Mysquar Regulatory News (MYSQ)

MySQUAR Limited ("MySQUAR" or the "Group")

Final Results & Posting of Annual Accounts

MySQUAR, the Myanmar-language social media, entertainment and payments platform whose principal activity is to design, develop and commercialise Myanmar-focused internet-based mobile applications, announces its final results for the year ended 30 June 2016.

Key highlights in FY2016

§ Revenue for the year ended 30 June 2016 was US$795,191.

§ Total expenses for the year were US$3,246,778 including US$501,214 of share-based payment expenses.

§ The Group has diversified its business portfolio to include the chat and social networking application MyCHAT (with the monetisable features integrated in MyCHAT such as advertising, stickers, push notification, etc.), mobile gaming, mobile marketplace, VoIP, and the payment application (in cooperation with MyPAY Ltd). All products have already been released, except the VoIP and the payment application which are planned to release soon.

§ The Group's strategy has transitioned away from relying solely on applications developed in-house to partnering or licensing applications developed by third parties.

§ Appointment of Neil Frank Osborn to the Board as Non-executive Director.

§ As of 30 June 2016, the Group's registered users across all applications and games were approximately 2.9 million.

Post period end highlights

§ On 1 August 2016, the Group completed a placing of 13,571,429 shares for £475,000, of which Neil Frank Osborn subscribed for 571,429 shares.

§ On 30 September 2016, the Group issued a Convertible Loan Note ("CLN") to Sandabel Capital L.P. to raise gross proceeds of US$1.0 million.

§ Following the release of the first mobile game Destroyer King in May 2016, the Group released two additional mobile games including MyFish on 2 August 2016 and Hawk Hero on 12 September 2016.

§ Mobile game revenue has been growing strongly in the first months of the financial year ending 30 June 2017, from US$27,674 in August to US$65,659 in September, US$73,113 in October and US$86,098 in November.

§ On 30 September 2016, the Group announced the agreement with Fastsell Company Limited to localise and release Fastsell, a location-based customer-to-customer mobile market place application, in the Myanmar market. The application was soft-launched on 5 December 2016.

§ On 17 October 2016, the Group announced that as of 14 October 2016, the Group's registered users across all applications and games have exceeded 6 million.

§ Partnerships with a few local digital newspaper and magazines who have agreed to supply their content for MyCHAT, including Chelmo, Trend Myanmar, Aye Say. The Group will continue to acquire more content (mostly via partnering) for MyCHAT.

§ On 16 November 2016, fastacash and MySQUAR entered into a master services agreement under which MySQUAR will provide payment application development services to Fastacash Pte Ltd.

§ In November 2016, the Group has agreed a new revenue share structure with the key payment service provider MecTel. As a result, the profit margin of the gaming business is expected to increase, dependent on revenue levels (current gross margins of 44% are expected to improve by at least 5%).

§ On 12 December 2016, the Group issued another Convertible Loan Note ("CLN") to Sandabel Capital L.P. to raise gross proceeds of US$2.0 million.

MySQUAR has achieved its objectives for the financial year 2016 and in particular has transitioned to a revenue generating entity. The Group is now in an excellent position to build its revenues as it targets future profitability. MySQUAR now has a large, growing user base on which various products have been generating, or are about to generate, revenue, and an appropriate team that can support and deliver the opportunities these businesses create. Those elements are crucial for the Group to accelerate future growth.

Compared to last year, 2015, when the Group was focused on developing a single application MyCHAT, it now has a portfolio of applications (including those that were already released and those that we are planning to release) in mobile gaming, mobile marketplace, VoIP, and the payment application that MySQUAR has been developing with MYPAY all of which are expected to generate revenue in the financial year to June 2017. As the Group has refined its strategy from making home-grown applications (e.g. MyCHAT) to partnering and licensing applications developed by third parties, we expect that the Group's product portfolio will be rapidly enlarged and thus provides a broad spectrum of mobile value added services in Myanmar.

We are delighted with progress during the period in continued user acquisition and managing costs and, while the revenue growth is at an early stage, we expect that as the Group focuses on monetisation during the 2017 financial year and onwards, income will grow significantly month on month.

Our confidence in the Myanmar market and in the growth of our businesses has been cemented with favorable changes in the political structure and economy of the country during the past twelve months. We expect that trend to continue to enhance the business environment in the coming years, in accordance with the government's commitments.

The Annual Report and Accounts for the year ended 30 June 2016 are available on the Group's website at http://investors.mysquar.com/annual-reports/ 

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

For further information:

About MySQUAR

MySQUAR is engaged in the design, development and commercialization of Myanmar focused internet-based mobile services, mobile messaging applications, including social networks, digital content, mobile games and to extend functionality to include in-app advertising, news aggregation, transaction-based monetisation and e-commerce.

Our Strategy

The Group's principle objective is to become a leading player in the mobile and Internet-based value added services in Myanmar. However, our strategy has transitioned away from relying solely on applications developed in-house to partnering or licensing applications developed by third parties. By following this strategy, we can expand our products and services quickly while being able to mitigate technical and financial risks relating to the product development process. For instance, mobile games are sourced and licensed from studios in Vietnam, China, Singapore, etc.; the voice technology is expected to be provided by a Hong Kong-based company; and the Fastsell application has come from partnership with a Vietnam-based developer.

MySQUAR is now a publisher and operator of mobile value added services, leveraging its deep knowledge of the local market and the capability to operate complex applications. As the Group expands its sourcing and licensing of applications from others, it will just concentrate its resources on localisation, operation and customer services, local payment for the applications, and marketing - all areas in which it has considerable strengths.

The strategic synergies among our businesses are two fold: (i) users of MySQUAR can be driven from one application to another, increasing the opportunities for success of any newly-introduced application, and (ii) monetisation will be enhanced by offering bundle packages to users as a way of improving selling opportunities across the applications included in the packages. For instance, with a 10,000 kyats (equivalent to US$8) top-up, a user can be offered a package of rewards including coins in games, voice, stickers, and other options. As our product categories are grown over time, we expect that the bundle packages will become more appealing to users.

Operation

MyCHAT has been further developed with significant improvements to the existing features of chatting, feed, push notification, look-around and user on-boarding as well as additions of new features and contents such as the fast article feature, new stickers and content provided from third parties. The Group has successfully signed agreements with a number of local digital newspapers and magazines that have agreed to supply their content for MyCHAT, including Chelmo, Trend Myanmar and Aye Say. These feature improvements and the content that is enriched over time are expected to make MyCHAT more appealing to both users and advertisers.

Within MyCHAT, there are App stores in which all MySQUAR's applications and games will be placed. MyCHAT users will be able to see, be notified of and download applications and games. Going forward, MyCHAT is set to include more paid features, such as music downloads, stickers, voices, and light casual games. MyCHAT will bring a world of digital goods to its users.

The gaming business, started in May 2016 with the official launch of Destroyer King followed with the launches of MyFish in August and Hawk Hero in September, has developed very well with millions of registered users and revenue growing on a monthly basis. MyGAME, the brand adopted by MySQUAR for the mobile gaming business, has become popular with local Myanmar people as a source of good and - importantly - localised games.

We are consistently executing the strategy for the gaming business, determined from Day One, of not marketing individual games but building and marketing a branded portal of games for a large sticky community of gamers. Operational wise, the game team has done an excellent job in creating a strong gaming operational platform that includes, among others, a payment software development kit (SDK) that contains an e-wallet for users to top up and store their virtual money. From their wallet, gamers can spend their virtual money to purchase in-game items across all games - a technique that builds loyalty towards MySQUAR's games. Other operational functions of the gaming business such as localisation, marketing, gamer data analysis, game research, graphic design, and customer services are all in place supported by an excellent team. We believe that the established operational platform and the existing team is ready for greater expansion in coming months.

The VoIP application has been developed, extensively tested and is expected to be ready shortly. Although there are still areas of improvement that the team has to tackle as an on-going task in the development process, we believe that the application and its quality meet the requirements for the niche markets that we will penetrate. Our target markets remain unchanged, including the domestic market of Myanmar and the overseas diaspora in Thailand, Singapore, and Malaysia. The voice application is designed to include on-net calls (app to app) and off-net calls (app to landline and mobile numbers) that will be priced and offered to users in bundle packages - users will pay a subscription amount to unlock a package including unlimited on-net calls within a time frame plus limited minutes of off-net calls.

The development and integration of the MYPAY payment application has been progressing well. We understand that MYPAY is happy with the development capability and the constructive contributions of the MySQUAR team to the project. Via this project, the MySQUAR team has also gained a great deal of experience and knowledge in the technical development of the payment application and integration of such applications to complex e-wallets. The Group's management is reviewing the possibility of expanding the team further in order to provide the payment application development services to other partners as well as MYPAY.

Post the end of the financial year 2016, the Group has partnered with a Vietnam-based company to develop and market Fastsell, a mobile market-place application, to the Myanmar market. The application allows sellers to list their products while buyers can use the application to identify potential purchases and negotiate prices. The application also provides the geographic location of sellers to make purchases easier. Monetisation will come initially from advertising and subscription fees charged to premium accounts, and thereafter handling fees charged on every transaction. According to the perpetual agreement, MySQUAR's share of revenues will be 60%. Since our partner handles all the product development activities, MySQUAR will therefore spend a minimal amount of resources for Fastsell but expects to still be able to enjoy a large portion of revenue if the application proves successful. We believe that as Myanmar lacks an online market place for customer-to-customer commerce, the application Fastsell has a great opportunity for success.

Regarding payment tools for our products' monetisation, we have established strong relationships with local payment partners including Mectel, Reddot and easyPoints. Mectel distributes physical top up cards that MySQUAR's users (gamers for instance) can purchase and top up into the MySQUAR's e-wallet (as noted previously). Reddot and easyPoints provide electronic top-ups and QR codes, with a similar top-up flow to that of Mectel. These payment service providers collect the money paid by MySQUAR's users and transfer it to MySQUAR. Cash collection from these relationships to date has been good with no late payments. In an effort to maximise revenue, we will continue to find and be engaged with more payment partners, who have broader geographical coverage, in both Myanmar and neighbouring countries where many Myanmar people live.

As we have added new business units, our organisation has grown significantly from 40 employees at the end of financial year 2015 to about 80 by the end of financial year 2016. That is a great number of additional employees, but I am glad to note that we have taken a very conservative approach in human resource management, in which optimisation and mobilisation of the existing team is always considered carefully before we make decisions on new hires.

Financial Review

Revenue for the financial year 2016 was US$795,191. Total expenses in the same period were US$3,246,778 including US$501,214 of share-based payment expenses. The Group's loss before tax was US$2,433,794 for the financial year 2016.

We will continue to manage our cost base prudently and seek opportunities to reduce costs wherever possible without affecting our ability to deliver our products.

Cash balance at the end of the period was US$2,192 as we only draw down our credit facilities, provided from Rising Dragon, when necessary to minimise interest expense. Regarding future cash flow, post period end, the Group has generated revenue from the gaming business, the payment application development services and advertising. It also expects revenue will grow significantly on a monthly basis following the release of new games, the voice business, paid features in MyCHAT and other applications. In August 2016 the Group issued shares to raise £475,000 followed with the issue of a Convertible Loan Note to raise US$1.0 million in September 2016.

We forecast our operating cash flow to improve over time as our revenue grows, cost base is reduced and gross profit margin increases (as revenue-shared commission paid to our payment partners is lowered as a result of the growing revenue). Effective from November 2016, the Group has agreed a new revenue share structure with the key payment service provider MecTel. As a result of the new structure, the Group expects to improve the profit margin of the gaming business by at least 5%.

Outlook

We believe we have a robust business model and strategy, a well-established market position, and a strong product and service portfolio, which will enable us to capitalise on the market opportunities.

As most of the applications in our development pipeline were released or are close to completion for release, the Group is currently well-positioned to strengthen its market position, enlarge its user-base and more importantly grow revenue via various products and services. The Group will focus on further monetisation over the coming years and the Board looks forward to providing further updates to investors as appropriate.

Overall, the key objective for all MySQUAR employees will be to work hard to achieve financial break-even as soon as possible.

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2016

Consolidated Statement of Financial Position

For the year ended 30 June 2016

Consolidated Statement of Changes in Equity

For the year ended 30 June 2016

Consolidated Cash Flow Statement

For the year ended 30 June 2016

.

Notes to the Consolidated Financial Statements

For the year ended 30 June 2016

1. Accounting policies

The principal accounting policies applied in the preparation of the Consolidated non-statutory registered Financial Statements are set out below. These policies have been consistently applied to all financial periods presented, unless otherwise stated.

a) General information

The Company is registered in the British Virgin Islands under the BVI Business Companies Act 2004 with registered number 1857565. The Company's ordinary shares are held on the AIM Market which is operated by the London Stock Exchange.

The principal activities of the Group are to design, develop and commercialise Internet-based and mobile services, including social networks, mobile messaging applications, digital contents, mobiles gaming, online advertising, online news aggregation, mobile payment services, ecommerce, etc.

b) Basis of preparation

The Consolidated non-statutory Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) as adopted by the European Union.

The Consolidated non-statutory Financial Statements are presented in US Dollars rounded to the nearest US Dollar and have been prepared under the historical cost convention.

The preparation of the Consolidated non-statutory Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires Management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant in the preparation of the Consolidated Financial Statements are disclosed in Note 3.

c) Going concern

The Consolidated non-statutory Financial Statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

The Group reported US$795,191 in revenue and a net loss after tax of US$2,433,794 for the financial year ended 30 June 2016 (30 June 2015: loss of US$2,220,256) and as of that date, the Company's total current liabilities exceeded its total current assets by US$146,283 (30 June 2015: US$1,156,730). Management's assessment of the ability of the Group to continue as a going concern has considered cashflow forecasts, including assumptions regarding revenue growth, the timing of bringing new products to market and the Group's ability to settle liabilities as they fall due. Following the year end the Group has raised US$3,642,098 in the form of both equity and convertible loans, and the cashflow forecasts have been prepared including the cash inflows that have arisen from these successful raises (see note 22).

Based on the above, the Directors consider there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable, as well as to fund the Group's future operating expenses. The going concern basis preparation is therefore considered to be appropriate for the Consolidated non-statutory Financial Statements.

Should the Group not be able to continue trading, adjustments would have to be made to reduce the value of assets to their recoverable amounts to provide for further liabilities which might arise and to re-classify non-currents assets as current.

The financial statements do not include any adjustments that may be required should the Group be unable to continue as a going concern.

d) Basis of consolidation

The consolidated financial statements of MySquar Limited and the audited financial statements of its subsidiary undertakings made up to the consolidated financial statements as at 30 June 2016.

Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The following 100% owned subsidiaries have been included within the Consolidated Financial Statements and represent all entities controlled by the Company as at 30 June 2016:

e) Standards and interpretations

(i) New and amended standards mandatory for the first time for the financial periods beginning on or after 1 July 2015

New standards, amendments and interpretations in issue but not yet effective or not yet endorsed and not early adopted

*1 Subject to EU endorsement

The Group is evaluating the impact of the new and amended standards above. The Directors believe that these new and amended standards are not expected to have a material impact on the Group's results or shareholders' funds.

f) Foreign currency transactions

(i) Functional and presentational currency

Items included in the Financial Statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("functional currency").

The Consolidated Financial Statements is presented in US$ which is the Group's functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions, or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the statement of comprehensive income

g) Revenue recognition

Revenue of a transaction involving the rendering of services is recognised when the outcome of such transactions can be measured reliably. Where a transaction involving the rendering of services is attributable to several periods, revenue is recognised in each period by reference to the percentage of completion of the transaction at the balance sheet date of that period. The outcome of a transaction can be measured reliably when all four (4) following conditions are satisfied:

(i) the amount of revenue can be measured reliably;

(ii) it is probable that the economic benefits associated with the transaction will flow to the Company;

(iii) the percentage of completion of the transaction at the balance sheet date can be measured reliably; and

(iv) the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

It should be noted that the revenue recognition policies detailed above were applicable to the revenue generated in the year. Revenue recognition policies in relation to the new revenue streams that are due to come on board in the financial year ending 30 June 2017 and are discussed in the Chairman's Statement and Chief Executive's review are not disclosed.

h) Property, plant and equipment

Property, plant and equipment are measured on the cost basis and therefore stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

All repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which they are incurred.

Depreciation

Depreciation is calculated using the straight-line method to allocate their cost over their estimated useful lives, as follows:

Computer equipment 12 - 15 months

Office furniture 15 - 60 months

The assets' residual values and useful lives are reviewed, and, if appropriate, asset values are written down to their estimated recoverable amounts, at each reporting date. Gains and losses on disposals are determined by comparing proceeds with the carrying amounts, and are included in Statement of Comprehensive Income.

i) Financial instruments

Financial assets

The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group's loans and receivables comprise Trade and Other Receivables and Cash and Cash Equivalents.

Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade date - the date on which the Group commits to purchasing or selling the asset. After initial measurement, loans and receivables are carried at amortised cost using the effective interest method less any allowance for impairment. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred, and the Group has transferred substantially all of the risks and rewards of ownership.

Impairment of financial assets

At the end of each reporting period, the Group assesses whether there is objective evidence that a financial instrument has been impaired, if so, the Group performs a detailed impairment calculation to determine whether an impairment loss should be recognised. A financial asset, or a group of financial assets, is impaired, and impairment losses are incurred, only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event"), and that loss event (or events) has an impact on the estimated future cash flows of the financial asset, or group of financial assets, that can be reliably estimated.

Evidence of impairment may include indications that the receivables or a group of receivables is experiencing significant financial difficulty, default or delinquency in interest or principal repayments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For the loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the financial asset's original effective interest rate. The asset's carrying amount is reduced, and the loss is recognised in the income statement.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement.

The totals for each category of financial instruments is as follows:

Financial liabilities

Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities and include trade and other payables and borrowings.

Financial liabilities are initially measured at fair value, net of transaction costs. Financial liabilities are subsequently measured at amortised cost using effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payment through the expected life of financial liability, or, where appropriate, a shorter period.

j) Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held at call with banks.

k) Trade payables 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

l) Share based payments

The Group provides benefits to senior personnel, consultants and advisors of the Group in the form of share-based payments, whereby such parties render services in exchange for shares or rights over shares (equity-settled transactions).

The cost of these equity settled transactions with such parties is measured by reference to the fair value of the equity instruments at the date at which they are granted.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the share of MySQUAR Limited (market conditions) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant party become fully entitled to the award (the vesting period).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects:

(i) The extent to which the vesting period has expired; and

(ii) The Group's best estimate of the number of equity instruments that will ultimately vest.

No adjustment is made for the likelihood of market performance conditions being met, as the effect of these conditions is included in the determination of fair value at grant date. The charge to the Income Statement for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

m) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings, using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

Borrowing costs are recognised as an expense in the period in which they are incurred except borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period to get ready for its intended use or sale. In this case the borrowing costs are capitalised as part of the cost of such a qualifying asset.

n) Current and deferred income tax

Income tax comprises current and deferred tax. Current income tax is recognised in the Income Statement, except to the extent that it relates to items recognised directly in equity. In this case the tax is also recognised directly in other comprehensive income or directly in equity, respectively.

Current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. However, the deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects either accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

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

o) Leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.

p) Employee benefits

Salaries, wages, paid annual leave, bonuses and non-monetary benefits are accrued in the year in which the associated services are rendered by the employees of the Group.

q) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Share Capital - Amount subscribed for share capital

Shares to be issued - Amount subscribed for unissued share capital

Share Option Reserve - Comprises the fair value of options and share rights recognised as an expense

Reconstruction Reserve - Arose from the difference between the carrying value of the investment and the nominal value of subsidiaries upon consolidation

Retained Loss - Cumulative net losses recognised in the consolidated statement of comprehensive income

2 Financial risk management

Financial risk factors

The Group's activities expose it to a variety of financial risks as below.

The Board's overall risk management strategy seeks to assist the Group in meeting its financial targets, while minimising potential adverse effects on financial performance. Its functions include the review of future cash flow requirements.

(i) Interest rate risk

The Group's exposure to interest rate risk relates primarily to interest bearing financial assets and interest bearing financial liabilities.

Interest bearing financial assets

Cash is invested in deposit accounts which provide a modest return on the Group's resources whilst ensuring there is limited risk of loss to the Group and held in banks with strong credit ratings per credit rating agencies.

Interest bearing financial liabilities

Interest bearing financial liabilities includes borrowings from Rising Dragon Singapore Pte Ltd., where the interest fixed upon drawdown date is closely affected by the market rate of interest. The Group is exposed to a risk of change in cash flows from undrawn loan facilities due to changes in interest rate. The rates and terms of repayment of the interest bearing bank loans of the Group are disclosed in Note 16. The Group manages the net exposure to interest rate risks by monitoring the exposure to such risks by maintaining sufficient lines of credit to obtain acceptable lending costs and by monitoring the exposure to such risk on an ongoing basis.

At the statement of financial position date, the interest rate profile of the Group's interest bearing financial instruments was:

Note borrowings are short term in 2015 and long term in 2016

Cash flow sensitivity analysis for variable rate instruments

Any change in interest rate for cash in bank at the reporting date would not have a material impact in profit or loss and as such is not disclosed.

(ii) Foreign exchange risk

Foreign exchange risk arises because the Group has operations located in various parts of the world whose functional currency is not the same as the functional currency in which other Group companies are operating, which primarily relates to the US Dollar, British Pound Sterling, Singapore Dollar, Vietnamese Dong and Burmese Kyat. The Group's net assets arising from such overseas operations are exposed to currency risk resulting in gains and losses on retranslation into US$. Only in exceptional circumstances will the Group consider hedging its net investments in non US$ operations as generally it does not consider that the reduction in foreign currency exposure warrants the cash flow risk created from such hedging techniques. It is the Group's policy to manage working capital requirements as a function of the Parent Company treasury activities. The Group considers this policy minimises any unnecessary foreign exchange exposure and allows risk to be managed on a Group wide basis.

In order to monitor the continuing effectiveness of this policy the Board go through their approval of both corporate and capital expenditure budgets, and review the currency profile of cash balances and management accounts and considers the effectiveness of the policies in place on an ongoing basis. No split of the bank accounts held by the Group by currency has been made on the grounds of materiality.

(iii) Liquidity risk

The purpose of liquidity risk management is to ensure the availability of funds to meet present and future financial obligations. Liquidity is also managed by ensuring that the excess of maturing liabilities over maturing assets in any period is kept to manageable levels relative to the amount of funds that the Group believes can generate within that period. The Group policy is to regularly monitor current and expected liquidity requirements to ensure that the Group maintains sufficient reserves of cash, borrowings and adequate committed funding from its owners to meet its liquidity requirements in the short and longer term.

The following table details the Group's remaining contractual maturity for its non-derivative financial assets and liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets, if any, and undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. The inclusion of information on non-derivative financial assets is necessary in order to understand the Group's liquidity risk management as the liquidity is managed on a net asset and liability basis.

The tables below reflect an undiscounted contractual maturity analysis for financial assets and liabilities.

The Board of Directors assess the liquidity risk at a high level.The Board of Directors believes that the Group will be able to generate sufficient funds to meet its financial obligations as and when they fall due. The Board of Directors believes that the Group can negotiate with its related parties to extend the due date to a longer term, if required.

(iv) Credit risk

Credit risk is the risk of loss associated with the counterparty's inability to fulfil its obligations. The Group's credit risk is primarily attributable to other receivables and cash and bank balances with the maximum exposure being the reported balance in the consolidated statement of financial position. The Group's significant debtors are with related parties and as such the Group believes that the credit risk to these is minimal. The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk.

(v) Market risk

Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. The Group does not hedge these risk exposures due to the lack of any market to purchase financial instruments.

(vi) Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of net debt, which includes the borrowings disclosed in Note 16, net of cash and cash equivalents; and equity attributable to equity holders of the Group, comprising capital and accumulated losses as disclosed in the statement of changes in equity.

The Board controls the capital of the Group in order to ensure that the Group can fund its operations and continue as a going concern. The Group's capital includes ordinary share capital. There are no externally imposed capital requirements.

The Board effectively manages the Group's capital by assessing the Group's financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels and share issues.

There have been no changes in the strategy adopted by the Board to control the capital of the Group in the year ended 30 June 2016. This strategy is to maintain share capital as dictated by operational requirements and market conditions.

The gearing ratio for the year ended 30 June 2016 is as follows:

3 Critical accounting judgements and key uncertainties of estimation uncertainty

Key judgements

The Directors make estimates and judgements incorporated into the Consolidated Financial Statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Following their review in relation to this, the Directors consider the following to be the critical estimate and judgement that has a significant risk of causing a material adjustment within the Consolidated Financial Statements.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and model for estimating fair value for share- based payment transactions are set out in Note 18 to the Consolidated Financial Statements.

4. Staff costs

The average number of employees, including Directors, employed by the Group was:

5. Segment revenues and results

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision-maker ('CODM'), being the Chief Executive Officer, and the Chief Financial Officer, to allocate resources to segments and to assess their performance. For this purposes, the Group is currently organised into three operating divisions technical integration, mobile gaming and advertising. These divisions are the basis on which the Group reports its primary segment information. No comparatives have been included as the Group only began reporting in this manner during the year ended 30 June 2016.

Principal activities are as follows:

- Sales of technical integration

- Sales of mobile gaming

- Sales of advertising

The following customers accounted for more than 10% of the Group's revenue:

6. Finance income

7. Finance costs

8. Marketing and selling expenses

9. Administrative expenses

10. Income tax  

The total tax charge for the year is nil (2015: nil).

A reconciliation of income tax expense applicable to the loss before taxation at the statutory tax rate to the income tax expense at the effective tax rate of the Group are as follows:

 Potential deferred tax assets totalling $629,817 (2015:$317,312) have not been recognised due to uncertainty as to when profits will be generated.

 The Group is not subject to taxation in the British Virgin Islands.

Under the provisions of the Subsidiary's Investment Certificate, Squar Company Limited in Vietnam is obligated to pay income tax at the rate of 20% on its taxable income. No corporate income tax has been provided for during the period as the Company has no assessable income.

Under the provisions of the Subsidiary's Incorporation Certificate, MySQUAR Limited in Myanmar is obligated to pay income tax at the rate of 25% on its taxable income. No corporate income tax has been provided for during the period as the Company has no assessable income.

11. Earnings per share

Basic earnings per share has been calculated by dividing the loss attributable to equity holders of the company after taxation by the weighted average number of shares in issue during the year. There is no difference between the basic and diluted earnings per share as the effect on the exercise of options and warrants would be to decrease the loss per share.

Details of share options that were anti-dilutive but may be dilutive in the future are set out in Note 17.

12. Property, plant and equipment 

13. Non-current trade and other receivables

* According to the facility agreement dated 13 May 2015 with Rising Dragon Singapore Pte Ltd., the Group issued 18,751,535 shares to Rising Dragon Singapore Pte Ltd. with the fair value of US$0.051999 per share (resulting in US$975,065 in share capital). The amount of US$975,065 is accounted as share based payment to Rising Dragon Singapore Pte Ltd., and is amortised as share based payment expenses over the 5-year term of the facility.

14. Trade and other receivables

15. Trade and other payables

16. Borrowings

On 13 May 2015 and as varied pursuant to a deed of variation dated 25 May 2015, the Group and Rising Dragon Singapore Pte Ltd ("Rising Dragon), entered into a term facility agreement under which Rising Dragon agreed to make available, subject to the terms therein, a credit facility for a sum of up to US$ one million (the "Facility Agreement") in consideration for an arrangement fee satisfied by the allotment and issue of 18,751,535 Shares to Rising Dragon. The facility under this agreement is repayable on the date being the earlier of 30 June 2020 and the completion of a fund raise in the sum of US$ one million or more by the Group subject to the unanimous approval of the Board. The interest rate payable under this agreement is 12% per annum, payable monthly in advance.

17. Share capital

18. Share based payments

Warrants

At 30 June 2016, warrants for 2,936,995 new Ordinary Shares in the Company were in issue as follows:

Share options

At 30 June 2016, options to subscribe for 9,476,848 new Ordinary Shares in the Company were in issue as follows:

The outstanding options are exercisable as follows:

The options outstanding at 30 June 2016 had a weighted average remaining contractual life of 5 years, 311 days.

Fair value of options

The fair value of the share options issued during 2016 was determined using the Black Scholes valuation model. The assumptions used in applying the Black Scholes pricing model were as follows:

19. Contingent liabilities

The Board does not consider that the Group has any material contingent liabilities.

20. Financial commitments

Operating leases

The Group had outstanding commitments for future minimum lease payments on its office premises under non-cancellable operating leases which fall due as follows:

21. Related party transactions

The transactions during the financial period with related parties were:

* The service agreement entered into by MySQUAR with MyPAY Ltd., dated 14 October 2015, constitutes a related party transaction under the AIM Rules as Eric Alfred Schaer, Chief Executive Officer of MySQUAR, holds an indirect controlling interest in MyPAY Ltd. Eric Alfred Schaer is also the Chairman and CEO of Rising Dragon Singapore Pte Ltd.

The balances with related parties as at 30 June 2016 were:

Details of the shareholder loans are disclosed in Note 16 Borrowings.

The Directors consider there to be no ultimate controlling party.

22. Events after the reporting period

On 1 August 2016, the Company completed a placing of 13,571,429 shares for £475,000 (Placing Price was 3.5 pence per share), including 571,429 shares subscribed by the new Non-executive Director Neil Frank Osborn. For each Placing Share subscribed for, placees also received 1 warrant to subscribe for one new share of no par value each in the Company at an exercise price of 5.5 pence per share with a 3 year exercise period from admission of the Placing Shares to trading on AIM ("Admission"). As part of the Placing arrangements, the Company issued 650,000 warrants to subscribe for new Shares to Beaufort Securities Limited, exercisable at the Placing Price (3.5 pence per share) for a period of 5 years from Admission. The 650,000 warrants were exercised on 27 October 2016.

On 30 September 2016, the Company issued a Convertible Loan Note ("CLN") to Sandabel Capital L.P. to raise a gross proceed of US$1.0 million. Following the issuance and by the date of approval of these Financial Statements, the Company has drawn down US$1.0 million in principal value, of which US$750,000 has been converted into 20,290,616 ordinary shares. Pursuant to the conversion of the loans, MySQUAR has issued 10,145,307 warrants to Sandabel Capital L.P. and 10,145,307 warrants to Beaufort Securities Limited, exercisable at 7.5p per share at any time within 3 years from the date on which the warrants are issued.

Following the release of the first mobile game Destroyer King in May 2016, the Company released 2 additional mobile games including MyFish on 2 August and Hawk Hero on 12 September.

Revenue of the Group steadily grew in recent months, from US$27,674 in August to US$65,659 in September, US$73,113 in October and US$86,098 in November.

On 30 September 2016, the Group announced an agreement with Fastsell Company Limited to localize and release Fastsell, a location-based customer-to-customer mobile market place application, in the Myanmar market. Monetisation will come initially from advertising and subscription fees charged to premium accounts, and thereafter handling fees charged on every transaction. According to the perpetual agreement, MySQUAR's share of revenues will be 60%.

On 17 October 2016, the Group announced that as of 14 October 2016, the Company's registered users across all apps and games have exceeded 6 million.

On 16 November 2016, fastacash and the Group entered into a master services agreement for payment application development. Under the agreement, the Group will provide payment application development services to Fastacash Pte Ltd., the Singapore-based global social and mobile payment platform, for a period of 24 months.

In November 2016, the Group has agreed a new revenue share structure with the key payment service provider MecTel, the state-backed mobile phone operator. The new structure is effective from November 2016 and as a result, the profit margin of the gaming business is expected to increase by at least 5% from the current margin of 44%, dependent on revenue levels.

On 5 December 2016, the Group soft-launched Fastsell.

On 12 December 2016, the Group issued another Convertible Loan Note ("CLN") to Sandabel Capital L.P. to raise a gross proceed of US$2.0 million. Following the issuance and by the date of approval of these Financial Statements, the Group has drawn down US$500,000 in principal value.