GROWING

OPPORTUNITIES
ANNUAL REPORT AND ACCOUNTS 2018
INTRODUCTION

Who we are Our focus

Kape is a privacy first The Group utilises its proprietary
digital distribution technology to
cybersecurity company
optimise its reach and create a
focused on helping superb user experience.
consumers around the world
have better experience and
protection in their digital life.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

Digital marketing expertise Our vision

Kape offers products which Kape’s vision is to provide online
provide online security, privacy and autonomy for a secure and
an optimal online experience. accessible personal digital life.

Financial highlights Operational highlights Contents

$52.1m
• Progress: Substantial progress in Strategic Report
transitioning to a pure SaaS-based Highlights 01
model, providing a solid platform for At a glance 02
Revenue from core app future growth. Chairman’s statement 04
distribution segment
219%
Market overview 06
Chief Executive Officer’s review 08
+8%
Growth in subscriptions Growth strategy 11

$10.4m
Our user acquisition model 12
• Growth: Launched CyberGhost 7.0
Strategy in action 14
app and developed add-ons for
Financial review 16
Chrome and Firefox browsers.
Adjusted EBITDA* Principal risks and uncertainties 20

+28.3% 1.1 million Corporate Governance

$15.9m
Paying users Board of Directors 22
• Acquisition of Intego, a leading SaaS Corporate governance statement 24
cyber-security provider Mac and iOS Remuneration Committee report 28
Adjusted cash flow cybersecurity and malware Directors’ report 30
from operations excluding protection. Statement of Directors’ responsibilities 32

movement in deferred • Acquisition of Zenmate a multi- Financial Statements

contract costs platform security software business Independent Auditor’s report 33

$40.4m
with a focus on the provision of virtual Consolidated statement of comprehensive
private network (“VPN”) solutions. income37
Consolidated statement of financial position38
Cash balance Consolidated statement of changes
and no debt in shareholders’ equity 39
Consolidated statement of cash flows 40
Underlying Adjusted EBITDA** ($ million) Notes to the consolidated
financial statements 41
12 Shareholder information and advisors 72
th
row
10 %G
271 10.4
8
($ million)

6
6.0
4

2 2.8
0
2016 2017 2018

* Adjusted EBITDA is a non-GAAP measure and a company specific measure which excludes
other operating income and expenses which are considered to be one off and non-recurring
in nature.
** The Adjusted EBITDA attributable to the Web Apps and License division for 2017 was $2.2
million. This division was discontinued as of September 2017; as no such revenue was
recorded in 2018.
KAPE TECHNOLOGIES PLC
Annual Report and Accounts 2018
01
AT A GLANCE

Kape’s core
software products

Company overview Our product range

Digital Privacy
• Consists of our two complementary digital
privacy solutions: CyberGhost and
recently acquired ZenMate
• Safeguards personal information when
browsing the internet through unsecured
networks
• Blocks malicious content and provides a

c. 400 9
fully encrypted internet
• CyberGhost is consistently rated a Top 3
VPN SaaS provider in Europe and the USA

Employees Global Hubs

OS Performance Optimisation
• Consists of Restoro & Reimage, our PC
and Mac repair product, and Driverfix, our
driver repair solution
• Restoro is a patented repair solution to fix
PCs and Macs remotely; removes malware
and repairs computer software
• Proprietary Driverfix solution scans
computers for outdated drivers across all
Windows operating systems on desktop
computers, tablets and mobile devices

830,000 160
• Developed subscription brands

Subscribers Subscriber countries

Malware Protection
• Consists of Intego, our leading Mac and
iOS cybersecurity and malware protection
SaaS provider
• Focused on the provision of malware
protection, firewall, anti-spam, backup,
data protection
• Provide parental controls software for
Mac, a tool for keeping children safe
online
• NetBarrier provides a two-way firewall to
protect consumers from malicious apps

02 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
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KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
03
CHAIRMAN’S STATEMENT

As the world becomes more reliant on digital

communication, with individuals accessing data
across multiple devices and from various locations
globally, consumers have become more vulnerable to
cyber-attacks – with high profile hacking often
targeting individuals’ private and personal data
stored online. We believe that digital privacy,
alongside protection, is becoming the number one
individual security concern. The global cybersecurity
market was worth $153 billion in 20181 and is
estimated to be growing by 12-15% p.a., while the
market for privacy solutions is growing at an equally
fast rate of 15% p.a.2

Kape’s growing range of ‘privacy first’ solutions are

now well-positioned to capitalise on this sizeable
global market opportunity, as we continue to market
to a receptive and highly scalable customer base.
DON ELGIE
NON-EXECUTIVE CHAIRMAN
Competitive advantage
Customer acquisition knowhow and a superior
product stack continue to be key competitive
Kape’s growing range of ‘privacy first’ advantages for our business.

solutions are now well-positioned to Our ability to manage and implement highly
targeted customer acquisition methodologies
capitalise on this sizeable global enables our team to reach millions of customers
daily, effectively and has enabled management to
market opportunity both accelerate organic growth and enhance the
customer traction of the software solutions that
we have acquired.
Introduction
I am pleased to report 12 months of significant
Our product and R&D teams continue to work hard
further development for the Group, during which
to develop and improve our solutions, ensuring
Kape delivered another impressive operating profit
quality and ease of use as well as heightened
performance. Our senior management team has
customisation and performance.
worked tirelessly to both shape and grow the
business – successfully completing two
acquisitions, alongside product upgrades and
launches. This strong performance has only been
possible due to the commitment, hard work and
dedication of the entire ‘global’ Kape family and
has underpinned our transformation into a leading

74%
consumer security company.

Market overview
The shift that Kape has made into a leading privacy- Subscription
first consumer security company has been central to
retention rate
our commitment to create long-term shareholder
value, as the directors believe that the characteristics
of the global cybersecurity market support our
underlying growth aspirations for the business.

1 Cybersecurity Market by Solution, Markets & Markets, September 2018

2 The Cybersecurity Market Report, by Cybersecurity Ventures, March 2018

04 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

PROGRESS AGAINST STRATEGY

Alongside this, Kape prides itself on the strength Strategic Goals Progress Achieved
and talent of its people. We now operate from ten
locations in eight countries and are thriving as a
truly global business. We are also strong advocates Grow • 219% growth to
Kape’s user base across 830,000 subscriptions
of diversity within our workforce and closely monitor
existing products by • Grew our product portfolio
the gender ratio of employees within the Company,
leveraging proprietary expanding into the Malware
with the percentage of women growing from 25% to
technology and expertise. protection, consumer firewall
35% in 2018, which is an incredible achievement
as well as expanded on
given less than 20% of the global cybersecurity
privacy protection offering.
workforce are women. We firmly believe that part of
Kape’s long-term success is the global and diverse
nature of our workforce and we intend to continue
our efforts to promote this. We have accelerated Acquire • Acquisition of Intego
our training efforts across the Company and see Businesses that broaden provides Kape with a
personal development as an important strategic product offering and grow strong foothold in the
component of our future growth. user base. malware protection
market, grows user base
and expands R&D
capabilities.
Ongoing strategy • Acquisition of ZenMate, is
Given the successful execution of our organic
highly synergistic expands
and acquisitive growth strategy in the year,
Kape’s product range and
management remain fully committed to
grows our user base into
maintaining our current focus. We will therefore
new geographies.
continue to develop and grow our product base,
while evaluating selective acquisition targets,
which would further enhance our market presence.
Build-up • Increased SaaS-based
The board remains confident in delivering year-on- A fully SaaS-based revenues through our
year growth in 2019. business model, improving Privacy solutions, Malware
both visibility and quality protection and PC & Mac
of earnings. repair products.
DON ELGIE • Overall increased visibility
NON-EXECUTIVE CHAIRMAN over revenues, with over
18 March 2019 $30 million expected to be
delivered from existing
user in future periods

KAPE TECHNOLOGIES PLC

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 MARKET OVERVIEW

The cybersecurity
• High internet penetration has increased
the number of cyber attacks, resulting in
heightened concerns around data privacy
market was worth
• VPN market is already worth $24 billion and
is expected to grow by 50% by 2022
$153 billion in 2018
• The Data Protection and Privacy subsector
was the fastest growing, in light of the
and is expected to
General Data Protection Regulation (GDPR)
and countless large data breaches that
grow by 52%*
have occurred over the last few years
by 2022

• Frequ
Digital privacy enc
growing y of usage of
in tier 1
market
VPN
• Value
awareness is of p s
underp ersonal data
inning t is
trend o he grow
f c yb er ing
growing, supported targetin
• 75% o
g consu
crime
m e r s’ d
ata
f VPN u
by new regulations on a we
• VPN u
ekly ba
s e r s us
sis
e VPN
se is m
and a more niche te
widely
ch prod
used co
oving fr
om a
uct to a

educated market applica ns u m e

tion** r

* Source: Cybersecurity Market by Solution, Markets & Markets,

September 2018, Start-Up Nation Central: Finder Insights Series
The State of the Israeli Ecosystem in 2018, March 2019
** Source: Global Web Index - VPN around the World 2018

06 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
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Market drivers

B2C market replicating

B2B trends

IoT increasing levels Individuals increasingly

of data and connected becoming targets of
devices cybercrime

Increasing awareness Rise in personal data

of need to protect stored in the cloud
digital presence

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
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CHIEF EXECUTIVE OFFICER’S REVIEW

In the last 12 months, we delivered adjusted EBITDA

growth of 28.3% to $10.4 million, increased our
subscription user base by 219% to c. 830,000 users
and improved our customer retention rate to 74%.
We expect to generate revenues of c. $30 million in
future financial years from the existing user base.

Performance in the Group’s App Distribution

segment – which is now Kape’s sole focus –
remained strong, with revenues of $52.1 million
(2017: $48.2 million), and an improvement in both
profitability, margin and forward visibility over
revenues as a result of the Group’s transition to a
recurring SaaS revenue model.

We have achieved this positive momentum by

focusing on a clear strategy, centred on:
• growing our existing user base by leveraging our
IDO ERLICHMAN proprietary technology to drive customer
CHIEF EXECUTIVE OFFICER acquisition;
• broadening and strengthening our product
offering through R&D and acquisitions which
offer the potential to enter new verticals; and
• building our SaaS-based business model to
Strong progress was made in the year improve both visibility and quality of earnings.

against our core KPIs, with the increase Operational overview

in both paying users and subscriptions Key Performance Indicators
In order to focus on profitability, growth and
demonstrating the strength of our earnings predictability we introduced five key
performance indicators, which ultimately underpin
digital marketing expertise in driving Kape’s financial progress.
user acquisition. Deferred income and adjusted operating cash
flow demonstrate the true value of each product
Introduction purchase from our customers, given that they
2018 was a very significant year for Kape, during recognise the benefits across the life time of the
which we completed our transformation into a contract. Paying users and subscriptions represent
privacy-led cybersecurity software provider, our ability to grow the customer base. The
reaching over a million paying customers. We are retention rate is an indication of the quality of our
now proud to offer our consumers an end-to-end service and products and our aim is for this to
software suite which includes: Privacy (CyberGhost remain constant over the short term and improve
and ZenMate), Malware Protection (Intego) and in the medium term.
Performance (Reimage and DriverFix).
2018 2017

Paying users (thousands) 1,100 887

Subscriptions (thousands) 830 260
Retention rate 74% 69%
Deferred income ($’000) 9,514 4,014
Adjusted operating cash flow:
Attributable to current year ($’000) 15,936 9,471
Investment in growth ($’000) (10,215) (1,330)

219%
growth in
Adjusted operating cash flow ($’000) 5,721 8,141

subscriptions

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Annual Report and Accounts 2018
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Strong progress was made in the year against our also integrated Intego’s R&D, marketing and
core KPIs, with the increase in both paying users product teams into Kape, which further benefit
and subscriptions demonstrating the strength of from the economies of scale of the enlarged group.
our digital marketing expertise in driving user We also expect to release new malware protection
acquisition. Additionally, the increase in our products in the coming months.
retention rate to 74% is particularly pleasing, and
now compares favourably against the wider B2C In October 2018, Kape acquired ZenMate,
cybersecurity industry. Clearly, the most important a multi-platform security software business
improvement is in visibility of revenues, and we with a focus on the provision of privacy solutions,
expect to deliver $30 million revenue from existing for a total consideration of $5.6 million. ZenMate
users in future periods (Dec 2017: $8 million). This is a highly complementary solution to CyberGhost,
is a key metric for the Group, as it reflects our Kape’s existing VPN solution. This synergistic
customers’ satisfaction, in addition to providing infrastructure allows Kape to leverage the
quality, highly visible earnings for the Company products’ strengths and create an improved
moving forward. In 2018, the Company remained product for users worldwide coupled with
highly cash generative. As stated in our growth substantial cost savings. In addition, with
ambitions we enhanced the investment in growth, ZenMate’s highly regarded web firewall and its
primarily in user acquisition. Safesearch application, Kape is now able to
provide a broader software suite to protect our
Divestment of Media division customers’ digital lives. As part of its integration,
and re-brand Kape implemented an extensive restructuring of
During 2018, we completed our transition to solely ZenMate, which has been completed in less than
focus on the delivery of cybersecurity solutions two months, ahead of management’s expectations.
following the divestment of Kape’s Media division, As a result, in this short time we have been able
announced in July 2018, to Ecom Online Ltd. As to bring ZenMate to profitability. ZenMate is
consideration, Kape will receive a 50% share of anticipated to be EBITDA enhancing from Q1 2019.
EBITDA from the Media division for the next five
years following the sale. This divestment resulted Prior to being acquired, both businesses’
in an anticipated decrease in revenues for the year marketing activities were primarily organic,
and is aligned to the Company’s strategy to focus presenting a clear opportunity for the
on the development and growth of its owned implementation of Kape’s digital marketing
cybersecurity assets. In March 2018, we rebranded expertise to drive user acquisition and enhance
to Kape Technologies Group plc to better reflect profit margin. The benefits of this implementation
the ongoing activities of the business. are anticipated to begin to be realised in 2019.

Acquisitions and integration

In-line with our strategy laid out at the beginning July 2018
of the year, we were able to successfully execute acquired Intego for
on two earnings enhancing acquisitions in 2018,
both of which form part of Kape’s approach to
acquire select businesses to add complementary
products and additional users.
$16.0m
In July 2018, Kape acquired Intego, a US-
October 2018
headquartered SaaS business providing malware acquired ZenMate for
protection, firewall, anti-spam, backup, data
protection and parental control software for Mac
users globally, for a total consideration of $16.0
million. With a user base of 150,000 paying
$5.6m
customers, high renewal rates and a strong brand
presence, Intego brought additional benefits to the
Group. We have now completed the integration of
Intego, and implemented Kape’s user acquisition
methodologies which we expect to accelerate
Intego’s growth in the first half of 2019. We have

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
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CHIEF EXECUTIVE OFFICER’S REVIEW

Organic growth Outlook

During the year, we saw accelerated growth in The underlying trends in digital privacy and
CyberGhost, as we increased user acquisition cybersecurity continue to broaden Kape’s
through the application of our digital marketing addressable VPN market to $36 billion by 20224
technologies and expertise. We have seen positive with demand for privacy solutions anticipated to
results in CyberGhost’s user acquisition on desktop continue growing 15% annually, underpinning the
and mobile; and expect enhanced growth and ongoing demand for our products.
profitability to be delivered in 2019. In 2018, Management are confident that not only does a
CyberGhost was one of the top performing VPN sizable opportunity exist to add further products
solutions globally – ranking in the top three in the US, to Kape’s portfolio through future acquisitions, but
France, Germany and the UK by industry reviewers.3 there is also substantial potential within Kape’s
existing product portfolio and user base to further
In our Performance vertical (ReImage and invest in organic initiatives.
Driverfix), focus has been on transitioning to a
subscription-based model and implementing new We continue to improve and expand our product
product marketing initiatives ahead of the launch offering to best serve our customers globally and
of two major updates for our driver and computer will continue to evaluate select acquisition
repair solutions. We are extremely pleased with opportunities to broaden and deepen our reach.
the results of the transition to a subscription
model, which we expect to improve profitability
moving forward. IDO ERLICHMAN
CHIEF EXECUTIVE OFFICER
18 March 2019
Product development
We accelerated our R&D efforts in the year and we
now have 68 employees globally who are top-tier
experts in their field. Our focus has been on:
• investment in the next generation infrastructure;
• development of new products and updates to
existing solutions; and
• implementation of proprietary cross-product
business intelligence and marketing tools.

Specifically, we released the most comprehensive

update to our CyberGhost product to-date with the
launch of the CyberGhost 7.0 app across Apple and
Android devices, following an increase in mobile
subscribers, as individuals look to safeguard their
mobile devices. Kape also launched a Google
Chrome and Mozilla Firefox plug-in based on a
distributed computing platform and operating
system, which enables greater freedom on the
internet. We have seen significant traction across
these products, demonstrating our standing at the
forefront of the privacy technology sector.

3 Best VPN, January 2019; VPN Mentor 2019, Comparitech June 2018
4 Size of the virtual private network (VPN) market worldwide from 2016
to 2022 (in billion U.S. dollars), Statista 2019.

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GROWTH STRATEGY

Broadening our product portfolio

and accelerating our market penetration.

Accelerate SaaS Leverage existing Ongoing R&D supported

adoption expertise to by complementary
• Continue to transition all accelerate growth acquisitions
products to licence/ • Leverage technology • Expand and develop core
subscription based models expertise to accelerate user products
• Execute on SaaS-based acquisition across existing • Add complementary
acquisitions such as Intego products products and user base
• Increase recurring revenues • Broaden customer cross and through acquisition
to achieve heightened up-sell opportunities to • Build a complete suite of
visibility over earnings increase ARPU cybersecurity products to
• Enhance inter-company provide consumers with all
synergies their digital protection needs
• Develop a one platform
dashboard allowing
consumers to purchase
Kape’s products from one
place

KAPE TECHNOLOGIES PLC

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OUR USER ACQUISITION MODEL

Through digital distribution

technology, we can optimise
the customer reach and create
a superb user experience.

1 2 3
Target market Digital funnel optimisation Existing customers

User acquisition Funnel expertise Retention and cross-selling

• Advanced user acquisition • Proprietary data driven automatic • Once acquired, provide a
technology and leveraging of funnel subscription model to grow
digital marketing platform • Ongoing customisation of customer’s LTV
• Utilise extensive network to drive product • Provide servicing such as remote
users to our products • Automatic personalisation of user technician and 24/7 support to
• Leverage wide user base for journey increase customer retention
indirect user acquisition • Proprietary targeting of purchase • Convert users to additional Kape
• Highly efficient method to drive process products by channelling
traffic customers to further owned
software solutions
Organic • Increase the value of the user
• High brand awareness drives • 200 support personnel in Manilla,
users to products supporting main languages
• Referrals from existing customers
• Consumers go directly to product
websites or search for product as
a result of growing media
presence 830k
Subscribers

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Our ability to manage and

implement highly targeted
customer acquisition
methodologies enables our
team to reach millions of
customers daily, effectively
and has enabled
management to both
accelerate organic growth
and enhance the customer
2
traction of the software
Digital Funnel Optimisation solutions that we have
Funnel expertise
acquired
– Ido Erlichman, CEO

Privacy
Malware Protection
Performance

1 3
Target Market Existing Customers
User acquisition Retention and Cross-Selling

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
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STRATEGY IN ACTION

Kape’s M&A integration process

and implementation
Kape has demonstrated its ability to source,
execute, integrate and grow revenue enhancing
acquisitions. Working with superb companies to Operational leverage
accelerate their user growth and leverage on • Integrate Kape’s in-house support
Kape’s proprietary capabilities.
systems
• Align G&A to wider Kape group
• Provide support to existing
management
• Maximise operational leverage and
realisation of cost synergies

Future growth
Business with the
acquired Kape Group

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Growth acceleration Cross promotion

• Implement Kape’s marketing • Implemented initial cross promotion
platform and expertise for user campaigns between Kape’s product
acquisition, the benefits of which suite, already experiencing traction
expect to see in 2019
• Integrate R&D teams and practices
to further develop products

Quarterly new users through Kape’s marketing platform

70

60
63k

50
Users (Thousands)

40

30 37k

20 24k

10
12k
10k
0 5k

Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18

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CHIEF FINANCIAL OFFICER’S REVIEW

expensed in future periods as it attributable to

future revenue from subscriptions and is recognised
over the expected life time of the users in
accordance with IFRS 15 (2017: $1.3 million). When
excluding this investment, adjusted cash conversion
from operations was $15.9 million, which represents
cash conversion of 151%. The Group’s balance
sheet remains strong with cash of $40.4 million
at 31 December 2018 (31 December 2017: $69.5
million) and no debt after cash outflow for investing
and financing activities of $32.0 million, that
comprise mainly of the acquisitions of Intego and
ZenMate and a special dividend payment.

On 24 July 2018, the Group acquired 100% of the

share capital of Neutral Holdings Inc, trading as
Intego, for a total consideration of $16.0 million.
Intego is a leading Mac and IOS cybersecurity and
MORAN LAUFER malware protection SaaS business. Intego is
CHIEF FINANCIAL OFFICER focused on the provision of malware protection,
firewall, anti-spam, backup, data protection and
parental controls software for Mac. In the year to
31 December 2017, Intego generated profit before
tax of $1.3 million.
Strong performance of Kape’s core App
On 16 October 2018, the Group acquired 100% of
Distribution activity, with an increase of the share capital of ZenGuard GMBH trading as
8% in revenues, 49.3% in segment results ZenMate, a multi-platform security software
business with a focus on the provision of virtual
and 73.3% in underlying adjusted EBITDA private network solutions. The total consideration
for the acquisition was $5.6 million (€4.8 million) in
cash, funded from Kape’s internal cash resources,
which was satisfied on closing of the acquisition.
As part of the acquisition, Kape initiated a
Overview restructuring plan which was intended to downsize
Revenue from continued operations for the year to ZenMate’s staff and reduce operational costs.
31 December 2018 increased by 3% to $52.1 million
(2017: $50.6 million). Adjusted EBITDA from continued
operations increased by 28.4% to $10.4 million (2017: Segment result
$8.1 million) with the increase in Adjusted EBITDA Revenue Segment result
driven by the strong performance of Kape’s core App 2018 2017 2018 2017
Distribution activity, with an increase of 8% in $’000 $’000 $’000 $’000
revenues, 49.3% in segment results and 73.3% in
App Distribution 52,060 48,226 25,690 17,207
underlying adjusted EBITDA. In July 2018, Kape
Web Apps and
divested its Media division to a third party, Ecom
license - 2,376 - 2,376
online Ltd, and is now considered a discontinued
operation. Revenue 52,060 50,602 25,690 19,583

Kape remains a cash generative business, with cash

The segment result has been calculated using
generated from continued operations after
revenue less costs directly attributable to that
adjusting for one-off non-recurring items in 2018 of
segment. Cost of sales comprises payment
$5.7 million (2017: $8.1 million). This represents
processing fees and infrastructure costs of the
adjusted cash conversion of 55% (2017: 101%). Cash
group’s VPN products. Direct sales and marketing
flow from operations includes $10.2 of million
costs are user acquisition costs.
investment in user acquisitions growth that will be

16 KAPE TECHNOLOGIES PLC

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REPORT GOVERNANCE STATEMENTS

App Distribution Operating profit

A reconciliation of Adjusted EBITDA to operating profit is
2018 2017
$’000 $’000
provided as follows:

Revenue 52,060 48,226 2018 2017

$’000 $’000
Cost of sales (5,605) (4,572)
Direct sales and marketing costs (20,765) (26,447) Adjusted EBITDA 10,374 8,085

Segment result 25,690 17,207

Employee share-based payment charge (1,490) (303)
Charge for repurchase of employee options - (3,176)
Segment margin (%) 49.3 35.7
Exceptional and non-recurring costs (1,441) (796)
Depreciation and amortisation (3,800) (2,376)
During the period, the App Distribution segment has seen
continued growth with an 8.0% increase in revenue to $52.1 Operating profit 3,643 1,434
million (2017: $48.2 million) and a 49.3% increase in segment
result to $25.7 million (2017: $17.2 million). The segment Exceptional and non-recurring costs in 2018 comprised
margin has significantly improved to 49.3% (2017: 35.7%). non-recurring staff costs of $0.5 million (2017: $0.3 million),
Following their acquisition, Intego contributed $2.6 million mainly due to payments made to employees that were
and ZenMate contributed $0.4 million to the segment result. option holders in parallel to the special dividend paid in June,
Excluding acquisitions, the segment results has increased by $0.8 million for professional services for acquisitions (2017:
30.2% to $22.4 million in 2018. $0.3 million) and $0.1 million related to an onerous lease
contract (H1 2017: Nil).
Adjusted EBITDA from continued operations
Adjusted EBITDA from continued operations for the year Profit/(Loss) before tax from
to 31 December 2018 was $10.4 million (2017: $8.1 million). continuing operations
Adjusted EBITDA is a non-GAAP company specific measure Profit before tax from continuing operations was $3.3 million
which is considered to be a key performance indicator of (2017: $1.3 million).
the Group’s financial performance. It excludes share based
payment charges and expenses which are considered to be
one-off and non-recurring in nature and are excluded from
Profit from continuing operations
Profit from continuing operations was $2.2 million (2017:
the following analysis:
$0.2 million). The tax charge derives mainly from group
2018 2017
subsidiaries’ residual profits. The Group recognises a
$’000 $’000 deferred tax asset of $0.2 million (2017: Nil) in respect of
tax losses accumulated in previous years.
Revenue 52,060 50,602
Cost of sales (5,605) (4,572)
Direct sales and marketing costs (20,765) (26,447)
Segment result 25,690 19,583

Indirect sales and marketing costs (6,398) (3,657)

Research and development costs
Management, general and administrative cost
Adjusted EBITDA
(1,389)
(7,529)
10,374
(535)
(7,306)
8,085
49.3%
App distribution
margin
1
Adjusted EBITDA is a company specific measure which is calculated as
operating loss before depreciation, amortisation, exceptional and
non-recurring costs, employee share-based payment charges and charge
of repurchase of employee options which are considered to be one off and
non-recurring in nature as set out in note 4. The Directors believe that this
provides a better understanding of the underlying trading performance of
the business.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
17
CHIEF FINANCIAL OFFICER’S REVIEW

Discontinued operations Cash flow

On 26 July 2018, the Group sold the Media division to Ecom 2018 2017
Online Ltd. This sale is in-line with the Company’s strategy to $’000 $’000
focus on the development and distribution of its own Cash flow from operations 3,695 6,533
cybersecurity products. As consideration, the Group will
receive a 50% share of EBITDA from the Media division for the
Exceptional and non-recurring payments 1,441 1,005
five years following the sale. The Company recognised a loss Net cash flow from discontinued operating activities 336 603
from the sale as calculated below: Net cash paid due to restructuring plan 249 (796)
2018 Adjusted cash flow from operations 5,721 8,141
Consideration received or receivable: $’000
% of Adjusted EBITDA 55% 101%
Fair value of contingent consideration 1,257
Total consideration 1,257 Cash flow from operations was $3.7 million (2017: $6.5 million).
Carry amount of net assets sold (4,498) Adjusted cash flows from operations, after adding back
Non-controlling interest 989 payments that are one off in nature was $5.7 million (2017:
$8.1 million). This represents a cash conversion of 55% of
Loss on sale (2,252) Adjusted EBITDA (2017: 101%). Cash flow from operations
includes $10.2 million investment in user acquisitions growth
The financial performance and cash flow information that will be expensed in future periods as it attributable to
presented are for the period ended 26 July 2018 and the year future revenue from subscriptions and therefore is
ended 31 December 2017. recognised over the expected life time of the users in
accordance with IFRS 15 (2017: $1.3 million). When excluding
this investment adjusted cash conversion from operations is
2018 2017
$’000 $’000 $15.9 million (2017: $9.5 million) which represents cash
conversion of 151% (2017: 115%).
Revenue 4,185 15,781
Share of results of equity accounted associates – (40) Tax paid net of refunds in the period was $0.5 million (2017:
Expenses (4,501) (19,895) $0.1 million).
Loss before income tax (316) (4,154)
Cash spent in the period on capital expenditure of $2.5 million
Income tax income/ (expenses) (166) 636
(2017: $2 million) mainly comprises capitalised development
Loss after income tax of discontinued operation (482) (3,518) costs and purchase of fixed assets. Net cash paid for
Loss on sale of the Media division (2,252) – acquisitions in the period totalled $20.8 million (2017: $5.3
million), of which the Company paid $15.5 million in relation to
Loss from discontinued operation (2,734) (3,518)
the acquisition of Neural Holdings Inc and $5.3 million related
to the acquisition of ZenGuard GMBH. Net cash outflow for
Net cash outflow from operating activities (336) (603) sold operations in the period amounted to $0.3 million in
Net cash outflow from investing activities (341) (175) relation to the disposal of the Media division to a third party
in July 2018. As a result, net cash outflow from investing
Net cash flow from financing activities – –
activities was $23.6 million (2017: $7.4 million).
Net decrease in cash generated by the
Media division (677) (778) In June 2018, the Company paid a special dividend in the
amount of $6.8 million representing 3.55 pence per share. In
November 2017, the Company repurchased 3.8 million share
options from CyberGhost’s founder for a total consideration
of $3.8 million, out of which $1.9 million was paid in 2017 and
the rest in eight equal quarterly instalments. During 2018 $0.9
million in payments were made for the repurchase. During
2018 the Company paid $1.1 million of lease related payments
that were recorded as part of the financing activities
following the adoption of IFRS 16. Employee option exercises
resulted in cash receipts of $0.4 million during 2018. As a
result, net cash outflow from financing activities was $8.4
million (2017: $1.5 million).

18 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

Financial position
At 31 December 2018, the Company had cash of $40.4 million
(31 December 2017: $69.5 million), net assets of $73.0 million

$40.4m
(31 December 2017: $79.4 million) and was debt free. At
31 December 2018, trade receivables and contract assets
were $3.6 million (31 December 2017: $8.5 million) which
represented 13 days outstanding, (31 December 2017: 42 days). Cash at
The decrease in Trade receivables is mainly due to the sale of
the media division
31 December 2018

Early adoption of IFRS 16

From 1 January, 2018, the Company adopted IFRS 16, which
specifies how to recognise, measure, present and disclose
leases. The Company has not restated comparatives for the
2017 reporting period.

On initial application, the Group recognised lease liabilities

in relation to leases which had previously been classified as
‘operating leases’ under the principles of IAS 17 Leases.
If the Company had chosen not to early adopt IFRS 16, the
Company net profits from continuing operations would have
been $2.3 million.

The recognised right-of-use assets and lease liabilities are

specified below:

Right-of-Use Assets
Real estate
leases Vehicles Total
$’000 $’000 $’000

At 1 January 2018 1,331 77 1,408

Additions 1,265 – 1,265
Additions through business
combination 305 – 305
Amortisation (1,181) (28) (1,209)
At 31 December 2018 1,720 49 1,769

Lease liabilities
Real estate
leases Vehicles Total
$’000 $’000 $’000

At 1 January 2018 1,331 77 1,408

Additions 1,265 – 1,265
Additions through business
combination 305 – 305
Interest expense 82 11 93
Lease payments (1,058) (29) (1,087)
Interest expense (62) (3) (65)
At 31 December 2018 1,863 56 1,919

MORAN LAUFER
CHIEF FINANCIAL OFFICER
18 March 2019

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
19
PRINCIPAL RISKS AND UNCERTAINTIES

There are a number of potential risks and uncertainties

that could have a material impact on the Group’s
long-term performance and could cause results to differ
materially from expected and historical results. The risks to
which the business is exposed are set out below:

Risks Background Mitigating controls

Regulatory, legislative International regulatory bodies are increasingly • All the information that the Group
or self-regulatory focused on online privacy issues and user data obtains regarding users and their
developments regarding protection. In particular, GDPR was approved by profiling is information that may
internet privacy matters the European Union (EU) and takes effect from May correspond to a particular person,
could adversely affect 2018. It intends to strengthen and unify data account or profile, but does not
the Group’s ability to protection for all individuals within the EU. It also identify, allow contact or enable Kape
conduct its business. addresses the export of personal data outside the to locate the person to whom such
EU. The GDPR aims primarily to give control back information pertains. As a
to citizens and residents over their personal data consequence, the Group is not
and to simplify the regulatory environment for regulated by any regulator or subject
international business by unifying the regulation to any regulatory approval for its
within the EU. day-to-day operations.
• Whilst not externally regulated, the
Group adheres to a strict set of
controls with its partners. Partners,
developers, publishers and
advertisers are required to comply
with these contractually imposed
controls, which have been jointly
created by the Group and its legal
advisers.

Large and established Large and established internet, Antivirus and • The Group actively monitors the
internet, Antivirus and technology companies such as Symantec developments of the large and
technology companies Corporation, Amazon.com, Inc. (“Amazon”), AOL, established internet, Antivirus and
may be able to significantly Inc., Apple, eBay Inc., Facebook, Inc. (“Facebook”), technology companies to identify any
impair the Group’s Google and Microsoft, may have the power to threats that may impair the Group’s
ability to operate. significantly change the very nature of the ability to operate.
app-distribution and internet display advertising
marketplace. These changes could materially
disadvantage the Group. For example, Amazon,
Apple, Facebook, Google and Microsoft have
substantial resources and control a significant
share of widely adopted industry platforms such as
web browsers, mobile operating systems and
advertising exchanges and networks. Changes to
their web browsers, mobile operating systems,
platforms, exchanges, networks or other products
or services could be significantly harmful to the
Group’s business. Such companies could also seek
to replicate all or parts of the Group’s business.

20 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

Risks Background Mitigating controls

If the Group fails to innovate To remain competitive, the Group’s future success • The Group invests in research and
and respond effectively will depend on its ability to continuously enhance development resources to ensure that
to rapidly changing and improve its solutions to meet client needs, add the Group’s technology platforms are
technology, the Group’s functionality to its product portfolio and address continually enhanced through
solution may become less technological advancements. evolution and innovation.
competitive or obsolete. • The Group also invests in acquisitions
to expand its technology platforms
and adapt to the rapidly changing
technology environment.

Failures in the Group’s IT In addition to the optimal performance of the • The Group outsources hosting
systems and infrastructure Kape Engine, the Group’s business relies on the services, holding minimal server
supporting its solution continued and uninterrupted performance of its infrastructure itself. This allows the
could significantly disrupt software and hardware infrastructures. Sustained Group to flex and grow its operations
its operations and cause or repeated system failures of its software and efficiently.
it to lose clients. hardware infrastructures, which interrupt its ability • Kape uses third party content
to deliver its software products and services or distribution network services in order
advertisements quickly and accurately, could to offload traffic served directly from
significantly reduce the attractiveness of its its own infrastructure and minimise
solution to advertiser clients and publishers, network latency.
reduce its revenue and affect its reputation.

The Group is a multinational As a multinational organisation, operating in • The Group uses advisers to review its
organisation faced with multiple jurisdictions such as the Isle of Man, tax position and ensure compliance
increasingly complex tax Cyprus, Israel, Romania, Germany, Untied States with local tax legislation.
issues in many jurisdictions, and the United Kingdom, the Group may be
and it could be obliged subject to taxation in several jurisdictions around
to pay additional taxes the world with increasingly complex tax laws, the
in various jurisdictions application of which can be uncertain. The amount
as a result of new taxes, of taxes it pays in these jurisdictions could increase
laws or interpretation, substantially as a result of changes in the
including sales taxes, applicable tax principles, including increased tax
which may negatively rates, new tax laws or revised interpretations of
affect its business.
existing tax laws and precedents, which could have
a material adverse effect on its liquidity and results
of operations.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
21
BOARD OF DIRECTORS

Don Elgie Non-Executive Chairman

Don has many years’ experience in marketing services including
developing companies organically and by acquisition. Don retired
as Group CEO of Creston plc, which was listed on the Main Market
of the London Stock Exchange, at the end of March 2014. He
founded Creston as a digitally focussed communications and
insight group in 2001 and built it into an international group which
generated £75m revenue, £12m EBITDA and employed over 800
people as at March 2014.

Ido Erlichman Chief Executive Officer

Ido joined Kape Technologies plc in May 2016 as Group Chief Executive
Officer. Ido has more than nine years’ experience in the technology
sector garnered through roles in private equity, consulting and
finance. Prior to joining Kape, Ido was acting Joint Chief Executive
Officer of VisualDNA (which was acquired by The Nielsen Company) a
leading psychographic data business, where he led its geographic
expansion and oversaw significant EBITDA growth. Prior to VisualDNA,
Ido worked as a Senior Associate within KPMG’s Private Equity deal
advisory practice in London and as a Senior Manager within KPMG’s
Transaction Services practice focusing on technology deals in Israel
and with the Israeli Ministry of Finance. Ido is the author of the
bestselling book ‘Battle of Strategies’ published in Israel by Yediot
Books. Ido is a Certified Public Accountant, having graduated magna
cum laude in Accounting and Economics from The Hebrew University
of Jerusalem, he also obtained his Masters degree in Law from
Bar-Ilan University, and has received an MBA from the University
of Cambridge’s Judge Business School.

Moran Laufer Chief Financial Officer

Moran joined Kape Technologies plc as Group Financial Controller
in 2012. He was a key member of the finance team that
successfully supported the Group’s admission to AIM in
September 2014. Prior to joining Kape, Moran was a Divisional
Controller at SafeCharge international Ltd (AIM: SCH), a global
provider of payments services, technologies and risk
management solutions for online and mobile businesses.
Previously Moran worked for Ernst & Young as a senior auditor on
London Stock Exchange and NASDAQ traded companies primarily
focused on the technology sector. Moran is a Certified Public
Accountant, who graduated in Accounting and Economics and
received an MBA from Tel Aviv University.

22 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

David Cotterell Non-Executive Director

David has over 30 years’ experience in the information technology
software and service sector. He has held senior management roles
with firms such as ACT Financial Systems, DST, Advent and SQS Group
Plc and has led and successfully integrated many trade sales of
technology companies. Between 2006 and 2011 David served as the
CEO of UKIISA Region (UK, Ireland, South Africa and India) and as
Board Director at SQS Group plc (LSE:SQS). David is a director of David
Cotterell Partnership Limited. Additionally, David is Chairman of IT
services company Qualitest UK. David is Kape Group’s Senior
Independent Director and also Chairman of the Company’s
Remuneration Committee.

Martin Blair Non-Executive Director

Prior to joining the Board of Kape, Martin acted as CFO of Pilat Media
Global plc, a company which previously traded on both AIM and the
Tel Aviv Stock Exchange and developed, marketed and supported new
generation business management software solutions for content and
service providers in the media industry. Martin joined Pilat Media in
2001, ahead of its admission to AIM in 2002. Pilat Media was acquired
by SintecMedia Ltd for £63.3 million in April 2014. Martin qualified as
a chartered accountant with Ernst & Young in 1982 and between
1983 and 1986 worked for PwC. Martin is Chairman of Kape’s Audit
Committee. Martin is also currently a non-executive director and
Chairman of the Audit Committees at both Green Biologics Ltd and
Cake Box PLC.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
23
CORPORATE GOVERNANCE

Overview and where appropriate, other members of the senior

On 8 March 2018, the LSE issued revised rules for AIM-listed management team meet regularly with investors (including
companies, within which was a requirement (Rule 26) for AIM institutional shareholders) and analysts to actively build the
companies to apply a recognised corporate governance code relationship, provide them with updates on the Group’s
from 28 September 2018. Taking account of this, the Board business and to obtain feedback regarding the market’s
has adopted the Quoted Company Alliance’s (QCA) Corporate expectations for the Group. Shareholders also have access to
Governance Code for Small and Mid-Size Quoted Companies current information on the Company through its website
(“QCA Code”). The principal means of communicating our http://investors.kape.com/, and via its financial PR advisor
application of the Code are this annual report and our and the Chief Financial Officer who is available to answer
website (http://investors.kape.com/corporate-governance). investor relations queries.
As Chairman, I am the custodian of the corporate governance
approach adopted by the Board to ensure that the Company 3. Take into account wider stakeholder and social
has the right people, strategy and culture to deliver success responsibilities and their implications for long-
in the medium to long term. Since adopting the QCA Code
term success
I have led the Company’s application of its ten principles to
The Group is aware of its corporate social responsibilities and
ensure that the Company’s strategy is linked to and
the need to maintain working relationships across a range of
supported by its governance arrangements. The remainder
stakeholder groups. The Group’s operations and working
of this statement sets out the Company’s application of the
methodologies take account of the requirement to balance
Code including, where appropriate, cross references to other
the needs of all of these stakeholder groups while
sections of the annual report.
maintaining focus on the Board’s primary responsibility to
promote the success of the Group for the benefit of
1. Establish a strategy and business model members as a whole. Our employees are the key to our
which promote long-term value for shareholders success and therefore regular meetings are held with staff to
The strategy and business operations of the Group are set ensure that the strategic vision of the Group is realised and
out in the Chairman’s Statement on pages 4 and 5 and the to provide a forum for employees to engage in open and
Chief Executive Officer’s Review on pages 8 to 10. The confidential dialogue and ensure successful two-way
Group’s strategy and business model and amendments communication with agreement on goals, targets and
thereto, are developed by the Chief Executive Officer and the aspirations of employees and the Group. In addition, the
senior management team, and approved by the Board. The Group is in the process of setting up formal arrangements to
management team, led by the Chief Executive Officer, facilitate whistleblowing. These feedback processes help to
is responsible for implementing the strategy and managing ensure that the Group can respond to new issues and
the business at an operational level. opportunities that arise to further the success of employees
and the Group. In addition, there are a range of processes
The Group’s overall strategic objective is to become the and systems in place with other stakeholders to ensure that
leading next generation providers of consumer there is close oversight and contact with key stakeholders.
cybersecurity products. These relationships are addressed at regular
Board meetings.
The Group continues to grow and develop its product
portfolio in the growing cybersecurity market, with a 4. Embed effective risk management,
renewed focus in consumer cybersecurity. The Group
considering both opportunities and threats,
deploys its financial and other resources towards developing
R&D internally, growing its product offering through organic throughout the organisation
growth and acquisitions and strengthening its SaaS business. The Board is responsible for the systems of risk management
and internal control and for reviewing their effectiveness.
The Board believes that this approach will continue deliver The internal controls are designed to manage rather than
significant long-term value for shareholders through a strong eliminate risk and provide reasonable but not absolute
share performance and against the Group’s key performance assurance against material misstatement or loss. Through
indicators. The Board also believes that remaining admitted the activities of the Audit Committee, the scope and
to trading on AIM is of long-term value to shareholders as it effectiveness of these internal controls is reviewed annually,
offers a combination of access to capital markets, flexibility identifying key financial and non-financial risks, risk control
to make acquisitions, incentives and rewards to management measures and the implementation status of risk control
through share schemes, and a regulatory environment measures. The review was presented to the Audit Committee
appropriate to the size of the Company. by the Chief Financial Officer. A summary of the principal
risks and uncertainties facing the Group, as well as mitigating
controls, are set out on pages 20 and 21. All material
2. Seek to understand and meet shareholder contracts are required to be reviewed and signed by a senior
needs and expectations Director of the Company and reviewed by our General
The Group seeks to maintain a regular dialogue with both Counsel. Whilst not externally regulated, the Group adheres
existing and potential new shareholders in order to to a strict set of controls with its partners. Partners,
communicate the Group/Company’s strategy and progress developers, publishers and advertisers are required to
and to understand the expectations and needs of comply with these contractually imposed controls, which
shareholders. Beyond the Annual General Meeting, the have been jointly created by the Group and its legal advisers.
Chairman, Chief Executive Officer and Chief Financial Officer

24 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

A comprehensive budgeting process is completed once a 6. Ensure that between them the directors have
year and is reviewed and approved by the Board. Actual the necessary up-to-date experience, skills and
results are monitored on a weekly and monthly basis and
compared to the yearly budget. In addition, the Group
capabilities
The Board considers that all of the Non-Executive Directors
performs quarterly reforecasts for expected performance
are of sufficient competence and calibre to add strength and
over the remainder of the financial period. These cover
objectivity to its activities. The Directors’ biographies are set
profits, cash flows, capital expenditure and balance sheets.
out on pages 22 and 23. The Board considers that the
The Group maintains appropriate insurance cover in respect
combination of the complementary skills and experience of
of actions taken against the Directors because of their roles,
its Board members provides it with an appropriate balance of
as well as against material loss or claims against the Group.
sector, financial and public markets skills. The composition of
The insured amounts and type of cover are reviewed
the Board is reviewed regularly to ensure that it has the
periodically. The Board has ultimate responsibility for the
necessary breadth and depth of skills to support the ongoing
Group’s system of internal control and for reviewing its
development of the Group. The Chairman has a clear and
effectiveness. However, any such system of internal control
distinct responsibility for running the Board whilst the
can provide only reasonable, but not absolute, assurance
executive responsibility for running the Company’s business
against material misstatement or loss. The Board considers
was delegated to the Chief Executive Officer.
that the internal controls in place are appropriate for the size,
complexity and risk profile of the Group.
7. Evaluate board performance based on clear
5. Maintain the board as a well-functioning, and relevant objectives, seeking continuous
balanced team led by the chair improvement
The Board currently comprises three Non-Executive Board and Committee meetings are scheduled in advance for
Directors (one of whom also acts as Senior Independent each calendar year. Additional meetings are arranged as
Director) and two Executive Directors. The Directors’ necessary.
biographies are set out on pages 22 and 23. The Board is
satisfied that it has a suitable balance between The Chairman assesses the individual contributions of each
independence on the one hand, and knowledge of the member of the Board to ensure that:
Company on the other, to enable it to discharge its duties • their contribution is relevant and effective;
and responsibilities effectively. The Board considers, after • that they are committed;
careful review, the Non-Executive Directors to be • understand the business and its strategy;
independent of management and free of any relationship • where relevant, they have maintained their independence
which could materially interfere with the exercise of their
independent judgment. The Board is responsible for the 8. Promote a corporate culture that is based on
overall strategy and direction of the Group. It provides robust ethical values and behaviours
leadership of the Company within a framework of effective The Board seeks to maintain the highest standards of
controls which enables risk to be assessed and managed. integrity and probity in the conduct of the Group’s
The Board, in setting the Company’s aims, ensures that the operations. These values are enshrined in written policies
necessary financial and human resources are in place to and working practices adopted by all employees in the
meet its objectives. It regularly reviews management Group. We strive to create an agile, creative and openminded
performance on a yearly basis and upholds the Company’s culture to support our success in a constantly evolving
values and standards so that its obligations to shareholders market where time to market and outside of the box thinking
and others are understood and met. The Board is supplied is essential for success. We promote cross company
with information in a timely manner to enable it to discharge discussions as well as encourage involvement of employees
its duties. The Board also reviews arrangements under which in proposing new and innovative project initiatives we do that
employees can raise concerns in confidence about possible through cross company activities as well as regular subject
improprieties in matters of financial reporting or other areas. based meetings.
The Board meets at regular scheduled intervals ten times a
year and follows a formal agenda. It also meets as and when The board believes that diversity is a key to future success
required. During 2018, all the directors attended all the board of our business we have put an effort on monitoring and
meetings. No one individual has unfettered powers of improving the gender ratio in the company, and we are
decision. The Directors may take independent professional pleased to report that the percentage of women in the
advice at the Group’s expense. The Non-Executive Directors company has gone up from 25% to 35% in the last year, as we
normally do not have any day-to-day involvement in the firmly believe that part of the company success is the global
running of the business but are responsible for scrutinising and diverse nature of our workforce and we intend to
the performance of management in meeting agreed goals continue our effort to promote diversity.
and objectives and monitoring the reporting of performance.
All Board members are considered to be able to allocate
sufficient time to the Company to discharge their
9. Maintain governance structures and
responsibilities as Directors effectively with a minimum of processes that are fit for purpose and support
45 days a year dedicated to fulfil their roles. good decision-making by the board
Our corporate governance structures and processes are
summarised and discussed under the heading Corporate
Governance on pages 24 to 26.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
25
CORPORATE GOVERNANCE CONTINUED

10. Communicate how the company is governed Board committees

and is performing by maintaining a dialogue with The Group has an Audit Committee, a Nominations
Committee, and a Remuneration Committee, each consisting
shareholders and other relevant stakeholders
of three Non-Executive Directors. Each committee has
In addition to the activities summarised under the QCA Code
written terms of delegated responsibilities which will be
principle, “Seek to understand and meet shareholder needs
available for review at the end of the Annual General Meeting
and expectations” the Company provides information for
for 2018 and are available for review in the Investor Relations
investors on its website, arranges Investor meetings and
section of the Group’s website www.Kape.com. The Board
maintains contact with institutional shareholders and fund
and its committees are considered to have an appropriate
managers. The Company’s joint-brokers provide independent
balance of skills, experience, independence, and knowledge
feedback to the Board on market views and produce regular
of the Company to enable them to discharge their respective
research notes on the Company. This enables the Board to
duties and responsibilities effectively.
understand the concerns of shareholders and the wider
investment community.
Remuneration committee
The Remuneration Committee is comprised of David Cotterell
Role of the Board
(Chair of the Committee), Don Elgie and Martin Blair, all of
The Board is responsible for the overall strategy and
whom are Non-Executive Directors. It is responsible for
direction of the Group. It provides robust leadership of the
making recommendations to the Board on remuneration
Company within a framework of effective controls which
policy as applied to the Company’s Executive Directors. The
enables risk to be assessed and managed. The Board in
Remuneration Committee also considers grants of options
setting the Company’s aims, ensures that the necessary
under the company’s share option schemes. The policy of the
financial and human resources are in place to meet its
Remuneration Committee is to grant share options to
objectives. It regularly reviews management performance
employees as part of a remuneration package to motivate
and upholds the Company’s values and standards so that its
them to contribute to the growth of the Group over the
obligations to shareholders and others are understood
medium to long term.
and met.
The Chief Executive may, at the Remuneration Committee’s
The Board is supplied with information in a quality form and
invitation, attend meetings except where his own
in a timely manner to enable it to discharge its duties. The
remuneration is discussed. The Remuneration Committee
Board also reviews arrangements under which employees
met twice during the past financial year. The Remuneration
can raise concerns in confidence about possible
Committee’s terms of reference, which can be found on the
improprieties in matters of financial reporting or other areas.
Company’s website www.Kape.com, are reviewed on an
annual basis and updated as required.
Division of responsibilities
During 2018, the Chairman, Donald (Don) Elgie had a clear The Remuneration Committee Report, which includes details
and distinctive responsibility of running the Board whilst the of Directors’ remuneration, pension entitlements and
executive responsibility of running the Company’s business Director’s interests, together with information on service
was delegated to the Chief Executive Officer, Ido Erlichman. contracts, is set out on pages 28 and 29.

As at 31 December 2018, the Board comprised five Directors, Audit committee

three of whom were Non-Executive Directors. The Audit Committee is comprised of Martin Blair (Chair of
the Committee), David Cotterell and Don Elgie, all of whom
The Non-Executive Directors normally do not have any are Non-Executive Directors.
day-to-day involvement in the running of the business but
are responsible for scrutinizing the performance of The Committee meets at least twice a year and at other
management in meeting agreed goals and objectives and times as agreed between the members of the Committee.
monitoring the reporting of performance. All Board members In 2018 the Committee met 4 times. Executive Directors and
are considered to be able to allocate sufficient time to the the Group’s auditors may be invited to attend all or part of
Company to discharge their responsibilities as any meetings. The Committee also meets with the Group’s
Directors effectively. external auditors without the presence of the Executive
Directors.
The Board meets at regular scheduled intervals and follows a
formal agenda; it also meets as and when required. No one The Committee terms of reference, which can be found on
individual has unfettered powers of decision. The Directors the Company’s website www.Kape.com, are reviewed on an
may take independent professional advice at the annual basis and updated as required.
Group’s expense.
Risk management and internal controls
During the year, the Audit Committee has reviewed the scope
and effectiveness of systems to identify and address
financial and non-financial risks. The review identified the key
risks, risk control measures and the implementation status of
the risk control measures. The report was presented to the
Committee by the Chief Financial Officer.

26 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

Audit of the Group’s annual report financial

statements
In advance of the audit of the Group’s annual report and
financial statements the Audit Committee reviewed the plans
as presented by the Group’s external auditor, BDO LLP. The
plan set out the proposed scope of work, audit approach,
materiality and identified areas of audit risk.

The Audit Committee also reviewed the annual report and

financial statements along with the audit findings report
presented by BDO LLP.

Auditor independence
The Audit Committee monitors the independence of the
Group’s external auditor. During the year BDO LLP provided
the Group with the following non-audit services:

• Taxation compliance services; and

• Taxation advisory services.

The Audit Committee considered the threats to the

independence of BDO LLP created by the provision of the
non-audit services and concluded that sufficient safeguards
were in place.

BDO was appointed as auditor of the Group for the year

ended 31 December 2013. The Audit Committee will keep
under review, in consultation with major shareholders, the
decision as to whether to conduct a tender in respect of the
audit in line with the recommendations of the Financial
Reporting Council.

Nominations committee
The Nominations Committee is comprised of Don Elgie (Chair
of the Committee), Martin Blair and David Cotterell, all of
whom are independent Non-Executive Directors. The
Committee meets when appropriate and considers the
composition of the Board, retirements and appointments of
additional and replacement directors and makes appropriate
recommendations to the Board. The objective of the
Committee is to review the composition of the Board and to
plan for its progressive refreshing, with regard to balance
and structure. The Committee is responsible for:

• Reviewing the structure of the Board;

• Evaluating the balance of skills, knowledge, experience and
diversity of the Board;
• Advising the Board on any areas where further recruitment
may be appropriate; and
• Succession planning for key executives at Board level
and below.

Where necessary and appropriate, recruitment consultants

are used to assist the Committee in delivering its objectives
and responsibilities. The Committee leads the process for the
identification and selection of new Directors and makes
recommendations to the Board in respect of such
appointments. The Committee also makes recommendations
to the Board on membership of its committees. The
Committee terms of reference, which can be found on the
Company’s website www.Kape.com, are reviewed on an
annual basis and updated as required.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
27
REMUNERATION COMMITTEE REPORT
(UNAUDITED)

The Remuneration Committee (for the purpose of the Remuneration Committee report “the Committee”) is comprised of
David Cotterell (Chair of the Committee), Don Elgie and Martin Blair all of whom are Non-Executive Directors.

The Directors (other than alternate Directors) shall be entitled to receive by way of fees for their services as Directors (in
addition to fees paid for employment or executive services) such sum as the Board may from time to time determine,
provided that such amount shall not exceed in aggregate £500,000 per annum or such greater sum as the Company in
general meeting shall from time to time determine by ordinary resolution. Any fees payable shall be distinct from any salary,
remuneration or other amounts payable to a Director.

Each Director is entitled to be repaid all reasonable travelling, hotel and other expenses properly incurred by him in or about
the performance of his duties as a Director, including any expenses incurred in attending meetings of the Board or any
committee of the Board or general meetings or separate meetings of the holders of any class of shares or of debentures of
the Company.

Directors emoluments
Directors’ emoluments for the 2018 financial year are set in Pounds Sterling. These are set out in the tables below along with
the US Dollar equivalent cost to the Company:
Base
Salary/Fees Benefits Pension Bonus Total
Name GBP£ GBP£ GBP£ GBP£ GBP£

Ido Erlichman 300,000 117,569 24,750 200,000 642,319

Don Elgie 80,000 – – – 80,000
David Cotterell 50,000 – – – 50,000
Martin Blair 50,000 – – – 50,000
Moran Laufer 113,217 72,145 – 80,000 265,362

The US Dollar equivalent cost to the Company has been calculated using an average USD/GBP rate of 1.33
Base Salary/
Fees Benefits Pension Bonus Total
Name $ $ $ $ $

Ido Erlichman 395,198 154,972 32,345 274,688 857,203

Don Elgie 105,386 – – – 106,400
David Cotterell 65,866 – – – 66,500
Martin Blair 65,866 – – – 66,500
Moran Laufer 148,849 95,182 – 109,875 353,906

The beneficial interests of the Directors who held office at 31 December 2018, together with that of persons connected with
the Directors, in the share capital of the Company were as follows:

Directors’ interests in shares

2018 2017
Percentage of Number of Percentage of Number of
issued share ordinary issued share ordinary
Name capital shares capital shares

Ido Erlichman 0.07% 100,000 0.07% 100,000

Don Elgie 0.07% 97,087 0.07% 97,087
Martin Blair 0.01% 19,417 0.01% 19,417
David Cotterell 0.03% 48,544 0.03% 48,544
Moran Laufer 0.04% 50,000 0.04% 50,000

28 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

Directors’ interests in share options

Number of
Number of ordinary
ordinary shares shares under
under option at option at
31 December 31 December
Name 2017 Date of grant Exercise Price 2018

Ido Erlichman 2,000,000 1 June 2016(*) £0,275 2,000,000

24 August 2018(**) £0.000 1,200,000
Moran Laufer 215,054 29 May 2014(*) £0,380 215,054
50,000 5 January 2016(*) £0,555 50,000
634,946 26 October 2016(*) £0,365 634,946
24 August 2018(**) £0.000 600,000

(*) Vesting schedule: 25% one year from date of grant and then in 12 equal quarterly instalments thereafter.
(**) The Awards vest equally over the three year period from grant, subject to the achievement of certain performance metrics relating to the three
financial years of the Company commencing 1 January 2018, as set out below:

SaaS Revenue Target Adjusted EPS Target G&A Target

50% of Award 25% of Award 25% of Award Total Vesting

FY 2018 25% of total Company revenues $0.049 The adjusted G&A expenses 33.33%
FY 2019 40% of total Company revenues $0.065 as a proportion of the total 33.33%
revenue of the Company is
FY 2020 55% of total Company revenues $0.072 < 15% for each financial year 33.34%

For the purposes of the above:

• “SaaS Revenue” means revenues from customer contracts that will renew automatically at the end of their term unless
actively terminated by the customer;
• “Adjusted EPS” means the fully diluted adjusted Earnings Per Share of the Company (as presented in the annual accounts
related to each financial year of the Performance Period); and
• “G&A” means the general and administrative expenses after adjusting for one-off and non-recurring expenses of the
Company (as presented in the annual accounts related to each financial year of the Performance Period).

Should the SaaS Revenue, Adjusted EPS or G&A expenses fail to meet these target levels in any of the financial years, the
proportion of the Award for that financial year will be lost and will not be capable of vesting for the Executives.

The Awards have been granted as Jointly Owned Equity Awards (“JOE Awards”). The Company will transfer 1,800,000 Ordinary
Shares out of treasury to Intertrust Employee Benefit Trustee Limited as trustee of the Kape Technologies plc Employee
Benefit Trust, to be held jointly with the Executives in order to satisfy the proposed JOE Awards.  Under the terms of the
Awards, the Executives will benefit from the growth in value of their respective Award from the date of grant along with the
right to acquire the Trustee’s interest by way of a nil cost option in the event that the Awards vest.

Annual bonus
The bonuses for the Executive Directors for 2019 will be based on Adjusted EBIDTA and non-financial and strategic objectives.
The level of bonus payable by reference to the financial performance of the Company will be determined on a sliding scale
based on the Company’s budget for the forthcoming financial year.

Service contracts
Executive Directors
The service agreements of the Executive Directors are for an indefinite term and provide for formal notice of six months for
the Chief Executive Director and three months for the Chief Financial Officer to be served to terminate the agreement, either
by the Company or by the Director. In addition to their annual salaries, the Executive Directors are entitled to annual pension
contributions starting at 1 per cent. as well as other benefits commensurate with their positions including health related
benefits.

Non-executive Directors
Fees for Non-Executive Directors are set with reference to time commitment, the number of committees chaired and relevant
external market benchmarks.

The Non-Executive Directors each have specific letters of appointment, rather than service contracts. Non-Executive
directors are appointed for an initial term of three years and, under normal circumstances would be expected to serve for
additional three-year terms, up to a maximum of nine years, subject to satisfactory performance and re-election at the annual
general meeting as required.

DAVID COTTERELL
CHAIRMAN, REMUNERATION COMMITTEE
18 March 2019 KAPE TECHNOLOGIES PLC
Annual Report and Accounts 2018
29
DIRECTORS’ REPORT

The Directors present their annual report on the affairs Appointment of a Director
of the Group, together with the financial statements The Articles of Association require that any Director
and independent auditor’s report for the year ended appointed by the Board shall, unless appointed at such
31 December 2018. The Corporate Governance Statement meeting, hold office only until the dissolution of the Annual
set out on pages 14 to 16 forms part of this report. General Meeting of the Company next following such
appointment.
The Company’s full name is Kape Technologies plc, domiciled
in the Isle of Man with company number 011402V. Kape Directors’ responsibility statement
Technologies plc is a public listed company, listed on the AIM The statement of Directors’ responsibility is set out on
market of the London Stock Exchange (“AIM”). page 32.

Principal activity Directors’ indemnities

Kape develops and distributes a variety of digital products The Directors have been granted an indemnity from the
in the online security space. The Company utilises its Company to the extent permitted by law in respect of
proprietary digital distribution technology to optimise its liabilities incurred as a result of their office which remains in
reach and distribute its software products to consumer. force at the date of this report.
The Company offers products which provide online security,
privacy and optimisation tools for the consumer system.
A  detailed overview of the Group’s activities is set out on
Employee policies
At the 31 December 2018, the Group employed 344 people,
pages 2 to 13.
(31 December 2017: 128 people). The Group is committed to
attracting and retaining personnel with the requisite
Review of business and future developments technical skills and experience to implement its growth
Details of the Group’s performance during the year under strategy and maintain its position in the competitive industry
review and expected future developments are set out in in which it operates. Kape therefore places significant
the Chairman and Chief executive officer statements emphasis on ensuring that it has a strong recruitment team
on pages 4 to 10. A description of the principal risks and as well as appropriate remuneration and bonus policies
uncertainties facing the Group is set out on pages 20 to 21. which are set by reference to appropriate objectives and
include share based incentive schemes, details of which are
Dividends set out in note 17 to the financial statements.
On 14 March 2018, The Board has declared the payment of
a special dividend of 4.93 US$ cents per share being a Financial instruments
total payout of $7 million (2016: nil), which was paid to The Group does not currently use derivative financial
shareholders on the register as at 25 May 2018. No additional instruments. A summary of the Group’s financial instruments,
dividend were declared in 2018. changes in share capital and related disclosures are set out
in notes 14 and 16 to the financial statements. The Group has
Directors no material exposure to price, liquidity, or cash flow risk that
The Directors who served during the period were as follows: would impact its objectives.
Ido Erlichman Active
Donald (Don) Elgie Active Capital structure
David Cotterell Active Under the IOM Companies Act, the Company is not required
Martin Blair Active to have an authorised share capital. The Ordinary Shares in
Moran Laufer Active issue at 31 December 2018 have been created pursuant to
the BVI Companies Act and the articles of association of
Re-election of Directors the Company in place prior to the re-domiciliation of the
The Articles of Association require that at each Annual Company from the BVI to the IOM on 13 August 2014 and
General Meeting one third of the Directors (excluding any are ordinary shares of USD 0.0001 par value.
Director who has been appointed by the Board since the
previous Annual General Meeting) or, if their number is not Details of the issued share capital as at 31 December 2018
an integral multiple of three, the number nearest to one third of 148,496,073 ordinary shares of USD 0.0001 par value,
but not exceeding one third shall retire from office (but so together with details of the movements in the Company’s
that if there are fewer than three Directors who are subject issued share capital during the year are shown in note 14 to
to retirement by rotation one shall retire). the financial statements. The Company has one class of
ordinary shares, which carry no right to fixed income. Each
Any Director who is not required to retire by rotation but share carries the right to one vote at general meetings of
who has been in office for three years or more since his the Company.
appointment or his last re appointment or who would have
held office at not less than three consecutive Annual General
Meetings of the Company without retiring shall retire
from office.

30 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

There are no specific restrictions on the size of a holding nor Auditor

on the transfer of shares, which are both governed by the A resolution to reappoint BDO LLP as the Company’s auditor
general provisions of the Articles of Association and will be proposed at the 2018 Annual General Meeting.
prevailing legislation. Save as provided by the terms of
certain lock-in agreements entered into between the Each of the persons who are Directors at the date of approval
Company, the Directors and certain shareholders, the of this annual report confirms that:
Directors are not aware of any agreements between holders
of the Company’s shares that may result in restrictions on the • So far as the Director is aware, there is no relevant audit
transfer of securities or on voting rights. information of which the Company’s auditor is unaware;
and
As at 31 December 2018 the Company held 4,476,153 shares • The Director has taken all the steps that he ought to have
in treasury and 1,800,000 are held by Intertrust Employee taken as a Director in order to make himself aware of any
Benefit Trustee Limited as trustee of the Kape Technologies relevant audit information and to establish that the
plc Employee Benefit Trust. No other shares in the capital of Company’s auditor is aware of that information.
the Company are held by or on behalf of the Company or by
any of the Company’s subsidiaries. Signed on behalf of the Board by:

Details of employee share schemes are set out in note 17 to

the financial statements. DON ELGIE
NON-EXECUTIVE CHAIRMAN
Related party transactions 18 March 2019
Details of all related party transactions are set out in note 22
to the financial statements.

Research and development

The Group maintains an integrated global research and
development team which has a staff of 68 (2017: 44). In the
opinion of the Directors, continuity of investment in this area
is essential for the maintenance of the Group’s market
position and for future growth. The amount of research and
development costs capitalised in the year was $2,289,000
(2017: $1,432,000).

Going concern
The Directors, having considered the Group’s resources
financially and the associated risks with doing business in the
current economic climate, believe the Group is capable of
successfully managing these risks. The Board has reviewed
the cash flow forecast and business plan as provided by
management which includes the rate of revenue growth,
margins and cost control. As such, the Directors are satisfied
that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing
these financial statements.

Annual general meeting

The annual general meeting for 2019 will be held on Tuesday,
07 May 2019 at 12 noon. The notice convening the annual
general meeting for this year, and an explanation of the items
of non-routine business are set out in the circular that
accompanies the Annual Report.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
31
DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors are responsible for preparing the Annual

Report and the financial statements in accordance with
applicable law and regulations.

Isle of Man company law does not require the Directors to

prepare financial statements for each financial year, however
the group is required to do so to satisfy the requirements of
the AIM Rules for Companies. Under company law, when
preparing the financial statements, the Directors are
required to prepare the group financial statements in
accordance with an appropriate set of generally accepted
accounting principles or practice. The Directors have elected
to use International Financial Reporting Standards (IFRSs) as
issued by the IASB.

Under Company law the Directors must not approve the

accounts unless they are satisfied that they give a true and
fair view of the state of affairs of the Company and of the
profit or loss of the Company for that period.

In preparing these financial statements, International

Accounting Standard 1 (revised) requires that directors:

• Properly select and apply accounting policies;

• Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
• Provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions,
other events and conditions on the entity’s financial
position and financial performance; and
• Make an assessment of the Company’s ability to continue
as a going concern.

The Directors are responsible for keeping adequate

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

The Directors are responsible for the maintenance and

integrity of the corporate and financial information included
on the Company’s website. The Directors’ responsibility also
extends to the continued integrity of the financial statements
contained therein.

Signed on behalf of the Board by:

DON ELGIE
NON-EXECUTIVE CHAIRMAN
18 March 2019

32 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KAPE TECHNOLOGIES PLC

Opinion Conclusions relating to going concern

We have audited the financial statements of Kape We have nothing to report in respect of the following matters
Technologies Plc for the year ended 31 December 2018 which in relation to which the ISAs (UK) require us to report to
comprise consolidated statement of comprehensive income, you where:
the consolidated statement of changes in equity,
the consolidated statement of financial position, the • the directors’ use of the going concern basis of accounting
consolidated cash flow statement and notes to the financial in the preparation of the financial statements is not
statements, including a summary of significant appropriate; or
accounting policies. • the directors have not disclosed in the financial statements
any identified material uncertainties that may cast
The financial reporting framework that has been applied in significant doubt about the group’s or the parent
the preparation of the financial statements is applicable law company’s ability to continue to adopt the going concern
and International Financial Reporting Standards (IFRSs) basis of accounting for a period of at least twelve months
as issued by the International Accounting Standards from the date when the financial statements are
Board (IASB). authorised for issue.

In our opinion: Key audit matters

Key audit matters are those matters that, in our professional
• the financial statements give a true and fair view of the
judgment, were of most significance in our audit of the
state of the affairs as at 31 December 2018 and of the
financial statements of the current period and include the
group’s loss for the year then ended;
most significant assessed risks of material misstatement
• the group financial statements have been properly
(whether or not due to fraud) we identified, including those
prepared in accordance with IFRSs as issued by the IASB;
which had the greatest effect on: the overall audit strategy,
• the financial statements have been prepared in
the allocation of resources in the audit; and directing the
accordance with the requirements of the Isle of Man
efforts of the engagement team. These matters were
Companies Act 2006.
addressed in the context of our audit of the financial
Basis for opinion statements as a whole, and in forming our opinion thereon,
We conducted our audit in accordance with International and we do not provide a separate opinion on these matters.
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 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.

Key audit matter How we addressed the matter in our audit

Revenue recognition
The group has a number of revenue streams for which the We assessed whether the revenue recognition policies
accounting must be individually considered. Due to the adopted by the Group comply with relevant accounting
different nature of agreements entered into by the group, standards.
and the fact that revenue is recognised both at a point in
time and over a period of time, there is a key risk of We tested revenue through substantive procedures, including
material misstatement arising from both the recognition of confirmation of cash receipts through to bank statement over
revenue around the year end (cut-off) and the revenue all material revenue streams.
recognition policy itself, as detailed in note 2 to these
financial statements. We performed cut-off procedures including recalculations of
contract liabilities around the year-end in order to get comfort
In accordance with accounting standards, costs that are over subscription revenues, noting that both newly acquired
directly incremental to obtaining a contract are eligible to entities have subscription based revenue.
be recognised as an asset, provided the entity expects to
recover the costs. A material deferred contract cost asset We reviewed the capitalised customer acquisition costs
has been capitalised in respect of costs incurred to obtain against the accounting standard requirements to check the
and fulfil contracts. There is judgement surrounding costs costs met the criteria for recognition. The length of time over
meeting the capitalisation criteria and a risk that this which costs are amortised is based upon management’s
balance is overstated. estimate of average customer lifetime, which exceeds the
licence length. Discussions were held with management and
reviews of historic customer purchasing trends were
undertaken. A recalculation was also performed over the
amortisation charge recognised in the year.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
33
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KAPE TECHNOLOGIES PLC CONTINUED

Key audit matter How we addressed the matter in our audit

Business combinations
See accounting policy in note 2, and the intangibles assets With input from our valuations team, we challenged the
note (note 9) and the business combinations note (note 20) assumptions underpinning the significant judgements and
on page 66 respectively. estimates used by management in the assessment of the fair
values of the assets and liabilities acquired and consideration
There are risks present as a result of management’s paid including; reviewing underlying cash flow projections and
requirement to make significant judgements in assessing comparing against post-year end, royalty rates, discount rates
the fair values of consideration and of the assets and applied and the long term growth rates.
liabilities acquired. Management have engaged external
valuations experts to undertake the purchase price Our testing focused on both material and more judgmental
allocation exercise required. fair value adjustments that were recorded. Particular
adjustments we tested were:
The two acquisitions resulted in the group holding, on
consolidation, goodwill and intangible assets of $19.96m Intangible assets – the directors obtained external valuations
and $7.43m respectively. for the acquired intangible assets. Utilising our own valuations
expertise, we evaluated the valuation methodologies used for
each type of asset and used these to check that the
methodology used by the directors was appropriate and
consistent with market practice. We also examined the
key assumptions used as inputs to the valuation models to
assess whether these were consistent with our understanding
of the businesses acquired, their historical performance and
the markets in which they operate. These assumptions
included revenue and profit forecasts, discount rates,
customer attrition rates, technology obsolescence rates and
royalty rates.

We examined and satisfied ourselves with the methodology

and tax rates used to calculate the associated deferred tax
liabilities arising from the creation of intangible assets. This
involved reference to the tax jurisdictions in which the group
operates, levels of business in those jurisdictions and the
manner in which profits are expected to be repatriated
and taxed.

Adoption of IFRS 16: Leases

The Group have elected to early adopt IFRS 16 – Leases We assessed whether the lease policy adopted by the Group
effective 1 January 2018, as detailed in notes 2 and 23 to complies with accounting standards. The relevant IFRS is
the financial statements. International Financial Reporting Standard 16 Leases.

The new standard sets out the principles for the Our procedures included the following:
recognition, measurement, presentation and disclosure
of leases. It requires lessees to bring all leases within the • Obtaining copies of lease agreements to assess the key
scope of IFRS 16 on balance sheet with an asset shown terms included and verify the inputs to the calculation.
for the right of use and a liability shown for the discounted
amount of future payments. • Checking that any practical expedients taken are in line with
those allowed by the standard.
There is a risk associated with the accounting in respect of
IFRS 16, as a result of the judgements and inputs required • Reviewing the financial statement disclosures against the
within the calculation including determining the incremental disclosure requirements of the standard.
borrowing rate, noting that the asset and corresponding
liability are material to the Group at year-end.

34 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

Our application of materiality This, together with the additional procedures performed at
We apply the concept of materiality both in planning and Group level over the acquisition accounting and consolidation
performing our audit, and in evaluating the effect of process gave us the evidence we needed for our opinion on
misstatements. We consider materiality to be the magnitude the financial statements as a whole.
by which misstatements, including omissions, could influence
the economic decisions of reasonable users that are taken on Classification of components
the basis of the financial statements. Importantly,
misstatements below these levels will not necessarily be Revenue
evaluated as immaterial as we also take into account of the
nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.

We determined materiality for the financial statements as

a whole to be $560,000 (2017 – $646,000) which represents
approximately 1% of revenues (2017 – 1% of revenues). We
agreed with the audit committee that we would report to
them misstatements identified during our audit above
$28,000 (2017 – $32,300).

Revenue has been determined to be the most relevant

performance measure to the stakeholders of the group. Adjusted EBITDA

Performance materiality is the application of materiality at

the individual account or balance level set at an amount to
reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole.
Performance materiality was set at $420,000 (2017: $484,500)
which represents 75% (2017 75%) of the above materiality
levels.

Individual component audits were carried out using

component materialities of between 25-50% of overall
financial statement materiality (this ranged from $140,000
and $280,000). Total Assets

An overview of the scope of our audit

We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on the Full scope audit
financial statements as a whole, taking into account the
geographic structure of the Group, the accounting processes Group level procedures
and controls, and the industry in which the Group operates.

In establishing the overall approach to the Group audit, we

assessed the audit significance of each reporting unit in the
Group by reference to both its financial significance and
other indicators of audit risk, such as the complexity of
operations and the degree of estimation and judgement in
the financial results. We also considered the changes to the We identified two individually significant components,
overall Group as a result of the acquisitions of Neutral which together make up 82% of Group revenue.
Holdings Inc. (trading as ‘Intego’) and ZenGuard GmbH and
where the key business activities and transactions reside. A further two components have been scoped in as significant
to ensure sufficient coverage was obtained across the group.
We instructed BDO’s member firms in Romania and Cyprus This relates to the newly acquired component Intego Inc. and
as component auditors, to perform full scope audits of Intego S.A., the trading subsidiaries acquired as part of the
financial information of the significant components acquisition of Neutral Holdings Inc. in July 2018. These
accounted for locally in those territories. We visited these components contributed to a further 5% of group revenue.
locations during the year to ensure we obtained a full
understanding of the operational activities and appropriately
scoped risks and agreed responses to those risks. We also
attended audit clearance meetings in these locations and
took an active part in reviewing the work undertaken by our
component auditors.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
35
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KAPE TECHNOLOGIES PLC CONTINUED

The remaining components not subject to full scope audit Misstatements can arise from fraud or error and are
have been reviewed for group reporting purposes, using considered material if, individually or in the aggregate, they
analytic procedures to corroborate the conclusions reached could reasonably be expected to influence the economic
that there are no significant risks of material misstatement of decisions of users taken on the basis of these financial
the aggregated financial information of those components. statements.

Other information A further description of our responsibilities for the audit of

The directors are responsible for the other information. The the financial statements is located on the Financial Reporting
other information comprises the information included in the Council’s website at: www.frc.org.uk/auditorsresponsibilities.
annual report and accounts, other than the financial This description forms part of our auditor’s report.
statements and our auditor’s report thereon. Our opinion on
the financial statements does not cover the other information Use of our report
and, except to the extent otherwise explicitly stated in our This report is made solely to the Company’s Directors,
report, we do not express any form of assurance conclusion as a body, in accordance with the terms of our engagement
thereon. letter dated 29 November 2018. Our audit work has been
undertaken so that we might state to the Company’s
In connection with our audit of the financial statements, our Directors those matters we are required to state to them in
responsibility is to read the other information and, in doing an auditor’s report and for no other purpose. To the fullest
so, consider whether the other information is materially extent permitted by law, we do not accept or assume
inconsistent with the financial statements or our knowledge responsibility to anyone other than the Company and the
obtained in the audit or otherwise appears to be materially Company’s Directors as a body, for our audit work, for this
misstated. If we identify such material inconsistencies or report, or for the opinions we have formed.
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 Iain Henderson (Senior Statutory Auditor)
information. If, based on the work we have performed, we For and on behalf of BDO LLP, Chartered Accountants
conclude that there is a material misstatement of this other London, UK
information, we are required to report that fact. We have 18 March 2019
nothing to report in this regard.
BDO LLP is a limited liability partnership registered in
Responsibilities of directors England and Wales (with registered number OC305127).
As explained more fully in the directors’ responsibilities
statement set out on page 32, 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.

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Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2018

2018 2017
Note $’000 $’000

Revenue 3,4 52,060 50,602

Cost of sales (5,605) (4,572)
Gross profit 46,455 46,030
Selling and marketing costs 3c (27,564) (30,143)
Research and development costs (1,653) (856)
Management, general and administrative costs (9,795) (11,221)
Depreciation and amortisation 9,10,23 (3,800) (2,376)
Total operating costs (42,812) (44,596)
Operating profit 5 3,643 1,434
Adjusted EBITDA 5 10,374 8,085
Employee share-based payment charge 17 (1,490) (303)
Charge for repurchase of employee options 17 – (3,176)
Exceptional and non-recurring costs 5 (1,441) (796)
Depreciation and amortisation 9,10,23 (3,800) (2,376)
Operating profit 3,643 1,434
Finance income 587 277
Finance costs 7 (938) (452)
Profit before taxation 3,292 1,259
Tax charge 8 (1,064) (1,102)
Profit from continuing operations 2,228 157
Loss from discontinued operations (attributable to equity holders of the company) 21 (2,734) (3,518)
Loss for the year (506) (3,361)
Other comprehensive income:
Items that may be reclassified to profit and loss:
Foreign exchange differences on translation of foreign operations 7 858
Total comprehensive loss for the year (499) (2,503)
Total profit/(loss) for the year attributable to:
Owners of the parent (518) (3,561)
Non-controlling interests 12 200
Total comprehensive income/ (loss) attributable to:
Owners of the parent (511) (2,703)
Non-controlling interests 12 200
Total profit/(loss) for the year attributable to Owners of the parent:
Continuing operations 2,228 157
Discontinuing operations (2,746) (3,718)
(518) (3,561)
Earnings per share from continuing operations attributable to the ordinary
equity  holders of the company:
Basic earnings per share (cents) 18 1.5 0.1
Diluted earnings per share (cents) 18 1.5 0.1
Earnings per share attributable to the ordinary equity holders of the company:
Basic earnings per share (cents) 18 (0.3) (2.4)
Diluted earnings per share (cents) 18 (0.3) (2.4)

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
37
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2018

2018 2017
Note $’000 $’000

Non-current assets
Intangible assets 9 36,265 12,350
Property, plant and equipment 10 713 815
Right-of-use assets 23 1,769 –
Non-current investments – 50
Contingent consideration 21 934 –
Deferred contract costs 3c 7,196 406
Deferred tax asset 8 728 97
47,605 13,718
Current assets
Software license inventory 52 65
Deferred contract costs 3c 5,216 1,386
Contingent consideration 21 323 –
Trade and other receivables 11 6,101 11,071
Cash and cash equivalents 12 40,405 69,502
52,097 82,024
Total assets 99,702 95,742
Equity
Share capital 15 15
Additional paid in capital 131,091 130,728
Foreign exchange differences on translation of foreign operations 859 852
Retained earnings (58,991) (53,200)
Equity attributable to equity holders of the parent 72,974 78,395
Non-controlling interests – 977
Total equity 72,974 79,372
Non-current liabilities
Contract liabilities 3b 2,165 892
Deferred tax liabilities 8 3,125 349
Long term lease liabilities 23 1,693 –
Deferred consideration 25 143 993
7,126 2,234
Current liabilities
Trade and other payables 13 11,131 10,094
Contract liabilities 3b 7,349 3,120
Short term lease liabilities 23 226 –
Deferred consideration 25 896 922
19,602 14,136
Total equity and liabilities 99,702 95,742

The financial statements were approved by the Board and authorised for issue on 18 March 2018.

IDO ERLICHMAN MORAN LAUFER

CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER

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Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2018

Foreign
exchange Equity
differences attributable
Additional on translation to equity Non-
Share paid in of foreign Retained holders of controlling
capital capital operations earnings the parent interests Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000

At 1 January 2017 14 130,292 (6) (49,747) 80,553 – 80,553

Loss for the year – – (3,561) (3,561) 200 (3,361)
Other comprehensive income:
Foreign exchange differences on translation
of foreign operations – – 858 – 858 – 858
Total comprehensive loss for the year – – 858 (3,561) (2,703) 200 (2,503)
Non-controlling interest from acquisition
of subsidiary – – – – – 777 777
Transactions with owners:
Share based payments – – – 3,516 3,516 – 3,516
Exercise of employee options (note 14) 1 436 – – 437 – 437
Purchase of own share options (note 14) – – – (3,408) (3,408) – (3,408)
At 31 December 2017 15 130,728 852 (53,200) 78,395 977 79,372
At 1 January 2018 15 130,728 852 (53,200) 78,395 977 79,372
Loss for the year – – (518) (518) 12 (506)
Other comprehensive income:
Foreign exchange differences on translation
of foreign operations – – 7 – 7 – 7
Total comprehensive loss for the year – – 7 (518) (511) 12 (499)
Non-controlling interest from disposal
of subsidiary – – – – – (989) (989)
Transactions with owners:
Share based payments – – – 1,490 1,490 – 1,490
Exercise of employee options (note 14) * 363 – – 363 – 363
Dividend paid to company’s shareholders – – – (6,763) (6,763) – (6,763)
At 31 December 2018 15 131,091 859 (58,991) 72,974 – 72,974

* amounts below 1 thousand

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
39
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018

2018 2017
Note $’000 $’000

Cash flow from operating activities

Loss for the year after taxation (506) (3,361)
Adjustments for:
Amortisation of intangible assets 9 2,617 6,046
Loss from Selling the media activity 21 2,252 –
Depreciation of Right-to-use assets 23 1,209 –
Depreciation of property, plant and equipment 10 288 399
Loss on sale of property, plant and equipment 10 58 101
Tax charge 8 1,230 467
Interest income (587) (277)
Interest expenses, fair value movements on deferred consideration 7 252 411
Share based payment charge 17 1,490 3,516
Share of results of associates 15 – 40
Movement in deferred and contingent consideration (20) (90)
Re-measurement gain on equity interest in associate 15 – (52)
Expense from repurchase of employee share options – 208
Interest received 587 277
Unrealised foreign exchange differences (168) 240
Operating cash flow before movement in working capital 8,702 7,925
Decrease in trade and other receivables 3,142 967
Decrease/(Increase) in software licenses inventory 13 (65)
Increase/(Decrease) in trade and other payables 82 (2,113)
Decrease in other current liabilities – (209)
Increase in deferred contract costs (10,215) (1,330)
Increase in contract liabilities 1,971 1,358
Cash flow from operations 3,695 6,533
Tax paid net of refunds (502) (109)
Cash generated from operations 3,193 6,424
Cash flow from investing activities
Purchases of property, plant and equipment 10 (179) (540)
Sale of property, plant and equipment 10 39
Net cash paid on business combination 20 (20,823) (5,337)
Net cash paid on business sold 21 (341) –
Intangible assets acquired 9 (6) (115)
Capitalisation of development costs 9 (2,289) (1,432)
Net cash used in investing activities (23,628) (7,385)
Cash flow from financing activities
Repurchase of employee share options 14,17 (929) (1,914)
Dividend paid (6,763) –
Payment of leases 23 (1,087) –
Exercise of options by employees 14 363 437
Net cash generated from financing activities (8,416) (1,477)
Net (decrease)/increase in cash and cash equivalents (28,851) (2,438)
Revaluation of cash due to changes in foreign exchange rates (246) (124)
Cash and cash equivalents at beginning of year 69,502 72,064
Cash and cash equivalents at end of year 12 40,405 69,502

40 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

NOTES FORMING PART OF THE FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2018

1 Basis of preparation
The financial information provided is for Kape Technologies Plc (“the Company”) and its subsidiary undertakings (together the
“Group”) in respect of the financial years ended 31 December 2018 and 2017. The company is incorporated in the Isle of Man.

The financial information has been prepared in accordance with International Financial Reporting Standards, International
Accounting Standards and interpretations (collectively IFRS) as issued by the International Accounting Standards Board (IASB).

The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgement in applying the Group’s accounting policies. The areas
where significant judgements and estimates have been made in preparing the financial statements and their effects are
disclosed in note 2.

Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence for the foreseeable future. They therefore continue to
adopt the going concern basis of accounting in preparing the financial statements.

Adoption of new and revised standards

New standards impacting the Group that will be adopted in the annual financial statements for the year ended 31 December
2018, and which have given rise to changes in the Group’s accounting policies are:
• IFRS 16 Leases (IFRS 16); and
• IFRS 9 Financial Instruments (IFRS 9)

Details of the impact IFRS 16 have had is given in note 23. Other new and amended standards and Interpretations issued by
the IASB that will apply for the first time in the next annual financial statements are not expected to impact the Group as they
are either not relevant to the Group’s activities or require accounting which is consistent with the Group’s current accounting
policies.

IFRS 9 – Financial instruments

IFRS 9 has replaced IAS 39 Financial Instruments: Recognition and Measurement, and has had no significant effect on the
Group.

The impairment provision on financial assets measured at amortised cost (such as trade and other receivables) has been
calculated in accordance with IFRS 9’s expected credit loss model, which differs from the incurred loss model previously
required by IAS 39. The Group has chosen not to restate comparatives on adoption of IFRS 9. The change to an expected
credit loss model as required under IFRS 9 has had an immaterial impact on the group.

As allowed by the transitional rules in IFRS 9, prior year financial statements have not been restated and, in any event, no
material changes in the numbers recognised were required. The adoption of IFRS 9 has though resulted in presentational
changes as described above.

On the date of initial application, 1 January 2018, the financial instruments of the group were as follows:
Measurement Category Carrying amount
Original (IAS 39) New (IFRS 9) Original New Difference
$’000 $’000 $’000 $’000 $’000

Current financial assets

Trade receivables and contract assets Amortised cost Amortised cost 8,536 8,536 –
Other receivables Amortised cost Amortised cost 1,872 1,872 –
Cash and cash equivalents Amortised cost Amortised cost 69,502 69,502 –

Non-current liabilities
Deferred consideration FVTPL FVTPL 993 993 –

Current liabilities
Trade payables Amortised cost Amortised cost 2,469 2,469 –
Other payables and accrued expenses Amortised cost Amortised cost 5,939 5,939 –
Deferred consideration FVTPL FVTPL 922 922 –

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

1 Basis of preparation continued

New standards, interpretations and amendments not yet effective
IFRIC 23 ‘Uncertainty over Income Tax Positions’ is effective for annual periods beginning on or after 1 January 2019. IFRIC 23
clarifies how to recognise and measure current and deferred income tax assets and liabilities when there is uncertainty over
income tax treatments. When there is uncertainty over income tax treatments. IFRIC 23 is not expected to have a significant
impact on the amounts recognised in the Group’s consolidated financial statements.

The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the
Group.

2 Significant accounting policies

Basis of consolidation
The Group consolidated financial statements comprise the financial statements of the parent company Kape Technologies Plc
and the financial statements of the subsidiaries as shown in note 19 of the consolidated financial statements.

The financial statements of all the Group companies are prepared using uniform accounting policies. All transactions and
balances between Group companies have been eliminated on consolidation.

Business combinations and goodwill

Acquisitions of businesses not under common control are accounted for using the acquisition method. The consideration
transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair
values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the
equity interests issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit
or loss as incurred.

Contingent consideration that is classified as an asset or a liability is initially recognised at fair value and subsequently at fair
value thorough profit and loss in accordance with IFRS 9 as appropriate.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the
acquisition date.

Goodwill is measured as the excess of the sum of the consideration transferred and the fair value of the acquirer’s previously
held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and
the liabilities assumed.

Common control transactions

Common control transactions have been accounted for using merger accounting.

Under merger accounting, the assets and liabilities of both entities are recorded at book value, not fair value (although
adjustments are made to achieve uniform accounting policies), intangible assets and contingent liabilities are recognised only
to the extent that they were recognised by the legal acquiree in accordance within applicable IFRS, no goodwill is recognised,
any expenses of the combination are written off immediately to the income statement and comparative amounts, if
applicable, are restated as if the combination had taken place at the beginning of the earliest accounting period presented.

The result is that the merged groups are treated as if they had been combined throughout the current and comparative
accounting periods.

Non-Controlling Interests
For business combinations, the Group initially recognises any non-controlling interest in the acquiree at the non-controlling
interest’s proportionate share of the acquiree’s net assets.

The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-
controlling interests in proportion to their relative ownership interests.

Foreign currencies
(a) Presentational currency
Items included in the Group’s financial statements are measured using the currency of the primary economic environment in
which each entity of the group operates (the “functional currency”). The financial statements are presented in United States
Dollars ($000).

42 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
profit or loss. Exchange rates gains and losses are recognised net within Finance cost.

(c) Consolidation
The functional currency of the Company, and the presentation currency for the consolidated financial statements is United
States Dollars. For the purpose of the consolidated financial statements, the assets and liabilities of the Group’s foreign
operations with a functional currency other than United States Dollars are translated into United States Dollars using
exchange rates prevailing on the reporting date. Income and expense items (including comparatives) are translated at the
exchange rates at the dates of the transactions. Exchange differences arising, if any, are recognised within other
comprehensive income.

Effective March 31, 2018, the functional currency of one of the Company’s subsidiaries, CyberGhost SRL, has changed to US
dollar (“USD” or “$”) from Romanian Lei (“Lei”). The change was following an assessment by company’s management that
found that the USD is the primary currency of the economic environment in which the subsidiary operates. The exchange rate
at that date was Lei 1= $0.2646.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the closing rate.

Associates
Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another
entity, it is classified as an associate. Associates are initially recognised in the consolidated statement of financial position at
cost. Subsequently associates are accounted for using the equity method, where the Group’s share of post-acquisition profits
and losses and other comprehensive income is recognised in the consolidated statement of profit and loss and other
comprehensive income (except for losses in excess of the Group’s investment in the associate unless there is an obligation to
make good those losses).

Revenue recognition
Revenue is measured based on the consideration specified in a contract with customer and excludes amounts collected on
behalf of third parties. The company recognises revenue when it transfers control over a product or service to a customer.

Sales from App distribution

The majority of the Group revenue is derived from sales of products to customers in a B2C model. Transaction price been
determined by the fixed price of each product which may be changed according to management decision.

• The CyberGhost, Zenmate, VirusBarrier and ContentBarriar products are SaaS products which contain one performance
obligation that is satisfied over time. Since the service is being provided evenly across the contract period, revenue is
recognised on a straight-line basis. All payments from customers are received upfront. Some of these contracts’ term are
greater than one year, mostly for 24 and 36 months. The Company determined that the upfront payments are for reasons
other than providing a financing benefit to the Company and thus there are no significant financing components in its
contracts. The following factors were considered in the analysis:
• The intent of the payment terms that require all payments in advance is to preserve the customers, and to make it
economically unlikely for them to stop using the Company’s services.
1. The company has no need for financing and it charges its customers with an upfront payment, since otherwise it would
incur high administration costs related to renewals and collection of payments.
2. An upfront payment of the entire consideration is in accordance with the typical payment terms in the industry.
• The Reimage PC and DriverAgent products contain three performance obligations: one-time repair, unlimited use of the
repair software for one year and technical support for one year. Revenue for performing the one-time repair obligation is
recognised at the time of the sale. For the unlimited use package, customers benefit from the use of the repair software
and technical support for one year, revenues are recognised in line with the pattern of usage of the products and technical
support, which is substantially within the first 30 days of the 12 months period.
• Revenue from the sale of Intego Mac Washing Machine, NetBarrier and Backup products is recognised at the time of the
sale as the customer is able to use the products independently without any additional resources of the company.
• The Company also offers its products for sale as a bundle. For software bundles, the company allocates revenue to each of
the performance obligations based on their relative standalone selling price. The stand- alone selling prices are determined
based on the prices charged to customers who acquire software packages individually.

In respect of the App distribution CGU, customers are provided with a 30-60 day refund period in which they can receive a full
refund. Historical experience and information post year end allows management to estimate the value of products that will be
returned which are not material to the group and a refund liability has therefore not been recognised.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

2 Significant accounting policies continued

Sales from advertising
The Company provides advertisers with the ability to manage and monetize publishers’ inventory and manage advertisers’
campaigns. These services represent one performance obligation and are recognised in the accounting period in which the
services are rendered based on clicks/ views/ impression as detailed below.

The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the
Company controls the specified services before the transfer to its customers. In determining this, the Company follows the
accounting guidance for principal-agent considerations. This determination involves judgment and is based on an evaluation
of the terms of each arrangement. The Company determined that it is the principal in these transactions and therefore
revenue is recognised on a gross basis since it is primarily responsible for fulfilling of the services. The Company also bears
inventory risk as it pays the majority of publishers according to cost per mille impressions (CPM( but charges the payment
from the customer according to cost per acquisition (CPA)/ cost per click (CPC)/DCPC/ or cost per install (CPI). Stated
differently, an impression can be purchased from a publisher with no corresponding sale to an advertiser if the final user does
not click on the advertisement delivered. Moreover, The Company has the discretion in establishing the prices.

Sales from Ajillion – Ad-exchange

The Company provides ad-exchange services which allow the Company’s partners to seamlessly buy and sell from each other
through a real time bidding process. Revenue is recognised in the accounting period in which the services are rendered.

In this case, the Company determined that it is acting as an agent and therefore revenue is recognised on a net basis. While
the Company is primarily responsible for the connectivity services, it does not bear inventory risk nor has discretion in
establishing the prices. The customer chooses the inventory to purchase on a real-time basis, the amount spent on the
campaign is determined by the customer through a real-time bidding process and the amount earned by the Company is
based on a fixed percentage.

Sales from license of web apps platform

The company licenses its web apps platform to customers on a SaaS basis. The benefits simultaneously provided to and
consumed by the customers therefore revenues were recognised on a straight line bases over the period of the contract.

Costs to obtain and fulfil a contract

According to IFRS 15, Incremental costs of obtaining a contract are those costs that the entity would not have incurred if the
contract had not been obtained (for example, sales commissions). Incremental costs of obtaining a contract with a customer
are recognised as assets if they are recoverable. The Company recognise an asset in relation to marketing costs to obtain a
contract. The costs include fees paid to marketing partners on behalf of subscription sales of Cyberghost or Reimage to
customers referred by the partners. The company believes that the costs are recoverable as the proceeds from the customer
over the expected relationship period exceed the costs to obtain the contract. The asset is amortised on a systematic basis
over the expected customer relationship period including expected contract renewals by customers. The expected customer
relationship period is an estimation, which is based on historical renewal data.

In addition, the company recognised an asset for fulfilment costs that are considered directly attributable in fulfilling a
contract. The fulfilment costs comprised of processing fees paid to third party processing service providers. This asset is
amortised on a systematic basis over the contract period.

Assets recognised from the costs to obtain or fulfill a contract are subject to impairment testing. An impairment loss should
be recognised in profit or loss to the extent that the carrying amount of an asset exceeds:
a. The remaining amount of consideration that the entity expects to receive in exchange for the goods or services to which
the asset relates, less
b. The costs that relate directly to providing those goods or services and that have not been recognised as expenses.

Intangible assets
Amortisation for all classes of intangible assets is included within amortisation and depreciation costs in the income
statement.

(a) Externally acquired intangible assets

Externally acquired intangible assets comprise intellectual property (“IP”), customer lists, trademarks and internet domains.
All such intangible assets are stated at cost less any accumulated amortisation and any accumulated impairment losses.
Amortisation of these intangible assets is calculated using the straight-line method over their useful economic lives.

Where intangible assets are acquired as part of a business combination they are recorded initially at their fair value.

The useful economic life of IP, customer lists and trademarks is 3 to 11 years.

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 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

Internet domains are generally considered to have an indefinite useful economic life. They are purchased due to the
marketability of the related domain name, are not specific to a particular product, brand, market or service and therefore are
not expected to diminish in value or use as a function of time.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal.
Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal
proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

(b) Internally generated intangible assets (development costs)

An internally-generated intangible asset arising from the Group’s e-business development is recognised only if all of the
following conditions are met:
• The technical feasibility of completing the intangible asset so that it will be available for use or sale;
• The intention to complete the intangible asset and use or sell it;
• It is probable that the asset created will generate future economic benefits; and
• The development cost of the asset can be measured reliably.

Internally-generated intangible assets are amortised on a straight-line basis over their estimated useful lives, which is 2 to 3
years. Amortisation commences when the asset is available for use.

Where no internally-generated intangible asset can be recognised, development expenditure is charged to profit or loss in
the period in which it is incurred.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal.
Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal
proceeds and the carrying amount of the asset are recognised in profit or loss when the asset is derecognised.

(c) Goodwill
Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment
losses. The Group tests goodwill annually for impairment, or more frequently if there are indicators that goodwill might be
impaired.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment
losses.

Depreciation is calculated on the straight-line method so as to write off the cost of each asset to its residual value over its
estimated useful life. The annual depreciation rates used are as follows:
• Computer equipment: 2-3 years
• Furniture, fixtures and office equipment: 6 -15 years
• Leasehold improvements: 10 years or the term of the lease if shorter
• Cars: 4 years

The assets residual values and useful lives are reviewed and adjusted, if appropriate, at each reporting date.

Expenditure for repairs and maintenance of property, plant and equipment is charged to profit or loss in the year in which it is
incurred.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant
and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognised in profit or loss.

Impairment of property, plant and equipment and internally generated intangible assets
Assets that have an indefinite useful life are not subject to depreciation or amortisation and are tested annually for
impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair
value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash generating units).

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash at bank and short-term
bank deposits.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

2 Significant accounting policies continued

Financial assets
(a) Classification
From 1 January 2018, the Group classifies its financial assets in the following measurement categories:
• Those to measured subsequently at fair value (either through OCI or through profit or loss), and
• Those to be measured at amortised cost.

The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the
cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI.

The Group’s financial assets are trade receivables, other receivables and cash and cash equivalents. These assets are held
within a business model whose objective is to collect contractual cash flows, and give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount outstanding. As such, they are classified as
measured at amortised cost.

(b) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the date which the Group commits to
purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

(c) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVTPL are expenses in profit or loss. Changes in the fair value of financial
assets at FVTPL are recognised in the statement of comprehensive.

Financially assets measured at amortised cost arise principally through the provision of services to customers (e.g. trade
receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus
transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost
using the effective interest rate method, less provision for impairment.

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 365 days and therefore are all classified as current. Trade receivables are
recognised initially at the amount of consideration that is unconditional. The group holds the trade receivables with the
objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the
effective interest method.

Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value.
Other receivables consist of amounts generally arising from transactions outside the usual operating activities of the group.
Due to the short-term nature of the other current receivables, their carrying amount is considered to be the same as their fair
value.

(d) Impairment
The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables.

The following policy was applied before the adoption of IFRS 9:

The Group has applied IFRS9 retrospectively but has elected not to restate comparative information. As a result, the
comparative information provided continues to be accounted for in accordance with the Group’s previous accounting policy.

Trade receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the
effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss
when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between
the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate
computed at initial recognition.

Financial liabilities
Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.

Current and deferred tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

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Current tax
Current tax liabilities and assets are measured at the amount expected to be paid to or recovered from the taxation
authorities, using the tax rates and laws that have been enacted, or substantively enacted, by the reporting date.

Deferred tax
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial statements.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which
the temporary differences can be utilised. Deferred tax is calculated at the tax rates that are expected to apply in the period
when the liability is settled or the asset realised, based on tax rates that have been enacted or substantively enacted by the
period end date, and is not discounted.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against
current tax liabilities and when the deferred taxes relate to the same fiscal authority.

Operating leases
The implementation of IFRS 16 replaced the existing guidance in IAS 17 – “Leases” (hereafter – “IAS 17”). The standard sets
out the principles for the recognition, measurement, presentation and disclosure of leases, and has a material impact mainly
on the accounting treatment applied by the lessee in a lease transaction.

Until the 2018 financial year, leases were classified as either finance or operating leases. Payments made under operating
leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of
the lease.

IFRS 16 changes the existing guidance in IAS 17 and requires lessees to recognise a lease liability that reflects future lease
payments and a “right-of-use asset” in all lease contracts within scope, with no distinction between financing and capital
leases. IFRS 16 exempts lessees in short-term leases or the when underlying asset has a low value.

The Company has elected to apply the practical expedient not to recognise right-of-use assets and lease liabilities for leases
of low-value assets only. The lease payments associated with these leases is recognised as an expense on a straight-line
basis over the lease term.

IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify
its leases as operating leases or finance leases, and to account for those two types of leases differently.

IFRS 16 also changes the definition of a “lease” and the manner of assessing whether a contract contains a lease. At inception
of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the
right to control the use of an identified asset for a period of time in exchange for consideration.

The Company has elected to apply the practical expedient to account for each lease component and any non-lease
components as a single lease component.

The Company recognises a right-of-use asset and a lease liability at the lease commencement date.

The lease liability is initially measured at the present value of the following lease payments:
• Fixed payments
• Variable payments that are based on index or rate
• The exercise price of an extension or purchase option if reasonably certain to be exercised
• Payment of penalties for terminating the lease, if relevant

The lease payments are discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined,
the Company’s incremental borrowing rate. The Company uses its incremental borrowing rate as the discount rate.

The right-of-use asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives
received. The assets are depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using
the straight-line method. The lease term includes periods covered by an option to extend if the Company is reasonably
certain to exercise that option. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.

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Annual Report and Accounts 2018
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

2 Significant accounting policies continued

Operating leases continued
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the
amount expected to be payable. When the lease liability is remeasured in this way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has
been reduced to zero.

The following policy was applied before the adoption of IFRS 16:
Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the
lease.

Share-based payments
Kape operates equity-settled, share-based compensation plans, under which the entity receives services from employees as
consideration for Kape equity instruments (options). The fair value of the options and share awards is recognised as an
employee benefit expense. The total amount to be expensed over the vesting period is determined by reference to the fair
value of the options granted, excluding the impact of any non-market vesting conditions (for example, Recurring Revenue and
Earning Per Share targets). Non-market vesting conditions are included in assumptions about the number of options that are
expected to vest.

At each balance sheet date, the entity revises its estimates of the number of options that are expected to vest. It recognises
the impact of the revision of original estimates, if any, in the income statement, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital (par value) and share
premium when the options are exercised.

Cancellation or settlement is accounted for as an acceleration of the vesting period, and therefore the amount that otherwise
would have been recognised for services received over the remainder of the vesting period is recognised immediately.
Repurchase of cancelled or settled share based compensation plan, is accounted for as a deduction from equity, except to
the extent that the payment exceeds the fair value of the equity instruments granted, measured at purchase date. Such
excess is accounted as expense.

Share capital
Ordinary shares are classified as equity. The difference between the fair value of the consideration received by the Group and
the nominal value of the share capital being issued is classified as additional paid in capital.

Critical accounting estimates and judgements

The preparation of consolidated financial statements under IFRS requires the Group to make estimates and judgments that
affect the application of policies and reported amounts. Estimates and judgments 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 following accounting policies cover areas that the Directors consider require estimates and assumptions which have a
significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year:

(a) Capitalisation of development expenses

Research and development costs which create identifiable assets and are expected to generate future economic benefits are
capitalised, and the remainder is expensed to income statement. This requires the Group to perform judgements in
apportioning costs to identifiable assets and making judgements about which assets are expected to give rise to future
economic benefits.

(b) Presentation of net revenues

The Group makes judgements in assessing whether it has acted as a principal or agent in transactions for selling and
acquiring advertising media space, and therefore whether it reports its revenues gross or net respectively. The Group
assesses a number of criteria in making these judgements, including the party, who is responsible for price setting and credit
risk of the transaction, the losses the Group would suffer for non-delivery of service as well as the perceived and contractual
relationship between the media publisher and seller or ad network.

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(c) Determining the lease term

In determining the lease term, management considers all facts and circumstances that create an economic incentive to
exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are
only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this
assessment and that is within the control of the lessee.

(d) Determining the customer lifetime

On recognising an asset in relation to marketing costs to obtain a contract, the Group determined the expected lifetime of the
customer. The lifetime value been determined after taking into consideration, the product sold, period of the license, and the
Group past experience.

The Group is monitoring changes which can affect the assessment during the period such as changes with the product,
renewals rate etc.

3 Revenue 2018 2017

$’000 $’000

Sale of software license and services 52,060 48,226

Revenue from advertising – 2,376
52,060 50,602

Revenues from sale of software tool and provision of virtual private network (“VPN”) solutions are generated from the App
distribution CGU, while revenues from advertising is generated mainly from the Web Apps and licenses CGU. The revenues
generated from the Media CGU are presented as discontinued operations.

(a) Disaggregation of revenue

The following table presents our revenues disaggregated by the timing of revenue recognition in accordance with our
reporting segments:
2018 2017
(USD, in thousands) (USD, in thousands)
App App Web apps
distribution Total distribution and license Total

Revenue recognised over a period 11,788 11,788 6,454 2,376 8,830

Revenue recognised at a point in time 40,272 40,272 41,772 – 41,772
Total 52,060 52,060 48,226 2,376 50,602

(b) Contract liabilities

The company has recognised the following revenue-related contract liabilities:
December December
31, 2018 31, 2017
(USD, in (USD, in
thousands) thousands)

Contract liabilities 9,514 4,012

Total 9,514 4,012

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Annual Report and Accounts 2018
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

3 Revenue continued
(b) Contract liabilities continued
Significant changes in relation to contract liabilities
The following table shows the significant changes in the current reporting period which relate to carried-forward contract
liabilities.
December December
31, 2018 31, 2017
(USD, in (USD, in
Significant changes in the contract liabilities balances during the period are as follows: thousands) thousands)

Business combination (3,415) (2,324)

Revenue recognised that was included in the contract liability balance from Business combination (1,863) 2,181
Revenue recognised that was included in the contract liability balance at the beginning of the period (3,189) –
Increases due to cash received, excluding amounts recognised as revenue during the period 3,082 (3,537)
Revaluation of contract liabilities in foreign currency (117) (332)

Management expects that 77.2% of the transaction price allocated to the unsatisfied contracts (which represent to contract
liabilities) as of 31 December 2018 will be recognised as revenue during the next annual reporting period ($7,349,000), 15.1%
and 4.5% ($1,432,000 and $433,000) and will be primarily recognised in the 2020 and 2021 financial years, respectively. The
remaining 3.2% ($300,000) will be primarily recognised on the following financial years.

(c) Assets recognised from costs to obtain and fulfil a contract

The Company recognises an asset in relation to marketing costs to obtain a contract. The asset is recognised as the Company
expects to recover the cost over the expected relationship period with the customer which includes the initial contract period
and expected renewals. The expected relationship period with the customer is estimated based on historical contract
renewals data. The asset is amortised on a straight line basis over the expected relationship period with the customer.

In addition, the company recognised an asset for fulfilment costs that are considered directly attributable in fulfilling a
contract. The fulfilment costs comprised of processing fees paid to third party processing service providers. This asset is
amortised on a systematic basis over the initial contract period.

Significant changes in relation to assets recognised from costs to obtain and fulfil a contract
December December
31, 2018 31, 2017
(USD, in (USD, in
thousands) thousands)

Short term Asset recognised from marketing cost to obtain a contract 4,624 1,071
Long term Asset recognised from marketing cost to obtain a contract 7,066 315
Short term Asset recognised from fulfilment cost to fulfil a contract 592 315
Long term Asset recognised from fulfilment cost to fulfil a contract 130 91

Amortization recognised during the period – marketing costs (2,155) (294)

Amortization recognised during the period – fulfilment cost (1,319) (804)

4 Segmental information
Segments revenues and results
On 26 July 2018, the Group disposed the Media division which represented a separate reportable segment in the prior year
and this has been accounted for as a discontinued operation, as set-out in Note 21.

Based on the management reporting system, the group operates two reportable segments:
• App distribution – comprising the Group’s own software and SAAS products and distribution platform;
• Web Apps and License – comprising revenue generated from monetising web apps and licencing the associated
technology; and

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 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

App Web apps

distribution and license Total
2018 2018 2018
Year ended 31 December 2018 $’000 $’000 $’000

Revenue 52,060 – 52,060

Cost of sales (5,605) – (5,605)
Direct sales and marketing costs (20,765) – (20,765)
Segment result 25,690 – 25,690
Central operating costs (15,316)
Adjusted EBITDA(1) 10,374
Depreciation and amortisation (3,800)
Employee share-based payment charge (1,490)
Exceptional and non-recurring costs (1,441)
Operating loss 3,643
Finance income 587
Finance costs (938)
Profit before tax 3,292
Taxation (1,064)
Profit from continuing operations 2,228
Loss from discontinued operations (attributable to equity holders of the company) (2,734)
Loss for the year (506)

Exceptional and non-recurring costs in 2018 comprised non-recurring staff costs of $0.5 million (2017: $0.3 million) mainly due
to payments made to option holders in parallel to the special dividend paid in June, $0.8 million (2017: $0.3 million) for
professional services for acquisitions and rebranding expenses and $0.1 of onerous cost related to lease contract (H1 2017:
Nil). The decrease in Employee share-based payment charge is due to the repurchase of the share-based option
consideration from the founder of CyberGhost, which completed on 20 November 2017.
App Web apps
distribution and license Total
2017 2017 2017
Year ended 31 December 2017 $’000 $’000 $’000

Revenue 48,226 2,376 50,602

Cost of sales (4,572) – (4,572)
Direct sales and marketing costs (26,447) – (26,447)
Segment result 17,207 2,376 19,583
Central operating costs (11,498)
Adjusted EBITDA(1) 8,085
Depreciation and amortisation (2,376)
Employee share-based payment charge (303)
Charge for repurchase of employee options (3,176)
Exceptional and non-recurring costs (796)
Operating profit 1,434
Finance income 277
Finance costs (452)
Profit before tax 1,259
Taxation (1,102)
Profit from continuing operations 157
Loss from discontinued operation (attributable to equity holders of the company) (3,518)
Loss from the year (3,361)

Exceptional and non-recurring costs in 2017 comprised $0.3 million of acquisition bonuses to employees, professional
services related to business combination of $0.3 million and a $0.2 million expense from repurchase of CyberGhost’s founder’s
share options on 20 November 2017.

(1) Adjusted EBITDA is a company specific measure which is calculated as operating loss before depreciation, amortisation, exceptional and non-recurring
costs, employee share-based payment charges and charge for repurchase of employees options which are considered to be one off and non-recurring in
nature as set out in note 5. The Directors believe that this provides a better understanding of the underlying trading performance of the business.

Information about major customers

In 2018 and 2017 there were no customers contributing more than 10% of total revenue of the Group.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

4 Segmental information continued

Geographical analysis of revenue
Revenue by origin 2018 2017
$’000 $’000

Europe 49,302 48,225

British Virgin Islands – 4
Asia – 2,373
US 2,758 –
52,060 50,602

Geographical analysis of non-current assets 2018 2017

$’000 $’000

Europe 23,972 10,364

British Virgin Islands – 1,954
Asia 90 847
US 12,916 –
Total intangible assets and property, plant and equipment 36,978 13,165

5 Operating profit
Adjusted EBITDA
Adjusted EBITDA is calculated as follows:
2018 2017
$’000 $’000

Operating profit 3,643 1,434

Depreciation and amortisation 3,800 2,376
Employee share-based payment charge 1,490 3,479
Exceptional and non-recurring costs:
Non-recurring staff and restructuring costs 1,441 796
Adjusted EBITDA 10,374 8,085
Excluding Web Apps and License Segment – (2,062)
Adjusted EBITDA excluding Web Apps and License segment 10,374 6,023

Operating profit has been arrived at after charging:

2018 2017
$’000 $’000

Exceptional and non-recurring operating costs

Non-recurring staff costs 543 295
Professional services related to business combination 813 293
Expenses from repurchase of employee share options – 208
Costs related to onerous rent agreement 85 –
1,441 796

Auditor’s remuneration:
 Audit 220 158
  Taxation services 7 8
Amortisation of intangible assets 2,305 1,982
Depreciation 286 394
Amortisation of Right-to-use assets 1,209 –
Employee share-based payment charge (note 17) 1,490 3,479

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REPORT GOVERNANCE STATEMENTS

Operating costs
Operating costs are further analysed as follows:
2018 2018 2017 2017
Adjusted Total Adjusted Total
$’000 $’000 $’000 $’000

 Direct sales and marketing costs 20,765 20,765 26,447 26,447

  Indirect sales and marketing costs 6,398 6,799 3,657 3,696
  Selling and marketing costs 27,163 27,564 30,104 30,143
Research and development costs 1,389 1,653 535 856
Management, general and administrative cost 7,529 9,795 7,306 11,221
Depreciation and amortisation 2,079 3,800 963 2,376
Total operating costs 38,160 42,812 38,908 44,596

Adjusted operating costs exclude share based payment charges, exceptional and non-recurring costs, amortisation of
acquired intangible assets and impairment of intangible assets. See note 4.

6 Staff costs
Total staff costs comprise the following: 2018 2017
$’000 $’000

Salaries and related costs 9,988 5,587

Expenses for defined contribution plans 421 291
Employee share-based payment charge (note 17) 1,490 3,478
11,899 9,356

The remuneration of the key management personnel of the Group which comprises the Executive Directors and senior
management team, is set out below:
2018 2017
$’000 $’000

The aggregate remuneration comprised:

Wages and salaries 2,504 1,896
Expenses for defined contribution plans 54 36
Employee share-based payment charge 655 3,608
3,213 5,540

Details of directors’ remuneration are set out in the Remuneration Committee report on pages 28 to 29.

7 Finance costs 2018 2017

$’000 $’000

Interest expense 93 –
Fair value movements on deferred consideration 219 411
Net foreign exchange and Other finance expenses 626 41
938 452

The interest expense relates to lease liabilities on real-estate and vehicles that were originally recognised at fair value.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

8 Taxation
The parent company is domiciled, for tax purposes, in both the Isle of Man and the UK. The final tax charge shown below
arises partially from the difference in tax rates applied in the difference jurisdictions in which the subsidiaries’ jurisdictions.

The Group continues to recognise a deferred tax asset of $159,000 (2017: $97,000) in respect of tax losses accumulated in
previous years.

The total tax charge can be reconciled to the overall tax charge as follows:
2018 2017
$’000 $’000

Profit from continuing operations before income tax expense 3,292 1,259
Loss from discontinuing operation before income tax expense (2,568) (4,153)
724 (2,894)

Tax at the applicable tax rate of 19% (2017: 19%) 137 (550)
Tax effect of
Differences in overseas rates 83 (421)
Expenses not deductible for tax purposes 835 1,253
Deferred tax not recognised on losses carried forward 81 122
Tax expense for previous years 94 63
Tax charge for the year 1,230 467

Income tax expenses/ (credit) is attributable to:

Profit from continuing operations 1,064 1,102
Loss from discontinued operation 166 (635)
1,230 467

The tax expense from continuing operations analysed as:

Deferred taxation in respect of the current year 173 41
Current tax charge 891 1,061
Tax charge for the year 1,064 1,102

The group has maximum corporation tax losses carried forward at each period end as set out below:
2018 2017
$’000 $’000

Corporate tax losses carried forward 38,974 33,235

Details of the deferred tax asset recognised arising in respect of losses and timing differences is set out below:
2018 2017
$’000 $’000

At the beginning of the year 97 166

Additions through business combinations 770 10
Disposal of the media division (12) –
Derecognised in the year from continuing operations (115) (100)
Foreign exchange revaluation (12) 21
At the end of the year 728 97

Details of the deferred tax liability recognised arising from timing differences is set out below:
2018 2017
$’000 $’000

At the beginning of the year 349 691

Arising from business combinations 2,718 366
Foreign exchange differences – 42
Movement in the year due to temporary differences from continuing operations 58 (59)
Movement in the year due to temporary differences from discontinuing operation – (691)
At the end of the year 3,125 349

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In addition, the Group has an unrecognised deferred tax asset in respect of the following:
2018 2017
$’000 $’000

Tax losses carried forward 38,218 33,026

Unrecognised deferred tax assets due to tax losses carried forward 6,603 4,011

9 Intangible assets Capitalised

Software
Intellectual Customer Internet Development
Property Trademarks Lists Goodwill Domains Costs Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000

Cost
At 1 January 2017 36,424 9,462 2,383 685 69 3,450 52,473
Additions – 90 – – 25 1,432 1,547
Acquisition through business combination 1,706 546 743 5,690 – 204 8,889
Foreign exchange differences 212 70 92 479 – 16 869
At 31 December 2017 38,342 10,168 3,218 6,854 94 5,102 63,778
Additions – 6 – – – 2,289 2,295
Acquisition through business combination 5,751 2,491 2,342 16,168 – – 26,752
Disposals (3,663) (2,035) (2,078) (2,524) – (768) (11,068)
Foreign exchange differences (81) 10 24 125 – (30) 48
At 31 December 2018 40,349 10,640 3,506 20,623 94 6,593 81,805

Accumulated amortisation
At 1 January 2017 (33,559) (7,968) (1,415) – – (2,418) (45,360)
Charge for the year (2,320) (1,595) (1,128) – – (1,003) (6,046)
Foreign exchange differences (12) (4) (5) – – (1) (22)
At 31 December 2017 (35,891) (9,567) (2,548) – – (3,422) (51,428)
Charge for the period (1,031) (241) (450) – – (895) (2,617)
Disposals 3,663 2,035 2,078 – – 719 8,495
Foreign exchange differences 15 (5) (4) – – 4 10
At 31 December 2018 (33,244) (7,778) (924) – – (3,594) (45,540)

Net book value

At 1 January 2017 2,865 1,494 968 685 69 1,032 7,113
At 31 December 2017 2,451 601 670 6,854 94 1,680 12,350
At 31 December 2018 7,105 2,862 2,582 20,623 94 2,999 36,265

On 16 October 2018, the Group acquired 100% of the share capital of ZenGuard GMBH trading as ZenMate (“ZenMate”), a
multi-platform security software business with a focus on the provision of virtual private network (“VPN”) solutions. ZenMate is
a digital privacy company, headquartered in Berlin, focused on encrypting and securing internet connections and protecting
individuals’ privacy and digital data, as set out in note 20.

On 24 July 2018, the Group acquired 100% of the share capital of Neutral Holdings Inc trading as Intego (“Intego”), a leading
Mac and IOS cybersecurity and malware protection SaaS business. Intego is focused on the provision of malware protection,
firewall, anti-spam, backup, data protection and parental controls software for Mac, as set out in note 20.

On 26 July 2018, the Group sold the media division to Ecom Online Ltd. This sale is in-line with the Company’s strategy to
develop and distribute its own cybersecurity products. The carrying value of the Intangible assets of the Media division on the
Group balance sheet as the date of the sale is $2.6 million of which the majority related to Goodwill, as set out in note 21.

On 14 March 2017, the Group acquired 100% of the share capital of CyberGhost S.A (“CyberGhost”), a leading cyber security
SaaS provider, with a focus on the provision of virtual private network (“VPN”) solutions. Prior to the acquisition date,
CyberGhost acquired Mobile Concepts GmbH, a software development company based in Germany, for an amount of €1.5
million.

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Annual Report and Accounts 2018
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

9 Intangible assets continued

On 1 April 2017, the Company increased its holding in Clearvelvet Trading Limited (“Clearvelvet”) to 50.01% of the share capital
by acquiring an additional 33.34% of its issued share capital. In September 2015, the Group acquired 16.67% of the share
capital of Clearvelvet for a total consideration of $850,000, of which $350,000 paid in 2016 with the completion of certain
milestones.

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGUs), or group of units
that are expected to benefit from that business combination.

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined from value in use calculations. Goodwill allocated to the App
Distribution CGU has a carry amount of $20,623,000 (2017: $4,330,000).

The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected
changes to selling prices and direct costs during the period.

For the App Distribution CGU, the recoverable value has been determined from value in use calculations based on cash flow
projections for the next five years from the most recent budgets approved by management and extrapolated cash flows
beyond this period using an estimated growth rate of 1 per cent (2017: 1 per cent). This rate does not exceed the average
long-term growth rate for the relevant markets. The rate used to discount these forecast cash flows is 25 per cent (2017: 25
per cent).

The discount rate used in the valuation of the App Distribution CGU was 25 per cent. If the discount rate was increased by 1
percentage point the effect would have been nil. There is no reasonably possible change in assumption that would give rise to
an impairment.

10 Property, plant and equipment

Furniture,
fixtures and
Computer office Leasehold
equipment equipment improvements Cars Total
$’000 $’000 $’000 $’000 $’000

Cost
At 1 January 2017 976 279 450 – 1,705
Additions 215 40 174 111 540
Disposals (67) (140) (350) – (557)
Acquisition through business combination 94 60 14 42 210
Foreign exchange differences 22 6 2 9 39
At 31 December 2017 1,240 245 290 162 1,937
Additions 99 43 37 – 179
Disposals (17) (57) (146) (17) (237)
Acquisition through business combination 35 47 – – 82
Foreign exchange differences (15) – 5 4 (6)
At 31 December 2018 1,342 278 186 149 1,955

Accumulated depreciation:
At 1 January 2016 (711) (88) (315) – (1,114)
Charge for the period (250) (29) (106) (14) (399)
Disposals 55 44 304 – 403
Foreign exchange differences (9) (1) – (2) (12)
At 31 December 2017 (915) (74) (117) (16) (1,122)
Charge for the period (196) (37) (10) (45) (288)
Disposals 12 22 126 15 175
Foreign exchange differences (5) (1) – (1) (7)
At 31 December 2018 (1,104) (90) (1) (47) (1,242)

Net book value

At 1 January 2017 265 191 135 – 591
At 31 December 2017 325 171 173 146 815
At 31 December 2018 238 188 185 102 713

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REPORT GOVERNANCE STATEMENTS

11 Trade and other receivables 2018 2017

$’000 $’000

Trade receivables and contract assets 3,648 8,536

Prepayments 1,267 663
Other receivables 1,186 1,872
6,101 11,071

Other receivables as of 31 December 2018 include VAT receivable balance of $736,000 (2017: $742,000).

The fair values of trade and other receivables due within one year approximate to their carrying amounts as presented above.
The exposure of the Group to credit risk and impairment losses in relation to trade and other receivables is set out in note 16
of the consolidated financial statements.

12 Cash and cash equivalents 2018 2017

$’000 $’000

Cash in bank accounts 22,462 17,844

Bank deposits 17,943 51,658
40,405 69,502

The carrying value of these assets represents a reasonable approximation to their fair value.

13 Trade and other payables 2018 2017

$’000 $’000

Trade payables 4,146 2,469

Accrued expenses 3,303 4,643
Employee liabilities 1,361 655
Current tax liability 2,004 1,573
Other payables 317 754
11,131 10,094

The Group’s management consider that the carrying value of trade and other payables approximates their fair value. The
Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe and no
interest has been charged by any suppliers as a result of late payment of invoices.

14 Shareholder’s equity
2018 2017
Number of Shares Number of Shares

Issued and paid up ordinary shares of $0.0001 148,496,073 148,496,073

During the year a total of 374,095 new ordinary shares of $0.0001 par value from treasury were sold for cash in relation to
share option schemes resulting in cash consideration of $363,000 (2017: $437,000).

During the year 1,800,000 shares were transferred out of treasury to an employee benefit trust as part of a jointly owned
equity shares award to members of the executive management.

During 2017 a total of 3,810,667 of share option of $0.0001 par value were repurchased by the Company for a total cash
consideration of $3,800,000.

As at 31 December 2018, the Company hold in the treasury total of 4,476,153 of ordinary shares of $0.0001 per value (2017:
6,650,248). During 2018, 374,095 of ordinary shares of $0.0001 par value were transferred out of treasury to satisfy the
exercise of options by the company employees (2017: 801,175).

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57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

14 Shareholder’s equity continued

The following describes the nature and purpose of each reserve within owner’s equity:
Reserve Description and purpose

Additional paid in capital Share premium (i.e. amount subscribed or share capital in
excess of nominal value)
Retained earnings Cumulative net gains and losses recognised in the
consolidated statement of comprehensive income
Foreign exchange Cumulative foreign exchange differences of translation of
foreign operations

In accordance with Isle of Man Company Law, all of the reserves with the exception of share capital are distributable.

15 Interests in associates
On 1 April 2017, the Company increased its holding in Clearvelvet Trading Limited (“Clearvelvet”) to 50.01% of the share capital
of Clearvelvet by acquiring an additional 33.34% of its issued share capital. In September 2015, the Group acquired 16.67% of
the share capital of Clearvelvet for a total consideration of $850,000, of which $350,000 paid in 2016 on completion of certain
milestones.

Although the Group held less than 20% of the equity shares of the voting power at shareholder meetings, until 1 April 2017,
the Group exercises significant influence by virtue of its contractual right to appoint one of four directors to the Board of
Directors of Clearvelvet and to veto certain significant trading and investment decisions.

On 26 July 2018, the company decreased its holding in Clearvelvet to 0% of the share capital of Clearvelvet as part of the sale
of the Media division, as set-out in note 21.
2018 2017
$’000 $’000

Interest in associates at the beginning of the year – 859

Share of results (40)
Re-measurement gain on equity interest in associate – 52
Transfer on increase in stake – (871)
Interest in associates at the end of the year – –

Aggregated amounts relating to Clearvelvet as an equity accounted associate are as follows:

2018 2017
$’000 $’000

Total current assets – –

Total current liabilities – –
Revenues – –
Profit (Loss) – (240)*

* Clearvelvet loss until 1 April 2017.

16 Financial Instruments and risk management

The Group is exposed to the risks that arise from its use of financial instruments. This note describes the objectives, policies
and processes of the Group for managing those risks and the methods used to measure them. Further quantitative
information in respect of these risks is presented throughout this financial information.

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises are as follows:
• Trade and other receivables
• Trade and other payables
• Cash and cash equivalents
• Deferred consideration
• Contingent consideration
• Lease liabilities

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REPORT GOVERNANCE STATEMENTS

Financial assets
The Group held the following financial assets:
2018 2017
$’000 $’000

Contingent consideration (see note 21) 1,257 –

Trade receivables and contract assets 3,648 8,536
Other receivables 1,186 1,872
Cash 40,405 69,502
46,496 79,910

Financial liabilities
The Group held the following financial liabilities:
2018 2017
$’000 $’000

Amortised cost
Trade payables 4,146 2,469
Other payables and accrued expenses 4,728 5,939
Lease liabilities (see note 23) 1,919 –
Deferred consideration (see note 25) 1,039 1,915
11,832 10,323

The Group’s Directors monitor and manage the financial risks relating to the operation of the Group. These risks include
market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk.

Market risk
(a) Foreign currency risk management
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.
Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency
that is not the Group’s measurement currency. The Group is exposed to foreign exchange risk arising from various currency
exposures primarily with respect to the Israeli New Shekel, British Pound, Euro, Australian Dollar, Philippines peso and
Romanian Leu. The Group’s management monitors the exchange rate fluctuations on a continuous basis and acts accordingly
and also avoids engaging in a significant level of transactions in currencies which are considered volatile or exposed to risk of
significant fluctuations.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting
date are as follows:
Liabilities Assets
2018 2017 2018 2017
$’000 $’000 $’000 $’000

Israeli New Shekel 1,135 541 696 524

Euro 1,744 308 5,612 6,028
British Pound 262 74 962 259
Australian Dollar 3 – – –
Romanian Lei 941 269 309 219
Philippines peso 316 – 357 –
Japanese Yen 6 – 5 –
4,407 1,192 7,941 7,030

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59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

16 Financial Instruments and risk management continued

Market risk continued
(a) Foreign currency risk management continued
A 10% weakening of the United States Dollar against the following currencies at 31 December 2018 would have increased/
(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular
interest rates, remain constant. For a 10% strengthening of the United States Dollar against the relevant currency, there would
be an equal and opposite impact on the profit and other equity.
Profit or loss
2018 2017
$’000 $’000

Israeli New Shekel (44) (2)

Euro 387 572
British Pound 70 19
Australian Dollar – –
Romanian Lei (63) (5)
Philippines peso 4 –
Japanese Yen – –
354 584

(b) Interest rate risk management

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The
Group has no material interest bearing financial instruments and is therefore not exposed to changes in market rates of
interest or fair value interest rate risk.

At the reporting date the interest rate analysis of financial instruments was:
2018 2017
$’000 $’000

Fixed rate financial instruments

Financial assets 40,405 69,502
Financial liabilities (note 23) (1,919) –
38,486 69,502

Any increase/ (decrease) in interest rates will have no effect on results and equity of the Group, because, all financial
instruments are fixed rate.

Credit risk
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash
inflows from financial assets on hand at the reporting date. The principle credit risk is considered to result from new
relationships with customers with which the Group does not have a long working relationship and for which reliable
information as to their credit ratings cannot be obtained. In such cases the Group limits the initial credit facility afforded to
these customers. Cash balances are held with high credit quality financial institutions and the Group has policies to limit the
amount of credit exposure to any financial institution or customer.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at
the reporting date was:
2018 2017
$’000 $’000

Trade and other receivables 4,184 9,527

Cash at bank 22,462 17,844
Bank deposits 17,943 51,658
Receivables from related companies 650 881
Short term Asset recognised from marketing cost to obtain a contract 4,624 1,071
Long term Asset recognised from marketing cost to obtain a contract 7,066 315
56,929 81,296

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash
inflows from financial assets on hand at the balance sheet date.

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 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

Wherever possible and commercially practical the Group invests cash with major financial institutions that have a rating of at
least A- as defined by Standard & Poors. While the majority of money is held in line with the above policy, a small amount is
held at various institutions with no rating. The Group holds approximately 3.5% of its funds (2017: 2.9%) in financial institutions
below A- rate and 0.3% in payment methods with no rating (2017:4.4%).

Management expects that 39.5% of assets recognised to obtain a contract as of 31 December 2018 will be recognised as
expense during the next annual reporting period ($4,624,000), 33.1% and 22.8% ($3,867,000 and $2,663,000) and will be
primarily recognised in the 2020 and 2021 financial years, respectively. The remaining 4.6% ($536,000) will be primarily
recognised on the following financial years
Financial
Financial institutions
institutions below
with A- and A- rating and
Total above rating no rating
$’000 $’000 $’000

At 31 December 2018 40,405 38,860 1,545

At 31 December 2017 69,502 64,431 5,071

Before accepting a new customer, the Group assesses each potential customer’s credit quality and risk. Customer contracts
are drafted to reduce any potential credit risk to the Group. Where appropriate the customer’s recent financial statements are
reviewed.

The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on
the days past due. The expected loss rates are based on the payment profiles of sales over a period of 90 days month before
31 December 2018 or 1 January 2018 respectively and the corresponding historical credit losses experienced within this period.

At 31 December the expected credit losses provision for trade receivables and contract assets is as follows:
Between 1 Between 31 More than
and 30 days and 30 days 60 days past
Current past due past due due
$’000 $’000 $’000 $’000

Expected loss rate 0% 0% 0% 0%

Gross carrying amount 3,536 40 32 40
Loss provision – – – –

The ageing of trade receivables that are past due but not impaired is shown below:
2018 2017
$’000 $’000

Between 1 and 30 days 40 455

Between 31 and 60 days 32 411
More than 60 days 40 1,734
112 2,600

The Group holds a specific loss provision of $17,000 at 31 December 2018 (2017: $239,000). The expected credit loss rate is
immaterial to the Group, given the nature of the Group’s activities operating within B2C markets. At 31 December 2018, the
Group had trade receivables of $112,000 (2017: $2,600,000) that were past due but not impaired.

Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group and any
change in the credit quality from the date the credit was initially granted up to the reporting date.

Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent
recoveries of amounts previously written off are credited against the same line item.

In determining the recoverability of trade receivables, the Group considers any change in the credit quality of the trade
receivable from the date the credit was initially granted up to the reporting date. The Group does not hold any collateral as
security. Impairments of trade receivables are expensed as operating expenses.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

16 Financial Instruments and risk management continued

Liquidity risk management
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position
potentially enhances profitability but can also increase the risk of losses. The Group has procedures with the object of
minimising such losses such as maintaining sufficient cash and other highly liquid current assets.

The Group’s liquidity risk is monitored using regular cash flow reporting and projections to ensure that it is able to meet its
obligations as they fall due.

The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn
up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required
to pay. The table includes both interest and principal cash flows.
Carrying Contractual 3 months Between Between More than
amounts cash flows or less 3-12 months 1-5 years 5 years
2018 $’000 $’000 $’000 $’000 $’000 $’000

Trade and other payables 8,664 8,664 8,664 – – –

Payables to related parties 210 210 210 – –
Lease liabilities 1,919 2,026 366 782 878
Deferred consideration 1,039 1,243 226 717 300 –
11,832 12,143 9,446 1,499 1,178 –

Carrying Contractual 3 months Between Between More than

amounts cash flows or less 3-12 months 1-5 years 5 years
2017 $’000 $’000 $’000 $’000 $’000 $’000

Trade and other payables 8,318 8,318 8,318 – – –

Payables to related parties 90 90 90 – –
Deferred consideration 1,915 2,249 236 728 1,285 –
10,323 10,657 8,644 728 1,285 –

Capital risk
The Group seeks to maintain a capital structure which enables it to continue as a going concern and which supports its
business strategy. The Group’s capital is provided by equity and manages its capital structure through cash flow from
operations. The Group invest available funds within short-term bank deposit which support the Group future available capital.

17 Employee share-based payments

Options have been granted under the Group’s share option scheme to subscribe for ordinary shares of the Company.
At 31 December 2018, the following options were outstanding (2017: 8,490,329):
Subscription
Number of shares price per
Group Grant date under option share

Group 1 29 May 2014 1,258,132 $0.538

Group 2 21 April 2015 338,781 $1.305
Group 3 5 January 2016 291,500 $0.710
Group 4 31 May 2016 2,000,000 $0.352
Group 5 26 October 2016 2,232,272 $0.467
Group 6 3 April 2017 884,333 $0.0001
Group 7 15 June 2017 991,287 $0.845
Group 8 26 April 2018 67,500 $0.0001
Group 9 26 April 2018 485,000 $1.280
Group 10 13 July 2018 1,810,000 $1.437
Group 11 24 August 2018 1,800,000 $0.000
Total 12,158,805

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REPORT GOVERNANCE STATEMENTS

Vesting conditions
Groups 1-5 and 7-10 – 25% at the end of the first year following the grant date. 6.25% on a quarterly basis during 12 quarters
period thereafter.

Group 6 – 50% at the end of the second year following the grant date and the remainder at the end of the third year following
the grant.

Group 11 – 33.33% on a yearly basis during 3 years period following the grant date subject to certain performance conditions

The total number of shares exercisable as of 31 December 2018 was 5,864,311 (2017: 2,973,348).

The weighted average fair value of options granted in the year using the Cox, Ross and Rubinstein’s Binomial Model (the
“Binomial Model”) was $1.03. The inputs into the Binomial model are as follows:
2018 2017
$’000 $’000

Early exercise factor 100% 150%

Fair value of Group’s stock $1.51-$1.61 $0.78
Expected Volatility 60% 70%
Risk free interest rate 0.72%-1.50% 0.16%-1.11%
Dividend yield – –
Forfeiture rate 0%-28% 43%

We used the empirical observations for early exercise factor of public companies as an appropriate benchmark for the
expected early exercise factor.

Expected volatility was determined based on the historical volatility of comparable companies.

Forfeiture rate is assumed to be 0% for senior management and 28% for other employees.

The risk-free interest rate was estimated based on average yields of UK Government Bonds.

The Group recognised total share based payments relating to equity-settled share based payment transactions as follows:
2018 2017
$’000 $’000

Share-based payment charge 1,490 303

Charge for repurchase of employee options – 3,176

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
2018 2017
Weighted average Weighted average
exercise price Number of options exercise price Number of options

At the beginning of the year $0.55 8,490,329 $0.66 10,259,383

Granted $0.81 4,162,500 $0.17 5,843,424
Lapsed $0.96 (119,929) $0.81 (3,000,633)
Exercised $1.02 (374,095) $0.55 (801,178)
Repurchased by the company – – $0.0001 (3,810,667)
At the end of the year $0.59 12,158,805 $0.55 8,490,329

The options outstanding at 31 December 2018 had a weighted average remaining contractual life of 7.9 years (2017: 8.2 years).
On 24 August 2018, the Company awarded 1,800,000 in respect of its ordinary shares of $0.0001 each have been granted
under the Company’s 2014 Global Equity Plan to members of its executive management. The Awards vest equally over the
three-year period from grant, subject to the achievement of certain performance metrics relating to the three financial years
of the Company commencing 1 January 2018. The Awards have been granted as Jointly Owned Equity Awards (“JOE Awards”).
Under the terms of the Awards, the Executives will benefit from the growth in value of their respective Award from the date of
grant along with the right to acquire the Trustee’s interest by way of a nil cost option in the event that the Awards vest.

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63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

18 Earnings per share

Basic loss/earnings per share is calculated by dividing the loss /earnings attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the year.
2018 2017
cents cents

Basic earnings per share:

From continuing operations 1.5 0.1
from discontinued operations (1.8) (2.5)
Total basic earnings per share (0.3) (2.4)

Diluted earnings per share:

From continuing operations 1.5 0.1
from discontinued operations (1.8) (2.5)
Total diluted earnings per share (0.3) (2.4)

Adjusted basic 5.2 3.8

Adjusted diluted 5.0 3.7

Adjusted earnings per share is a non-GAAP measure and therefore the approach may differ between companies. Adjusted
earnings have been calculated as follows:
2018 2017
$’000 $’000

Loss for the year (506) (3,361)

Post tax adjustments:

Employee share-based payment charge 1,578 3,535
Exceptional and non-recurring costs 1,403 793
Amortisation on acquired intangible assets 1,905 4,439
Loss from discontinued operations 2,723 –
Finance cost on deferred consideration for options repurchase 247 –
Adjusted profit for the year 7,350 5,406

Number Number

Denominator – basic:
Weighted average number of equity shares for the purpose of earnings per share 142,008,376 141,547,496

Denominator – diluted
Weighted average number of equity shares for the purpose of diluted earnings
per share 147,955,573 145,260,658

The diluted denominator has not been used where this has anti-dilutive effect. Basic and diluted loss per share are therefore
the same for reporting purposes.

The difference between weighted average number of Ordinary shares used for basic earnings per share and the diluted
earnings per share is 5,947,198 (2017: 3,713,162) being the effect of all potentially dilutive Ordinary shares derived from the
number of share options granted to employees.
 

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REPORT GOVERNANCE STATEMENTS

19 Subsidiaries
Name Country of incorporation Principal activities Holding %

BestAd Hi Tech Media Limited (**) Israel Development technical support and marketing 100
services
Crossrider Advanced Technologies Israel Development services and technical and marketing 100
Limited (**) support
Crossrider (Israel) Limited (**) Israel Provision of marketing services to related parties 100
Crossrider Technologies Limited Cyprus Licensing of IP software and agency services to 100
(formerly Market Connect (Cyprus) related parties
Limited)
Crossrider Sports Limited (**) United Kingdom Provision of consulting services 100
Reimage Limited Isle of Man Development and sale of the “Reimage” software tool. 100
Reimage Limited(**) Cyprus Consulting, market research and software 100
development services
R.S.F Remote Software Fixing Israel Provision of development, technical support and 100
Limited (**) marketing support services to its parent company
Crosspath Trading Limited British Virgin Islands Performance of commercial activity through the 100
licensing of technology from Crossrider technologies
Ltd
Blueroad Trading Limited Cyprus Provision of agency services to Crosspath Limited 100
Frontbase Trading Limited Cyprus Provision of agency services to Crosspath Limited 100
Crossrider ROM SRL(**) Romania Provision of marketing and development services 100
Definiti Media Ltd(**) Israel Providing digital advertising services for mobile 100
platforms
CyberGhost SRL(**) Romania leading cyber security SaaS provider, with a focus on 100
the provision of virtual private network (“VPN”)
solutions
Mobile Concept(**) Germany Provision of software development services to its 100
parent company
Neutral Holding Inc United Sates of Holding company of Intego inc, a leading cyber 100
America security SaaS provider, with a focus on the provision
of malware protection to Macintosh operating
systems.
Intego SA (**) France Development and technical support services. 100
Intego Inc (**) United Sates of A leading cyber security SaaS provider, with a focus 100
America on the provision of malware protection to Macintosh
operating systems
ZenGuard GMBH Germany A leading cyber security SaaS provider, with a focus 100
on the provision of malware protection to Macintosh
operating systems
Kape Technologies Employee Benefit Jersey Employee benefit trust 100
Trust

(**) Indirect shareholding

The Group has been formed from a series of common control transactions which have been accounted for using merger
accounting; and acquisitions from third parties which have been accounted for using the acquisition method.

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65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

20. Business combinations

(a) Acquisition of Neutral Holdings Inc
On 24 July 2018, the Group acquired 100% of the share capital of Neutral Holdings Inc trading as Intego (“Intego”), a leading
Mac and IOS cybersecurity and malware protection SaaS business. Intego is focused on the provision of malware protection,
firewall, anti-spam, backup, data protection and parental controls software for Mac.

The Acquisition is directly in-line with Kape’s core strategy to accelerate its growth in the cybersecurity market through select
acquisitions, and brings significant strategic benefits to the Company.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill, are as follows:
Acquiree’s
carrying
amount
before
combination Fair value
$’000 $’000

B2C Brand – 625

Customer relations – 2,155
Corporate Trademark – 1,334
Technology – 3,687
Deferred tax liability (61) (1,857)
Cash and cash equivalents 510 510
Trade and other receivables 229 229
Property, plant and equipment 67 67
Deferred Contracts costs 291 291
Deferred tax assets 684 684
Contract liabilities (2,499) (2,499)
Trade and other payables (931) (931)
(1,710) 4,295
Fair value of consideration
Cash 15,979
Goodwill 11,684

Net cash outflow on acquisition of business

2017
$’000

Cash consideration 15,979

Cash and cash equivalents acquired (510)
15,469

Intego is being acquired for a total consideration of $16.0 million cash, from internal cash resources, to be satisfied on closing
of the Acquisition.

Since the acquisition date, Intego has contributed $2.9 million to group revenues, profit of $1.1 million to group loss. In
addition, since the acquisition date Intego contributed $2.6 million to segment results of the app distribution segment (as set
out in note 4). If the acquisition had occurred on 1 January 2018, group revenue would have been $55.5 million, group loss for
the period would have been $0.9 million and the app distribution segmental result would have been $28.2 million.

Acquisition costs of $0.6 million arose as a result of the transaction. These have been recognised as part of administrative
expenses in the statement of comprehensive income.

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(b) Acquisition of ZenGuard GMBH

On 16 October 2018, the Group acquired 100% of the share capital of ZenGuard GMBH trading as ZenMate (“ZenMate”), a
multi-platform security software business with a focus on the provision of virtual private network (“VPN”) solutions. ZenMate is
a digital privacy company, headquartered in Berlin, focused on encrypting and securing internet connections and protecting
individuals’ privacy and digital data.

The Acquisition is highly complementary to CyberGhost, Kape’s existing VPN solution.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill, are as follows:
Acquiree’s
carrying
amount
before
combination Fair value
$’000 $’000

Customer relations – 187

Brand – 532
Technology – 2,064
Deferred tax liability (29) (861)
Property, plant and equipment 15 15
Deferred Contracts costs 96 96
Trade and other receivables 139 139
Cash and cash equivalents 200 200
Deferred tax asset – 86
Contract liabilities (916) (916)
Trade and other payables (472) (472)
(967) 1,070
Fair value of consideration
Cash 5,554
Goodwill 4,484

ZenMate is being acquired from several venture capital funds and private investors, including the founders of the business, for
a total consideration of $5.6 million (€4.8 million) in cash, funded from Kape’s internal cash resources, to be satisfied on
closing of the Acquisition.

As part of the acquisition, Kape indicated a restructuring plan which was planned and designed by ZenMate former
management. The restructuring plan was intended to downsize ZenMate’s staff and reduce operational costs. The
restructuring plan cost was circa $0.3 million and was completed in January 2019.

Net cash outflow on acquisition of business 2018

$’000

Cash consideration 5,554

Cash and cash equivalents acquired (200)
5,354

Since the acquisition date, ZenMate has contributed $0.55 million to group revenues, profit of $0.1 million to group loss and
$0.4 million to segment results (as set out on note 4). If the acquisition had occurred on 1 January 2018, group revenue would
have been $54.2 million, group loss for the period would have been $1.7 million and the app distribution segmental result
would have been $26.7 million.

Acquisition costs of $0.1 million arose as a result of the transaction. These have been recognised as part of administrative
expenses in the statement of comprehensive income.

KAPE TECHNOLOGIES PLC

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67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

21 Discontinued operation
(a) Description
On 26 July 2018, the Group sold the Media division to Ecom Online Ltd. As for the sale date, the Media division included
Clearvelvet Trading Limited (“Clearvelvet”) and Intangible assets of the Media CGU. This sale is in-line with the Company’s
strategy to develop and distribute its own cybersecurity products.

(b) Financial performance

The financial performance and cash flow information presented are for the period ended 26 July 2018 (2018 column) and the
year ended 31 December 2017.
2018 2017
$’000 $’000

Revenue 4,185 15,781

Share of results of equity accounted associates – (40)
Expenses (4,501) (19,895)
Loss before income tax (316) (4,154)
Income tax income/ (expenses) (166) 636
Loss after income tax of discontinued operation (482) (3,518)
Loss on sale of the Media division (2,252) –
Loss from discontinued operation (2,734) (3,518)

Net cash outflow from operating activities (336) (603)

Net cash outflow from investing activities (341) (175)
Net cash flow from financing activities – –
Net decrease in cash generated by the Media division (677) (778)

(c) Details of the sale of the subsidiary

2018
$’000

Consideration received or receivable:

Short term fair value of contingent consideration 323
Long term fair value of contingent consideration 934
Total consideration 1,257
Carry amount of net assets sold
Goodwill (2,524)
Capitalised Software Development Costs (49)
Investment (50)
Property, plant and equipment (4)
Trade and other receivables (2,517)
Deferred tax asset (12)
Cash and cash equivalents (341)
Trade and other payables 999
(4,498)
Non-controlling interest 989
Loss on sale (2,252)

As consideration, the Group will receive a 50% share of EBITDA from the Media division for the next five years following the
sale, which will be reinvested in the Group’s core App Distribution segment, where all Media division employees were be
transferred to.

In order to calculate contingent consideration, the recoverable value has been determined from value in use calculations
based on cash flow projections for the next five years agreed upon with the acquiree.

The discount rate used in the valuation was 25 per cent. If the discount rate was increased by 1 percentage point the effect
would have been $0.03 million. There is no reasonably possible change in assumption that would give rise to an impairment.

68 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

22 Related party transactions

The Group is controlled by Unikmind Holdings Limited incorporated in British Virgin Islands, which owns 72.77% of the
Company’s shares. The controlling party is the Unikmid holding Ltd, established under the laws of British Virgin Islands. Mr.
Teddy Sagi is the sole ultimate beneficiary of Unikmind Holding Ltd.

(a) Related party transactions

The following transactions were carried out with related parties:
2018 2017
$’000 $’000

Revenue from common controlled company 85 2,587

Technical support services to end customers provided by common controlled company (2,227) (2,704)
Payment processing services provided by common controlled company (376) (208)
Office rent expenses to common controlled companies – (230)
Amortisation of Right-to-use assets with common controlled companies (Note 23) (744) –
Interest expenses from Lease liabilities to common controlled companies (71) –
Loss debt from related parties (Note 23) (323) –
(3,656) (555)

(b) Receivables owed by related parties (Note 16)

2018 2017
Name Nature of transaction $’000 $’000

Parent company Unpaid share capital 10 10

Companies related by virtue of common control Trade 650 881
660 891

(c) Payables to related parties (Note 16)

2018 2017
Name Nature of transaction $’000 $’000

Companies related by virtue of common control Other 210 90

210 90

(d) Right-to-use assets and Lease liabilities to related parties (Note 23)
2018 2017
$’000 $’000

Right-to-use assets 1,422 –

Lease liabilities (1,543) –

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

23 Operating leases
Effective January 1, 2018, the Company early adopted IFRS 16, which specifies how to recognize, measure, present and
disclose leases. The Company has not restated comparatives for the 2017 reporting period, as permitted under the specific
transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are
therefore recognised in the opening balance sheet on 1 January 2018.

On initial application, the group recognised lease liabilities in relation to leases which had previously been classified as
‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee’s incremental borrowing rate as of 1 January 2018. The weighted average
lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2018 was 4.49%. The Company has elected to
record right-of-use assets based on the corresponding lease liability.

In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:
• The use of a single discount rate to a portfolio of leases with reasonably similar characteristics
• Reliance on previous assessments on whether leases are onerous
• The exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
• The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead,
for contracts entered into before the transition date the group relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.

The Company’s operating lease liability at December 31, 2017, as previously disclosed in the Company’s consolidated financial
statements (2017: $578,000) differs from the lease liability recognised on initial application of IFRS 16 at January 1, 2018
$1,408,550. The differences attributed mainly to, management assumptions for periods of the leases contract, and the
Company decision to apply the practical expedient to account for each lease component and any non-lease components as a
single lease component.

The recognised right-of-use assets relate to the following types of assets:

2018
Rights-of-use assets: $’000

Real estate leases 1,720

Vehicles 49
1,769

Right-of-Use Assets
Real estate
leases Vehicles Total
$’000 $’000 $’000

At 1 January 2018 1,331 77 1,408

Additions 1,265 – 1,265
Additions through business combination 305 – 305
Amortisation (1,181) (28) (1,209)
At 31 December 2018 1,720 49 1,769

The Group had sub-leased one of the Right-of-use asset on 2018, for total consideration of $0.1 million.

Lease liabilities
Real estate
leases Vehicles Total
$’000 $’000 $’000

At 1 January 2018 1,331 77 1,408

Additions 1,265 - 1,265
Additions through business combination 305 - 305
Interest expense 82 11 93
Lease payments (1,058) (29) (1,087)
Foreign exchange movements (62) (3) (65)
At 31 December 2018 1,863 56 1,919

70 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
 STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

Carrying Contractual 3 months Between Between More than

amount cash flow or less 3-12 months 1-5 years 5 years
2018 $’000 $’000 $’000 $’000 $’000 $’000

Lease liabilities 1,919 2,026 366 782 878 –

The Company leases various offices and vehicles. Lease terms are negotiated on an individual basis and contain a wide range
of different terms and conditions. The lease agreements do not impose any covenants.

Extension and termination options are included in a number of property and equipment leases across the group. These terms
are used to maximize operational flexibility in terms of managing contracts.

24 Contingent liabilities
The Group had no contingent liabilities as at 31 December 2018.

25 Deferred consideration
(a) Acquisition of AjillionMax
The consideration for the acquisition of certain assets of AjilionMAX Limited in May 2014 included $654,000 deferred
consideration. Of this $104,000 was repaid during the year ending 31 December 2014, $156,000 was repaid during the year
ending 31 December 2015, $189,000 was repaid during the year ending 31 December 2016 and the remainder was repaid
during the year ending 31 December 2017.

In addition, $435,000, included as part of the acquisition arrangements, has been recognised directly in the income statement
during the year ending 31 December 2015, out of which $209,000 was paid in May 2017.

(b) Acquisition of DriverAgent intangibles

In October 2016, the Group acquired the intellectual property of PC maintenance software product, DriverAgent, from
eSupport.com, Inc for a total consideration of $1.2 million. As for 31 December 2018, the consideration included $0.17 million
of deferred consideration (2017: $0.17 million) which is contingent on future results.

(c) Repurchase of share-based consideration

On 20 November 2017, the Company repurchased 3,810,667 options out of the 4,057,813 option granted to the Cyberghost’s
former founder for total cash consideration of $3.8 million (€3.2 million). Out of which $1.9 million (€1.625 million) paid upon
execution of the purchase agreement, while the remaining amount to be paid in eight equal instalments amounting of $235
thousand (€197 thousand) per quarter over the course of two years and recognised as deferred consideration. As for 31
December 2018, the consideration included $0.9 million of deferred consideration (2017: $1.75 million) which will be fully paid
in 2019.

(d) Sale of the Media Division

On 26 July 2018, the Group sold the media division to Ecom Online Ltd. This sale is in-line with the Company’s strategy to
develop and distribute its own cybersecurity products. As consideration, the Group will receive a 50% share of EBITDA from
the Media division for the next five years following the sale, which will be reinvested in the Group’s core App Distribution
segment, where all Media division employees were be transferred to. As at 31 December 2018, the consideration included
$1.3 million of contingent consideration receivable.

26 Subsequent events
There were no material events after the reporting period, which have a bearing on the understanding of the consolidated.

KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
71
SHAREHOLDER INFORMATION AND ADVISORS

Shareholder information, including financial results, news and information on products and services, can be found
at www.kape.com.

Independent Auditor Corporate Legal Advisors

BDO LLP Morrison Foerster
55 Baker Street CityPoint
London W1U 7EU One Ropemaker Street
London, United Kingdom EC2Y 9AW
Nominated Advisor and Broker
Shore Capital & Corporate Limited Joint Broker
Bond Street House Nplus1 Singer Advisory LLP
14 Clifford Street 1 Bartholomew Lane
London W1S 4JU London EC2N 2AX
United Kingdom
Investor Relations
Vigo Communications Registrars
180 Piccadilly Computershare Investor Services (Jersey) Limited
London W1J 9HF Queensway House
Hilgrove Street
Registered Office St Helier
Sovereign House Jersey JE1 1ES
4 Christian Road
Douglas Stock exchanges
Isle of Man IM1 2SD The Company’s ordinary shares are listed on the AIM market
of the London Stock Exchange under the symbol “KAPE”.
The Company does not maintain listings on any other
stock exchanges.

72 KAPE TECHNOLOGIES PLC

Annual Report and Accounts 2018
Kape Technologies plc
LABS Atrium
Stables Market
Chalk Farm Road
London NW1 8AH
Tel: +44 (0) 203 355 7926
Email: [email protected]