MAIS.L Regulatory News (MAIS)

Maistro plc

(the "Company")

Final Results

The Board is pleased to report continuing material improvement in revenue performance, which increased by 154% when compared to 2017. Revenue growth has been driven by the increasing adoption of services by Multinational Enterprises enabling Maistro to drive operational efficiencies against a background of stringent cost control.

The adjusted EBITDA loss increased 1% to £2.11m (2017: £2.08m) due to increased investment in business development activities which has significantly contributed to the revenue growth in 2018.

The Group has increased its investment in its PaaS ("Procurement-as-a-Service") Platform with the implementation and continued investment in its "AI" technology to further drive operational efficiencies.

To support this investment, the Board successfully raised £2.1m net after issue costs, receiving £1.2m during 2018 and £0.9m in January 2019.

As disclosed in the Interim Results, the Board concluded in 2018 that the reporting currency of the Group has been changed to GBP Sterling from US Dollars to provide greater transparency in the operating results of the Group.

In relation to strategic and operational highlights, the successful re-branding of the business was completed in January 2018. The Group appointed Ian Cleverly to the Board as Chief Financial Officer on 9 April, and appointed PricewaterhouseCoopers as its auditors.

The Board is encouraged by the Group's performance for the year ended 31 December 2018 and continues to invest in its PaaS Platform and business development team in order to further drive revenue growth, improve gross margins and deliver value to its customers.

Summary Financial Highlights

** Adjusted EBITDA is loss before interest, tax, depreciation and amortisation, foreign exchange movements and share option costs. EBITDA is a key monitoring tool used by the Board to monitor underlying trading performance while excluding the impact of non-trading items which may, due to one off adjustments, materially impact reported performance. (In 2017 this specifically referred to a material share based payment credit generated by the departure of the Board of Directors and subsequent forfeiture of their share options, and foreign exchange movements, which are deemed outside the scope of measuring underlying performance. There were no such one-off adjustments in 2018).

Enquiries

Chairman's Statement

Maistro has made good progress during 2018 with strong sales growth and improvement in gross margin contribution. Revenue growth has been driven by the increasing use of Maistro's PaaS Platform by Multinational Enterprises which will be the bedrock of the Group's growth during 2019. Ongoing investment in the PaaS Platform has enabled the Group to stay ahead of the field in the automated purchasing of services and sets the Group up well for the work in progress in AI during 2019.

The aspirations of the Board for Maistro in 2019 are to rapidly increase the take up of the PaaS Platform by its core existing and new customers driving revenues and margins. The Board remains confident that the management team can achieve this, creating a very strong platform for continued leadership in this exciting and rapidly developing market.

David Rowe

Chairman

22 March 2019

Chief Executive Officer's Report

I am pleased to report on the significant progress that has been made in 2018. Our growing Enterprise customer base is responding to the significant benefits that our PaaS Platform offers, namely:

- Significant supplier cost savings

- Internal operational efficiencies in procuring and managing the supply of services

- Application of best practice procurement processes delivered through our end-to-end cloud-based software Platform, delivering compliance and risk management benefits

I am encouraged that both H1 and H2 2018 delivered sequential revenue growth on 2017 with Q4 2018 revenue closing just short of the entire revenue for FY 2017. For 2018 as a whole, revenue increased 154% on 2017.

Excluding share-based payments, administrative costs decreased by 2%, reflecting our commitment to continually improve operational efficiencies whilst supporting revenue growth. At the same time, we have continued to invest in the Maistro PaaS Platform and introduce AI technology to enable us to source and deliver projects faster and more cost-effectively reducing the need for significant increases in headcount.

To support our investment in technology and business development the Board successfully raised £2.1m net after costs, receiving £1.2m in the last quarter of 2018 and £0.9m in early 2019.

We strengthened the leadership team early in 2018 by appointing Ian Cleverly to the Board as Chief Financial Officer and in February 2019 appointed Neale Pritchard as Chief Commercial Officer.

The relationship with our largest Enterprise customers continues to grow as we deliver projects for them on a global basis. The business development team has grown the pipeline of new customers and have signed a large UK Enterprise customer in Q1 2019.

2018 has been a year of continued growth driven by excellent service from our operations team which is reflected in very high levels of customer satisfaction. The increase in the strength and depth of the new customer pipeline is a reflection of our increased sales and marketing investment which we expect to deliver new customers in early 2019.

I am encouraged by the continued progress we are making and believe that 2019 will prove to be more successful in both repeat business and increased new customer acquisition.

I would like to take this opportunity to thank all of our employees, customers, Board members and shareholders for their continued support.

Laurence Cook

Chief Executive Officer

22 March 2019

Strategic Report

Maistro has developed and operates an Enterprise focused Procurement-as-a-Service software Platform that helps private and public-sector organisations achieve significant cost savings and operational efficiencies in both procuring and managing the supply of goods and services. Maistro, acting as principal, delivers this solution using its proprietary cloud-based software and managed services to create an end-to-end solution that includes sourcing, supplier vetting, shortlisting, contract and project management through to payment processing and reporting.

Maistro focuses on Enterprise buyers and suppliers, with national and multi-national entities increasingly engaged on the PaaS Platform.

A Typical Project

The process starts with a customer submitting their project requirements, timeline and budget range onto Maistro's PaaS Platform. The requirement is then listed on the Marketplace and relevant suppliers are invited to pitch for the business.

Maistro's AI powered software efficiently identifies the best supplier pitches using references, ratings, credentials and credit scores. The shortlist is finalised by Maistro's Delivery team.

Once an approved supplier has been chosen, Maistro's PaaS Platform produces a digital 'Statement of Work' ('SOW') that forms the contract for both customer and supplier. At the agreement of both parties the project commences.

During the delivery cycle, our Delivery team, the customer and supplier maintain constant communication through 'Project Space', our online project management and collaboration system. At agreed milestones, and on project completion, billing and payments are managed by Maistro.

The Business Model

Maistro derives revenue from customers, acting as principal provider of the services, in the following ways:

1. Project revenue - Being revenue from projects that list on Maistro's marketplace, where the customer, in conjunction with Maistro, selects the service provider and a legally binding contract between Maistro and its customers is established within a Statement of Work (SOW). At this stage Maistro has assumed the principal contractual responsibility to deliver the agreed services, the delivery of the service has commenced, and project revenue recognition commences. Project revenue is recognised as control is passed, either over time, or at a point in time.

2. Premium Services - Comprising wraparound support services for projects including enhanced and accelerated procurement services. Revenue is recognised in alignment to the parent project as control is passed, either over time, or at a point in time.

3. Subscription & Licence Fees - customers pay for a licence to access the global Marketplace of pre-vetted suppliers. This allows users to log onto their personalised dashboard where they can place orders, review status tracking, create tasks and manage purchase orders. The cloud-based user dashboard is specifically designed to for quick deployment without the need for integration. Subscription fees relating to tiered annual subscriptions to service providers were terminated during 2017. 2018 revenue primarily represents that completion of legacy subscriptions.

Market Insight

Throughout 2018 we have seen a further and faster shift towards corporate marketplaces becoming key to cost and efficiency improvements for Enterprises. In May 2018 in a Times supplement titled "The firm of the future", Accenture commented that "the firm of the future will include corporate marketplaces that combine on-demand labour platforms and online work management systems, leading a major trend that will transform existing organisational forms and management models by 2022". This trend was further confirmed in a study by KPMG titled "State of operations and outsourcing" where they comment that digital sourcing will surpass outdated sourcing adding that digital technologies including automation, artificial intelligence and smart analytics are topping the list of critical C-suite directives for operations strategy.

Maistro sees the trend towards corporate marketplaces gaining momentum through 2019 and beyond and is leading the thought leadership in this space. In October 2018 Maistro announced an agreement with the Chartered Institute of Procurement and Supply (CIPS) to become their exclusive Knowledge Partner focusing on B2B Marketplaces.

Helen Alder, Head of Knowledge and Product Development at CIPS commented, "Procurement and supply chain managers have more difficulties and pressures than ever before to operate and source from a global marketplace. It has become really challenging. As the business environment becomes more complex, and with Brexit on the horizon, our members need and want more information and data on how to navigate these new unchartered waters. This partnership with Maistro can help procurement and help add value to the business so the Maistro offering will ultimately benefit businesses in many ways."

We believe that based on market trends Maistro is uniquely positioned to take advantage of this global opportunity.

Sales and Marketing

As the Enterprise sector continues its shift towards corporate marketplaces, Maistro's value proposition becomes more relevant to those organisations needing to quickly move towards digital sourcing as a means to reduce cost and optimise procurement efficiency. The knowledge partnership with CIPS and the increasing awareness in the trade press of Maistro's capabilities and subsequent requests for commentary continue to raise Maistro's profile. This combined with further investment in sales and marketing is expected to shorten the prospect to customer sales cycle. We have signed a major UK based enterprise customer in Q1 2019, which combined with a strengthening pipeline supports expected strong sales growth in 2019.

Technology Developments

The 2018 Technology Roadmap focused on optimising the Source to Pay business process that underpins the core value proposition for our customers and suppliers. This includes our own back office functions, designed to optimise lead to cash and drive margin improvements.

In a recent interview, Mckinsey stated that of the 220 distinct activities in a typical Source to Pay process, more than 50% of these could be automated. Ultimately, we see the Source to Pay process for procuring Services evolving to mirror the consumer experience for procuring goods.

Aside from the normal technology requirements to fulfil such a user experience, like systems integration, there will be a heavier reliance on AI/Machine learning approaches to both accommodate the variety of Services categories, but also provide a robust and compliant procurement process that enterprises require.

With this in mind, the strategic roadmap developments in 2018 focused on:

· Further developing Maistro's AI capabilities

· Enhancements to the Supplier onboarding and vetting process

· Improvements to Maistro's Delivery workflow

AI

In 2018 Maistro partnered with DXC to continue to develop our AI capabilities. Maistro's business model of being principal provides a rich source of historical data which the various Machine Learning approaches we employ benefit from. Beyond the pure sourcing of suppliers, we have utilised historical data on the delivery of services projects, supplier performance, compliance as rated by the Customer and Maistro, invoicing and payment data to develop the algorithms. These algorithms provide Maistro with a framework for scaling the AI to other categories and complexity of Services spend as we encounter them.

Supplier Onboarding and Vetting

One of the challenges many Enterprises have is a standardised way of categorising services spend. We have integrated a standards-based mechanism of codifying Services Categories and supplier skills. This allows suppliers to more accurately describe the types of services they provide and associated skills, thereby speeding up the sourcing process.

Supplier vetting and compliance, knowing your supplier, is becoming a key requirement of our Enterprise customers. During the course of 2018 we have further developed a combination of both on-platform and off-platform tools, customisable to each customer's requirements, to improve the efficiency of the vetting process. This has been integrated into Maistro's AI engine improving the precision and efficiency with which Maistro's Delivery function can source suppliers.

Workflow Improvements

The variety of geographical locations spend categories and value of projects increased in 2018. To optimise this a number of workflow improvements were developed to assist Maistro's Delivery function. These included an improved communications environment with customisable email templates, ability for customers to track savings on a per project basis and a deal review template to aid decision making when delivering projects with complex tax regimes on services rendered.

Outlook

The roadmap for 2019 will continue to further refine these themes with the ultimate objective of moving towards a "Self-Serve" offering for lower value commodity projects. For higher value complex projects Maistro will continue to utilise the PaaS Platform for sourcing the right supplier but with the added managed service offering of a "human in the loop". This combination of technology and managed services has been a key element to our success in 2018 with large global Enterprise customers.

Environmental matters

As far as the Directors are aware the Group's business does not cause a materially adverse impact on the environment.

Human rights policy

We adopt an equal opportunities policy in relation to all employee matters. The aim of the policy is to ensure that there is no discrimination against any employee or job applicant either directly or indirectly on the grounds of race, gender, disability, sexual orientation, marriage or civil partnership, pregnancy or maternity, religion or belief, or age.

Employees and Directors

As at 31 December 2018 the Group employed 24 people in one office (2017: 22 people), of whom 15 were male and 9 were female. As at the date of this document of the 4 senior members of management, none was female.

Details of Directors who served during the year ending 31 December 2018 are outlined in the Directors' Report, of whom 5 were male and 1 was female.

Approved and on behalf of the Board:

Laurence Cook

Chief Executive Officer

22 March 2019

Principal Risks and Uncertainties

The Board and management regularly review and monitor the key risks involved in running and operating the business. The future success of the Group is dependent on the Board's ability to implement its strategy. The model for the future development of the Group is reliant on its ability to achieve a critical mass of customers, its ability to derive revenue from these customers by providing excellent technical support, a value-added service, solution delivery and delivering operational gearing. Material risks together with relevant mitigating factors are set out below:

Market Risks

Competition

There may be competition from new entrants to the "Procurement as a Service" (PaaS) space, some of whom may have greater financial resources.

Maistro believes it continues to hold 'first mover' advantage in its market. It continues to invest in expanding its lead in technology, expertise, and service delivery and believes it has a level of knowledge, expertise and established supplier base which drives competitive advantage.

Operational Risks

Technology

Maistro's performance is dependent on its technology keeping pace with developments in cloud and mobile technology, including volumes of data and growth in applications.

Maistro manages this risk by a commitment to research and development combined with ongoing dialogue with trading partners and sector specialists to ensure that market developments are understood and updates to the PaaS Platform are made as appropriate.

Customers

As Maistro acquires the trust and loyalty of larger Enterprise customers, the dynamics of projects that generate revenue continue to evolve, with more complex and longer life cycle projects being submitted to the PaaS Platform. In addition, the Enterprise customer requires an enhanced level of service and high-quality outcomes for their projects. Added complexity and enhanced service requires employees with requisite skills.

Maistro focuses on the customer experience with a dedicated Delivery team. Maistro also offers a range of defined Premium Services to allow the Enterprise customer access to higher levels of project support.

Revenues from customers are dependent on them submitting projects onto the Group's proprietary PaaS software Platform, which can be variable, and are outside the Group's control and therefore inherently difficult to predict.

Suppliers

Maintenance and addition of high-quality suppliers able to deliver high value projects over all indirect spend categories is key to growth particularly as Enterprise customers submit larger and more complex projects.

Maistro attracts suppliers by maintaining leading-edge technology and by the quality and volume of potential projects on offer on its PaaS Platform.

Maistro extensively vets all potential suppliers. External credit ratings and/or reports on customers and other counterparties are also obtained and extensively employed to ensure only high-quality suppliers have access to projects.

Dependence on key management personnel

The performance of Maistro will depend heavily on its ability to retain the services of the Board and key management personnel, and to recruit, motivate and retain suitably skilled personnel. The loss of service of key individuals may have an adverse effect on the business, operations, customer relationships and results.

The Board will ensure that the management team are appropriately incentivised and there is scope to appropriately incentivise new key personnel where required.

Maistro operates a share option scheme which enables employees to benefit from growth. It also ensures that the management team, staff and shareholders objectives are aligned.

Financial Risks

Liquidity

Liquidity risk is the risk that Maistro may be unable to meet short term financial demands.

The Group made significant progress in 2018, delivering a significant improvement in revenue growth, which increased by 154%. As a result of investment in business development net cash burn from operations increased to (£2.0m) (2017: (£1.8m)).

The Group successfully raised £1.2m net of issue costs in placing proceeds received in December 2018. A further £0.9m net of issue costs in placing proceeds was received in January 2019.

Warrant conversions during 2018 resulted in net cash inflows of £0.1m net of issue costs. Warrants totaling £1.6m remain outstanding which, if exercised, will provide the business with additional funds. The exercise of warrants is in part, reliant on an increase in the Group's share price.

The Group had cash of £1.1m as at 31 December 2018.

The Group has made significant progress during 2018. Cash forecasts through to December 2020 are based on continued sequential growth in revenues combined with increased investment in technology development and business development functions. Cash burn excluding financing for 2019 is forecast to be £1.5m (2018: £2.7m) and positive in 2020. Cash balances at 31 December 2018 include £1.2m net of issue costs in placing proceeds received in December 2018. A further £0.9m net of issue costs was received in January 2019.

The Group focuses on large national and multi-national entities ("Enterprise") rather than smaller customers and has made significant progress in signing up new Enterprise customers over the past year. The Directors recognise that building the Enterprise business and making the Group sustainably profitable and cash generative is a medium-term goal that may require further funding to be raised in the future. The Directors and major shareholders continue to support the Group to achieve its objectives.

The Directors have prepared cash flow forecasts for a period of more than 12 months from the signing date of this report. The forecasts exclude the effect of any cash inflows from the exercise of the Group's warrants, in part because the exercise price is higher than the current share price.

The forecasts contain assumptions including significant growth in future revenue, both in project revenues and premium services; the cost model; and margins. The Directors recognise that the forecasts contain assumptions that are inherently uncertain, and should the assumed growth and margin improvements not be achieved, further funding will be required which is not in the control of the Group. The Directors have concluded that the combination of these circumstances represents a material uncertainty that casts significant doubt upon the Group and Company's ability to continue as a going concern and that therefore the Group and Company may be unable to continue realising their assets and discharging their liabilities in the normal course of business.

Credit

Credit risk is the risk that a counterparty fails to discharge an obligation to Maistro.

Maistro is exposed to this risk for various financial instruments, for example by granting receivables to customers.

Maistro continuously monitors customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls.

Maistro's focus on Enterprise customers reduces its exposure to credit risk and where risk is identified for small and medium sized customers, takes cash in advance of projects going onto the PaaS Platform. External credit ratings and/or reports on customers and other counterparties are also obtained and extensively employed.

Foreign exchange

Maistro is exposed to foreign exchange risk predominantly on its sales and purchases in the USA, Eurozone and Asia Pac region.

Maistro manages its foreign exchange exposure on a net basis. To reduce its exposure to movements in foreign exchange rates the Group enters into forward currency contracts when appropriate. See Note 21 to the consolidated Financial Statements for further information.

Brexit

The UK economy remains in a period of uncertainty while the ramifications of leaving the European Union are worked through. There is a lack of clarity on how any free trade agreements will be negotiated and there continues to be major implications for the Sterling exchange rate and other fiscal levers. At the time of writing we are unclear as to how these factors will impact the UK economy. Maistro is well positioned to manage any uncertainty.

Chief Financial Officer's Review

During 2018 Maistro has focused on its Enterprise strategy, developing and expanding its relationships with its customer base. The strategic outlook is encouraging, as we report significant improvements in both Revenue and Gross margin contribution, with a continued focus on managing operational costs and improving operational efficiencies to drive performance towards a positive EBITDA.

The Board concluded in H1 2018 to change the currency it presents its financial results from US Dollars to GBP Sterling. Accordingly, the previously reported results for the twelve months ended 31 December 2017 have been translated from US Dollars to GBP Sterling using the exchange rates set out in Note 1.

Revenue

Revenue for the year increased by 154% to £1.50m (2017: £0.59m). This growth was due to improved project engagement with global Enterprise customers, particularly those in the Asia Pac region.

Project revenue increased by 225% to £1.48m (2017: £0.46m). During 2018 the Group successfully engaged with a number of global Enterprise customers and delivered projects with materially higher values than in previous periods.

As in 2017, the overall quality and collectability of Maistro's project revenues significantly improved during the year.

Gross Margin

Maistro includes the cost of Maistro staff directly involved in the delivery of projects from listing to completion, in cost of sales. The gross margin has been impacted by irrecoverable withholding and sales taxes incurred in a number of territories.

Gross profit was £0.13m in 2018 (2017: £0.10m). The increase has been driven by the increase in Project revenue and a reduction of 38% in staff costs charged to cost of sales to £0.08m (2017: £0.13m). This was achieved by further automation of Maistro's PaaS Platform and delivery processes driving improved operational efficiency.

Adjusted EBITDA

The adjusted EBITDA ('Earnings before Interest, Tax, Depreciation and Amortisation, Foreign Exchange movements and Share Option costs') loss for the year increased by 1% to £2.11m (2017: £2.08m). This was driven by an overall reduction in administrative and other costs, being offset by increased investment in business development which has significantly contributed to revenue growth in 2018. A reconciliation to arrive at adjusted EBITDA is included in Note 5 of the Financial Statements.

Costs

Administrative costs increased by 28% to £3.2m (2017: £2.50m). The increase was largely due to the normalisation of share-based payment costs, which in 2017 were impacted by a £0.57m credit due to the forfeiture of share options upon cessation of employment of leavers which included the previous Board of Directors. Excluding the share-based payments, administrative costs decreased by 2%.

During 2018 the average number of employees reduced from 24 to 21. Staff recruitment accelerated in the second half of the year as the Group increased its investment in the business development team and professionally qualified Delivery staff. Share-based payments resulted in a charge of £0.18m (2017: credit of £0.57m).

The credit risk associated with customers using the Marketplace in 2018 resulted in a credit £0.013m (2017: credit £0.006m) bad debt provision included within Administrative costs. The credit was driven by recovery of previously provided for debts.

Loss after Tax

The loss after tax for the year increased 29% to £2.91m (2017: £2.25m).

Finance income of £0.008m (2017: £0.03m) reflects cash balances held on deposit. Taxation includes £0.16m (2017: £0.15m) of R&D tax credit.

Tax Losses

Tax losses for the Group up to the end of December 2018 amount to a total of £27.6m (2017: £18.1m), none of which have been recognised as a deferred tax asset.

Cash

The cash balance at 31 December 2018 was £1.1m (31 December 2017: £2.45m). Cash balances at 31 December 2018 include £1.2m net of issue costs in placing proceeds received in December 2018. A further £0.9m net of issue costs was received in January 2019.

Operating cash outflow from operating activities was £2.03m (2017: £1.78m). Investments in intangible technology assets totaled £0.61m (2017: £0.53m), reflecting the capitalisation of internal technology development, and investment in AI technology into the PaaS Platform.

Net cash generated from financing activities was £1.3m (2017: £2.76m) after deducting issue costs of £0.13m (2017: £0.19m). Financing activities included warrant conversion of £0.1m net of issue costs and £1.2m net of issue costs from the December 2018 placing.

Trade Receivables

With the transition to the Enterprise strategy completed, and a rigorous customer vetting process, credit risk has been materially mitigated in 2018.

Governance

Board of Directors

David Rowe - Chairman. Appointed 10 July 2017

David Rowe is the CEO of Black Green Capital, a Venture Capital investment company based in London specialising in disruptive digital transformation. Companies in the portfolio include, hydro66.com, sendwyre.com, and message.io. David was CEO and founder of Easynet Group, a UK listed global Enterprise Cloud services business sold to BSkyB in 2006. David subsequently headed up B2B at BSkyB.

Laurence Cook - Chief Executive Officer. Appointed 7 August 2017

Laurence Cook has 25 years' experience in the Information, Communications and Technology industry, successfully bringing disruptive products and services to market while leading global sales, driving product development and defining commercial strategies. Throughout his career, he has consistently instigated double-digit growth year on year across his sales and business development teams across Europe, US, and Asia while holding senior commercial roles in Siemens, Sopra Steria and NTL Broadcast and Telecoms. In addition to his corporate responsibilities, Laurence has held several Board roles within both technology and services.

Ian Cleverly - Chief Financial Officer. Appointed 9 April 2018

Ian has more than 15 years' experience in senior financial positions across telecommunications and high-tech industries across the UK, Europe and Asia Pac. He has a proven track record creating and delivering shareholder value. Working extensively within both start-up and multinational businesses, Ian has held prominent senior leadership roles within respected global brands including NTL, Procter & Gamble, 3 Hutchison Ireland (Hutchison Whampoa) and most recently within Cable & Wireless where he acted as Chief Financial Officer. Ian has a diverse background in successfully taking businesses from inception to maturity throughout his career and is a qualified UK Chartered Accountant.

Richard Croft - Non-executive Director. Appointed 10 July 2017

Richard Croft is a solicitor with more than 20 years' experience of corporate and commercial law. Richard's current directorships include Croft Legal Services Limited, Black Green Capital Limited and Hydro66 UK Limited. His initial career was at GEC and as general counsel for Easynet Group. Richard specialises in TMT and new media commercial law.

Richard Rae - Non-executive Director. Appointed 10 July 2017

Richard Rae qualified as a Chartered Accountant with KPMG and joined Hoare Govett as an investment analyst in 1987. He spent 22 years working in investment research and equities management, latterly as a Managing Director, responsible for smaller companies, in the Global Equities division of ABN AMRO. Since 2009, he has established himself as an independent management consultant providing corporate advice to both listed and unlisted companies. He is also a director of Aberforth Smaller Companies Trust Plc.

Preeti Mardia - Non-executive Director. Appointed 10 July 2017

Preeti Mardia has diverse end-to-end operational management and commercial expertise across Electronics, Telecoms, Aerospace and FMCG sectors. She is a Board Director with ThinFilm Electronics ASA, a global leader in printed electronics technology, and a non-executive Board Director of GFinity Plc. Prior to the position of Senior Vice President Operations held at IDEX ASA, she was Vice President Operations for Axxcss Wireless UK and Operations Director at Filtronic Plc. She has FMCG experience with Cadbury Schweppes Plc. She has a Master's degree in Management from Ashridge.

Directors' Report

The Directors present their report and the audited consolidated Financial Statements for the year ended 31 December 2018.

Maistro Plc was incorporated on 22 August 2012 and is listed on the AIM market of the London Stock Exchange. The Company is domiciled and incorporated in the United Kingdom. The Group changed its name to Maistro Plc on 8 January 2018. These Financial Statements are prepared in accordance with IFRS as adopted by the European Union. The Group Financial Statements consolidate the Financial Statements of the Company and its subsidiaries. The Company Financial Statements present information about the Company as a separate entity and not about its Group.

Review of the year

The results of the Group during the year are set out in the Strategic Report. This analysis includes comments on the position of the Group at the end of the financial year, an indication of likely future developments in the business of the Group.

Employment policies

The Group is committed to providing equality of opportunity to all existing and prospective employees without unlawful or unfair discrimination. Full support is given to the employment and advancement of disabled persons.

Financial risk management

The Group's financial risk management objectives and policies are shown in Note 1 of the consolidated Financial Statements.

Dividend

The Group's current policy is not to pay dividends. There can be no assurance as to the level of future dividends (if any) that may be paid by the Group.

The Board intends to adopt a dividend policy appropriate to the Group's financial performance. This will take into account its ability to operate and grow and the need to retain a prudent level of cash resources. Any profits are likely to be retained to make good the cumulative retained losses and used towards the development of the Group's activities and business for the foreseeable future.

Directors and Directors' Interests

The Directors who held office during the financial year are set out below, together with their interests in the Ordinary shares of the company according to the register of Directors' interests:

1 Appointed 7 August 2017

2 Appointed 10 July 2017

3 Non-Executive Director

4 Company Secretary

5 Resigned 1 August 2017

6 Resigned 10 July 2017

7 Resigned 28 July 2017

8 Resigned 31 January 2017

9 Appointed 9 April 2018

10 Includes 2,142,857 Ordinary shares purchased via exercised warrants 13 August 2018

The Directors who held office during the financial year are set out below, together with their interests in Warrants attached to the Ordinary shares of the Company according to the Register of Directors' interests. The Directors received the Warrants in the capacity of a Shareholder, rather than in the capacity of a Director providing services.

1 Appointed 7 August 2017

2 Appointed 10 July 2017

3 Non-Executive Director

4 Company Secretary

5 Resigned 1 August 2017

6 Resigned 10 July 2017

7 Resigned 28 July 2017

8 Resigned 31 January 2017

9 Appointed 9 April 2018

The Directors interests in share options of the Company were:

1 Appointed 7 August 2017

2 Appointed 10 July 2017

3 Non-Executive Director

4 Company Secretary

5 Appointed 9 April 2018

6 33.3% vesting at the end of each year for a period of three years.

7 Further to the terms of the August 2017 placing, David Rowe was granted an Option Agreement as part of his incentive-based remuneration package. These options have been excluded from the above table. See Note 20 for specific terms in respect of the options.

During the year the Directors were awarded a total of 1,770,928 share options (2017: 4,975,285) at a weighted average exercise price of £0.04 (2017: £0.04615). These options are long-term in nature. No share options were received or receivable in respect of qualifying services under a formal long-term incentive scheme.

No share options were exercised during the year.

Emoluments and compensations in relation to Directors for the period of their office:

1 These fees were paid to Revviva LLC, a Company in which Kara Cardinale has an interest, in relation to her services as a Director.

The number of Directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2017: 1).

Substantial Shareholdings

The Company has been advised of the following interests in more than 3% of its Ordinary share capital as at 31st December 2018:

Research and Development

The Group undertakes development activities which involve the enhancement of its PaaS Platform. Development expenditure is capitalised as an intangible asset, only if the development costs can be measured reliably and the platform being built will be completed and will generate future economic benefits in the form of cash flows to the Group. Expenditure being capitalised includes internal staff time and cost spent directly on developing the PaaS Platform.

Material uncertainty related to Going Concern

The Group's Financial Statements have been prepared on a going concern basis, which assumes that the Group will be able to realise its assets and discharge its liabilities in the normal course of business.

The Group focuses on large national and multi-national entities ("Enterprise") rather than smaller customers and has made significant progress in signing up new Enterprise customers over the past year. The Directors recognise that building the Enterprise business and making the Group sustainably profitable and cash generative is a medium-term goal that may require further funding to be raised in the future. The Directors and major shareholders continue to support the Company to achieve its objectives.

The Group recorded a loss from operations in the year of £3.1m and had cash of £1.1m as at 31 December 2018. In January 2019 the Group received further placing proceeds of £0.9m net of issue costs. Cash burn excluding financing for 2019 is forecast to be £1.5m (2018: £2.7m) and positive in 2020. Cash at the end of 2019 and 2020 is forecast to be £0.8m and £1.9m respectively. Cash balances at 31 December 2018 include £1.2m net of issue costs in placing proceeds received in December 2018. A further £0.9m net of issue costs was received in January 2019.

The Directors have prepared cash flow forecasts for a period of more than 12 months from the signing date of this report. The forecasts exclude the effect of any cash inflows from the exercise of the Group's warrants, in part because the exercise price is higher than the current share price.

The forecasts contain assumptions including significant growth in future revenue, both in project revenues and premium services; the cost model; and margins. The Directors recognise that the forecasts contain assumptions that are inherently uncertain and should the assumed growth and margin improvements not be achieved further funding will be required which is not in the control of the Group. The Directors have concluded that the combination of these circumstances represents a material uncertainty that casts significant doubt upon the Group and Company's ability to continue as a going concern and that therefore the Group and Company may be unable to continue realising their assets and discharging their liabilities in the normal course of business.

Nevertheless, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue for at least 12 months from the date of approval of these Financial Statements. For these reasons, they continue to adopt the going concern basis in preparing the Annual Report and Financial Statements. The Financial Statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

Political Contributions

The Group made no political donations or incurred any political expenditure during the year.

Corporate Governance

The Board is committed to the maintenance of high standards of corporate governance.

The corporate governance framework which the Group operates, including Board leadership and effectiveness, Board remuneration, and internal control is based upon practices which the Board believes are proportional to the size, risks, complexity and operations of the business and is reflective of the Group's values.

Of the two widely recognised formal codes, we have therefore decided to adhere to the Quoted Companies Alliance's (QCA) Corporate Governance Code for small and mid-size quoted companies (revised in April 2018).

The QCA Code is constructed around ten broad principles and a set of disclosures. The QCA has stated what it considers to be appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the principles through the prescribed disclosures. We have considered how we apply each principle to the extent that the Board judges these to be appropriate in the circumstances, and below we provide an explanation of the approach taken in relation to each as required by the QCA Code. The Board considers that it does currently depart from principle 7 of the QCA Code.

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

Our strategy is focussed on the retention and growth of multinational Enterprise customers and on the continued development of our PaaS platform to support revenue growth.

2. Seek to understand and meet shareholder needs and expectations

Responsibility for investor relations rests with the Chief Executive Officer (CEO), supported by the Chief Financial Officer (CFO). The Group is committed to communicating openly with its shareholders to ensure that its strategy and performance are clearly understood. We communicate with shareholders through the Annual Report and Accounts, full-year and half-year announcements, trading updates and the annual general meeting (AGM), and we encourage shareholders' participation in face-to-face meetings. A range of corporate information (including all Maistro announcements) is also available to shareholders, investors and the public on our website.

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

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

The Board is responsible for ensuring the Group has effective and sound systems of internal controls, which are designed to manage the risk of failure to achieve business objectives and provide reasonable assurance against material misstatements and loss. The Board, with the advice of the Audit Committee, has reviewed the effectiveness of the systems of internal control for the year to 31 December 2018.

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

The Board includes three independent non-executive Directors: Preet Mardia, Richard Rae and Richard Croft.

The composition and experience of the Board is included in the Annual Report. The Board has a formal schedule of matters reserved for its approval and is supported by the Audit, Remuneration, Risk and Nomination Committees. All Directors are required to devote sufficient time to carry out their role.

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

The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience, including in the areas of technology and software, business transformation and management, capital markets, change management and governance. To ensure that the Directors maintain appropriate skills they are provided with training when identified as appropriate by the Chairman.

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

The current Board has been in place since August 2017 and a Board evaluation process has not yet taken place. The Board expects an evaluation to take place during the following 12 months.

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

The Board embodies and promotes a corporate culture that is based on sound ethical values and behaviours.

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

The Board provides strategic leadership for the Group and operates within the scope of a robust corporate governance framework. Its purpose is to ensure the delivery of long-term shareholder value, which involves setting the culture, values and practices that operate throughout the business, and defining the strategic goals that the Group implements in its business plans.

The Board defines a series of matters reserved for its decision and has approved terms of reference for its Audit and Remuneration committees to which certain responsibilities are delegated. The Chair of each committee reports to the Board on the activities of that committee.

The Audit Committee members are Richard Rae (Chair) and Preeti Mardia. The committee monitors the integrity of Financial Statements, oversees risk management and control, monitors the effectiveness of the internal audit function and reviews external auditor independence.

The Remuneration Committee members are Preeti Mardia (Chair), David Rowe and Richard Rae. The committee sets and reviews the compensation of Executive Directors including the setting of targets and performance frameworks for cash and share-based awards.

The Executive Board, consisting of the Executive Directors, operates as a management committee, chaired by the CEO, which reviews operational matters and performance of the business, and is responsible for significant management decisions while delegating other operational matters to individual managers within the business.

The Chairman has overall responsibility for corporate governance and in promoting high standards throughout the Group. He leads and chairs the Board, ensuring that committees are properly structured and operate with appropriate terms of reference, ensures that performance of individual Directors, the Board and its committees are reviewed on a regular basis, leads in the development of strategy and setting objectives, and oversees communication between the Group and its shareholders.

The CEO provides coherent leadership and management of the Group, leads the development of objectives, strategies and performance standards as agreed by the Board, monitors, reviews and manages key risks and strategies with the Board, ensures that the assets of the Group are maintained and safeguarded, leads on investor relations activities to ensure communications and the Group's standing with shareholders and financial institutions is maintained, and ensures that the Board is aware of the views and opinions of employees on relevant matters.

The Executive Directors are responsible for implementing and delivering the strategy and operational decisions agreed by the Board, making operational and financial decisions required in the day-to-day operation of the Group, providing executive leadership to managers, championing the Group's core values and promoting talent management.

The Independent Non-Executive Directors contribute independent thinking and judgement through the application of their external experience and knowledge, scrutinise the performance of management, provide constructive challenge to the Executive Directors and ensure that the Group is operating within the governance and risk framework approved by the Board.

The Company Secretary is responsible for providing clear and timely information flow to the Board and its committees and supports the Board on matters of corporate governance and risk.

The Board has approved the adoption of the QCA Code as its governance framework against which this statement has been prepared and will monitor the suitability of this code on an annual basis and revise its governance framework as appropriate as the Group evolves.

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

Historical annual reports and other governance-related material is available on the Investors section of our website.

At the company's 2018 AGM all resolutions were passed with over 90% of the votes cast.

The Audit Committee

The Audit Committee ('the Committee') is established by and is responsible to the Board. The Audit Committee members are Richard Rae (Chair) and Preeti Mardia. It has written terms of reference which are available at www.maistro.com. Its main responsibilities are:

· to consider and be satisfied with the truth and fairness of the Group's Financial Statements before submission to the Board for approval, ensuring their compliance with the appropriate accounting standards, the law and the Listing Rules of the Financial Conduct Authority;

· to monitor and review the effectiveness of the Group's system of internal control;

· to consider areas of accounting judgement;

· to make recommendations to the Board in relation to the appointment of the external auditor and its remuneration, following appointment by the Shareholders in General Meeting, and to review and be satisfied with the auditor's independence, objectivity and effectiveness on an ongoing basis; and

· to implement the policy relating to any non-audit services performed by the external auditor.

The Committee meets with the external auditors, without the Executive Directors being present, at least once a year.

The Committee is authorised by the Board to seek and obtain any information it requires from any officer or employee of the Group and to obtain external legal or other independent professional advice as is deemed necessary by it. Meetings of the Committee are held at least three times per year to coincide with the review of the scope and plans for the external audit and the publication of the interim and full year Financial Statements. The external auditor is invited to attend these meetings to present the results of their work including their views on significant accounting policies and judgements. During the year the Committee considered in particular the judgements relating to Going Concern, the carrying value of the intangible assets, the investment in and receivable from the subsidiary and, particularly in respect of the appropriateness and application of the revenue recognition policy.

The Committee receives reports from management on the effectiveness of the system of internal controls. It also receives from the external auditor a report of matters arising during the course of the audit that the auditor deems to be of significance for the Committee's attention. The external auditor is required to give the Committee information about policies and processes for maintaining its independence and compliance regarding the rotation of audit partners and staff.

The Committee considers all relationships between the external auditor and the Company to ensure that they do not compromise the auditor's judgement or independence particularly with the provision of non-audit services. The performance of the external auditor is reviewed at least annually, normally in the spring.

The Nomination Committee

David Rowe is Chairman of the Committee. Preeti Mardia and Richard Croft are members of the Committee. The Nomination Committee meets at least once a year, with the Chief Executive Officer in attendance as appropriate. The Nomination Committee considers appointments to the Board.

The Remuneration Committee

The Remuneration Committee members are Preeti Mardia (Chair), David Rowe and Richard Rae. The Remuneration Committee meets at least two times a year, with the other Board members in attendance as appropriate. It has written terms of reference. The Remuneration Committee agrees the framework for Executive Directors' remuneration with the Board.

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

Internal Controls and Risk Management

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

Statement of Disclosure to the Auditors

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

Auditors

In accordance with section 485 of the Companies Act 2006, a resolution to reappoint PricewaterhouseCoopers LLP as auditor will be put to the forthcoming Annual General Meeting.

Approved and on behalf of the Board:

David Rowe

Chairman

Maistro Plc

22 March 2019

Statement of Directors' Responsibilities in Respect of the Annual Report and the Financial Statements

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulation.

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

· select suitable accounting policies and then apply them consistently;

· state whether applicable IFRSs as adopted by the European Union have been followed for the Group Financial Statements and IFRSs as adopted by the European Union have been followed for the Company Financial Statements, subject to any material departures disclosed and explained in the Financial Statements;

· make judgements and accounting estimates that are reasonable and prudent; and

· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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

The Directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

Independent auditor's report to the members of Maistro plc

Opinion

In our opinion, Maistro Plc's Group Financial Statements and Company Financial Statements (the "Financial Statements"):

· give a true and fair view of the state of the Group's and of the Company's affairs as at 31 December 2018 and of the Group's loss and the Group's and the Company's cash flows for the year then ended;

· have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Company's Financial Statements, as applied in accordance with the provisions of the Companies Act 2006; and

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

We have audited the Financial Statements, included within the Annual Report and Financial Statements (the "Annual Report"), which comprise: the Consolidated and Company Statements of Financial Position as at 31 December 2018; the Consolidated Statement of Total Comprehensive Income, the Consolidated and Company Statements of Cash Flows, and the Consolidated and Company Statements of Changes in Equity for the year then ended; and the notes to the Financial Statements, which include a description of the significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors' responsibilities for the audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in the UK, which includes the FRC's Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Material uncertainty related to going concern - Group and Company

In forming our opinion on the Group and Company Financial Statements, which is not modified, we have considered the adequacy of the disclosure made in Note 1 to the Financial Statements concerning the Group's and Company's ability to continue as a going concern. The Group has incurred a net loss of £2.9 million during the year ended 31 December 2018. The Group is reliant on significant future revenue growth and margin improvements to meet their forecast cash flow requirements which if not achieved will require the Group to obtain additional funding for it to continue as a going concern. These conditions, along with the other matters explained in Note 1 to the Financial Statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group's and Company's ability to continue as a going concern. The Group and Company Financial Statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

Our audit approach

Overview

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the Financial Statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.

Key audit matters

Key audit matters are those matters that, in the auditors' professional judgement, were of most significance in the audit of the Financial Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to going concern, described in the Material uncertainty related to going concern section above, we determined the matters described below to be the key audit matters to be communicated in our report. This is not a complete list of all risks identified by our audit.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the Financial Statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.

Maistro Plc Group consists of 3 components with operations centralised in Exeter, UK. The primary trading Company is Maistro UK Limited which accounts for 100% revenue and approximately 97% of consolidated loss before tax. Operations in Maistro Inc. represent less than 1% of consolidated Group loss before tax. The Group audit team audited both Maistro UK Limited and Maistro Plc standalone financial statements obtaining more than 97% coverage of consolidated loss before tax.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the Financial Statements as a whole.

Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated to both components was £100,000.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £6,000 (Group audit) and £6,000 (Company audit) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.

Reporting on other information

The other information comprises all of the information in the Annual Report other than the Financial Statements and our auditors' report thereon. The Directors are responsible for the other information. Our opinion on the Financial Statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the Financial Statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.

With respect to the Strategic Report and Directors' Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included.

Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain opinions and matters as described below.

Strategic Report and Directors' Report

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors' Report for the year ended 31 December 2018 is consistent with the Financial Statements and has been prepared in accordance with applicable legal requirements.

In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic Report and Directors' Report.

Responsibilities for the Financial Statements and the audit

Responsibilities of the Directors for the Financial Statements

As explained more fully in the Statement of Directors' responsibilities, the Directors are responsible for the preparation of the Financial Statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are also responsible for such internal control as they 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 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 Company or to cease operations, or have no realistic alternative but to do so.

Auditors' 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 auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

A further description of our responsibilities for the audit of the Financial Statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors' report.

Use of this report

This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Other required reporting

Companies Act 2006 exception reporting

Under the Companies Act 2006 we are required to report to you if, in our opinion:

· we have not received all the information and explanations we require for our audit; or

· adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or

· certain disclosures of directors' remuneration specified by law are not made; or

· the Company Financial Statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Colin Bates (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

Bristol

22 March 2019

Consolidated Statement of Total Comprehensive Income

for the year ended 31 December 2018

The results reflected above relate to continuing activities.

The accompanying notes are an integral part of these Financial Statements.

Consolidated Statement of Financial Position

At 31 December 2018

The Financial Statements were approved and authorised for issue by the Board of Directors on 22 March 2019 and were signed on its behalf by:

David Rowe

Chairman

Company Registration Number: 08188404

The accompanying notes are an integral part of these Financial Statements.

Consolidated Statement of Changes in Equity

for the year ended 31 December 2018

* During 2017 a number of share options were forfeited, and as a result any remaining balances relating to these arrangements in the share-based payment reserve were transferred to the Statement of Comprehensive Income The presentational currency in 2017 was in US Dollars. Upon translation to GBP Sterling the 2017 balances transferred to retained earnings was £nil.

Consolidated Statement of Cash flows

for the year ended 31 December 2018

Notes to the Consolidated Financial Information

1. Accounting Policies

Maistro plc is a public limited company quoted on AIM and incorporated and domiciled in the UK.

Basis of Preparation

The principal accounting policies adopted in the preparation of the Financial Statements are set out below. The policies have been consistently applied to all the years presented, except for the change in presentational currency from US Dollars to GBP Sterling.

The consolidated Financial Statements of the Group have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards (IFRS), and interpretations issued by the IFRS Interpretation Committee (IFRSIC) as adopted by the European Union and with the Companies Act 2006 as applicable to companies reporting under IFRS.

The preparation of Financial Statements in compliance with adopted IFRSs 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 effect are disclosed in Note 2.

The Group Financial Statements consolidate the Financial Statements of the Company and its subsidiaries (together referred to as "the Group"). The Parent company Financial Statements present information about the Company as a separate entity and not about its Group.

Going Concern

The Group's Financial Statements have been prepared on a going concern basis, which assumes that the Group will be able to realise its assets and discharge its liabilities in the normal course of business.

The Group focuses on large national and multi-national entities ("Enterprise") rather than smaller customers and has made significant progress in signing up new Enterprise customers over the past year. The Directors recognise that building the Enterprise business and making the Group sustainably profitable and cash generative is a medium-term goal that may require further funding to be raised in the future. The Directors and major shareholders continue to support the Group to achieve its objectives.

The Group recorded a loss from operations in the year of £3.1m and had cash of £1.1m as at 31 December 2018. In January 2019 the Group received further placing proceeds of £0.9m net of issue costs. Cash burn excluding financing for 2019 is forecast to be £1.5m (2018: £2.7m) and positive in 2020. Cash at the end of 2019 and 2020 is forecast to be £0.8m and £1.9m respectively. 

The Directors have prepared cash flow forecasts for a period of more than 12 months from the signing date of this report. The forecasts exclude the effect of any cash inflows from the exercise of the Group's warrants, in part because the exercise price is higher than the current share price.

The forecasts contain assumptions including significant growth in future revenue, both in project revenues and premium services; the cost model; and margins. The Directors recognise that the forecasts contain assumptions that are inherently uncertain, and should the assumed growth and margin improvements not be achieved, further funding will be required which is not in the control of the Group. The Directors have concluded that the combination of these circumstances represents a material uncertainty that casts significant doubt upon the Group and Company's ability to continue as a going concern and that therefore the Group and Company may be unable to continue realising their assets and discharging their liabilities in the normal course of business.

Nevertheless, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue for at least 12 months from the date of approval of these Financial Statements. For these reasons, they continue to adopt the going concern basis in preparing the Annual Report and Financial Statements. The Financial Statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

Basis of consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated Financial Statements present the results of the Company and its subsidiaries (the Group) as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

The consolidated Financial Statements incorporate the results of business combinations using the purchase method. In the Consolidated Statement of Financial Position, the acquirees' identifiable assets, liabilities, and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Income Statement from the date on which control is obtained.

Inter-company transactions, balances and unrealised gains and losses (where they do not provide evidence of impairment of the asset transferred) on transactions between Group companies are eliminated.

Functional and Presentation Foreign Currency

The functional currency of Maistro Group Plc and Maistro UK Ltd is GBP Sterling, whereas of Maistro US Inc. it is US Dollars.

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 the reporting period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income in either cost of sales or administrative expenses as appropriate.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities are recognised in other comprehensive income and accumulated in a separate component of equity. Exchange differences are recycled to profit or loss as a reclassification adjustment upon disposal of the foreign operation.

Change in presentation currency

As part of a review, the Board concluded that from the beginning of the current financial year it would be changing the currency in which it presents its Financial Statements from US Dollars to GBP Sterling. Accordingly, the reported results for the year ended 31 December 2018 and 31 December 2017 have been translated from US Dollars to GBP Sterling using the following exchange rates:

Changes in Accounting Policies and Disclosures

(a) New and amended standards adopted by the Group

The Group has applied any applicable new standards, amendments to standards and interpretations that are mandatory for the financial year beginning on or after 1 January 2018. However, none of them has a material impact on the Group's Consolidated Financial Statements.

(b) Impact of IFRS 15 - Revenue from contracts with customers

IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018. Management have assessed the impact of the adoption of IFRS 15 in detail and conclude that there is no material impact on the Group's consolidated Financial Statements. Further there was no impact on prior year revenue. The approach was to undertake a detailed assessment of the core principles of IFRS 15 and test these against the existing revenue recognition policy for each type of revenue, Conclusions were as follows:

Step 1 - Identify the contract with the customer

A contract with a customer will be within the scope of IFRS 15 if all of the following conditions are met:

· The contract has been approved by the parties to the contract.

· Each party's rights in relation to the goods/services to be transferred can be identified.

· The payment terms for the goods or services to be transferred can be identified.

· The contract has commercial substance.

· It is probable that the consideration to which the entity is entitled to in exchange for the goods/services will be collected.

Maistro conclusions

· Maistro captures the full scope of any project within the project Statement of Work (SOW) with the customer. The SOW includes project scope, deliverables, performance obligations, pricing, payment terms, premium services (where applicable), subscriptions & license's (where applicable) and terms & conditions for each contracted party (incorporating cancellation fees). The customer is required to agree to the Terms & Conditions of the SOW before a project commences.

· The specific Terms and Conditions in respect of each parties' rights are captured in the SOW, detailed terms and conditions of service are embedded within the SOW document and may be further supported by a Master Service Agreement.

Step 2 - Identify the performance obligations within the contract

At the inception of the contract, the entity should assess the goods or services that have been promised to the customer, and identify as a performance obligation:

· A good or service (or bundle of goods and services) that is distinct, or

· A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.

Maistro conclusions

· Contracted project performance obligations are captured within each SOW. The SOW provides a detailed breakdown of all contracted performance obligations within each contracted project, aligned to a specific cost and date of delivery.

· Where it is not possible to provide a detailed breakdown, due to the nature of the contracted project, the SOW captures a series of distinct services that are substantially the same and that have the same pattern of transfer to the customer.

Step 3 - Determine the transaction price

The transaction price is the amount to which an entity expects to be entitled in exchange for the transfer of goods and services. When making this determination, an entity will consider past customary practices.

Maistro conclusions

· The transaction price is clearly stated and agreed in the SOW for all contracted projects.

Step 4 - Allocate the transaction price to the performance obligations in the contracts

Where a contract has multiple performance obligations, an entity will allocate the transaction price to the performance obligations in the contract by reference to the relative standalone selling prices. If a standalone selling price is not directly observable, the entity will need to estimate it.

Maistro conclusions

· Transaction prices are typically attached to specific performance obligations within the SOW.

· Where transaction prices cannot be attached to specific performance obligations (due to the specific nature of the project), then these are estimated, based on discussions with the Delivery team to allocate reasonable value to each stage of the project.

· Maistro does not offer discounts compared to the aggregate of standalone selling prices, as standalone selling prices are not considered during the project pitch process.

· Maistro does not enter into contracted projects where consideration would be receivable or payable greater than 12 months.

Step 5 - Recognise revenue when (or as) the entity satisfies a performance obligation

Revenue is recognised as control is passed, either over time or at a point in time.

Maistro conclusions

· Each contracted project undergoes an assessment to determine the relevant applicable revenue recognition methodology to be applied.

· The assessment principally considers the project type, performance obligations, nature of deliverables, project duration and commercial value.

· Project type is critical to the revenue recognition methodology applied:

o Event-based projects - i.e. where the project requires the delivery of a specific event-based deliverable, are recognised on a milestone basis. Revenue is recognised at the point in time the event is delivered.

o Timeline based projects - i.e. where the project is delivered over a period of time. Revenue is recognised on a daily basis over the life of the project.

o Where Maistro is engaged in projects that have both elements of event-based and timeline deliverables, Maistro assesses the relative weighting of each project deliverable); value and project timescale to determine revenue recognition methodology and makes a reasonable commercial judgement as to the method to apply. Example projects may include the creation of an asset followed by a period of management or further development of that asset.

(c) Impact of IFRS 16 - Leases

IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019. Management have assessed the impact of the adoption of IFRS 16 in detail and conclude that there is no material impact on the Group's consolidated Financial Statements. Further there was no impact on prior year comparatives. As at 31 December 2018 the group was committed only to short term leases.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment.

(d) Impact of IFRS 9 - Financial Instruments

IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018. The Standard includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting. The Group has assessed the impact of IFRS 9 in detail and concludes that there is no material impact on its consolidated results or financial position but that it has resulted in increased disclosure. 

(e) New, amended standards, interpretations not adopted by the Group

The following Adopted IFRSs have been issued but have not been applied by the Group in these Financial Statements. The full impact of their adoption has not yet been fully assessed; however, management do not expect the changes to have a material effect on the Financial Statements unless otherwise indicated:

· Annual Improvements to IFRSs - 2015-2017 Cycle (1 January 2019)

· Amendments to IAS 1 and IAS 8 - on definition of materiality (1 January 2019)

· Amendments to IAS 19 - employees benefits plan amendments, curtailments or settlements

· Amendments to IAS 28 on long term interests in associates and joint ventures

· Amendments to IFRS 3 "Business combinations" on definition of a business

· Amendments to IFRS 9, financial instruments on prepayment features with negative compensation

· IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration (effective date to be confirmed)

· Amendments to IAS 40 Investment Property (effective date to be confirmed)

· IFRIC 23 Uncertainty over Income Tax Treatments (1 January 2019)

· Amendments to IAS 28 Investments in Associates and Joint Ventures (effective date to be confirmed)

· IFRS 17 Insurance contracts (1 January 2021) 

Revenue Recognition

Revenue represents the gross value of services provided to customers in respect of revenue earned, net of discounts and sales taxes.

There are three principal sources of revenue:

Project Revenue

Being revenue from projects that list on Maistro's marketplace, where the customer, in conjunction with Maistro, selects the service provider and a legally binding contract between Maistro and its customers is established within a Statement of Work (SOW). At this stage Maistro has assumed the principal contractual responsibility to deliver the agreed services, the delivery of the service has commenced, and project revenue recognition commences.

Project revenue is recognised on either a timeline, or milestone basis.

Premium Services

Comprising wraparound support services for projects including enhanced and accelerated procurement services. Revenue is recognised in alignment to the parent project as control is passed, either over time, or at a point in time.

Subscription & Licence Fees

Customers pay for a licence to access the global Marketplace of pre-vetted suppliers. This allows users to log onto their personalised dashboard where they can place orders, review status tracking, create tasks and manage purchase orders. The cloud-based user dashboard is specifically designed to for quick deployment without the need for integration.

Subscription fees relating to tiered annual subscriptions to service providers were terminated during 2017. 2018 revenue primarily represents that completion of legacy subscriptions.

Accrued and Deferred Income & Cost of Sales

Accrued and deferred income and cost of sales arise due to timing differences in the recognition of revenue and cost of sales compared to the underlying invoice transactions.

Fair Value Hierarchy

All financial instruments measured at fair value must be classified into the levels below:

· Level 1: Quoted prices, in active markets.

· Level 2: Fair Inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

· Level 3: Inputs that are not based on observable market data.

Trade Receivables

Trade receivables are amounts due from customers for services provided in the ordinary course of business. They are generally due for settlement within 60 days and are therefore all classified as current. Trade receivables are recognised initially as the amount of consideration that is unconditional, unless they contain significant financing components, in which case they are recognised at fair value. The Group holds the trade receivables with the objective of collecting the contractual cash flows, and so it measures them subsequently at amortised cost using the effective interest method. Due to the short-term nature of current receivables, their carrying amount is considered to be the same as their fair value.

Cash and Cash Equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and for the purpose of the statement of cash flows - bank overdrafts or outstanding credit card balances.

Convertible Debt

The proceeds received on issue of the Group's convertible debt are allocated into their liability and equity components. The amount initially recognised and attributed to the debt component equals the discounted redemption value of the financial instrument, discounted at a deemed market rate of interest (the effective interest rate) and not the financial instrument's coupon rate. The deemed rate of interest utilised in the estimation was compared to the rate of interest that was payable on similar debt instruments that do not include an option to convert.

Subsequently, the debt component is accounted for as a financial liability measured at amortised cost until extinguished on conversion or maturity of the convertible loan. The remainder of the proceeds are allocated to the equity reserve within shareholders' equity, net of income tax effects.

Share Capital

Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.

The Group only has one class of Ordinary shares, denominated as £0.01 (2017: £0.01) Ordinary shares, as set out in Note 15. The Company's Ordinary shares are classified as equity instruments.

Leases

Leases of property, plant and equipment where the group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised, at the lease's inception. at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset's useful life, or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the group will obtain ownership at the end of the lease term.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee 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.

Property, Plant and Equipment

Items of property, plant and equipment are initially recognised at cost.

Depreciation is provided on all items of property, plant and equipment so as to write-off their carrying value over their expected useful economic lives. It is provided at the following rates:

Intangible Assets

The development of the PaaS Platform is capitalised as an intangible asset. Development activities involve a planned investment in the development and enhancement of the PaaS Platform. The development expenditure of the PaaS Platform is recognised as intangible assets when the following criteria are met:

1. It is technically feasible to complete the development of the platform so that it will be available for use.

2. Management intends to complete and use or sell the platform.

3. There is an ability to use or sell the platform.

4. It can be demonstrated how the platform will generate future economic benefits.

5. Adequate technical, financial and other resources to complete the development of the platform and to use or sell the use of the platform are available.

6. The expenditure attributable to development of the platform can be measured reliably.

Expenditure being capitalised includes internal staff time and cost spent directly on developing the PaaS Platform. Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment costs. The amortisation period is over 48 months on a straight-line basis and is included within Administrative costs.

Each version released has built incrementally on the prior release (as opposed to being a completely new platform) so no prior costs have been written-off.

Expenditure that does not meet the above criteria are expensed as incurred within Administrative expenses.

Taxation

Income tax expense represents the sum of the current tax and deferred tax charge for the year.

Current taxes are based on the results shown in the Financial Statements and are calculated according to local tax rules, using tax rates enacted or substantively enacted by the reporting date. During the year, the current tax charge is nil as there are tax losses for the year. R&D credits are recognised as and when eligible, within the tax charge/credit in the Financial Statements in accordance with IAS 12.

Deferred tax is recognised in respect of relevant temporary differences that have originated but not reversed at the balance sheet date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Management has elected not to recognise the deferred tax asset due to the lack of certainty of future profitability as the Group is still in its early stage of maturity.

The deferred tax asset on shares and share option charges is affected by the difference between the grant price of the shares and share options and the market price of the Company's shares at the accounting year end. If the market value of the shares at the date of exercise were to be lower than the market value at the account year end the amount of tax relief obtained would be less than anticipated in the deferred tax calculations.

Share-based Payments

The Company operates two option schemes, namely an unapproved option scheme and an Enterprise Management Incentive ('EMI') scheme.

In compliance with the requirements of IFRS 2 on share-based payments, the fair value of options granted during the period or which were granted in previous periods but had an extended period before vesting is calculated either using the Black Scholes option pricing model or on the basis of the fair value of remuneration waived in consideration for the grant.

Further, as disclosed in the 2017 Annual Report, options over Ordinary shares were expected to be granted by the Board to David Rowe, Chairman, as part of his incentive-based remuneration package. On 20 March 2018, these options were granted.

In compliance with the requirements of IFRS 2 on share-based payments, the fair values of the options issued to the Chairman were estimated at the grant date using the share price at the grant date less the exercise price, multiplied by the probabilities of vesting, which reflect the market vesting conditions. The market vesting probabilities were determined using an adjusted form of the Black-Scholes model, which includes a Monte Carlo simulation process that takes into account the terms and conditions on which the options were granted (the exercise price, the term of the option, the share price at the grant date, the vesting conditions, the expected volatility of the underlying share, the expected dividend yield, and the short-term risk-free rate over the term of the option).

Warrants

In accordance with IAS 32 'Financial instruments', the group reflects the fair value of warrants issued to shareholders by recording the fair value in the warrant reserve account.

Fair value of the warrants is calculated at transaction date, based on the Black-Scholes valuation model, which takes into account conditions attached to the vesting and exercise of the equity instruments therein.

2. Critical Accounting Estimates and Judgements

In preparing the Financial Statements, the Directors make certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including the expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year are discussed below.

Judgments

(a) Going concern

As set out in Note 1 the Directors have prepared a cash flow forecast covering a period extending 12 months from the date of approval of these Financial Statements which shows that the Group will have sufficient cash to meet its debts as they fall due for 12 months. The forecasts exclude the effect of any cash inflows from the exercise of the Group's warrants, in part because the exercise price is higher than the current share price.

The Group has made significant progress during 2018. Cash forecasts through to December 2020 are based on continued sequential growth in revenues combined with increased investment in technology development and sales functions. Cash burn excluding financing for 2019 is forecast to be £1.5m (2018: £2.7m) and positive in 2020.

The Group focuses on large national and multi-national entities ("Enterprise") rather than smaller customers and has made significant progress in signing up new Enterprise customers over the past year. The Directors recognise that building the Enterprise business and making the Group sustainably profitable and cash generative is a medium-term goal that may require further funding to be raised in the future. The Directors and major shareholders continue to support the Group to achieve its objectives.

The forecasts contain assumptions including significant growth in future revenue, both in project revenues and premium services; the cost model; and margins. The Directors recognise that the forecasts contain assumptions that are inherently uncertain, and should the assumed growth and margin improvements not be achieved, further funding will be required which is not in the control of the Group.

(b) Revenue recognition

Revenue is recognised on a gross basis, as our evaluation and assessment of the indicators under IFRS 15 supports the fact that Maistro is acting as principal. The factors that are considered and prove decisive in the conclusion of this assessment include the following:

· Maistro has the latitude to agree the fee for each project;

· Maistro has primary responsibility for providing the services to a customer;

· Maistro is responsible for the quality of the service delivery, delivered on time, budget and to a sufficiently high standard. This includes the management of the service delivery of the supplier; and

· Maistro facilitates both commercial terms and the project management for each project.

Although Maistro passes on some of the credit risk to the supplier it engages to deliver the services to its customers, Maistro does not consider this is sufficiently persuasive in light of the other factors noted above to suggest that accounting for the transaction as principal is not appropriate.

Maistro recognises revenue as control is passed to the customer, either over time or at a point in time.

Non-significant other estimates

(a) Intangible assets

Intangible assets include the capitalised development costs of the PaaS Platform. These costs are assessed based on management's view of the technology team's time spent on projects that enhance the PaaS Platform, supported by internal time recording and considering the requirements of IAS 38 'Intangible assets'. The development cost of the PaaS Platform is amortised over the useful life of the asset. The useful life is based on the management's estimate of the period that the asset will generate revenue, which is reviewed on a project by project basis for continued appropriateness and is one of the key assumptions involved in determining the value of these assets. The carrying value is tested for impairment when there is an indication that the value of the assets might be impaired. The impairment tests also require assumptions about future events which require management judgement. Changes in those assumptions could result in a materially different amortisation charge, or an impairment, in future years depending on the circumstances prevailing at that time.

(b) Share-based payments

The fair value of share options is calculated using the Black-Scholes valuation model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations.

The fair values of the Chairman's options were estimated at the grant date using the share price at the grant date less the exercise price, multiplied by the probabilities of vesting, which reflect the market vesting conditions. The market vesting probabilities were determined using an adjusted form of the Black-Scholes model, which includes a Monte Carlo simulation process that takes into account the terms and conditions on which the options were granted (the exercise price, the term of the option, the share price at the grant date, the vesting conditions, the expected volatility of the underlying share, the expected dividend yield, and the short-term risk-free rate over the term of the option).

3. Segmental Analysis

The Group currently has one reportable segment, provision of services, and categorises all revenue from operations to this segment.

The Group currently has three reportable categories which are:

1. Project revenues - for the provision of services from projects that list on Maistro's marketplace, where the customer accepts the bid from the service provider and a legally binding contract between Maistro and its customers is established;

2. Premium services - comprising wraparound support services for projects;

3. Subscriptions and licences - for the provision of access to Maistro's PaaS Platform. Subscription services relating to tiered annual subscriptions to service providers were terminated in 2017. 2018 revenue primarily relates to the completion of legacy subscriptions.

The Group operates in three main geographic areas: UK, USA and Rest of the World.

Revenue and non-current assets by origin of geographical segment for all entities in the Group is as follows:

The total loss from operations of £3.1m (2017: £2.4m) predominantly relates to project revenue which makes up 99% of revenue. The vast majority of the costs of sales and overheads for 2018 relate to the head office in the UK. Given this, the Directors consider the split of costs across geographical segments would be arbitrary and judgmental. Therefore, they consider reporting the loss by geographical segment could be misleading in this phase of Maistro's development.

Revenue relating to specific territories amounting to 10% or more of revenue includes:

Revenues derived from single external customers amounting to 10% or more of revenue include:

· £857,425 (2017: £32,725) revenue from a single external Enterprise customer. These revenues are attributable to project revenue.

· £322,071 (2017: £201,271) revenue from a single external Enterprise customer. These revenues are attributable to project revenue.

4. Loss from Operations

The operating loss as at 31 December 2018 is stated after charging/(crediting):

5. Adjusted EBITDA

Loss before interest, tax, depreciation and amortisation is calculated as follows:

6. Staff Costs

Staff costs (including Directors emoluments) incurred in the year were as follows:

The average monthly number of employees during the period was as follows:

Key management personnel comprise of the Board of Directors. Details about the composition of the Directors' emoluments and the Directors' interest in share options of the Company are set out in the Director's Report. The information on these pages' forms part of this note to the Financial Statements.

During the year the Directors were awarded a total of 1,770,928 share options (2017: 4,975,285) at a weighted average exercise price of £0.04 (2017: £0.046).

No share options were exercised during the year. Remuneration disclosed above includes the following amounts paid to the highest paid Director:

In the year ended 31 December 2018 the highest paid Director received no share options (2017: 4,975,285). No share options were exercised by this Director in the current financial year (2017: nil).

7. Finance Income and Expenses

8. Income Tax

Analysis of the Tax Credit

No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2018 nor for the year ended 31 December 2017. However, a receivable cash tax credit in respect of the UK R&D activity has been recognised.

The R&D Tax Credit receipt from HMRC is expected to be received within a few months of the submission of the corporate tax return for Maistro UK Limited.

A liability for overseas tax has been recognised on ordinary activities for the year ended 31 December 2018 in respect of Maistro US Inc. The Directors have considered the impact of recent US tax reforms and do not consider the reforms will materially impact the Group given the current level of revenue and operations in the US.

Factors Affecting the Tax Charge

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to the result for the year are as follows:

The Group has carried forward losses and accelerated temporary differences amounting to £27,580,225 as of 31 December 2018 (2017: £18,104,745). As the timing and extent of taxable profits are uncertain, the potential deferred tax asset of £4,688,638 (2017: £3,077,807) arising on these losses (at 17% future tax rate) and accelerated timing differences has not been recognised in the Financial Statements.

9. Loss Per Share

Loss per Ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The basis for calculating the basic loss per share is as follows:

Due to the loss in the period the effect of the share options was considered anti-dilutive and hence no diluted loss per share information has been provided.

NET BOOK VALUE

12. Trade and Other Receivables