L o o p U p G r o u p p l c A n n u a l R e p o r t & A c c o u n t s 2 0 2 1 ANNUAL REPORT & ACCOUNTS 2021 At LoopUp, we believe great communications are at the heart of all successful organisations. Our mission is to help them communicate and collaborate in a secure and effective way wherever they may be. STRATEGIC REPORT 2 Financial Highlights 4 Cloud Telephony 6 Hybridium 8 Co-Chief Executive Officers’ Statement 10 Strategic Priorities 12 Our People and Culture 14 Corporate Social Responsibility 15 Streamlined Energy and Carbon Reporting (SECR) 16 Chief Financial Officer’s Review 18 Principal Risks and Uncertainties 20 Section 172 Statement GOVERNANCE 22 Board of Directors 24 Chairman’s Statement 25 Corporate Governance Report 34 Audit Committee Report 35 Nomination Committee Report 36 Remuneration Committee and Remuneration Report 39 Directors’ Report 41 Directors’ Responsibilities Statement FINANCIAL STATEMENTS 42 Independent Auditor’s Report 50 Consolidated Statement of Comprehensive Income 51 Consolidated Statement of Financial Position 52 Company Statement of Financial Position 53 Consolidated Statement of Changes in Equity 54 Company Statement of Changes in Equity 55 Consolidated Statement of Cash Flows 56 Company Statement of Cash Flows 57 Notes to the Financial Statements 88 Company Information and Corporate Advisers LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements LoopUp Group plc | Annual Report & Accounts 2021 1 FINANCIAL HIGHLIGHTS A year of strategic transition for the Group Revenue1 £19.5m 50.2 42.5 34.2 19.5 17.5 M £ Gross profit1 £13.5m 35.6 28.2 23.9 13.5 13.4 M £ 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Adjusted EBITDA1,2 £1.2m 15.3 7.7 6.4 3.5 M £ 1.2 Adjusted operating (loss)/profit1,2 £(6.1)m 9.0 4.5 M £ 0.7 1.2 (6.1) 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Cash at 31 December 2021 £5.5m (2020: £12.1m) Notes: 1. 2021 includes 3 months of SyncRTC (Hybridium), acquired in October 2021 2. Adjusted EBITDA and operating (loss)/profit exclude non-recurring transaction costs, exceptional reorganisation costs, non-recurring transaction costs, amortisation of acquired intangibles and share-based payments charges 2 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements From our traditional base of remote meetings to a broader cloud platform for premium hybrid communications REVENUE SEGMENTATION (FY2021) (%) 54% 23% 13% 9% 1% Graph key: Remote Meetings: – £10.56m – 54% Cloud Telephony: – £2.54m – 13% Virtual Events: – £1.74m – 9% Hybridium: – £0.24m – 1% WebEx resale: – £4.44m – 23% LoopUp Group plc | Annual Report & Accounts 2021 3 CLOUD TELEPHONY Next Generation Cloud Telephony In Q3 2020, the Group announced the launch of its Cloud Telephony solution, which now sits squarely at the heart of the Group’s forward-looking growth strategy. LoopUp’s next generation solution is integrated with Microsoft Teams and enables users to make phone calls to external phone numbers and receive phone calls to their own work phone numbers, all seamlessly via their Teams enabled devices. LoopUp’s differentiated platform is targeted at multinational enterprises, enabling them to consolidate their telephony provision globally with one vendor partner – LoopUp – rather than multiple geographic-specific carriers. Specifically, LoopUp: • expects to be a fully licensed and regulated telecommunications service provider in approximately 60 countries by the end of 2022, including certain challenging jurisdictions such as China and India; • has built a premium voice platform over the last 15 years (originally for the purpose of high quality legal conference calls), comprising a private redundant IP backbone between seven global data centres, which interconnect with 18 carefully selected tier-1 carrier partners with calls routed on highest quality basis; Gold Cloud Productivity Gold Collaboration and Content Gold Communications Gold Messaging Gold Project and Portfolio Management Gold Windows and Devices LoopUp's Advanced Specialization Awards Calling for Microsoft Teams Adoption and Change Management Meetings and Meeting Rooms for Microsoft Teams 4 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Forecast Cloud Telephony market value by 2025 £29b (source: Gartner 2022) • brings deep, multilingual Microsoft voice expertise to assist its customers with solution design, configuration and rollout project management across complex global deployments. The Group has recently been awarded the 'Calling for Microsoft Teams Advanced Specialization' by Microsoft, which represents the highest competency tier above and beyond Microsoft's gold level; • has developed a global management and administration portal for its customers, enabling visibility and management of phone numbers, users and usage/spend analysis on a global level; and • has introduced differentiated 'PerfectBundleTM' pricing, which enables customers to pool their committed spend across their international billing entities. During 2021, the Group closed 31 new Cloud Telephony enterprise contracts, with all customer deployments proving successful and all rollouts progressing positively. The Group is targeting an additional 50 wins during 2022. The Group’s sales pipeline of direct Cloud Telephony opportunities continued to grow and mature, reaching approximately £72 million of potential Annual Recurring Revenue (ARR) by the end of FY2021. Gold Cloud Productivity Gold Collaboration and Content Gold Communications Gold Messaging Gold Project and Portfolio Management Gold Windows and Devices LoopUp's Advanced Specialization Awards Calling for Microsoft Teams Adoption and Change Management Meetings and Meeting Rooms for Microsoft Teams LoopUp Group plc | Annual Report & Accounts 2021 5 HYBRIDIUM Hybrid Auditorium Technology (acquired by the Group in October 2021, as SyncRTC) The post pandemic hybrid workplace is seeking new ways to communicate, learn and engage, and yet getting large groups of people together is harder than ever. 6 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Universitas is at the heart of our objective to turn Telefónica’s headquarters into a complete and avant-garde technological, disruptive, training and creative ecosystem, and we are delighted to partner with Hybridium in this endeavour. Hybrid classes will leverage Hybridium’s technology, combining virtual and face-to-face sessions in groundbreaking formats that honour the essence of the Hub in attracting, fostering and nurturing talent. We see Universitas and its technologies as a world reference" José María Álvarez-Pallete, president of Telefónica People want flexibility between in-person and remote participation and need to feel represented and engaged in both settings. At Hybridium, we understand that sometimes ‘just another Teams or Zoom’ simply doesn’t cut it. As specialists in hybrid auditorium technology for the last decade, we help organisations catapult engagement and competitiveness to the next level. Hybridium’s large scale video and hologram wall unites participants for exceptionally immersive and engaging hybrid collaboration, training and events, and is designed for: • • • Immersive engagement – ultra-low latency at ultra-high resolution Full video wall layout flexibility – any content of any screen In-person and remote delegate parity – neither group should feel second class • Driven engagement – facilitating interactions, capturing reactions, uniting hybrid audiences • Event persistence – content and video wall layout continuity for recurring sessions • Session analytics – attendee interactions tracked providing valuable event insights LoopUp Group plc | Annual Report & Accounts 2021 7 CO-CHIEF EXECUTIVE OFFICERS' STATEMENT Continued execution on our strategic transition • Hybrid Auditorium Technology (Hybridium) – enabling large scale collaboration and events (20-150 people in room and 20-150 people remote) for events such as company town halls, management onsites/offsites, team kick-offs, capital markets days, product launches, corporate training and external thought leadership events. By contrast, the Group’s Remote Meetings business has been declining in the post pandemic environment as enterprises progressively embrace more holistic Unified Communications (UC) platforms, such as Microsoft Teams, which incorporate meetings functionality. Overall, FY2021 Group revenue was £19.5 million (FY2020: £50.2 million) and adjusted EBITDA was £1.2 million (FY2020: £15.3 million), declines which were exaggerated by the material Q2/Q3 2020 spike in Remote Meetings business at the onset of the COVID-19 pandemic, which peaked at over £7 million per month in each of March and April 2020. We continue to manage our business operations carefully to preserve cash during this strategic transition and are excited by the forward-looking growth potential of both Cloud Telephony and Hybridium. Strong commercial momentum in Cloud Telephony In Q3 2020, the Group announced the launch of its Cloud Telephony solution, integrated into Microsoft Teams, which enables users to make phone calls to external phone numbers and receive phone calls to their own work phone numbers, all seamlessly via their Teams-enabled devices. LoopUp’s differentiated platform enables multinational enterprises to consolidate their telephony provision globally with one vendor partner – LoopUp – rather than from multiple geographic-specific carriers. Following 31 new Cloud Telephony contract wins during FY2021 – the Group’s first full year of trading since the launch of its solution for Microsoft Teams – the Group has added 16 additional new contract wins as at 7 June 2022. This performance places the Group on track to meet its full year target of securing 50 additional contract wins during the full year. The post pandemic workplace has shone a spotlight on hybrid communications solutions" Steve Flavell and Michael Hughes FY2021 has been a challenging year for the Group, as it has been executing on a strategic transition to grow its forward-looking hybrid communications lines of business – Cloud Telephony and Hybridium – as its Remote Meetings line of business declines. The post pandemic workplace has shone a spotlight on hybrid communications tools that are equally secure and effective in the office, at home and on the road. The Group has two exciting solutions in hybrid communications: • Cloud Telephony (LoopUp) – enabling next generation phone calls to and from work phone numbers independently of the user’s physical location, and in LoopUp’s case, enabling multinational enterprises to buy telephony globally from one service provider as opposed to multiple telecommunications carriers; and 8 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements In aggregate, these 47 contract wins – 31 in FY2021 and 16 in FY2022 to date – represent: • Minimum Annual Recurring Revenue (ARR) of c.£0.8 million and minimum Total Contract Value (TCV) of c.£3.1 million, based on minimum contracted levels; • Expected ARR of c.£1.9 million and expected TCV of c.£6.2 million, based on expected rollout levels, where LoopUp has relatively strong visibility of customer intent based on conversations, planning and pricing; and • Potential ARR of c.£4.4 million and potential TCV of c.£13.8 million, based on identified potential rollout levels but where LoopUp currently has less clear visibility of customer intent. In addition to the 47 contract wins, the Group’s sales pipeline of potential new Cloud Telephony opportunities continues to grow and now stands in excess of £100 million of additional potential ARR, of which 15% is at written proposal stage or later. Operationally, all customer deployments to date have been successful, and all rollouts are progressing positively. We are excited by the potential of our differentiated solution in this large market, which is forecast to grow to c.£29 billion by 2025 (source: Gartner 2022). Acquisition of SyncRTC, since rebranded to Hybridium In October 2021, the Group acquired SyncRTC Inc., a hybrid auditorium technology company, at an enterprise value of c.£3.3 million, which the Group has since rebranded to Hybridium (www.hybridium.com). The acquisition stemmed from the Group’s longstanding relationship with SyncRTC CEO, Victor Sanchez, who founded the company in 2013. Following the acquisition, Victor has taken on the combined role of President of Hybridium and LoopUp Group CTO. Hybridium combines video wall and hologram technology, bringing unrivaled engagement and analytics to larger scale hybrid education, corporate training and events such as management onsites, departmental kick-offs, capital markets days and thought leadership seminars. Events with Hybridium benefit from ultra-low latency at ultra-high resolution, with full video wall layout flexibility facilitating any content on any screen. In April 2022, Hybridium signed a landmark deal with Telefónica, who is deploying the solution at ‘Universitas’, its global innovation and talent hub, located at its Madrid headquarters in Distrito Telefónica. The initial 2-year contract with Telefónica is for a minimum value of approximately EUR 200,000, with potential for expansion and extension. José María Álvarez-Pallete, president of Telefónica, commented, “Universitas is at the heart of our objective to turn Telefónica’s headquarters into a complete and avant- garde technological, disruptive, training and creative ecosystem, and we are delighted to partner with Hybridium in this endeavour. Hybrid classes will leverage Hybridium’s technology, combining virtual and face-to-face sessions in groundbreaking formats that honour the essence of the Hub in attracting, fostering and nurturing talent. We see Universitas and its technologies as a world reference.” Business priorities and looking ahead The Group is focused on the following business priorities during FY2022: Cloud Telephony: driving the next stage of commercial traction Continuing the rapid flow of new opportunities into the sales pipeline; developing the weighting of pipeline opportunities to more progressed stages in the sales cycle; generating an increasing rate of successful conversions into new customer wins; and reaching a state of material predictable revenue growth at attractive unit customer acquisition economics; Cloud Telephony: introducing highly scalable strategic distribution partnerships Seeking to form strategic partnerships with major global Microsoft partners who sell other related Microsoft technology but are not licensed to sell cloud telephony, particularly on a multi-jurisdictional basis consistent with their enterprise customer bases; Hybridium: extending distribution into the enterprise market Moving beyond Hybridium’s existing customer base in education, and leveraging the post pandemic enterprise demand for communications tools that can drive communications, learning and engagement in the hybrid workplace; and Hybridium: introducing LoopUp-managed hybrid events in London Extending the Group’s long-established virtual events business by launching a managed hybrid events capability, initially as a proof of concept in London. Looking ahead, we are excited about the potential of our forward-looking hybrid communications lines of business – Cloud Telephony and Hybridium. We are firmly focused on their market success and growth, while leveraging the cash generation of our declining Remote Meetings business. This transition will extend into FY2022, as the Group continues to manage its operations to preserve cash while turning the corner back towards strong and sustainable medium term growth. Steve Flavell Co-CEO Michael Hughes Co-CEO LoopUp Group plc | Annual Report & Accounts 2021 9 STRATEGIC PRIORITIES Growing our hybrid communications lines of business - Cloud Telephony and Hybridium PRIORITY EXPLANATION 1. CLOUD TELEPHONY BUSINESS GROWTH Building scalable and efficient routes to market 2. HYBRIDIUM BUSINESS GROWTH Building scalable and efficient routes to market 10 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements ACHIEVEMENTS OUTLOOK • Rapid development of Cloud Telephony pipeline, • Targeting 50 additional enterprise reaching an estimated £72 million of potential Annual Recurring Revenue (ARR) by the end of 2021 contract wins in 2022 • Closed 31 enterprise contracts in 2021 • Enter into strategic partnership discussions for indirect distribution of Cloud Telephony • All deployments successful and all rollouts • Continue to develop and widen progressing positively LoopUp’s product differentiation for its multinational target market • Seek cross sale opportunities from Hybridium customers • Acquired SyncRTC in October 2021 • Targeting 8 contract wins in 2022 • Effective integration of the business into the LoopUp Group structure • Launch of a London facility for LoopUp-managed events • Reformulated go-to-market strategy to target the • Continue to develop Hybridium’s multinational enterprise market alongside Hybridium’s existing education market product differentiation • Seek cross sale opportunities from LoopUp Cloud Telephony customers LoopUp Group plc | Annual Report & Accounts 2021 11 OUR PEOPLE AND CULTURE Our primary growth markets are in transition, but our focus on teamwork remains steadfast.” Steve Flavell Co-CEO KEY STATS Employees (at year end) 202 46% Female employees Percent of employees currently with over 2 years’ service 86% The excellence of our employees has always been, and remains, the Group’s primary asset, even as we transition into new growth markets. Notwithstanding the COVID-19 pandemic and the new ways of working, teamwork has always been at the heart of LoopUp’s culture. Each employee is keen to do their part, and collectively employees galvanise to drive success for the company and each other. It is this deep-rooted team culture that differentiates our products and service to customers in our markets. Our 5 pillars During 2021, our People and Culture Team has refocused efforts around 5 key pillars which support our culture and values: 1. Reward and recognition – rewarding individuals and teams for demonstrating our values 2. Learning and Development – encouraging the development and sharing of skills amongst employees, and supporting those driven to be industrious, ambitious, innovative and curious 3. Wellbeing – looking after our employees, ensuring equity, respect, opportunity and wellbeing 4. Corporate Social Responsibility – acting with integrity for our employees, shareholders, stakeholders and the wider community. 5. Social – ensuring we have fun along the way. Equity incentive schemes As part of this focus we aim to develop, motivate and reward our employees. In July 2021, we launched the LoopUp Employee Share Incentive Scheme (ESIS), whereby employees can choose to sacrifice a percentage of their base salary in return for equity in LoopUp. The scheme has been highly successful with approximately 80 employees taking part. In addition, the company has continued to use the approved share options schemes to incentivise and retain key employees. The directors consider these schemes as a great way to reward employees, while aligning their interest with the company and all shareholders. 12 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements New ways of working We promptly introduced home working for all our offices as lockdown measures were introduced in most countries in March 2020 and have continued to act in the best interests of our employees’ health and our customers’ quality of service. Staff are well equipped and able to work efficiently remotely, making the most of the technology available. With the pandemic lasting longer than any of us imagined, motivation and engagement of employees has been paramount, especially during a time of uncertainty. Regular communications from our co-CEOs, Executive Leadership Team and senior management team have served to reassure, support and connect colleagues while they were distanced from one another. We are currently working in a hybrid mode, with choices being driven by the needs of each team to drive productivity, the specific situation and preferences of individuals, and the company’s need to retain effective communications and guiding culture. Our values ACTING WITH PROFESSIONALISM • Being accountable and reliable • Displaying professionalism • Acting with integrity DEMONSTRATING A ‘ONE TEAM’ ATTITUDE • Treating others with trust and respect • Being collaborative, helpful and supportive • Making the job fun DISPLAYING A PASSION FOR RESULTS • Being industrious, determined and ambitious • Taking ownership and being a self-starter • Being innovative, curious and agile • Focusing on business outcomes and taking a lean approach LoopUp Group plc | Annual Report & Accounts 2021 13 CORPORATE SOCIAL RESPONSIBILITY Focusing on the environment, our communities and our future We recognise that we have a responsibility to our employees, to the communities in which we work, and to our planet. At LoopUp, we consider Corporate Social Responsibility (CSR) as an intrinsic part of our business. We are committed to: • promoting equality and social mobility; • reducing the impact of our activities on the environment; and • supporting entrepreneurial activities. We contribute through a combination of charitable giving, volunteering and mentorship, and we collaborate with charities, not-for-profit organisations and community groups. A spotlight on the Silicon Valley Internship Programme (SVIP) The Silicon Valley Internship Programme (SVIP) was founded by LoopUp’s co-CEO, Michael Hughes, in 2013. Michael works with a group of volunteers who want to give back to the entrepreneurial community with a view to spreading innovation, diversity, and entrepreneurship around the world. The program gives newly graduating software engineering students (and related disciplines) the unique experience of working with tech companies in the San Francisco Bay Area through a one-year paid internship. The aim is that through this experience, SVIP interns will pick up and bring back a little bit of the Silicon Valley culture to the entrepreneurial community in their home countries. Successful applicants are matched with a tech company in the Bay Area and will work as an integral part of that engineering team. SVIP arranges for US work visas, provides flights to and from San Francisco, and organises the first month’s accommodation. During the programme, SVIP hosts regular ‘Meet the Entrepreneur’ and ‘Hackathon’ events, which take the participants through the company formation process from idea to revenue. SVIP places into small to medium sized high growth software companies, ranging from enterprise software to consumer offerings, and even tools for developers. SVIP interns gain hands-on experience of day-to-day Silicon Valley life, and that can sometimes mean shoes in the office being optional or high-level meetings conducted over a game of ping pong. 14 LoopUp Group plc | Annual Report & Accounts 2021 STREAMLINED ENERGY AND CARBON REPORTING (SECR) Strategic Report Governance Financial Statements Group usage of energy varies by office location and is a combination of: • being metered and paid for by the Group as consumed; and • being pooled across all building tenants and paid for by the Group as part of a service. Energy consumption across the Group has been estimated by calculating electricity usage per employee in our main London office, where data is available for energy directly consumed. This electricity usage per employee figure has then been applied to all employees in the Group. The greenhouse gas emissions have been calculated using a conversion factor of 0.212 tCO2e per MWh. This is the greenhouse gas conversion factor recommended by the UK Government for company reporting purposes. The Group has no significant energy consumption which falls into scope 1. LoopUp energy consumption data, 2021 UK International Total Energy consumption (MWh) Scope 2: (tCO2e) Employees tCO2e per employee 106 22.5 121 0.19 71 15.0 81 0.19 177 37.5 202 0.19 In 2021 the Group continued its actions to reduce energy consumption and greenhouse gas emissions. These include increasing the number of employees that work remotely for some or all of the week, rather than being present in the office. As a result, the Group closed a number of its offices in favour of continued remote and hybrid working, resulting in reduced energy consumption as well as reduced costs. Furthermore, the Group continued to reduce the need for employees to travel, especially on international trips. LoopUp Group plc | Annual Report & Accounts 2021 15 CHIEF FINANCIAL OFFICER’S REVIEW A year of transition After an extraordinary 2020, it is pleasing to see the Group's strategic transition progressing well" Simon Sacerdoti During 2021, the Group has made good progress in its strategic transition towards hybrid communications and collaboration, which began in the latter part of 2020 with the launch of its Cloud Telephony product for Microsoft Teams and the acquisition of SyncRTC (rebranded as Hybridium in 2022) in October 2021 added to the Group's product offerings. Operating results With the acquisition of SyncRTC Inc in 2021 (since rebranded to Hybridium), the Group has added a new revenue stream hybrid auditorium technology. The segmental reporting now considers the following segments: • Revenue from our Cloud Telephony, Remote Meetings and Managed Events capabilities, all delivered on LoopUp’s global technology platform, is categorised as LoopUp Platform Capabilities (“LPC”); • Revenue from the provision of hybrid auditorium technology is categorised as ‘Hybridium’; and • Revenue from the resale of Cisco WebEx Meetings is categorised as ‘third party resale services’. 16 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Revenue £19.5m FY2020: £50.2m Adjusted EBITDA £1.2m FY2020: £15.3m 2020 was an exceptional year due to the global lockdown having a hugely positive, but relatively short-lived impact on revenues. While revenue spiked in Q2 and Q3 2020, a steady decline then set in as enterprises progressively moved to more holistic Unified Communications platforms, such as Microsoft Teams, rather than using discrete meetings products. Relative to that high point, 2021 revenue from LPC decreased by 65% to £14.8 million (2020: £43.0 million), and revenue from third party resale services declined by 38% to £4.4 million (2020: £7.2 million). The Group had an operating cash outflow after capital expenditure of £11.4 million (FY2020: £11.4 million inflow). This was partly offset by the proceeds of a placing in October 2021 which raised £8.85 million and enabled a prepayment of £4.1 million of term debt in addition to the £1.7 million that was scheduled. Net debt has risen to £2.4 million as at 31 December 2021 (2020: £0.7 million). Included in the LPC figures is £0.74 million of Cloud Telephony revenue, for which 2021 was the first year of trading (excluding the Group’s legacy cloud telephony capability for Skype for Business). The Group’s overall gross profit decreased by 62% to £13.5 million (2020: £35.6 million), representing a gross margin of 69.0% (2020: 70.9%). This slight decrease of two percentage points reflects a change in mix between LPC and lower margin third party resale services. The gross profit on LPC business fell by 65% to £11.7 million (2020: £33.5 million), at a slightly improved gross margin of 79.1% (2020: 77.8%). The adjusted operating expenses of the Group in 2021 were reduced by 39% on 2020 levels at £12.3 million (2020: £20.3 million). Management and the Board have actively managed costs in line with the reduced revenues, and this has included reorganising staffing levels where necessary. Furthermore, the Group’s performance in 2020 gave rise to a large bonus accrual, which was not the case in 2021. Assets and Cash Flow The Group has reassessed the carrying value of its intangible assets as at 31 December 2021, which has led to an exceptional impairment charge of £19.6 million in respect of the customer relationships asset that arose on the acquisition of MeetingZone in 2018. The majority of the customers represented by this asset were Remote Meetings and Managed Events customers, and the decline in those lines of business has resulted in: (1) this asset needing to be impaired; and (2) the amortisation period being revised down to 6 years from the original 15 years. This does not apply to the goodwill recognised on the same acquisition, as the technological, telecommunications and operating platform acquired is a key part of the Group’s Cloud Telephony offering going forward. In 2018, the Company entered into a term loan with Bank of Ireland for £17.0 million, which has since reduced to £6.76 million as at 31 December 2021, following an additional repayment of £4.10 million following the Group’s £8.85 million placing in October 2021 (balance at 31 December 2020: £12.75 million). Since the year-end, the Group has successfully renegotiated and amended this senior debt with Bank of Ireland to reflect the Group’s ongoing strategic transition plan. Key elements of the amended arrangements include: • a holiday on planned principal repayments through to June 2023, representing £1.7 million in aggregate deferred payments; • a margin increase of 2.0 percent, taking the total interest rate to 4.5 percent above the Sterling Overnight Index Average (SONIA); • continuation of the Group's undrawn revolving credit facility of £1.5 million; • an extension of the term through to September 2023; and • a revised set of financial covenants which are more concerned with sufficient ongoing cash liquidity and the growth objectives for Cloud Telephony and Hybridium in the Group’s transition business plan. Due to the reduced scale of the business since the high point in 2020, the Group’s management and Board have carefully reviewed both near and mid-term cash forecasts and are comfortable with the Group’s application of the going concern basis of accounting. Key performance indicators As the Group is in a state of strategic transition, the key performance indicators (KPIs) used by management to monitor the business are being developed in line with the transition. The financial indicators currently being used by management to monitor performance align closely with the performance highlights set out on page 2. There are no non-financial KPIs used by management, and accordingly, the Group does not report any non-financial KPIs in this report. Simon Sacerdoti CFO LoopUp Group plc | Annual Report & Accounts 2021 17 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 consistent, so far as appropriate given the size and nature of the business, with the guidance issued by the Financial Reporting Council. 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 on the Group. PRINCIPAL RISK OR UNCERTAINTY IMPACT MITIGATION COMPETITION AND TECHNOLOGICAL CHANGE PEOPLE KEY SYSTEM FAILURE OR DISRUPTION The Group operates in dynamic software technology and telecommunications markets, which may be subject to material change in terms of customer demand and substitutional technology. 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. While certain products in the Group’s portfolio may experience threat and decline due to competition and technological change from time to time, the Group maintains a policy of active product development and, if appropriate, technology acquisition that can promote long term business sustainability. In 2021, the Group invested materially in its Cloud Telephony growth line of business, and acquired SyncRTC as a further growth line of business in hybrid auditorium technology. 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 always seeks to ensure that it has 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. 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. 18 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Key Increased Decreased Unchanged PRINCIPAL RISK OR UNCERTAINTY IMPACT MITIGATION PRODUCT DEVELOPMENT INTELLECTUAL PROPERTY FOREIGN EXCHANGE New capabilities and enhancements introduced into the Group’s products 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. 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. 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. 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. 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 strive to maintain robust contracts with any key software licensed from third parties, and are aware of and informed about alternative sources of supply as necessary. The Group’s costs and revenues in US Dollars are broadly aligned, providing a natural hedge. This position is monitored continually by management. LoopUp Group plc | Annual Report & Accounts 2021 19 SECTION 172 STATEMENT We believe that proactively engaging with, and acting on the needs of, our key stakeholders is critical to a culture and strategy that achieves long-term sustainable success The Board identifies the following as its key stakeholders, and it is committed to effective engagement with them to promote the success of the company for the benefit of each group: Shareholders Our aim is to promote long term value and growth to our shareholders. Through our AGMs, Capital Markets Days (from time to time), investor meetings and other discussions with our shareholders, we are able to communicate effectively with this group to help shape our commercial strategy. Please see our Corporate Governance Report on pages 26 to 33 for further information. Community We believe in making a commitment to the communities we live and work in, to our planet and to society more broadly. Please see our Corporate Social Responsibility section on pages 14 and 15 for further information. Relevant information obtained from our key stakeholders is provided to the Board through reports sent in advance of each Board meeting and through in-person presentations. As a result of these activities, the Board has an overview of engagement with stakeholders, and other relevant factors, which enables the Directors to comply with their legal duty under section 172 of the Companies Act 2006. This strategic report was approved by the Board of Directors and authorised for issue on 25 July 2022. It was signed on their behalf by: Steve Flavell Co-CEO 25 July 2022 Employees We are committed to investing in our people and creating an environment where every employee can reach their full potential. We regularly communicate with our employees via face-to-face meetings, employee surveys as well as team and company-wide meetings. Such communication drives the process on how we can support our employees reaching their potential. Please see the section on Our People and Culture on pages 12 and 13 and our Corporate Governance Report on pages 26 to 33 for further information. Customers We pride ourselves on providing a reliable, secure and productive service to customers for business-critical communications. As well as the day-to-day contact from our Account Managers with customers we also seek feedback at the end of each call via LoopUp and host product advisory sessions. This information shapes how we innovate and develop our services. Please see pages 4 to 7 and our Corporate Governance Report on pages 26 to 33 for further information. 20 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements We are committed to investing in our people and creating an environment where every employee can reach their full potential." Steve Flavell and Michael Hughes LoopUp Group plc | Annual Report & Accounts 2021 21 BOARD OF DIRECTORS Non-Executives Mike Reynolds Independent Non-Executive Director and Non-Executive Chairman Keith Taylor Independent Non-Executive Director 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. Keith has extensive experience in finance having operated in the industry for over 30 years. He worked for Barclays for over 20 years, most recently as a Managing Director within the Corporate & Investment Bank. He has also served as a Vice Chairman and Board Member of the Loan Market Association. Additional Board experience includes several years as a Trustee Director of the Barclays UK Retirement Fund (one of the largest UK pension funds). Keith has a first-class honours degree from Cambridge University and an MBA with distinction from Bayes Business School. Mike has BBA and MBA degrees, both from the University of Georgia. A R N A R N Nico Goulet Non-Executive Director Nico is a managing partner at Adara Ventures where he has managed venture capital funds for the last 20 years. Nico has been actively involved with more than 40 early-stage ventures and served on the boards of 30 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. A R 22 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Executives Steve Flavell Co-CEO Michael Hughes MBE Co-CEO 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. N 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. Key to Committees A R Audit Remuneration N Nomination LoopUp Group plc | Annual Report & Accounts 2021 23 CHAIRMAN’S STATEMENT I am confident in our ability to manage the transition The team is executing well on our transition and growth of our forward- looking lines of business" Mike Reynolds In my Chairman’s Statement last year, I spoke of the beginning of LoopUp Group’s strategic transition from a single capability remote meeting business into a broader cloud-platform based, hybrid communications solutions company. The strategic transition had already begun with the launch of our Cloud Telephony solution in the third quarter of 2020. I also stated in my Statement that 2021 will “inevitably be a transitional year”, and it has been just that! When a company undertakes a strategic transition of this magnitude, it will always face significant challenges, but also great opportunities. We have seen both in 2021. Some challenges are a natural part of such a transition, and others are a part and parcel of anticipating and reacting to a world transitioning out of COVID-19 as our clients try to solve the puzzles of operating in a post-pandemic work environment. The team is executing well on our transition and growth of our forward- looking lines of business. In addition to strong momentum in Cloud Telephony we have added a second new line of business of Hybrid Auditorium Technology. This was one of the opportunities discussed above, coming to fruition in October 2021 when the Group acquired SyncRTC, since re-branded as Hybridium. Hybridium combines video wall and hologram technology enabling large scale collaboration and events such as company town halls, capital market days, corporate training and many others use cases. While challenging, LoopUp Group’s decision to undertake its strategic transition is proving to be prescient. Cloud Telephony market value is forecast to be £29 billion by 2025 (source: Gartner 2022) and we are well positioned to succeed in that space. Hybridium is leading edge and represents solutions in a post pandemic world to allow large groups of people to communicate, learn and engage. We see both areas having tremendous growth opportunities for the Group. While our Remote Meetings business has been declining in the post pandemic environment as enterprises embrace more holistic Unified Communications platforms such as Microsoft Teams, Remote Meetings continues to contribute value to the Group as we progress our strategic transition and compete in the high growth hybrid communications world. In 2022 we are laser-focused on accelerating the already strong growth of Cloud Telephony and establishing Hybridium across multiple customer segments, achieving both while leveraging the cash generation of Remote Meetings. We are excited about the Group’s potential and continue to be focused on its growth and success. I continue to count on the support of the strong and committed members of our management team and Board of Directors. Mike Reynolds Chairman 25 July 2022 24 LoopUp Group plc | Annual Report & Accounts 2021 CORPORATE GOVERNANCE REPORT Strategic Report Governance Financial Statements Committed to high standards of corporate governance A note on corporate governance The Board recognises the importance of, and remains committed to, the maintenance of high standards of corporate governance. Through these high standards, it is the Board’s aim to deliver growth, maintain a dynamic management framework and build trust – such matters being key ingredients to delivering long-term sustainable performance. After due consideration, the Board continues to report against the Quoted Companies Alliance Corporate Governance Code (“QCA Code”). The following Statement of Compliance sets out in broad terms how we comply at this point in time against the ten principles set out in the QCA Code. The Board shall review and update this Statement of Compliance periodically as the business progresses. The composition of the Board was considered carefully prior to the Group’s admission to AIM in 2016 to ensure an appropriate mix of skills and experience and again in light of the acquisition of MeetingZone in 2018, the acquisition of SyncRTC in 2021 and various Board changes. The Board holds its strategic decision-making meetings remotely or in various Group offices, taking the opportunity to meet with members of both the Executive Team and wider senior management team, building their knowledge of the business. We remain of the opinion that LoopUp creates significant value for its customers by delivering a premium cloud platform with differentiated and specialist communications capabilities, which we continue to innovate and improve. LoopUp Group plc | Annual Report & Accounts 2021 25 CORPORATE GOVERNANCE REPORT CONTINUED QCA Code Statement of Compliance Delivering growth Principle Application Compliance 1. Establish a strategy and business model which promote long-term value for shareholders. The Board must be able to express a shared view of the Group’s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the Group intends to deliver shareholder value in the medium to long-term. It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the Group from unnecessary risk and securing its long term future. The Group’s strategy is focused on commercialising the value created through its cloud platform for specialist enterprise communications. Platform capabilities are carefully selected on the basis of being differentiated from and complementary to those found in foundational unified communications platforms, such as Microsoft Teams. Critical platform capabilities currently comprise: • Cloud Telephony: primarily focused on relatively international and fully-managed implementations for larger sized enterprises • Remote Meetings: primarily focused on business- critical, external client meetings for Professional Services firms • Managed Events and Webcasts: primarily focused on a premium end-to-end experience for hosts and coordinators of important virtual corporate events which has been significantly enhanced following the acquisition of SyncRTC in 2021 Details of the Group’s strategic priorities are set out on pages 10 and 11. The principal risks and uncertainties to the Group (including how they are mitigated) are detailed on pages 18 and 19. 2. Seek to understand and meet shareholder needs and expectations. Directors must develop a good understanding of the needs and expectations of all elements of the Group’s shareholder base. The Board aims to respond promptly and suitably to shareholder enquiries and comments. The Board periodically meets with the Group’s major shareholders and takes on feedback from such meetings. The Board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions. Shareholders are invited to participate at the Group’s AGMs and are encouraged to continue any discussion of the Group’s activities following the conclusion of the formal AGM agenda. All queries should be directed to the Company Secretary. 26 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Principle Application Compliance 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success. 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation. Long-term success relies upon good relations with a range of stakeholder groups both internal (workforce) and external (suppliers, customers, partners, regulators and others). The Board needs to identify the Group’s stakeholders and understand their needs, interests and expectations. Where matters that relate to the Group’s impact on society, the communities within which it operates or the environment have the potential to affect the Group’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the Group’s strategy and business model. Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups. The Board needs to ensure that the Group’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; the Group needs to consider its extended business, including the Group’s supply chain, from key suppliers to end-customer. Setting strategy includes determining the extent of exposure to the identified risks that the Group is able to bear and willing to take (risk tolerance and risk appetite). The Group endeavours to keep in regular contact with its customers, partners and key suppliers. LoopUp constantly monitors functionality of its cloud communications platform and prides itself on one of the best service levels in relation to uptime of services in the comparable market. In addition, there is an ability to rate every LoopUp remote meeting call, enabling us to review and improve our services. Additionally, we have dedicated Service Delivery managers to provide clarity and assistance wherever required by our customers. The Group is active, both financially and in terms of participation, in wider areas of corporate responsibility, such as promoting equality in both its workplace and the communities in which it operates. The Board is well advised by its Nomad and maintains regular contact with other key stakeholders, which enables the Group to evaluate and mitigate risks or act on opportunities when they arise. The Board considers risk and uncertainties at each Board meeting. The Board meets at least quarterly, however in practice will meet much more frequently. Such meetings are typically held remotely. The Board, together with the Executive Leadership Team and senior management, is responsible for reviewing and evaluating risks. Additionally, the Information Security Management Team (ISMT) meets quarterly and assesses risks relating to information security. A sub-committee of the ISMT also meets every month to review and update the information security risk register. The Group is ISO 27001 accredited. The principal risks and uncertainties to the Group (including how they are mitigated) are detailed on pages 18 and 19 of this Report. LoopUp Group plc | Annual Report & Accounts 2021 27 CORPORATE GOVERNANCE REPORT CONTINUED Maintaining a dynamic management framework Principle Application Compliance 5. Maintain the Board as a well- functioning, balanced team led by the chair. The Board members have a collective responsibility and legal obligation to promote the interests of the Group, and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the Board. The Board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight. The Board should have an appropriate balance between the executive and Non-Executive Directors and should have at least two independent Non- Executive Directors. Independence is a Board judgment. The Board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively. Directors must commit the time necessary to fulfil their roles. The Board is responsible for the long-term success of the Group. It sets strategic objectives 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 responsible for the corporate governance and overall financial performance of the Group. The Board comprises two Executive Directors and three Non-Executive Directors (including the Chairman). Two of the Non-Executive Directors are considered by the Board to be independent and are free to exercise independence of judgement. Each of the Audit Committee and Remuneration Committee comprises three Non-Executive Directors, of which two are deemed independent. Membership of the Nomination Committee comprises two independent Non-Executive Directors and one executive director. The Board and each of its committees receive regular and timely reports on the Group’s operational and financial performance. Board packs are circulated in advance of each Board meeting and minutes reviewed and approved following each meeting. The Board has direct access to the advice and services of the Company Secretary and General Counsel, and is able to take independent advice, if required. The Board considers that each Director has suitable knowledge and experience to guide the Group in its strategic aims. Details of Board and committee composition, together with attendance records, are set out on page 32 onwards. 28 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Principle Application Compliance 6. Ensure that between them the Directors have the necessary up-to- date experience, skills and capabilities. The Board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The Board should understand and challenge its own diversity, including gender balance, as part of its composition. 7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement. The Board should not be dominated by one person or group of people. Strong personal bonds can be important but also divide a board. As companies evolve, the mix of skills and experience required on the Board will change, and Board composition will need to evolve to reflect this change. The Board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual Directors. The Board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual Directors or the wider senior management team. It is healthy for membership of the Board to be periodically refreshed. Succession planning is a vital task for boards. No member of the Board should become indispensable. The primary purpose of the Nomination Committee is to lead the process for Board appointments and to make recommendations to the Board to achieve the optimal composition. The Board believes it is important to reach the correct balance of skills, experience, independence and knowledge of the Board. All Board appointments are 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 with this and to increase awareness. The Board operates in a highly collaborative manner, and having two Co-CEOs helps to provide balanced executive input. Further details about each of the directors can be found on the investor page of the LoopUp website, and on page 22 onwards of this report. 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-CEOs’ 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. LoopUp Group plc | Annual Report & Accounts 2021 29 CORPORATE GOVERNANCE REPORT CONTINUED Maintaining a dynamic management framework continued Principle Application Compliance 8. Promote a corporate culture that is based on ethical values and behaviours. The Board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage. The Board reviews the Group’s statement that embodies its culture and values, and means of communicating and instilling these values broadly across the organisation. The Group’s key cultural values include: • Teamwork and being collaborative, helpful and supportive; • Treating others with respect; • Acting with integrity, honesty and openness; • Displaying professionalism; and • Taking ownership and being reliable and accountable. Further details about our people, culture and corporate social responsibility strategy are set out from page 12. Details of the governance structures of the Group are set out from page 32 onwards. The policy set by the Board should be visible in the actions and decisions of the chief executives and the rest of the management team. Corporate values should guide the objectives and strategy of the Group. The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the Group. The corporate culture should be recognizable throughout the disclosures in the annual report, website and any other statements issued by the Group. The Group should maintain governance structures and processes in line with its corporate culture and appropriate to its: (i) size and complexity; and (ii) capacity, appetite and tolerance for risk. The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the Group. 9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board. 30 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Building trust Principle Application Compliance The Board aims to respond promptly and suitably to all shareholder enquiries and comments. The Board periodically meets with the Group’s major shareholders and takes on any feedback from such meetings. All shareholders are invited to participate at the Group’s AGMs and encouraged to continue any discussion of the Group’s activities following the conclusion of the formal AGM agenda. Reports from the Audit Committee, Nominations Committee and Remuneration Committee are set out from page 34 onwards. 10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders. A healthy dialogue should exist between the Board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the Group. In particular, appropriate communication and reporting structures should exist between the Board and all constituent parts of its shareholder base. This will assist: (i) the communication of shareholders’ views to the Board; and (ii) the shareholders’ understanding of the unique circumstances and constraints faced by the Group. It should be clear where these communications practices are described (annual report or website). Board composition The Board currently comprises two Executive and three Non-Executive Directors (including the Chairman). Simon Healey resigned as director in December 2021. The composition of the board will be further considered in 2022. Mike Reynolds and Nico Goulet remained in place from the pre-IPO Ring2 Communications Board, with the former being considered independent. Keith Taylor was appointed as an Independent Non-Executive Director in 2019. Steve Flavell and Michael Hughes were co-founders of the Group in 2003, and have both served on the Board since that time. LoopUp Group plc | Annual Report & Accounts 2021 31 CORPORATE GOVERNANCE REPORT CONTINUED Board meetings and attendance The Board meets at least quarterly, with meetings generally being held remotely. The table below shows the attendance at Board meetings during the year. Non-Executive Directors Mike Reynolds Nico Goulet Keith Taylor Executive Directors Steve Flavell Michael Hughes Simon Healey Mike Reynolds Nico Goulet Keith Taylor Steve Flavell Michael Hughes Simon Healey Board meetings Possible Attended 9 9 9 9 9 9 9 9 9 9 8 8 Committee meetings Audit Remuneration Nomination Possible Attended Possible Attended Possible Attended 3 3 3 3 – 3 3 3 3 3* – 3* 2 2 2 2 2 – 2 2 2 2* 2* – 1 – 1 1 – – 1 – 1 1 – – * Not a Committee member, but attended by invitation. Board responsibilities The Board is responsible for the long-term success of the Group. It sets strategic objectives 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. 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-CEOs’ 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. 32 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Detailed monthly reporting of trading results and financial position, including variances against budget; Reporting of any non-compliance with internal financial controls; and 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 periodically 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. In addition, the Executive Directors hosted a shareholder event in October 2021 following the acquisition of SyncRTC to provide a forum for questions and to present the strategy for the group. Feedback from these meetings is presented to the Board. All Directors encourage the participation of all shareholders, including private investors, at the AGM. 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 are published on the Group’s website and can be accessed by shareholders. Directors’ independence Two 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 options which were issued prior to IPO, all of which are fully vested. 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 regarding the Group’s business. Directors are subject to re-election at the Annual General Meeting following their appointment. In addition, at each AGM, 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; LoopUp Group plc | Annual Report & Accounts 2021 33 AUDIT COMMITTEE REPORT Committee composition The Audit Committee (‘the Committee’) was established in August 2016, and a similar committee operated 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 Keith Taylor and Nico Goulet. The Board considers the members to have relevant and recent financial experience, given their biographies as set out on pages 22 and 23. 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; and 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 either in person or remotely. 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. These meetings were attended by the external auditor, one Co-CEO and the CFO, as well as the three committee members. 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; Accounting for the acquisition of SyncRTC Inc; Impairment of intangible fixed assets; and Going concern. 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 The Group reassessed the position of the external auditor during 2021 and as a result appointed Moore Kingston Smith LLP. To ensure the independence of the external auditor, the Group has used KPMG LLP to advise on global tax compliance. 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. 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. 34 LoopUp Group plc | Annual Report & Accounts 2021 NOMINATION COMMITTEE REPORT Strategic Report Governance Financial Statements Committee composition The Nomination Committee was established in August 2016. Mike Reynolds is Chair of the Nomination Committee and the other members are Keith Taylor 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 Committee met once during 2021. 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. LoopUp Group plc | Annual Report & Accounts 2021 35 REMUNERATION COMMITTEE AND REMUNERATION REPORT The Remuneration Committee The Remuneration Committee was established in August 2016. 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 twice during 2021, with other Board members in attendance as appropriate. Remuneration Committee report As an AIM-quoted 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 The Remuneration Committee comprises three Non- Executive Directors, namely Mike Reynolds as Chair, Nico Goulet and Keith Taylor. 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. Directors’ 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. 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, participation in share option and incentive schemes, and private healthcare benefits. UK Executives participate in a company contributory pension scheme, and US executives have access to a corporate 401k plan, which attracted no employer contribution in 2021 or 2020. Annual bonuses The 2021 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. The Group’s performance in 2021 did not result in the payment of any bonuses to the Executive Directors. This contrasts with 2020, where the Group’s performance significantly exceeded budgeted expectations, which resulted in a bonus payment of 175% of target being payable. 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 payout percentages in line with those outlined above. Payouts can exceed these amounts should performance exceed these targets, and are capped. 36 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Total Directors’ Remuneration The table below sets out the total remuneration payable to the Directors: Audited Executive Steve Flavell Michael Hughes Simon Healey Non-Executive Lady Barbara Judge (until 31 August 2020) Mike Reynolds Nico Goulet Keith Taylor Salary and fees £000 Annual bonus £000 Healthcare and pension £000 201 225 145 – 22 – 23 14 13 – – – – – 8 4 6 – – – – 2021 total £000 223 242 151 – 22 – 23 2020 total £000 440 514 214 33 23 – 23 Shares held by Directors The beneficial interests of the Directors in the share capital of the Company at 31 December 2021 and 31 December 2020 were as follows: Executive: Steve Flavell Michael Hughes Simon Healey (resigned 12 November 2021) Non-Executive: Mike Reynolds Nico Goulet (as Managing Partner of shareholder, Adara Ventures SICAR) Keith Taylor 31 December 2021 31 December 2020 Number of shares % of issued ordinary share capital Number of shares % of issued ordinary share capital 2,660,250 2,657,183 64,500 75,000 6,964,548 133,500 2.7% 2.7% 0.1% 0.1% 7.2% 0.1% 2,625,875 2,616,899 64,500 75,000 4.7% 4.7% 0.1% 0.1% 6,964,548 58,500 12.6% 0.1% LoopUp Group plc | Annual Report & Accounts 2021 37 REMUNERATION COMMITTEE AND REMUNERATION REPORT CONTINUED Directors’ share options Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the Group granted to or held by the Directors. Details of option holdings for Directors who served during the year are as follows: Executive: Steve Flavell Michael Hughes Simon Healey (resigned 12 November 2021) Non-Executive: Mike Reynolds Nico Goulet Keith Taylor Number of options at 31 December 2021 Exercise price 199,000 575,000 880,000 199,000 651,769 70,000 82,000 27,500 181,250 75,000 – – £1.105 £0.00 £0.75 £1.105 £0.00 £0.50 £0.75 £1.105 £0.00 £0.75 – – Following consultation with applicable employees and senior management, it was decided that payments earned under the 2020 Company Bonus Plan of approximately £1.5 million would be satisfied in share based payments rather than cash. At the recommendation of the Remuneration Committee, the Company granted nil cost options to eligible employees and senior management in lieu of any cash settlement of such bonus entitlements, where the number of options was calculated based on the bonus amount earned and the issue price of the capital raising in October 2021. As such grants were in lieu of bonus already earned, there were no vesting conditions attached to them. This grant included options granted to the following Directors: 575,000 to Steve Flavell; 651,769 to Michael Hughes; and 181,250 to Simon Healey. During 2021, Steve Flavell and Michael Hughes each participated in the company’s Employee Share Incentive Scheme whereby each Director sacrificed a proportion of their salary and instead were allocated shares in the Company pursuant to the scheme rules. By order of the Board Mike Reynolds Chairman of the Remuneration Committee 25 July 2022 38 LoopUp Group plc | Annual Report & Accounts 2021 DIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2021 Strategic Report Governance Financial Statements The Directors present their report and the audited financial statements for the year ended 31 December 2021. Principal activity The principal activity of the Group is the provision of a premium cloud communications platform for business-critical external and specialist communications. Business review and future developments A review of the Group’s operations including strategy and markets, and future developments is covered in the Strategic Report section of the Annual Report and Accounts on pages 2 to 21. In accordance with section 414C(11) of the Companies Act 2006, the Directors have chosen to include information about the future developments and principal risks and uncertainties in the Strategic Report. Details of the Group’s financial results are set out in the consolidated statement of comprehensive income, other statements and related notes on pages 42 to 87. Corporate status LoopUp Group plc (the ‘Company’ or ‘Group’) is a public limited company domiciled in the United Kingdom and was incorporated in England and Wales with company number 09980752 on 1 February 2016. The company has its registered office at The Tea Building, 56 Shoreditch High Street, London E1 6JJ. The principal places of business of the Group are its offices in London and San Francisco, and it also operates a number of other offices in the United States and United Kingdom, as well as Germany, Spain, Sweden, Australia, Hong Kong and Barbados. Directors The following served as Directors during the year: Steve Flavell, Michael Hughes, Simon Healey (resigned 12 November 2021), Mike Reynolds, Nico Goulet, Keith Taylor. The current members of the Group’s Board and Committees are set out on pages 22 to 23. One-third of the Directors are required to retire at the AGM and can offer themselves for re-election. The Company has agreed to indemnify the Directors against third party claims which may be brought against them and has put in place a Directors’ and Officers’ insurance policy. Shares, dividends and significant shareholders The middle market price of the Company’s shares on 31 December 2021 was 19.5 pence and the range during the year was 17.1 pence to 98.0 pence with an average of 54.4 pence. The Directors do not recommend the payment of a dividend (2020: £nil). The Company is informed that, at 31 May 2022, individual registered shareholdings of more than 3% of the Company’s issued share capital were as follows: Andrew Scott(1) Adara Ventures SICAR Hargreaves Lansdown Asset Management Interactive Investor Schroder Investment Management Herald Investment Management 1. This includes shares registered in the name of his wife, Rhonda Scott and SFT Capital Limited. Number of shares % of issued ordinary share capital 26,555,754 6,964,548 5,980,242 5,722,292 4,289,913 4,200,000 27.4% 7.2% 6.2% 5.9% 4.4% 4.3% LoopUp Group plc | Annual Report & Accounts 2021 39 DIRECTORS’ REPORT CONTINUED Going concern After making enquiries, the Directors believe that the Group has adequate resources and prospects to continue in operational existence for the foreseeable future. Following the balance sheet date, the Group renegotiated and amended its banking facilities with Bank of Ireland reflecting the Group’s ongoing strategic transition plan. Management have prepared detailed stress tested forecasts which indicate the Group’s ability to continue to trade with sufficient cash resources and within the amended covenant tests agreed with Bank of Ireland for the Group’s debt facility. 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. Research and development Details of the Group’s policy for the recognition of expenditure on research and development of its core platform are set out in note 2.03 of the consolidated financial statements. Risk management objectives and policies Details of the Group’s financial risk management and policies are set out in note 19 of the consolidated financial statements. The key non-financial risks faced by the Group are set out in the Strategic Report on page 18. Related party transactions Details of the Group’s transactions and balances with related parties are set out in note 21 of the consolidated financial statements. 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. No charitable donations were made during the year (2020: £5,000). 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 2021 was 68 days (2020: 60 days). Statement as to disclosure of information to the auditor The Directors who were in office on the date of the approval of these financial statements have confirmed 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. 40 LoopUp Group plc | Annual Report & Accounts 2021 DIRECTORS’ RESPONSIBILITIES STATEMENT Strategic Report Governance Financial Statements The Directors are responsible for preparing the Strategic Report and Directors’ Report and the financial statements in accordance with applicable law and regulations. The consolidated financial statements of the Group have been prepared in accordance with UK adopted International Accounting Standards (“IFRS”) and IFRS Interpretations Committee (formerly IFRIC) interpretations in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The consolidated financial statements have been prepared under the historical cost basis. 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; and 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 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. By order of the Board Mike Reynolds Chairman 25 July 2022 LoopUp Group plc | Annual Report & Accounts 2021 41 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF LOOPUP GROUP PLC We have audited the financial statements of LoopUp Group plc (the ‘parent company’) and its subsidiaries (‘the group’) for the year ended 31 December 2021 which comprises the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated and Company Statements of Cash Flows, the Consolidated and Company Statements of Changes in Equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and UK adopted International Accounting Standards 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 2021 and of the group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with UK adopted International Accounting Standards; the parent company financial statements have been properly prepared in accordance with UK adopted International Accounting Standards 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. 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. We conducted substantive audit procedures and evaluated the group’s internal control environment. The components of the group were evaluated by the group audit team based on a measure of materiality, considering each component as a percentage of the group’s total assets, current assets, revenue and gross profit, which allowed the group audit team to assess the significance of each component and determine the planned audit response. For those components that were evaluated as significant components, either a full scope audit or specified audit approach was determined based on their relative materiality to the group and our assessment of the level of audit risk. For significant components requiring a full scope approach, we evaluated the controls in place at those components by performing walkthroughs over the financial reporting systems identified as part of our risk assessment. We also reviewed the accounts production process and addressed critical accounting matters. We then undertook substantive testing on significant classes of transactions and material account balances. In order to address the audit risks identified during our planning procedures, we performed a full scope audit of the financial statements of the parent company and of the financial information of LoopUp Limited, MeetingZone Limited, Pimco 2711 Limited, Warwick Holdco Limited, Warwick Debtco Limited and Warwick Bidco Limited. We performed specified audit procedures over the other components in the UK and overseas. 42 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 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) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter – Group How the matter was addressed in the audit – Group Revenue recognition Revenue is a significant item in the consolidated Statement of Comprehensive Income and impacts a number of management’s key judgements, performance indicators and key strategic indicators. Under ISA 240 (UK) there is a presumed risk that revenue may be misstated due to the improper recognition of revenue due to fraud or error. There is a risk of incorrect revenue recognition due to fraud or error, arising from: recognition of revenue in the wrong period; revenue not being recognised in accordance with IFRS 15 ‘Revenue from Contracts with Customers’; and Our audit work included, but was not restricted to: Evaluating the group’s revenue recognition accounting policy to check compliance with IFRS 15 and to ensure consistency of application; Engaging our IT specialists who assessed the design and operating effectiveness of the underlying systems on the LoopUp platform and tested key IT application controls over the revenue recognition process; Performing substantive testing on a sample of individual revenue transactions throughout the year across the significant revenue streams; This included agreeing revenue transactions selected for testing through to supporting evidence including sales invoice, contracts and cash receipts; and Performing sales cut off tests to ensure revenue had been manipulation of revenues around the year-end through recognised in the correct period. management override. We therefore identified incorrect revenue recognition as a significant risk. The group’s accounting policy on revenue recognition is shown in note 2.09 to the financial statements and related disclosures are included in note 6. In addition, we reviewed the adequacy of the disclosures under IFRS15. Key observations Based on our audit testing we did not identify any material misstatements of revenue. We consider the disclosures in accordance with IFRS 15 in the notes to the financial statements to be acceptable. LoopUp Group plc | Annual Report & Accounts 2021 43 INDEPENDENT AUDITOR’S REPORT CONTINUED Key Audit Matter – Group How the matter was addressed in the audit – Group Impairment of the carrying value of goodwill and other intangible assets The Group has material goodwill and other intangible assets balances of £35.425m and £5.638m respectively at 31 December 2021. The other intangible assets balance includes customer relationships of £4.134m and brand & trademarks of £1.504m. The directors are required to make an assessment to determine whether there are impairment indicators relating to the group’s intangible assets. The process for assessing whether impairment exists as set out in International Accounting Standard (IAS) 36 ‘Impairment of Assets’ is complex. The process of determining the value in use, through forecasting cash flows related to each asset and the determination of the appropriate discount rate and other assumptions to be applied, can be highly judgemental and can significantly impact the results of the impairment review. Based on the judgemental nature of an impairment review and significant impairment adjustments in prior periods, we identified impairment of the carrying value of goodwill and other intangible assets to be a significant risk. The group’s accounting for goodwill and other intangible assets are shown in notes 2.04 and 2.05 to the financial statements and related disclosures are included in note 14. Our audit work included, but was not restricted to: Reviewing the design and implementation of controls relevant to the impairment reviews for goodwill and other intangible assets; Critically assessing management’s assessment of impairment including critically reviewing the discounted cash flow model and the judgements and estimates applied in the model; Critically assessing the assumptions underlying the discounted cash flow model including growth rate and discount rate; Performing sensitivity analysis on the discounted cash flow model taking into consideration management’s base and downside scenarios; Evaluating the accounting policy and detailed disclosures included in the financial statements to determine whether the information provided in the financial statements complies with the requirements of IAS 36 and is consistent with the results of the impairment review; and Considering the appropriateness of the amortisation policy for other intangible assets. Key observations Following the performance of our audit testing on the discounted cash flow model as set out above an impairment of £19.597m was identified in respect of the customer relationship balance initially recognised on the acquisition of MeetingZone. This impairment has been recognised in the consolidated financial statements. We consider the disclosures in the consolidated financial statements in respect of impairment of goodwill and other intangible assets to be acceptable. 44 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Key Audit Matter – Group How the matter was addressed in the audit – Group Our audit work included, but was not restricted to: Evaluating the development costs capitalised in the year to ensure that the costs can be recognised as an asset in accordance with the requirements of IAS 38 ‘Intangible Assets’; Performing substantive testing on a sample of development costs capitalised including reviewing the employee contracts of employees whose salaries were capitalised; Discussing a sample of projects with the relevant management personnel to gain an understanding of the key developments in the year and milestones achieved; Challenging management’s key assumptions to determine that the capitalisation of development costs meet the technical and feasibility criteria stated in IAS 38; and Evaluating the accounting policy and detailed disclosures included in the financial statements to confirm whether information provided in the consolidated financial statements is compliant with the requirements of IFRS. Key observations Based on our audit testing we did not identify any material misstatements of development costs. We consider the disclosures in the consolidated financial statements to be acceptable. Our audit work and conclusion in respect of going concern has been detailed in the ‘Material uncertainty related to going concern’ section of our audit report. Capitalisation of development costs The Group capitalises development costs within intangible assets. The amount capitalised in the year was £6.919m. The carrying value at 31 December 2021 was £12.726m. The Group has been developing and enhancing its remote meetings platform in recent years and continues to enhance the platform in the prior and current year to integrate the Group’s Cloud Telephony business. The development relates primarily to the payroll costs of the developers who work on the development projects. The group’s accounting for development costs is shown in note 5.03 to the financial statements and related disclosures are included in note 14. Going concern Revenue for the year ended 31 December 2021 has declined from £50.230m to £19.526m and the Group incurred an operating loss of £30.554m (2020:£6.260m operating profit) including a £19.597m non-cash exceptional impairment charge. The Group has outstanding borrowings of £7.881m at 31 December 2021 (2020:£12.750m) and cash funds of £5.465m (2020: £12.086m). The Group’s loan facility with Bank of Ireland of £6.764m at 31 December 2021 is due for repayment in September 2023. Given the trading performance in the year, including the decrease in revenue and cash funds, and the repayment date of the loan facility, going concern was considered to be a key audit risk area. LoopUp Group plc | Annual Report & Accounts 2021 45 INDEPENDENT AUDITOR’S REPORT CONTINUED Key Audit Matter – Company How the matter was addressed in the audit – Company Recoverability of amounts owed by subsidiary undertakings The total amounts owed by subsidiary undertakings recognised in the parent company Statement of Financial Position at 31 December 2021 was £69.329m. The directors are required to make an assessment to determine whether the amounts owed by subsidiary undertakings are materially recoverable. Due to the size of the amounts in question in the context of the parent company Statement of Financial Position, the recoverability of these amounts was considered to be a key risk area for the audit of the parent company. The company’s disclosures in respect of amounts owed by subsidiary undertakings are shown in note 15 to the financial statements. Our audit work included, but was not restricted to: Critically assessing management’s intercompany matrix to confirm that all intercompany balances have been included and materially reconciled at 31 December 2021; Critically assessing the discounted cash flow model and the judgements and estimates applied in the model which support the ability of the subsidiaries to generate sufficient profits and cash flows to enable them to repay the amounts owed to the parent company; Critically assessing the assumptions underlying the discounted cash flow model including growth rate and discount rate; Performing sensitivity analysis on the discounted cash flow model taking into consideration management’s base and downside scenarios; Challenging key assumptions as to why the management consider the amounts owed by subsidiary undertakings to be materially recoverable; Critically assessing post year end trading and the liquidity position of subsidiaries; and Evaluating the detailed disclosures included in the financial statements to confirm whether information provided in the financial statements is compliant with the requirements of IFRS. Key observations Based on our audit testing we concluded that we agreed with management’s assertion that no impairment of amounts owed by subsidiary undertakings was required. We consider the disclosures in the financial statements to be acceptable. 46 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Our application of materiality The scope and focus of our audit was influenced by our assessment and application of materiality. We define materiality as the magnitude of misstatement that could reasonably be expected to influence the readers and the economic decisions of the users of the financial statements. We use materiality to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole. Due to the nature of the Group we considered revenue to be the main focus for the readers of the financial statements, accordingly this consideration influenced our judgement of materiality. Based on our professional judgement, we determined materiality for the Group and parent to be £195,260 based on a percentage of revenue (1%). Based on our professional judgement, we determined materiality for the Parent Company to be £185,497 based on a percentage of gross assets (0.25%). On the basis of our risk assessment, together with our assessment of the overall control environment, our judgement was that performance materiality (i.e. our tolerance for misstatement in an individual account or balance) for the Group and Parent was 50% of materiality, namely £97,630 and £92,748 respectively. We agreed to report to the Audit Committee all audit differences in respect of the Group and Parent in excess of £9,763 and £9,274 respectively and, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also reported to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. Material uncertainty related to going concern We draw attention to note 1.03 to the financial statements, which indicates that the Group may need to raise debt or equity funding in order to repay or refinance the Bank of Ireland debt facilities at term in September 2023 and therefore to continue in business and meet its liabilities as they fall due after that point. The Group incurred an operating loss of £30.554m (2020:£6.260m operating profit) for the year ended 31 December 2021 including a £19.597m non-cash exceptional impairment charge. Subsequent to the reporting date the Group successfully renegotiated and amended its debt facilities with the Bank of Ireland as detailed in note 1.03 to the financial statements. However the facilities are due for repayment at term in September 2023. Although the directors are confident that the Group will be able to repay or refinance the debt facilities at term there can be no certainty in this respect and a failure to repay at term or refinance would be material to the Group. These events or conditions indicate that a material uncertainty exists that may cast doubt on the Group’s and Parent Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. In auditing the financial statements, we have concluded that the use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting included a critical assessment of the detailed cash flow projections prepared by the directors, which are based on their current expectations of trading prospects, and obtaining an understanding of all relevant uncertainties, including those arising as a result of the ongoing COVID-19 pandemic and the measures taken by the UK and overseas governments to contain it. We have factored the ongoing impact of COVID-19 into our analysis of the risks affecting the ability of the group to continue to trade and meet its liabilities as they fall due for at least twelve months from the date of approval of the financial statements. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. LoopUp Group plc | Annual Report & Accounts 2021 47 INDEPENDENT AUDITOR’S REPORT CONTINUED Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, 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. Opinions on other matters prescribed by the Companies Act 2006 In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. 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 parent company financial statements; and the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report. We have nothing to report in respect of the following matters where 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 and the part of the directors’ remuneration report to be audited 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 41, 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. 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 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 is available on the FRC’s website at https://wwww.frc.org.uk/auditors/auditor- assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor’s-responsibilities-for This description forms part of our auditor’s report. 48 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the group and the parent company. Our approach was as follows: We obtained an understanding of the legal and regulatory requirements applicable to the group and the parent company and considered that the most significant are the Companies Act 2006, UK adopted International Accounting Standards, the rules of the Alternative Investment Market and UK taxation legislation. We obtained an understanding of how the group and the parent company complies with these requirements by discussions with management and those charged with governance. We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance. We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations. Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required. There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. Use of our report 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 for no purpose other than to draw to the attention of the company’s members those matters which we are required to include in an auditor’s report addressed to them. To the fullest extent permitted by law, we do not accept or assume responsibility to any party other than the company and company’s members as a body, for our work, for this report, or for the opinions we have formed. Matthew Banton (Senior Statutory Auditor) for and on behalf of Moore Kingston Smith LLP Chartered Accountants Statutory Auditor 25 July 2022 6th Floor 9 Appold Street London EC2A 2AP LoopUp Group plc | Annual Report & Accounts 2021 49 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021 Revenue Cost of sales Gross profit Adjusted operating expenses(i) Adjusted EBITDA(ii) Depreciation Amortisation of development costs Adjusted operating (loss)/profit(iii) Exceptional reorganisation costs and tax charge Exceptional impairment charge Amortisation of acquired intangibles Share-based payment charges Operating (loss)/profit Finance costs (Loss)/profit before income tax Income tax (Loss)/profit for the year Currency translation loss Total comprehensive (loss)/income for the year attributable to the equity holders of the parent (Loss)/earnings per share from continuing and total operations (pence): Basic Diluted Note 6 7 7 7 7 7 7 20.06 10 11 12 2021 £000 19,526 (6,058) 13,468 (12,272) 1,196 (1,760) (5,582) (6,146) (392) (19,597) (2,211) (2,208) (30,554) (465) (31,019) 6,052 (24,967) (340) 2020 Restated (Note 24) £000 50,230 (14,632) 35,598 (20,270) 15,328 (1,702) (4,581) 9,045 — — (2,210) (575) 6,260 (599) 5,661 308 5,969 (75) (25,307) 5,894 (39.0) (39.0) 10.8 9.9 (i) Total administrative expenses excluding depreciation, amortisation of development costs and acquired intangibles, exceptional reorganisation and tax charge, exceptional impairment charges and share-based payment charges. (ii) Adjusted EBITDA is operating (loss) / profit stated before depreciation, amortisation of development costs and acquired intangibles, exceptional reorganisation and tax charge, exceptional impairment charges and share-based payment charges. (iii) Before amortisation of acquired intangibles, exceptional reorganisation and tax charge, exceptional impairment charges and share-based payment charges. 50 LoopUp Group plc | Annual Report & Accounts 2021 CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31 DECEMBER 2021 Strategic Report Governance Financial Statements Assets Property, plant and equipment Right of use assets Development costs Other intangible assets Goodwill 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 Lease liabilities Borrowings Total current liabilities Net current assets Non-current liabilities Borrowings Lease liabilities Deferred tax Provisions Total non-current liabilities Total liabilities Net assets Equity Share capital Share premium Other reserve Foreign currency translation reserve Share-based payment reserve Retained loss Shareholders’ funds attributable to equity owners of parent Note 13 13 14 14 14 15 16 15 17 17 13 18 18 13 26 27 20 20 2021 £000 2,368 2,130 12,726 5,638 35,425 58,287 3,608 5,465 1,862 10,935 69,222 (3,384) (2,036) (956) (1,700) (8,076) 2,859 (6,181) (1,463) (1,721) (172) (9,537) (17,613) 51,609 485 70,860 12,691 (2,749) 3,395 (33,073) 51,609 2020 Restated (Note 24) £000 1 January 2020 Restated (Note 24) £000 2,663 2,951 11,389 27,446 31,511 75,960 6,875 12,086 1,647 20,608 96,568 (6,303) (3,607) (953) (1,700) 2,737 3,304 9,104 29,656 31,511 76,312 8,652 3,000 1,631 13,283 89,595 (5,415) (2,578) (862) (1,700) (12,563) (10,555) 8,045 2,728 (11,050) (2,372) (6,099) — (19,521) (32,084) 64,484 277 60,677 12,691 (2,409) 1,354 (8,106) 64,484 (12,750) (2,656) (5,709) — (21,115) (31,670) 57,925 276 60,588 12,691 (2,334) 779 (14,075) 57,925 The financial statements were approved by the Board of Directors and authorised for issue on 25 July 2022. They were signed on its behalf by: Steve Flavell Director The notes on pages 57 to 87 form part of these financial statements. Company number 09980752 LoopUp Group plc | Annual Report & Accounts 2021 51 COMPANY STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31 DECEMBER 2021 Assets Investments Total non-current assets Trade and other receivables Total current assets Total assets Net assets Equity Share capital Share premium Share-based payment reserve Retained profit Shareholders’ funds attributable to equity owners of parent Note 22 15 20 20 2021 £000 6,248 6,248 68,492 68,492 74,740 74,740 485 70,860 3,395 – 74,740 2020 Restated (Note 24) 1,493 1,493 60,815 60,815 62,308 62,308 277 60,677 1,354 – 62,308 1 January 2020 Restated (Note 24) £000 918 918 60,725 60,725 61,643 61,643 276 60,588 779 – 61,643 Under section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own statement of comprehensive income. The result for the year dealt with in the financial statements of the Company was £nil (2020: £nil). The financial statements were approved by the Board of Directors and authorised for issue on 25 July 2022. They were signed on its behalf by: Steve Flavell Director The notes on pages 57 to 87 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 52 LoopUp Group plc | Annual Report & Accounts 2021 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021 Strategic Report Governance Financial Statements Share capital £000 Share premium £000 Other reserve £000 Note Foreign currency translation reserve £000 Share-based payment reserve £000 Shareholders’ funds/deficit attributable to equity owners of parent £000 Retained loss £000 276 60,588 12,691 (2,334) 779 (14,075) 57,925 – – – – 1 – – – – 89 – – – – – – (75) (75) – – – 5,969 – 5,969 (75) 5,969 5,894 – – 575 – – – 575 90 277 277 60,677 12,691 (2,409) 60,677 12,691 (2,409) 1,354 1,354 (8,106) 64,484 (8,106) 64,484 – – – 4 204 485 20 20 – – – 163 10,020 – – – – – – (340) (340) – – – (24,967) – (24,967) (340) (24,967) (25,307) – – 2,041 – – – 2,208 10,224 70,860 12,691 (2,749) 3,395 (33,073) 51,609 As at 1 January 2020 (Restated - Note 24) Profit for the year Other comprehensive income Total comprehensive profit for the year Transactions with owners of parent in their capacity as owners: Equity share-based payment compensation Shares issued net of transaction costs As at 31 December 2020 (Restated - Note 24) As at 1 January 2021 Loss for the year Other comprehensive loss Total comprehensive loss for the year Transactions with owners of parent in their capacity as owners: Equity share-based payment compensation Shares issued net of transaction costs As at 31 December 2021 The notes on pages 57 to 87 form part of these financial statements. LoopUp Group plc | Annual Report & Accounts 2021 53 COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021 Share capital £000 Note Share premium £000 Share-based payment reserve £000 Retained profit £000 As at 1 January 2020 (Restated – Note 24) 276 60,588 779 Result for the year Total comprehensive result for the year Transactions with owners of parent in their capacity as owners: Equity share-based payment compensation Shares issued net of transaction costs 20 As at 31 December 2020 (Restated – Note 24) As at 1 January 2021 Result for the year Total comprehensive result for the year Transactions with owners of parent in their capacity as owners: Equity share-based payment compensation – – 575 – 1,354 1,354 – – – – – 1 – – – 89 277 277 60,677 60,677 – – – – 4 163 2,041 Shares issued net of transaction costs 20 As at 31 December 2021 204 485 10,020 70,860 – 3,395 The notes on pages 57 to 87 form part of these financial statements. Shareholders’ funds attributable to equity owners of parent £000 61,643 – – 575 90 62,308 62,308 – – 2,208 10,224 74,740 – – – – – – – – – – – – 54 LoopUp Group plc | Annual Report & Accounts 2021 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2021 Strategic Report Governance Financial Statements Operating activities (Loss)/profit before income tax Non-cash adjustments Depreciation and amortisation Share based payments charge Impairment charge Interest payable Working capital adjustments Decrease in trade and other receivables (Decrease)/increase in trade and other payables Net tax received Net cash generated by operating activities Cash flows from investing activities Purchase of property, plant and equipment Addition of intangible assets Payment for acquisition of subsidiary Net cash used in investing activities Cash flows from financing activities Proceeds from share issue net of issue costs Repayment of loans Payments in respect of leases Loans acquired on acquisition Interest and finance fees paid Net cash generated from/(used in) financing activities Net change in cash and cash equivalents Cash and cash equivalents, beginning of year Exchange differences on cash and cash equivalents Cash and cash equivalents, end of year The notes on pages 57 to 87 form part of these financial statements. Note 7 13.01 14.01 20 26 16 2021 £000 (31,019) 9,548 2,208 19,597 465 3,377 (4,864) 1,194 506 (586) (6,919) (3,574) (11,079) 10,391 (5,839) (840) 971 (365) 4,318 (6,255) 12,086 (366) 5,465 2020 Restated (Note 24) 5,661 8,493 575 – 598 1,867 1,310 1,200 19,704 (757) (6,866) – (7,623) 90 (1,700) (828) – (494) (2,932) 9,149 3,000 (63) 12,086 LoopUp Group plc | Annual Report & Accounts 2021 55 COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2021 Operating activities Profit before income tax Working capital adjustments Increase in debtors Net cash used by operations Net cash from financing activities Proceeds from share issue net of issue costs Net cash generated from financing activities Cash flows from investing activities Investment in subsidiary Payment for acquisition of subsidiary Net cash used in investing activities Net change in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year The notes on pages 57 to 87 form part of these financial statements. 2021 £000 – (7,677) (7,677) 10,391 10,391 (167) (2,547) (2,714) – – – 2020 £000 – (90) (90) 90 90 – – – – – – 56 LoopUp Group plc | Annual Report & Accounts 2021 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 Strategic Report Governance Financial Statements 1. Business description and basis of preparation 1.01 Business description The principal activity of the Group is the provision of a cloud communications platform for external and specialist communications. 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 The Tea Building, 56 Shoreditch High Street, London, E1 6JJ. 1.02 Basis of preparation The consolidated financial statements of the Group have been prepared in accordance with UK adopted International Accounting Standards (“IFRS”) and IFRS Interpretations Committee (formerly IFRIC) interpretations in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The consolidated financial statements have been prepared under the historical cost basis. The preparation of financial information requires the Directors to exercise judgements in the process of applying accounting policies as outlined in note 5. 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 result for the year dealt with in the financial statements of the Company was £nil (2020: £nil). The accounting policies used have been consistently applied throughout all periods presented in the financial statements. 1.03 Going concern At the 2021 balance sheet date, the Group has cash of £5.5m (2020: £12.1m), net debt of £2.4m (2020: £0.7m), net assets of £51.6m (2020: £64.5m), and net current assets of £2.9m (2020: £8.0m). The operating loss for the year was £30.5m (2020: £6.3m profit), due to an exceptional non-cash impairment charge and the adjusted operating loss for the year (before amortisation of other intangible assets, non-recurring transaction costs, exceptional reorganisation costs, exceptional impairment charges and share based payments charges) was £6.1m (2020: £9.0m profit). The Directors prepared detailed cash flow forecasts covering the Group’s expected performance and activity over a period covering at least the next twelve month from the date of these financial statements. This modelled expected activity in each of the business segments of the Group, and also covered 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 during this period. At the balance sheet date, the Group had outstanding borrowings of £7.9m, including £6.9m under a facility agreement with Bank of Ireland. These facilities were renegotiated and amended following the balance sheet date to reflect the Group’s ongoing strategic transition plan. Key elements of the amended arrangements include a holiday on planned principal repayments through to June 2023; a margin increase of 2.0 percent, taking the overall interest rate to 4.5 percent above the Sterling Overnight Index Average (SONIA); an extension of the term through to September 2023; and a revised set of financial covenants which are more concerned with sufficient ongoing cash liquidity and the growth objectives for Cloud Telephony and Hybridium in the Group’s transition business plan. Management have reviewed forecast cash flows and revenues for at least the next twelve months following the date of these financial statements and are confident of remaining within the amended covenant levels and facility limits. The Bank of Ireland debt facilities will remain available throughout the twelve months following the date of these financial statements. However, in order to repay the Bank of Ireland debt facilities at term in September 2023, the Group may need to raise debt or equity funding, or both. The Group has a strong track record of fundraising from a group of consistently supportive shareholders, and the Directors are confident that the Bank of Ireland debt facilities will be able to be repaid at term. However, because there can be no certainty of this, and because the impact of a failure to refinance would be material, a material uncertainty exists in relation to going concern. 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 of not less than twelve months form 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 chief operating decision-maker is considered to be the Board of Directors acting together. LoopUp Group plc | Annual Report & Accounts 2021 57 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 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. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation. The consolidated financial statements incorporate the financial statements of the Company and all Group undertakings. 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’). (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 statement of financial position presented are translated at the closing rate at the balance sheet date; income and expenses for each statement of comprehensive income are translated at average exchange rates; and • • all resulting exchange differences are recognised in the statement of changes in equity 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 Development costs 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. 58 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 2. Summary of significant accounting policies continued These projects are designed to bring new capabilities into the Group’s products. 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. 2.04 Goodwill Goodwill arising on business combinations represents the difference between the consideration for a business acquisition and the fair value of the net identifiable assets acquired, less any accumulated impairment losses. The consideration for a business acquisition represents the fair value of the assets given and equity instruments issued in return for the assets acquired. Goodwill is not amortised but is subject to an impairment review performed at least annually. 2.05 Acquired intangible assets Acquired intangible assets include customer relationships and brands. Intangible assets acquired in material business combinations are capitalised at their fair value as determined by reference to the methodologies, judgements and policies disclosed on page 74. Intangible assets are amortised on a straight-line basis over their useful economic life of between six and 15 years. Amortisation charges are charged to the income statement as other administrative expenses. The table in note 7 separates out the amortisation of each asset category. During 2021, the useful economic life of the customer relationships asset, which was previously assessed at 15 years, was reassessed to a total of six years from acquisition in 2018. 2.06 Investments Investments in subsidiary and associated undertakings are stated at cost less provision for impairment. 2.07 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; and • Certain assets in acquired subsidiaries are depreciated on a reducing balance basis, resulting in an immaterial difference in depreciation charges. 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. 2.08 Impairment of non-current assets For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of a related business combination and represent the lowest level within the Group at which management monitors goodwill. Cash-generating units to which goodwill has been allocated (determined by the Group’s management as equivalent to its operating segments) are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or charges in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s (or cash-generating units) carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group’s latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect current market assessments of the time value of money and asset-specific risk factors. LoopUp Group plc | Annual Report & Accounts 2021 59 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 2. Summary of significant accounting policies continued Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset’s or cash-generating unit’s recoverable amount exceeds its carrying amount. 2.09 Revenue recognition Revenue comprises the transaction price, being the amount of consideration the Group expects to be entitled to in exchange for transferring promised goods or services to a customer in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group. LoopUp Platform Capabilities revenue arises from the delivery of conferencing services using LoopUp’s proprietary products, as well as revenue earned on MeetingZone’s audio conferencing platform and the Group’s Cloud Telephony products. The significant majority of revenue arises upon usage by customers of services delivered on a pay as you go model, based on seconds of conference time, the number of participants on the conference, and usage of other value- added services. An increasing proportion of customers are subject to contracted levels of minimum usage, however this is still invoiced and recognised on a monthly basis. Revenue is recognised in relation to conferencing services as the service is performed, is invoiced to the customer monthly in arrears, and is recognised at a point in time. Revenue from Cloud Telephony products arises from subscription and usage charges. Subscription charges are recognised in the month to which they relate, and usage charges at the point of billing, which occurs monthly. Hybridium revenue arises from the licensing of hybrid meetings software, as well as from professional services connected to the installation of appropriate hardware on which to run the software. The licensing revenue is recognised monthly over the lifetime of the license, and professional services revenue is recognised when delivered. Subscription revenues are recognised over the life of the subscription term. Revenue from equipment sales is recognised when delivery is made and the risk in the equipment has passed to the customer, with support costs recognised over the period of time to which the charges relate. Third party resale services revenue arises from a combination of re-sold seat licenses for third party products, sold on a ‘per host per month’ basis, typically on twelve month or more committed terms, and minutes and overage charges for usage of these products. Revenue from licenses is recognised evenly over the period of time to which the charges relate. Revenue from usage is recognised at the time the service is performed. 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. 2.10 Cost of sales Cost of sales consists of fees payable to third parties and other expenses that are directly related to sales. 2.11 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 or 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. 60 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 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. 2.12 Leases The Group is not party to any material leases where it acts as a lessor, but it does have certain material property leases, under which it is a lessee. Following adoption of IFRS16, for any new contracts entered into on or after 1 January 2019, the Group considers whether a contract is, or contains, a lease. A lease is defined as “a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration”. To apply this definition the Griup assesses whether the contract meets three key evaluations, which are whether: • the contract contains an identified asset, which is ether explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group; the Group has the right to obtain substantially all of the economic benefit from the use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; and the Group has the right to direct the use of the identified asset throughout the period of use, The Group assesses whether it has the right to direct “how and for what purpose” the asset is used throughout the period of use. • • Measurement and recognition of leases as a lessee At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight line basis from lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease, if that rate is readily available or the Group’s incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero. The Group has elected to account for short term leases and leases of low value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense to the income statement on a straight-line basis over the lease term. On the statement of financial position, right-of-use assets have been disclosed separately within non-current assets and lease liabilities have been disclosed separately within current and non-current liabilities. 2.13 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. LoopUp Group plc | Annual Report & Accounts 2021 61 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 2. Summary of significant accounting policies continued 2.14 Benefits and pension costs LoopUp Limited and MeetingZone Limited operate contributory pension schemes under the UK’s auto-enrolment rules. Company contributions (3% in 2020 and 2021) 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. The Group has no further payment obligations once the contributions have been deducted and paid. The costs of administering this scheme are charged as an expense to the statement of comprehensive income in the period to which they relate. 2.15 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. The Group operates an Employee Share Incentive Scheme (ESIS) under which employees may sacrifice a portion of their base salary, and receive shares in the Group. The fair value of the shares issued is taken to the statement of comprehensive income as a share-based payment charge, with a corresponding adjustment to equity reserves. 2.16 Alternative performance measures The Board assesses the performance of the Group using alternative performance measures (namely Adjusted operating expenses, Adjusted EBITDA, Adjusted operating profit and Adjusted basic/diluted earnings per share) as in the Board’s view, these reflect 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. Adjusted operating expenses represents total administrative expenses excluding depreciation, amortisation and impairment of development costs and acquired intangibles, exceptional reorganisation and tax charges, exceptional impairment charges and share-based payments charges. Adjusted EBITDA is defined as operating profit stated before depreciation, amortisation and impairment of development costs and acquired intangibles, exceptional reorganisation and tax charges, exceptional impairment charges and share- based payments charges. Adjusted operating profit is defined as operating profit stated before amortisation of acquired intangibles, exceptional reorganisation and tax charges, exceptional impairment charges and share-based payments charges. Adjusted earnings per share numbers are calculated using profit attributable to shareholders, adjusted for exceptional reorganisation costs, amortisation of acquired intangibles, and share-based payment charges. Exceptional reorganisation costs are considered to be one-off in nature and are of such significance to the performance of the Group due to their size, nature or incidence that the board considers it necessary to show them separately on the face of the statement of comprehensive income. It is important to note that alternative performance measures are not defined under IFRS and therefore are 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 measures of performance. 2.17 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. 62 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 2. Summary of significant accounting policies continued 2.18 Accounting developments This report has been prepared based on the accounting policies detailed in the Group’s financial statements for the year ended 31 December 2021 and is consistent with the policies applied in the previous financial year. There are no other new standards, amendments and interpretations which are effective for periods beginning on or after 1 January 2021, which had any impact on the Group’s accounting policies and disclosures in these financial statements. None of the new standards, amendments and interpretations, which are effective for periods beginning after 1 January 2021 and which have not been adopted early, are expected to have a significant effect on the consolidated financial statements of the Group. 2.19 Segment reporting IFRS 8 Operating Segments requires operating segments to be identified on the same basis as is used internally for the review of performance and allocation of resources by the CODM. 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 CODM. In July 2020, the Group announced a major extension to the LoopUp proposition to include global cloud voice services via Direct Routing integration with Microsoft Teams (known as Cloud Telephony). This capability, alongside the Group’s longstanding Remote Meetings and Managed Events capabilities, combine into a category termed LoopUp Platform Capabilities (LPC). Revenue from resale of Cisco WebEx services is categorised as ‘third party resale services’. In addition to the above segments adopted in the 2020 annual report and accounts, this year a new segment exists as a result of the acquisition of SyncRTC in October 2021, that of Hybridium. Segmental revenues are external and there are no material transactions between segments. The Group’s largest customer represented less than 5% of total revenue in both years. No segmental balance sheet was presented to the CODM. It is not possible to allocate overheads, and therefore profits, by segment due to the pooled nature of the overhead base and the capital structure. Overheads are not presented to the CODM on a segmental basis. 2.20 Adoption of new and revised standards Standards and amendments that are not yet effective and have not been adopted early by the Group include: • Amendments to IAS 1 – Classification of Liabilities as Current or Non-current; • Amendments to IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors; • Amendments to IFRS 3 – Reference to the Conceptual Framework; • Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract; • Annual improvements to IFRS Standards 2018 – 2020; • Amendments to IFRS 10 and IAS 28 – Sale or contribution of assets between an investor and its associate or jount venture; and • Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16 and IAS 39 – Interest Rate Benchmark Reforms – Phase 2. 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 receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and are therefore all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant financing components, when they are recognised at fair value. The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. The Group assesses impairment of trade receivables on a collective basis as they possess shared credit risk characteristics and have been grouped based on the days past due. LoopUp Group plc | Annual Report & Accounts 2021 63 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 3. Financial instruments continued 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. 3.05 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. (c) Retained earnings The retained net profits or losses to date less distributions. (d) Foreign currency translation reserve The net foreign exchange gains or losses to date on consolidation of investments in overseas subsidiaries. (e) Other Reserve A reserve has been created to enable the reservation of a consolidated balance sheet which combines the equity structure of the legal parent with the non-statutory reserves of the legal subsidiary. (f) Share-based payments reserve A reserve used to recognise the value of equity-settled share-based payments provided to employees, including Key Management Personnel as part of their remuneration. 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. 64 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 4. Financial risk management continued 4.02 Capital risk management The Group is funded by equity and loans. 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. 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. Aside from the contractual conditions of the Group’s loan facilities, which include certain financial covenants, 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 The preparation of financial statements under UK adopted IFRS required the Group to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions which have a risk of causing a material adjustment to the carrying amount of assets and liabilities are discussed below. Judgements 5.01 Functional currency The functional currency is deemed to be Sterling, as the Directors consider that the primary economic environment. 5.02 Recognition 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 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 £12.3m (2020: £8.5m) and non-trading losses of £0.5m (2020: £1.4m) 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. 5.04 Valuation of acquired intangibles Management identified and valued acquired intangible assets on acquisitions made during the period. Management has applied judgements in identifying and valuing intangible assets separate from goodwill that consist of assessing the value of brands and customer relationships. The Board has a policy of engaging professional advisors on acquisitions with a purchase price greater than £5 million to advise and assist in calculating intangible asset values. The Group consistently applies the following methodologies for each class of identified intangible: • Customer relationships – Net present value of future cash flows • • Brands – Royalty relief method Intellectual Property – Cost to recreate the asset LoopUp Group plc | Annual Report & Accounts 2021 65 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 5. Critical accounting estimates and judgements continued Estimates 5.05 Useful economic life of intangible assets Assumptions are made on the useful life of an intangible and if shortened, would increase the amortisation charge recognised in the income statement. The identified intangibles are set out in note 14. There are a number of assumptions in estimating the present value of future cash flows including management’s expectation of future revenue, renewal rates for subscription customers, costs, timing and quantum of future capital expenditure, long-term growth rates and discount rates. During the year, the useful economic life of the customer relationships asset was reassessed, and amended from 15 years to six years from acquisition. 5.06 Carrying value of goodwill and other intangibles The carrying value of goodwill and other intangibles is assessed at least annually to ensure that there is no need for impairment. Performing this assessment requires management to estimate future cash flows to be generated by the related cash generating unit, which entails making judgements including the expected rate of growth of sales, margins expected to be achieved, the level of future capital expenditure required to support these outcomes and the appropriate discount rate to apply when valuing future cash flows. The Group now considers that it has two cash generating units in the Group as a whole. LoopUp Platform In the years since the acquisition of MeetingZone, the vast majority of MeetingZone’s audio revenue customer base has been transitioned onto the LoopUp platform. The growing cloud telephony business also relies on infrastructure created within both the LoopUp and MeetingZone businesses. Staff and overhead costs have also been amalgamated such that it is not possible to separately identify the acquired MeetingZone business. This is entirely in line with the intention at the time of the acquisition. Impairment testing has therefore been carried out on this basis. Hybridium Hybridium (previously known as MashMe) revenues are delivered through a distinct technology platform, which was acquired with SyncRTC in October 2021. As this cash generating unit was acquired in the year, it is not required to be assessed for impairment. 5.07 Intangible asset life Intangible assets are amortised over their estimated useful lives. 5.08 Share based payments The Group operates a share-based compensation plan under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options and awards is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market service and performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period). Non-market vesting conditions are included in assumptions about the number of options and awards that are expected to vest. The total amount expensed is recognised over the vesting period, which is the period over which all the specified existing conditions are to be satisfied. At each reporting date, the entity revises its estimates of the number of options and awards that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. The significant judgements involved in calculating the share based payments charge are the fair value at the date of grant which is determined by using the Black-Scholes model, the staff retention rate which is determined with reference to historical churn and the estimated vesting periods which are determined with reference to the Group’s forecasts. Additional disclosures on the calculation of share-based payments are provided in note 20. The Group also operates an employee share incentive scheme (ESIS) pursuant to which employees can choose to sacrifice a percentage of their base salary in respect of an ESIS period (calendar quarters) and receive shares in the Group. The fair value of the shares issued in respect of each ESIS period is charged to the statement of comprehensive income as a share-based payment, with a corresponding increase in issued share capital and share premium account. 66 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 6. Revenue and segmental reporting The Group’s revenue disaggregated by primary geographical markets is as follows: LoopUp Platform Capabilities £000 Third party Resale Services £000 Hybridium £000 Total £000 For the year ended 31 December 2021: UK EU North America Rest of World Total For the year ended 31 December 2020: UK EU North America Rest of World Total 7,027 2,181 5,363 269 14,840 22,634 6,217 13,258 940 43,049 The Group’s revenue disaggregated by pattern of revenue recognition is as follows: For the year ended 31 December 2021: Services transferred at a point in time Services transferred over time Total For the year ended 31 December 2020: Services transferred at a point in time Services transferred over time Total The Group’s gross profit disaggregated by segment is as follows: LoopUp Platform Capabilities £000 12,740 2,100 14,840 40,774 2,275 43,049 LoopUp Platform Capabilities Third Party Resale Services Hybridium Total 1,624 1,136 1,684 – 4,444 2,957 1,573 2,651 – 7,181 Third party Resale Services £000 10 4,434 4,444 599 6,582 7,181 13 138 61 30 242 – – – – – 8,664 3,455 7,108 299 19,526 25,591 7,790 15,909 940 50,230 Hybridium £000 Total £000 – 242 242 – – – 2021 £000 11,740 1,487 241 13,468 12,750 6,776 19,526 41,373 8,857 50,230 2020 £000 33,497 2,101 – 35,598 LoopUp Group plc | Annual Report & Accounts 2021 67 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 6. Revenue and segmental reporting continued The Group’s non-current assets disaggregated by primary geographical markets are as follows: Geographical analysis of non-current assets: UK EU North America Rest of World 7. Administrative expenses The (loss)/profit from operations is stated after charging amounts as follows: Staff costs (note 9) Auditor’s remuneration (note 8) Foreign exchange loss Other administrative expenses Total adjusted operating expenses Depreciation of owned property, plant and equipment (note 13) Amortisation of right of use assets (note 13) Amortisation of development costs (note 14) Amortisation of acquired intangibles (note 14) Exceptional reorganisation costs and tax charge Exceptional impairment charge Share-based payment charge (note 20) Total administrative expenses 2021 £000 2020 £000 56,851 253 1,181 2 58,287 2021 £000 7,223 211 24 4,814 12,272 934 826 5,582 2,211 392 19,597 2,208 44,022 74,230 24 1,701 5 75,960 2020 Restated £000 13,773 135 65 6,297 20,270 818 884 4,581 2,210 – – 575 29,338 Exceptional reorganisation costs are legal and professional fees and staff termination costs incurred in relation to restructuring the Group in line with the strategic transition. The reorganisation impacted entities throughout the group, but principally LoopUp Limited and LoopUp LLC, where the majority of staff are employed. These are not expected to recur. The exceptional impairment charge arose from an assessment of the carrying value of the customer relationships asset conducted in the year. As a result of this assessment, the value of the asset was impaired, and the useful economic life shortened (see note 14.03). 8. Auditor’s remuneration The Group obtained the following services from the auditor and their associates: Fees payable to the Group’s auditor for the audit of the consolidated financial statements Fees payable to the Group’s auditor for the audit of the Parent Company’s financial statements Audit-related assurance services Other professional services Tax compliance services Total auditor’s remuneration (included within adjusted operating expenses) 2021 £000 150 10 8 43 – 211 2020 £000 115 10 10 – – 135 Other professional services related to due diligence work on acquisition which took place prior to appointment as auditor. 68 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 9. Staff and remuneration 9.01 Number of staff Average number of employees (including Directors): Executive Directors Non-executive Directors Commercial Engineering and development Other 9.02 Remuneration Aggregate remuneration of staff (including Directors): Short-term remuneration Social security costs Benefits in kind Capitalisation as development costs (note 14) Included in adjusted operating expenses 2021 Number 2020 Number 3 3 62 60 72 200 2021 £000 10,906 1,333 1,017 13,256 (6,028) 7,228 3 3 104 53 78 241 2020 £000 16,952 1,532 1,265 19,749 (5,976) 13,773 In addition to the staff costs above, £738,000 (2020: £844,000) of outsourced contractor costs and £nil (2020: £46,000) of other, non-salary 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 Share based payments Benefits in kind Non-Executive Director fees 2021 £000 572 27 18 45 662 2020 £000 1,149 – 19 79 1,247 The highest paid director received remuneration in 2021 of £225,000 (2020: £514,000) including pension contributions of £nil (2020: £nil). The remuneration of key management personnel is shown in note 21.01. LoopUp Group plc | Annual Report & Accounts 2021 69 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 10. Finance costs Interest on loans Loan facility fees Interest charges on right of use assets 11. Taxation 11.01 Income tax credit Current tax Current period UK income tax Current period foreign income tax Adjustment for prior periods Total current tax Deferred tax adjustments (note 26) Net income tax credit 2021 £000 300 49 116 465 2021 £000 (1,878) 151 53 (1,674) (4,378) (6,052) 2020 Restated £000 424 49 126 599 2020 Restated £000 (1,450) 530 222 (698) 390 (308) 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 (Loss)/profit before income tax Tax at the UK corporate tax rate Effects of: Expenses deductable Expenses not deductible for tax purposes Losses surrendered for R&D credit Additional reduction for R&D expenditure Losses carried forward Set against brought forward losses Effect of foreign tax rates Adjustment for prior periods Deferred tax adjustments Other differences Net income tax credit 2021 £000 19% (31,019) (5,894) (1,930) 5,976 2,461 (1,391) (862) (89) 55 (16) (4,378) 16 (6,052) 2020 Restated £000 19% 5,661 1,076 – 13 – (1,451) – (713) 22 40 390 315 (308) 11.03 Factors that may affect future tax charges The effective rate of UK corporate tax at the period end was 19%. An increase in the rate to 25% for the financial year commencing 1 April 2023 had been substantively enacted at the date of these financial statements. 70 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 12. Earnings per share The basic earnings per share is calculated by dividing the net (loss)/profit attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the year. (Loss)/profit attributable to equity holders (£000) Adjusted (loss)/profit attributable to equity holders (£000)(i) Weighted average number of ordinary shares in issue (000) Basic adjusted earnings per share (pence)(ii) Basic earnings per share (pence) 2021 (24,967) (4,938) 63,992 (7.7) (39.0) 2020 Restated 5,969 9,144 55,330 16.5 10.8 The diluted earnings per share have 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. 2021 000 2020 000 Weighted average number of ordinary shares in issue Adjustment for share options Weighted average number of potential ordinary shares in issue Diluted adjusted earnings per share (pence)(ii) Diluted earnings per share (pence) 63,992 – 63,992 (7.7) (39.0) 55,330 5,065 60,395 15.1 9.9 (i) Calculated as (loss)/profit attributable to equity holders adjusted for exceptional reorganisation costs, amortisation of acquired intangibles and share based payments charges. (ii) Basic adjusted and diluted adjusted earnings per share are calculated using the (loss)/profit above and adjusting for exceptional reorganisation and tax charges, exceptional impairment charges, amortisation of acquired intangibles and share based payments charges. LoopUp Group plc | Annual Report & Accounts 2021 71 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 13. Property, plant and equipment 13.01 Property, plant and equipment (Group) Cost: As at 1 January 2020 Additions Disposals Net exchange difference As at 31 December 2020 Additions Acquired on acquisition of SyncRTC (Note 22.02) Disposals Net exchange difference As at 31 December 2021 Accumulated depreciation: As at 1 January 2020 Charge for the year Disposals Net exchange difference As at 31 December 2020 Charge for the year Acquired on acquisition of SyncRTC (Note 22.02) Disposals Net exchange difference As at 31 December 2021 Carrying amount: As at 1 January 2020 As at 31 December 2020 As at 31 December 2021 13.02 Property, plant and equipment (Company) The Company held no property, plant and equipment during the period. 13.03 Right of use assets The balance sheet shows the following amounts in relation to leases: Right-of-use assets Buildings Lease liabilities Current Non-current Computer equipment £000 Office equipment £000 8,559 753 (575) (83) 8,654 614 79 (30) 20 9,337 6,525 600 (575) (73) 6,477 815 51 (30) 26 7,339 2,034 2,177 1,998 1,482 4 (551) (6) 929 3 – (15) 1 918 779 218 (551) (3) 443 119 - (15) 1 548 703 486 370 Total £000 10,041 757 (1,126) (89) 9,583 617 79 (45) 21 10,255 7,304 818 (1,126) (76) 6,920 934 51 (45) 27 7,887 2,737 2,663 2,368 2021 £000 2020 Restated £000 2,130 2,951 956 1,463 2,419 953 2,372 3,325 72 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 13. Property, plant and equipment continued There were no additions to the right-of-use assets during 2021 (2020 restated: £558,000). The income statement shows the following amounts relating to leases: Amortisation of right-of-use assets Buildings Interest expense 2021 £000 826 826 116 2020 Restated £000 884 884 126 The aggregate cash outflow in respect of leases in the year was £840,000 (2020: £828,000). The Group’s leases include various office premises, typically on rental contracts from three to ten years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease arrangements do not impose any covenants other than the security interests in the leased assets held by the lessor. Leased assets may not be used as security for borrowing purposes. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the future expected lease payments. The lease payments are discounted using the Group’s incremental borrowing rate, estimated at 3.5%. The loan interest rate increased after the year-end to 4.5% above SONIA. The Directors will reassess the discount rate used in 2022 in the light of this change. Lease payments are allocated between principal and finance costs. The latter is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right of use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight line basis. Payments associated with short-term or low value leases are recognised on a straight line basis as an expense on the income statement. The right of use assets balances were subject to prior year adjustments which are explained more fully in Note 24.01. 14. Intangible assets 14.01 Intangible assets (Group) Cost: As at 1 January 2020 Additions As at 31 December 2020 Additions As at 31 December 2021 Accumulated amortisation: As at 1 January 2020 Charge for the year As at 31 December 2020 Charge for the year Exceptional impairment charge As at 31 December 2021 Carrying amount: As at 1 January 2020 As at 31 December 2020 As at 31 December 2021 Customer relationships £000 Brand and trademarks £000 Acquired goodwill £000 Development costs £000 31,178 – 31,178 – 31,178 3,290 2,078 5,368 2,079 19,597 27,044 27,888 25,810 4,134 1,977 – 1,977 – 1,977 209 132 341 132 – 473 1,768 1,636 1,504 31,511 – 31,511 3,914 35,425 – – – – – – 31,511 31,511 35,425 23,251 6,866 30,117 6,919 37,036 14,147 4,581 18,728 5,582 – 24,310 9,104 11,389 12,726 Total £000 87,917 6,866 94,783 10,833 105,616 17,646 6,791 24,437 7,793 19,597 51,827 70,271 70,346 53,789 LoopUp Group plc | Annual Report & Accounts 2021 73 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 14. Intangible assets continued 14.02 Development costs 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. 14.03 Goodwill, customer relationships and brands and trademarks The addition to acquired goodwill in 2021 arose on the acquisition of SyncRTC. Aside from that, there were no additions to these assets in 2021 or 2020. The customer relationships and brands and trademarks assets relate to the acquisiton of MeetingZone in 2018. The acquisition consisted of a single identifiable cash generating unit. The Group used specialist external advisors to value the separately identifiable assets acquired using an income approach to identify the present value of the future economic value of these assets and the resulting goodwill. Detailed three-year cash flow forecasts were produced at the time of the acquisition to support these valuations. The acquired customer relationships and brand assets were considered to have a useful economic life of at least 15 years when acquired. The useful economic life of the customer relationships was reassessed in 2021, and it was determined that the churn in customers in the period since the acquisition results in a reduced assessment of the economic life of this customer book to six years (with 2.5 years remaining at 31 December 2021). There was also determined to be an impairment in the value of the customer relationships asset, which was assessed by considering a discounted cash flow calculation of those acquired customers remaining, and making assumptions about future churn. This impairment resulted in an exceptional impairment charge of £19.6 million in 2021. 14.04 Impairment testing The Group tests goodwill for impairment on an annual basis by considering the recoverable amount of each cash generating unit. The Hybridium cash generating unit was not tested for impairment in 2021, being the year of acquisition. There are no intangible assets with indefinite useful lives (other than goodwill). For the purpose of impairment testing, the recoverable amount of the LPC cash-generating unit has been calculated with reference to value in use. The key assumptions for the period over which management approved forecasts are based and, beyond this, for the value in use calculations overall, are those regarding discount rates, growth rates and achievement of future revenues. In arriving at the values assigned to each key assumption management make reference to past experience and external sources of information regarding the future. The assumptions have been reviewed in light of the current economic environment. The key features of these calculations are shown below: Period over which management approved forecasts are based Growth rate applied beyond approved forecast period for both costs and revenues Pre-tax discount rate 5 years 2% 8.8% The discount rates used in each value in use calculation have been based upon divisional specific risk, taking account of factors such as the nature of service user need, cost profiles and the barriers to entry into each market segment as well as other macro-economic factors. The Directors believe that, even in the current economic environment and taking into account the nature of the Group’s operations, any reasonably possible change in the key assumptions on which the recoverable amounts are based would not cause the cash-generating units’ carrying amount to exceed the recoverable amount. 14.05 Intangible assets (Company) The Company held no intangible assets during the period. 74 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 15. Trade and other receivables Trade receivables Accrued revenue Amounts owed by subsidiary undertakings Other receivables Deposits and prepayments Current corporate tax Group 2021 £000 2,298 83 – – 1,227 3,608 1,862 Group 2020 Restated £000 4,804 222 – 8 1,841 6,875 1,647 Company 2021 £000 – – 69,329 – – 69,329 – Company 2020 £000 – – 60,815 – – 60,815 – 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 3% 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 ageing analysis of trade receivables is as follows: Not overdue Up to 30 days overdue Between 30 and 60 days overdue Over 60 days overdue Provision for credit losses Group 2021 £000 1,226 697 127 465 2,515 (217) 2,298 Group 2020 £000 2,067 1,675 499 1,027 5,268 (464) 4,804 Company 2021 £000 Company 2020 £000 – – – – – – – – – – – – – – Amounts owed by subsidiary undertakings are repayable on demand and are interest free. 16. Cash and cash equivalents Cash and cash equivalents Group 2021 £000 5,465 5,465 Group 2020 £000 12,086 12,086 Company 2021 £000 – – Company 2020 £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. LoopUp Group plc | Annual Report & Accounts 2021 75 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 17. Trade and other payables Current: Trade payables Other tax and social security Accruals Deferred income Lease liabilities (note 13.03) Borrowings (note 18) Total current liabilities 18. Borrowings Borrowings held at amortised cost Current: Bank loan Total current borrowings Non-current: Bank loan Debt acquired in SyncRTC acquisition Total non-current borrowings Total of current and non-current borrowings Group 2021 £000 2,320 1,064 3,384 1,148 888 2,036 956 956 1,700 1,700 8,076 Group 2021 £000 1,700 1,700 5,218 963 6,181 7,881 Group restated 2020 £000 3,650 2,653 6,303 2,927 680 3,607 953 953 1,700 1,700 12,563 Group 2020 £000 1,700 1,700 11,050 – 11,050 12,750 Company 2021 £000 Company 2020 £000 – – – – – – – – – – – – – – – – – – – – – – Company 2021 £000 Company 2020 £000 – – – – – – – – – – The Group’s bank loan is a £17m facility arranged with the Bank of Ireland in June 2018 in connection with the acquisition of MeetingZone, and was amended in October 2021 in connection with the acquisition of SyncRTC. The facility is a 5-year term loan – 50% amortising, 50% bullet repayment at maturity, at a floating interest rate of 2.5% over LIBOR, with a zero LIBOR floor. Repayments of £0.85m are made every six months, and a prepayment of £4.1 million was made in October 2021. As at 31 December 2021, the maturity date for the facility was 30 June 2023. Subsequent to the year-end the facility was further amended. These amendments include extending the term of the loan to 30 September 2023, the removal of capital repayments until June 2023, an increase in the interest rate to 4.5% above SONIA, and the adoption of a different suite of covenants. The Group also has access to a £1.5m revolving credit facility which has been reconfirmed in the amended facility agreement. The facility includes security over the assets of LoopUp Limited and certain other subsidiary companies. The Group is required to ensure that it complies with covenants governing net debt/Adjusted EBITDA and Adjusted EBITDA/gross interest for the period of the loan. The Group has complied with all covenant tests up to the balance sheet date. 76 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 18. Borrowings continued Debt acquired in SyncRTC acquisition comprises several loans, as below: • Unsecured bank loans from Banco Sabadell, as below: – €40,000 taken in May 2020. Interest only for the first twelve months, following which the loan is repayable in 48 monthly instalments of interest and capital. The interest rate is 3.5% per annum. – €90,000 taken in May 2021. Interest only for the first eleven months, following which the loan is repayable in a single payment on the anniversary of the loan. The interest rate is 3.5% per annum. • Unsecured bank loans from La Caixa, as below: – €100,000, taken in October 2019. Repayable in 48 monthly payments of interest and capital. Interest rate is 3.0%. – €120,000, taken in July 2020. Interest only for twelve months, following which the loan is repayable in 48 monthly instalments of interest and capital. The interest rate is 1.5%. – €40,000, taken in March 2021. Interest only for twelve months, following which the loan is repayable in 48 monthly instalments of interest and capital. The interest rate is 2.5%. • An unsecured, non-bank loan from European Regional Development Fund, FEDER as part of a RETOS R&D project, which included grant and loan funding. The loan was made in three tranches: €180,000 in June 2016, €318,000 in June 2017 and €316,000 in June 2018. The tranches are each repayable in even annual payments, beginning around four years after drawdown of the tranche. The interest rate on each tranche is 0.06%. • A non-bank loan from The European Union Agency for Cybersecurity (ENISA) for €200,000, made in November 2016. Repayable in 16 quarterly payments, which began in February 2019. Interest rate is 3.68%. • A non-bank loan from the Centre for the Development of Industrial Technology (CDTI) a Spanish public sector organisation. The loan was initially created in November 2015, with drawdowns in 2016 (€124,000) and 2021 (€109,000). The loans are secured on a cash deposit of €124,000, held by Banco Santander. The loans are repayable in six-monthly payments of interest and capital. The interest rate is 0.163%. Maturity analysis showing the contractual undiscounted cash flows. The Group’s non-derivative financial liabilities have contractual maturities as summarised below: 31 December 2021: Trade payables SyncRTC acquired debt Bank loan 31 December 2020: Trade payables Bank loan Within six months £000 Six to twelve months £000 2,320 – 850 3,170 3,650 850 4,500 – – 850 850 – 850 850 One to five years £000 – 963 5,218 6,181 – 12,750 12,750 Non-current later than five years £000 – – – – – – The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the reporting date. The changes in the Group’s liabilities arising from financing activities can be classified as follows: At 1 January 2020 Cash flows: – Repayment At 31 December 2020 At 1 January 2021 Cash flows: – Repayment – Reclassification – SyncRTC acquired debt At 31 December 2021 LoopUp Group plc | Annual Report & Accounts 2021 Long-term borrowings £000 12,750 (1,700) 11,050 11,050 (4,132) (1,700) 963 6,181 Short-term borrowings £000 1,700 – 1,700 1,700 (1,700) 1,700 – 1,700 Total £000 14,450 (1,700) 12,750 12,750 (5,832) – 963 7,881 77 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 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 (note 20) and loans (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 Group 2021 £000 5,465 2,298 – – 262 8,025 19.03 Financial liabilities The following financial liabilities were held, all classified as other financial liabilities: Trade payables Loans Other payables Group 2021 £000 2,320 7,881 – 10,201 Group 2020 £000 12,086 4,804 – 8 342 17,240 Group 2020 (Restated) £000 3,650 12,750 – 16,400 Company 2021 £000 – – 69,329 – – 69,329 Company 2020 £000 – – 60,815 – – 60,815 Company 2021 £000 Company 2020 £000 – – – – – – – – 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, as the Group’s US Dollar revenues and costs are naturally hedged, to a large degree. 19.05 Credit risk Careful consideration is given to the choice of bank in order to minimise credit risk. Cash is held at different banks in each local jurisdiction. The amounts of cash held with those banks at the reporting date can be seen in the financial assets table above. Cash is held in local currency in each jurisdiction. Amounts held in non-sterling accounts are minimised where possible. 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. A provision of £217,000 (2020: £464,000) has been made for impairment losses in relation to trade receivables. This represents 8.6% of gross outstanding trade receivables (2020: 8.8%). The Group considers the current level of this provision to be adequate to cover expected credit losses on trade receivables. Bad debt expenses are reported in the income statement. 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. 78 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 19. Financial instruments continued 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 The maturity of non-derivative financial liabilities and assets at the reporting date are shown in note 18. 19.08 Fair value The fair values of all the financial assets and liabilities on the balance sheet are considered to approximate to their carrying values. Financial instruments are either carried at amortised cost, less any provision for impairment, or fair value. The fair value of long-term borrowings is the same as the carrying value of long-term borrowings as at 31 December 2021. The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: • Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; • Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and • Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. There were no financial instruments which met any of the above classifications as at 31 December 2021 or 2020. 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; and 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 2021 Number 2020 Number 97,001,114 55,441,182 97,001,114 55,441,182 2021 £000 485 485 208 208 2020 £000 277 277 1 1 LoopUp Group plc | Annual Report & Accounts 2021 79 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 20. Share capital and share premium continued 20.03 Changes to shares in issue Shares at the start of the year Ordinary shares issued at £0.0128 - exercise of share options Ordinary shares issued at £0.5000 - exercise of share options Ordinary shares issued at £0.7500 - exercise of share options Ordinary shares issued at £0.3730 - consideration for SyncRTC acquisition Ordinary shares issued at £0.25 - placing Ordinary shares issued at £0.2201 - pursuant to the ESIS Shares at the end of the year 20.04 Share premium account Brought forward Arising during the year on issue of shares Costs of share issue Carried forward 2021 Number 2020 Number 55,441,182 – – – 5,374,050 35,400,000 785,882 55,245,182 75,000 9,000 112,000 – – 97,001,114 55,441,182 2021 £000 60,677 10,183 — 70,860 2020 £000 60,588 89 – 60,677 20.05 Share options The Group operates a shared-based payment scheme for employee remuneration, which is settled in equity. Options are granted to the majority of employees on a periodic basis. Options under the scheme will vest if certain conditions, as defined in the scheme, are met. Upon vesting, each option allows the holder to purchase one ordinary share at a price determined upon the issue of the option. Outstanding share options were as follows: Outstanding at 1 January Granted at £nil Granted at £1.10 Cancelled and not replaced Lapsed Exercised (note 20.03) Outstanding at 31 December Number of options exercisable at the balance sheet date At £nil At £0.0128 At £0.50 At £0.75 At £1.105 At £3.175 At £4.40 Options outstanding at 31 December 2021 Number 5,459,929 5,412,538 – – (242,703) – 2020 Number 4,992,645 – 1,195,700 (360,000) (172,416) (196,000) 10,629,764 5,459,929 2021 Number 2020 Number 9,026,017 2,669,108 2021 Number 5,412,538 127,387 88,000 3,877,030 1,084,705 2,500 37,604 2020 Number – 127,387 88,000 4,020,280 1,181,450 2,500 40,312 10,629,764 5,459,929 80 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 20. Share capital and share premium continued Weighted average exercise price of outstanding options carried forward £ 0.41 £ 0.83 In May 2020, the Group issued a total of 1,195,000 new share options at a strike price of £1.105, equal to the market price at the date of grant. These options vest over a four-year period with a one year cliff. In October 2021, the Group issued a total of 5,412,538 new share options at a nil strike price, in lieu of paying bonuses relating to 2020 in cash. These options vested in full on issue. 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 1.007%, a volatility of 25% and zero dividend yield. Other inputs were as follows: Number granted in year Share price at grant date Exercise price Fair value of each issued option Vesting period (years) Allowance for leavers and failed vestings Total charge for grant Charge for the year: – 2021 grant – 2020 grant – 2019 grant – 2018 grant Charge in relation to share options Charge in relation to employee share incentive scheme 2021 Number 2020 Number 5,412,538 1,195,700 £0.27 £0.005 £0.27 1 0% £1,436,000 £1,436,000 £57,000 £144,000 £398,000 £2,035,000 £173,000 £1.105 £1.105 £0.265 4 10% £285,000 – £33,000 £144,000 £398,000 £575,000 – £2,208,000 £575,000 21. Related party transactions 21.01 Remuneration of key personnel Key management of the Group are the members of the executive leadership team. Key management personnel remuneration includes the following expenses: Short-term remuneration Share based payments 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 These amounts represent unpaid expense claims or fee invoices. 2021 £000 1,604 59 59 1,722 2021 £000 (19) (36) (4) (59) 2020 £000 2,850 – 62 2,912 2020 £000 (13) (29) (4) (46) LoopUp Group plc | Annual Report & Accounts 2021 81 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 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 Silicon Valley Internship Program, a company of which Michael Hughes is the sole director and shareholder. The purchases from this related party and the balance owed at year end are set out below: Purchases from related parties: Silicon Valley Internship Program Amounts owed to (by) related parties: Silicon Valley Internship Program 22. Subsidiary undertakings and business combinations 22.01 Subsidiary undertakings At the start of the year Additions – acquisition of subsidiary Additions – issue of share-based payments in own shares to employees of Group undertakings At the end of the year 2021 £000 – – – – 2021 £000 1,493 2,547 2,208 6,248 2020 £000 (46) (46) – – 2020 £000 918 – 575 1,493 The Company owns 100% of the issued shares of the following telephony and conferencing services subsidiaries which, taken with the amounts of share-based payments relating to shares in the parent but awarded to employees of subsidiaries, make up the carrying value of £6,248,000 (2020 Restated: £1,493,000). 82 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 22. Subsidiary undertakings and business combinations continued Country of incorporation and principal place of business Principal activity 2021 2020 Proportion of ownership interests held by Group at year end Owned directly by LoopUp Group plc: LoopUp Limited SyncRTC Inc Owned indirectly by LoopUp UK USA Telephony and conferencing services Hybrid meetings and events services Group plc Held in LoopUp Limited: LoopUp LLC LoopUp (Barbados) Limited LoopUp (HK) Limited LoopUp Australia Pty Ltd Pimco 2711 Limited* Warwick Holdco Limited* Warwick Debtco Limited* Warwick Bidco Limited* MeetingZone Limited MeetingZone GmbH MeetingZone Inc MeetingZone Canada Limited Confy MeetingZone AB LoopUp South Africa LoopUp SG Pte Ltd LoopUp India Private Limited Loopup Brasil Solucoes Em Technologia Ltda Loopup Estonia OÜ Held in SyncRTC Inc: MashMe Group SL SyncRTC Limited* Telephony and conferencing services Telephony and conferencing services Telephony and conferencing services Telephony and conferencing services Dormant company Holding company Holding company Holding company Telephony and conferencing services Telephony and conferencing services Telephony and conferencing services Telephony and conferencing services Telephony and conferencing services USA Barbados Hong Kong Australia UK UK UK UK UK Germany USA Canada Sweden South Africa Dormant company Dormant company Singapore Dormant company India Brazil Estonia Spain UK Dormant company Dormant company Hybrid meetings and events services Hybrid meetings and events services 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% – 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% – – * The company’s subsidiary SyncRTC Limited is exempt from the requirements of the Companies Act 2006 relating to the audit of their individual accounts by virtue of section 479A of the Companies Act 2006. LoopUp Group plc | Annual Report & Accounts 2021 83 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 22. Subsidiary undertakings and business combinations continued The registered offices of the companies in the Group are: All UK subsidiaries LoopUp LLC Tea Building, 56 Shoreditch High Street, London E1 6JJ, UK 282 2nd Street, Suite 200, San Francisco, CA 94105, USA LoopUp (Barbados) Limited 1st Floor, One Welches, St Thomas 220025, Barbados LoopUp (HK) Limited LoopUp Australia Pty Ltd 46/F Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong Level 10, 580 George Street, Sydney, NSW 2000, Australia MeetingZone Canada Limited 11-1155 North Service Road West, Oakville, ON L6M 3E3, Canada MeetingZone Inc MeetingZone GmbH Confy MeetingZone AB LoopUp South Africa LoopUp SG Pte Ltd LoopUp India Private Limited One Mifflin Place, Suite 40, Cambridge MA 02138, USA Hardenbergstr 32, 10623 Berlin, Germany Sodra Forstadsgatan 40A, 21143 Malmo, Sweden 4 Lisbon Lane, Waterfall Coty, Jukskei View, Gauteng 2090, South Africa 6 Battery Road #42, Singapore 049909 Plot No 66, Lower Ground Floor, #TheHub, Okhla Phase III, Okhla Industrial Estate, New Delhi 110020, India LoopUp Brasil Solucoes Em Technologia Ltda LoopUp Estonia OÜ MashMe Group SL venida Paulista No 2064, 14 andar, Bela Vista, São Paulo - SP - CEP 01310-200, Brazil Padriku tee 12/3-4, 11912 Tallinn, Estonia C/Cronos 20 bloque 2 1º4 28037, Madrid 22.02 Acquisition On 1 October 2021, the Company acquired the entire share capital of SyncRTC Inc. The consideration of £2,547,000 million was comprised of cash of £542,000 and the issue of 5,374,500 shares at a price of £0.37303 each, being the market price, to a total of £2,005,000 paid on completion. In addition, the Group assumed £1 million of cash indebtedness of SyncRTC Inc. The consideration for the acquisition was as follows: Cash consideration – paid Equity consideration – issued £000 542 2,005 2,547 SyncRTC Inc, together with its subsidiaries MashMe Group SL and SyncRTC Limited (together “SyncRTC”) provides a best-in-class experience for larger scale hybrid education and corporate training implementations. At the time of acquisition, SyncRTC had a customer base of approximately 30 education and corporate training customers including Said Business School at the University of Oxford, NYU Stern School of Business, Colorado State University, Saudi Aramco and Grupo Santander. SyncRTC brings meaningful differentiation to both LoopUp’s Collaboration and Managed Events strategic rings by taking both into hybrid as well as purely virtual implementations. The Group plans to continue to target new business in higher education and increase investment into targeting new business in both corporate training and hybrid events leveraging cross-selling opportunities with its existing enterprise customer base. 84 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 22. Subsidiary undertakings and business combinations continued The fair value of the assets acquired, and liabilities assumed was as follows: Goodwill Intangible assets Tangible assets Trade and other receivables Cash and cash equivalents Current liabilities Non-current liabilities Deferred tax Book value £000 Fair Value Adjustment £000 – 467 28 401 (56) (882) (768) 271 (539) 3,914 (467) – (73) – (17) – (271) 3,086 Fair Value £000 3,914 – 28 328 (56) (899) (768) – 2,547 Trade and other receivables shown above at a fair value of £328,000 has a gross contractual value of £401,000. The best estimate at the acquisition date of the contractual values not to be collected was £73,000. The goodwill represents the acquired workforce and the product synergies with the Group’s business and customer-base. SyncRTC contributed £242,000 revenue and £100,000 to the Group’s loss between the date of acquisition and the reporting date. If the acquisition had completed on the first day of the financial year, the Group’s revenue for the year would have been £20,205,000 and the Group’s loss would have been £25,711,000. The Consolidated Statement of Comprehensive Income includes nil of acquisition costs. 23. Dividends The Directors do not recommend the payment of a dividend (2020: £nil). 24. Prior Year Restatements 24.01 Right of use assets During the year, the Group identified that certain assets, liabilities and charges relating to right of use assets had been misstated in prior years. These balances have been restated as at 1 January 2020 and 31 December 2020, and the adjustments at each date are set out below: Right of use asset Lease liabilities Prepayments Trade creditors Opening reserves Depreciation of right of use assets Finance charges Exchange differences 31 December 2020 £000 1 January 2020 £000 527 (687) 131 60 – 3 31 (65) 76 (290) – – 214 – – – Basic and diluted earnings per share were each decreased by this adjustment by 0.06p in 2020. 24.02 Share-based payments During the year, the Group discovered that the share-based payment expense had been erroneously recognised in LoopUp Group plc instead of in the subsidiaries in which the relevant employees were employed. Under IFRS 2 Share-based Payments, when a parent grants rights to its equity instruments to employees of its subsidiaries, this arrangement should be accounted for as equity-settled in the consolidated financial statements, but results in an investment being created in the parent’s own statement of financial position. The subsidiaries concerned should measure the services received from the employees in their own financial statements in accordance with the requirements of IFRS 2 applicable to equity-settled transactions, which results in a corresponding increase being recognised in equity as a capital contribution from the parent. LoopUp Group plc | Annual Report & Accounts 2021 85 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2021 There has been no impact on the prior year’s Group profit or earnings per share for the year, however in the Company statement of financial position, the following adjustments have been made: Investments in subsidiaries Share-based payments reserve 31 December 2020 £000 575 (575) 1 January 2020 £000 779 (779) 24.03 Deferred tax During the year, the Group identified that in 2020 the deferred tax liability relating to the customer relationship and brand assets recognised on the acquisition of MeetingZone had been calculated at the incorrect main corporation tax rate. This deferred tax liability was intially calculated using a tax rate of 17%, as the reduction to this rate had been substantively enacted through parliament. However, in 2020, the UK government announced that the rate would remain at 19%. An adjustment should have been made in 2020, through the deferred tax charge, to reflect the new tax rate. The adjustment results in an increase of £518,000 in the Group’s deferred tax charge and deferred tax liability in 2020. Basic and diluted earnings per share were reduced by this adjustment by 0.94p and 0.86p respectively in 2020. 25. Recognition of liabilities arising from financing activities The change in the Group’s liabilities arising from financing activities can be classified as: 1 January 2021 Cash flows: – repayment – reclassification – acquired on acquisition of SyncRTC 31 December 2021 26. Deferred Tax Deferred tax assets and liabilities are attributable to the following: Balance as at 1 January 2020 (Restated) Timing differences recognised on tax losses Timing differences recognised on intangible assets Reduction in timing differences on amounts amortised Balance as at 31 December 2020 (Restated) Balance as at 1 January 2021 Timing differences recognised on tax losses Timing differences recognised on intangible assets Reduction in timing differences on amounts amortised Balance as at 31 December 2021 Long-term borrowing £000 11,050 (4,132) (1,700) 963 6,181 Short-term borrowing £000 1,700 (1,700) 1,700 – 1,700 Intangible assets timing differences £000 Timing differences on tax losses £000 (5,709) – (2,238) 422 (7,525) (7,525) – (1,155) 3,805 (4,875) – 1,426 – – 1,426 1,426 1,728 – – 3,154 Total £000 12,750 (5,832) – 963 7,881 Total £000 (5,709) 1,426 (2,238) 422 (6,099) (6,099) 1,728 (1,155) 3,805 (1,721) 86 LoopUp Group plc | Annual Report & Accounts 2021 Strategic Report Governance Financial Statements 27. Provisions At the start of the year Provision in year At the end of the year 2021 £000 – 172 172 2020 £000 – – – Under three of its office leases, the Group is required to restore the leased premises to their original condition at the end of the respective lease terms. A provision has been recognised for the present value of the estimated expenditure required to do so. The provision as at 31 December 2021 is £172,000 (2020: £nil). The expiry dates of these leases fall between June 2023 and September 2024. LoopUp Group plc | Annual Report & Accounts 2021 87 COMPANY INFORMATION AND CORPORATE ADVISERS Legal Counsel White & Case 5 Old Broad Street London EC2N 1DW 020 7532 1000 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 Cenkos Securities 6-8 Tokenhouse Yard London EC2R 7AS 020 7397 8900 Auditor Moore Kingston Smith LLP 6th Floor 9 Appold Street London EC2A 2AP 020 7566 4000 Registrars Neville Registrars Neville House Steelpark Road Halesowen B62 8HD 0121 585 1131 Company Registration Number: 09980752 88 LoopUp Group plc | Annual Report & Accounts 2021 L o o p U p G r o u p p l c A n n u a l R e p o r t & A c c o u n t s 2 0 2 1 LoopUp Group plc The Tea Building 56 Shoreditch High Street London United Kingdom E1 6JJ Tel: +44 (0)20 3107 0206 Email: ir@loopup.com www.loopup.com