Final Results

IQ-AI Limited

26 April 2023

 

26 April 2023

IQ-AI Ltd

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

Publication of Annual Report

The Board of IQ-AI Ltd is pleased to announce the Company's audited financial statements for the year ended 31 December 2022.

The Annual Report will be available on the Company's corporate website at www.iq-ai.ltd.

--ENDS-

The Directors of the Company accept responsibility for the contents of this announcement.

For further information, please contact:

IQ-AI Ltd Trevor Brown/Vinod Kaushal/Brett Skelly/Michael Schmainda Tel: [phone]

Peterhouse Capital Limited (Financial Adviser and Broker) Lucy Williams/Heena Karani Tel: [phone]

Introduction

In essence, IQ-AI is an ideas incubator, a creative collaboration of dedicated medical scientists, clinicians, and software developers who are originating solutions and tools which are having a growing impact on the treatment and management of one of the most intractable cancers.

The key drivers are all shareholders, who have had to become accustomed to the vagaries of the stock market and how it values the Company`s shares. Oftentimes the market capitalization of the Company has changed over a small number of trading days by 10-25% without any discernable reason, however we remain firmly focused on the medium-term commercial prospects for our unique products and are confident that shareholder patience will be eventually rewarded. We will not deviate from our central aim of achieving commercial and medical success.

Operational Highlights

·      The Company launched an MR exam processing service and secured its first commercial contract. Revenue from this new service is anticipated to grow as further contracts are won.

·      The phase I clinical trial for oral gallium maltolate ("GaM") continues to track ahead of schedule. Orphan Drug Designation status has been granted to Imagining Biometrics ("IB") by the FDA. This designation offers several significant advantages to the Company including seven years market exclusivity post market approval, and reduced FDA fees.

·      IB Nimble, the handheld app which connects medical specialists in a secure environment and allows them to establish optimal treatment plans for their patients without having to physically meet, enabling for example a virtual 'tumour board'. IB Nimble is adaptable to any disease group. The Company has now secured its first commercial contract to install an operating network for clinical use of the app in a new disease area.  Interest from other potential users is being stimulated by this initial installation and we are hopeful that further contracts will ensue in due course.

·      The architecture of the IB automated processing pipeline has been re-engineered to provide significant additional commercial and operational benefit for existing and future clients. Specifically, the new platform reduces exposure to cybersecurity risks, enables more rapid and flexible integration of new algorithms, streamlines internal testing and debugging during product development, and enables cloud processing capability.   

·      Using patented artificial intelligence ("AI") technology, IB Zero G generates enhanced "with contrast" images using only non-contrast (0% gadolinium) images as input. The FDA's response to the FDA 510(k) submission concluded that IB Zero G™ was too novel and unique a product and subsequently directed IB to pursue a different regulatory clearance pathway. IB is compiling additional documentation in preparation for a pre-submission meeting with the FDA and plans to submit a "de novo" application in the second half of the year. The de novo request is a market clearance pathway designed for novel medical devices for which no legally marketed predicate device exists to demonstrate substantial equivalence.                

·      With an unprecedented and increasing number of trials currently underway, our focus in 2023 is to convert as many as possible of those trial sites to long-term customers.

IQ-AI's Products/Services:

IB Clinic

The automated imaging platform, IB Clinic, is ideally suited for high-volume cancer centers treating and monitoring brain tumor patients with a range of therapies. There are 71 such centers designated by the National Cancer Institutes ("NCI") in the USA, most of which are affiliated with university medical centers in larger metropolitan areas. These centers are funded by the NCI to deliver innovative treatments, such as IB's quantitative solutions, to patients.

To further capitalize on the unique capabilities of IB software and recognizing that smaller hospitals and imaging centers do not have the expertise or staff on hand to independently generate on-site advanced imaging, a processing service is now offered by the Company. The fee-per-exam processing solution is expected to launch at our first multi-site imaging center in early Q2. In the US alone there are 6,000 other independent diagnostic imaging centers who could potentially be interested in access to IB's advanced mapping solutions as a service.

The Company entered into agreements with two prominent players to expand our geographic footprint and outreach. Bayer (Calantic) and TeraRecon (Eureka) each have multi-site trials underway in the USA and UK that include IB products.

Driving the service demand is a peer-reviewed scientific publication by the RANO (response assessment in neuro oncology) resect group. This international publication, published in August 2022, proposes new guidance based on the prognostic value of quantifying residual tumor volume post-surgery. Intuitively, the more tumor tissue a surgeon can resect without compromising viable tissue, the better the outcome for the patient. IB's Delta T1 maps can measure these volumes and provide this information to neurosurgeons.

As a catalyst to the adoption of IB Clinic is the automatic generation of our perfusion-derived vascularity class maps (referred to in the literature as fractional tumor burden ("FTB"); https://pubmed.ncbi.nlm.nih.gov/35483909/ and https://pubmed.ncbi.nlm.nih.gov/31515215/. These maps, or computed medical images, classify blood volume measurements based on clinically validated thresholds. These thresholds have been shown to distinguish tumor from post-treatment radiation effect and aid clinicians in making treatment decisions.

The Company will release an automated processing pipeline in Q2 that shows great promise in overcoming long-standing challenges of auto-segmenting regions using AI technology alone. The processing workflow will be a hybrid approach that leverages AI plus Delta T1 technologies. The AI component of the solution is a result of the development efforts of IB Zero G and is expected to accurately segment a large percentage of brain tumor exams. This automation will provide a tremendous and highly anticipated boost in productivity for busy neuroradiologists and MR technologists who currently must manually segment each MRI exam to achieve the desired information.  Eliminating the manual processing step with this automation will also enable our internal staff to absorb a much higher volume of exams for the service business with far fewer resources.

IB Zero G

Over 450 million GBCA exams are performed globally each year in the USA alone. Once cleared by the FDA, IB Zero G will also provide a positive environmental benefit by reducing the use and disposal of gadolinium, which is becoming increasingly present in surface water near hospital MR departments.

The patented AI technology available in IB Zero G aims to provide an imaging alternative for patients who cannot, or at risk of, receiving gadolinium-based contrast during MRI exams. Various features of the AI technology are being leveraged in other products while the Company pursues regulatory clearance via the de novo pathway. The Company is receiving several hundred new datasets to further develop the technology. This additional work is necessary to satisfy the responses received by the FDA from the first 510(k) submission. The primary source of these datasets is from pediatric hospitals who are interested in the technology for use on MRI exams for children. The Company will request a Q-Submission ("Q-Sub") meeting with the FDA when the development and other criterion outlined by the FDA is nearing completion. Q-Sub meetings are voluntary and allow submitters to receive feedback prior to the premarket submission. The guidance received will be used to appropriately structure the FDA application. Once accepted for substantive review by the FDA, the cited review time for de novo applications is 150 days and can vary depending on the documentation required. This is longer than the review time for traditional 510(k)s as there is no cleared predicate device already on the market that can be used to prove substantial equivalence. The innovation truly represents a disruptive shift in technology and the Company is committed to completing the pre-submission work to help accelerate the review process.

IB Nimble

IB Nimble was added to our product portfolio in August 2022 to build on the impact it made at Froedtert Hospital (Milwaukee, WI) in treating metastatic brain tumor patients during the Covid-19 pandemic. Today, over 300 patients have benefitted from IB Nimble's ability to facilitate optimal treatment recommendations within hours as opposed to days. Moreover, the way clinicians prefer to perform their jobs is rapidly changing. Multi-disciplinary specialists do not want to be tethered to a computer, or even login to a website, to access pertinent information. Nor do they want to wait for days to collaborate with colleagues to identify an optimal treatment plan. IB Nimble is on the forefront of this transition. Other metastatic treatment teams have contacted the Company about adopting IB Nimble at their sites. In addition, two entirely different disease groups have met with our team to discuss integrating IB Nimble in their routine clinical workflows. Recently, one of them has chosen IB Nimble to fulfill their mobile app needs, representing the first commercial sale for the Company.

Oral GaM

In March of 2022, the Company sponsored a Phase I Clinical trial to study oral GaM for the treatment of recurrent GBM; a fast-growing and deadly brain tumor. Per the FDA, GBM is defined as an orphan disease affecting fewer than 200,000 people in the USA.

Orphan drugs are pharmaceutical agents which show promise in the treatment, prevention, or diagnosis of orphan diseases. In 1983, the Orphan Drug Act was passed by the US government to bring promising agents to patients faster. In December 2022, the Company requested Orphan Drug Designation (ODD) status with the FDA. The request was granted in February 2023.

The Company submitted its second Orphan Drug Designation request to the FDA for treating pediatric brain tumors with GaM. A decision is expected by early Q3. Motivation for this request was generated from two landmark pre-clinical studies completed by Dr. Mona Al-Gizawiy, PhD in the laboratory of Dr. Kathleen Schmainda, PhD at MCW. These studies demonstrated similar remarkable results of GaM in atypical teratoid/rhabdoid tumor (ATRT) and GBM in children as it did in the pre-clinical study for adult GBM. Current treatment protocols for pediatric brain tumors subject children to the same toxic, invasive, and harsh treatment protocols used to treat adult brain tumors.

The Company recognizes the interest and willingness of the FDA and the National Institutes of Health ("NIH") to help companies accelerate the delivery of promising new treatments to these patients and intends to form a close working relationship with the agencies in the coming months.

Outlook

It is five years since IQ-AI acquired Imaging Biometrics. Throughout that time the IB team have worked continuously and intensively to innovate and develop what has now become a valuable portfolio of medical IP. We believe that the cumulative accretion of value during this time is not adequately reflected in the current market valuation of the Company, and we are now considering how best to address this anomaly.

Trevor Brown

Chief Executive Officer

Consolidated Income Statement

For the year ended 31 December 2022

		2022	2021
	Notes	£	£
Continuing operations
Revenue		535,886	521,069
Cost of sales		(1,782)	(17,047)
Gross profit		534,104	504,022
Administrative expenses		(1,035,005)	(994,388)
Other income		10	18
Operating loss	5	(500,891)	(490,348)
Finance costs	4	(10,710)	(10,710)
Loss before income tax		(511,601)	(501,058)
Income tax	7	-	-
Loss for the year from continuing operations		(511,601)	(501,058)
Loss for the year attributable to the owners of the Company		(511,601)	(501,058)
Earnings per share attributable to owners of the Company
From continuing operations:
Basic & diluted (pence per share)	8	(0.28)	(0.29)

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2022

		2022	2021
		£	£
Loss for the period		(511,601)	(501,058)
Other comprehensive income
Items that may be subsequently reclassified as profit or loss
Exchange differences on translation of foreign operations		(2,593)	737
		(2,593)	737
Total comprehensive loss for the year attributable to the owners of the Company		(514,194)	(500,321)

Consolidated Statement of Financial Position

As at 31 December 2022

		2022	2021
		£	£
	Notes
Non-current assets
Property, plant and equipment	9	4,233	4,440
Goodwill	10	220,224	205,203
Intangible assets	11	531,866	567,060
Total non-current assets		756,323	776,703
Current assets
Trade and other receivables	13	197,273	78,189
Cash and cash equivalents		313,985	728,586
Total current assets		511,258	806,775
Current liabilities
Trade and other payables	14	560,508	392,787
Total current liabilities		560,508	392,787
Net current assets/(liabilities)		(49,250)	413,988
NET ASSETS		707,073	1,190,691
Equity
Share capital	15	1,826,214	1,825,076
Share premium		20,553,499	20,547,343
Capital redemption reserve		23,616	23,616
Merger reserve		160,000	160,000
Convertible loan note reserve	18	217,784	207,074
Share based payment reserve		81,696	71,808
Foreign currency reserve		21,064	20,973
Retained losses		(22,176,800)	(21,665,199)
Equity attributable to owners of the Company		707,073	1,190,691
TOTAL EQUITY		707,073	1,190,691

Company Statement of Financial Position

As at 31 December 2022

		2022	2021
		£	£
	Notes
Non-current assets
Investments	12	668,823	668,823
Total non-current assets		668,823	668,823
Current assets
Trade and other receivables	13	1,255,093	1,130,304
Cash and cash equivalents		107,849	468,767
Total current assets		1,362,942	1,599,071
Current liabilities
Trade and other payables	14	263,587	137,598
Total current liabilities		263,587	137,598
Net current assets		1,099,355	1,461,473
NET ASSETS		1,768,178	2,130,296
Equity
Share capital	15	1,826,214	1,825,076
Share premium		20,553,499	20,547,343
Capital redemption reserve		23,616	23,616
Merger reserve		160,000	160,000
Convertible loan note reserve	18	217,784	207,074
Share based payment reserve		81,696	71,808
Retained losses		(21,094,631)	(20,704,621)
Equity attributable to owners of the Company		1,768,178	2,130,296
TOTAL EQUITY		1,768,178	2,130,296

Company Statement of Changes in Equity

For the year ended 31 December 2022

	Share capital	Share premium	Capital redemption reserve	Merger reserve	Convertible loan note reserve	Share based payment reserve	Foreign currency reserve	Retained losses	TOTAL EQUITY
	£	£	£	£	£	£	£	£	£
Balance at 1 January 2021	1,701,076	20,076,343	23,616	160,000	196,364	63,087	15,009	(21,164,141)	1,071,354
Loss for the year	-	-	-	-	-	-	-	(501,058)	(501,058)
Exchange differences on translation of foreign operations	-	-	-	-	-	-	737	-	737
Total comprehensive loss for the year	-	-	-	-	-	-	737	(501,058)	(500,321)
Shares issued	124,000	496,000	-	-	-	-	-	-	620,000
Unclaimed dividends	-	(25,000)	-	-	-	-	-	-	(25,000)
Share based payments	-	-	-	-	-	8,721	-	-	8,721
Movement in the year	-	-	-	-	10,710	-	5,227	-	15,937
Balance at 31 December 2021	1,825,076	20,547,343	23,616	160,000	207,074	71,808	20,973	(21,665,199)	1,190,691
Loss for the year	-	-	-	-	-	-	-	(511,601)	(511,601)
Exchange differences on translation of foreign operations	-	-	-	-	-	-	(2,593)	-	(2,593)
Total comprehensive loss for the year	-	-	-	-	-	-	(2,593)	(511,601)	(514,194)
Shares issued	1,138	6,156	-	-	-	-	-	-	7,294
Cost of shares issued	-	-	-	-	-	-	-	-	-
Share based payments	-	-	-	-	-	9,888	-	-	9,888
Movement in the year	-	-	-	-	10,710	-	2,684	-	13,394
Balance at 31 December 2022	1,826,214	20,553,499	23,616	160,000	217,784	81,696	21,064	(22,176,800)	707,073

Company Statement of Changes in Equity

For the year ended 31 December 2022

	Share Capital	Share Premium	Capital Redemption Reserve	Merger Reserve	Convertible Loan Note Reserve	Share Based Payment Reserve	Retained Losses	TOTAL EQUITY
	£	£	£	£	£	£	£	£
Balance at 1 January 2021	1,701,076	20,076,343	23,616	160,000	196,364	63,087	(20,181,460)	2,039,026
Total comprehensive loss for the year	-	-	-	-	-	-	(523,161)	(523,161)
Shares issued	124,000	496,000	-	-	-	-	-	620,000
Unclaimed dividends	-	(25,000)	-	-	-	-	-	(25,000)
Share based payments	-	-	-	-	-	8,721	-	8,721
Movement in the year	-	-	-	-	10,710	-	-	10,710
Balance at 31 December 2021	1,825,076	20,547,343	23,616	160,000	207,074	71,808	(20,704,621)	2,130,296
Total comprehensive loss for the year	-	-	-	-	-	-	(390,010)	(390,010)
Shares issued	1,138	6,156	-	-	-	-	-	7,294
Cost of shares issued	-	-	-	-	-	-	-	-
Share based payments	-	-	-	-	-	9,888	-	9,888
Movement in the year	-	-	-	-	10,710	-	-	10,710
Balance at 31 December 2022	1,826,214	20,553,499	23,616	160,000	217,784	81,696	(21,094,631)	1,768,178

 

Consolidated and Company Statement of Cash Flows

For the year ended 31 December 2022

	GROUP		COMPANY
	2022	2021	2022	2021
	£	£	£	£
Operating loss	(511,601)	(501,058)	(390,010)	(523,161)
Adjustment for:
Depreciation and amortisation	140,609	133,474	-	-
Impairment of intangible assets	-	42,303	-	-
Impairment of the investment in a subsidiary	-	-	-	115,000
Fees in exchange for shares	7,292	-	7,292	-
Share based payment expense	9,888	8,721	9,888	8,721
Foreign exchange (loss)/ gain	(80,207)	509	-	-
Finance costs	10,710	10,710	10,710	10,710
(Increase)/decrease in receivables	(119,084)	(14,616)	(124,789)	(143,663)
Increase/(decrease) in payables	167,722	31,198	125,989	(1,606)
Net cash used in operating activities	(374,671)	(288,759)	(360,918)	(533,999)
Cash flows from investing activities:
Purchase of equipment	(1,525)	(5,874)	-	-
Purchase of intangible assets	(38,405)	(50,691)	-	-
Net cash from investing activities	(39,930)	(56,565)	-	-
Cash flows from financing activities
Shares issued net of share costs	-	595,000	-	595,000
Net cash from financing activities	-	595,000	-	595,000
Net (decrease)/increase in cash and cash equivalents	(414,601)	249,676	(360,918)	61,001
Cash and cash equivalents brought forward	728,586	478,910	468,767	407,766
Cash and cash equivalents carried forward	313,985	728,586	107,849	468,767

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 46.

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

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

Basis of preparation

These financial statements have been prepared and approved by the Directors in accordance with the EU-endorsed international financial reporting standards. 

The financial statements have been prepared under the historical cost convention.

The preparation of financial statements in conformity with EU-endorsed 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 20 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 Group meets its day to day working capital requirements through its revenue generating cashflows, discrete fund raises and the issue of convertible loan notes.

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 2022, the Group had cash balances of £313,985 (2021: £728,586).

Additional financial support, if required, will be available from the Chief Executive Officer through the convertible loan facility. In addition, all existing convertible loans including accrued interest are not repayable in cash.

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. There has been no direct impact to the Company and the Group due to the war in the Ukraine.

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

The following IFRS or IFRIC interpretations were effective for the first time for the financial year beginning 1 January 2022. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements:

Standards /interpretations	Application
IAS 1 & IAS 8 amendments	Definition of Material
IFRS 3 amendments	Business Combinations - Reference to Conceptual Framework
Amendments to IAS 16	Property, Plant and Equipment
Amendments to IAS 37	Provisions, Contingent Liabilities and Contingent Assets
Annual Improvements to IFRS Standards	2018-2020 cycle

New standards, amendments and interpretations not yet adopted

Standards /interpretations	Application
IAS 1 amendments	Presentation of Liabilities as Current or Non-Current. Effective: Annual periods beginning on or after 1 January 2023
IAS 1 amendments	Classification of Liabilities as Current or Non-Current. Effective: Annual periods beginning on or after 1 January 2023
IAS 1 amendments	Presentation of Financial Statements and IFRS Practice Statements 2: Disclosure of Accounting Policies
IAS 8 amendments	Accounting policies Changes in Accounting Estimates and Errors - Definition of Accounting Estimates
IAS 12 amendments	Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction

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

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.

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.

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.

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. The Group reports on a two-segment basis - holding company expenses and medical software.

Share capital

Ordinary shares

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

Share-based payments

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

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

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

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

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

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

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

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

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

Revenue recognition

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

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

Taxation

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

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

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

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

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

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.

Impairment of intangible assets

The directors have reviewed the valuation of Stone Checker Software Limited in the year and valued the company based on the last offer that was received in the previous year for the company and its software. Since the offer, the software has continued to be improved upon and therefore the directors feel that this valuation is acceptable. The asset has been impaired accordingly. Refer to Note 11.

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 2022: 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:  

				2022	2021
				£	£
(Loss)/ profit before income tax
Holding company				(390,010)	(523,161)
Medical software				47,382	22,103
Oral GaM				(168,973)	-
				(511,601)	(501,058)
Net assets/(liabilities)
Holding company				1,768,178	2,130,296
Medical software				(892,132)	(939,605)
Oral GaM				(168,973)	-

Segmentation by geographical area:

				2022	2021
				£	£
Revenue to external customers
United States of America				535,886	521,069
				535,886	521,069
Loss before income tax
Jersey				(390,010)	(523,161)
United Kingdom				775	(43,410)
United States of America				(122,366)	65,513
				(511,601)	(501,058)

				2022	2021
Net assets/(liabilities)				£	£
Jersey				1,768,178	2,130,296
United Kingdom				(295,573)	(294,798)
United States of America				(686,077)	(519,216)

4.  Finance costs

	2022	2021
	£	£
Interest payable on unsecured convertible loan notes	10,710	10,710

5.      Operating loss

	2022	2021
	£	£
The following items have been included in arriving at operating loss
Staff costs	398,620	380,631
Amortisation of internally generated intangible assets	138,413	130,734
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	34,000	28,500
Total audit fees payable to the Group auditors	34,000	28,500

6.      Employee information

The average monthly number of employees (including Executive Directors) was:

	2022	2021
	Number	Number
Administration	7	7
	£	£
Staff costs (for the above employees)
Wages and salaries	396,145	378,912
Social security costs and pension contributions	2,475	1,719
	398,620	380,631

Directors' remuneration and transactions 

	2022	2021
	£	£
Directors' remuneration
Emoluments and fees	160,000	160,000
Remuneration of the highest paid director:
Emoluments and fees	100,000	100,000
	100,000	100,000

7.      Income tax expense

	2022	2021
The tax assessed for the period is different from the standard rate of income tax, as	£	£
Income tax as explained below:
Loss before tax on continuing operations	(511,601)	(501,058)
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.

	2022	2021
Group:
Loss attributable to equity holders of the parent (£)	(511,601)	(501,058)
Weighted average number of shares in issue (Number)	182,609,544	172,757,472
Loss per share (pence) from continuing operations	(0.28)	(0.29)

9.      Property, plant and equipment

			Equipment	Total
Group			£	£
Cost
At 1 January 2021			10,110	10,110
Additions			5,874	5,874
Exchange differences			36	36
At 31 December 2021			16,020	16,020
Additions			1,525	1,525
Exchange differences			1,121	1,121
At 31 December 2022			18,666	18,666
Depreciation
At 1 January 2021			(8,827)	(8,827)
Charge for the year			(2,740)	(2,740)
Exchange differences			(13)	(13)
At 31 December 2021			(11,580)	(11,580)
Charge for the year			(2,194)	(2,194)
Exchange differences			(659)	(660)
At 31 December 2022			(14,433)	(14,434)		-
Carrying amount
At 31 December 2022			4,233	4,232
At 31 December 2021			4,440	4,440

10.  Goodwill

Group				£
Cost

At 1 January 2021				204,061
Exchange differences				1,142
At 31 December 2021				205,203
Exchange differences				15,021
At 31 December 2022				220,224

The goodwill at 31 December 2022 represents the goodwill recognised at the purchase of the Company's subsidiary companies Imaging Biometrics and Stone Checker Software Limited. 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 2022.

11.  Intangible assets - intellectual property, imaging and diagnostic software

Group				£
Cost

At 1 January 2021				946,779
Exchange differences				4,608
Additions from internal development				50,691
Impairment				(42,303)			(42,303)
At 31 December 2021				959,775
Exchange differences				60,613
Additions from internal development				38,405
At 31 December 2022				1,058,793
Accumulated Amortisation
At 1 January 2021				261,663
Exchange differences				318
Charge for the year				130,734
At 31 December 2021				392,715
Exchange differences				(4,201)
Charge for the year				138,413
At 31 December 2022				526,927
Net book value
At 31 December 2022				531,866
At 31 December 2021				567,060

The Directors have reviewed the valuation of Stone Checker Software Limited in the year and valued the company based on the last offer that was received in the previous year for the company and its software. Since the offer, the software has continued to be improved upon and therefore the directors consider that no additional impairment is required at this stage.

12.   Investments in subsidiaries

Company				Shares in group undertakings
				£
Cost
At 1 January 2021				783,823
Impairment				(115,000)
At 31 December 2021				668,823
Impairment				-
At 31 December 2022				668,823

At 31 December 2022, the Group consisted of a parent company, IQ-AI Limited, registered in Jersey and its two wholly owned subsidiaries.

Subsidiaries:

Imaging Biometrics LLC
Registered Office: 13406 Watertown Plank Road, Elm Grove, WI 53122, United States of America
Nature of business: develops ready-to-use software applications for the healthcare industry.
Class of share	% Holding
Ordinary shares

Stone Checker Software Limited
Registered Office: Unit 12 Westway Business Centre, Marksbury, Bath, BA2 9HN, 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

13.   Trade and other receivables      

	Group			Company
	2022	2021		2022	2021
	£	£		£	£
Amounts owed by group undertakings	-	-		1,238,995	1,114,810
Trade receivables	150,647	36,470		-	-
Other receivables	10,320	13,076		-	-
Prepayments	36,306	28,643		16,097	15,494
	197,273	78,189		1,255,092	1,130,304

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 credit risks as at 31 December 2022 (2021: none).

14.   Trade and other payables

	Group			Company
	2022	2021		2022	2021
	£	£		£	£
Amounts owed to group undertakings	-	-		185,655	98,449
Loans	62,197	55,409		-	-
Other creditors	12,302	233,165		-	-
Accruals and deferred income	486,009	104,213		77,932	39,149
	560,508	392,787		263,587	137,598

In the Directors' opinion, the carrying amount of payables is considered a reasonable approximation of fair value.

15.   Share capital

	2022	2021		2022	2021
	Number	Number		£	£
Allotted, called up and fully paid
Ordinary shares of 1p each	182,621,390	182,507,609		1,826,214	1,825,076
	182,621,390	182,507,609		1,826,214	1,825,076

The movement in share capital is detailed below:

	Number of shares issued
On 8 February 2022, the Company issued 113,781 new ordinary shares at 1p per share.	113,781

The movement in share capital of the previous year is detailed below:

	Number of shares issued
On 14 October 2021, the Company issued 12,400,000 new ordinary shares at 5p per share.	12,400,000

16.   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.

17.   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.

On 20 September 2022, 775,000 shares in IQ-AI Limited were granted under option to employees of Imaging Biometrics LLC. The shares are exercisable at 2.253p and the options are exercisable over 10 years from the date of grant. 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

	2022
Exercise price (pence)	2.253p
Shares under option	775,000
Risk free interest (%)	3
Expected volatility (%)	65%
Expected life in years	5

The total charge for the year relating to share-based payments was £9,888 (2021: £8,721).

18.   Convertible loan note reserve

	2022	2021
	£	£
At the beginning of the year	207,074	196,364
Interest charge for the year	10,710	10,710
At the end of the year	217,784	207,074

The above reserve was created on the issue and conversions of the 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. Interest is charged to the company at 6%.

19.   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.

20.   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 2022. The Group considers its maximum exposure to be:

	2022	2021
	£	£
Financial instrument
Cash and cash equivalents	313,985	728,586
Trade and other receivables	150,647	36,470
	464,632	765,056

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.

(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:

	Carrying	Contractual	6 months	6 to 12	1 to 2	2 to 5
31 December 2022	amount	cash flows	or less	months	years	years
	£	£	£	£	£	£
Trade and other payables	498,311	-	498,311	-	-	-
Borrowings	62,197	-	62,197	-	-	-
	560,508	-	560,508	-	-	-
	Carrying	Contractual	6 months	6 to 12	1 to 2	2 to 5
31 December 2021	Amount	cash flows	or less	months	years	years
	£	£	£	£	£	£
Trade and other payables	337,378	-	337,378	-	-	-
Borrowings	55,409	-	55,409	-	-	-
	392,787	-	392,787	-	-	-

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 2022, the net foreign liabilities were £686,077 (2021: £519,216). 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.

Fair value of financial assets and liabilities

	Book value	Fair value	Book value	Fair value
	2022	2022	2021	2021
	£	£	£	£
Financial assets
Cash and cash equivalents	313,985	313,985	728,586	728,586
Trade and other receivables	150,647	150,647	36,470	36,470
Total at amortised cost	464,632	464,632	765,056	765,056
Financial liabilities
Trade and other payables	498,311	498,311	337,378	337,378
Borrowings	62,197	62,197	55,409	55,409
Total at amortised cost	560,508	560,508	392,787	392,787

21.   Related party transactions

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 (2021: US$75,000). The loan is interest free and repayable on demand. This balance is included in note 14, trade and other payables.

Non-Executive Chairman, Brett Skelly, is also an employee of GBAC Limited. During the year GBAC Limited charged the Company a total of £30,000 (2021: £30,000) in respect of services provided by Mr Skelly. The balance outstanding at year end was £nil (2021: £nil).

 

END