4 May 2020

Certain information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 (“MAR”). Upon publication of this Announcement, this information is now considered to be in the public domain.

Bidstack Group Plc

(“Bidstack” or the “Company”)

Preliminary Results for the year ended 31 December 2019

Bidstack Group Plc (LON: BIDS), the native in-game advertising group, announces its audited results for the year ended 31 December 2019.

Financial Performance

·      Turnover of approx. £140,000 (FY 2018: £316,000) reflecting the strategic decision to focus on significant development work

·      Cash balance at 31 December 2019 of £3.1m (31 Dec 2018:  £2.1m)

·      Adjusted loss before tax of £5.3m (FY 2018: £1.2m)

Operational Performance

·      Successful oversubscribed Placing in May 2019 raising £5.0m

·      Acquisition of Pubguard in August 2019 to protect Bidstack’s gaming inventory and enhance its SDK

·      Strategic partnership agreement signed with Dentsu Aegis Network in September 2019

·      Exclusive Rights secured over various titles including Codemasters DiRT Rally 2 and Grid titles and Sports Interactive’s Football Manager 2020

·      Two-year trading agreement agreed in December 2019 with global marketing services group

·      Contracts signed with Xandr Invest (formerly AppNexus) and The Trade Desk

·      Agreement with Epic Games to make Bidstack’s SDK available for games using Unreal Games Engine

·      Working with the Internet Advertising Bureau (IAB) so that programmatic advertisers will be able to use “in-game advertising” on a self-serve basis in the same way they currently access display and video inventory

·      Strengthened Board with appointment of Mike Hayes and Derek Wise as Non-Executive Directors

·      Established an Advisory Committee of leading individuals in the video games and programmatic advertising industries

Post Period-end Highlights

·      Further exclusive agreement with Codemasters for upcoming 2020 title and appointment of industry gaming veteran, Andrew House, to Advisory Committee

·      Lumen Research, an attention technology company that has developed eye-tracking technology to help companies understand how consumers interact with their products, was commissioned on behalf of an automotive brand to better understand how in-game adverts performed versus traditional advertising channels such as desktop display, out of home and mobile display.

James Draper, CEO of Bidstack, said:

 “In 2019 we have completed significant development work to ensure Bidstack and our partners are able to make the most out of the significant opportunities that lie ahead.  New console launches, the continued evolution of cloud computing and the phenomenal growth in e-sports all provide strong tailwinds and are clear indicators of a healthy, vibrant market. We remain absolutely focused on our mission to become one of the world’s foremost advertising network for games, as we pioneer a new category of ‘native in-game’ advertising.

The Company continues with its strategy of prioritising investment, in order to build a strong foundation on which to grow and to create value for our shareholders.

We have successfully secured increasing demand side interest from ad agencies and are focused on bolstering our supply side through further agreements with content developers, like the fantastic agreement recently announced with Codemasters. 

COVID-19 disruption to the advertising industry, particularly in the out of home and live sports segments, is leading media buyers to seek digital alternatives for their brands. Our technology enables them to do that and we are working closely with agency groups to help them test, report and activate larger campaigns across our growing portfolio of titles through this period.

We are confident that we are approaching this balance in the right way which will lead to material revenues in the second half of 2020.”

The Company’s Annual Report and Accounts for the year ended 31 December 2019 will be published today on the Company’s website – www.bidstackgroup.com.  Copies will also be posted today to those shareholders who have opted to receive physical copies.

Bidstack’s Annual General Meeting will be held at Plexal, 14 East Bay Lane, The Press Centre, Here East, Queen Elizabeth Olympic Park, Stratford, London on 28 May 2020 at 11:00 a.m.

Contacts

Notes to editors

Bidstack is an advertising technology company which provides dynamic, targeted and automated native in-game advertising for the global video games industry across multiple platforms. Its proprietary technology is capable of inserting adverts into natural advertising space within video games across multiple video games platforms (mobile, PC and console).

Bidstack’s customers are games publishers and developers (on the supply side), and advertising agencies, brands and programmatic advertising platforms (on the demand side). Bidstack contracts exclusive access to the native in-game advertising space within video games from their developers or publishers and sells that advertising space either direct to specific brands and their agencies or through programmatic advertising platforms.

Chairman’s statement

Introduction

2019 was a year of considerable progress towards Bidstack’s goal of becoming a leading platform to deliver in-game advertising in video games.  Some of the highlights of the year included Mike Hayes, former CEO of SEGA Europe and America, joining the board in April; an oversubscribed placing to raise £5 million in May; Derek Wise, former CTO of Grapeshot and VP of Contextual Intelligence with Oracle Data Cloud, joining the Board in July; our first acquisition in August, on-line brand safety business Minimised Media Limited (trading as Pubguard), signing our first significant engagement with a major global advertising agency in September and ending the year with a two year advertising trading agreement.

Although the Company failed to meet its revenue targets for the year, 2019 has been spent ensuring the foundations of the business are sufficiently robust to achieve meaningful future growth.  With the strength of our Board and Advisory Committee, the engagement we have achieved with leading international advertising agencies and their clients, our ability to provide end-to-end programmatic advertising with some of the world’s largest demand-side platforms (“DSPs”) and the growth of our team from 17 on 31 December 2018 to 49 at the period end, the Board is content with Bidstack’s evolution through the period under review.

During the current period, the unprecedented Covid-19 global pandemic has caused some disruption to the business, primarily due to a number of trade shows having been cancelled. This has clearly had an impact on the face-to-face meetings that had been scheduled to take place during those events. Despite this, the systems and procedures we have in place, along with our technology-based platform, are ensuring that, from an operational standpoint, Bidstack’s business is largely able to proceed as normally as possible with our staff working remotely.

Background

Bidstack and its partners are in the forefront of the creation of in-game advertising as a new advertising category which comes with many technical, regulatory and commercial hurdles.

Bidstack’s software facilitates the insertion of adverts into natural advertising space (e.g. billboards) in video games.  The advertising is dynamic, targeted and automated, and works globally across multiple platforms (PC, mobile and console).  The key benefit of native in-game advertising over non-native variants (e.g. video rolls and banner ads) is that it appears authentic and “natural” to the environment of the game and does not impact the gamer’s experience and cannot be excluded with ad-blocking software.

Advertisers can target the users they want to reach based on age, gender and location and the software is able to display different advertisements to different users playing the same game so that adverts can be delivered to the players most relevant to a particular brand.

Progress during 2019

As we stated in our unaudited interim results for the six months ended 30 June 2019, during 2019 we made the strategic decision not to prioritise the acquisition of new games and additional advertising inventory in order to give our technical development and product teams the freedom they needed to carry out significant development work.  In addition, we were not disappointing major video games developers and publishers by having to hold off filling their advertising inventory while necessary development work took place.

In early August 2019, Bidstack completed its purchase of Minimised Media Limited, trading as “Pubguard” for £300,000 satisfied by the issue of Bidstack shares. Pubguard reviews in-app and mobile advertisements and desktop web content for offensive, malicious, illegal ad content and malware.  This software is being used to protect Bidstack’s gaming inventory and to enhance its Software Development Kit (“SDK”).

In late August we appointed Stifel Nicolaus Europe Limited (“Stifel”) as our corporate broker to support our growth.  Stifel is an NYSE-listed full-service investment bank with a 100-person global technology & internet banking team and offices across the US, Europe and Asia.  Stifel commenced research coverage of the Company in March 2020. 

In late September we entered into a strategic partnership agreement with Dentsu Aegis Network (“DAN”) encompassing a partnership framework allowing DAN to scale access to Bidstack’s in-game inventory on a programmatic basis globally, giving video game publishers frictionless access to one of the world’s largest agency holding groups.

On 18 December, following several months’ work by the team, we signed a two-year trading agreement with a global marketing services group to assist brands embrace the full potential of Bidstack’s disruptive technology.  The Board believes this level of engagement represents a significant shift in approach from a major advertiser looking to engage with an affluent, diverse and growing gaming and esports audience on a larger scale.

For more information on the Group’s technical and commercial progress in 2019 please refer to the Chief Executive’s Statement set out below.

Board Appointments and Advisory Committee

During 2019 we added two talented and well connected new Non-Executive Directors, Mike Hayes (formerly of SEGA, Codemasters and Nintendo) and Derek Wise (Oracle Data Cloud, formerly of Grapeshot and Jagex) who are bringing their skills and experience to the business and are making a considerable impact.

During the period we also established an Advisory Committee which has allowed Bidstack to engage with leading individuals in the video games and programmatic advertising industries. More information about the Advisory Committee is set out in the Chief Executive’s Statement below.

Financial Summary

The summary income results for the Company for the year under review are as follows:

*Adjusted for transaction costs (2019: £0.04m) and RTO charges (2018: £0.7 million) and the deemed cost of acquisition (2018: £1.4 million)

The Company raised £5.0m in May 2019 as a result of a placing of 40 million new ordinary shares with institutional and other investors at 12.5 pence per share. In addition, the Company received a further £0.7m following the exercise of 4,375,616 warrants issued in November 2017 at an exercise price of 20 pence per warrant.

The Company ended 2019 with cash reserves of £3.1 million (2018: £2.1 million).  Cash management is a key focus within the business.  We expect to continue to have negative cash flows in 2024, as our strategic focus remains on the development of our software platform alongside our product offering.

Outlook and Prospects

Although the Company has achieved significant engagement with major global advertising agencies, including Dentsu Aegis, giving the world’s leading advertising agencies the comfort to buy and report on native in-game advertising takes time and the Board believes further building blocks are still required before those revenues can be fully exploited.

The Board believes that the addressable market for video game advertising will go through a period of substantial change over the next three to five years, which Bidstack is well placed to take advantage of. We believe that new console launches, the growth of cloud-gaming and e-sports, coupled with legislative restrictions affecting targeting via app and web-based advertising, should all work in Bidstack’s favour.

2020 will see a new generation of hardware launched into the gaming market not least because both Microsoft and Sony have announced plans to launch new consoles this year.  The next generation of Xbox, codenamed “Project Scarlett,” is scheduled to arrive this year, as is the Sony PlayStation 5.

The Company continues to work with some of the largest game publishers in the world to make more inventory available to advertisers and some of these games are currently at integration or beta testing phase. However, the Company’s focus continues to be on games with higher user statistics, rather than on sheer numbers of games, in order to maximise advertisers’ access to targeted demographics. The Board will update the market on significant new games when it is able to do so.

Bidstack is also continuing its work with the Internet Advertising Bureau (“IAB”), the trade group which sets technical standards and best practices for the digital advertising industry, to create a recognised advertising category for native in-game advertising.  When this work is completed, programmatic advertisers will be able to use “in-game advertising” on a self-serve basis in the same way they currently access display and video inventory.

With the connections Bidstack has made through the Advisory Committee and Board members, the Directors believe the Company is well-positioned strategically to capitalise on the commercial and technical opportunities ahead. Bidstack will continue to add high calibre individuals to the Advisory Committee to assist the Company and the team on its stated goals.

As a result of the experience gained in 2019, the Board believes that Bidstack’s medium and longer term interests require the Company to continue with its strategy of prioritising technical investment over seeking short term revenues in order to take full advantage of the potentially significant shifts in technology and media planning capabilities which are underway. While we are working hard to increase the breadth of our inventory of games in H1 2020 and with some success, the Board continues to expect that revenues in H1 2020, although higher than total revenues for 2019, will continue to be minor and that material revenues for 2020 will start to occur only in the second half. 

On 6 April we were pleased to confirm that, as announced by the Department for Digital, Culture, Media and Sport (“DCMS”), Bidstack provided its technology to insert the important message “Stay Home Save Lives” within Codemasters DiRT Rally 2.

The video games industry is currently witnessing record numbers of daily active users and hours played; concurrently Bidstack is experiencing high levels of inbound demand from advertising agencies and others. Nevertheless, in its planning for 2020 the Board has taken a highly conservative view on revenue prospects and believes it is right to do so, particularly given the currently unknown duration and impact of Covid-19 related restrictions on movement and face to face meetings. For 2020 Bidstack’s focus remains on securing significant commercial and technological deals that will position the Company well for growth in the medium term.

In the meantime we remain focussed on careful management of our existing cash resources and expected trading and non-trading cash receipts as we continue to grow the business.

Chief Executive’s report

Introduction

This is my second report as Chief Executive of Bidstack Group Plc.

In the current period COVID-19 has created an unprecedented economic and social climate. Our first concern has been to ensure the safety and wellbeing of all our staff, who are now working safely from home.

That said, I would like to thank all my other directors and staff at Bidstack for having driven the business forward and achieved so much during 2019. I would also like to thank our shareholders and investors.

Progress during 2019

2019 was a year in which Bidstack laid many of the foundations which will enable us to progress towards our goal of becoming one of the world’s foremost advertising networks for video games, leading with our native in-game advertising platform. If an advertiser wants to place their brand in front of an engaged gamer in a non-intrusive, contextual manner (we call it the native in-game environment), our technology enables them to do so.

The Company undertook significant strides throughout 2019 in terms of personnel, infrastructure, market positioning, demand and supply interest.

As a result, Bidstack’s inventory is now available to buy on The Trade Desk, a huge technological accomplishment which has been made possible by our impressive technical teams in Riga and London.

Native in-game advertising remains new territory and the work we’ve achieved with our launch partners, SEGA and Codemasters, enabled us, at the tail end of 2019, to secure our first trading agreement with a global advertising agency group. Not only is this a huge step for Bidstack and this new industry sector, it is also a significant third-party endorsement of our technology and strategy.

While still on a small scale, by the end of 2019 we were running fully programmatic campaigns on our inventory of games.

As the Company also focused on advancing towards frictionless scalability during the period under review, we also invested heavily in our AdConsole, our proprietary adserver and centralised platform, which allows campaigns to be monitored and reported on seamlessly to our advertising agency and game developer clientele.

More detail on our developments in specific areas of the business are set out below:

Games

We have worked hand in glove with our friends at Codemasters in 2019 to deliver native in-game advertising into their DiRT Rally 2 and Grid titles.

In addition we extended our multi-year partnership with Sports Interactive, SEGA’s world-leading developer of football management simulations, by a further three years giving Bidstack exclusive rights to serve native in-game advertising within Football Manager 2020 with Bidstack’s Software Development Kit (“SDK”), which was released in November 2019.

A SDK is a sophisticated set of software tools, libraries, code samples, processes and components built to incorporate features and drive user behaviours.

This is the first title on which Bidstack’s SDK is running live. The SDK’s functionality includes added brand safety and security measures and allows game publishers to track the real-time performance of their in-game inventory through our AdConsole.

Programmatic Advertising

The ability to provide programmatic advertising with related reporting and analysis is critical to our business because it unlocks digital advertising spend from the major advertising agency groups.

During 2019 we delivered on our initial challenge to provide a working end-to-end programmatic digital advertising platform, first with demand side platform (“DSP”) Avocet Systems Limited, a significant technical milestone in our development, and then with Platform 161. DSPs enable advertisers to target advertising inventory, either direct or via an agency, that fits their campaign demographics (e.g. age, gender, location etc.) and allows media buyers to trade and optimise campaigns with real‐time reporting.

Our subsequent relationships with Xandr Invest (formerly known as AppNexus) and The Trade Desk (Nasdaq: TTO), the operators of two of the world’s largest DSPs, have proven that native in-game advertising can be traded programmatically. However, as we stated in our interim results in September 2019, the roll-out of this new ad format is a complex process but we are pleased that we have already made strides on the journey.

Proof of our evolution in this area came in September 2019 in the form of a pioneering agreement with global advertising giant Dentsu Aegis and, in December, a two-year advertising trading agreement for 2020 and 2021 with a leading global agency.

Other Technology

In early August 2019, we bought Minimised Media Limited. Under the trading name “Pubguard” it reviews in-app and mobile advertisements and desktop web content for offensive, malicious, illegal ad content and malware.

During 2019 we developed both our proprietary lightweight SDK and our proprietary adserver and centralised platform, AdConsole which, as previously noted, enables automatic monitoring and reporting on digital advertising campaigns. As I mentioned above, Bidstack’s SDK facilitates game publishers to track the real-time performance of their in-game inventory through our AdConsole and includes additional functionality for brand safety and security enhanced by the integration of Pubguard’s advertising verification software.

As we announced in August, Epic Games, the creator of Fortnite, Unreal, Gears of War, Shadow Complex, and the Infinity Blade series of games, has agreed to make our SDK available for games built using their Unreal Games Engine.

Commercial Developments

We have completely revised and rebuilt our web-site, www.bidstack.com in 2019 to provide a much more informative and attractive shop window for our industry profile and marketing and adopted and installed a new CRM system.

During the period we commissioned Lumen Research Limited to carry out studies using their eye tracking attention technology to measure and predict visual engagement with advertisements across several of our gaming titles. We were pleased to announce on 24 June 2019 that our ads outperformed online browsing norms across all the titles tested, in some cases by more than double. In particular, our ads performed well above industry standards with gamers who play every day. We believe the findings of this study demonstrate that Bidstack’s in-game format is a powerful way for brands to reach their target audience and to reach the “unreachables” in a demonstrable way.

The Digital Trading Standards Group awarded us a Brand Safety Seal which reassures our clients that we are taking the strongest possible proactive steps to protect the integrity of the digital advertising supply chain.

Staffing

Our rapid hiring programme has taken us from 17 employees on 31 December 2018 to 49 at 31 December 2019. The Bidstack team now comprises many extremely talented and capable people with impressive backgrounds and experience in related businesses. Senior hires such as Lewis Sherlock from Verizon, Moritz Natalini from King, Grace Cooke from Kargo, Adam Fisher from Unity and former Ubisoft, Sony and Atari sales professional John Koronaios, to name but a few, have strengthened the core group during the year.

We constituted our Advisory Committee to enable our team to obtain assistance from an impressive array of industry stalwarts from the video games and digital marketing industries in relation to technical and commercial questions. I am grateful to all those who have agreed to participate and slightly in awe that some of the biggest names in the world of video games and adtech have publicly and clearly chosen to associate themselves with Bidstack. With the committee members we have been able to brainstorm and access major gaming studios, advertising agency groups, leading technology companies and gaming and advertising governing bodies. The Advisory Committee includes luminaries such as Will Kassoy (former SVP of Publishing at Activision Blizzard and CEO of AdColony) Ian Hetherington (“Development Legend”), Jon Epstein (former CEO of GameSpot and Double Fusion), Bryan Neider (former SVP of Electronic Arts) and, most recently, Andrew House (former Global CEO of Sony PlayStation).

We believe Bidstack can now access almost any significant individual in the gaming and advertising worlds through our Board and Advisory Board members and our management teams are fully supported by decades worth of experience.

Industry Initiatives

Unlike in-app, TV, digital audio, out of home etc., native in-game advertising hasn’t been a recognised advertising category. We are working with our partners from game developers, advertising agencies, researchers and independent third-party verifiers to assist the Internet Advertising Bureau (IAB) to standardise this category.

For instance, setting the parameters for how “viewability” is defined in video games, whether racing, stadium or open world environment games, is crucial to how agencies can report on their ad spend and verify impression numbers within an in-game. This has been a significant technical challenge for our team to overcome.

The establishment of sector wide standards should unlock significant revenues. Bidstack has taken huge strides in the process of standardising definitions for the in-game advertising category and we will continue to do so through 2020 and beyond.

Other Developments

We are now open for business in the US following the opening of an office in San Francisco in August and an office in New York in October. We now have a full-time employee in each location.

Strategy

The Company pushes into 2020 with a clear team management and organisational structure across the UK, Riga and the US. The technological, governance, demand and supply teams are working cohesively and are fully focused on ensuring the Company makes continued significant strides.

Major technological and governance challenges are being overcome as we bring the in-game advertising medium to the advertising community. The Company is in advanced conversations with a number of AAA game studios and we expect to add further advertising agency trading agreements to our existing agreement, signed in 2019.

Covid-19 disruption to the advertising industry, particularly in the out of home and live sports segments, is leading media buyers to seek digital alternatives for their brands. It’s no longer “business as usual” in these significant areas. Agencies need to innovate to assist their brand clients to reach targeted audiences. Bidstack’s technology enables them to do that and our team is working closely with agency groups to help them test, report and activate larger campaigns across our growing portfolio of titles through this period.

With 2020 expected to see the launch of the PlayStation 5 and Xbox’s Series X, the focus now is for the Company to position itself to capitalise on the next generation of hardware and the new business models these will bring to the video gaming industry. This approach continues to be the strategy during the current Covid-19 related macro-economic upheaval. As we set out in our update to the market on 30 March 2020, the gaming sector now provides an opportunity for brands and advertisers, including governmental agencies, to target audiences, which are currently not reachable through other mediums due to the restrictions in place across multiple markets.

In summary, I believe that, while revenues for the first half of 2020 will be better than last year, they will remain low. The impact of Covid-19 remains impossible to predict and we are taking a highly conservative view on our revenues for the full year. That said the work we have done in 2019 positions the business well to build a highly scalable native in-game platform that can carve out a significant position within the evolving video game advertising and communications sector.

I look forward to updating you on further developments in this exciting journey we find ourselves on as they arise.

Strategic Report

Principal Activity

Bidstack is an advertising technology company which provides dynamic, targeted and automated native in-game advertising for the global video games industry across multiple platforms. Its proprietary technology is capable of inserting adverts into natural advertising space within video games across multiple video games platforms (mobile, PC and console).

Going concern

The Board continues to adopt the going concern basis to the preparation of the financial statements as is confident of the Company continuing operations into the foreseeable future. This assessment has been arrived at after the Board has considered various alternative operating strategies should these be necessary in the light of actual trading performance not matching the Group’s forecasts given the current macro-economic conditions, and are satisfied that such revised operating strategies could be adopted, if and when necessary. Specific attention needs to be drawn to the comments made in respect of the impact the COVID-19 pandemic on Going Concern and the approaches being taken by the Group to manage and mitigate the additional operational and financial challenges the environment presents. 

The financial statements at 31 December 2019 show that the Group generated an operating loss for the year of £5.2 million (2018: £3.3 million) after accounting for acquisition related costs of £0.045 million (2018: £2.1 million); with cash used in operating activities of £4.5 million (2018: £2.0 million) and a net increase in cash and cash equivalents of £1.04 million in the year (2018: increase of £2.1 million). Group balance sheet also showed cash reserves at 31 December 2019 of £3.1 million (2018: £2.1 million). The Group is dependent on further equity fundraising in order to operate as a going concern for at least twelve months from the date of approval of the financial statements. Although the entity has had past success in fundraising and continues to attract interest from investors, making the Board confident that such fundraising will be available to provide the required capital, there can be no guarantee that such fundraising will be available.  Accordingly, this constitutes a material uncertainty over going concern.

Key Performance Indicators

The Board’s focus for 2020 is on expanding the number of games in which its technology is employed, increasing its network of advertising agency trading agreements and addressing definitional issues in the sector including ‘viewability’ and associated third party verification issues.

The Group’s KPIs will provide a critical measure of the Group’s revenue potential and are evolving to reflect the Group’s progressing business model. Available advertising space, our pipeline of additional future games, the installed base and active user statistics for individual games and technological developments with programmatic advertising platforms are all valuable indicators of potential revenue.  Content drives players, who can view our brand safe advertising in an increasing theatre of distribution, which ultimately generates advertising revenue.

For forward looking performance measurement, the Board will seek to assess the Group’s various engagements with new business prospects, and the level and speed of their progress.

Principal risks and uncertainties

The Board places a high emphasis on being risk aware. The model for the future development of the Group is reliant on its ability to achieve a critical mass of quality native in-game advertising inventory and its ability to derive revenue from brand and advertising agencies who want to access the audience for Bidstack’s inventory.

We track risks and uncertainties that can impact the performance of the Group, some of which are beyond the control of the Group.  These are reviewed at monthly board meetings where the Company’s performance is assessed against budget.  This enables the board to determine and mitigate the Company’s risk environment, which includes:

Employment without discrimination

The Company is committed to employ on the basis of aptitude and ability. We hire and promote our people regardless of gender, orientation, origin, creed, disability or any other inappropriate discrimination.

Environmental and social

In our day-to-day business, we commit to comply with applicable environmental laws, and the direct impact of our operations is low. We also look to tread lightly through good housekeeping practices such as reducing energy consumption, using sustainable resources and recycling waste.

Directors, senior managers and employees

At 31 December 2019, there were six male directors of the Company and the Company had twenty-two other employees.

Section 172 Statement

Under section 172 of the Companies Act 2006 (“Section 172”), a director of a company must act in a way that they consider, in good faith, and would most likely promote the success of the company for the benefit of its members as a whole, taking into account the non-exhaustive list of factors set out in Section 172.

Section 172 also requires directors to take into consideration the interests of other stakeholders set out in Section 172(1) in their decision making.

Bidstack Group Plc’s (“Bidstack”, “Group” or the “Company”) key stakeholders include its investors, employees, regulatory bodies, suppliers and customers.

The Company’s strategy is to expand and further monetise its digital media platform and/or its associated complementary technologies. Upon the successful implementation of the Company’s strategy, the Company will have an expanded range of internal and external stakeholders, relations with which the Board will take into consideration when making decisions on Company strategy.

Engagement with our members plays an essential role throughout our business. We are cognisant of fostering an effective and mutually beneficial relationship with our members. Our understanding of our members is factored into boardroom discussions regarding the potential long-term impacts of our strategic decisions.

Post the reporting period end, the directors of the Company (“Directors”) have continued to have regard to the interests of the Company’s stakeholders, including the potential impact of its future activities on the community, the environment and the Company’s reputation when making decisions. The Directors also continue to take all necessary measures to ensure the Company is acting in good faith and fairly between members and is promoting the success of the Company for its members in the long term.

The table below acts as our Section 172 statement by setting out the key stakeholder groups, their interests and how the Company engages with them. Given the importance of stakeholder focus, long-term strategy and reputation to the Company, these themes are also discussed throughout this Annual Report.

The above statement should be read in conjunction with the Strategic Report and the Company’s Corporate Governance Statement.

The Strategic Report was approved by the Board of Directors on 4 May 2020 and was signed on its behalf by:

James Draper

Chief Executive

4 May 2020

Directors’ report

The directors present their report together with the audited financial statements for the year ended 31 December 2019.

Principal activity

The principal activity of the Group is the provision of native in-game advertising.

Results and dividends

The results of the Group for the year ended 31 December 2019 show a loss before tax and acquisition related costs for the year of £5,319,681 (2018: loss of £1,187,291). The accounting loss after tax and acquisition related costs was £5,364,514 (2018: loss of £3,262,725). The directors do not recommend the payment of a dividend (2018: £Nil).

Financial instruments

Details of the use of financial instruments by the Company are contained in note 23 of the financial statements.

Substantial shareholders

On 31 December 2019 the following shareholders held an interest of 3% or more of the ordinary share capital of the Company:

As at 31 December 2019 no other person had reported an interest of 3% or more in the Company’s ordinary shares.

Directors

The directors who held office during the year were as follows:

Directors’ emoluments

¹ Donald Stewart, Chairman, is also a consultant to Kepstorn Solicitors. Fees for corporate and legal services of £79,186 (2018: £77,370) were charged by Kepstorn during the year ended 31 December 2019, of which £24,000 related to Kepstorn’s fees for acting as the Company’s solicitors on the corporate transaction for the acquisition of Minimised Media Limited (2018: £60,000). As at 31 December 2019, £Nil was owed to Kepstorn Solicitors (2018: £19,080).

² John McIntosh, Finance Director, is also a Director of C P Limited. Fees for consultancy services of £Nil (2018: £9,000) were charged by C P Limited during the year ended 31 December 2019. As at 31 December 2019, £Nil was owing to C P Limited (2018: £Nil).

³ John Taylor, Non-Executive Director, is also a Partner of Ugly Panda LLP. Fees for consultancy services to Bidstack Ltd of £Nil (2018: £26,471) were charged by Ugly Panda LLP during the year ended 31 December 2019. As at 31 December 2019, £Nil was owing to Ugly Panda LLP (2018: £409).

Statement of compliance with the Corporate Governance Code

The Group complies with the Quoted Companies Alliance’s Corporate Governance Code (the “QCA Code”) as revised and reissued in May 2018.

Donald Stewart, in his capacity as Non-Executive Chairman, has assumed responsibility for leading the Board effectively and ensuring that the Group has appropriate corporate governance standards in place and that these standards are observed and applied within the Group as a whole.

The corporate governance arrangements that the Board has adopted are intended to ensure that the Group delivers medium and long-term value to its shareholders. The Board maintains a regular dialogue with its major investors and other professional investors, providing them with such information on the Group’s progress as is permitted by the AIM rules, MAR and the requirements of the relevant legislation.

It should be noted that all the Directors are shareholders and/or option holders in the Group and that both Mr Draper and Mr Petruzzelli are founders and significant shareholders. The Directors therefore view their own medium and long-term interests to be integrally linked to the medium and long-term value of the Group and, as such, the interests of the Directors are directly aligned with those of the shareholders.

The Board currently consists of three Independent Non-Executives, Donald Stewart, Mike Hayes and Derek Wise, and three Executive Directors, James Draper, Francesco Petruzzelli and John McIntosh.

Since the period end, as outlined in the Chairman’s statement, the Company has constituted an advisory committee of selected individuals with experience in areas relevant to the business growth, whose remit is to provide strategic input and direction to the Board and to assist with introductions to key counterparties.

The QCA Code sets out 10 principles that should be applied. These are listed on the Company’s website at www.bidstackgroup.com together with an explanation of how the Company applies each of the principles. Set out below are further disclosures on certain of these principles.

Principle 1 – Business Model and Strategy

Bidstack is a provider of native in-game advertising that is dynamic, targeted and automated, serving the global video games industry across multiple platforms. Its proprietary technology is capable of inserting adverts into natural advertising space within video games.

Bidstack has two sets of customers. On the demand side are advertising agencies, buyers for specific brands and operators of programmatic advertising platforms. On the supply side are games publishers, owners and developers.

As set out in the Chairman’s statement, the Board has concluded that the highest medium and long-term value can be delivered to its shareholders by focusing the Group’s resources during the first half of 2019 on technical development. 

For further information on the market, the future strategy of the Group and the risks the Board consider to be the most significant for potential investors, Shareholders are referred to the Strategic Report.

Principle 4 – Risk Management

The Board has overall responsibility for the determination of the Company’s risk management objectives and policies and recognises the need for an effective and well-defined risk management process. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility. The Board is responsible for the monitoring of financial performance against budget and forecast and the formulation of the Group’s risk appetite including the identification, assessment and monitoring of the Group’s principal risks.

For further information on the risks the Board consider to be the most significant for potential investors, Shareholders are referred to in the section headed “Principal risks and uncertainties”.

The Board has delegated certain authorities to committees, each with formal terms of reference. As part of its terms of reference, the Audit Committee is obliged, inter alia, to keep under review the Group’s internal financial controls systems that identify, assess, manage and monitor financial risks, and other internal control and risk management systems, review the adequacy and security of the Group’s arrangements for its employees and contractors to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters and ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action, review the Group’s procedures for detecting fraud and review the Group’s systems and controls for the prevention of bribery.

Principle 5 – A Well-functioning Board of Directors

The Board is responsible for the management of the business of the Group, setting the strategic direction of the Group and establishing the policies of the Group. It is the Board’s responsibility to oversee the financial position of the Group and monitor the business and affairs of the Group on behalf of Shareholders, to whom the Directors are accountable. The primary duty of the Board is to act in the best interests of the Group at all times. The Board also addresses issues relating to internal control and the Group’s approach to risk management.

The Board consists of three Executive Directors, comprising the Chief Executive Officer, Finance Director and Chief Technology Officer, and three Non-Executive Directors.  

Donald Stewart chairs the Board. The Executive Directors have industry and technical knowledge and expertise (James Draper and Fran Petruzzelli) and financial expertise (John McIntosh). The Non-Executive Directors have legal, accounting, public market, leadership and people management experience (Donald Stewart, Mike Hayes and Derek Wise).

Liam O’Donoghue, who is a qualified corporate lawyer and an experienced Company Secretary, is the Company Secretary.

The Board holds board meetings monthly and whenever issues arise which require the urgent attention of the Board.  The Executive Directors are full time employees, and the Non-Executive Directors are expected to devote at least two days per month to the affairs of the Company and such additional time as may be necessary to fulfil their roles.

The Board has also established an Audit Committee and a Remuneration Committee. The Company considers that, at this stage of its development, and given the current size of its Board, it is not necessary to establish a formal Nominations Committee and nominations to the Board will be dealt with by the whole Board. This position will be reviewed on a regular basis by the Directors.

All three Non-Executive Directors (Donald Stewart, Mike Hayes and Derek Wise) are considered to be independent. The three Non-Executive Directors sit on the Audit Committee, which is chaired by Mike Hayes (who is a chartered accountant) and on the Remuneration Committee, which is chaired by Derek Wise.

During the year under review the Board held ten regular board meetings, at which all the members of the Board attended.  In addition, the Board met formally a further eighteen times for specific purposes including in relation to the exercise of warrants, to approve the Company’s fundraise, to approve publication of the Report and Accounts for 2018 and to approve publication of the Interim Accounts for the period to 30 June 2019.  In addition to the Company’s formal board meetings, all of the directors regularly discuss matters affecting the business and the strategy of the Group.

Principle 6 – Appropriate Skills and Experience of the Directors

The Group believes that the current balance of skills within the Board as a whole reflects a broad and appropriate range of commercial, technical and professional skills relevant to the sector in which the Group operates and its status as an AIM listed company.

Biographical details of each of the Directors and officers are set out below:

Donald Stewart – Non-Executive Chairman

Appointed to the Board on 1 December 2015, Donald is a solicitor and has practiced corporate law, particularly focused on smaller quoted companies, for almost 30 years. Between April 2013 and July 2015, he was on the board of AIM quoted Progility Plc and, before that, had been a corporate partner in the London office of a global law firm. He is a former director (and past chairman) of the Quoted Companies Alliance.  Donald brings extensive experience of quoted companies, legal and regulatory issues, corporate governance and of the role of chairman.  As a practicing solicitor, Donald is required to keep his skills up to date through continuing professional development.

James Draper – Chief Executive Officer

James is the co-founder and Chief Executive Officer of Bidstack. He initiated Bidstack’s move into the gaming space in 2017 and led the negotiations to secure the three-year contract with SEGA’s Football Manager title. He has been responsible for the day to day management of Bidstack, as well as overseeing its strategic direction. Prior to Bidstack, James spent several years working within marketing and advertising with a range of clients in the sports and b2b space. James brings core management, marketing and strategic vision and an intimate knowledge of all aspects of the Bidstack business to the Board.

Francesco Petruzzelli – Chief Technology Officer

Fran is the co-founder and Chief Technology Officer of Bidstack. He created Bidstack’s core artificial intelligence engine, heads its development studio and oversees its team of developers and programmers. Prior to Bidstack, Francesco founded Whaleslide, a privacy conscious search engine allowing users to control all aspects of their online lives from one webpage. Fran brings to the Board software technical and developmental expertise and a comprehensive understanding of the Bidstack product.

John McIntosh CA – Finance Director

After qualifying with Deloitte in 1994, John worked with Sony, global advertising agency DMB&B (acquired by Publicis) and the BBC before concentrating on online, multi-media businesses. He was CFO and COO of DCD Media plc for five years until May 2012 then CFO of Progility Plc to April 2015, growing the business from a £12 million to £60 million turnover. John has worked as a consultant CFO for a number of entities in UK, Europe and Hong Kong, and since October 2016 as CFO for McLaren GT, a joint venture with McLaren Automotive.  John brings significant experience of CFO and COO roles in AIM-quoted companies. As a member of the Institute of Chartered Accountants of Scotland John is required to keep his skills up to date through the ICAS Professional Development Process.

Michael (Mike) Hayes – Non-Executive Director

Mike has a wealth of experience in the video games industry having spent eight years at SEGA, latterly as CEO of SEGA Europe and America. During his tenure, SEGA became established as a top 10 worldwide publisher of video games.  Prior to SEGA, Mike spent five years as Sales and Marketing Director on the Board of Codemasters, the award-winning British developer and publisher of high quality racing games. For over five years, Mike was Sales and Marketing Director at Nintendo, responsible for hardware and software.  Mike is a former Investment Director at AIM listed Mercia Technologies PLC, where he was Head of Digital and Digital Entertainment.

Derek Wise – Non-Executive Director

Derek, a highly experienced software technologist, became Chief Technology Officer of Grapeshot in January 2017 responsible for software development, product, support and operations globally. Following Oracle’s acquisition of Grapeshot in August 2018, Derek is now VP of Contextual Intelligence with Oracle Data Cloud, responsible globally for all products related to the contextual understanding of data. Starting his technical career in 2000 with Enron Broadband, in 2001 Derek founded GNi, turning it into one of the fastest growing technology companies in the US. He then held a series of Technical Director and CTO roles with CCP, TRC Family Entertainment, Jagex and Benevolent AI.

Liam O’Donoghue from ONE Advisory Group acts as the Company Secretary and is responsible for ensuring that Board procedures are followed and that the Company complies with all applicable rules, regulations and obligations governing its operation, as well as helping the Chairman maintain good standards of corporate governance. Liam is an ICSA Chartered Company Secretary.

The Directors have access to the Company’s external advisers e.g. Nomad, lawyers and auditors as and when required and are able to obtain advice from other external advisers when necessary.

All Directors have access to independent legal advice at the Company’s expense.

The Board will seek to take into account Board imbalances for future nominations, with areas to take into account including gender balance.

Principle 7 – Evaluation of Board Performance

The first internal evaluation of the Board, its Committees and individual Directors and officers is due to be undertaken in Q3 of 2019 and thereafter such evaluations will be undertaken on an annual basis to ensure the Board is performing effectively as a whole. Such evaluations will be undertaken with reference to how the Director or officer has performed in fulfilling his/her specific functions, attendance at Board and Committee meetings as appropriate, and overall contribution to the Group as a whole.

The Board is aware that succession planning is a vital task and the management of succession planning represents a key responsibility of the Board. The balance of skills required of the Board as a whole is under constant review as the business develops. As a result the composition of the Board will change over time.  The Board is likely to appoint additional directors in the event that outstanding people with relevant skills are able to make the necessary commitment to drive the business forward.

Principle 8 – Corporate Culture

The Company recognises the importance of promoting an ethical corporate culture, interacting responsibly with all stakeholders and the communities and environments in which the Group operates. The Board considers this to be essential if medium and long term value is to be delivered. 

The Directors consider that at present the Group has an open culture facilitating comprehensive dialogue and feedback, particularly with regard to providing a safe and enjoyable working environment for employees and seeking to ensure they are remunerated and incentivised appropriately.

The Group also works directly with games publishers and developers to understand their unique requirements, participates in gaming conferences and sponsors e-sport tournaments to get direct feedback from the players and viewers of video games and seeks to be regarded as a good corporate citizen by all its stakeholders within its sphere of operation.

The Directors view their own medium and long-term interests to be integrally linked to the medium and long-term value of the Group, and, as such, the interests of the Directors are directly aligned with those of the shareholders.  The Group has adopted policies to deal with corruption and bribery and to comply with the UK Bribery Act.

Principle 10 – Shareholder Communication

The Board delegates authority to two Committees to assist in meeting its business objectives, and the Committees meet independently of Board meetings.