5%
7.9%
6.0%
5.8%
4.8%
4.0%

1. This includes shares registered in the name of his wife, Rhonda Scott, Jim Nominees Limited and SFT Capital Limited.

Research and development
The Group expended £3,760,000 during the year
(2016: £3,211,000) on development, which was all capitalised
within intangible assets. An amortisation charge of £2,140,000
(2016: £1,419,000) has been charged against previously
capitalised costs. In addition, a small number of projects deemed
to have been impaired resulted in an impairment charge of
£300,000 (2016: £nil). No research costs have been incurred.

Financial instruments
The Group’s policy and exposure to financial instruments
is set out in note 19.

Employee involvement
It is the Group’s policy to involve employees in its progress,
development and performance. This has been communicated
through both formal and informal meetings at all levels
throughout the Group. During such meetings, employees are
encouraged to provide a free flow of information and ideas.

Applications for employment by disabled persons are fully
considered, bearing in mind the respective aptitudes and
abilities of the applicants concerned. The Group is a
committed equal opportunities employer and has engaged
employees with broad backgrounds and skills.

It is the policy of the Group that the training, career
development and promotion of a disabled person should,
as far as possible, be identical to that of a person who does
not have a disability. In the event of members of staff
becoming disabled, every effort is made to ensure that
their employment within the Group continues.

Political and charitable donations
The Group does not make political donations. Charitable
donations of £1,000 were made during the year (2016: £1,000).

Supplier payment policy and practice
The Group does not operate a standard code in respect of
payments to suppliers. The Group agrees terms of payment
with each supplier at the start of business and makes
payments in accordance with these terms.

The number of creditor days outstanding at 31 December
2017 was 56 days (2016: 62 days).

Directors’ Responsibilities Statement
The Directors are responsible for preparing the Strategic
Report and Directors’ Report and the financial statements
in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors
have prepared the financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted
by the European Union. Under Company law, the Directors must
not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs and profit
or loss of the Company and Group for that period. In preparing
these financial statements, the Directors are required to:
select suitable accounting policies and then apply

them consistently;

make judgements and accounting estimates that are

reasonable and prudent;

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

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

The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions, and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies
Act 2006. 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 confirm that:

so far as each Director is aware, there is no relevant audit
information of which the Company’s auditor is unaware;
and

the Directors have taken all the steps that they ought to
have taken as Directors in order to make themselves
aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.

The Directors are responsible for the maintenance and
integrity of the corporate and financial information on the
Group’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.

Auditor
A resolution for the re-appointment of Grant Thornton UK LLP
as auditor of the Group is to be proposed at the forthcoming
Annual General Meeting.

By order of the Board

Lady Barbara Judge
Chairman
27 April 2018

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 201730

Independent Auditor’s Report
To the members of LoopUp Group plc

Our opinion on the financial statements is unmodified
We have audited the financial statements of LoopUp Group PLC (the ‘parent company’) and its subsidiaries (the ‘group’) for the
year ended 31 December 2017 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Financial Position, the Company Statement of Financial Position, the Consolidated Statement of Changes in Equity,
the Company Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Company 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 adopted by the European Union and, as regards the parent company financial
statements, as applied in accordance with the provisions of the Companies Act 2006.

In our opinion:

the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at

31 December 2017 and of the group’s profit for the period then ended;

the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the

European Union and as applied in accordance with the provisions of the Companies Act 2006; and

the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

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

Who we are reporting to
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.

Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate;

the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for
a period of at least twelve months from the date when the financial statements are authorised for issue.

Overview of our audit approach

Overall materiality: £262,000, which represents 1.5% of the group’s total revenue.
Key audit matters identified were the occurrence of revenue recognition and

capitalisation of development costs.

We performed a full scope audit of the financial information of four components out
of the seven components within the group. These accounted for 98% of the Group’s
revenue and 104% of the Group’s Earnings Before Interest Tax Depreciation and
Amortisation (EBITDA) (with the remaining three components contributing a 4%
EBITDA loss for the financial year); and

There were no key changes in the scope of the audit from the prior year.

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. These matters included those that 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–Group

How the matter was addressed in the audit–Group

Occurrence of revenue
Revenue is generated by the sale of conferencing services.
Revenue is typically recognised based on the number
of seconds of each meeting at rates agreed with each
individual customer.

The group’s revenue has increased from £12.8m to £17.5m.

Revenue is recognised based on the conferences held by
customers, the timings of which are recorded in the billing
system. This information generates revenue recognised
in the accounting system. There is an audit risk that revenue
recognised is not supported by evidence of the relevant
conferences taking place. Consequently, we identified
occurrence of revenue as a significant risk, which was one of
the most significant assessed risks of material misstatement.

Our audit work included, but was not restricted to:

Gaining an understanding of the controls in the revenue
cycle including the monthly billing process to record call
details and billing rates.

For a sample of revenue, we agreed the seconds billed
to the call detail records and the rates back to customer
signed contracts.

Performing analytical procedures on revenue based on
comparisons with prior year and focused on trends such
as seasonality, gross profit percentage, and rates per
minute across the group.

Testing credit notes raised during the year and subsequent
to the year-end to ensure revenue was recognised in the
correct period.

Considering the appropriateness of the revenue

recognition policy adopted and confirmed that transactions
have been treated in accordance with the adopted policy.

The group’s accounting policy on revenue recognition is
shown in note 2.07 to the financial statements and related
disclosures are included in note 6.

Key observations
Our testing did not identify any material misstatements
in relation to the occurrence of revenue.

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 2017Financial StatementsFinancial Statements32

Independent Auditor’s Report
To the members of LoopUp Group plc

Key Audit Matter–Group

How the matter was addressed in the audit–Group

Materiality was determined as follows:

Capitalisation of development costs
The group capitalises development costs within intangible
assets. The amount capitalised in the year amounted to £3.8m
(2016: £3.2m).

The capitalisation of development costs under IAS 38
involves judgement and therefore there is a risk that a
material error could occur if items have been incorrectly
capitalised. We therefore identified capitalisation of
development costs as a significant risk, which was one of the
most significant assessed risks of material misstatement.

Our audit work included, but was not restricted to:

Reviewing the development costs capitalised to ensure
these meet the requirements as stated within IAS 38
‘Intangible Assets’. We gained further understanding
of the projects under development based on the analysis
of papers prepared by management, discussions with
management and review of the changes in the software
in the year.

Confirming that costs were capitalised in accordance

with IAS 38, in particular that the development met the
technical and commercial feasibility criteria.

Agreeing, on a sample basis, relevant payroll costs

to payroll records.

Reviewing the amortisation period of three years to ensure
this is appropriate for the expected product life cycle given
the history of the product.

Reviewing the impairment review carried out by

management on projects under development and
completed in the period and for those projects which
require impairment, we have reviewed to ensure these
have been written off as required.

The group’s accounting policy on intangible assets is shown
in note 2.03 to the financial statements and related disclosures
are included in note 14.

Key observations
Our testing did not identify any material misstatements in the
capitalisation of development costs during the year.

There are no key audit matters relating to the parent company.

Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature,
timing and extent of our audit work and in evaluating the results of that work.

Materiality measure

Group

Parent Company

Financial statements as a whole

Performance materiality used to
drive the extent of our testing

Specific materiality

We determined materiality for the audit of
the group financial statements as a whole
to be £262,000 which is 1.5% of total
revenue. This benchmark is considered
the most appropriate given that the
group’s results are driven directly by the
volume of conference services. This
approach is consistent with prior year.

Materiality for the current year is higher
than the level that we determined for the
year ended 31 December 2016 to reflect
the growth of the group compared to the
prior year.

We use a different level of materiality,
performance materiality, to drive the
extent of our testing and this was set at
70% of financial statement materiality for
the audit of the group financial statements.

We also determine a lower level of specific
materiality for certain areas such as
directors remuneration and related party
transactions.

We determined materiality for the audit of
the parent company financial statements
to be £128,000 which is 1% of total assets.

This benchmark is considered the most
appropriate as the company is a holding
company with no trade occurring within the
parent entity. This approach is consistent
with prior year.

Materiality for the current year is higher than
the level that we determined for the year
ended 31 December 2016 based on the
increased level of total assets.

We use a different level of materiality,
performance materiality, to drive the extent
of our testing and this was set at 70% of
financial statement materiality for the audit
of the parent company financial statements.

We also determine a lower level of specific
materiality for certain areas such as directors
remuneration and related party transactions.

Communication of misstatements
to the audit committee

£13,000 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.

£6,000 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.

An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the group’s business, its environment
and risk profile and in particular included:

Evaluation by the group audit team of identified components to assess the significance of that component and to determine

the planned audit response based on a measure of materiality, considering each as a percentage of total group assets,
liabilities, revenues and EBITDA.

We performed a full scope audit of the financial information of four components and for the remaining three components,

we have performed other procedures appropriate to respond to the risk of material misstatements.

The four reporting components where we performed full audit procedures, these accounted for 98% of the Group’s revenue
and 104% of the Group’s EBITDA, with the remaining group components reporting an EBITDA loss for the financial year. This
includes all UK components as well as the US component. The remaining entities where other procedures were performed
included the Hong Kong, Barbados and the Australian components.

We have obtained an understanding of the entity-level controls of the Group which assisted us in identifying and assessing
risks of material misstatement due to fraud or error, as well as assisting us in determining the most appropriate audit strategy.

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 2017Financial StatementsFinancial Statements34

Independent Auditor’s Report
To the members of LoopUp Group plc

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

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

Jeremy Read
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Milton Keynes
27 April 2018

An overview of the scope of our audit continued

We evaluated controls over the financial reporting systems identified as part of our risk assessment and addressed critical

accounting matters. We then undertook substantive testing on significant transactions and material account balances.
During the year, the group has incorporated a new component within Australia as a 100% owned subsidiary. The activity

within this component was below group materiality.

All accounting records and the finance team are located at head office and our work was conducted there accordingly.

Other information
The directors are responsible for the other information. The other information comprises the information included in the
Annual Report & Accounts set out on pages 2 to 29, 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. In connection with our audit of the financial
statements, our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.

We have nothing to report in this regard.

Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:

the information given in the strategic report and the directors’ report for the financial year for which the financial statements

are prepared is consistent with the financial statements; and

the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:

adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been

received from branches not visited by us; or

the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 29, 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 and the parent company’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 the parent company or to cease operations, or have
no realistic alternative but to do so.

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 2017Financial StatementsFinancial Statements36

Consolidated Statement of Comprehensive Income
For the year ended 31 December 2017

Consolidated Statement of Financial Position
As at 31 December 2017

LoopUp Revenue(1)
Discontinued licensing revenue

Total revenue
Cost of sales

Gross profit
Administrative expenses

Operating profit

EBITDA(2)

Depreciation
Amortisation of intangible fixed assets
Impairment of intangible fixed assets
Share-based payments charges

Operating profit

Finance costs

Profit/(loss) before income tax

Income tax

Profit for the year

Other comprehensive income and loss

Currency translation loss

Total comprehensive income/(loss) for the year attributable to the equity holders

of the parent

Earnings per share (pence):
Basic
Diluted

Note

7
7
7
20.06

2017
£000

17,465
–

17,465
(4,076)

13,389
(12,657)

732

3,463

(291)
(2,140)
(300)
–

732

(3)

729

1,260

1,989

2016
£000

12,823
736

13,559
(3,265)

10,294
(9,896)

398

2,063

(246)
(1,419)
–
–

398

(684)

(286)

484

198

(175)

(1,209)

1,814

(1,011)

4.8
4.4

0.6
0.5

Assets
Property, plant and equipment
Intangible assets

Total non-current assets

Trade and other receivables
Cash and cash equivalents
Current tax

Total current assets

Total assets

Liabilities
Trade and other payables
Accruals and deferred income
Borrowings

Total current liabilities

Net current assets

Total liabilities

Net assets

Equity
Share capital
Share premium
Other reserve
Foreign currency translation reserve
Retained loss

Shareholders’ funds attributable to equity owners of parent

Note

2017
£000

2016
£000

13
14

15
16
15

17
17
18

20
20

466
6,142

6,608

3,348
2,902
904

7,154

463
4,822

5,285

2,802
2,547
500

5,849

13,762

11,134

(2,118)
(1,189)
–

(3,307)

3,847

(1,744)
(1,378)
(306)

(3,428)

2,421

(3,307)

(3,428)

10,455

7,706

210
12,637
12,691
(1,983)
(13,100)

10,455

204
11,708
12,691
(1,808)
(15,089)

7,706

1. LoopUp Revenue is revenue from the LoopUp product and associated value-added add-on capabilities; excludes discontinued BT technology licensing revenue.
2. EBITDA is operating profit stated before depreciation, amortisation and impairment of intangible fixed assets and share-based payments charges.

The notes on pages 43 to 66 form part of these financial statements.

The financial statements were approved by the Board of Directors and authorised for issue on 27 April 2018. They were signed
on its behalf by:

Steve Flavell
Director

The notes on pages 43 to 66 form part of these financial statements.

Company number 09980752

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 2017Financial StatementsFinancial Statements38

Company Statement of Financial Position
As at 31 December 2017

Consolidated Statement of Changes in Equity
For the year ended 31 December 2017

Assets
Investments

Total non-current assets

Trade and other receivables

Total current assets

Total assets

Net assets

Equity
Share capital
Share premium
Retained profit

Shareholders’ funds attributable to equity owners of parent

Note

20
20

2017
£000

139

12,708

12,847

210
12,637
–

12,847

2016
£000

139

11,773

11,912

204
11,708
–

11,912

The financial statements were approved by the Board of Directors and authorised for issue on 27 April 2018. They were signed
on its behalf by:

Steve Flavell
Director

The notes on pages 43 to 66 form part of these financial statements.

The Company recorded no profit or loss in the period since incorporation on 1 February 2016.

Company number 09980752

Share
capital
£000

Share
premium
£000

Note

139
–
–

–

–
204

–
–
–

–

12,935

(1,227)
11,708

Foreign
currency
translation
reserve
£000

(599)
–
(1,209)

(1,209)

Shareholders’
funds/deficit
attributable
to equity
owners of
parent
£000

(3,056)
198
(1,209)

(1,011)

Retained
loss
£000

(15,287)
198
–

198

–

13,000

Other
reserve
£000

12,691
–
–

–

–
12,691

–
(1,808)

–
(15,089)

(1,227)
7,706

204

11,708

12,691

(1,808)

(15,089)

–
–

–

–
–

–

929

–
–

–

–
(175)

1,989
–

7,706

1,989
(175)

(175)

1,989

1,814

–

935

210

12,637

12,691

(1,983)

(13,100)

10,455

As at 1 January 2016
Profit for the year
Other comprehensive income

Total comprehensive loss for the year

Transactions with owners of parent

in their capacity as owners:

Share issue on AIM listing

Cost of issue of equity shares
As at 31 December 2016

As at 1 January 2017

Profit for the year
Other comprehensive income

Total comprehensive profit

for the year

Transactions with owners of parent

in their capacity as owners:

Share issues

As at 31 December 2017

The notes on pages 43 to 66 form part of these financial statements.

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 2017Financial StatementsFinancial Statements40

Company Statement of Changes in Equity
For the year ended 31 December 2017

Consolidated Statement of Cash Flows
For the year ended 31 December 2017

As at incorporation (1 February 2016)

Result for the year

Total comprehensive result for the year

Transactions with owners of parent

in their capacity as owners:

Share-for-share exchange
Share issue on AIM listing
Cost of issue of equity shares

As at 31 December 2016

As at 1 January 2017

Result for the year

Total comprehensive result for the year

Transactions with owners of parent

in their capacity as owners:

Share issues

As at 31 December 2017

The notes on pages 43 to 66 form part of these financial statements.

Share
capital
£000

Share
premium
£000

Retained
profit
£000

Note

–

139
65
–

204

–

–
12,935
(1,227)

11,708

204

11,708

–

929

210

12,637

20
20

–

–
–
–

–

Shareholders’
funds
attributable
to equity
owners of
parent
£000

–

139
13,000
(1,227)

11,912

–

935

12,847

Net cash flows from operating activities
Profit/(loss) before income tax
Non-cash adjustments
Depreciation and amortisation
Impairment of intangible fixed assets
Interest payable
Working capital adjustments
Increase in trade and other receivables
Increase in trade and other payables
Tax received

Net cash generated by operations

Cash flows from investing activities
Purchase of property, plant and equipment
Addition of intangible assets

Net cash used by investing activities

Cash flows from financing activities
Proceeds of borrowings
Proceeds from share issue
Issue costs in relation to IPO
Repayment of loans
Interest and finance fees paid
Finance lease paid

Net cash generated from financing activities

Net increase in cash and equivalents
Cash and cash equivalents brought forward
Effect of foreign exchange rate changes

Cash and cash equivalents carried forward

The notes on pages 43 to 66 form part of these financial statements.

Note

2017
£000

2016
£000

729

(286)

7
7

13.01
14.01

2,430
300
–

(547)
183
858

3,953

(331)
(3,760)

(4,091)

–
935
–
(306)
–
–

629

491
2,547
(136)

2,902

1,665
–
684

(706)
1,468
468

3,293

(304)
(3,211)

(3,515)

819
8,500
(1,277)
(5,404)
(21)
(10)

2,657

2,435
402
(290)

2,547

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 2017Financial StatementsFinancial Statements42

Company Statement of Cash Flows
For the year ended 31 December 2017

Notes to the Financial Statements

Net cash flows from operating activities
Profit before income tax
Working capital adjustments
Increase in debtors

Net cash used by operations

Cash flows from financing activities
Proceeds from share issue
Issue costs in relation to IPO

Net cash generated by financing activities

Net increase in cash and cash equivalents
Cash and cash equivalents brought forward

Cash and cash equivalents carried forward

The notes on pages 43 to 66 form part of these financial statements.

2017
£000

–

(935)

935
–

935

–
–

–

2016
£000

–

(7,273)

8,500
(1,227)

7,273

–
–

–

1. Business description and basis of preparation
1.01 Business description
The principal activity of the Group is the provision of a software-as-a-service (SaaS) solution for remote business meetings.

LoopUp Group plc (‘the Group’) is a limited liability company incorporated and domiciled in England and Wales, with company
number 09980752. Its registered office is 78 Kingsland Road, London E2 8DP.

The Parent Company (‘the Company’) LoopUp Group plc was incorporated on 1 February 2016 as Pacific Shelf 1812 Limited, and
its name was changed on 11 March 2016 to LoopUp Limited, and on 8 June 2016 to LoopUp Group Limited. It re-registered as a
plc with the name LoopUp Group plc on 18 August 2016.

On 2 August 2016, the Company acquired the entire issued share capital of the former parent company of the Group, Ring2
Communications Limited (now LoopUp Limited), by way of a share for share exchange (see note 21). This share for share
exchange qualifies as a common control transaction and therefore falls outside of the scope of IFRS 3 Business Combinations.
Consequently, an accounting policy has been developed based on the principles of reverse acquisition accounting:

No goodwill has been recorded.
The assets and liabilities of the legal subsidiary, Ring2 Communications Limited are recognised and measured in the
consolidated financial statements at their pre-combination carrying amounts, without restatement to their fair value.

The retained reserves recognised in the consolidated financial statements reflect the retained reserves of LoopUp Limited

to the date of acquisition.

In applying IFRS 3 by analogy, the equity structure appearing in the consolidated financial statements reflects the equity

structure of the legal parent LoopUp Group PLC, including the equity instruments issued under the share exchange to effect
the business combination.

An ‘Other reserve’ has been created to enable the presentation of a consolidated balance sheet which combines the equity

structure of the legal parent with the non-statutory reserves of the legal subsidiary.

1.02 Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting
Standards (IFRSs) and International Accounting Standards (IASs) as adopted by the EU together with the International Financial
Reporting Standards Interpretations Committee interpretations issued by the International Accounting Standards Boards (IASB)
that are currently effective or early adopted (collectively IFRS) and in accordance with those parts of the Companies Act 2006
that are relevant to those companies that report in accordance with IFRSs.

The preparation of financial information requires the Directors to exercise judgements in the process of applying
accounting policies.

Financial information is presented in Pounds Sterling (£) and, unless otherwise stated, amounts are expressed in thousands
(£000), with rounding accordingly.

Under section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own statement
of comprehensive income. The loss for the year dealt with in the financial statements of the Company was £nil.

The accounting policies used have been consistently applied from the transition balance sheet and throughout all periods
presented in the financial statements.

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 2017Financial StatementsFinancial Statements44

Notes to the Financial Statements

1. Business description and basis of preparation continued
1.03 Going concern
As part of their going concern review, the Directors have followed the guidelines published by the Financial Reporting Council entitled
‘Guidance on the Going Concern basis of Accounting and Reporting on Solvency and Liquidity Risks’, published in April 2016.

At the balance sheet date, the Group had net cash of £2.9m and net assets of £10.5m.

The Directors have prepared a detailed budget and forecasts of the Group’s expected performance over a period covering at
least the next 12 months from the date of these financial statements. These forecasts model the realisation of the current sales
pipeline and also cover a number of scenarios and sensitivities in order for the Board to satisfy itself that the Group has sufficient
cash resources to continue to trade successfully during this period.

As a consequence, the Directors have a reasonable expectation that the Group can continue to operate and to meet its
commitments and discharge its liabilities in the normal course of business for a period not less than 12 months from the date
of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing these Group
financial statements.

1.04 Chief operating decision-maker
The Board of Directors acting together are considered the chief operating decision-maker.

2. Summary of significant accounting policies
The principal accounting policies adopted are set out below:

2.01 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company (‘the Subsidiaries’) made up to the accounting reference date each year. Subsidiaries are all entities over which the
Group has the power to control the financial and operating policies. Control is achieved when the Group has power over an
entity in which it has invested (‘the Investee’); is exposed, or has rights, to variable returns from its involvement with the Investee;
and has the ability to use its power to affect its returns.

The Group reassesses whether or not it controls an Investee if facts and circumstances indicate that there are changes to one
or more of the three elements of control listed above. Consolidation of a subsidiary begins when the Group obtains control over
the subsidiary and ceases when the Group losses control of the subsidiary. Specifically, the results of subsidiaries acquired or
disposed of during the year are included in the consolidated statement of comprehensive income from the date the Group gains
control until the date when the Group ceases to control the subsidiary.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into
line with the Group’s accounting policies.

2. Summary of significant accounting policies continued
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of
the transactions or at an average rate for a period if the rates do not fluctuate significantly. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. Non-monetary
items that are measured in terms of historical cost in a foreign currency are not retranslated.

(c) Group companies that have a functional currency other than the presentational currency of the Group
The results and financial position of all Group companies that have a functional currency different from the presentational
currency of the Group are translated into the presentational currency as follows:

assets and liabilities for each balance sheet presented are translated at the closing rate at the balance sheet date;
income and expenses for each income statement are translated at average exchange rates; and
all resulting exchange differences are recognised in other comprehensive income as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are recognised in
other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were previously
recognised in other comprehensive income are reclassified to the income statement as part of the gain or loss on sale.

2.03 Intangible assets
Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Development costs are capitalised when the related projects meet the recognition criteria of an internally generated intangible
asset, the key criteria being as follows:

(a) technical feasibility of the completed intangible asset has been established;
(b) it can be demonstrated that the asset will generate probable future economic benefits;
(c) adequate technical, financial and other resources are available to complete the development;
(d) the expenditure attributable to the intangible asset can be reliably measured; and
(e) management has the ability and intention to use or sell the asset.

These projects are designed to bring new capabilities into the LoopUp product. Salaries associated with development time
and directly attributable overheads are capitalised within intangible assets.

Development costs recognised as assets are amortised on a straight-line basis over their expected useful life. Development
expenditure is only amortised over the period the Group is expected to benefit and is subject to annual impairment testing.
The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any
changes in estimate being accounted for on a prospective basis.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members
of the Group are eliminated on consolidation.

2.04 Investments
Investments in subsidiary and associated undertakings are stated at cost less provision for impairment.

The consolidated financial statements incorporate the financial statements of the Company and all Group undertakings.

Intragroup transactions, dividends and balances are eliminated, as are unrealised gains and losses on intragroup transactions.

2.02 Currencies
(a) Functional and presentational currency
Items included in the consolidated financial statements are measured using the currency of the primary economic environment
in which the Parent Company operates (‘the functional currency’) which is UK Sterling (£). The consolidated financial statements
are presented in UK Sterling, as described in note 1.02 (‘the presentational currency’).

2.05 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Cost includes the
original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

Depreciation is charged so as to write off the costs of assets over their estimated useful lives, on a straight-line basis starting
from the month they are first used, as follows:
Office equipment – 20-33% straight line
Computer equipment – 20-33% straight line

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 2017Notes to the Financial StatementsFinancial StatementsFinancial Statements46

2. Summary of significant accounting policies continued
The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the consolidated statement of comprehensive income.

2.06 Impairment of non-current assets
At each reporting date, the Directors review the carrying amounts of all non-current assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less
costs to sell and value in use.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates
of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be
less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised as an expense immediately in the Statement of Comprehensive Income.

2.07 Revenue recognition
Revenue is recognised at the fair value of the consideration received or receivable for the provision of services in the ordinary
course of business and is shown net of Value Added Tax.

Revenue arises from the delivery of conferencing services using LoopUp’s proprietary products. The majority of revenue arises
upon usage by customers of services delivered on a pay as you go model, based on seconds of conference time and the
number of participants on the conference. Revenue is recognised in relation to conferencing services as the service
is performed.

Additionally, in the prior year, the Group has one material customer whose arrangement is based on a licence agreement for use
of the service over an agreed time period. Revenue on this agreement is recognised on a straight-line basis over the period of
the licence.

Any difference between the amount of revenue recognised and the amount invoiced to a customer is included in the statement
of financial position as accrued or deferred income.

2.08 Cost of sales
Cost of sales consists of fees payable to third parties and other expenses that are directly related to sales.

2.09 Current and deferred tax
The tax expense or credit represents the sum of the tax currently payable or recoverable and the movement in deferred tax
assets and liabilities.

(a) Current tax
Current tax is based on taxable income for the period and any adjustment to tax from previous periods. Taxable income differs
from net income in the statement of comprehensive income because it excludes items of income or expense that are taxable
or deductible in other periods or that are never taxable or deductible. The calculation uses the latest tax rates and laws for the
period that have been enacted on substantively enacted by the reporting date.

(b) Deferred tax
Deferred tax is calculated at the latest tax rates and laws that have been enacted or substantively enacted by the reporting date
that are expected to apply when settled. It is charged or credited in the statement of comprehensive income, except when it
relates to items credited or charged directly to equity, in which case it is also dealt with in equity.

2. Summary of significant accounting policies continued
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable income,
and is accounted for using the liability method. It is not discounted.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised
to the extent that it is probable that taxable income will be available against which the asset can be utilised. Such assets are
reduced to the extent that it is no longer probable that the asset can be utilised.

Deferred tax assets are recognised to the extent it is probable that the underlying deductible temporary differences will be able
to be offset against future taxable income.

Deferred tax assets and liabilities are offset when there is a right to offset current tax assets and liabilities and when the deferred
tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable entity or different
taxable entities where there is an intention to settle the balances on a net basis.

2.10 Leased assets
Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or,
if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the
consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant
rate of interest on the remaining balance of the liability.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

If lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit
of incentives is recognised as a reduction of rental expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

2.11 Payroll expense and related contributions
Wages, salaries, payroll tax, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the period
in which the associated services are rendered.

2.12 Benefits and pension costs
In 2016 LoopUp Limited established a contributory pension scheme under the UK’s auto-enrolment rules. Company
contributions (2% in FY2017) are recognised as an expense in the statement of comprehensive income as they fall due.

US staff qualify for a non-contributory 401k pension scheme which has been in place since 2013. The Group has no further
payment obligations once the contributions have been deducted and paid. The contributions are recognised as an in expense
in the statement of comprehensive income as they fall due.

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 2017Notes to the Financial StatementsFinancial StatementsFinancial StatementsNotes to the Financial Statements48

2. Summary of significant accounting policies continued
2.13 Share-based compensation
The Group issues share-based payments to certain employees and Directors. Equity-settled share-based payments
are measured at fair value at the date of grant and expensed on a straight-line basis over any vesting period, along with
a corresponding increase in equity if they are deemed to be material to the Group.

At each reporting date, the Directors revise their estimate of the number of equity instruments expected to vest as a result of
the effect of non-market-based vesting conditions. The impact of any revision is recognised in the statement of comprehensive
income, with a corresponding adjustment to equity reserves.

The fair value of share options is determined using a Black-Scholes model, taking into consideration the best estimate of the
expected life of the option and the specific terms of the option grant.

2.14 Alternative performance measures
The Board assesses the performance of the Group using alternative performance measures (namely LoopUp Revenue, LoopUp
Gross Margin and EBITDA) as in the Board’s view, this reflects the underlying performance of the business and provides a more
meaningful comparison of how the business is managed and measured on a day-to-day basis and is used as a basis for
incentive compensation arrangements for employees.

LoopUp Revenue is defined as total Group revenue adjusted to exclude discontinued technology licensing revenue. LoopUp
Gross margin is total Group gross margin adjusted to exclude the same revenue.

EBITDA is defined as operating profit stated before depreciation, amortisation of intangible fixed assets and a reconciliation
of EBITDA is included on the Consolidated Statement of Comprehensive Income.

It is important to note that alternative performance measures are not defined under IFRS and therefore defined as “non GAAP”
measures. The alternative performance measures used by the Group may not be directly comparable to similarly titled measures
reported by other companies. They are not intended to be a substitute for, or be superior to GAAP measurements of performance.

2.15 Dividends
Dividends are recognised as a liability and deducted from equity at the time they are approved. Otherwise dividends are
disclosed if they have been proposed before the relevant consolidated financial statements are approved.

2.16 Accounting developments
The Group has adopted the following new standards, or net provisions of amended standards:

Disclosure Initiative: Amendments to IAS 7
Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses

There has been no material impact on either amounts reported or disclosure in the financial statements arising from first time adoption.

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing
standards have been published by the IASB but are not yet effective and have not been applied early by the Group.
Management anticipates that the following pronouncements relevant to the Group’s operation will be adopted in the Group’s
accounting policies for the first period beginning after the effective date of the pronouncement, once adopted by the EU:

IFRS 9 Financial Instruments (effective 1 January 2018)
IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)
Annual Improvements to IFRSs 2014-2016 Cycle (effective 1 January 2018)
IFRS 16 Leases (effective 1 January 2019)
Clarification and Measurement of Share-based Payment Transactions (Amendment to IFRS 2) (not yet adopted by the EU)
IFRIC Interpretation 22 Foreign currency transactions and advance considerations (not yet adopted by the EU)
Annual Improvements to IFRS Standards 2015-2017 Cycle (not yet adopted by the EU)
IFRIC Interpretation 23 Uncertainty over Income Tax Treatments (not yet adopted by the EU)

2. Summary of significant accounting policies continued
There are other standards and interpretations in issue but these are not considered to be relevant to the Group.

IFRS 16 will replace IAS 17 for accounting periods commencing on or after 1 January 2019 and from the perspective of the Group
as lessee will require (subject to certain practical expedients) most of the Group’s lease obligations to be reflected on balance
sheet with a corresponding asset reflecting the right to use the underlying leased asset.

Management are currently performing a detailed review of the Group’s lease arrangements and are deciding on how IFRS 16
will be implemented and are considering which practical expedients might apply and whether or not the standard will be
implemented on a full or partial retrospective basis. The full impact of IFRS 16 is therefore not yet known but is limited to the
operating leases with regards to the land and buildings as indicated in note 23 of the financial statements.

The Directors expect that the adoption of the standards listed above, other than IFRS 16, will not have a material impact on the
financial information of the Group in future reporting periods. This includes both IFRS 9 Financial Instruments and IFRS 15
Revenue from Contracts from Customers.

As per note 6, the whole of the Group’s revenue in 2017 was derived from LoopUp Revenue, which is delivered on a pay as you
go model, recognised on the number of seconds of conference time and the number of participants on the conference. This is
not expected to change after the implementation of IFRS 15 on the basis that there are no ongoing performance obligations.

3. Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes
party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual rights to the cash
flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are
de-recognised when the obligation specified in the contract is discharged, cancelled or expires.

3.01 Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method less provision for impairment. Appropriate provisions for estimated irrecoverable amounts are
recognised in the statement of comprehensive income when there is objective evidence that the assets are impaired. Interest
income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest
would be immaterial.

3.02 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid
investments maturing within 90 days from the date of acquisition that are readily convertible into known amounts of cash and
which are subject to an insignificant risk of changes in value.

3.03 Financial liabilities
The Group’s financial liabilities comprise borrowings, finance leases and trade and other payables.

Borrowings and trade and other payables
Trade and other payables are initially measured at their fair value and are subsequently measured at their amortised cost using
the effective interest rate method; this method allocates interest expense over the relevant period by applying the ‘effective
interest rate’ to the carrying amount of the liability.

3.04 Classification as debt or equity
Debt and equity instruments issued are classified as either financial liabilities or as equity in accordance with the substance of
the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets
of the Group after deducting all liabilities.

3. Financial instruments continued
3.05 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued are recognised as the proceeds received, net of direct issue costs. The components
of equity are as follows:

(a) Share capital
The nominal values of equity shares. The rights attributable to the classes of equity in issue are disclosed in note 20.

(b) Share premium
The fair value of consideration received in excess of the nominal value of equity shares, net of expenses of the share issue.

(d) Foreign currency translation reserve
The net foreign exchange gains or losses to date on consolidation of investments in overseas subsidiaries.

3.06 Research and development (R&D) tax credits
R&D tax credits for applicable research and development expenditure is accounted for as a credit to income tax expense in the
year in which it is earned.

4. Financial risk management
4.01 Financial risk factors
The Group’s activities expose it to certain financial risks: market risk, credit risk and liquidity risk, as explained below. The overall
risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the Group’s financial performance. Risk management is carried out by the Directors, who identify and evaluate
financial risks in close cooperation with key staff.

(a) Market risk is the risk of loss that may arise from changes in market factors, such as competitor pricing, interest rates,

foreign exchange rates.

(b) Credit risk is the risk of financial loss to the Group if a client or counterparty to financial instruments fails to meet its
contractual obligation. Credit risk arises from the Group’s cash and cash equivalents and receivables balances.

(c) Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. This risk relates to the
Group’s prudent liquidity risk management and implies maintaining sufficient cash. The Directors monitor rolling forecasts
of liquidity, cash and cash equivalents based on expected cash flow.

4.02 Capital risk management
The Group is funded by equity and loans. The components of shareholders’ equity are:

(a) Share capital.
(b) Retained earnings, reflecting net comprehensive income to date less distributions.

The objective when managing capital is to maintain adequate financial flexibility to preserve the ability to meet financial
obligations, both current and long term. The capital structure is managed and adjusted to reflect changes in economic
conditions. Expenditures on commitments are funded from existing cash and cash equivalent balances, primarily received from
issuances of shareholders’ equity.

4. Financial risk management continued
Financing decisions are made based on forecasts of the expected timing and level of capital and operating expenditure
required to meet commitments and development plans.

There are no externally imposed capital requirements.

4.03 Fair value estimation
The carrying value less impairment provision of trade receivables and payables are assumed to approximate to their fair values
because the short-term nature of such assets renders the impact of discounting to be negligible.

5. Critical accounting estimates and judgements
Details of significant accounting judgements and critical accounting estimates include:

Judgements
5.01 Functional currency
The functional currency is deemed to be Sterling, as the Directors consider that the primary economic environment.

5.02 Recoverability of deferred tax assets
Deferred tax assets are recognised to the extent that it is considered probable that those assets will be recoverable.
This involves an assessment of when those assets are likely to reverse, and a judgement as to whether there will be sufficient
taxable income available to offset the assets when they do reverse.

This requires assumptions regarding the future the profitability of the Group for the 12 months from the date of signing of the
financial statements, and as this is inherently uncertain, no deferred tax asset in relation to tax losses has been recognised in
the financial statements. The Group has trading losses of £12,768,000 (2016: £12,643,000) and non-trading losses of £401,000
(2016: £401,000) carried forward.

5.03 Capitalised development costs
Capitalisation of development costs requires the Directors to make judgements in allocating staff time appropriately to relevant
projects and in assessing the technical feasibility and economic potential of those projects.

These judgements have resulted in the intangible assets as set out in note 14.

Estimates
5.04 Intangible asset life
Intangible assets are amortised over their estimated useful lives.

5.05 Impairment of assets
The impairment review process involves the Directors making judgements about, inter alia, future cash flows and the discount
rate to be applied to those cash flows. Details of key assumptions made are given in note 15.

6. Revenue and segmental reporting
The Directors have identified the segments by reference to the principal groups of services offered and the geographical
organisation of the business as reported to the chief operating decision-maker (CODM).

Segmental revenues are external and there are no material transactions between segments.

The main segment is LoopUp Revenue which consists of ongoing contracts to provide customers with access to the LoopUp
conferencing platform.

The discontinued licensing revenue represented a contract with a single customer in the UK which terminated in 2016. This was
the only customer which represented more than 10% of revenues in either year.

No segmental balance sheet was presented to the CODM.

Analysis of revenue by segment:
LoopUp Revenue
Discontinued licensing revenue

Analysis of gross profit before tax by segment:
LoopUp Revenue
Discontinued licensing revenue

Geographical analysis of total revenue:
EU(1)
US
Rest of World

Geographical analysis of LoopUp Revenue:
EU(2)
US
Rest of World

Geographical analysis of non-current assets:
EU
US
Rest of World

All EU non-current assets reside in the UK.

1. Includes revenue earned in the UK of £6,957,000 (2016: £5,903,000).
2. Includes revenue earned in the UK of £6,957,000 (2016: £5,167,000).

2017
£000

2016
£000

17,465
–

17,465

13,389
–

13,389

8,224
8,968
273

12,823
736

13,559

9,558
736

10,294

7,356
5,952
251

17,465

13,559

8,224
8,968
273

6,620
5,952
251

17,465

12,823

6,209
354
45

6,608

4,897
351
37

5,285

7. Administrative expenses
The profit/loss from operations is stated after charging amounts as follows:

Staff costs (note 9)
Establishment and general:
Auditor’s remuneration (note 8)
Operating lease costs – land and buildings
Depreciation of owned property, plant and equipment (note 13)
Amortisation of intangible assets (note 14)
Impairment of intangible assets (note 14)
Other administrative expenses

Total administrative expenses

8. Auditor’s remuneration
The Group obtained the following services from the auditors and their associates:

Fees payable to the Group’s auditor for the audit of the consolidated and Parent Company’s

financial statements

Audit-related assurance services
Tax compliance services
Tax advisory services(1)
Corporate finance services(1)

Total auditor’s remuneration

2017
£000

2016
£000

6,479

5,156

99
548
291
2,140
300
2,800

12,657

63
420
246
1,419
–
2,592

9,896

2017
£000

2016
£000

50
7
31
7
4

48
7
8
40
115

218

1 Fees of £nil (2016: £155,000) were charged in relation to the Group’s listing. These were set against share premium (note 20) and not charged to the profit and loss account.

9. Staff and remuneration
9.01 Number of staff

Average number of employees (including Directors):
Executive Directors
Commercial
Engineering and development
Other

2017
Number

2016
Number

3
61
26
26

116

2
50
24
23

9. Staff and remuneration continued
9.02 Remuneration

Aggregate remuneration of staff (including Directors):
Short-term remuneration
Compensation for loss of office
Social security costs
Benefits in kind

Capitalisation as development costs (note 14)

Included in operating expenses

2017
£000

2016
£000

8,526
–
779
616

9,921
(3,442)

6,479

7,274
15
663
445

8,397
(2,881)

5,156

In addition to the staff costs above, £318,000 (2016: £330,000) of outsourced contractor costs were incurred and capitalised as
development costs.

9.03 Directors’ remuneration
Remuneration of the Directors included within the statement of comprehensive income is as follows:

Short-term remuneration
Social security
Benefits in kind
Non-Executive Director fees

Short-term remuneration of highest paid Director

The remuneration of key management personnel is shown in note 21.01.

10. Finance income and expense

Interest payable on shareholder loan (note 18)

2017
£000

800
69
15
79

963

349

2017
£000

2016
£000

724
40
7
39

810

340

2016
£000

684

11. Taxation
11.01 Income tax credit

Current tax
Current period UK income tax
Current period foreign income tax
Adjustment for prior periods

Net income tax credit

2017
£000

(900)
5
(365)

(1,260)

2016
£000

(500)
13
3

484

11.02 Factors affecting the tax charge
The income tax charge differs from the theoretical charge arising from applying UK corporate tax rates to the profits for the
reasons below:

UK corporate tax average rate

Profit/(loss) before income tax

Tax at the UK corporate tax rate
Effects of:
Expenses not deductible for tax purposes
Additional reduction for R&D expenditure
Effect of foreign tax rates
Adjustment for prior periods
Other differences

Net income tax credit

2017
£000

19.25%

729

140

2
(944)
14
(365)
(107)

(1,260)

2016
£000

20%

(286)

(57)

3
(437)
13
(3)
(3)

(484)

11.03 Factors that may affect future tax charges
The effective rate of UK corporate tax at the period end was 19%. Reductions in the UK corporation tax rate from 20% to 19%
from 1 April 2017 and to 18% from 1 April 2020 were substantively enacted on 26 October 2015. In the Budget on 16 March 2016,
the Chancellor announced a further planned reduction to 17% from 1 April 2020 which has been substantively enacted at the
balance sheet date.

12. Earnings per share
The basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Group by the weighted
average number of ordinary shares in issue during the year.

13. Property, plant and equipment
13.01 Property, plant and equipment (Group)

Profit attributable to equity holders (£000)

Weighted average number of ordinary shares in issue (000)

Basic earnings per share (pence)

2017

1,989

2016

198

41,208

32,352

4.8

0.6

The diluted earnings per share has been calculated by dividing the net profit attributable to equity holders of the Group by the
weighted average number of shares in issue during the year, adjusted for potentially dilutive shares that are not anti-dilutive.

Weighted average number of ordinary shares in issue
Adjustment for share options

Weighted average number of potential ordinary shares in issue

Diluted earnings per share (pence)

2017
000

2016
000

41,208
3,699

44,907

4.4

32,352
4,413

36,765

0.5

Cost:
As at 1 January 2016
Additions
Net exchange difference

As at 31 December 2016
Additions
Net exchange difference

As at 31 December 2017

Accumulated depreciation:
As at 1 January 2016
Charge for the year
Net exchange difference

As at 31 December 2016
Charge for the year
Net exchange difference

As at 31 December 2017

Carrying amount:
As at 1 January 2016
As at 31 December 2016

As at 31 December 2017

13.02 Property, plant and equipment (Company)
The Company held no property, plant and equipment during the period.

13.03 Finance leases (Group)

Assets under finance leases within above carrying amount:
As at 1 January 2016
As at 31 December 2016
As at 31 December 2017

Computer
equipment
£000

Office
equipment
£000

1,351
258
241

1,850
292
(155)

1,987

1,068
215
183

1,466
258
(121)

1,603

283
384

384

309
46
13

368
39
(9)

398

250
31
8

289
33
(6)

316

59
79

Total
£000

1,660
304
254

2,218
331
(164)

2,385

1,318
246
191

1,755
291
(127)

1,919

342
463

466

Computer
equipment
£000

Office
equipment
£000

9
–
–

–
–
–

Total
£000

9
–
–

The depreciation charges on these assets have been included in administrative expenses in the statement of
comprehensive income.

14. Intangible assets
14.01 Intangible assets (Group)

Cost:
As at 1 January 2016
Additions

As at 31 December 2016
Additions

As at 31 December 2017

Accumulated amortisation and impairment:
As at 1 January 2016
Charge for the year

As at 31 December 2016

Charge for the year
Impairment charge

As at 31 December 2017

Carrying amount:
As at 1 January 2016
As at 31 December 2016

As at 31 December 2017

Development
costs
£000

6,983
3,211

10,194
3,760

13,954

3,953
1,419

5,372

2,140
300

7,812

3,030
4,822

6,142

An impairment test is a comparison of the carrying value of assets to their recoverable amount. Where it is higher than the
recoverable amount, an impairment results. Amortisation and any impairment charges are included in operating expenses in the
statement of comprehensive income. Intangible assets not yet ready for use are tested for impairment at least annually.
Amortisation of each asset begins from the date the asset becomes available for use.

Recoverable amounts have been measured based on value in use. Forecasts for the remaining life of each asset have been
used (maximum three years), based on approved annual budgets and strategic projections representing the best estimate
of future performance.

14.02 Intangible assets (Company)
The Company held no intangible assets during the period.

15. Trade and other receivables

Trade receivables
Amounts owed by subsidiary undertakings
Other receivables
Deposits and prepayments

Current corporate tax

Group
2017
£000

2,785
–
31
532

3,348

904

Group
2016
£000

2,380
–
39
383

2,802

500

Company
2017
£000

–
12,708
–
–

12,708

–

Company
2016
£000

–
11,773
–
–

11,773

–

The Directors believe that the carrying value of receivables represents their fair value. In determining the recoverability of
a receivable, the Directors consider any change in its credit quality from the date credit was granted up to the reporting date.

The largest single receivable at any time would typically constitute no more than 5% of total receivables and would relate
to a blue-chip customer. As such, the concentrated credit risk is considered minimal.

Details of the credit risk management policies are shown in note 19.05. No collateral is held as security for trade or
other receivables. The amounts at 31 December, analysed by the length of time past due, are:

Receivables past due but not impaired:
30-60 days
60-90 days
More than 90 days

16. Cash and cash equivalents

Cash and cash equivalents

Group
2017
£000

987
245
187

748
518
89

1,419

1,355

Group
2016
£000

Company
2017
£000

Company
2016
£000

–
–
–

–

–
–
–

–

Group
2017
£000

2,902

Group
2016
£000

2,547

Company
2017
£000

Company
2016
£000

–

The cash and cash equivalents do not currently earn interest. The Directors consider that the carrying value of cash and cash
equivalents approximates to their fair value.

17. Trade and other payables

Current:
Trade payables
Other tax and social security
Other payables

Accruals
Deferred income

Borrowings (note 18)

Group
2017
£000

1,206
814
98

2,118

1,130
59

1,189

–

3,307

Group
2016
£000

Company
2017
£000

Company
2016
£000

1,062
661
21

1,744

1,275
103

1,378

306

3,428

–
–
–

–

–
–

–

–
–
–

–

–
–

–

The liabilities relating to finance leases are secured on the assets which the leases were used to purchase.

18. Borrowings
Borrowings held at amortised cost

Current:
Shareholder loan

Total borrowings

Group
2017
£000

Group
2016
£000

Company
2017
£000

Company
2016
£000

–

306

–

Trade payables
Loans
Other payables

19. Financial instruments
There is an exposure to the risks that arise from the financial instruments. The policies for managing those risks and the
methods to measure them are described in note 4.

19.01 Capital risk management
Funding to date has been by equity and loans. Loans are no longer outstanding as shown in note 18.

19.02 Financial assets
The following financial assets were held, all classified as loans, cash or receivables:

Cash and cash equivalents
Trade receivables
Amounts owed by subsidiary undertakings
Other receivables
Deposits

19.03 Financial liabilities
The following financial liabilities were held, all classified as other financial liabilities:

Group
2017
£000

2,902
2,785
–
31
183

5,901

Group
2017
£000

1,206
–
98

1,304

Group
2016
£000

2,547
2,393
–
39
180

5,159

Group
2016
£000

1,062
306
21

1,389

Company
2017
£000

–
–
12,708
–
–

12,708

Company
2016
£000

–
–
11,773
–
–

11,773

Company
2017
£000

Company
2016
£000

–
–
–

–

–
–
–

–

Maturity analysis showing the contractual undiscounted cash flows
The Group’s non-derivative financial liabilities have contractual maturities (including interest payments) as summarised below:

31 December 2017:
Trade payables

31 December 2016:
Trade payables
Shareholder loan

Within
six months
£000

Six to
12 months
£000

One to
five years
£000

Non-current
later than
five years
£000

1,206

1,062
306

1,368

–

–
–

–

–
–

–

–
–

–

The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities
at the reporting date.

19.04 Market risk
There is an exposure to the financial risk of changes in exchange rates impacting overseas revenues and costs. The Directors
do not consider it appropriate to engage in hedging activities at this point in time. The Group also held significant US Dollar-
denominated shareholder loans which were fully repaid in early 2017, as shown in note 18. Exchange rate movements on these
loan balances resulted in currency translation losses in both 2017 and 2016 as shown in the statement of comprehensive
income. As these loans have now been paid off, these losses are not expected to recur.

19.05 Credit risk
Careful consideration is given to the choice of bank in order to minimise credit risk. Cash is held with five institutions. The amounts
of cash held with those banks at the reporting date can be seen in the financial assets table above. All of the cash and equivalents
were denominated in UK Sterling.

There was no significant concentration of credit risk at the reporting date other than as described at note 15.

The carrying amount of financial assets, net of any allowances for losses, represents the maximum exposure to credit risk
without taking account of the value of any collateral obtained.

19. Financial instruments continued
A provision of £103,000 (2016: £89,000) has been made for impairment losses in relation to trade receivables. In the Directors’
opinion, there has been no other impairment of financial assets. An allowance for impairment is made where there is an identified loss
event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The Directors consider
the above measures to be sufficient to control the credit risk exposure. No collateral is held as security in relation to its financial assets.

Amounts owed by subsidiaries are unsecured, have no fixed date of repayment and are repayable on demand.

19.06 Liquidity risk management
The Directors manage liquidity risk by regularly reviewing cash requirements by reference to short-term cash flow forecasts and
medium-term working capital projections.

19.07 Maturity of financial assets and liabilities
All the non-derivative financial liabilities and assets at the reporting date are either payable or receivable within one year.

19.08 Fair value
The fair values of all the financial assets and liabilities on the balance sheet are considered to be equal to their carrying values.

Where market values are not available, fair values of financial assets and liabilities have been calculated by discounting
expected future cash flows at prevailing interest rates with the following assumptions being applied:

for trade and other receivables and payables with a remaining life of less than one year the carrying amount is deemed to

reflect the fair value;

for cash and cash equivalents the amounts reported on the balance sheet approximate to fair value.

20. Share capital and share premium
20.01 Number of shares in issue

Ordinary shares of 0.5p each

20.02 Share capital at par, fully paid

Carried forward:
Ordinary shares of 0.5p each

Movement in year:
Shares issued:
– Ordinary shares of 0.5p each
Shares converted:
– Ordinary shares of 0.5p each
– A ordinary shares of 0.5p each
– EIS A ordinary shares of 0.5p each

The classes of ordinary shares ranked pari-passu in respect of voting and dividends.

2017
Number

2016
Number

42,069,727

40,784,176

42,069,727

40,784,176

2017
£000

210

–
–
–

2016
£000

204

27
(25)
(2)

20. Share capital and share premium continued
20.03 Changes in shares issued

Ordinary shares issued at £0.0125
Ordinary shares issued at £0.0128
Ordinary shares issued at £0.5000
Ordinary shares issued at £0.0750
Ordinary shares issued at £1.0000

2017
Number

–
–
116,000
1,169,551
–

2016
Number

–
43,750
–
–
13,000,000

1,285,551

13,043,750

As part of the Group’s preparation for admission to AIM, a share-for-share exchange took place on 2 August 2016, whereby the
entire share capital of Ring2 Communications Limited was exchanged for identical shares in LoopUp Group plc. On 17 August
2016, under a deed of capitalisation, £4,500,000 of funds borrowed under the shareholder loan facility were capitalised by the
allotment and issue of 4,500,000 ordinary shares to the debt holder. Upon admission to AIM on 24 August 2016, the following
events occurred:

All shares in LoopUp Group plc converted into ordinary shares of £0.05 each.
8,500,000 new shares of £0.005 each were issued for a rated consideration of £8,500,000.

20.04 Share premium account

Brought forward
Arising during the year on issue of shares
Costs of share issue

Carried forward

20.05 Share options
Outstanding share options were as follows:

Outstanding at 1 January
Granted at £0.750 and £0.0128
Lapsed at £0.125
Exercised (note 20.03)

Outstanding at 31 December

Weighted average exercise price of outstanding options carried forward

2017
£000

11,708
929
–

12,637

2016
£000

–
12,935
(1,227)

11,708

2017
Number

2016
Number

4,388,115
–
(93,158)
(1,285,551)

4,438,400
309,000
(315,535)
(43,750)

3,009,406

4,388,115

0.6817

0.6955

The Directors have assessed the charge arising from the issue of share options as immaterial based on the assumptions below
in note 20.06.

20. Share capital and share premium continued
20.06 Share-based payments
The fair values of the options granted have been calculated using a Black-Scholes model. Assumptions used were an option life
of five years, a risk-free rate of 1%, a volatility of 60% and no dividend yield. Other inputs were as follows:

21. Related party transactions continued
21.03 Transactions with related companies and businesses
The Group has purchased services in the normal course of business from certain companies related to individuals who are
or were Directors of the Group:

Number granted in period

Assumed share price at grant date
Exercise price

2017
Number

2016
Number

–

–
–

309,000

0.0125
0.75

21. Related party transactions
21.01 Remuneration of key personnel
Key management of the Group are the members of the executive team. Key management personnel remuneration includes the
following expenses:

Short-term remuneration
Social security
Benefits in kind

Total remuneration

21.02 Transactions and balances with key management personnel

Amounts owed by/(to) key personnel:
Steve Flavell
Michael Hughes
Mike Reynolds
Barmak Meftah
Simon Healey

This amount represents expense claims outstanding at the year end.

2017
£000

1,368
123
33

1,524

2017
£000

(96)
(20)
(4)
(5)
(15)

(140)

2016
£000

1,275
90
23

1,388

2016
£000

–
(2)
(4)
–
(5)

(11)

The purchases from these parties and the balances owed at year end are as set out below:

Purchases from (sales to) related parties:
Silicon Valley Internship Program LLC
Silicon Valley Internship Program LLC

Amounts owed to (by) related parties:
Silicon Valley Internship Program LLC
ScottFin ECE Limited

Interest charged during the year on shareholder loan

2017
£000

–
(38)

(38)

23
–

2016
£000

45
(45)

–

16
306

322

684

The Group has a related party relationship with its subsidiaries. At the balance Sheet date, the Company had receivables due
from LoopUp Limited of £8,208,000 (2016: £7,273,000) and Pimco 2711 Limited of £4,500,000 (2016: £4,500,000).

22. Subsidiary undertakings
The Company owns 100% of the issued shares of the following telephony and conferencing services subsidiaries which make
up the carrying value of £139,000 (2016: £139,000).

LoopUp Limited – registered office 78 Kingsland Road, London E2 8DP, UK.
LoopUp LLC (incorporated in the USA) – registered office 282 Second St, San Francisco, 94105, USA.
LoopUp (HK) Limited (incorporated in Hong Kong) – registered office 111 Connaught Road, Central, Hong Kong.
LoopUp (Barbados) Limited (incorporated in Barbados) – registered office The Gables, Haggatt Hall, St Michael, Barbados.
LoopUp Australia Pty Ltd (incorporated in Australia) – registered office 383 Kent St, Sydney, NSW 2000, Australia.
PIMCO 2711 Limited – registered office 78 Kingsland Road, London E2 8DP, UK.

All subsidiary undertakings have been included in the consolidation.

Company Information
Company Information and Corporate Advisers

23. Operating lease arrangements
Outstanding commitments for future minimum lease payments under non-cancellable operating leases were:

Land and buildings:
Within one year
In the first to fifth years inclusive
After the fifth year

2017
£000

2016
£000

555
1,474
159

2,188

535
535
–

1,070

The Group’s main UK office was leased on a five-year term expiring in November 2016, at an annual rental of £98,000. This was
renewed for a further five-year term (with a three year break option) from December 2016 at an annual rental of £200,000.

The San Francisco office was leased at an annual rental equivalent to £233,000, payable monthly, for 2017 (increasing annually).
The lease expires in June 2018, and has been renewed for another five year term.

Smaller offices were also leased during the period in London, Hong Kong and the US with a total annual cost of approximately
£105,000. They expire on various dates and the longest term has been three years.

24. Reconciliation of liabilities arising from financial liabilities
The changes in the Group’s liabilities arising from the financial activities can be classified as follows:

As at 1 January 2017
Cash flows:

– repayment

As at 31 December 2017

25. Subsequent events
There have been no substantial events since the period end that require disclosure.

Short-term
borrowings
£000

306

Total
£000

306

(306)

–

Advisers

Legal Counsel
Pinsent Masons
30 Crown Place
Earl Street
London
EC2A 4ES
020 7418 7000

Financial Public Relations
FTI Consulting
200 Aldersgate Street
London
EC1A 4HD
020 7979 7400

Financial Adviser, NOMAD, Joint Broker
Panmure Gordon
1 New Change
London
EC4M 9AF
020 7886 2500

Joint Broker
Numis Securities
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT

Reporting Accountant and Auditor
Grant Thornton
30 Finsbury Square
London
EC2A 1AG
020 7184 4300

Registrars
Neville Registrars
Neville House
18 Laurel Lane
Halesowen
B63 3DA
0121 585 1131

Company Registration Number: 09980752

LoopUp Group plc | Annual Report & Accounts 2017LoopUp Group plc | Annual Report & Accounts 2017Financial StatementsNotes to the Financial Statements68

Notes

LoopUp Group plc | Annual Report & Accounts 2017L

LoopUp Group plc

First Floor
78 Kingsland Road
London
United Kingdom
E2 8DP

T +44 (0)20 3107 0206
E ir@loopup.com