TIDMLSAI
RNS Number : 8105D
Location Sciences Group PLC
26 June 2023
This announcement contains inside information for the purposes
of Regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310. With the publication of this announcement via
a Regulatory Information Service, this inside information is now
considered to be in the public domain.
Location Sciences Group PLC
("Location Sciences" or the "Company" or the "Group")
Audited Results for the year ended 31 December 2022
Location Sciences (AIM: LSAI), announces its audited results for
the year ended 31 December 2022.
Financial Performance
-- Revenues from the Verify division in 2022 were GBP110,856
compared to GBP167,940 in 2021 representing a 33.99% decrease in
revenues year-on-year, reflecting the continued headwinds faced by
the business during the year
-- Administrative costs excluding depreciation and amortisation
for the year to 31 December 2022 GBP723,149 (2021: GBP801,432)
-- Loss before exceptional items, amortisation and depreciation
for the year to 31 December 2022 GBP641,651 (2021: GBP699,468)
-- Loss per share from continuing operations decreased from 0.076p in 2021 to 0.029p in 2022
Financial Position at Year End
-- Net assets were GBP4,330,452 (2021: GBP5,178,571)
-- Net current assets were GBP4,195,778 (2021: GBP4,641,080)
-- Cash and cash equivalents of GBP4,125,571 (2021: GBP4,378,825)
-- Borrowings were GBPNil (2021: GBPNil)
-- Potential deferred tax asset of GBP5,423,000 (2021: GBP3,977,000)
A copy of this announcement and the Company's report &
accounts are available on the Company's website
https://www.locationsciencesgroup.ai/investor-relations/
For further information please contact:
Location Sciences Group PLC
via Allenby Capital
Simon Wilkinson, Chairman
Allenby Capital Limited (Nominated Adviser) Tel: +44 (0)20 3328
5656
David Hart
Vivek Bhardwaj
Turner Pope Investments (TPI) Ltd (Broker) Tel: +44 (0)20 3657
0050
James Pope
Andy Thacker
CHAIRMAN'S REPORT FOR THE YEARED 31 DECEMBER 2022
Dear Shareholders,
I write to you today to present the Chairman's statement for the
Location Sciences Group PLC 2022 report and accounts. It is with a
mix of challenges and opportunities that I update you on the
progress we made during the past year.
The year 2022 marked a significant turning point for Location
Sciences Group PLC as we undertook a thorough review of our
strategic options. Amidst market volatility and evolving industry
dynamics, we recognised the need to reevaluate our strategies and
ensure the long-term viability of our company.
Financially, the year presented its share of challenges, with a
decline in revenue compared to the previous year. However, I am
pleased to report that we entered 2022 with a solid financial
foundation. The successful fundraise in 2021 provided us with ample
resources, enabling us to pursue our strategic objectives and
navigate the complex business landscape.
Furthermore, in our pursuit of strategic optimisation, we took
decisive action to streamline our operations. The disposal of our
Insights business to Digital Envoy Inc during 2021 was a key
milestone in this journey. Not only did it allow us to focus on our
core offerings, but it also significantly reduced our overheads and
cash burn. As a result, we are well-funded and with a solid
platform to deliver shareholder value going forward.
Throughout this process, we have remained committed to our key
stakeholders, in particular our shareholders. We recognise that
change brings uncertainty, and we have made every effort to
navigate these challenges with transparency and fairness. Our team
has shown remarkable resilience and adaptability during this period
of transition, and we are grateful for their dedication to our
shared vision.
Looking forward, we remain cautiously optimistic. The strategic
review process has provided us with valuable insights into our
strengths, weaknesses, and potential growth opportunities. Armed
with this knowledge, we are actively exploring avenues for
sustainable expansion and enhancement of our offerings.
Finally, I would like to express my heartfelt gratitude to our
shareholders, clients, and partners for their unwavering support
throughout this transformative period. Your confidence in our
ability to navigate these challenges and capitalise on emerging
opportunities has been instrumental in our progress.
In conclusion, while 2022 presented its fair share of hurdles,
we are well-funded and strategically positioned for the future.
With a solid financial foundation, streamlined operations, and a
focus on delivering a new strategic path going forward, we are
confident in our ability to create long-term value for our
shareholders.
Thank you for your continued trust and support.
INDEPENT DIRECTORS FINANCIAL REVIEW FOR THE YEARED 31 DECEMBER
2022
Dear Shareholders,
As the Independent Director of Location Sciences Group PLC, I am
pleased to present my report alongside the Chairman's statement for
the 2022 report and accounts. As a member of the Board, my role is
to provide an unbiased perspective and act in the best interests of
the company and its shareholders.
Throughout 2022, I actively participated in the strategic review
process and monitored the company's performance, governance, and
risk management. I have assessed the decisions made and actions
taken by the Board, ensuring that they align with the company's
values and objectives.
Financial Performance
The financial performance of Location Sciences Group PLC in 2022
reflected the challenges faced by the company and the broader
market environment. I have scrutinised the financial statements and
worked closely with the team to understand the underlying causes
and evaluate the appropriateness of the strategic initiatives
undertaken. I have enclosed below a summary of the Group's
financial performance and statement of financial position at the
end of the year:
Year to Six months Year to Comparison
All figures 31 December to 31 December to prior year
in GBPGBP (unless 2022 30 June 2021
otherwise stated) 2022
Revenue 110,856 53,073 167,940 (34.0%)
------------- ----------- ------------- ---------------
Administrative
costs 723,149 489,552 801,432 (9.8%)
------------- ----------- ------------- ---------------
Loss before
tax 850,578 492,353 1,199,068 (29.1%)
------------- ----------- ------------- ---------------
Loss per share 0.029p 0.020p 0.076p (61.8%)
------------- ----------- ------------- ---------------
Net assets 4,330,452 4,805,999 5,178,571 (16.4%)
------------- ----------- ------------- ---------------
Net current
assets 4,195,778 4,399,032 4,641,080 (9.6%)
------------- ----------- ------------- ---------------
Cash at bank 4,125,571 4,227,685 4,378,825 (5.8%)
------------- ----------- ------------- ---------------
Group borrowings Nil Nil Nil -
------------- ----------- ------------- ---------------
The Board made further overhead reductions during the year and
the impact of these can be seen in the decreased administration
costs in H2 2022 of GBP233,597 compared to H1 2022 of GBP489,552,
representing a 52.3% reduction. The loss per share was negatively
impacted in H2 2022 by a further right down of our intangible
assets of GBP143,482 (2021: GBP283,210).
Strategic Review and Actions Taken
The Board conducted a thorough strategic review during the year
to identify the most viable options for sustainable growth and
shareholder value creation. This review included the disposal of
the Insights business to Digital Envoy Inc, which significantly
reduced overheads and cash burn, as well as refocusing the company
on its core offerings. We closely scrutinised this disposal and
believe it was a prudent decision that will help streamline
operations and allocate resources more efficiently. We have also
assessed the effectiveness of the board's decision-making process,
ensuring that all potential risks and opportunities were duly
considered.
Corporate Governance
We are committed to upholding the highest standards of corporate
governance. Throughout the year, we monitored the company's
compliance with applicable laws, regulations, and best practices.
We reviewed the effectiveness of internal controls, risk management
systems, and ethical practices. We are pleased to report that
Location Sciences Group PLC has maintained a robust governance
framework, with appropriate checks and balances in place to
safeguard shareholder interests.
Stakeholder Relations
As the Independent Director, I place great importance on the
company's relationships with its key stakeholders. I have closely
monitored the engagement efforts undertaken by the team to foster a
positive team culture, ensure fair treatment, and provide
opportunities for professional growth. Furthermore, I have assessed
the company's relationships with clients, suppliers, and other
stakeholders, ensuring that open lines of communication are
maintained and that their expectations are being met.
Looking Ahead
As the Independent Director, I remain committed to our fiduciary
duties and to serving the best interests of Location Sciences Group
PLC and its shareholders. I will continue to provide oversight,
guidance, and independent perspectives to the Board as the company
navigates the evolving landscape. I will monitor progress against
strategic objectives, evaluate risk management practices, and
advocate for responsible and sustainable business practices.
In conclusion, I express our appreciation for the trust placed
in us by the shareholders of Location Sciences Group PLC. I believe
that the company's strategic initiatives, including the disposal of
the Insights business and the ongoing commitment to find a new
strategic direction for the Group, will position it for long-term
success. I remain vigilant in our oversight role and are dedicated
to the company's continued growth and value creation.
STRATEGIC REPORT FOR THE YEARED 31 DECEMBER 2022
The Directors present their strategic report for the year ended
31 December 2022.
Fair review of the business
The fair review of the business is set out in the Chairman's and
Independent Director's reviews, which describe in detail the
financial results and future plans for Location Sciences.
The Board monitors progress on the overall Group strategy and
the individual strategic elements by reference to KPIs. The primary
measures are revenue, costs, EBITDA before exceptional items and
working capital levels.
The Group is in a transition stage with the benefits of the
refinancing, reorganisation of the Group and the Board's strategic
review yet to deliver the value the Board expects to
shareholders.
Principal risks and uncertainties
The principal and commercial risks to the Group are as
follows:
Description The Group's strategic review does not deliver the expected
improved shareholder returns
Impact The Group may not deliver shareholder value
Mitigation The Board conducted a thorough strategic review during
the year to identify the most viable options for sustainable
growth and shareholder value creation.
Description Location Sciences Group PLC continues to be in a cash
consumption phase.
Impact Going concern has been carefully considered and details
are provided in the Corporate Governance Report below
and in note 2 of the Group's financial statements.
Mitigation The Group had in excess of GBP4 million in net cash
resources as at 31 December 2022, which is more than
sufficient for the Groups requirements for the foreseeable
future.
Description Changes in regulation negatively impact the Group's
market.
Impact The Group may find the demand for its products is reduced
and / or the Group may be forced to change or stop
selling one or more of its products.
Mitigation The Board takes account of commentators and industrial
bodies as to the direction of policy change.
The Board meets regularly to review specific and general risks
that face the Group. The Board strives to position the Group in a
way that any risks can be minimised and met, should the need
arise.
The Group's performance will be dependent on the outcome of the
strategic review and the implementation of the results of this
review. As part of our strategic review, we have thoroughly
analysed market trends, customer needs, and emerging opportunities
to ensure the long-term success and sustainable growth of the
company.
The Group is managing this risk by reducing the overheads of the
Group and continuing to analyse new opportunities as they arise.
The Board are committed to delivering shareholder value in the
long-term.
Strategic risks
Following the strategic review, Location Sciences Group PLC has
identified key initiatives, such as seeking acquisition targets and
optimising operational efficiency. However, a strategic risk lies
in the effective execution of these initiatives. Ensuring
successful implementation, alignment across the organisation, and
timely delivery of desired outcomes require careful planning,
resource allocation, and effective management of change. Any
delays, misalignment, or inadequate execution could impede the
company's ability to achieve its strategic objectives and may
result in lost opportunities, lower competitiveness, and suboptimal
financial performance.
It is important for Location Sciences Group PLC to establish
clear goals, allocate appropriate resources, and monitor the
progress of these strategic initiatives. The company should
implement robust project management practices, establish effective
communication channels, and regularly evaluate and adjust the
execution plan as needed. Additionally, strong leadership and
stakeholder engagement are crucial to drive alignment and foster a
culture of accountability throughout the organisation.
By proactively addressing this strategic risk and implementing
effective execution strategies, Location Sciences Group PLC can
enhance its chances of successfully realising the desired outcomes
of the strategic initiatives and drive long-term value for
shareholders.
This report, in conjunction with the Chairman's statement and
Independent Directors report, form the Strategic Report for the
purposes of s414A of the Companies Act 2006.
Section 172 statement
The Directors believe that they have effectively implemented
their duties under section 172 of the Companies Act 2006 through
adherence to the Quoted Companies Alliance Corporate Governance
Code, as disclosed on pages 14 to 16 and as published on our
website:
www.locationsciencesgroup.ai/investor-relations/board-governance.
The Chairman's Report and Chief Executive's Review details the
Group's future plans to achieve its long-term strategy.
The Group is committed to maintaining an excellent reputation
and strive for high standards, while maintaining an awareness of
the environmental impact of the work that it does and strives to
reduce its carbon footprint.
The Directors recognise the importance of the wider stakeholders
in delivering their strategy and achieving sustainability within
the business; in ensuring that all our stakeholders are considered
as part of every decision process we believe we act fairly between
all members of the company.
CORPORATE GOVERNANCE
The Board recognises the importance of good corporate governance
in order to protect and build upon the substantial investments made
by our diverse shareholder base. We have chosen to apply the Quoted
Companies Alliance Corporate Governance Code (the 'QCA Code'),
which was developed by the QCA in consultation with a number of
significant institutional small company investors, as an
alternative corporate governance code applicable to AIM companies.
The underlying principle of the QCA Code is that "the purpose of
good corporate governance is to ensure that the company is managed
in an efficient, effective and entrepreneurial manner for the
benefit of all shareholders over the longer term". The Board
anticipates that whilst the Company will continue to comply with
the QCA Code, given the Group's size and plans for the future, it
will also endeavour to have regard to the provisions of the UK
Corporate Governance Code as best practice guidance to the extent
appropriate for a company of its size and nature.
An explanation of how these principles have been applied is set
out both below and in the Directors' remuneration, Audit Committee
and internal control sections of this report.
Certain information required under the QCA code is included
within the Strategic report and the Directors Remuneration
Report.
Name Date Appointed Date Resigned Role Committees
Simon Wilkinson 25/05/2021 Chairman Remuneration, Nomination,
Audit
Nigel Burton 25/05/2021 Non-Executive Remuneration, Nomination,
Director
Audit
Mark Slade 24/07/2017 22 June 2022 CEO -
David Rae 12/02/2018 22 June 2022 CFO -
The Board is responsible to the shareholders for the proper
management of the Group through setting the overall strategy of the
business and to review the people, performance, policies and
budgets of the Group. The Board typically meets bi-monthly and also
meets for any other extraordinary matters as they may arise.
Detailed information on matters to be discussed during the meetings
are circulated in advance of the meeting to ensure non-executive
directors can contribute in an educated manner.
Independence of Chairman
The roles of the Chairman, Simon Wilkinson, and the Independent
Director, Dr Nigel Burton, have a formal division. The Chairman is
responsible for delivering the outcome of the strategic review and
ensure the adequate and effective resources are in place to deliver
shareholder value. The Independent Director is responsible for
monitoring the Board and ensuring no individual or group takes
control of the Board's decision making and that all key
stakeholders are fully briefed on matters and their
responsibilities.
Board Balance
A minimum of 50% of the Board will always consist of
non-executive directors including the Chairman. All non-executive
directors are independent of the management team and are not
involved in any other business or relationship, both as an
executive or non-executive, which may impair their independent
nature and judgement.
Nomination Committee
The Group's nomination committee is responsible for reviewing
and making proposals to the Board on the appointment of Directors
and meets as necessary. The Group's nomination committee consists
of Simon Wilkinson, who acts as Non-Executive Chairman of the
committee, and Nigel Burton.
Performance Evaluation and Re-election
The Board has continued to evaluate its effectiveness and
performance during the year, taking into account the Financial
Reporting Council's Guidance on Board Effectiveness. It is
anticipated that following the completion of the Board strategic
review director appraisals will be performed to ensure that their
performance is, and continues to be, effective, that where
appropriate they maintain their independence and that they are
demonstrating continued commitment to the role. The Directors will
be evaluated internally based on their responsibilities to the
Board. New Directors resign and stand for re-election at the
Group's first AGM following their appointment. 50% of continuing
Directors stand for re-election on an annual basis.
The Directors carry out continued professional development
throughout the year where appropriate and each Director keeps up to
date with market changes through the use of market articles and
industry contacts.
Remuneration Committee
The Group's remuneration committee is responsible for the
specific remuneration and incentive packages for each of the
company's executive directors, senior executives and managers. The
Group's Remuneration Committee consists of Nigel Burton and Simon
Wilkinson, who acts as Non-Executive Chairman of the committee.
Further details of the Committee's remit are contained in the
Directors' Remuneration Report on pages 11 to 13.
Relations with Shareholders
The Group encourages two-way communication with both its
institutional and private investors and responds promptly to all
queries received. The Non-Executive Directors communicate regularly
with the Group's institutional shareholders and ensure that their
views are communicated fully to the Board. The Board recognises the
Group's AGM as an important opportunity to meet with the Group's
private shareholders. The Directors are available to listen to the
views of shareholders informally immediately following the AGM.
Annual General Meeting
The Annual General Meeting of the Group provides shareholders
with the opportunity to be updated on the Group's progress and to
ask questions of the Board.
Financial Reporting and Internal Control
The Company has established policies covering the key areas of
internal financial control and the appropriate procedures,
controls, authority levels and reporting requirements which must be
applied throughout the Group.
The key procedures that have been established in respect of
internal financial control are:
-- An annual budget set by the Board
-- Monthly management accounts with comparisons to budget
-- Monthly forecast updates with comparisons to budget
-- Monthly cashflow forecasts with comparisons to budget
-- Weekly meetings of the Executive Directors and Senior
Management to review priorities and issues
-- Restriction of user access to systems, including but not
limited to Financial, HR and Technology.
The above controls have been established to support the growth
of the business and to protect against future risks.
Corporate Culture
It is the Board's view that the Group's corporate culture is
consistent with its objectives, strategy and business model. The
Board is aware that the culture set by the Board will greatly
impact all aspects of the Group and the way that employees behave.
The Board invites employees to provide feedback on their peers and
management.
Consolidated Accounts
The aforementioned Financial Reporting and Internal Controls
apply to all subsidiaries. The accounts of all subsidiaries are
combined with those of the Company to form consolidated accounts
each month. The Chief Financial Officer is responsible for
producing the consolidated accounts, including the elimination of
intercompany transactions and balances.
Audit Committee
The Group's Audit Committee is responsible for ensuring the
financial performance of the Group is properly monitored and
reported on, the effectiveness of accounting systems and financial
reporting procedures. The Group's Audit Committee consists of Nigel
Burton and Simon Wilkinson, who acts as Non-Executive Chairman of
the committee.
The Committee considers all proposals for non-audit services and
ensures that these do not impact on the objectivity and
independence of the auditor. The Audit Committee reviews, with the
external auditor, the safeguards and procedures developed by the
auditor to counter threats or perceived threats to their
objectivity and independence. Non-audit services performed by the
external auditor are assessed for threats to objectivity and
independence on a case-by-case basis.
Board and Committee Attendance
Name Main Board Audit Committee Remuneration Nomination
Committee Committee
Simon Wilkinson 4/4 1/1 1/1 1/1
Nigel Burton 4/4 1/1 1/1 1/1
Mark Slade 2/4 - - -
David Rae 2/4 - - -
Going concern
The directors have taken a view of the Group as a whole.
The Group ended 2022 with cash resources of GBP4,125,571, no
debt and an annualised cash burn of less than GBP0.5 million. The
Group continues to operate Verify which has a global client base
with customers in Europe and South Africa and is seeking strategic
alternatives to deliver shareholder value in the long term.
However, despite the actions of the Board, the Group continued
to operate with a trading loss during the year and the same is
expected throughout 2023. The new funds raised during 2021 will be
utilised for the operation of Verify and for working capital
purposes and future opportunities and enable the Group to also
remain debt free. The Board will continue to monitor cash resources
and progress the ongoing business review.
Based on the current status, after making enquiries and
considering the existing cash resources of the business and the
further cost reductions made during 2022, the Board has a
reasonable expectation that the Group will be able to execute its
plans in the medium term such that the Group will have adequate
resources to continue in operational existence for the foreseeable
future. This provides the Board with assurance on the Group's
ability to continue as a going concern, and therefore adopt the
going concern basis of accounting in preparing the annual financial
statements.
DIRECTORS' REMUNERATION REPORT
As a Company admitted to trading on AIM, Location Sciences Group
PLC is not required to present a directors' remuneration report,
however, a number of voluntary disclosures have been made. The
Company has complied with the disclosure requirements set out in
the AIM Rules for Companies.
Remuneration Committee
The Remuneration Committee, consisting of the chairman Simon
Wilkinson and Nigel Burton, determines the Group's policy for
executive remuneration and the individual remuneration packages for
executive directors. In setting the Group's remuneration policy,
the committee considers a number of factors including:
-- salaries and benefits available to executive directors of
comparable companies; and
-- the need to both attract and retain executives of appropriate
calibre
Remuneration of executive directors
Consistent with this policy, benefit packages awarded to
executive directors comprise a mix of basic salary and performance
-- related remuneration that is designed as an incentive. The
remuneration packages can comprise the following elements:
-- base salary: the Remuneration Committee sets the base
salaries to reflect responsibilities and the skills, knowledge and
experience of the individual;
-- bonus scheme: the executive directors are eligible to receive
a bonus dependent on both individual and Group performance as
determined by the Remuneration Committee;
-- equity: share options; and
-- various other add on benefits such as private medical
insurance.
The executive directors are engaged under separate contracts
which require a notice period of three or six months given at any
time by the individual.
Remuneration of non-executive directors
The fees and equity awarded to non -- executive directors are
determined by the Board. The non -- executive directors do not
receive any other forms of benefit such as private medical
insurance.
Year to 31 December 2022
Share
Salary based
Director and fees Bonus Pension Benefits payments Total
GBP GBP GBP GBP GBP GBP
M Slade
(Executive)* 77,600 - 660 - - 78,260
D Rae
(Executive)* 64,667 - 660 - - 65,327
S Wilkinson
(Non-executive) 101,563 - - - - 101,563
N Burton
(Non-executive) 71,094 - - - - 71,094
----------------- ------------ ---------------- -------------- ------------- ------------------
314,924 - 1,320 - - 316,244
================= ============ ================ ============== ============= ==================
Included within directors' remuneration for S Wilkinson and
Nigel Burton is remuneration of GBP101,563 and GBP71,094
respectively that was settled by issue of shares.
* Resigned 22 June 2022.
Year to 31 December 2021
Share
Salary based
Director and fees Bonus Pension Benefits payments Total
GBP GBP GBP GBP GBP GBP
M Slade
(Executive) 170,654 - 1,318 1,951 15,671 189,594
K Harrison*
(Non-executive) 59,129 - - - - 59,129
D Rae
(Executive) 157,837 - 1,318 - 10,241 169,396
B Chilcott*
(Non-executive) 36,000 - - - - 36,000
S Wilkinson**
(Non-executive) 165,000 - - - - 165,000
N Burton**
(Non-executive) 115,500 - - - - 115,500
------------------ ------------ ------------------ ------------------ ------------ ------------------
704,120 - 2,636 1,951 25,912 734,619
================== ============ ================== ================== ============ ==================
Included within directors' remuneration for S Wilkinson and
Nigel Burton is remuneration of GBP165,000 and GBP115,500
respectively that was settled by issue of shares.
* Resigned 25 May 2021.
** Appointed 25 May 2021.
At 31 December At 31 December
Exercise 2022 2021
Director Grant Date Price Number Number
M Slade (Executive) 29/11/2018 2.25p - 15,555,556
D Rae (Executive) 29/11/2018 2.25p - 7,333,333
Notes: The options were to vest in three equal tranches when
certain share price targets have been reached, the share price
targets are as follows:
-- 4.8 pence per New Ordinary Share
-- 7.3 pence per New Ordinary Share
-- 9.7 pence per New Ordinary Share
The options in place at the end of 31 December 2021 were forfeit
on 22 June 2022 when the option holders ceased to hold office.
Director Warrants
Non-transferable warrants to subscribe for, in aggregate,
120,000,000 Ordinary Shares were issued to the Executive Directors
and the Non-Executive Directors, exercisable at 0.20p for five
years from 25 May 2021, provided that the Ordinary Shares have
traded at a Volume Weighted Average Price (VWAP) at or above 0.30p
for 20 consecutive Business Days, or on a change of control of the
Company.
Name Number of Ordinary Shares subject to Director Warrants
Simon Wilkinson 30,000,000
Dr Nigel Burton 30,000,000
Mark Slade 30,000,000
David Rae 30,000,000
Broker Warrants
Transferable warrants to subscribe for, in aggregate, 41,250,000
Ordinary Shares were issued to the Executive Directors and the
Non-Executive Directors, exercisable at 0.20p for five years from
25 May 2021.
Name Number of Ordinary Shares subject to Broker Warrants
Dr Nigel Burton 25,000,000
Mark Slade 10,000,000
David Rae 6,250,000
Promoter Warrants
Promoter warrants were issued to certain investors in the
fundraising completed on 25 May 2021 in consideration of those
persons assembling and co-ordinating the Concert Party's investment
in the Company. As part of this issuance, non-transferable warrants
to subscribe for, in aggregate, 500,000,000 Ordinary Shares were
issued to Simon Wilkinson, exercisable at 0.20p for five years from
25 May 2021.
DIRECTORS' REPORT FOR THE YEARED 31 DECEMBER 2022
The Directors are pleased to present the annual report and
audited financial statements of Location Sciences Group PLC for the
year ended 31 December 2022.
Dividends
The Directors do not recommend the payment of a dividend.
Board of Directors
Simon Wilkinson, Non-Executive Chairman
Simon joined Location Sciences as Non-Executive Chairman in May
2021. Simon is a highly experienced software executive and
entrepreneur, having been involved with a number of public and
private companies over his career. He was most recently CEO then
Chairman of Mobica, a world-leading, award-winning software
services company offering bespoke development, QA and consultancy.
He was previously Chief Executive Officer of Myriad Group AG, which
was listed in Zurich, and founder and Chief Executive Officer of
Magic4 Ltd, a mobile messaging software market leader, backed by
3i, Philips Ventures and Motorola Ventures.
Nigel Burton, Non-Executive Director
Nigel was appointed as a Non-Executive Director in May 2021.
Nigel spent 14 years as an investment banker at leading City
institutions including UBS Warburg and Deutsche Bank, including as
the Managing Director responsible for the energy and utilities
industries. Following this he spent 15 years as Chief Financial
Officer or Chief Executive Officer of a number of private and
public companies. He is currently a Non-Executive Director of
BlackRock Throgmorton Investment Trust plc, DeepVerge plc, eEnergy
Group plc, Mobile Streams plc and Microsaic Systems plc.
Research and development
Due to the reorganisation of the business following the Board's
strategic review, Location Sciences ceased investing into research
and development. GBPNil (2021: GBP341,441) of development
expenditure has been capitalised as "Intangible Assets".
Financial Risk Management
The Group's financial instruments comprise cash and cash
equivalents, trade receivables and payables and borrowings. The
main risks arising from the Group's financial instruments are
interest rate risk, credit risk, liquidity risk and foreign
currency risk.
Interest rate and credit risk - the principal assets of the
Group are its cash deposits. These are short-term liquid assets and
as a result the exposure to interest rate income risk is not
considered significant. The principal focus of the Directors has
been to minimise any credit risk in relation to its cash deposits
even at the expense of interest income received. Borrowings include
financial instruments on fixed interest rate terms and a revolving
credit facility at a variable rate. As a result, the exposure to
interest rate expense risk is low and no active management of
interest rate risk is undertaken by the Board.
Foreign currency risk - the main functional currency is
sterling. Throughout 2022, the Company's transactions have
primarily been denominated in sterling and the Group has had low
exposure to foreign currency risk.
Liquidity risk - the Board's policy is to ensure that sufficient
cash and cash equivalents are held on a short-term basis at all
times in order to meet the Group's operational needs. The Group
does actively raise funds through market placings and other loan
facilities.
The Group has been operating at a trading loss due to its stage
of development and seeks to ensure that its investments will
deliver long term value to shareholders. Liquidity risk is actively
managed through regular review of cash requirements of the business
in conjunction with the strategic and operational plans for the
Group.
Substantial shareholdings
As at 26 June 2023 the Directors had been notified of the
following holdings representing 3% or more of the issued share
capital of the Company:
Percentage
Number of of issued share
ordinary shares capital
Richard Hughes 200,000,000 7.55%
Mahmud Kamani 200,000,000 7.55%
Turner Pope Investments 132,750,000 5.01%
Darron Lee 125,000,000 4.72%
Simon Wilkinson 100,000,000 3.78%
Dr Nigel Burton 85,000,000 3.21%
Directors
The Directors, who held office during the year, were as
follows:
S Wilkinson
N Burton
D Rae (resigned 22 June 2022)
M Slade (resigned 22 June 2022)
The Company maintains director and officers' liability
insurance.
Statement of Directors' responsibilities
The Directors acknowledge their responsibilities for preparing
the Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the 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 apply them consistently;
-- make judgements and accounting estimates that are reasonable
and prudent;
-- state whether applicable International Financial Reporting
Standards (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 company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the group's and the
company's transactions and disclose with reasonable accuracy at any
time the financial position of the group and the company and enable
them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the group and the company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Directors' interests in shares
The directors held the following interests in Location Sciences
Group PLC:
At 31 December 2022 At 31 December 2021
Warrants over Warrants
Ordinary Options over Ordinary Shares Ordinary Options over over Ordinary
Shares of Ordinary Shares of 0.1p each Shares of Ordinary Shares Shares of
0.1p each of 0.1p each 0.1p each of 0.1p each 0.1p each
S Wilkinson 100,000,000 - 530,000,000 75,000,000 - 530,000,000
N Burton 85,000,000 - 55,000,000 67,500,000 - 55,000,000
The market price of the Company's shares at the end of the
financial year was 0.13p.
Disclosure of information to auditor
Each of the persons who are directors at the time when this
director's report is approved has confirmed that:
-- so far as that director is aware, there is no relevant audit
information of which the Company's auditor is unaware; and
-- that director has taken all the steps that ought to have been
taken as a director in order to be aware of any relevant audit
information and to establish that the auditor is aware of
that information.
Annual General Meeting
Notice of the forthcoming Annual General Meeting of the Company
together with resolutions relating to the Company's ordinary
business will be given to the members separately.
Reappointment of auditors
The auditors, Hazlewoods LLP, will be proposed for reappointment
in accordance with section 485 of the Companies Act 2006.
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF LOCATION SCIENCES
GROUP PLC
Opinion
We have audited the financial statements of Location Sciences
Group PLC (the 'parent company') and its subsidiaries (the 'group')
for the year ended 31 December 2022, which comprise the
Consolidated Income Statement, Consolidated Statement of
Comprehensive Income, Consolidated Statement of Financial Position,
Statement of Financial Position, Consolidated Statement of Changes
in Equity, Statement of Changes in Equity, Consolidated Statement
of Cash Flows, 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 UK adopted international
accounting standards.
In our opinion the financial statements:
-- give a true and fair view of the state of the group's and
the parent company's affairs as at 31 December 2022 and of
the group's loss for the year then ended;
-- have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
-- have been prepared in accordance with the requirements of
the Companies Act 2006.
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
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.
Our approach to the audit
Our audit approach was based on a thorough understanding of the
Group's business and is risk based. In arriving at our opinions set
out in this report, we highlight the key audit matters that in our
judgment, had the greatest effect on the financial statements.
Key audit matters How our scope addressed this matter
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) we identified, including 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.
Recognition of revenue
Revenue consists of the value Our audit work included but was
of services provided. Revenue not restricted to:
recorded for services is recorded - For revenue recognised in the
to the extent that the Group year our audit work include, assessing
has performed its contractual whether the Group's accounting
obligations. We therefore identified policy for revenue recognition
revenue recognition as a risk was in accordance with IFRS 15
that required particular audit 'Revenue';
attention. - Sampling service sales in the
year and comparing them to usage
reports and stated performance
dates;
- Performing cut-off testing of
sales around the year end; and
- Analytical review of revenue
recognised in the year including
variance review.
Internally generated intangible
assets
The Group has GBP134,674 of Our audit work included, but was
development costs in the year not restricted to:
on the balance sheet. The Group - Assessing the nature of the costs
capitalises development costs capitalised to ensure they met
when the following criteria the required accounting criteria
have been met: The product is for capitalisation;
technically viable, it is intended - Discussions with management to
for sale, a market exists, expenditure ensure that all criteria for capitalisation
can be measured reliably, and had been met and supporting evidence
sufficient resources are available was obtained to corroborate this.
to allow completion of the project. - Considering whether there are
When the Board is sufficiently any impairment indicators and,
confident that these criteria where these exist, reviewing impairment
are met, the costs are capitalised. reviews prepared by management.
We therefore identified internally
generated intangibles as a risk
that required particular audit
attention.
Going concern
Trading performance of the Group Our audit work included, but was
has previously indicated the not limited to:
existence of material uncertainty, - considering funds and resources
which may cast significant doubt available to the Group in the year;
about the Company and the Group's - review of forecasts prepared
ability to continue as a going by management to support the going
concern. concern assumption; and
- consideration of customer contracts.
Our application of materiality
We apply the concept of materiality in planning and performing
our audit, in evaluating the effect of any identified misstatements
and in forming our opinion. For the purpose of determining whether
the group financial statements are free from material misstatement,
we define materiality as the magnitude of a misstatement or an
omission from the financial statements or related disclosures that
would make it probable that the judgement of a reasonable person,
relying on the information would have been changed or influenced by
the misstatement or omission. We also determine a level of
performance materiality, which we used to determine the extent of
testing needed, to reduce to an appropriately low level that the
aggregate of uncorrected and undetected misstatements exceed
materiality of the group financial statements as a whole.
We establish materiality for the financial statements as a whole
to be GBP45,000, which is 1% of the value of the trading
subsidiary's total assets.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
director's use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the directors' assessment of the company's
ability to continue to adopt the going concern basis of accounting
included discussions with management to support assumptions
included in forecasts and the Group ongoing strategy and assessing
the level of resource available to the Group.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
company's ability to continue as a going concern for a period of at
least twelve months from when the original financial statements
were authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant section
of this report.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, 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.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the Strategic Report and Directors'
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements;
and
-- the Strategic Report and Directors' Report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of our knowledge and understanding of the group and
the parent company and its environment obtained in the course of
the audit, we have not identified material misstatements in the
Strategic Report and the Directors' Report.
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by
law are not made; or
-- we have not received all the information and explanations
we require for our audit.
Responsibilities of directors
As explained more fully in the Directors' Report set out on page
16, the directors are responsible for the preparation of the
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 financial statements, the directors are
responsible for assessing the Group's and the 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 the parent 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.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below.
Based on our understanding of the company and its activities, we
identified that the principal risks of non-compliance with laws and
regulations related to UK tax legislation and money laundering, and
we considered the extent to which non-compliance might have a
material effect on the financial statements. We also considered
those laws and regulations that have a direct impact on the
preparation of the financial statements such as UK GAAP and the
Companies Act 2006. We evaluated management's incentives and
opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and
determined that the principal risks were related to posting
inappropriate or fictitious journal entries to manipulate the
financial performance or financial position of the company.
As part of an audit in accordance with ISAs (UK), we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also planned and performed audit
procedures including:
-- Gaining an understanding of the legal and regulatory
framework and considering the risk of any acts which may be
contrary to applicable laws and regulations, including fraud.
-- Obtaining an understanding of internal control relevant to
the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control.
-- Evaluation of the appropriateness of accounting policies used
and the reasonableness of accounting estimates and related
disclosures made by the directors.
-- Making inquiries with management including consideration of
known or suspected instances of non-compliance with laws and
regulation and fraud.
-- Testing journal entries and other adjustments for
appropriateness and evaluating the business rationale of any
significant transactions outside the normal course of business.
-- Evaluation of the overall presentation, structure and content
of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
-- Conclusion on the appropriateness of the directors' use of
the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future events or
conditions may cause the Group to cease to continue as a going
concern.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely
related to events and transactions reflected in the financial
statements. Also the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations or through
collusion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
A further description of our responsibilities is available on
the Financial Reporting Council's website
at:www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor's report.
Use of this report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
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.
Ryan Hancock (Senior Statutory Auditor)
For and on behalf of Hazlewoods LLP, Statutory Auditor
Staverton Court
Staverton
Cheltenham
GL51 0UX
Date: 26 June 2023
CONSOLIDATED INCOME STATEMENT FOR THE YEARED 31 DECEMBER
2022
2022 2021
Continuing Operations Note GBP GBP
Revenue 4 110,856 167,940
Cost of sales (29,358) (77,243)
---------- ------------
Gross profit 81,498 90,697
Administrative expenses (723,149) (801,432)
Other operating income 5 - 11,267
---------- ------------
Operating loss before exceptional administrative
expenses, amortisation and depreciation (641,651) (699,468)
Amortisation and depreciation (259,335) (216,392)
Exceptional administrative expenses 7 42,040 (283,210)
---------- ------------
Operating loss 7 (858,946) (1,199,070)
Finance income 8 8,368 2
---------- ------------
Loss before tax (850,578) (1,199,068)
Income tax receipt 12 - 113,871
---------- ------------
Loss for the year for the financial
year from continuing operations (850,578) (1,085,197)
Discontinued operations
Profit (loss) for the year from discontinued
operations 6 92,357 (298,161)
---------- ------------
Loss for the financial year (758,221) (1,383,358)
========== ============
Earnings per share
Loss per share - basic and diluted 13 (0.029p) (0.076p)
The above results were derived from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 31
DECEMBER 2022
2022 2021
GBP GBP
Loss for the year (758,221) (1,383,358)
Other comprehensive income
Foreign currency translation loss - (4,718)
--------- -----------
Total comprehensive income for the
year attributable to owners of the
parent (758,221) (1,388,076)
========= ===========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER
2022
2022 2021
Note GBP GBP
Assets
Non-current assets
Intangible assets 14 134,674 537,491
Property, plant and equipment 15 - -
------------ ------------
134,674 537,491
Current assets
Trade and other receivables 17 228,072 331,559
Tax asset 12 - 113,871
Cash and cash equivalents 4,125,571 4,378,825
------------ ------------
4,353,643 4,824,255
Current liabilities
Trade and other payables 18 (157,864) (183,175)
Net current assets 4,195,778 4,641,080
------------ ------------
Total assets less current liabilities 4,330,453 5,178,571
------------ ------------
Net assets 4,330,453 5,178,571
============ ============
Equity
Share capital 21 16,340,507 16,298,007
Share premium 20,088,118 20,034,993
Merger relief reserve 11,605,556 11,605,556
Capital reserve 209,791 209,791
Reverse acquisition reserve (9,225,108) (9,225,108)
Equity reserve 1,135,319 1,135,319
Retained earnings (35,823,730) (34,879,987)
------------ ------------
Equity attributable to owners of the
company 4,330,453 5,178,571
============ ============
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022
2022 2021
Note GBP GBP
Assets
Non-current assets
Investments 16 3,034,374 3,219,896
Current assets
Trade and other receivables 17 58,797 132,919
Current liabilities
Trade and other payables 18 (76,000) (76,000)
------------ ------------
Net current assets (17,203) 56,919
------------ ------------
Total assets less current liabilities 3,017,171 3,276,815
------------ ------------
Net assets 3,017,171 3,276,815
============ ============
Equity
Share capital 21 16,340,507 16,298,007
Share premium 20,088,118 20,034,993
Merger relief reserve 11,605,556 11,605,556
Equity reserve 1,135,319 1,135,319
Retained earnings (46,152,329) (45,797,060)
------------ ------------
Total equity 3,017,171 3,276,815
============ ============
The Company has taken advantage of the exemption allowed under
section 408 of the Companies Act 2006 and has not presented its own
statement of comprehensive income in these financial statements.
The loss after tax for the parent Company for the year was
GBP169,747 (2021: GBP3,796,912).
Approved by the Board on 26 June 2023 and signed on its behalf
by:
Simon Wilkinson
Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 31
DECEMBER 2022
Merger Reverse
Share Share relief Capital acquisition Equity Retained
capital premium reserve reserve reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP GBP GBP
At 1 January
2021 14,280,258 19,315,231 11,605,556 209,791 (9,225,108) - (33,540,223) 2,645,505
Loss for the
year - - - - - - (1,383,358) (1,383,358)
Other
comprehensive
income - - - - - - (4,718) (4,718)
----------- ----------- ----------- -------- ------------ ----------- ------------ ------------
Total
comprehensive
income - - - - - - (1,388,076) (1,388,076)
New share
capital
subscribed 2,017,749 1,855,081 - - - - - 3,872,830
Warrants
issued - (1,135,319) - - - 1,135,319 - -
Share-based
payments - - - - - - 48,312 48,312
----------- ----------- ----------- -------- ------------ ----------- ------------ ------------
At 31 December
2021 16,298,007 20,034,993 11,605,556 209,791 (9,225,108) 1,135,319 (34,879,987) 5,178,571
=========== =========== =========== ======== ============ =========== ============ ============
Merger Reverse
Share Share relief Capital acquisition Equity Retained
capital premium reserve reserve reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP GBP GBP
At 1 January
2022 16,298,007 20,034,993 11,605,556 209,791 (9,225,108) 1,135,319 (34,879,987) 5,178,571
Loss for the
year - - - - - - (758,221) (758,221)
Total
comprehensive
income - - - - - - (758,221) (758,221)
New share
capital
subscribed 42,500 53,125 - - - - - 95,625
Share-based
payment
credit - - - - - - (185,522) (185,522)
At 31 December
2022 16,340,507 20,088,118 11,605,556 209,791 (9,225,108) 1,135,319 (35,823,730) 4,330,453
=========== =========== =========== ======== ============ =========== ============ ============
STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 31 DECEMBER
2022
Merger relief Retained
Share capital Share premium reserve Equity reserve earnings Total
GBP GBP GBP GBP GBP GBP
At 1 January 2021 14,280,258 19,315,231 11,605,556 - (42,048,460) 3,152,585
Loss for the year - - - - (3,796,912) (3,796,912)
------------- ------------- ------------- -------------- ------------ -------------
Total comprehensive income - - - - (3,796,912) (3,796,912)
New share capital subscribed 2,017,749 1,855,081 - - - 3,872,830
Share-based payments - - - 48,312 48,312
Warrants issued - (1,135,319) - 1,135,319 - -
------------- ------------- ------------- -------------- ------------ -------------
At 31 December 2021 16,298,007 20,034,993 11,605,556 1,135,319 (45,797,060) 3,276,815
============= ============= ============= ============== ============ =============
Merger relief Retained
Share capital Share premium reserve Equity reserve earnings Total
GBP GBP GBP GBP GBP GBP
At 1 January 2022 16,298,007 20,034,993 11,605,556 1,135,319 (45,797,060) 3,276,815
Loss for the year - - - - (169,747) (169,747)
------------- ------------- ------------- -------------- ------------ -------------
Total comprehensive income - - - - (169,747) (169,747)
Share-based payment credit - - - - (185,522) (185,522)
New share capital subscribed 42,500 53,125 - - - 95,625
------------- ------------- ------------- -------------- ------------ -------------
At 31 December 2022 16,340,507 20,088,118 11,605,556 1,135,319 (46,152,329) 3,017,171
============= ============= ============= ============== ============ =============
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Cash flows from operating activities Note GBP GBP
Loss for the year from continuing activities (850,758) (1,085,197)
Loss for the year from discontinued activities 92,537 (298,161)
Adjustments to cash flows from non-cash
items:
Depreciation and amortisation 7 259,335 508,862
Impairment charge 7 143,482 283,210
Profit on disposal of discontinued operations - (290,640)
Foreign exchange gain - (4,718)
Finance income 8 (8,368) (2)
Share based payment transactions (185,522) 48,312
Income tax expense - (113,871)
Shares issued other than for cash 85,000 120,000
Uplift in fair value of directors' fees 10,625 195,500
--------- -----------
(453,669) (636,705)
Working capital adjustments
Decrease / (Increase) in trade and other
receivables 103,487 88,225
Decrease in trade and other payables (25,310) (33,114)
--------- -----------
Cash used in operations (375,492) (581,594)
Income taxes received 113,871 166,272
--------- -----------
Net cash flow from operating activities (261,622) (415,322)
--------- -----------
Cash flows from investing activities
Interest received 8 8,368 2
Disposals of discontinued operations - 450,138
Acquisition of intangible assets 14 - (341,441)
--------- -----------
Net cash flows from investing activities 8,368 108,699
--------- -----------
Cash flows from financing activities
Proceeds from issue of ordinary shares,
net of issue costs - 3,557,330
Net cash flows from financing activities - 3,557,330
--------- -----------
Net increase/(decrease) in cash and cash
equivalents (253,254) 3,250,707
Cash and cash equivalents at 1 January 4,378,825 1,128,118
--------- -----------
Cash and cash equivalents at 31 December 4,125,571 4,378,825
========= ===========
2022 2021
GBP GBP
Non-cash financing activities:
Share warrants exercised in year - 10,000
Fees settled by share issues - 120,000
Directors' fees settled by share issues 95,625 163,625
====== =======
For full details on non-cash financing activities
see note 21
STATEMENT OF CASH FLOWS FOR THE YEARED 31 DECEMBER 2022
2022 2021
GBP GBP
Cash flows from operating activities
Loss for the year (169,747) (3,796,912)
Adjustments to cash flows from non-cash
items
Non-cash impairments - 3,314,312
Share issues other than for cash 85,000 120,000
Uplift in fair value of directors' fees 10,625 195,500
--------- -----------
(74,122) (167,100)
Working capital adjustments
Decrease/(increase) in trade and other
receivables 74,122 (132,918)
Increase / (decrease) in trade and other
payables - 57,000
--------- -----------
Net cash flow from operating activities - (243,018)
Cash flows from financing activities
Proceeds from issue of ordinary shares,
net of issue costs - 3,557,330
Decrease in inter-company loans - (3,314,312)
--------- -----------
Net cash flows from financing activities - 243,018
--------- -----------
Net increase in cash and cash equivalents - -
Cash and cash equivalents at 1 January - -
--------- -----------
Cash and cash equivalents at 31 December - -
========= ===========
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARED 31 DECEMBER
2022
General information
1
The company is a public company limited by share capital,
incorporated and domiciled in England.
The address of its registered office is:
First Floor
St James' House
St James' Square
Cheltenham
Gloucestershire
GL50 3PR
The Company's ordinary shares are traded on the Alternative
Investment Market (AIM) of the London Stock Exchange.
Principal activity
Location Sciences has developed a global platform called Verify,
which brings transparency to the location based mobile advertising
market. Verify allows marketeers to authenticate where their
adverts have been viewed and uses proprietary technology to detect
location ad-fraud, which would otherwise go unnoticed.
Accounting policies
2
Statement of compliance
The group financial statements have been prepared in accordance
with International Financial Reporting Standards and its
interpretations adopted by the EU ("adopted IFRS's").
Summary of significant accounting policies and key accounting
estimates
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.
Going concern
The directors have taken a view of the Group as a whole.
The Group ended 2022 with cash resources of GBP4,125,571, no
debt and an annualised cash burn of less than GBP0.5 million. The
Group continues to operate Verify which has a global client base
with customers in Europe and South Africa and is seeking strategic
alternatives to deliver shareholder value in the long term.
However, despite the actions of the Board, the Group continued
to operate with a trading loss during the year and the same is
expected throughout 2023. The new funds raised during 2021 will be
utilised for the operation of Verify and for working capital
purposes and future opportunities and enable the Group to also
remain debt free. The Board will continue to monitor cash resources
and progress the ongoing business review.
Based on the current status, after making enquiries and
considering the existing cash resources of the business and the
further cost reductions made during 2022, the Board has a
reasonable expectation that the Group will be able to execute its
plans in the medium term such that the Group will have adequate
resources to continue in operational existence for the foreseeable
future. This provides the Board with assurance on the Group's
ability to continue as a going concern, and therefore adopt the
going concern basis of accounting in preparing the annual financial
statements.
Basis of consolidation
The group financial statements consolidate the financial
statements of the company and its subsidiary undertakings drawn up
to 31 December 2022 in accordance with IFRS 10.
A subsidiary is an entity controlled by the company. Control is
achieved where the company has the power to govern the financial
and operating policies of an entity so as to obtain benefits from
its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the income statement from the effective date
of acquisition or up to the effective date of disposal, as
appropriate. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with those used by the group.
The purchase method of accounting is used to account for
business combinations that result in the acquisition of
subsidiaries by the group. The cost of a business combination is
measured as the fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of exchange,
plus costs directly attributable to the business combination.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. Any excess
of the cost of the business combination over the acquirer's
interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised is recorded as
goodwill.
Inter-company transactions, balances and unrealised gains on
transactions between the company and its subsidiaries, which are
related parties, are eliminated in full.
Intra-group losses are also eliminated but may indicate an
impairment that requires recognition in the consolidated financial
statements.
Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the
group. Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the group's equity
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination and the
non-controlling shareholder's share of changes in equity since the
date of the combination. Total comprehensive income is attributed
to non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
Changes in accounting policy
For the purpose of the preparation of these consolidated
financial statements, the Group has applied all standards and
interpretations that are effective for accounting periods beginning
on or after 1 January 2022. None of the standards that have been
applied have had a material effect on the financial statements.
New standards, interpretations and amendments not yet
effective
No new standards, amendments or interpretations to existing
standards that have been published and that are mandatory for the
Group's accounting periods beginning on or after 1 January 2022, or
later periods, have been adopted early.
None of the standards, interpretations and amendments which are
effective for periods beginning after 1 January 2022, and which
have not been adopted early, are expected to have a material effect
on the financial statements.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker
for the use in strategic decision making and monitoring of
performance. The Group considers the chief operating decision maker
to be the Executive Board.
Revenue recognition
Revenue represents the invoice value of services and software
licences provided to external customers in the period, stated
exclusive of value added tax.
Consideration received from customers in respect of services is
only recorded as revenue to the extent that the Group has performed
its contractual obligations in respect of that consideration.
Management assess the performance of the Group's contractual
obligations against project milestones and work performed to
date.
Revenue from software licences sold in conjunction with services
is invoiced separately from those services and recognised over the
period of the licence.
Revenue from software licences for the use of the technology
platform is recognised over the period of the license.
Revenue from software development is recognised to the extent
that the Group has obtained the right to consideration through its
performance.
The IFRS 15 Practical expedient has been applied whereby the
promised amount of consideration has not been amended for the
effects of a significant financing component as at the contract
inception there are no contracts where the period between transfers
of promised goods or services and customer payment is expected to
exceed one year.
Under the Group's standard contract terms, customers have a
right of return within 30 days. At the point of sale, a refund
liability and a corresponding adjustment to revenue is recognised
for those products expected to be returned. It is considered highly
probable that a significant reversal in the revenue recognised will
not occur given the consistent low level of returns over previous
years.
Grants
Grants for revenue expenditure are presented as part of the
Income Statement in the periods in which the expenditure is
recognised.
Foreign currency transactions and balances
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ("the functional
currency"). The consolidated financial statements are presented in
sterling, which is the Parent's presentational currency.
Transactions in foreign currencies are recorded at the rate
ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are translated at the
rate of exchange ruling at the balance sheet date.
The results and financial position of all Group entities that
have a functional currency different from the presentational
currency of the Group are translated into sterling follows:
-- Assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of the balance
sheet;
-- Income and expenses for each income statement are translated
at the average exchange rate for the month where these approximate
the exchange rate at the date of the transaction; and
-- All resulting exchange differences are recognised within
other comprehensive income and taken to the foreign exchange
reserve.
Tax
The current tax charge is calculated on the basis of tax rates
and laws that have been enacted or substantively enacted by the
reporting date in the countries where the group operates and
generates taxable income.
Deferred tax is provided for using the liability method on
temporary differences at the balance sheet date between tax basis
of assets and liabilities and their carrying amounts for financial
reporting purposes. Deferred tax liabilities are recognised in full
for all temporary differences other than those relating to goodwill
on investments in subsidiaries. Deferred tax assets are recognised
for all deductible temporary differences carried forward of unused
tax credits and unused tax losses to the extent that it is probable
that taxable profit will be available against which the deductible
temporary differences and carry-forward of unused tax credits and
unused tax losses can be utilised.
The carrying amount of deferred tax assets is assessed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are reassessed at each balance sheet date and
are recognised to the extent that it is probable that future
taxable profits will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period when the asset is
realised, or the liability settled, based on tax rates that have
been enacted or substantively enacted at the balance sheet
date.
The tax currently receivable is based on the taxable loss for
the period and relates to R&D tax credits. Taxable loss differs
from net loss as reported in the consolidated income statement
because it excludes items of income or expense that are taxable or
deductible in other periods and it further excludes items that are
never taxable or deductible. This is calculated using rates and
laws enacted or substantively enacted at the reporting date
Financial instruments
The Group recognises financial instruments when it becomes a
party to the contractual arrangements of the instrument. Financial
instruments are de-recognised when they are discharged or when the
contractual terms expire. The Group's accounting policies in
respect of financial instruments transactions are explained
below:
Financial assets
The Group classifies all of its financial assets as loans and
receivables. Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not quoted in
an active market. They arise principally through the provision of
goods and services to customers (e.g. trade receivables), but also
incorporate other types of contractual monetary assets. They are
initially recognised at fair value plus transaction costs that are
directly attributable to their acquisition or issue, and are
subsequently carried at amortised cost using the effective interest
rate method, less provision for impairment. Discounting is omitted
where the effect of discounting is immaterial.
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterpart or default or significant delay in payment) that
the Group will be unable to collect all of the amounts due under
the terms receivable, the amount of such a provision being the
difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired
receivable. For trade receivables, which are reported net, such
provisions are recorded in a separate allowance account with the
loss being recognised within administrative expenses in the Income
Statement. On confirmation that the trade receivable will not be
collected, the gross carrying value of the asset is written off
against the associated provision.
Financial liabilities
The Group classifies all of its financial liabilities as
liabilities at amortised cost. Liabilities are classified as
current liabilities when the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the
balance sheet date.
Intangible assets
Internally developed software
Intangible assets are predominantly internally generated
software development costs for Location Sciences' technologies.
Development costs are capitalised when certain criteria are met.
The product must be technically feasible, sale is intended, a
market exists, expenditure can be measured reliably, and sufficient
resources are available to complete the project. The extent of
capitalisation is limited to the amount, which taken together with
further related costs, will be recovered from the future economic
benefits related to the asset. When the Board is sufficiently
confident that all of the criteria for capitalisation are met,
development costs are amortised over the expected useful life,
currently 5 years, from the date the asset is available for use.
Development costs that have been capitalised, but where
amortisation has not yet commenced are reviewed annually for
impairment. If no intangible asset can be recognised based on the
above then development costs are recognised within administrative
expenses in the Consolidated Income Statement.
Amortisation
Amortisation method and
Asset class rate
Development costs 20% straight line
Amortisation is recognised within administrative expenses and
disclosed separately on the Consolidated Income Statement.
Depreciation
Depreciation method and
Asset class rate
Computer equipment 33.33% straight line
Office equipment 33.33% straight line
Right of Use assets Straight line over lease
term
Depreciation is recognised within administrative expenses and
disclosed separately on the Consolidated Income Statement.
Impairment of non-financial assets
At each Statement of Financial Position date, the Group performs
an impairment review in respect of goodwill and any intangible
assets not yet ready for use and reviews the carrying amounts of
its tangible and intangible assets to determine whether there is
any indication that those assets have suffered any impairment. If
any such indication exists, the recoverable amount of the asset
(being the higher of fair value less costs to sell and value in
use) is estimated in order to determine the extent of any
impairment. Any impairment loss is recognised as an expense in the
Consolidated Income Statement in the period in which it was
identified.
Investments
Investments are carried at cost, less any impairment in
value.
The Company grants options over its equity investments to the
employees of its subsidiaries. The carrying value of the investment
in this subsidiary is increased by an amount equal to the value of
the share-based payment charge attributable to the option holder in
the subsidiary.
Dividends on equity securities are recognised in income when
receivable.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value, and have a maturity of less
than 3 months from the date of acquisition. For the purpose of the
statement of cash flows, cash and cash equivalents consist of cash
in hand and bank deposits.
Trade receivables
Trade receivables are amounts due from customers for licences
sold or services performed in the ordinary course of business. 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 the transaction
price. They are subsequently measured at amortised cost using the
effective interest method, less provision for impairment. A
provision for the impairment of trade receivables is established
when there is objective evidence that the group will not be able to
collect all amounts due according to the original terms of the
receivables.
Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less (or in the normal
operating cycle of the business if longer). If not, they are
presented as non-current liabilities.
Trade payables are recognised initially at the transaction price
and subsequently measured at amortised cost using the effective
interest method.
Leases
Assets held under leases are recognised as assets of the Group
at the fair value at the inception of the lease or if lower, at the
present value of the minimum lease payments. The related liability
to the lessor is included in the Balance Sheet as a finance lease
obligation. Lease payments are apportioned between interest
expenses and capital redemption of the liability. Interest is
recognised immediately in the Consolidated Income Statement, unless
attributable to qualifying assets, in which case they are
capitalised to the cost of those assets.
Exemptions are applied for short life leases and low value
assets, with payments made under operating leases charged to the
Consolidated Income Statement on a straight-line basis over the
period of the lease.
Share capital
Ordinary shares are classified as equity. Equity instruments are
measured at the fair value of the cash or other resources received
or receivable, net of the direct costs of issuing the equity
instruments. If payment is deferred and the time value of money is
material, the initial measurement is on a present value basis.
Defined contribution pension obligation
A defined contribution plan is a pension plan under which fixed
contributions are paid into a separate entity and has no legal or
constructive obligations to pay further contributions if the fund
does not hold sufficient assets to pay all employees the benefits
relating to employee service in the current and prior periods.
For defined contribution plans contributions are paid publicly
or privately administered pension insurance plans on a mandatory or
contractual basis. The contributions are recognised as employee
benefit expense when they are due. If contribution payments exceed
the contribution due for service, the excess is recognised as an
asset.
Share based payments
The Group operates an equity-settled, share-based compensation
plan. Equity-settled share-based payments are measured at fair
value at date of grant. The fair value determined at the grant date
of the equity-settled share based payments is expensed on a
straight-line basis over the vesting period, based on the Group's
estimate of shares that will eventually vest. Fair value is
measured by use of the Black Scholes or a binomial options
valuation model as appropriate depending on the terms of the
options
Equity
Equity comprises:
Share capital - the nominal value of ordinary shares is
classified as equity.
Share premium - represents the excess over nominal value of the
fair value of consideration received for equity shares, net of
expenses of the share issue.
Merger relief reserve - the difference between cost or fair
value and the nominal value of shares issued on the exchange of
shares with Location Sciences AI Limited and on acquisition of
subsidiaries where shares are issued as part of the
consideration.
Translation reserve - the foreign exchange difference arising on
consolidation.
Capital reserve - represents a capital contribution to the
Company.
Equity reserve - represents the fair value of warrants over
shares issued as part of the May 2021 fundraise.
Reverse acquisition reserve - the balance of the amount
recognised as issued equity instruments arising on restatement of
Location Sciences AI Limited to reflect the parent equity
structure, further to the reverse acquisition basis of accounting
adopted in 2013 on the share exchange by Location Sciences Group
Plc for 100% of the shares of Location Sciences AI Limited.
Retained earnings - includes all current and prior period
retained profits/(losses).
Critical accounting judgements and key sources of estimation
3 uncertainty
The preparation of financial information in conformity with IFRS
requires the directors to make critical accounting estimates and
judgements that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. An
assessment of the impact of these estimates and judgements on the
financial statements is set out below.
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. Actual results could differ from these estimates and
any subsequent changes are accounted for with an effect on income
at the time such updated information is available.
Fair values for employee share schemes
The establishment of fair values in respect of employee services
received in exchange for share options require the exercise of
judgement and estimation in respect of the life of the option, the
expected dividend yield and, in particular, the volatility of the
underlying shares. A calculated value for the latter may not
accurately reflect the future share price movements given the
Group's stage of development.
Assessing whether development costs meet the criteria for
capitalisation
The point at which development costs meet the criteria for
capitalisation is critically dependent on management's judgement of
the point at which technical feasibility is demonstrable.
Commercial success of the development projects remains uncertain at
the time of recognition and therefore impairment reviews are
undertaken based on current estimates of future revenue streams.
This assessment has resulted in the impairment of GBP143,482 (2021:
GBP283,210) of development costs.
Fair values of warrant instruments
Warrants issued in May 2021 are valued based on the fair value
of the underlying services received. The directors' warrant
instruments have been valued with reference to the fair value of
the other warrants issued to third parties.
Classification and valuation of financial instruments
The Group previously issued financial instruments including
conversion features and warrants. The valuation of these financial
instruments, including Level 3 fair values where there are no
observable market inputs, are performed in consultation with third
party valuation specialists, with the overall aim of maximising the
use of market based information.
Assessing whether revenue meets the criteria for recognition
Contracts can include both the sale of licences and provision of
services including integration and development. Revenue is
recognised based on the analysis of individual contracts and the
point at which significant risks and reward of ownership transfer
is dependent on the contractual terms. In respect of a licence,
this would usually be on delivery of the software. Software
development and other consulting services generally recognised on
the basis of work done but where issues of client acceptance are
identified, then revenue is deferred until issues are resolved.
Segmental analysis
4
Operating segments are based on internal reports about
components of the Group, which are regularly reviewed and used by
the Board for strategic decision making, to allocate resources
across segments and to assess performance by segment.
Since 2018 the Group maintained a holding company structure with
one operating subsidiary. For financial reporting, Location
Sciences segments the Group based on its two distinct products.
Firstly, its UK Data and Insights platform, which gives customers
access to its data lake of over 36 billion location data points.
This helps customers in a variety of ways, for example, competitor
and footfall analysis, attribution services for advertisers, and
even the ability to enhance the sustainability of transport
systems. Secondly, Location Sciences has developed a global
platform called Verify, which brings transparency to the location
based mobile advertising market. Verify allows marketeers to
authenticate where their adverts have been viewed and uses
proprietary technology to detect location ad-fraud, which would
otherwise go unnoticed. The Insights segment was disposed of during
the year.
It should be noted that a segmental analysis of the Balance
Sheet is not part of routine management reporting and consequently
no segmental analysis of assets is shown here.
The analysis of the Group's revenue from contracts with
customers for the year is as follows:
2022 2021
GBP GBP
Verify 110,856 167,940
Location Data and Insights* - 373,448
-------- --------
110,856 541,388
======== ========
* disclosed within discontinued operations
An analysis of the Group's revenue by geographical segment is as
follows:
2022 2021
GBP GBP
UK 60,249 383,003
ROW 50,607 158,385
-------- --------
110,856 541,388
======== ========
All non-current assets of the Group are held in the UK.
During the year there was revenue from individual customers that
represented more than 10% of revenue as follows:
2022 2021
GBP GBP
Verify - customer 1 58,109 113,120
Verify - customer 2 50,607 -
Average payments terms are set out in note 17. There are no
significant financing components, nor variable consideration
elements in customers' contracts.
Other operating income
5
The analysis of the Group's other operating income for the year
is as follows:
2022 2021
GBP GBP
Furlough receipts - 11,267
Furlough scheme
The furlough scheme is a government grant relating to a wage
subsidiary programme introduced in the United Kingdom in response
to the COVID-19 coronavirus pandemic. The Company was entitled to
the wage subsidy because it had reduced operations in the United
Kingdom as a result of the COVID-19 pandemic. The accounting policy
adopted is set out in Note 2 to the financial statements; the grant
was recognised in the profit and loss in 'other income' as the
related wages and salaries for furloughed employees were
recognised.
Discontinued operations
6
On 21 October 2021, Location Sciences AI Limited entered into an
agreement for the sale of the 'Insights business'.
Outlined below are the results for the year in relation to the
portion of the business sold.
2022 2021
GBP GBP
Revenue - 373,448
Direct expenditure - (144,286)
------ ---------
Gross profit from discontinued operations - 229,162
------ ---------
Overheads - (817,963)
------ ---------
Loss before tax on discontinued operations - (588,801)
====== =========
Sale proceeds received* 92,357 450,138
Net book value of assets sold - (159,498)
------ ---------
Profit on sale of discontinued operations 92,357 290,640
------ ---------
Total loss on discontinued operations 92,357 (298,161)
====== =========
On the 31(st) January 2022 the Company received US$125,000 in
relation to the sale of the Insights business which was announced
on 22 October 2021. This deferred consideration was not included in
the sale proceeds recognised during 2021 as they did not meet the
requirements for recognition within the accounting period.
Loss before taxation
7
Arrived at after charging/(crediting)
2022 2021
GBP GBP
Depreciation expense - 5,828
Amortisation expense 259,335 503,034
Research and development expenditure - -
Exceptional administrative expenses* (42,040) 283,210
Share based payments - 48,312
Net foreign exchange losses - 4,718
Auditors remuneration
- Company audit 10,000 10,000
- Subsidiary audit 15,000 15,000
Non-audit services:
- Tax and other compliance services 7,750 7,750
======== ========
*Exceptional administrative expenses includes impairment of
intangible assets of GBP143,482 (2021 - GBP283,210) and a credit on
the reversal of share-based payments on the forfeit of share
options of GBP185,522 (2021 - GBPnil).
Finance income and costs
8
2021 2021
GBP GBP
Finance income
Interest income on bank deposits 8,368 2
Staff costs
9
The aggregate payroll costs (including directors' remuneration)
were as follows:
2022 2021
GBP GBP
Wages and salaries 331,703 794,544
Social security costs 38,899 102,073
Pension costs, defined contribution scheme 1,431 8,790
Share-based payment expenses (credit) -
see note 7 (185,522) 48,312
Redundancy - 19,035
--------- --------
186,511 972,754
========= ========
The average number of persons employed by the group (including
directors) during the year, analysed by category was as
follows:
2022 2021
No. No.
Finance and operations 1 2
Research and development - 4
Commercial and client services - 1
Non-executive directors 2 2
---- ----
3 9
==== ====
The average number of persons employed by the company (including
directors) during the year, analysed by category was as
follows:
2022 2021
No. No.
Finance and operations 1 2
Non-executive directors 2 2
----------------------------- ----------------------------
3 4
============================= ============================
Key management compensation and directors' remuneration
10
Details of aggregate key management emoluments for the year are
as follows:
2022 2021
GBP GBP
Salaries and other short-term employee
benefits 314,924 706,071
Pension costs 1,320 2,636
Expense of share-based payments - 25,912
-------- --------
316,244 734,619
======== ========
The directors are of the opinion that the key management of the
Group comprises the executive and the non-executive directors of
Location Sciences Group Plc. These persons have authority and
responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly.
Directors' remuneration is disclosed in the Directors'
Remuneration Report on pages 11 to 13. Directors' remuneration
includes salaries settled by issue of shares, as disclosed in note
21.
Auditors' remuneration
11
2022 2021
GBP GBP
Audit of the Company's financial statements 10,000 10,000
Audit of the subsidiaries' financial statements 15,000 15,000
------------ ----------
25,000 25,000
============ ==========
All other non-audit services comprising
interim review and permitted tax services 7,750 12,750
============ ==========
Income tax
12
Tax charged/(credited) in the income statement
2022 2021
GBP GBP
Current taxation
UK R&D tax credit - (113,871)
==== =========
The tax on profit before tax for the year is higher than the
standard rate of corporation tax in the UK (2022 - higher than the
standard rate of corporation tax in the UK) of 19% (2021 -
19%).
The differences are reconciled below:
2022 2021
GBP GBP
Loss before tax (858,946) (1,199,068)
========= ===========
Corporation tax at standard rate (163,200) (227,823)
Effect of expenses not deductible - 9,640
Unrecognised deferred tax asset 145,652 167,042
Surrender of tax losses for R&D tax credit - 35,339
Additional deduction for research development
expenditure - (84,336)
Discontinued operations 17,548 (56,651)
Other differences - 42,918
--------- -----------
Total tax credit - (113,871)
========= ===========
Subject to the UK tax authority's agreement, the Group has UK
tax losses of approximately GBP21,690,000 (2021: GBP20,933,000)
available to carry forward and offset against future taxable
profits arising from the same trade. The Group has a potential
deferred tax asset of GBP5,423,000 (2021: GBP3,977,000) which will
not be recognised until it is regarded as more likely than not that
there will be sufficient taxable profits from which the tax losses
can be deducted. In addition, no deferred tax asset is recognised
in respect of future tax deductions on exercise of share
options.
Loss per share
13
The calculation of loss per share is based on the loss of
GBP758,221 (2021: GBP1,383,358) and on the number of shares in
issue, being the weighted average number of equity shares in issue
during the period of 2,629,956,603 0.1p ordinary shares (2021:
1,814,571,645 0.1p ordinary shares).
2022 2021
GBP GBP
Loss for the financial year (758,221) (1,383,358)
========== ============
Earnings per share
Loss per share - basic and
diluted (0.029p) (0.076p)
Dilutive instruments
Instruments that could potentially dilute basic loss per share
in the future but are not included in the calculation of diluted
loss per share because they are anti-dilutive.
Intangible assets
14
Group
Internally generated
software development
costs
GBP
Cost or valuation
At 1 January 2021 3,270,180
Additions 341,441
Disposal (2,306,381)
---------------------
At 31 December 2021 1,305,240
---------------------
At 1 January 2022 1,305,240
Additions -
---------------------
At 31 December 2022 1,305,240
---------------------
Amortisation
At 1 January 2021 2,128,388
Amortisation charge 503,034
Disposal during the year (2,146,883)
Impairment 283,210
---------------------
At 31 December 2021 767,749
---------------------
At 1 January 2022 767,749
Amortisation Charge 259,335
Impairment 143,482
---------------------
At 31 December 2022 1,170,566
---------------------
Carrying amount
At 31 December 2022 134,674
=========
At 31 December 2021 537,491
=========
At 1 January 2021 1,141,792
=========
Internal development represents the cost incurred in developing
the Group's Verify proprietary location verification software with
net book value of GBP134,674 (2021: GBP537,491). These internal
costs have been capitalised in accordance with the Group's
accounting policies where all the conditions for capitalisation
have been met.
The intangible assets have on average a remaining amortisation
period of 2 years.
Impairment of research and development is considered within the
conditions of capitalisation. Amortisation charges are included in
administrative expenses, disclosed separately on the Consolidated
Income Statement.
Property, plant and equipment
15
Group
Computer
Equipment Office Equipment Total
GBP GBP GBP
Cost or valuation
At 1 January 2021 40,832 2,493 43,325
Additions - - -
Disposals (35,965) (2,493) (38,458)
---------- ------------------ ---------
At 31 December 2021 4,867 - 4,867
Additions - - -
Disposals (4,867) - (4,867)
---------- ------------------ ---------
At 31 December 2022 - - -
---------- ------------------ ---------
Depreciation
At 1 January 2021 36,112 1,385 37,497
Charge for year 4,720 1,108 5,828
Eliminated on disposal (35,965) (2,493) (38,458)
---------- ------------------ ---------
At 31 December 2021 4,867 - 4,867
Charge for year - - -
Eliminated on disposal (4,867) - (4,867)
---------- ------------------ ---------
At 31 December 2022 - - -
---------- ------------------ ---------
Carrying amount
At 31 December 2022 - - -
========== ================== =========
At 31 December 2021 - - -
========== ================== =========
At 1 January 2021 4,720 1,108 5,828
========== ================== =========
Investments
16
Company
2022 2021
GBP GBP
Investment in subsidiaries 2,045,589 2,045,589
Capital contribution arising from IFRS
2 share-based payments charge 988,785 1,174,307
---------- ----------
3,034,374 3,219,896
========== ==========
Subsidiaries
GBP
Cost or valuation
At 1 January 2021 3,171,622
Revaluation (38)
Impairment 48,312
------------
At 31 December 2021 3,219,896
------------
Revaluation (185,522)
At 31 December 2022 3,034,374
------------
Carrying amount
At 31 December 2022 3,034,374
============
At 31 December 2021 3,219,896
============
At 1 January 2021 3,171,622
============
Details of the Group subsidiaries held as direct investments of
the Company as at 31 December 2022 are as follows:
Proportion
of ownership
interest
and voting
rights
held
Name of subsidiary Principal activity Registered office 2021 2020
Same registered
Location Sciences office address
AI Limited Verify as group 100% 100%
Trade and other receivables
17
Group Company
2022 2021 2022 2021
GBP GBP GBP GBP
Trade receivables 160,892 175,875 - -
Prepayments 47,534 149,403 58,797 132,919
Other receivables 19,646 6,281 - -
------------------ ----------------- ------------- ---------
228,072 331,559 58,797 132,919
================== ================= ============= =========
Trade and other receivables are all current and the net carrying
amount of trade receivables is considered a reasonable
approximation of fair value. Average credit terms were 60 days
(2021: 45) and average debtor days outstanding were 80 (2021: 65)
excluding balances that have been fully provided for.
All of the Group's trade and other receivables have been
assessed for impairment based upon the expected credit losses
model. In order to manage credit risk, the Directors set limits for
customers based on a combination of payment history and third party
credit references. Credit limits are reviewed on a regular basis in
conjunction with debt ageing and collection history.
Trade receivables are regularly reviewed for bad and doubtful
debts. The Group's policy is to include a provision for impairment
based on estimated credit losses. This includes an assessment where
relevant of forward-looking information on macroeconomic factors
that may affect the ability of customers to settle receivables.
Trade receivables are written off where is no reasonable
expectation or recovery, for example where the customer has entered
insolvency proceedings or where a customer has failed to make
contractual payments for an extended period.
The Group's exposure to credit and market risks, including
impairments and allowances for credit losses, relating to trade and
other receivables is disclosed in the financial risk management and
impairment note.
Trade receivables above include amounts (detailed below) that
are past due at the end of the reporting period and which an
allowance for doubtful debts has not been recognised as the amounts
are still considered recoverable and there has not been a
significant change in credit quality.
Age of trade receivables that are past
due but not impaired Group
2022 2021
GBP GBP
31 to 60 days 18,738 32,680
61 to 90 days 12,068 40,082
91 to 120 days 6,711 17,578
3 to 6 months 103,253 41,575
------- -------
140,771 131,915
======= =======
Trade and other payables
18
Group Company
2022 2021 2022 2021
GBP GBP GBP GBP
Trade payables 7,170 18,699 - -
Payables to related
parties - - - -
Accrued expenses 89,660 79,872 19,000 19,000
Social security and
other taxes 57,000 81,215 57,000 57,000
Other payables 4,034 3,389 - -
-------- -------- ------- -------
157,864 183,175 76,000 76,000
======== ======== ======= =======
The directors consider that the carrying amount of trade and
other payables approximated their fair value.
Trade payables are paid between 30 and 60 days of receipt of the
invoice.
The Group's exposure to market and liquidity risks, including
maturity analysis, related to trade and other payables is disclosed
in the financial risk management and impairment note.
Obligations under leases
19
IFRS 16
For the year ended 31 December 2022, the following amounts have
been recognised under IFRS 16 in relation to property leases:
2022 2021
GBP GBP
Expense incurred in relation to 'short-term'
leases - 14,563
Total cash outflow in year in relation to
leases - 14,563
===== =======
20 Financial risk management and impairment of financial
assets
Treasury risk management
The Group manages a variety of market risks, including the
effect of changes in foreign exchange rates, liquidity and
counterparty risks.
Credit risk
The Group's principal financial assets are bank balances, cash, trade and other receivables.
The credit risk on liquid funds is limited because the counterparties are UK banks or "Blue
Chip" companies with high credit ratings assigned by international credit rating agencies.
The credit risk associated with trade receivables is minimal as invoices are based on contractual
agreements with long-standing customers. Credit losses historically incurred by the Group
have consequently been considered by the Directors to be exceptional in their occurrence.
The Group maintains a provision against receivables, however, this is not necessarily linked
to credit risk and the ageing of receivables is not the most relevant indicator to determine
the potential impairment of a receivable. The nature of the Group's operations is such that
misunderstandings or minor disagreements may arise during the course of contracts, which may
sometimes require an adjustment to be made to achieve settlement and the Group's provisions
are made on a case by case basis, based on Directors' knowledge of the circumstances surrounding
overdue balances as they arise.
As a result, investment returns and credit risk to the Group in this regard are not material
to the financial statements.
The Group's maximum exposure to credit risk is limited to the carrying amount of financial
assets at the reporting date. No collateral is held in respect of these amounts which are
expected to be received in full. In order to manage credit risk, credit limits are reviewed
on a regular basis in conjunction with debt ageing and collection history.
The Company has significant credit risks associated with the inter-company debt due from its
subsidiary, which is fully provided for as at the year end. As with the Group's policy for
making provisions against trade receivables, provisions against inter-company debt is considered
based on the Directors' knowledge of the subsidiary's trading activity and financial position.
Currency risk
The Group's operations are primarily located in the United
Kingdom. The Group's transactions during 2022 were predominantly
denominated in sterling, with consequently little exposure to
foreign currency risks. Due to the limited risks to the Group,
forward exchange contracts are not considered necessary and are not
used. At the year end, the Group operated both sterling and dollar
bank accounts. Going forward the Directors will continue to monitor
the currency risk.
The translation risk on the Group's foreign exchange payables and receivables is considered
to be immaterial due to their short-term nature.
Liquidity risk
The Group has sufficient capital resources to meet its external
current liabilities as they fall due in 2022.
Operational cash flow represents on going trading revenue and
costs, administrative costs and research and development
activities. The Group manages its liquidity requirements by the use
of both short-term and long-term cash flow forecasts. The Group's
policy is to ensure facilities are available as required or to
issue equity share capital to ensure cash resources available are
in accordance with long-term cash flow forecasts. The Group
currently has no overdrawn committed facilities as at 31 December
2022.
The Group actively manages its working capital to ensure it has
sufficient funds for operations and planned research and
development activities.
The Group's main financial liabilities include trade payables
and operational costs. All amounts for trade and other payables are
due for payment in accordance with agreed settlement terms with
suppliers or statutory deadlines. All such payment terms are within
six months.
Capital management
The Group's activities are of a type and at a stage of
development where the most suitable capital structure is that of
one primarily financed by equity. The directors will reassess the
future capital structure when projects under development are
sufficiently advanced.
The Group's financial strategy is to utilise its resources and
current trading revenue streams to commercialise its products and
grow revenues. The Group keeps investors informed of its progress
with its projects through regular announcements and raises
additional equity finance at appropriate times.
The Group manages capital on the basis of the carrying amount of
equity, and debt with regard to maintaining sufficient liquidity to
enable the Group to continue to trade and invest in
commercialisation. As at the year end the equity to overall
financing ratio, excluding IFRS 16 adjustments, is 1 (2021:1).
Categories of financial instruments
All of the Group's financial assets are classified as loans and
receivables; see note 17. The directors consider that the carrying
amount of trade and other receivables approximates their fair
value.
All of the Group's financial liabilities are classified as
liabilities at amortised cost: see note 18. The directors consider
that the carrying amount of trade and other payables approximates
their fair value. All financial liabilities are due within one
year.
The accounting policies applied are set out in note 2.
Share capital
21
Allotted, called up and fully paid shares
2022 2021
No. GBP No. GBP
New Ordinary shares
of 0.1p each 2,647,587,398 2,647,587 2,605,087,398 2,605,087
Deferred shares of 0.99p
each 1,040,712,398 10,303,054 1,040,712,398 10,303,054
New deferred shares
of 0.9p each 376,651,734 3,389,866 376,651,734 3,389,866
4,064,951,530 16,340,506 4,022,451,530 16,298,007
============= ========== ============= ==========
Reconciliation of shares
Number of
shares
Total number of shares at 1 January 2022 4,022,451,530
25 May 2022 share issue: settlement of director fees 42,500,000
At 31 December 2022 4,064,951,530
=============
Share issue
On 25 May 2022, 42,500,000 ordinary shares were issued at the
market value on day of admission of the shares at 0.225p to the
non-executive directors as consideration for their second-year
fees.
On 25 May 2021 various warrants were issued to certain parties
as detailed in the section below.
Share rights
Ordinary shares have attached to them full voting, dividend and
capital distribution (including on winding up) rights; they do not
confer any rights of redemption.
Deferred shares have attached to them no voting, dividend or
capital distribution (including on winding up) rights; they do not
confer any rights of redemption.
Warrants in Issue
1) Promoter Warrants - non-transferable warrants to subscribe
for up to 1,500,000,000 Ordinary Shares, exercisable at the 0.20p
for five years from 25 May 2021, were issued to certain members of
the Concert Party in consideration of those persons assembling and
co-ordinating the Concert Party's investment in the Company in May
2021 and facilitating the appointment of Simon Wilkinson as
Non-Executive Chairman.
Name Number of Ordinary Shares subject to Promoter Warrants
Richard Hughes 500,000,000
Mahmud Kamani 500,000,000
Simon Wilkinson 500,000,000
2) Cornerstone Investor Warrants - non-transferable warrants to
subscribe for up to 250,000,000 Ordinary Shares, exercisable at
0.20p for five years from 25 May 2021, were issued to the
Cornerstone Investors of the May 2021 placing.
Name Number of Ordinary Shares subject to Cornerstone Investor
Warrants
Ben Turner 50,000,000
Donna Turner 75,000,000
James Pope 50,000,000
Maxine Pope 75,000,000
3) Broker Warrants - transferable warrants to subscribe for up
to 100,000,000 Ordinary Shares, exercisable at the 0.20p for five
years from 25 May 2021 were issued as shown below.
Name Number of Ordinary Shares subject to Broker Warrants
Turner Pope 58,750,000
Dr Nigel Burton 25,000,000
Mark Slade 10,000,000
David Rae 6,250,000
4) Director Warrants - non-transferable warrants to subscribe
for, in aggregate, 120,000,000 Ordinary Shares were issued to the
Executive Directors and the Non-Executive Directors, exercisable at
0.20p for five years from 25 May 2021, provided that the Ordinary
Shares have traded at a Volume Weighted Average Price (VWAP) at or
above 0.30p for 20 consecutive Business Days, or on a change of
control of the Company.
Name Number of Ordinary Shares subject to Broker Warrants
Mark Slade 30,000,000
David Rae 30,000,000
Simon Wilkinson 30,000,000
Dr Nigel Burton 30,000,000
The expense recognised in respect of all warrants issued as part
of the May 2021 fundraise has been recognised directly in the share
premium reserve, based on the fair value of the services received
that are considered to directly relate to the issuing of
shares.
Share-based payments
22
The share option scheme was originally adopted by the company on
29 September 2011. It was established to attract and retain the
best available personnel for positions of responsibility, to
provide additional incentive to employees, officers or consultants
of the company and to promote the success of the company's
business. Further to the acquisition of the business by Location
Sciences Group plc , the options were granted over shares in the
parent entity. The share option scheme was and continues to be
administered by the directors.
All outstanding options as at 1 January 2018 and outstanding
options issued in March 2018 and May 2018 were surrendered and
replaced by options issued in November 2018. Further in 2019 part
of the outstanding share options issued in November 2018 were
surrendered and replaced by options issued in July 2019. Share
options surrendered are accounted for as modified options under
IFRS 2. The incremental value of the modified share options is not
material.
Share options issued in November 2018, February 2019, May 2019
and October 2019 are to be settled by way of issues of Ordinary
Shares. The options have no vesting period but cannot be exercised
until target share prices are achieved and have a maximum term of
10 years.
The target share prices are as follows:
Target A: GBP0.048
Target B: GBP0.073
Target C: GBP0.097
The movements in the number of share options during the year
were as follows:
2022 2021
Number Number
Outstanding, start of period 24,666,666 26,222,222
Forfeited during the period (24,666,666) (1,555,556)
Outstanding, end of period - 24,666,666
============ ===========
All remaining share options were forfeited during the year.
The movements in the weighted average exercise price of share
options during the year were as follows:
2022 2021
GBP GBP
Outstanding, start of period 2.25 2.25
Forfeited during the period 2.25 2.25
Outstanding, end of period - 2.25
==== ====
All remaining share options were forfeited during the year.
There was a credit on the reversal of share-based payments on
the forfeit of share options of GBP185,522 during the period (2021:
share-remuneration expense GBP48,312).
Commitments
23
No capital expenditure was committed to as at 31 December 2022
(2021: GBPNil).
Related party transactions
24
None during the period.
Net debt note
25
The Group and Company has no debt, thus no net debt note is
presented.
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END
FR UVASRORUNUAR
(END) Dow Jones Newswires
June 26, 2023 02:00 ET (06:00 GMT)
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