TIDMIQAI
RNS Number : 8050L
IQ-AI Limited
04 May 2020
IQ-AI Ltd
("IQ-AI" or the "Company")
Publication of Annual Report
The Board of IQ-AI Ltd are pleased to present announce that the
Company's audited financial statements for the year ended 31
December 2019.
The Annual Report will be available on the Company's corporate
website.
--S--
The Directors of the Company accept responsibility for the
contents of this announcement.
For further information, please contact:
IQ-AI Limited
Trevor Brown/Vinod Kaushal/Qu Li
Tel: 020 7469 0930
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Peterhouse Capital Limited (Financial Adviser and Broker)
Lucy Williams/Heena Karani
Tel: 020 7220 9797
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The Company's financial statements have been extracted, without
material change, from the Company's Annual Report and reproduced
without material change:
Chief Executive Officer's Statement
Annual Report and Financial Statements
For the year ended 31 December 2019
To the members of IQ-AI Limited
I am pleased to present the Company's results for the twelve
months ended 31 December 2019.
Operational report - Michael Schmainda
During 2019, IQ-AI's operating subsidiaries, Imaging Biometrics,
LLC and Stone Checker Software Limited, continued efforts to
increase sales of existing products as well as accelerate the
development of new technologies. We sell and service products
through a combination of direct sales and independent distributors,
and have particularly increased our efforts through our established
partnerships and sales channels. While our primary focus is in
providing proven solutions to clinicians for assisting them in the
treatment of a wide variety of disorders, we also remained active
in providing translational services to researchers and other
companies needing assistance in the development and
commercialization of their own products. The combination of our
existing product platform and our investment in product development
positions us well for an exciting 2020.
The Company will focus on the following areas of revenue
development in 2020:
1. Growing IQ-AI's Footprint in Core Markets
During 2019, the Company intensified its efforts to penetrate
clinical routines in areas we feel we have a technological
advantage. We believe the current standard of care for treating
brain tumor patients is insufficient and the information offered by
conventional imaging is lacking. IB's Fractional Tumor Burden (FTB)
mapping application, which is based on the underlying technology
within IB Neuro, continues to be a solution that offers brain tumor
treatment teams singular information not available elsewhere.
Continued growth amongst new customers in 2020 will include
marketing directly to the broader care team including neurosurgeons
and neuro-oncologists working at US-based brain tumor centers.
While neuroradiologists continue to be a primary user of our
solutions, expanding our customer outreach to other members of the
brain tumor treatment team will help drive adoption of our approach
and provide the fastest return on our investment.
Through our participation in the US National Cancer Institute's
Quantitative Imaging Network (QIN), the advantages of FTB and IB
Neuro in general have been promoted and are gaining momentum as the
accepted standard in brain tumor imaging. As the ONLY industrial
participant of the QIN, our FTB and Delta T1 applications have been
showcased to other participating members located at prestigious
academic research hospitals. During 2019, we continued our
engagement with three prestigious cancer centers. One site, a
leading brain tumor center in California USA, has purchased IB's
FTB mapping platform and will have the ability to generate
quantitative FTB and Delta T1 maps for patients by early Q2,
2020.
Increase Penetration in US Cancer Centers
We believe our brain tumor mapping software is the most accurate
and validated platform commercially available. Our collaborators,
and those early adopters of our application, continue to contribute
to a growing body of peer-reviewed publications that further
support the superiority of our approach. Yet, major cancer centers
remain a relatively untapped opportunity for us. To exploit this
opportunity, we intend to increase our marketing activity on:
-- Exhibits: Throughout our history, we have attended various
tradeshows and scientific meetings geared primarily towards
radiologists. This field remains a key market for us, however, in
2020, we will expand our involvement in neurosurgery and
neuro-oncology shows. While the current Covid-19 pandemic has
caused a number of tradeshow cancellations thus far in 2020, we are
actively demonstrating our solutions to prospective clients via net
meeting and other virtual means.
-- Brain Tumor Foundations: Tremendous efforts by a broad
international coalition of researchers continued throughout 2019 to
further standardise the approach for diagnosing and treating brain
tumors. Worldwide foundations are involved in these discussions
which often include regulatory agencies such as the US Food and
Drug Administration. Similar to the cancer center outreach, we
intend to educate and convey the benefits of our approach with
these foundations who may have a direct impact on creating
guidelines for brain tumor imaging standards. Along those lines, we
were recently invited by The Musella Foundation to participate in a
live video lecture series. May is Brain Cancer Awareness Month and
the lecture will be streamed via Facebook and distributed via
social media.
-- Direct Marketing: In the latter part of 2019, a comprehensive
list of cancer centers was compiled. Each will receive a customized
introduction to the benefits of our approach.
-- Surgical Navigation Incorporation. Companies such as
Medtronic and BrainLAB have surgical navigation platforms that are
commonplace in brain tumor treatment centres. These platforms
provide mapping software that helps surgeons navigate to tumor
sites for biopsy sampling and excisions. Our FTB maps have the
ability to more accurately identify areas of aggressive tumor and
non-tumor tissue for informing surgical navigation strategies and
our software is complementary to these products.
-- Radiation Treatment Planning. Analogous to surgical
navigation systems, FTB maps have the potential to impact the way
radiotherapy is performed by improving accuracy of target volume
definition and helping to spare critical adjacent brain tumor.
2. StoneChecker(R) 510(k) Market Clearance
On September 26, 2019, we received USFDA market clearance for
the StoneChecker software product. This long-awaited decision was a
significant accomplishment for our company and marked the
commencement of US-based marketing activities. Following an
internal strategic review of the company's opportunities and
identifying the best use of our resources, it was decided to sell
the StoneChecker technology. This process is now underway.
Unfortunately, the Covid-19 pandemic has meant that potential
purchasers have been obliged to postpone following up on their
original expressions of interest from in purchasing this product.
We will resume the process as soon as conditions allow.
3. Leveraging Existing Commercial Channels to Increase Adoption and Sales
Channel Partnerships
Our software is designed for rapid integration into other
medical imaging platforms. By strategically choosing not to
"reinvent the wheel" by developing another version of
industry-standard image visualization capabilities, we can maintain
our focus on developing novel and sophisticated solutions that add
value to other vendor's platforms. On July 9, 2019, we announced
our latest partnership with CorTechs Labs, Inc. This sales
agreement incentivizes the sales teams at CorTechs to introduce
their existing client base to IB's products. Training of the global
CorTechs sales team was completed and monthly meetings are taking
place to discuss lead generation activities and co-marketing
efforts.
In addition, 2019 saw a marked increase in activity from our
existing channel partners. aycan Medical Systems, the makers of the
aycan Workstation on which our FTB maps are generated, remained a
valued reseller and provided renewal licenses and support for key
clients. Envoy/TeraRecon, Blackford/InteleRAD, QMENTA, and
Medimsight provide automated processing options for our "tools"
through their platforms. In May 2019, Medimsight became the first
channel partner to secure a client who used our tools and all
partners have increased co-marketing efforts and represented IB
well at tradeshows such as the American Society of Neuro Radiology
(ASNR) and the Radiological Society of North America (RSNA)
throughout 2019.
Throughout the course of 2019, we established a relationship
with SNR Technology, an exclusive provider of the OsiriX MD
platform in Turkey. This relationship's initial focus was for using
key features of IB Diffusion to help analyse prostate images.
Specifically, IB Diffusion has the ability to generate an
"extrapolated b-value" which has a direct application when used in
conjunction with 1.5T MR scanners. High b-value output can only be
generated directly on high field strength systems (3.0T and over),
which are costly and not widely available in all regions. Since the
vast majority of scanners in Turkey are 1.5T, there is strong
interest in IB Diffusion for prostate imaging. In early 2020, we
sold our first license of IB Diffusion with SNR Technology, and we
are optimistic about the future opportunity in this area and the
promising relationship established with SNR Technology.
4. Development and Regulatory Services
Throughout all of 2019, we provided development and regulatory
support for AI Metrics, LLC and partnered with them to
commercialize their first software application, Liver Surface
Nodularity (LSN) for use in chronic liver disease. This product
analyses CT datasets by computing a roughness score along a
user-defined edge of the liver. This LSN score correlates to the
severity of disease, and aids in the staging and ultimate treatment
for those patients. In early 2020, after completing the development
of the initial LSN version, we entered into an agreement with AI
Metrics to serve as their contract manufacturer. Under this
agreement, we receive a monthly payment for distributing AI
Metrics' software to clients and providing support under our
established Quality Management System (QMS). In addition, we are
acting as a reseller of LSN software for which a commission of net
sales is received under mutually agreeable terms.
In addition, the company also contracted with Oregon Health and
Science University (OHSU) in the development of a "steady-state"
cerebral blood volume (ssCBV) processing workflow. This product
generates CBV maps using Ferumoxytol instead of Gadolinium as a
contrast media in MRI. Ferumoxytol is an iron-based imaging agent
currently under development by OHSU. It has a long circulation time
and is a good candidate for imaging due to the absence of early
leakage out of vessels. As with our own standardized rCBV maps,
ssCBV maps could potentially be a beneficial option in planning
biopsy and evaluating treatment response in patients with central
nervous system (CNS) neoplasms. In clinical practice, the
application of ssCBV would apply to patients who can remain still
in MR scanners over longer periods of time.
5. Development of New Products
In 2019, we announced the development of several significant new
product initiatives. To support these initiatives, the company
enlisted key person nel to assist in both the core development of
those products as well as provide business and regulatory support.
Specifically, in late 2019 a recognized leader in Artificial
Intelligence (AI) and Deep Learning applications was contracted and
will be an integral factor in achieving our development goals.
-- Longitudinal Delta T1 Maps: Using Image to identify areas of
residual brain tumor after surgery is integral to the evaluation of
treatment response and clinical decision-making. Despite continued
developments in advanced imaging biomarkers, the selection of the
contrast-agent enhancing (T1+C) tumor volume (or region of
interest, ROI) will remain central to this process. Delta T1 maps
were developed by IB to robustly determine enhancing tumor volumes.
Using an exclusive technology termed "standardization", Delta T1
maps have the ability to cause a paradigm shift in how brain tumor
burden is assessed before surgery and during treatment. To fully
realize its potential, development efforts are underway to automate
the segmentation of the residual enhancing volumes. Once automated,
this quantitative information would be provided to the treatment
team as a fundamental biomarker for any neuro exam containing a
pre- and post-contrast image. The next logical step would then be
to present this information over time, or longitudinally, in a
concise report.
-- Stroke Processing: In the latter half of 2019, IB announced
the launch of a stroke imaging platform. This platform leverages
our existing algorithms optimized for neuro application, and a
stroke application represents the next logical extension of our
product portfolio. In the US alone, stroke costs an estimated $34
billion annually. These costs include health care services,
medicines to treat stroke, and lost days of work. While several
competitors have strong market positions in stroke imaging, we
believe an opportunity exists in streamlining the processing of the
information and optimizing workflows using our existing software
algorithms.
New information is emerging around the ever-changing landscape
of the global COVID pandemic. Initially thought to only affect
respiratory tracts, new findings offer evidence that COVID impacts
major organ systems throughout the body. People between the ages of
20 and 50 and otherwise healthy are uncharacteristically
experiencing (large-vessel) strokes after being diagnosed with the
virus. Blood clots throughout the body are forming and migrating to
the brain. At the time of publishing this Annual Report, it is
still not clear how COVID-19 is causing blood clots. According to a
New England Journal of Medicine (NEJM) publication, initial reports
from Wuhan, China stated that approximately 5% of patients who were
hospitalized with the coronavirus suffered a stroke. And, other
clinicians are noticing abnormal clotting in a "significant
minority" of intensive care unit patients with COVID-19.
Thus, clinicians specialising in neurological disorders are
coming to the forefront, and IB's software solutions are available
to help them in cases where stroke is suspected. IB's core products
are renown for accurately computing a variety of MR and CT
perfusion parameters in the brain which are directly applicable to
stroke assessment. We intend to maintain a watchful eye as new
findings about COVID-19 surface and, as a nimble and responsive
company, potentially allocate resources to help clinicians combat
this virus as best we can (or as appropriate).
-- Automating FTB: As highlighted earlier, we believe FTB maps
represent the standard of care for brain tumor diagnosis and
treatment monitoring. To foster widespread adoption, we intend to
automate the final manual step necessary to generate FTB maps; the
auto-segmentation of the Delta T1 enhancing region. Currently,
neuroradiologists or MR Technologists need to manually segment the
enhancing region by drawing rough "bounding" regions-of-interest
(ROI) around the areas of concern. Depending on the location and
invasiveness of the tumor, this could take upwards of ten (10)
minutes to complete. Eliminating this manual step would foster
adoption particularly at sites with a high-volume of brain tumor
scans and provide the ability for any-sized healthcare facility to
generate FTB maps.
-- StoneChecker: While we are currently pursuing strategic
pathways to optimise the economic value of StoneChecker Software,
we continue to enhance its basic functionality to help prepare it
for widespread clinical adoption. During 2019, we incorporated an
easy way to route CT dataset to the software. This feature mimics
PACS retrieval capability common in the industry. In addition, an
output reporting feature was developed that can be exported
directly to a site's PACS.
-- Gd-Free Imaging: We continue efforts to offer lower dose and,
eventually, zero Gd contrast imaging options. These include:
o Simultaneous Perfusion Imaging with Consecutive Echoes
("SPICE"), a patented technology owned by IB that eliminates the
preload dose of the required two administrations of
gadolinium-based contrast agent (GBCA) during image acquisition for
brain tumor perfusion analysis. This patent has the additional
benefit of providing both dynamic susceptibility ("DSC") and
dynamic contrast enhanced ("DCE") parameter maps using a single MR
acquisition. Both DSC and DCE imaging provide biological and
physiological information about the brain. IB Neuro already
incorporates the ability to compute SPICE DSC parameters and two
sites are already leveraging this functionality to take advantage
of the reduced GBCA administration. Researchers at the Medical
College of Wisconsin (Milwaukee, WI, USA) are currently working
with major scanner vendors for acquiring the data in order to
optimize the DCE processing as well. Once validated, the benefits
of a reduced GBCA approach and the simultaneous generation of both
DSC and DCE parameters will be an attractive benefit.
o Low Flip Angle is an approach published in April 2019 that
also offers the option of eliminating the preload dose of GBCA.
This is currently validated on 3T MRI scanners and researchers do
intend to validate on 1.5T MRI scanners soon. Some existing sites
are already transitioning their MR protocols to acquire data using
this approach. Along with the reduction in GBCA use, the obvious
benefit is a smoother, more streamlined, workflow for patients
through MR departments.
o Simulated T1+C would provide the generation of post-contrast
images without the need for any GBCA. The acquisition of a pre- and
post-contrast T1-weighted image is common to all brain exams. IB
has filed a patent application at the USPTO for gadolinium free
imaging with the ultimate goal of using deep learning networks to
create a "simulated T1+C" without any exogenous contrast
material.
-- Development of PC-based options for IB software via
ClearCanvas (Synaptive Medical, Toronto, CA) remains on our 2020
roadmap. The final steps are underway to release IB Software as
plugin options to ClearCanvas. Since our inception, we have
leveraged the Mac computer based OsiriX platform to host our
plugins. The OsiriX environment has proven very stable and robust,
but Mac-based applications are not widely used in hospital
environments. In recognizing this fact, we have chosen ClearCanvas
as our PC-alternative host environment for our plugins. Once
validated, prospective clients will have immediate access to
PC-based options for our products.
-- IB Clinic, our automated processing option, continues to
experience increases in demand. Similar to the offering of our
channel partners, IB Clinic was developed to offer hands-free,
fully automated, processing and routing of quantitative maps and
information to a site's picture archiving and communication system
(PACS). As radiologists continue to be inundated with an exploding
number of images to view and interpret, IB Clinic allows them to
remain focused on their diagnostic evaluations by eliminating these
manual processing steps. An added benefit of IB Clinic is that the
datasets, which contain personal health information (PHI), are not
sent to the "cloud" for processing. Instead, the datasets remain on
site, within a site's IT firewall, thereby alleviating all PHI
concerns for healthcare administrators.
Outlook
We leave 2019 positioned on a strong foundation of talent,
technology, and optimism. Our best-in-class software solutions
continue to deliver clarity for brain tumor patients and their care
providers every day. While we are committed and focused on our
short and mid-term plans, we remain nimble and flexible to respond
to the ever-changing landscape and emerging opportunities we
anticipate evolving in healthcare over the next five years.
Increasing sales of our core products will be the backbone of
our business over this period. Supported by research and
development as evidenced by a growing body of clinical evidence and
research publications, our product enhancements are being fueled by
top software engineering talent. Automating the processing of data
using artificial intelligence (AI) and deep learning networks will
pave the way for widespread and rapid clinical adoption. At the
close of 2019, four leading brain tumor centers from major
metropolitan areas continued to explore the adoption of our tools
and, in early 2020, one of those centers purchased our neuro
oncology platform. Fully automating our brain tumor monitoring
platform will enable healthcare facilities of all sizes to take
advantage of our solution. The short-term focus on neuro
applications includes the development of stroke solutions and the
development of concise longitudinal reporting capabilities for our
exclusive Delta T1 maps.
Looking forward, as we advance our software capabilities for our
existing products, opportunities for new products present
themselves. We continue to be invited to collaborate with leading
research centers throughout the world. These collaborative efforts
include expanding our " fractional tumor burden" (FTB) mapping
process for low-grade tumors and metastatic cancers. A distinct
advantage in achieving our goals is our long-standing relationship
with the lab of Kathleen Schmainda PhD at the Medical College of
Wisconsin, which ensures we remain on the forefront of medical
imaging in the neuro space. We also have growing relationships with
researchers and clinicians in fields outside of the brain, such as
prostate, breast, and lung.
Since our inception, we have designed our plugins for
portability into other vendors platforms. We do anticipate a marked
increase in revenue through our growing relationships with channel
partners, distributors, and other medical imaging companies. Our
advanced mapping capabilities can directly apply in markets that
remain relatively untapped. For instance, neuro navigation and
radiotherapy companies are prime candidates for adopting advanced
imaging tools to more accurately guide their planning and treatment
platforms. Likewise, drug development companies could leverage our
proven biomarkers to provide a more accurate indication of the
effectiveness of their new agents. Improved accuracy for drug
developments equates to shortened product development timelines
and, ultimately, substantial benefits and savings.
Our expertise of translating novel technologies into routine
clinical practice sets us apart from other medical imaging
companies. As we move forward in 2020, we will continue to offer
services to researchers who may need assistance in translating
their research and technologies. Those services, whether software
development, regulatory assistance, or marketing support, allows us
to assess the commercialization potential of these new technologies
for possible merger and/or acquisition opportunities.
Finally, we remain alert to the myriad of new companies creating
innovative solutions that solve healthcare problems and aid
patients. While we are excited about our organic growth potential,
we recognize that merger and acquisition activity may accelerate
revenue generation, fulfill technical gaps, and a potentially
faster time to market. Expanding our footprint in medical imaging
to better serve patients remains our unwavering goal, and we will
remain aggressive in this pursuit.
Trevor Brown
Chief Executive Officer
Strategic Report
Annual Report and Financial Statements For the year ended 31
December 2019
The Directors present their strategic report on the group for
the year ended 31 December 2019.
Principal activities
The principal activity of the Group is the provision of
convenient, cost-effective and clinical treatments to patients in
the field of medical imaging diagnostics, based on proven
technologies.
Strategy
IQ-AI's vision is to become a leader in the field of medical
imaging diagnostics. The Company purchased 100% of the equity in
Stone Checker Software Limited in June 2017, and in March 2018
purchased Imaging Biometrics LLC ("IB") with its suite of advanced
imaging diagnostic software products.
On 18 December 2019, the Directors announced their intention to
seek a buyer for Stone Checker Software Limited.
Event since the year end
On 13 January 2020, David Smith exercised share options of
1,000,000 Ordinary Shares at GBP0.026 each, totalling
GBP26,000.
On 6 February 2020, the Company converted GBP60,000 convertible
loan notes and the GBP16,875 associated interest into 5,125,000
Ordinary Shares at a price of 1.15 pence per share. The convertible
loan notes were issued on 18 November 2015 to Free Association
Books Limited.
Results for the 2019 financial period
The summary results are found in the primary statements of the
Group, primarily being the Income Statement, the Statement of
Comprehensive Income and Statement of Financial Position.
In summary:
-- The net interest cost for the Group for the period was GBP28,975 (2018: GBP15,662)
-- Group revenue for the year was GBP267,868 (2018: GBP164,971)
-- Administrative expenses from continuing operations decreased to GBP859,171 (2018: GBP878,648)
-- Group loss after tax from continuing operations was GBP617,067 (2018: GBP764,080)
-- Taxation charge was GBPnil for the period (2018: GBPnil)
-- Basic and diluted loss per share from continuing operations was 0.48p (2018: 0.64p loss)
-- As at 31 December 2019, the Group had cash and cash
equivalents of GBP865,875 (2018: GBP28,783)
-- The Group's net assets increased to GBP1,659,649 (2018: GBP762,884)
-- Intangible assets, comprising intellectual property, imaging
and diagnostic software and goodwill, decreased to GBP567,396
(2018: GBP922,543)
Key performance indicators
The main KPI for the Group is achieving its cash flow forecasts
whilst efforts continue to implement the new investing policy.
The Board monitors its cash flow carefully to ensure that it has
the funds necessary to meet its on-going working capital
requirements, and planned product development costs. Detailed
forecasts are produced and reported against on a regular basis.
Future developments
With the encouraging results from the clinical studies, the
Company is in an excellent position to deliver benefits to
patients, as well as generate value for stakeholders. Further
commentary on the Group's future developments can be found in the
Chief Executive's Statement on page 2.
Principal risks and uncertainties
This section describes the principal risk factors that the
Directors believe could materially affect the Group's risk and
performance. Information relating to financial risk management is
included in note 21 to the financial statements.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due.
The Board reviews cash flow projections at periodic intervals
during the year as well as information regarding cash balances. At
balance sheet date, the Group had cash balances of GBP865,875
(2018: GBP28,783). The financial forecasts indicate that the Group
is expected to have sufficient liquid resources to meet its
obligations under all reasonably expected circumstances.
Interest rate risk
The Group has convertible loan notes totalling GBP668,278,
including accrued interest, outstanding as at 31 December 2019
(2018: GBP145,033). The notes accrue interest at a fixed rate of
6.75%p.a. and, as such, carries a limited interest rate risk.
Cash resources are held in current, floating rate accounts.
Market risk
Market price risk arises from uncertainty about the future
valuations of financial instruments held in accordance with the
Group's investment objectives. These future valuations are
determined by many factors but include the operational and
financial performance of the underlying investee companies, as well
as market perceptions of the future of the economy and its impact
upon the economic environment in which these companies operate.
Risk Table
The following table, whilst not an exhaustive list as other
risks may arise or existing risks may materially increase in the
future, sets out the principal risks and uncertainties to the
continuing Group. These are listed in no order of priority, and
alongside the description of each risk is a note of the main
mitigating factors and actions the Group is taking to address that
risk.
Risks/uncertainties to the continuing Group
Issue Risk/Uncertainty Mitigation
----------------------------------- ------------------------------
Imaging Biometrics Without medical regulatory The products are medical
and Stone Checker approval it would be difficult devices under Classification
may be subject to market and sell the products. 1 (medical software),
to medical regulatory which is the lowest
risk level of classification
requiring the least
regulatory oversight
as they are non-invasive
and non-sterile. The
products are not used
for treatment but are
rather used for diagnosis.
Intellectual The Group's success depends, The Group invests in
p roperty in part, on its ability maintaining and protecting
to obtain and maintain protection this intellectual property
for its intellectual and to reduce risks over
proprietary information, the enforceability and
so that it can prevent others validity of the Group's
from making, using or selling patents. The Group works
its inventions or proprietary closely with its legal
rights. The Group's patent advisors and obtains
applications may not be where necessary opinions
granted, and its existing on the intellectual
patent rights may be successfully property landscape relevant
challenged and revoked. to the Group's programmes
and activities.
TexRAD Limited Stone Checker's ability Balaji Ganeshan of TexRAD
- use of Intellectual to exploit its products works very closely with
property is reliant upon the terms Stone Checker in the
of an exclusive licence development of the products.
from TexRAD Limited which The Group continuously
grants Stone Checker the monitors its ongoing
right to use the TexRAD's compliance with the
patents in the field of terms of the licence
urolithiasis and to research, agreement.
develop or have developed,
make or have made, keep,
use, import, export, sell
and supply products based
upon the TexRAD Plug-in
pursuant to the terms of
the licence agreement dated
20 August 2015.
TexRAD may terminate this
agreement under a number
of circumstances, which
would prevent Stone Checker
being able to develop and
sell its products.
Identifying further The Group is dependent upon The Group has formal
suitable investments the ability of the Directors investment criteria
to identify suitable investment to identity suitable,
opportunities and to implement earnings-enhancing acquisition
its investing policy. The targets and employs
Directors are continuing experienced professionals
their search to identify to drive the acquisition
further opportunities in process.
line with the Company's
investing policy for creating
value.
The Directors may be unable
to identify further targets
and thus the Company may
not be able to invest its
cash in a manner which accomplishes
its objectives.
There is no guarantee that
the Company will be able
to acquire further identified
opportunities, or indeed
complete the investment.
The Group's ability to ascertain
the merits or risks of the
operations of a target company
or business.
The Group's ability to deploy
the net proceeds on a timely
basis.
The availability and cost
of equity or debt capital
for future transactions.
Raising emergency In the event of a significant The Group monitors its
funding issue arising for which cash requirements carefully
the Group is required to and in the need of significant
access substantial liquid additional funds would
funds in excess of its available look to increase its
cash balances, it may not financing.
be easy to obtain additional
funds as and when required
and on acceptable terms.
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Loss of key personnel The Group comprises of a The Group has a continuity
few key individuals in a program in place to
market which requires high ensure that Directors
quality experienced staff. would be able to minimise
Any unforeseen loss of these the disruption caused
key personnel would be damaging by the potential loss
to the Group. The retention of key personnel.
of their services cannot
be guaranteed.
------------------------------------- --------------------------------
The Group may Compliance with various The Group monitors legislative
be adversely laws and regulations does and regulatory changes
affected by the impose compliance costs and alters its business
enforcement of and restrictions on the practices where appropriate.
and changes in Group, with fines and/or
legislation and sanctions for non-compliance.
regulation affecting
its business
------------------------------------- --------------------------------
The Group relies The successful management The Group offers incentives
on the experience and operations of the Group in the form of share
and talent of are reliant upon the contributions options or warrants
its senior management of senior management and to incentivise its senior
and on its ability directors. In addition, management.
to recruit and the Group's future success
retain key employees depends in part on its ability
to continue to recruit,
motivate and retain highly
experienced and qualified
management and directors.
------------------------------------- --------------------------------
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 financial position of the Group, its cash flows and
liquidity position are described in this business review. In
addition, note 21 to the financial statements include the Group's
objectives, policies and processes for managing its capital, the
financial risk management objectives, details of its financial
instruments and its exposure to credit risk and liquidity risk. As
highlighted in note 21, the Group meets its day to day working
capital requirements through its revenue generating cash flows,
discrete fund raises and the issue of convertible loan notes.
The Company's employees carry out their duties remotely, via the
network infrastructure in place. As a result, there was no
disruption to the operational activities of the Company during the
COVID-19 social distancing and working from home restrictions. All
key business functions continue to operate at normal capacity.
The Directors have prepared Group forecasts and projections,
which show that the Group has a reasonable expectation of
maintaining sufficient working capital to enable the Group to meet
its liabilities as they fall due for the foreseeable future, being
a period of not less than 12 months from the date of approval of
this report. At 31 December 2019, the Group had cash balances of
GBP865,875 (2018: GBP28,783).
After making appropriate enquiries, the Directors continue to
adopt the going concern basis in preparing the annual report and
accounts.
This report was approved by the board of directors on 4 May 2020
and signed on behalf of the board by:
Trevor Brown
Chief Executive Officer
Directors' Report
Annual Report and Financial Statements
For the year ended 31 December 2019
The Directors present their annual report and audited financial
statements for the year ended 31 December 2019.
Incorporation
IQ-AI Limited is incorporated in Jersey, Channel Islands.
During 1996, the Group created a twinned share structure with
IQ-AI Holdings (UK) plc to enable UK based shareholders to receive
a UK dividend and thereby avoid being double taxed on the Jersey
dividend.
As a result of a General Meeting held in June 2017, the twinned
share structure has been discontinued. Shareholders now only hold
shares in IQ-AI Limited, which are listed on the Main Market
(standard segment) of the London Stock Exchange.
In January 2018, IQ-AI Holdings (UK) plc was dissolved and
removed from the register at Companies House in the United
Kingdom.
Full details of the share capital are provided in note 16 to the
financial statements.
Results and dividends
The audited financial statements for the year for the Group and
Company are set out on pages 25 to 47.
No dividends will be distributed for the year ended 31 December
2019 (2018: GBPnil).
Directors
The directors, who served throughout the year, were as
follows:
Mr T Brown Chief Executive Officer
Dr Qu Li Non-Executive Chairman
Mr V Kaushal Non-Executive Director
Non-Executive Director (appointed on 18 December
Mr M Schmainda 2019)
Biographical details of the Directors are given on page 18.
The interests of the Directors in the shares of the company and
their service contracts are noted in the Remuneration Committee
report on pages 19 to 20. The Directors have no interests in share
options and awards.
Although an overseas Company, the Directors have sought to
ensure that the financial statements of the Company and the Group
comply with the disclosure requirements of Jersey Company Law and
the listing requirements of the UK Listing Authority.
Capital expenditure
During the year, the Group did not invest in any capital
expenditure (2018: GBPnil). The Group made an investment in product
development during the period of GBP112,115 (2018: GBP62,147).
The Group held no bank debt at 31 December 2019 (2018: GBPnil).
Currently, the Group retains clearing facilities with the bank.
Share capital
Details of the authorised and issued share capital, together
with details of the movements in the Company's issued share capital
during the year, are shown in note 16. Each share carries the right
to one vote at general meetings of the Company and carries no right
to fixed income.
There are no specific restrictions on the size of a holding nor
on the transfer of shares, which are both governed by the general
provisions of the Articles of Association and prevailing
legislation. The Directors are not aware of any agreements between
holders of the Company's shares that may result in restrictions on
the transfer of securities or on voting rights. No person has any
special rights of control over the Company's share capital and all
issued shares are fully paid .
Statement of Directors' Responsibilities
Annual Report and Financial Statements
For the year ended 31 December 2019
Significant agreements/takeovers directive
There are a number of agreements that take effect, alter or
terminate upon a change of control of the Group such as commercial
contracts and employee share option/award schemes. None of these
are deemed to be significant in terms of their potential impact on
the business of the Group as a whole.
Charitable and political donations
The Company did not make any political or charitable donations
during the year ended 31 December 2019 (2018: GBPnil).
Employees
The Company's policy is to provide equal opportunities to all
present and potential employees, including, where practical, those
who are disabled.
The Group believes in respecting individuals and their rights in
the workplace. With this in mind, specific policies are in place
covering harassment and bullying, whistle blowing, equal
opportunities and data protection.
Ratio of men to women
At 31 December 2019, there were two women (2018: 2) employed
across the Group making 32% (2018: 32%) of our Group-wide employee
base.
The Board is satisfied that it has the appropriate balance of
skills, experience and expertise necessary, and will give due
regard to diversity in the event of further changes to both its own
membership and/or the membership of the senior management team.
Health and safety
The Group is committed to providing a safe place of work for
employees. Group policies are reviewed on a regular basis to ensure
that policies regarding training, risk assessment, safe working and
accident management are appropriate. There are designated officers
responsible for health and safety and issues are reported at each
board and executive meeting.
Greenhouse gas emissions
The Group is aware that it needs to measure its operational
carbon footprint in order to limit and control its environmental
impact. However, given the very limited nature of its operations
during the year under review, it has not been practical to measure
its carbon footprint. In the future, the Group will only measure
the impact of its direct activities, as the full impact of the
entire supply chain of its suppliers cannot be measured
practically.
Statement of disclosure to independent auditors
Each of the persons who is a Director at the date of approval of
this annual report confirms that:
-- so far as the Director is aware, there is no relevant audit
information of which the Company's auditor is unaware; and
-- the Director has taken all the steps that he/she ought to
have taken as a Director in order to make himself/herself aware of
any relevant audit information and to establish that the Company's
auditor is aware of that information.
Independent auditor
PKF Littlejohn LLP have expressed their willingness to continue
in office as auditor and will be proposed for reappointment at the
next Annual General Meeting.
This report was approved by the board of directors on 4 May 2020
and signed on behalf of the board by:
Trevor Brown
Chief Executive Officer
The Directors are responsible for preparing the annual report
and the financial statements in accordance with the applicable law
and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors
are required to prepare the Group and Company financial statements
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company, and of the
profit or loss of the Group and Company for that period.
In preparing these financial statements the Directors are
required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgements and estimates that are reasonable and prudent;
-- State whether the IFRSs as adopted by the European Union have
been followed, subject to any material departures disclosed and
explained in the financial statements; and
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are responsible for keeping accounting records
that are sufficient to show and explain the Group's and Company's
transactions. These records must disclose with reasonable accuracy
at any time the financial position of the Group and Company and to
enable the Directors to ensure that any financial statements
prepared comply with the Companies (Jersey) Law 1991, as amended.
They are also responsible for safeguarding the assets of the
Company and Group and hence for taking reasonable steps for the
prevention and detection of fraud, error, non-compliance with law
and regulations and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic report, Directors' report,
Directors' Remuneration report and Corporate Governance statement
that comply with that law and those regulations.
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in Jersey governing the preparation and
dissemination of financial statements, which may vary from the
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Corporate Governance Report
Annual Report and Financial Statements
For the year ended 31 December 2019
IQ-AI has a standard listing on the London Stock Exchange and is
thus not required to comply with the requirements of the U.K.
Corporate Governance Code ("the Code") as issued by the Financial
Reporting Council. The disclosures below are required by the UKLA's
Disclosure and Transparency Rule 7.
The Board is committed to ensuring the highest standards of
corporate governance, and voluntarily complies with, subject to a
small number of exceptions listed below, the supporting principles
and provisions set out in the Code.
In order to implement its business strategy, the Company has
adopted a corporate governance structure whereby the key feature is
a board of directors comprising at present one executive and three
non-executives, where despite the Company's early stage of
development, and its registration being in Jersey, the board
strives to observe the Quoted Companies Alliance revised Corporate
Governance Code for Small and Mid-Size Quoted Companies ('the QCA
Code') which the Company has voluntarily adopted. The voluntary
adoption of the QCA Code is over and above the requirements of
Jersey law.
The Company regularly updates its corporate governance policies
and procedures to reflect the changes made to corporate governance
guidelines. The following describes the ways in which the Company
complies with the detailed provisions of the Code. It includes full
disclosure of the limited number of areas in which the Company is
non-compliant and explanations why this is so.
The two areas of non-compliance with the Code are;
-- neither the Chairman, nor the other member of the Audit
Committee, has any relevant accounting experience; and
-- the Audit Committee is made up of only two members and not at
least three independent non-executive Directors.
Meetings of the Board of Directors
Four Board meetings were held during the year. The Directors'
attendance record during the year are as follows:
Attendance at
Board Meetings
-------------------------------------- ---------------
T Brown 4
Dr Q Li 4
V Kaushal 4
M Schmainda (appointed on 18 December
2019) 0
--------------------------------------- ---------------
The terms of appointment of the Non-Executive Directors are made
available for inspection at the AGM, along with the service
contract for the Executive Director. The Non-Executives do not have
a fixed term of office in their letters of appointment.
Re-election
The articles of association require each director to retire and
submit themselves for re-election every three years, but also that
at least one third of the Directors must be submitted for
re-election every year.
On an annual basis, the Chairman considers the performance of
the Board and discusses with the Company Secretary the re-election
process. Given the performance of the Company, the Chairman has
confirmed that the Directors being submitted for election in 2020
continue to be highly effective, qualified and committed to their
respective roles.
Insurance cover
The Company maintains insurance with a limit of GBP5m to cover
its Directors and officers against the cost of defending themselves
against civil legal proceedings taken against them. To the extent
permitted by law, the Company also indemnifies its Directors and
officers. Neither protection applies in the event of fraud or
dishonesty.
Board objectives and operation
The key objectives of the Board are as follows:
-- The agreement of strategy.
-- The agreement of the detailed set of objectives and policies
that facilitate the achievement of strategy.
-- Monitoring the performance of executive management in the
delivery of objectives and strategy.
-- Monitoring and safeguarding the financial position of the
Company and Group to ensure that objectives and strategy can be
delivered.
-- Approval of major capital expenditure and other expenditure
that is not part of the defined objectives or strategic plan.
-- Approving corporate transactions - this includes any potential acquisition or disposal.
-- Delegating clear levels of authority to the Executive
management team. This is represented by the defined system of
internal controls which is reviewed by the Audit Committee.
-- Providing the appropriate framework of support and
remuneration structures to encourage and enable Executive
management to deliver the objectives and strategies of the
Company.
-- Monitoring the risks being entered into by the Company and
ensuring that all of these are properly evaluated.
-- Approval of all external announcements.
A schedule is maintained of matters reserved to the Board for
decision.
The Board formally met four times in 2019 (2018: 4); the
Directors' attendance is summarised on page 14.
For each Board meeting, each Board member receives a pack of
information, including financial reports, project updates and a
formal agenda together with any relevant documentation.
Nominations Committee
The committee consists of the Chairman and the Chief Executive.
The committee meets as required to fulfil its duties of reviewing
the Board structure and composition and identifying and nominating
candidates to fill Board vacancies as they arise.
No formal induction process exists for new Directors, but the
Chairman ensures that each individual is given a tailored
introduction to the Company and fully understands the requirements
of the role.
Appraisal of Non-Executive Directors
The Chief Executive normally carries out an annual formal
appraisal of the performance of the Non-Executive Directors which
takes into account the objectives set in the previous year and the
individual's performance in the fulfilment of these objectives.
However, given the CEO is the only Executive Director, a formal
annual appraisal of the Chief Executive is carried out by the
Non-Executive Chairman. All the appraisals of the Non-Executive
Directors are provided to the Remuneration Committee.
Remuneration Committee
The report of the Remuneration Committee is included in this
annual report. Formal terms of reference for the Remuneration
Committee have been documented and are made available for review at
the AGM.
Audit Committee
Formal terms of reference for the committee have been documented
and are made available for review at the AGM.
The terms of reference of the Audit Committee include the
following requirements:
-- To monitor the integrity of financial statements and of any
formal announcements relating to the Company's financial
performance.
-- To review the Company's internal controls and risk management systems.
-- To make recommendations to the Board in relation to internal
control matters that require improvement or modification.
-- To make recommendations to the Board in relation to the
appointment, re-appointment and removal of the external auditor and
to approve remuneration.
-- To review and monitor the external auditor's independence and
objectivity and the effectiveness of the audit process.
-- To establish and monitor whistle blowing procedures.
No internal audit function exists due to the size of the Group.
This is reviewed annually by the Audit Committee which reflects on
any increased risk or regulatory changes in the period under review
in making their recommendation to the Board.
The Audit Committee met three times during the year and after
the year end. Matters considered at these meetings included:
reviewing and approving the report and financial statements for the
year ended 31 December 2018, the half year results to 30 June 2019
and the report and financial statements for the year ended 31
December 2019; discussion with the external auditors to confirm
their independence and scope for audit work; considering the
reports from external auditors identifying any accounting or
judgemental issues requiring the board's attention and the
auditors' assessment of internal controls; reviewing the company's
risk register and business continuity procedures; and considering
the adequacy of the whistle-blowing facility, the anti-bribery
training and monitoring and data protection policy and
procedures.
The Audit Committee chairman has maintained dialogue with the
auditors outside of the scheduled meetings and meets with the
auditors without the presence of the Executive Director and members
of the finance team.
The company did not engage its auditor for any non-audit
services, which has safeguarded the Auditor's objectivity and
independence.
The Audit Committee considers independence from a number of
perspectives, not only the materiality of fee income to the audit
firm in question. It is only after considering these aspects (along
with a report on independence from the external auditor) does it
conclude and make recommendations to the Board.
None of the members of the Audit Committee have a formal
accounting qualification though all have operated at the highest
levels of businesses. The Board is content that the overall level
of qualification within the Audit Committee is currently sufficient
to enable it to discharge satisfactorily its obligations.
In addition to the Non-Executive Director and the Chief
Executive, the external auditor was invited to attend part of the
meetings where relevant.
Internal controls
The Board is responsible for the Group and Company's system of
internal control and for reviewing its effectiveness. Given the
size of the organisation and the level of transactions involved
there are limited controls documented and in operation which is
appropriate for the Group in its current state.
The Audit Committee consider each year if the current level of
internal control is appropriate. On advice from the Audit
Committee, the Board does not consider any additional independent
verification of the system of internal control to be required,
based on the size of the Company and the Group, and the non-complex
nature of both its management systems and financial structure.
The Group operates certain controls specifically relating to the
production of consolidated financial information, covering
operational procedures, validation and review.
The above procedures reflect the Group's commitment to ensuring
it has policies in place that ensure high standards of integrity
and transparency throughout its operations. Further, when these
procedures detect unauthorised practises, the Group is committed to
correction of such events. The Group is committed to analysing its
internal controls to make them more robust and further limit the
risk of such incidents. The Board believes such action properly
reflects the Group's commitment to financial discipline and
integrity at all levels. The Board has reviewed the effectiveness
of internal control systems in operation during the financial
period in accordance with the guidelines set out in the FRC's Risk
Guidance report, through the processes set out above and no
weaknesses or failings were identified.
Dialogue with major shareholders
The Company places considerable importance on communications
with shareholders. Discussions take place with major shareholders
with the Company's delegating authority to the Chairman and Chief
Executive to present the strategy and financial results of the
Group.
Annual general meeting
At its AGM the Company complies with the provisions of the Code
relating to the disclosure of proxy votes, the separation of
resolutions and attendance of Directors, particularly committee
chairpersons. The timing of the despatch of the formal notice of
the AGM also complies with the Code.
The Directors consider that all the resolutions to be put to the
AGM, to be held in May/June 2020, are in the best interests of the
Company and its shareholders. The Board will be voting in favour of
them and unanimously recommends that shareholders do also.
Responsibility statement of the Directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
(i) the financial statements, prepared in accordance with IFRSs
as adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation taken as
a whole; and
(ii) the annual report includes a fair review of the development
and performance of the business and the position of the issuer and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
This report was approved by the board of directors on 4 May 2020
and signed on behalf of the board by:
Trevor Brown
Chief Executive Officer
Directors' Information
Annual Report and Financial Statements
For the year ended 31 December 2019
Trevor Brown
Trevor has been a strategic investor in equities and real estate
for more than 30 years. He is currently a Director of Remote
Monitored Systems plc and Braveheart Group plc.
Dr Qu Li
Qu Li is a Non-Executive Director of IQ-AI Limited. With over 25
years of experience in international mergers, acquisitions and
joint ventures, Dr Li has completed turnkey transactions ranging
from $5m-$200m and raised more than $300 million over the last 10
years. Dr Li is the founder and Chairman of China Ventures Ltd, a
leading consultancy and venture capital company, specialising in
Sino/Western business and offering a wide range of skills
associated with international business transactions. Dr Li
relocated to the UK over 20 years ago, where she obtained her
Doctor of Philosophy at Leeds University and then established her
business base. She is a qualified engineer and a successful
business entrepreneur who has worked on activities related to
government, industry and commerce in China, South East Asia, South
America, Europe and the US for over 20 years.
Apart from her business commitments, Dr Li devotes great effort,
interest and financial support to the development of young
entrepreneurs across the globe. She sits on the advisory board of
the Business School of Leeds University and is one of the Leaders
in Resident for the post graduates.
Vinod Kaushal
Vinod is a Non-Executive Director of IQ-AI Limited. Vinod is a
well-seasoned healthcare industry executive with nearly 30 years'
experience in predominantly commercial and general management
roles. He has worked nationally, regionally and globally for
several blue chip and SME companies.
Having been a member of the team which orchestrated the
international launch of Losec(R)/Prilosec(R) at Astra to its place
as the global No. 1 selling pharmaceutical, Vinod was Head of
Global Marketing at Novo Nordisk, Senior Vice President Fresenius
Kabi, Vice President of Amersham/GE Health's Neurology business,
Vice President at Royal Numico/Danone and CEO of SPL amongst other
pivotal roles.
Since leaving Big Pharma, Vinod has recently been focused on
entrepreneurial activities with several successful SMEs in the
Pharma/Healthcare space. With an impressive deal sheet to his name,
Vinod has been involved in various IP and business acquisitions.
His career has seen him relate to investors on several global stock
exchanges and he is an accomplished external speaker. Vinod holds a
BSc (Hons) in Biochemistry from Warwick University and an MBA from
Henley Business School.
Michael Schmainda
Michael was appointed as a Non-Executive Director of IQ-AI
Limited on 18 December 2019. Michael has a 20-year history of
successfully building global medical imaging businesses including
Prism Clinical Imaging and Imaging Biometrics. As co-founder of IB,
and has overseen all aspects of the company's development,
operation, and growth since its inception. He has established
strong collaborative relationships with leaders in the medical
imaging field who drive new product development and has led the
translation and commercialisation of sophisticated imaging
solutions, achieved regulatory approvals in the US and Europe, and
global product adoption.
Michael's career began with 3M Company, a company renowned for
bringing new products to market, where he held leadership roles
across multiple industries including the life science sector. Prior
to IB, Michael was a foundational member of Prism Clinical Imaging,
secured the initial investment for the company, and served as
president and COO.
The Remuneration Committee presents its report for the year
ended 31 December 2019.
Membership of the Remuneration Committee
The Remuneration Committee is currently comprised of Dr Li and V
Kaushal.
Subject to what appears below, no other third parties have
provided advice that materially assisted the Remuneration Committee
during the period.
Remuneration policy
The Group's remuneration policy is to retain and motivate its
staff with rewards linked to performance and results which promote
the interest of the shareholders. Bonus awards for employees are
assessed annually taking in to account the Group results.
Policy Table:
Objective Operation Maximum potential value
Base salary Base salary is set annually on 1 January. Broadly pitched around the median level for comparable
The basic salary positions.
element of Salary levels are reviewed on an annual basis by
remuneration is reference to the median for comparable positions When considering any increases to base salaries in the
set in relation in main market companies of a similar market normal course (as opposed to a change
to capitalisation and with similar revenues to the in role or responsibility), the Board will take into
responsibilities, Group. Broadly the Group seeks to pitch base consideration:
length of salary around the median level for such comparable * Reference to the increases provided to Executives in
service and positions without tracking it mechanistically. the comparator group.
contribution to
the Group's
activities. * Pay and employment conditions of employees throughout
the Group, including increases provided to the
Reflects level of employee population
responsibility
and achievement
of individual. * Inflation
--------------------------------------------------- ------------------------------------------------------------------
Other benefits Futures benefits may include: Cost of providing life assurance, private medical insurance and
To provide * Private medical insurance. permanent health insurance.
competitive
levels of
employment * Permanent health insurance.
benefits.
* Life assurance of two times base salary.
The level of benefits provided is reviewed
annually to ensure they remain market
competitive.
--------------------------------------------------- ------------------------------------------------------------------
Non-Executive Fee levels are set at the level paid for Fee levels are set by reference to the median of this peer
Director Fees comparable roles at companies of a similar size group. Fee levels are reviewed
To attract and annually in January. When considering any increases to fee
Non-Executive complexity to IQ-AI Limited within the main levels in the normal course, the
Directors with market. The Non-Executive Director fee structure Board will take into consideration:
the requisite is a matter for the full Board. * Increases provided to comparable roles in the
skills and comparator group;
experience to
perform the
role. * Pay and employment conditions of employees throughout
the Company, including increases provided to the
employee population; and
* Inflation.
--------------------------------------------------- ------------------------------------------------------------------
Share options
No share option scheme is provided to the Directors of the
Company.
Directors' pensions
The Company does not provide a pension scheme. Additionally, no
dependent pensions or benefits are provided.
Remuneration policy for Executive and Non-Executive
Directors
The Remuneration Committee seeks to provide the remuneration
packages necessary to attract, retain and motivate Executive and
Non-Executive Directors of the quality required to manage the
business of the Group and seeks to avoid paying more than is
necessary for this purpose. In establishing the level of
remuneration of each director, the committee has regard to packages
offered by similar companies.
Consistent with this policy, the benefit packages awarded to
Executive and Non-Executive Directors comprise a mix of performance
and non-performance elements. During 2019, the Executive and
Non-Executive Directors' pay was not based on the Group achieving
financial targets.
Directors' interests (held directly or indirectly) in the
Company's shares
2019 2018
Number Number
--------------- ----------- -----------
T Brown* 38,294,766 11,868,112
Dr Q Li - -
V Kaushal - -
M Schmainda** 9,108,400 9,108,400
--------------- ----------- -----------
*Includes shares held by Free Association Books Limited.
**Includes shares held by related parties
Directors' emoluments
The following table summarises the emoluments of Directors
during the year.
Salary 2019 2018
and fees Pension Benefits Total Total
GBP GBP GBP GBP GBP
------------- --------- -------- --------- -------- --------
T Brown 65,000 - - 65,000 65,000
V Kaushal 30,000 - - 30,000 30,000
Dr Q Li* 30,000 - - 30,000 30,000
M Schmainda - - - - -
------------- --------- -------- --------- --------
TOTAL 125,000 - - 125,000 125,000
------------- --------- -------- --------- -------- --------
*Dr Qu Li's services were invoiced by China Ventures
Limited.
Dr Qu Li
Chairman of the Remuneration Committee
4 May 2020
Independent auditor's report to the members of IQ-AI Limited
Annual Report and Financial Statements
For the year ended 31 December 2019
Opinion
We have audited the financial statements of IQ-AI Limited (the
'parent company') and its subsidiaries (the 'group') for the year
ended 31 December 2019 which comprise of the Consolidated Income
Statement, Consolidated Statement of Comprehensive Income,
Consolidated and Company Statements of Financial Position,
Consolidated and Company Statements of Changes in Equity,
Consolidated and Company Statement of Cash Flows and notes to the
financial statements, including a summary of significant accounting
policies. The financial reporting framework that has been applied
in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion the financial statements:
-- give a true and fair view of the state of the group and
parent company's affairs as at 31 December 2019 and of the group's
loss for the year then ended;
-- have been properly prepared in accordance with IFRSs as adopted by the European Union; and
-- have been prepared in accordance with the requirements the Companies (Jersey) Law 1991.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
and parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applied to listed entities,
and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group's or the parent company's ability to continue
to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Our application of materiality
The quantitative and qualitative thresholds for materiality
determine the scope of our audit and the nature, timing and extent
of our audit procedures. The materiality applied to the group
financial statements was GBP36,000 based on 5% of the loss before
tax. The performance materiality was GBP25,200. The materiality
applied to the parent company financial statements was GBP13,800
based on 5% of the loss before tax. The performance materiality was
GBP9,660. For each component in the scope of our group audit, we
allocated a materiality that was less than our overall group
materiality. As a group whose trade is in the process of expanding
through product development and existing product revenue streams,
loss before tax was considered the most appropriate benchmark to
shareholders.
We agreed with those charged with governance that we would
report all differences identified during the course of our audit in
excess of GBP1,800.
An overview of the scope of our audit
In designing our audit, we determined materiality and assessed
the risk of material misstatement in the group and parent company
financial statements. In particular, we looked at areas involving
significant accounting estimates and judgements by the directors
and considered future events that are inherently uncertain, in
particular with regard to the recognition and valuation of
intangible assets. We also assessed the risk of management override
of internal controls, including among other matters consideration
of whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
An overview of the scope of our audit (continued)
In addition to the parent company, two material components were
identified. One component was subject to an audit conducted
directly by us. The other component is located in the US and was
audited by a component auditor under our instruction and
supervision under ISA (UK) 600.
We interacted regularly with the component audit team during all
stages of the audit and was responsible for the scope and direction
of the audit process. This, in conjunction with additional audit
procedures performed at a consolidation level, gave us sufficient
appropriate evidence for our opinion of the group and parent
company financial statements.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
Key audit matter How the scope of our audit responded
to the key audit matter
Recognition and valuation We performed the following work
of intangible assets (refer to address the identified risk:
note 11)
As shown in note 11 of the * issued detailed instructions to the component auditor
financial statements, the which addressed all assertions relating to the costs
group reported GBP439,100 incurred on the development of IP;
of intangible assets as at
31 December 2019.
There is a risk that the Intellectual * reviewed the working papers of the component auditor,
Property (IP) developed and and held discussions with the component audit team,
under development may not of testing performed on intangible assets and the
be correctly capitalised in results thereof;
accordance with IAS 38. Additionally,
there is a risk that projects
under development are not * assessed any accounting policy differences regarding
fully recoverable and whether recognition and valuation between US GAAP and EU
existing commercially available endorsed IFRS;
products have any indicators
of impairment.
* completed substantive testing on additions;
* assessed compliance of the capitalised IP expenditure
with the recognition criteria under IAS38 and
challenged management on areas involving significant
judgement; and
* inquired into any indicators of impairment for IP
which is commercially available and subject to
amortisation.
========================================================================
Going concern We performed the following work
The going concern accounting to address the identified risk:
policy, as disclosed in note * reviewed the Directors' going concern assessment and
1 of the financial statements, challenged the assumptions based on our knowledge of
describes the Directors' assessment the business and of the market.
of the group and parent company's
ability to continue as a going
concern. This also includes * assessed the accuracy of previously provided budgets
the Directors' consideration and forecasts to actual results; and
of the COVID-19 impact.
IQ-AI Limited is currently
loss making and relies on * stress-tested the forecasts for possible change,
funding raised through issuing including those changes arising from the impact of
equity or convertible loan COVID-19, and performed an assessment of the ability
notes. to raise new funds, if required.
The risk for our audit is
whether additional funds will
need to be raised over the
going concern period, and
whether this, and the potential
impact of COVID-19, amounts
to a material uncertainty
that may cast doubt about
the ability of the group and
parent company to continue
as a going concern.
========================================================================
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The Directors are responsible for the
other information. Our opinion on the financial statements does not
cover the other information except to the extent otherwise
specifically stated in our report, and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where The Companies (Jersey) Law 1991 requires us to report to you
if, in our opinion:
-- proper accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the financial statements are not in agreement with the accounting records and returns; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the group and parent company financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements,
the directors are responsible for assessing the group's and parent
company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the group or company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: http://www.frc.org.uk/auditors
responsibilities. This description, forms part of our auditor's
report.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Article 113A of the Companies (Jersey) Law, 1991
and our engagement letter dated 2 January 2019. Our audit work has
been undertaken so that we might state to the company's members
those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the company and the company's members as a body, for our audit
work, for this report, or for the opinions we have formed.
David Thompson (Engagement Partner)
for and on behalf of PKF Littlejohn LLP
Registered Auditor
15 Westferry Circus
Canary Wharf
London
E14 4HD
04 May 2020
Annual Report and Financial Statements
For the year ended 31 December 2019
Consolidated Income Statement
For the year ended 31 December 2019
2019 2018
Notes GBP GBP
Continuing operations
Revenue 267,868 164,971
Cost of sales (4,361) (34,962)
------------------------------------- ------ ---------- ----------
Gross profit 263,507 130,009
Administrative expenses (859,171) (709,772)
Other income 7,572 221
------------------------------------- ------ ---------- ----------
Operating loss 5 (588,092) (579,542)
Finance costs 4 (28,975) (15,662)
Loss before income tax (617,067) (595,204)
Income tax 7 - -
Loss for the year from continuing
operations (617,067) (595,204)
Discontinued operations
Loss for the year from discontinued
operations 14 (21,587) (168,876)
Loss for the year attributable to
the owners of the Company (638,654) (764,080)
------------------------------------- ------ ---------- ----------
Earnings per share attributable
to owners of the Company
From continuing operations:
Basic & diluted (pence per share) 8 (0.48) (0.64)
From discontinued operations:
Basic & diluted (pence per share) (0.02) (0.18)
Total earnings per share (pence
per share) (0.50) (0.82)
------------------------------------- ------ ---------- ----------
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
2019 2018
GBP GBP
Loss for the period (638,654) (764,080)
Other comprehensive income
Items that may be subsequently reclassified
as profit or loss
Exchange differences on translation
of foreign operations 2,162 8,322
--------------------------------------------- --------- ---------
2,162 8,322
-------------------------------------------- --------- ---------
Total comprehensive loss for the year
attributable to the owners of the Company (636,492) (755,758)
Total comprehensive loss for the year arises from:
Continuing operations (614,905) (586,882)
Discontinued operations (21,587) (168,876)
-------------------------- ---------- ----------
(636,492) (755,758)
------------------------- ---------- ----------
The accompanying accounting policies and notes are an integral
part of these financial statements.
Consolidated Statement of Financial Position
As at 31 December 2019
2019 2018
GBP GBP
Notes
Non-current assets
Property, plant and equipment 9 2,710 918
Goodwill 10 128,296 201,274
Intangible assets 11 439,100 721,269
-------------------------------------- ------ ------------- -------------
Total non-current assets 570,106 923,461
-------------------------------------- ------ ------------- -------------
Current assets
-------------------------------------- ------ ------------- -------------
Trade and other receivables 13 28,030 65,568
Cash and cash equivalents 865,875 28,783
Assets classified as held for sale 14 404,504 -
Total current assets 1,298,409 94,351
-------------------------------------- ------ ------------- -------------
Current liabilities
Trade and other payables 15 199,918 254,928
Liabilities directly associated with
assets classified as held for sale 14 8,948 -
Total current liabilities 208,866 254,928
-------------------------------------- ------ ------------- -------------
Net current assets/(liabilities) 1,089,543 (160,577)
-------------------------------------- ------ ------------- -------------
NET ASSETS 1,659,649 762,884
-------------------------------------- ------ ------------- -------------
Equity
Share capital 16 1,398,310 1,203,465
Share premium 19,812,071 19,025,466
Capital redemption reserve 23,616 23,616
Merger reserve 160,000 160,000
Convertible loan note reserve 19 668,278 145,033
Share based payment reserve 36,982 10,877
Foreign currency reserve 10,484 8,322
Retained losses (20,450,092) (19,813,895)
-------------------------------------- ------ ------------- -------------
Equity attributable to owners of the
Company 1,659,649 762,884
TOTAL EQUITY 1,659,649 762,884
-------------------------------------- ------ ------------- -------------
Company Statement of Financial Position
As at 31 December 2019
2019 2018
GBP GBP
Notes
Non-current assets
Investments 12 543,823 783,823
-------------------------------------- ------ ------------- -------------
Total non-current assets 543,823 783,823
-------------------------------------- ------ ------------- -------------
Current assets
Investments held for sale 12 240,000 -
Trade and other receivables 13 761,756 449,618
Cash and cash equivalents 834,172 26,460
Total current assets 1,835,928 476,078
-------------------------------------- ------ ------------- -------------
Current liabilities
Trade and other payables 15 106,651 111,876
Total current liabilities 106,651 111,876
-------------------------------------- ------ ------------- -------------
Net current assets 1,729,277 364,202
-------------------------------------- ------ ------------- -------------
NET ASSETS 2,273,100 1,148,025
-------------------------------------- ------ ------------- -------------
Equity
Share capital 16 1,398,310 1,203,465
Share premium 19,812,071 19,025,466
Capital redemption reserve 23,616 23,616
Merger reserve 160,000 160,000
Convertible loan note reserve 19 668,278 145,033
Share based payment reserve 36,982 10,877
Retained losses (19,826,157) (19,420,432)
-------------------------------------- ------ ------------- -------------
Equity attributable to owners of the
Company 2,273,100 1,148,025
TOTAL EQUITY 2,273,100 1,148,025
-------------------------------------- ------ ------------- -------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
Share Share Capital Merger Convertible Share Foreign Retained TOTAL
capital premium redemption reserve loan note based currency losses EQUITY
reserve reserve payment reserve
reserve
GBP GBP GBP GBP GBP GBP GBP GBP GBP
-------------- --------- ---------- ---------- -------- ----------- -------- --------- ------------ ---------
Balance at 1
January 2018 675,594 18,418,674 23,616 160,000 368,933 - - (19,056,978) 589,839
-------------- --------- ---------- ---------- -------- ----------- -------- --------- ------------ ---------
Loss for the
year - - - - - - - (764,080) (764,080)
Exchange
differences
on
translation
of foreign
operations - - - - - - 8,322 - 8,322
-------------- --------- ---------- ---------- -------- ----------- -------- --------- ------------ ---------
Total
comprehensive
loss
for the year - - - - - - 8,322 (764,080) (755,758)
-------------- --------- ---------- ---------- -------- ----------- -------- --------- ------------ ---------
Shares issued 527,871 651,792 - - - - - - 1,179,663
Cost of shares
issued - (45,000) - - - - - - (45,000)
Unclaimed
dividends - - - - - - - 7,163 7,163
Share based
payments - - - - - 10,877 - - 10,877
Movement in
the year - - - - (223,900) - - - (223,900)
-------------- --------- ---------- ---------- -------- ----------- -------- --------- ------------ ---------
Balance at 31
December
2018 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
-------------- --------- ---------- ---------- -------- ----------- -------- --------- ------------ ---------
Company Statement of Changes in Equity
For the year ended 31 December 2019
Share Share Capital Merger Convertible Share based Retained TOTAL EQUITY
capital premium Redemption Reserve Loan Note payment losses
reserve Reserve reserve
GBP GBP GBP GBP GBP GBP GBP GBP
-------------- --------- ---------- ------------- -------- ------------ ------------ ------------ ------------
Balance at 1
January 2018 675,594 18,418,674 23,616 160,000 368,933 - (18,997,023) 649,794
-------------- --------- ---------- ------------- -------- ------------ ------------ ------------ ------------
Total
comprehensive
loss for the
year - - - - - - (430,572) (430,572)
-------------- --------- ---------- ------------- -------- ------------ ------------ ------------ ------------
Shares issued 527,871 651,792 - - - - - 1,179,663
Cost of shares
issued - (45,000) - - - - - (45,000)
Unclaimed
dividends - - - - - - 7,163 7,163
Share based
payments - - - - - 10,877 - 10,877
Movement in
the year - - - - (223,900) - - (223,900)
-------------- --------- ---------- ------------- -------- ------------ ------------ ------------ ------------
Balance at 31
December 2018 1,203,465 19,025,466 23,616 160,000 145,033 10,877 (19,420,432) 1,148,025
-------------- --------- ---------- ------------- -------- ------------ ------------ ------------ ------------
Total
comprehensive
loss for the
year - - - - - - (408,182) (408,182)
-------------- --------- ---------- ------------- -------- ------------ ------------ ------------ ------------
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 2018 1,398,310 19,812,071 23,616 160,000 668,278 36,982 (19,826,157) 2,273,100
-------------- --------- ---------- ------------- -------- ------------ ------------ ------------ ------------
Consolidated and Company Statement of Cash Flows
For the year ended 31 December 2019
GROUP COMPANY
2019 2018 2019 2018
GBP GBP GBP GBP
Loss for the year (638,654) (764,080) (408,182) (430,572)
Adjustment for:
Depreciation and amortisation 110,991 33,499 - -
Share based payment expense 26,105 10,877 26,105 10,877
Foreign exchange gain/(loss) (5,580) - - -
Decrease/(increase) in receivables 37,538 (65,070) (312,138) (336,235)
(Decrease)/increase in payables (55,010) 101,101 (2,768) 58,628
Net cash used in operating activities (524,610) (683,673) (696,983) (697,302)
--------------------------------------------------------------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Purchase of equipment (4,065) - - -
Purchase of intangible assets (112,115) (32,877) - -
Purchase of subsidiary - (104,366) - (104,366)
Net cash from investing activities (116,180) (137,243) - (104,366)
--------------------------------------------------------------- ---------- ---------- ---------- ----------
Cash flows from financing activities
Shares issued 1,049,230 515,085 1,049,230 515,085
Costs of shares issued (67,780) (45,000) (67,780) (45,000)
Interest paid (28,975) (15,662) - -
Proceeds from convertible loan notes issued 523,245 - 523,245 -
Net cash from financing activities 1,475,720 454,423 1,504,695 470,085
--------------------------------------------------------------- ---------- ---------- ---------- ----------
Net (decrease)/increase in cash and cash equivalents 834,930 (366,493) 807,712 (331,583)
Cash and cash equivalents brought forward 28,783 386,954 26,460 358,043
Effects of exchange rate changes on cash and cash equivalents 2,162 8,322 - -
--------------------------------------------------------------- ---------- ---------- ---------- ----------
Cash and cash equivalents carried forward 865,875 28,783 834,172 26,460
--------------------------------------------------------------- ---------- ---------- ---------- ----------
Notes to the financial statements (continued)
Annual Report and Financial Statements
For the year ended 31 December 2019
1. Summary of significant accounting policies
IQ-AI Limited (the "Company") is a limited liability company
incorporated and domiciled in Jersey. The address of the registered
office is given on page 48.
The financial statements are presented in pounds sterling (GBP)
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 in note 2.
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. In
addition, note 21 to the financial statements includes the Group's
and Company's objectives, policies and processes for managing its
capital and its financial risk management objectives.
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
Directors' are satisfied that the Group has sufficient resources to
meet any obligations over the going concern period. At 31 December
2019, the Group had cash balances of GBP865,875 (2018:
GBP28,783).
The Group's employees carry out their duties remotely, via the
network infrastructure in place. As a result, there has been no
disruption to date to the operational activities of the Group
during the COVID-19 social distancing and working from home
restrictions. All key business functions continue to operate at
normal capacity.
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.
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.
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.
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.
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.
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.
Share-Based Payments (continued)
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.
2. 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.
3. Segmental analysis
The Directors are of the opinion that under IFRS 8 - "Segmental
Information" the Group operated in two primary business segments in
2019; being holding company expenses and medical software. The
secondary segment is geographic. The Group's losses and net assets
by primary business segments are shown below.
Segmentation by continuing businesses:
2019 2018
GBP GBP
Loss before income tax
------------------------------------ ---------- ----------
Holding company (408,182) (430,426)
Medical software (208,885) (164,778)
(617,067) (595,204)
------------------------------------ ---------- ----------
Net assets
------------------------------------ ---------- ----------
Holding company 2,273,100 1,148,025
Medical software - net liabilities (320,335) (448,617)
--------------------------------------- ---------- ----------
Segmentation by geographical area:
2019 2018
GBP GBP
Revenue to external customers
------------------------------- ---------- ----------
Jersey - -
United States of America 267,898 164,971
267,898 164,971
------------------------------- ---------- ----------
Loss before income tax
------------------------------- ---------- ----------
Jersey (408,182) (430,426)
United States of America (208,885) (164,778)
(617,067) (595,204)
------------------------------- ---------- ----------
Net assets
------------------------------- ---------- ----------
Jersey 2,273,100 1,148,025
United States of America (320,335) (210,961)
---------------------------------- ---------- ----------
4. Finance costs
2019 2018
GBP GBP
Interest payable on unsecured convertible
loan notes 28,975 15,662
------------------------------------------ ------ ------
5. Operating loss
2019 2018
GBP GBP
The following items have been included in
arriving at operating loss
Staff costs 414,167 348,294
Amortisation of internally generated intangible
assets 109,012 33,187
Auditor's remuneration has been included in
arriving at operating loss as follows:
Fees payable to the Company's auditor and
their associates for the audit of the Group
and Company's financial statements 20,000 20,000
Non-audit services - -
------------------------------------------------ ------- -------
Total audit fees payable to the Group auditors 20,000 20,000
------------------------------------------------ ------- -------
6. Employee information
The average monthly number of employees (including Executive
Directors) was:
2019 2018
Number Number
Administration 7 7
GBP GBP
------------------------------------------------ ------- -------
Staff costs (for the above employees)
Wages and salaries 412,544 346,572
Social security costs and pension contributions 1,623 1,722
414,167 348,294
------------------------------------------------ ------- -------
Directors' remuneration and transactions
2019 2018
GBP GBP
Directors' remuneration
Emoluments and fees 125,000 125,000
GBP GBP
------------------------------------------- ------- -------
Remuneration of the highest paid director:
Emoluments and fees 65,000 65,000
Benefits and other fees - -
------------------------------------------- ------- -------
65,000 65,000
------------------------------------------- ------- -------
7. Income tax expense
2019 2018
The tax assessed for the period is different
from the standard rate of income tax, as GBP GBP
explained below:
Loss before tax on continuing operations (617,067) (595,204)
Loss before tax multiplied by the standard
rate of Jersey income tax of 0% - -
Adjustments to tax in respect of prior periods - -
Tax (credit)/charge for period - -
----------------------------------------------- --------- ---------
8. 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.
2019 2018
Group:
---------------------------------------------------- ----------- ----------
Loss attributable to equity holders of the parent
(GBP) (617,067) (595,204)
Loss from discontinued operation attributable
to equity holders of the parent (GBP) (21,587) (168,876)
Weighted average number of shares in issue (Number) 128,197,043 93,644,402
Loss per share (pence)
* From continuing operations (0.48) (0.64)
* From discontinued operations (0.02) (0.18)
---------------------------------------------------- ----------- ----------
9. Property, plant and equipment
Equipment Total
Group GBP GBP
Cost
At 1 January 2019 6,180 6,180
Additions 4,065 4,065
Transferred to assets classified as held for
sale (1,249) (1,249)
------------------------------------------------ --------- -------
At 31 December
2019 8,996 8,996
Depreciation
At 1 January 2019 (5,262) (5,262)
Charge for the
year (1,979) (1,979)
On assets reclassified as held
for sale 955 955
----------------------------------------------- --------- -------
At 31 December
2019 (6,286) (6,286)
Net book value
At 31 December
2019 2,710 2,710
------------------------------------------------ --------- -------
At 31 December
2018 918 918
------------------------------------------------ --------- -------
Property, plant and equipment transferred to assets classified
as held-for-sale relates to computer assets used in Stone Checker
Software Limited. See note 14 for further details regarding the
assets held for sale.
10. Goodwill
Group GBP
Cost
At 1 January 2018 82,627
Recognised on acquisition of subsidiary
- Imaging Biometrics 118,647
At 31 December 2018 201,274
------------------------------------------------------ -------------------------
Reclassified as held for
sale (see note 14) (82,627)
Exchange differences 9,649
------------------------------------------------------ -------------------------
At 31 December 2019 128,296
------------------------------------------------------ -------------------------
The goodwill at 31 December 2019 relates to the purchase of
Imaging Biometrics. The goodwill is not amortised but is reviewed
on an annual basis for impairment, or more frequently if there are
indications that goodwill might be impaired. The impairment review
comprises a comparison of the carrying amount of the goodwill with
its recoverable amount (the higher of fair value less costs to sell
and value in use). No impairment was deemed necessary for the year
ended 31 December 2019.
11. Intangible assets - intellectual property, imaging and
diagnostic software
Group GBP
Cost
At 1 January 2018 211,969
Acquisition of a subsidiary 480,340
Additions from internal development 62,147
At 31 December 2018 754,456
------------------------------------------------------ ----------------------
Exchange differences 38,936
Additions from internal development 112,115
Reclassified as held for sale (see note
14) (321,509)
At 31 December 2019 583,998
------------------------------------------------------ ------------------------
Accumulated Amortisation
At 1 January 2018 -
Charge for the year 33,187
At 31 December 2018 33,187
------------------------------------------------------ ------------------------
Exchange differences 2,699
Charge for the year 109,012
At 31 December 2019 144,898
------------------------------------------------------ ------------------------
Net book value
At 31 December 2019 439,100
------------------------------------------------------ ------------------------
At 31 December 2018 721,269
------------------------------------------------------ ------------------------
Intangible assets transferred to the disposal group classified
as held-for-sale relates to the internally developed software
'StoneChecker' held in Stone Checker Software Limited. See note 14
for further details regarding the assets held for sale.
12. Investments in subsidiaries
Shares in
Company group undertakings
GBP
Cost
At 1 January 2019 783,823
Reclassified to investments held
for sale (240,000)
------------------------------------- ----------------------
At 31 December 2019 543,823
-------------------------------------- ----------------------
Net book value
At 31 December 2019 543,823
-------------------------------------- ----------------------
At 31 December 2018 783,823
-------------------------------------- ----------------------
During 2019, the Group consisted of a parent company, IQ-AI
Limited, registered in Jersey and its two wholly owned
subsidiaries. On 18 December 2019, the Directors decided to
actively market Stone Checker Software Limited for sale. This
subsidiary has subsequently been classified as a disposal group
held for sale. See note 14.
Subsidiaries:
Imaging Biometrics LLC
Registered Office: 13406 Watertown Plank Road,
Elm Grove, WI 53122, United States
Nature of business: develops ready-to-use software applications
for the healthcare industry.
%
Class of share Holding
------------------------------------------------ ------------------
Ordinary shares 100
------------------------------------------------ ------------------
Stone Checker Software Limited
Registered Office: Norton Hall Cottage, The Street, Chilcompton,
Radstock, BA3 4HB United Kingdom
Nature of business: supplier of technology solutions
in the field of kidney stone analysis and kidney
stone prevention.
%
Class of share Holding
------------------------------------------------------ ------------------
Ordinary shares 100
------------------------------------------------------ ------------------
13. T rade and other receivables
Group Company
---------------- ------------------
2019 2018 2019 2018
GBP GBP GBP GBP
Amounts owed by group undertakings - - 756,467 434,461
Trade receivables 11,657 27,797 - -
Other receivables 5,564 16,254 - -
Prepayments 10,809 21,517 5,289 15,157
28,030 65,568 761,756 449,618
------------------------------------ ------- ------- -------- --------
In the Directors' opinion, the carrying amounts of receivables
is considered a reasonable approximation of fair value. The Group
monitors on a monthly basis the receivable balance and makes
impairment provisions when debt reaches a certain age. There are no
significant known risks as at 31 December 2019 (2018: none).
14. Non-current Assets Held for Sale and Discontinued Operations
On 18 December 2019, the Directors announced their intention to
actively seek a buyer for Stone Checker Software Limited. These
operations, which are expected to be sold within 12 months, have
been classified as a disposal group held for sale and presented
separately in the balance sheet. The proceeds of disposal are
expected to exceed the book value of the related net assets and
accordingly no impairment loss has been recognised on the
classification of these operations as held for sale.
The results of the discontinued operations which have been
included in the consolidated income statement, were as follows:
Year ended Year ended
31 December 31 December
2019 2018
GBP GBP
------------- -------------
Revenue 4,999 -
Expenses (26,586) (168,876)
------------- -------------
Loss before tax of discontinued operation (21,587) (168,876)
Tax - -
------------- -------------
Loss of discontinued operations attributable
to the owners of the Company (21,587) (168,876)
============= =============
The major classes of assets and liabilities comprising the
operations classified as held for sale are as follows:
Year ended
31 December
2019
GBP
-------------
Goodwill 82,627
Property, plant and equipment 294
Intangible assets 321,509
Other receivables 74
-------------
Total assets classified as held for sale 404,504
Trade and other payables (4,948)
Loans (4,000)
-------------
Total liabilities associated with assets classified
as held for sale (8,948)
Net assets of disposal group 395,556
=============
During the year, Stone Checker Software Limited contributed to
the Group's cash flows as follows:
Year ended
31 December
2019
GBP
-------------
Operating cash flows 78,788
Investing cash flows (79,020)
Financing cash flows -
-------------
Total cash flows (232)
-------------
15. Trade and other payables
Group Company
------------------ ------------------
2019 2018 2019 2018
GBP GBP GBP GBP
Amounts owed to group undertakings - - 32,665 -
Trade payables 12,741 11,768 - -
Loan from related party 57,994 62,890 - -
Other creditors - 6,976 - -
Accruals and deferred income 125,698 167,352 70,501 105,936
Dividends payable 3,485 5,942 3,485 5,942
199,918 254,928 106,651 111,876
------------------------------------ -------- -------- -------- --------
In the Directors' opinion, the carrying amount of payables is
considered a reasonable approximation of fair value.
16. Share capital
2019 2018 2019 2018
Number Number GBP GBP
Allotted, called up and
fully paid
Ordinary shares of 1p each 139,830,982 120,346,495 1,398,310 1,203,465
---------------------------- ------------ ------------ ---------- ----------
139,830,982 120,346,495 1,398,310 1,203,465
---------------------------- ------------ ------------ ---------- ----------
The movement in share capital is detailed below:
Number of
shares issued
---------------------------------------------------------- ---------------
On 26 June 2019, the Company raised GBP250,000, before
expenses, through a placing of 7,142,857 new Ordinary
Shares at a price of 3.5 pence per share. 7,142,857
In August 2019, the Company raised GBP275,000, before
expenses, through the placing of 4,583,333 new Ordinary
Shares at a price of 6 pence per share. 4,583,333
In August 2019, the Company also issued shares in
respect of the conversion of GBP18,750 of Convertible
Loan Notes, plus accrued interest, at a price of
1.1p per ordinary share 2,202,741
On 1 October 2019, the Company raised GBP500,000
through the placing of 5,555,556 new Ordinary Shares
at a price of 9.0 pence per share. 5,555,556
---------------------------------------------------------- ---------------
17. Reserves
The Group's reserves are made up as follows:
Share capital: Represents the nominal value of the issued share
capital.
Share premium account: Represents amounts received in excess of
the nominal value on the issue of share capital less any costs
associated with the issue of shares.
Capital redemption reserve: Reserve created on the redemption of
the Company's shares
Merger reserve: Represents the difference between the nominal
value of the share capital issued by the Company and the fair value
of Stone Checker Software Limited at the date of acquisition.
Convertible loan note reserve: Represents the equity portion of
the Convertible Loan Notes issued by the Company.
Foreign currency translation reserve: Reserve arising from the
translation of foreign subsidiaries at consolidation.
Retained earnings: Represents accumulated comprehensive income
for the year and prior periods.
18. Share-based payments
On 1 November 2018, 6,017,500 shares in IQ-AI Limited were
granted under option to David Smith. The shares are exercisable at
2.60p and the option will vest over 3 years, with 1/3(rd) vesting
on 1 August 2019 and the remainder vesting at a rate of 1/36(th)
per month on the last day of each month, until the shares become
fully vested. The option will be exercisable for 10 years and will
lapse on 1 August 2028. There are no cash settlement
alternatives.
The fair value is estimated as at the date of grant using a
Black-Scholes model, taking into account the terms and conditions
upon which the options were granted. The following table lists the
inputs to the model.
2018
---------
Exercise price (pence) 2.60p
Shares under option 6,017,500
Risk free interest (%) 2
Expected volatility (%) 52%
Expected life in years 3
The total charge for the year relating to this scheme was
GBP26,105 (2018: GBP10,877).
19. Convertible loan note reserve
2019 2018
GBP GBP
At the beginning of the year 145,033 368,933
Interest charge for the year 28,975 15,662
Loan notes converted (24,230) (239,562)
Loan notes issued during the year 518,500 -
----------------------------------- --------- ----------
668,278 145,033
----------------------------------- --------- ----------
The above reserve was created on the issue and conversions of
the following Convertible Loan Notes ("CLNs"). The above amount
relates to the equity portion of the CLNs. The capital and accrued
interest are wholly repayable by the issue of shares in the
Company.
On 11 March 2015, the Company raised GBP300,000 by the way of
the issue of unsecured CLNs. The CLNs are convertible into Ordinary
Shares at a price of 1.1p per Share. The CLNs accrue interest at a
rate of 6.75% against the balance outstanding. By 6 August 2019,
all of these notes were settled by the issue of ordinary
shares.
On 18 November 2015, the Company raised GBP100,000 by the way of
the issue of unsecured CLNs. The CLNs are convertible into Ordinary
Shares at a price of 1.5p per Share. The CLNs accrue interest at a
rate of 6.75% against the balance outstanding. These notes were due
to be repaid by 18 November 2018. However, the Holders of the CLNs
and the Company have agreed to extend the repayment date to 18
November 2020.
On 11 March 2019, the Company raised GBP268,500 by the way of
the issue of unsecured CLNs. The CLNs are convertible into Ordinary
Shares at a price of 1.5p per Share. The CLNs accrue interest at a
rate of 6.75% against the balance outstanding.
On 29 May 2019, the Company raised GBP250,000 by the way of the
issue of unsecured CLNs. The CLNs are convertible into Ordinary
Shares at a price of 1.5p per Share. The CLNs accrue interest at a
rate of 6.75% against the balance outstanding.
20. Operating lease commitments
Financial commitments
The Group had no contracts in respect of lessee arrangements.
The registered office is provided by the Company Secretary as part
of their services. The contract has a cancellation policy of 3
months.
21. Financial instruments
Financial risk management
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk, fair value interest
rate risk, cash flow interest rate risk and price risk), credit
risk and liquidity risk. The Group's overall risk management
programme focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the Group's
financial performance.
The Group has exposure to the following risks from its use of
financial instruments:
(a) Credit risk
(b) Liquidity risk
(c) Market risk
(d) Currency risk
(e) Interest rate risk
(f) Capital risk management
This note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for measuring and managing risks and the Group's
management of capital. Further quantitative disclosures are
included throughout these consolidated financial statements.
The Group's risk management policies are established to identify
and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits.
Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the Group's
activities.
The Group Audit Committee oversees how management monitors
compliance with the Group's risk management policies and procedures
and reviews the adequacy of the risk management framework in
relation to the risks faced by the Group.
The Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management
framework.
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a
customer fails to meet its contractual obligations. Each local
entity is responsible for managing and analysing the credit risk
for each of their new clients before standard payment and delivery
terms and conditions are offered.
Trade and other receivables
The Group's exposure to credit risk is influenced by the type of
customer the Group contracts with The Group has minimal trade
receivables.
The immediate credit exposure of financial instruments is
represented by those financial instruments that have a net positive
fair value by counterparty at 31 December 2019. The Group considers
its maximum exposure to be:
2019 2018
GBP GBP
Financial instrument
Cash and cash equivalents 865,875 28,783
Loans and receivables, net of impairment - 62,890
----------------------------------------- ------- ------
865,875 91,673
----------------------------------------- ------- ------
All cash balances and short-term deposits are held with an
investment grade bank who is our principal banker (Barclays Bank
PLC). Although the Group has seen no direct evidence of changes to
the credit risk of its counterparties, the current focus on
financial liquidity in all markets has introduced increased
financial volatility. The Group continues to monitor the changes to
its counterparties' credit risk.
21. Financial instruments (continued)
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due.
The Board are jointly responsible for monitoring and managing
liquidity and ensures that the Group has sufficient liquid
resources to meet unforeseen and abnormal requirements. The current
forecast suggests that the Group has sufficient liquid
resources.
The following are the contractual maturities of financial
liabilities:
1 to
Carrying Contractual 6 months 6 to 12 2 2 to 5
amount cash flows or less months years years
31 December 2019 GBP GBP GBP GBP GBP GBP
Non-derivative financial
liabilities
Trade and other payables 141,924 - 141,924 - - -
Loan from related party 57,994 - 57,994 - - -
199,918 - 199,918 - - -
1 to
Carrying Contractual 6 months 6 to 12 2 2 to 5
Amount cash flows or less months years years
31 December 2018 GBP GBP GBP GBP GBP GBP
Non-derivative financial
liabilities
Trade and other payables 225,047 - 225,047 - - -
Borrowings - - - - - -
225,047 - 225,047 - - -
------------------------- -------- ----------- -------- ------- ----- ------
Available liquid resources and cash requirements are monitored
using detailed cash flow and profit forecasts which are reviewed at
least quarterly, or more often as required. The Directors decision
to prepare these accounts on a going concern basis is based on
assumptions which are discussed in the going concern paragraph in
note 1.
(c) Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimising the return. Given the Group began revenue
generating operations in the year, the risk for the year was
minimal.
(d) Currency risk
The Group is exposed to currency risk as the assets of its
subsidiary, Imaging Biometrics LLC, are denominated in US Dollars.
At 31 December 2019, the net foreign liabilities were GBP566,216
(2018: GBP300,728). Differences that arise from the translation of
these assets from US Dollar to Pound Sterling are recognised in
other comprehensive income and the cumulative effect as a separate
component in equity.
(e) Interest rate risk
The Group has no floating rate loans. Therefore, the Group has
no exposure to interest rate risk.
(f) Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as a going concern while maximising
the return to stakeholders as well as sustaining the future
development of the business. In order to maintain or adjust the
capital structure, the Group may adjust dividends paid to
shareholders, return capital to shareholders, issue new shares or
sell assets to reduce debt.
The capital structure of the Group consists of net debt, which
includes loans, cash and cash equivalents, and equity attributable
to equity holders of the parent, comprising issued capital,
reserves and retained earnings.
21. Financial instruments (continued)
Fair value of financial assets and liabilities
Book value Fair value Book value Fair value
2019 2019 2018 2018
GBP GBP GBP GBP
Financial assets
Cash and cash equivalents 865,875 865,875 28,783 28,783
Loans and receivables, net
of impairment - - 62,890 62,890
Total at amortised cost 865,875 865,875 91,673 91,673
Financial liabilities
Trade and other payables 141,924 141,924 162,157 162,157
Borrowings and provisions 57,994 57,994 - -
Total at amortised cost 199,918 199,918 162,157 162,157
---------------------------- ---------- ---------- ---------- ----------
22. Related party transactions
During the year the Company was charged GBP77,780 (2018:
GBP60,000) by Peterhouse Capital Limited ("Peterhouse") for the
provision of corporate advisory services. The Company is connected
to Peterhouse as Qu Li serves as a director of Peterhouse.
Non-Executive Chairman, Qu Li, is also a Director and major
shareholder of China Ventures Limited. During the year China
Ventures Limited charged the Company a total of GBP30,771 (2018:
GBP 30,000 ) in respect of services provided by Dr Li. The balance
outstanding at year end was GBPnil (2018: GBP3,468).
At the year end, Trevor Brown directly and indirectly through
Free Association Books, a company in which he also serves as a
Director, holds 38,294,766 Ordinary Shares in the Company.
At the year-end, the amount due to Michael Schmainda in respect
of a loan provided to Imaging Biometrics LLC amounted to US$75,000
(2018: US$75,000). The loan is interest free and repayable on
demand.
23. Events after the reporting period
On 13 January 2020, David Smith exercised share options of
1,000,000 Ordinary Shares at GBP0.026 each, totalling
GBP26,000.
On 6 February 2020, the Company converted GBP60,000 convertible
loan notes and the GBP16,875 associated interest into 5,125,000
Ordinary Shares at a price of 1.15 pence per share. The convertible
loan notes were issued on 18 November 2015 to Free Association
Books Limited.
The outbreak of the coronavirus pandemic in the months after the
reporting date is considered to be a non-adjusting event. As
outlined in the Chief Executive Officer's Statement and Going
Concern within accounting policies, to date COVID-19 has not had a
significant impact on the Group's continuing activities. The
unknown length of the outbreak is a source of uncertainty and the
Board will continue to monitor events and provide updates as the
situation develops.
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 rns@lseg.com or visit www.rns.com.
END
FR GIGDUSUGDGGS
(END) Dow Jones Newswires
May 04, 2020 05:04 ET (09:04 GMT)
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