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IQ-AI Limited (IQAI)

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Friday 07 August, 2020

IQ-AI Limited

Half-year Report

RNS Number : 4335V
IQ-AI Limited
07 August 2020
 

7 August 2020

IQ-AI Limited (the "Company" or the "Group")

Half Yearly Report for the Period Ended 30 June 2020

Chief Executive's Statement

I am pleased to announce IQ-AI Limited's unaudited financial results for the six months ended 30 June 2020.

Highlights

· IB CAD™ - Detecting the Undetectable

· IB Stroke™

· Gad-Free Imaging

· Awarded a five-year NIH grant in collaboration with Barrow Neurological institute

· Teleradiology and expanding distribution

· Revenue impacted by the Covid-19 Pandemic though recovery expected over the rest of the year

· Maintained critical development momentum on current FDA cleared/CE marked products

For further information, please contact:

IQ-AI Limited

Trevor Brown/Dr Qu Li/Mr Vinod Kaushal

 

0207 469 0930

 

Peterhouse Capital Limited

Lucy Williams/Heena Karani

 

0207 220 9797

 

 

 

Overview

Whilst the unprecedented shock of the Covid-19 pandemic has understandably preoccupied and distracted our partners and customers, treatment priorities are now beginning to return to normal. Throughout the crisis the IB team have continued to develop and pursue our ambition to be a world leader in neuro oncological imaging.

Setting new standards in imaging technologies

IB CAD™ - Detecting the Undetectable

IB CAD is a unique Artificial Intelligence (AI) based solution that aims to identify areas of cancer cells that current imaging techniques cannot identify. CAD, which stands for "computer aided detection", will leverage commonly acquired MRI data to essentially, "detect the undetectable", by identifying where infiltrating tumour cells are located. Knowing where residual tumour cells exists has the potential to aide surgical resection, direct the most appropriate treatment, help plan radiotherapy, and monitor response to treatment. Thus, IB CAD has the potential to disrupt current clinical paradigms at every stage of treatment, ultimately helping brain tumour patients.

IB Stroke™

The US Centre for Disease Control (CDC) reports that almost 800,000 people have a stroke each year, and it is one of the leading causes of serious long-term disability. On target for release in early Q4, IB Stroke provides an initial entry point to this highly prevalent medical ailment. A key differentiator for IB Stroke resides in the core Imaging Biometrics' ("IB") algorithms that will be used to generate output commonly used for stroke assessment. Specifically, the ability to automatically quantify blood volume and other perfusion parameters is unique to IB. The initial launch of IB Stroke will be within an IB Rad Tech workflow, which is already installed at leading neurological centres. These centres will be offered the opportunity to evaluate release candidates in Q3 to ensure a smooth and successful launch of the initial version.

 

Gad-Free Imaging

Another disruptive technology under development by the Company is the ability to generate a contrast-free MRl image that is equivalent to one acquired with contrast. AI networks have been created and are being trained using only anatomical and functional images free of any exogenous contrast material. The ability to completely eliminate the administration of contrast material has significant benefits on multiple levels. Along with substantial financial savings that can be realised, the on-going concerns about the long-term effects of gadolinium deposition throughout the body can be avoided.

 

Awarded a five-year NIH grant in collaboration with Barrow Neurological institute

During the review period, IQ-AI's subsidiary IB received a five-year, $2.57 million, NIH grant award in collaboration with The Barrow Neurological Institute (BNI), the Mayo Clinic in Arizona, and the Medical College of Wisconsin (MCW). The scope of this grant further builds upon IB's world-leading position in quantitative assessment of brain tumour treatment. The NIH-funded effort also includes a plan to harmonise MRI data acquisition across vendor platforms including GE, Siemens, and Philips Medical. The Principal Investigator, Chad Quarles, PhD, Professor and Chair of the Division of Neuroimaging Research at BNI, is a current user of IB Software and has a longstanding relationship with IB. This award follows the previously announced five-year, $2.8 million award IB received in late 2019. Together, these grants provide long-term funding to execute the respective goals and, at current staffing levels, subsidise over 60% of IB's development costs. Additional grants have been submitted to the NIH and are due to be reviewed in the second half of 2020. IB intends to remain active in submitting grants to help fuel the translation of technologies deemed innovative and impactful by the scientific community.

 

Teleradiology and Expanding Distribution

Since the inception of IQ-AI's subsidiary, Imaging Biometrics™, LLC ("IB, the foundational architectural design strategy of the products has been to build them as platform independent plugins. Steadfast in this approach, IB has successfully translated advanced technologies into portable clinical solutions that readily extend the base functionality of established workstations, medical viewing stations, PACS, and servers. A logical application of the platform-independent design of IB's products is in telehealth. With the onset of Covid-19, healthcare providers had to find new ways to stay connected with patients and administer care. The field of telehealth is exploding and is, for all intents and purposes, and untapped market. During the review period, three licenses of IB Neuro were deployed specifically in teleradiology application. While IB's current products readily lend themselves as natural value-add extensions to established teleradiology platforms, the Company is exploring more direct applications and platforms in the rapidly emerging telehealth space.

 

In addition, IB entered into a new and enhanced partnership with CorTechs Labs "CorTechs". CorTechs is a privately held company which specialises in providing software to neuroradiologists to monitor neuro degenerative diseases like Alzheimer's. In 2019, the Company entered into a reseller agreement. As this relationship matured, both companies recognised the complementary and natural fit of IB products within the CorTechs platform. Thus, during the review period, the IB product line was embedded within the CorTechs application and now offers existing and new clients the distinct advantage of immediate accessibility to IB products in a streamlined and seamless workflow.

 

More recently, the IB product portfolio was made accessible via the Arterys AI marketplace. Arterys is an international company that offers a leading web-based (cloud), AI-powered platform on which the entire IB product line is available for trial or purchase. Training on the technology and clinical application for US sales and marketing teams was recently completed, and Arterys has started presenting IB solutions to prospective clients.

 

Actively Marketed the Sale of StoneChecker Software.

Post period end, the Company took a major step towards divesting of its StoneChecker software by signing a Letter of Intent (LOI) with a major international company interested in purchasing it, and due diligence has commenced. This milestone represents the next phase in the sales process which, if successful, will result in a cash consideration plus ongoing royalty on future sales. The ongoing royalty component offers IQ-AI a new potential revenue stream whilst maintaining an open door for future collaborative opportunities with this global medical group.  

 

Maintained critical development momentum on current FDA cleared/CE marked products

Despite the global economic challenges brought forth by the Covid-19 pandemic, the Company maintained its momentum on furthering its position as a leader in neuro imaging. Most notable is the AI development work underway to fully automate the processing and display of IB's quantitative biomarkers for brain tumour assessment. In addition, the collaborative and longstanding relationships with research labs at leading academic research hospitals ensure a steady stream of innovative ideas and enhancements. Integral to driving organic growth, IB Neuro™ earned recognition as the recommended consensus standard for dynamic susceptibility contrast (DSC) imaging. This announcement, made by a team of distinguished researchers from multiple institutions, was part of the Jumpstarting Brain Tumour Drug Development Coalition. As published in Neuro Oncology, the findings provide evidence-based best practices for the routine clinical use for both acquiring and processing DSC data. IB Neuro's proprietary and quantitative DSC approach has set the standard for the most common perfusion technology used in the evaluation of brain tumour patients.

 

Outlook

 

The Company has entered an exciting phase in its development, and we look forward to updating shareholders as events unfold .

 

 

Trevor Brown

Chief Executive

 

 

Results for the 2020 interim financial period

A summary of the key financial results is set out in the table below:

 

30 June 2020

 

£

Revenue

116,842

Gross Profit

112,161

Operating expenses

 

 

(459,105)

Finance costs

(16,585)

Loss for the period from discontinued operations

(3,676)

Loss for the period

(367,205)

Interest

The net interest cost for the Group for the period was £16,585 (2019: £10,274). 

Loss before tax

Loss before tax for the period was £367,205 (2019: £141,271).

Taxation

Taxation charge was £nil for the period (2019: £nil). 

Earnings per share

Basic and diluted earnings per share for the period were 0.25p loss (2019: 0.12p loss).

Financial position

The Group's balance sheet as at 30 June 2020 can be summarised as set out in the table below:

 

Net assets

£'m

 

£

Non-current assets

545,175

Net current assets

799,870

Net assets and total equity

1,345,045

Cash flow

Net cash outflow for the period was £254,512 (2019: £210,299 inflow). 

The net inflow in the prior year was due to the proceeds raised on the convertible loan notes issued.

Consolidated Income Statement

For the six months ended 30 June 2020

 

Half year ended

(Audited) Full year ended

Half year

ended

 

30 Jun 2020

31 Dec 2019

30 Jun 2019

 

£

£

£

Continuing operations

 

 

 

Revenue

116,842

267,868

142,375

Cost of sales

(4,681)

(4,361)

(1,843)

Gross profit

112,161

263,507

140,532

 

 

 

 

Administrative expenses

(460,165)

(859,171)

(278,378)

Other income

1,060

7,572

6,399

Operating loss

(346,944)

(588,092)

(131,447)

Finance costs

(16,585)

(28,975)

(10,274)

Loss before income tax

(363,529)

(617,067)

(141,721)

Income tax

-

-

-

Loss for the year from continuing operations

(363,529)

(617,067)

(141,721)

 

 

 

 

Discontinued operations

 

 

 

Loss for the period from discontinued operations

(3,676)

(21,587)

-

 

 

 

 

Loss for the year attributable to owners of the Company

(367,205)

(638,654)

(141,721)

 

 

 

 

Earnings per share attributable to owners of the Company

 

 

 

From continuing operations:

 

 

 

Basic & diluted (pence per share)

(0.25)

(0.48)

(0.12)

From discontinued operations:

 

 

 

Basic & diluted (pence per share)

(0.00)

(0.02)

-

 

 

 

 

Total earnings per share (pence per share)

(0.25)

(0.50)

-

 

Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2020

 

Half year

ended

(Audited) Full year ended

Half year

ended

 

30 Jun 2020

31 Dec 2019

30 Jun 2019

 

£

£

£

Loss for the period

(367,205)

(638,654)

(141,721)

 

 

 

Other comprehensive income

 

 

 

Items that may be subsequently reclassified as profit or loss

 

 

 

Exchange differences on translation of foreign operations

(3,204)

2,162

(1,549)

 

 

 

 

Total comprehensive loss for the year attributable to the owners of the Company 

(370,409)

(636,492)

(143,270)

 

 

 

 

Total comprehensive loss for year arises from:

 

 

 

Continuing operations

(366,733)

(614,905)

-

Discontinuing operations

(3,676)

(21,587)

-

 

(370,409)

(636,492)

-

 

Consolidated Balance Sheet

As at 30 June 2020

 

 

30 Jun 2020
£

(Audited)

31 Dec 2019

£

30 Jun 2019

£

 

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

2,834

2,710

5,058

Goodwill

134,145

128,296

201,274

Intangible assets

408,196

439,100

721,269

Total non-current assets

545,175

570,106

927,601

 

 

 

 

Current assets

 

 

 

Trade and other receivables

41,757

28,030

308,185

Cash

611,363

865,875

237,533

Assets classified as held for sale

404,348

404,504

-

Total current assets

1,057,468

1,298,409

545,718

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

248,650

199,918

114,588

Liabilities directly associated with assets classified as held for sale

8,948

8,948

-

Total current liabilities

257,598

208,866

114,588

 

 

 

 

Net current assets

799,870

1,089,543

431,130

NET ASSETS

1,345,045

1,659,649

1,358,731

 

 

 

 

Equity

 

 

 

Share capital

1,459,560

1,398,310

1,274,894

Share premium

19,835,759

19,812,071

19,159,037

Capital redemption reserve

23,616

23,616

23,616

Merger reserve

160,000

160,000

160,000

Convertible loan note reserve

626,092

668,278

673,711

Share based payment reserve

50,035

36,982

16,316

Foreign currency reserve

7,280

10,484

6,773

Retained losses

(20,817,297)

(20,450,092)

(19,955,616)

Equity attributable to owners of the Company

1,345,045

1,659,649

1,358,731

 

 

 

 

TOTAL EQUITY

1,345,045

1,659,649

1,358,731

             

Consolidated statement of changes in equity

For the six months ended 30 June 2020

 

Share

Capital

Share

premium

Capital redemption reserve

Merger

reserve

Convertible loan note reserve

Share based payment reserve

Foreign currency reserve

Retained

losses

TOTAL EQUITY

 

£

£

£

£

£

£

£

£

£

Balance at 1 January 2019

1,203,465

19,025,466

23,616

160,000

145,033

10,877

8,322

(19,813,895)

762,884

Loss for the year

-

-

-

-

-

-

-

(638,654)

(638,654)

Exchange differences on translation of foreign operations

-

-

-

-

-

-

2,162

-

2,162

Total comprehensive loss for the year

-

-

-

-

-

-

2,162

(638,654)

(636,492)

Shares issued

194,845

854,385

-

-

-

-

-

-

1,049,230

Cost of shares issued

-

(67,780)

-

-

-

-

-

-

(67,780)

Unclaimed dividends

-

-

-

-

-

-

-

2,457

2,457

Share based payments

-

-

-

-

-

26,105

-

-

26,105

Movement in the year

-

-

-

-

523,245

-

-

-

523,245

Balance at 31 December 2019

1,398,310

19,812,071

23,616

160,000

668,278

36,982

10,484

(20,450,092)

1,659,649

Loss for the period

-

-

-

-

-

-

-

(367,205)

(367,205)

Exchange differences on translation of foreign operations

-

-

-

-

-

-

(3,204)

-

(3,204)

Total comprehensive loss for the period

-

-

-

-

-

-

(3,204)

(367,205)

(370,409)

Shares issued

61,250

23,688

-

-

-

-

-

-

84,938

Share based payments

-

-

-

-

-

13,053

-

-

13,053

Movement in the period

-

-

-

-

(42,186)

-

-

-

(42,186)

Balance at 30 June 2020

1,459,560

19,835,759

23,616

160,000

626,092

50,035

7,280

(20,817,297)

1,345,045

Consolidated Cash Flow Statement

For the six months ended 30 June 2019

 

Half year ended

30 Jun 2020

(Audited) Full year ended

31 Dec 2019

 Half year ended

30 Jun 2019

 

£

£

£

Cash flows from operating activities:

 

 

 

Operating loss

(367,205)

(638,654)

(141,721)

Adjustment for:

 

 

 

Depreciation and amortisation

55,220

110,991

-

Share based payment expense

13,053

26,105

5,439

Foreign exchange loss

-

(5,580)

-

Decrease/(increase) in receivables

(13,727)

37,538

(242,617)

Increase/(decrease) in payables

48,732

(55,010)

(140,340)

Net finance expenditure

-

-

10,274

 

 

 

 

Net cash used in operating activities

(263,927)

(524,610)

(508,965)

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of subsidiaries

-

(4,065)

-

Purchase of intangible assets

-

(112,115)

-

Purchase of PPE

-

-

(4,236)

 

 

 

 

Net cash used in investing activities

-

(116,180)

(4,236)

 

 

 

 

Cash flows from financing activities

 

 

 

Shares issued

84,938

1,049,230

250,000

Cost of shares issued

-

(67,780)

(45,000)

Less shares issued arising from convertible loan notes

(58,938)

 

 

Interest cost

(16,585)

(28,975)

-

Proceeds from convertible loan notes issued

-

523,245

518,500

 

 

 

 

Net cash from financing activities

9,415

1,475,720

723,500

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

(254,512)

834,930

210,299

Cash and cash equivalents brought forward

865,875

28,783

28,783

Effects of exchange rate changes on cash and cash equivalents

-

2,162

(1,549)

Cash and cash equivalents carried forward

611,363

865,875

237,533

 

 

Summary of significant accounting policies

IQ-AI Limited (the "Company") is a limited liability company incorporated and domiciled in Jersey.

 

The financial statements are presented in pounds sterling (£) since that is the currency of the primary environment in which the Group and Company operates.

 

The principal accounting policies applied in the preparation of these financial statements are set out below.  These policies have been consistently applied to all the years presented, unless otherwise stated.

 

Basis of preparation

These financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations (IFRS IC) as adopted by the European Union.

 

The financial statements have been prepared under the historical cost convention, as modified for the assets held for sale measured at fair value less costs to sell.

 

The preparation of 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 accounting policies.  The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed under the heading 'Critical accounting estimates and judgements' below.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chief Executive Officer's Statement.

The current economic conditions continue to create uncertainty, particularly over (a) the level of demand for the group's products; and (b) the availability of finance for the foreseeable future.  The group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that additional funding will be required either via an issue of equity or through the issuance of convertible loan notes. The Directors are reasonably confident that funds will be forthcoming if and when they are required. The Chief Executive Officer has provided a letter of financial support to the Group to make sufficient funds available, if required, to ensure the Group can meet its obligations over the going concern period. 

Taking in to account the comments above, the Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to adopt the going concern basis of accounting in preparing the financial statements

 

New standards, amendments and interpretations adopted by the Group and Company

The Group and Company have applied the following new and amended standards for the first time for its annual reporting period commencing 1 January 2019:

· IFRS 16 Leases

· Annual improvements to IFRS Standards 2015-2017 Cycle

· Interpretation 23 'Uncertainty over Income Tax Treatments'

These new and amended standards have not had a material effect on the Group and Company financial statements.

 

New standards, amendments and interpretations not yet adopted

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group or Company.

 

Basis of consolidation

The Group financial statements consolidate the financial statements of the Company and all its subsidiaries (“the Group”). Subsidiaries include all entities over which the Group is exposed, 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 investee.  The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control commences until the date that control ceases. Intra-group balances and any unrealised gains and losses on income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

The acquisition method of accounting is used to account for business combinations. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange, and the equity interests issued. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. Acquisition related costs are expensed as incurred. Where necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.

 

Investments in subsidiaries

Investments in subsidiaries are held at cost less any impairment.

 

Goodwill

Goodwill on acquisition of subsidiaries represents the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets and contingent liabilities acquired. Identifiable assets are those which can be sold separately, or which arise from legal rights regardless of whether those rights are separable. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but is tested annually, or when trigger events occur, for impairment and is carried at cost less accumulated impairment losses.

 

Segment reporting

An operating segment is a component of the Group that engages in business activity from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with and of the Group's other components. All operating segments' operating results, for which discrete financial information is available, are reviewed regularly by the Group's Board to make decisions about resources to be allocated to the segment and assess its performance. As a result of the acquisition during the year, the Group reports on a two-segment basis - holding company expenses and medical software.

 

Foreign Currency Translation

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Foreign exchange gains and losses are presented in the income statement within 'finance income or costs.'

 

The results and financial position of Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

· assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at the date of that Statement of Financial Position;

· income and expenses for each Income Statement presented are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

· all resulting exchange differences are recognised in other comprehensive income.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income.

 

Property, Plant and Equipment

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

 

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

 

Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:

  Furniture, fittings and equipment  3 - 8 years

 

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

 

Intangible Assets - Intellectual property and internally generated software

Separately acquired intellectual property is shown at historic cost. Intellectual property acquired in a business combination is recognised at fair value at the acquisition date. Amortisation is calculated using the straight-line method over the estimated useful life of up to 5 years.

 

Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:

· it is technically feasible to complete the software product so that it will be available for use;

· management intends to complete the software product and use or sell it;

· there is an ability to use or sell the software product;

· it can be demonstrated how the software product will generate probable future economic benefits;

· adequate technical, financial and other resources to complete the development and use or sell the software product are available; and

· the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

 

Other development expenditure that does not meet these criteria is recognised as an expense as incurred.

 

Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed 5 years. Amortisation commences when regulatory approval is obtained, and the product is commercially available.

 

Impairment of Non-Financial Assets

Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

   

Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

 

Financial assets

The Group classifies its financial assets in the following categories financial assets as "at fair value through profit and loss" and "loans and receivables". The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Management determines the classification of its financial assets at initial recognition.

 

Loans and receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. Trade receivables are held with the objective of collecting the contractual cash flows. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets.  If not, they are presented as non-current assets.

 

Trade receivables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method, less provision for impairment. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets.

 

Due to the short-term nature of the other current receivables, their carrying amount is considered to be the same as their fair value.

 

A financial asset is assessed at each reporting date to determine whether there is any evidence that it is impaired. A financial asset is considered impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.  Individual significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the consolidated income statement.

 

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with maturities of three months or less. In the consolidated Statement of Financial Position, bank overdrafts are shown within borrowings in current liabilities.

 

Financial liabilities and equity instruments issued by the group

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issued costs.

 

Non-Current Assets (or Disposal Groups) Held-for-Sale and discontinued operations

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell. A discontinued operation is a component of the Group that is classified as held for sale and that represents a separate line of business or geographical area of operations. The results of discontinued operations are presented separately in the Consolidated Income Statement.

 

 

 

Convertible loan notes

The convertible loan note ("CLN") is a compound financial instrument that can be converted to share capital at the option of the holder. As the CLN, and the accrued interest, can only be repaid by the issue of shares, it has been recognised in equity only, with no liability component. Interest is accounted for on an accruals basis and charged to the Consolidated Income Statement and added to the carrying amount of the equity component of the CLN.

 

Trade and other 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 (or in the normal operating cycle of the business if longer).  If not, they are presented as non-current liabilities.

 

Trade and other payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method. The carrying amounts of trade and other payables are considered to be the same as their fair values.

 

Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects, from the proceeds.

 

Share-Based Payments

The Company operates an equity-settled, share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the Company.  The fair value of the employee services received in exchange for the grant of the options is recognised as an expense.  The total amount to be expensed is determined by reference to the fair value of the options granted:

· including any market performance conditions (for example, an entity's share price);

· excluding the impact of any service and non-market performance vesting conditions (for example, profitability or sales growth targets, or remaining an employee of the entity over a specified time period); and

· including the impact of any non-vesting conditions (for example, the requirement for employees to save or holding shares for a specific period of time).

At the end of each reporting period, the group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions and service conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

 

In addition, in some circumstances employees may provide services in advance of the grant date and therefore the grant date fair value is estimated for the purposes of recognising the expense during the period between service commencement period and grant date.

 

When the options are exercised, the company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

 

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution.  The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase in investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.

 

The social security contributions payable in connection with the grant of the share options is considered an integral part of the grant itself, and the charge will be treated as a cash-settled transaction.

 

Revenue recognition

The group derives revenue from the transfer of goods and services at a point in time and over time. Revenue from external customers arise on the sales of software licences, including associated maintenance, and consultancy services.

 

Revenue from licence sales is measured at the agreed transaction price at a point in time. A receivable is recognised when access to the software is granted, since this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. Support and maintenance services are provided on the product supplied; this is deemed to be a separately identifiable product and is recognised over time. Revenue from consulting services are recognised in the accounting period in which the services are rendered.

 

Taxation

The Company is registered in Jersey, Channel Islands and is taxed at the Jersey Company standard rate of 0%. However, the Company's subsidiaries are situated in jurisdictions where taxation may become applicable to local operations.

 

The major components of income tax on profit or loss include current and deferred tax.

 

The tax currently payable is based on the taxable profit for the period using the tax rates that have been enacted or substantially enacted by the balance sheet date. Taxable profit differs from the net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

 

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Group financial statements. Deferred tax is determined using tax rates that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised of the deferred tax liability is settled.

 

Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the asset can be utilised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity.

 

Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

Critical Accounting Estimates and Assumptions

The Group makes estimates and assumptions concerning the future.  The resulting accounting estimates will, by definition, seldom equal the related actual results.  The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

Fair value measurement

Management uses valuation techniques to determine the fair value of assets held for sale. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on best observable data available as far as possible. Estimated fair values may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

 

Critical judgments in applying the entity's accounting policies

The following are the critical judgements that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

 

Capitalisation of internally developed software

Distinguishing the research and development phases of the software suites and determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired.

 

Earnings per share

Basic and diluted

Earnings per share is calculated by dividing the loss attributable to the equity holders of the Company by the weighted average number of Ordinary shares in issue during the period, excluding Ordinary shares purchased by the Company and held as treasury shares.

 

Half year

ended

Audited

Full year ended

Half year

ended

 

30 Jun 2020

31 Dec 2019

30 Jun 2019

Loss attributable to equity holders of the Company (£)

(363,529)

(617,067)

(141,721)

Loss from discontinued operation attributable to equity holders of the parent (£)

(3,676)

(21,587)

-

 

 

 

 

Weighted average number of shares in issue (number)

144,898,662

128,197,043

120,543,811

Loss per share (pence)

 

 

 

-From continuing operations

(0.25)

(0.48)

(0.12)

-From discontinued operations

(0.00)

(0.02)

-


 

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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