REG - Fadel Partners Inc. - Final Results and Notice of AGM
22/06/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230622:nRSV5733Da&default-theme=true
RNS Number : 5733D Fadel Partners Inc. 22 June 2023
22 June 2023
Fadel Partners, Inc.
('FADEL', the 'Company' or, together with its subsidiaries, the 'Group')
Final Results and Notice of AGM
Fadel Partners, Inc. (AIM: FADL), a brand compliance and rights and royalty
management software provider, is pleased to announce its full year results for
the year ended 31 December 2022.
Financial Highlights
· Revenue up 10% on FY21 to $13.2m (2021: $12.0m)
· Recurring revenue increase of 34% on FY21 to $8.7m (2021: $6.5m) reflecting
the first full year of contribution from IDS of £1.1m ($1.3m)
· Gross profit of $7.9m (2021: $7.0m) with a gross profit margin of 60% (2021:
58%)
· Adjusted EBITDA* loss of ($609k) (2021: $359k) as a result of the increased
expenditure relating to planned investments for growth
· Cash and cash equivalents of $1.2m at 31 December 2022, with net cash of $0.1m
Operational Highlights
· Strong development of our Brand Vision offering through the integration of
PictureDesk, acquired as part of the IDS acquisition in late 2021 and the
addition of a sophisticated AI video matching capability into Brand Vision's
Content Tracking product
· Marquee new customer wins; Are Media, Coca-Cola, Macmillan Learning and
Whirlpool with a number of existing customers successfully brought through a
fully operational "Go-Live" phase including Hasbro and Média Participations
· Launched three component parts of Brand Vision in Content Cloud, Rights Cloud
and Content Tracking
Post Period Highlights
· Milestone listing on AIM Market in April 2023, raising $8m gross proceeds,
providing the funding and increased profile to support our growth ambitions
· Hiring of key strategic personnel including global Chief Revenue Officer and
several sales and lead generation positions across Europe
· Rollout of Brand Vision for Coca-Cola and PictureDesk for Are Media, a leading
content and experiences company in Australia and New Zealand
* Adjusted EBITDA (a non-US GAAP measure is defined as earnings after
capitalized commission costs and before interest, tax, depreciation,
amortization, exceptional costs and share-based payments)
Tarek Fadel, Chief Executive Officer, commented:
"2022 was a milestone year for FADEL, in which we delivered strong revenue
growth and successfully added a number of marquee clients to our business, as
we transition to the next phase of our growth journey.
"The successes in the year have further consolidated our position as a leader
in the digital content and intellectual property market and provide a strong
platform to take advantage of the significant market opportunity available to
us."
"Following our successful IPO in April 2023, we have started deploying the
funds raised in line with our strategic objectives to accelerate our growth.
These include key strategic hires such as our recent addition of a global
Chief Revenue Officer in June 2023, the rollout of a number of Brand Vision
products at key clients and the strengthening of R&D to widen our
competitive moat and expand our market share."
"I am pleased to report that trading in FY23 has been in line with
expectations and, with a growing pipeline of prospective new clients, we are
well positioned to capitalise on the significant opportunities that lie ahead.
We look forward to updating the market in July when we will release a trading
update in relation to H1 FY23."
Report & Accounts and Notice of AGM
The Company's statutory accounts, together with a Notice of Annual General
Meeting, are due to be made available on the Company's website
(https://investors.fadel.com/ (https://investors.fadel.com/) ) and will be
posted to shareholders on 22 June 2023. The Annual General Meeting is due to
be held at finnCap's offices, One Bartholomew Close, London, EC1A 7BL, United
Kingdom on 21 July 2023 at 4:00 p.m. (UK time).
In order to allow shareholders to follow the proceedings of the AGM without
attending in person, the company will provide access online via the Investor
Meet Company platform.
(https://www.investormeetcompany.com/fadel-partners-inc/register-investor
(https://www.investormeetcompany.com/fadel-partners-inc/register-investor) ).
For further information please contact:
Tarek Fadel, Chief Executive Officer Via Alma PR
Vicary Gibbs, Chief Financial Officer
finnCap Limited (Nomad & Broker) 020 7220 0500
Jonny-Franklin Adams, Emily Watts, Abigail Kelly, Milesh Hindocha (Corporate
Finance)
Tim Redfern, Sunila De Silva (ECM)
Alma PR Tel: +44(0)20 3405 0205
Josh Royston fadel@almapr.co.uk
Matthew Young
Andy Bryant
About FADEL Partners Inc.
FADEL is a developer of cloud based brand compliance and rights and royalty
management software, working with some of the world's leading licensors and
licensees across media, entertainment, publishing, consumer brands and
hi-tech/gaming companies. The Group combines the power of rights management
and content compliance with sophisticated content services, AI-powered visual
search and image and video recognition.
FADEL has two solutions, being IPM Suite (rights and royalty management for
publishers and licensing) and Brand Vision (an integrated platform for Brand
Compliance & Monitoring that includes Content Services, Digital Rights
Management, AI-Powered Content Tracking, a Brand Monitor, and 100 million
Ready-to-License Images).
The Group's main country of operation is the United States, where it is
headquartered in New York, with further operations in the UK, Lebanon, France,
Canada and India. Founded in 2003 by Tarek Fadel (Chief Executive Officer),
FADEL has since grown to a team of 116 full time employees, plus an additional
pool of c.50-60 contractors.
For more information, please visit the Group's website at: www.fadel.com
(http://www.fadel.com) .
Chair's statement
Introduction
I am pleased to report on the progress of Fadel Partners Inc. for the first
time as a public company following its successful flotation on AIM on 6 April
2023. I have been involved with FADEL in an informal and formal capacity for
several years, initially as Chief Financial Officer of Marvel Entertainment
which was a customer of FADEL and more recently as Non-Executive Chair. FADEL
has demonstrated impressive organic growth over several years and that is down
to the dedication of the management team in understanding the market
opportunity, evolving FADEL's products and services to meet the needs of its
customer base and demonstrating cost discipline. It is a privilege to be the
Chair at a time of such an exciting growth opportunity. I would also like to
welcome and thank those shareholders who joined us at IPO and thereafter.
Despite the challenging market conditions facing the technology sector and the
broader economies throughout 2022, we have made great progress across both our
IPM Suite and, in particular, our Brand Vision solution offerings as the
industry's increasing requirement for operational efficiencies, and the
subsequent cost savings, became ever more important. This past year
represented a significant milestone for the business as we built ever stronger
foundations for our journey ahead with the creation of Brand Vision, a next
generation of brand compliance and monitoring software. We have placed
ourselves at the very intersection of content creators/owners and the users of
that content, at a time where digital content is multiplying. It is already a
valuable space to inhabit and as it continues to grow, and we grow with it, we
are optimistic in respect of the opportunity.
Our growth strategy remains unchanged, and we have already made good progress
in utilising the proceeds raised at IPO to reinvest in the growth of the
business through investments in sales, marketing and R&D as well as
underpinning this growth through support and service recruitment.
2022 Financial Results
Revenues increased by 10% to $13.2m (FY21: $12.0m) and underlying adjusted
EBITDA was -$609k (FY21: $359k), which included a full year contribution from
IDS and was achieved notwithstanding foreign exchange headwinds and the
challenging global economic environment. In particular, I would like to
acknowledge the management team for having delivered another year of growth,
given the significant amount of their time that was consumed in successfully
delivering the IPO process and securing growth capital for the business. These
pleasing results and the positive growth trajectory for the Company are
reflective of the significant market opportunity, despite this time of
macroeconomic uncertainty that is driving demand for our solutions as clients
(and prospects) focus on improved management of their IP, including re-use
rather than creation, to drive their revenue growth. As we continue to deploy
the proceeds raised at IPO across US/European sales capabilities, marketing
activities and product development, we are confident that we will continue to
see sustainable growth in the coming periods.
Strategic aims
At the time of our listing in April 2023, we emphasised our intention to grow
the business predominantly by organic routes, and to utilise the proceeds from
the IPO accordingly. I am pleased to report that, post the year-end, this has
already begun with the strategic recruitment of a number of positions
including Chief Revenue Officer, Head of Demand Generation and a number of key
sales and operational support roles. As a result, our new business pipeline
looks very encouraging and as the market environment continues to benefit the
Group, we expect to see sustainable organic growth over the mid-term.
FADEL's future plans aim to accelerate growth through the pursuit of a
selective acquisition strategy alongside our organic approach of naturally
accumulating IP through developing our product set and working with our
customers. As previously shown with the acquisition of Image Data Systems (UK)
Limited ("IDS") in 2021, we will approach acquisitions with a robust set of
criteria identifying companies that can complement and expand our existing
solutions, widen our competitive moat and expand our market share. We expect
this process to commence from 2024 onwards.
People
Our success to date is a result of the diligence shown by our people. FADEL is
built on a foundation of passionate and hardworking employees which has been
more apparent than ever over the last 12 months. On behalf of the Board, I
offer them my sincere thanks.
Board and governance
Whilst several Board members have been involved across a number of years in a
more informal capacity, the Board, as established at the time of IPO, brings
with it a wealth of experience in dynamic software environments characterised
by rapid growth. Its extensive industry network and background in the AIM
market, as well other stock exchanges, positions the Board to successfully
execute FADEL's growth strategy and effectively identify new opportunities as
they arise.
The Board also recognises the value and importance of high standards of
corporate governance and has, since IPO, observed the requirements of the QCA
Corporate Governance Code.
ESG
FADEL is committed to conducting its business responsibly and mitigating
negative environmental impacts resulting from its operations. As a Group, we
also strive to instil similar values within our developer community and
business partners.
In all aspects of its business and operations, the Group prioritises
sustainable resource utilisation, waste reduction, and the well-being of its
employees. It upholds a commitment to fairness, equal opportunities, and
supporting charitable initiatives. Moreover, the Group maintains ethical
practices across the different jurisdictions where it conducts business,
ensuring responsible operations and engagement with stakeholders.
We intend to expand our ESG initiatives and beginning from our 2023 results we
will be reporting on our progress via the Audit, Risk and Sustainability
Committee report.
Looking ahead
The Group's momentum as a private company has continued post-IPO and I am
pleased to report that trading for FY23 has been in line with expectations.
Demand for our products and services has continued to increase and we believe
the investments we continue to make in product development, marketing and
recruitment are already showing signs of success and we expect new
opportunities across new geographies becoming available in early 2024. Backed
by an exceptional customer base and a favourable market environment, I hold a
strong belief that this positive momentum will endure as we forge ahead with
the execution of our growth strategy in the upcoming year.
Ken West
Chair of the Board
21 June 2023
CEO's review
Overview
Overall, this has been a year of encouraging progress for the Group and one
that has seen us build strong foundations for the next exciting phase of our
growth journey.
We created and launched a new brand compliance and monitoring product family
in Brand Vision. This was achieved through three key activities.
1) The integration of PictureDesk, acquired as part of the IDS
acquisition in late 2021, into our Brand Vision digital asset management
("DAM") system called Content Cloud. This solution helps customers centralise
and manage their brand assets;
2) We also integrated a sophisticated AI matching capability into Brand
Vision's Content Tracking product to help customers track and monitor
compliance of published content across brand, e-commerce, social and partner
websites; and
3) Finally, we launched all three component parts of Brand Vision, (our
DAM called Content Cloud, our legacy Digital Rights Management ("DRM") product
called Rights Cloud and Content Tracking) in Q4 of 2022.
We had strong operational progress.
4) We brought a number of existing customers through a fully operational
"Go-Live" phase including Hasbro and Média Participations, completed
successful additional regional rollouts for Pearson and welcomed a number of
marquee new customers into the FADEL family including Are Media, Coca-Cola,
Macmillan Learning and Whirlpool.
We commenced the next phase of our growth trajectory.
5) We began our growth capital pursuit assessing multiple options before
settling on our preferred route being AIM, a market supporting growth
companies in London. IPO preparations began in earnest, and we completed a
multitude of accounting, taxation and legal diligence workstreams across the
five jurisdictions we operate in.
6) Being certain of our path we choose to pre-invest our own funds into
the growth ahead of the IPO and started to hire additional salespeople ahead
of our launch of Brand Vision in Q4 2022.
The increased demand for our products from our extensive and growing customer
base throughout the year has, alongside robust market dynamics, enabled us to
continue to grow with significant progress being made across both our
Intellectual Property Management (IPM) Suite and Brand Vision solutions and
there is a strong degree of confidence in the medium-term prospects of the
business.
Financial performance
It has been an encouraging year of trading for the Group with an increasing
demand for both our IPM Suite and Brand Vision solutions driving revenue
growth for FY22 to $13.2 million, a 10% increase year-on-year and of which 66%
was recurring (FY21: 54%), which included a full year of contribution from
IDS. There was an overall decline in services ($4.5 million, FY 21: $5.5
million), primarily driven by the reduction of material service contracts in
IPM Suite due to successful implementations. Underpinning the Group's revenue
growth has been the continual growth of our IPM Suite which sits as the
foundation of the business. IPM Suite typically has large contract values of
which a significant amount is related to services, whilst the service revenue
is non-recurring in nature, the integration complexity results in an
attractive defensive revenue stream for us.
During the year, we have also heavily invested in our business while
maintaining a diligent eye on costs with our Adjusted EBITDA coming in at
-$609k. This is in line with the budget we set at the start of the IPO process
and reflects the investment into the strong momentum we are seeing as FADEL
embarks on the next stage of its journey towards serving the rapidly expanding
growth in digital content usage.
The Group reports a cash position as at 31 December 2022 of $1.2 million, with
net cash of $0.1 million.
Market opportunity
The demand for solutions to effectively manage digital content and
intellectual property (IP) licensing is increasing across industries,
geographies, and channels. In the area of rights and royalties, where IPM
Suite operates, a notable portion of companies still rely on traditional
custom-built legacy applications and spreadsheet-based methods for licensing
and royalty management. These methods often involve large teams and outdated
royalty monitoring and collection systems that are no longer suitable for
current needs.
Many large brands have shifted their content creation and digital agency
operations in-house, however, in the digital brand compliance marketplace,
which Brand Vision addresses, the landscape remains relatively new and highly
fragmented. As companies implement digital transformation strategies, the
value of an enterprise solution, such as those offered by FADEL, becomes
increasingly evident.
FADEL is well-positioned to expand its market share within its current
industry sectors as we innovate and invest in our solutions and as we build
out our sales teams.
We are committed to ongoing innovation and product development of IPM Suite,
as the more established product offering, boasting an impressive customer list
and holding a mature market position. This product has historically seen
considerable uptake in the publishing sector and with increasing traction
across adjacent industries, the opportunity is significant. We also clearly
recognise the considerable market potential for Brand Vision products, with
the pool of potential customers in the thousands. We continue to invest high
levels of our profits into developing our products, our R&D spend during
2022 was $3.7m (2021: $2.6m), and we will look at any potential integrations
or partnerships that add to our value proposition.
We are also committed to expanding to focus across the broader addressable
market and investing in our sales team to proactively sell our solutions into
growing US and European markets through direct sales, partnerships and
distribution arrangements.
Overall, FADEL's strategic position, commitment to innovation, and
comprehensive product portfolio will allow it to capitalise on the expanding
opportunities within the industry sectors we serve.
Intellectual Property Management (IPM) Suite solution
Utilising its Intellectual Property Management (IPM) Suite solution, FADEL
provides comprehensive support to several renowned clients, such as Pearson,
L'Oréal, Hachette Livre, and Marvel Entertainment. These blue-chip customers
require a cloud-based platform that seamlessly integrates into third-party
software and ERP systems, enabling them to manage efficiently and streamline
their intricate licensing contracts and royalty billing requirements.
FADEL's IPM Suite stands out due to several key differentiating factors.
Firstly, it is an award-winning cloud-based solution that is built on a highly
scalable architecture/software configuration, ensuring robust performance and
adaptability. Secondly, the platform offers substantial scale, enabling
customers to implement a single cloud solution across numerous business units,
spanning multiple geographies, languages, and currencies while providing a
sophisticated and flexible offering, catering to the diverse needs and
requirements of its users.
Within the expanding global licensing market, the Group's IPM Suite has
experienced substantial growth in recent years. The importance of our
solutions and the size of the opportunity is reflected in global licensing
reaching over $300bn last year and continuing to grow in size and complexity.
FADEL has consistently achieved high levels of customer satisfaction,
reflected in exceptionally low customer churn rates.
Brand Vision Solution
FADEL's Brand Vision is set apart from its competition through its distinctive
features and easy to use front-end. Brand Vision is a fully integrated and
scalable SaaS platform, offering a comprehensive end-to-end solution to users.
Serving as a one-stop shop, it provides seamless digital asset storage, rights
management, and content tracking capabilities. One of its innovative features
is the AI-powered visual search functionality, enabling efficient and accurate
search results. Brand Vision excels in post-distribution content tracking,
promptly notifying users of any violations or expirations while offering a
picture hub with over 100 million ready-to-license images, providing users
with a diverse range of options.
This offering is seeing significant growth potential in the digital brand
compliance marketplace, which is relatively nascent and highly fragmented,
with a number of large brands bringing their content creation and digital
agency function in-house. The comprehensive suite of Brand Vision solutions
operates within a total addressable market projected by the CMI to grow from
$8.9 billion in 2023 to $20.4 billion in 2028, a compound annual growth rate
of +18% per annum.
The nature of this expanding market, alongside the differentiated offering
when combined with IPM Suite, provides confidence there is significant market
opportunity in respect of the Group's Brand Vision products with thousands of
potential customers to target. In Brand Vision, we see a significant land and
expand opportunity as we further embed with existing blue-chip customers as
well as win new clients.
We believe that Brand Vision is strongly positioned to expand its market
share. Beyond our technical leadership in delivering a seamlessly integrated
brand compliance solution there is a significant opportunity to scale further
as we enter new geographies and continue to work with leading global brands
across various sectors. Clients such as L'Oreal, Coca-Cola, Kohler and
Whirlpool rely on Brand Vision to manage their brand compliance and marketing
content usage.
We are confident this extremely encouraging market backdrop, alongside our
strong network, growing blue-chip customer base and investment in sales and
support will support sustainable long-term growth for FADEL.
Competitive strength
FADEL continues to build on its strong foundations and existing relationships
as it implements strategic investments to become the leading brand compliance,
rights and royalty management software provider to businesses across the
globe.
The Group is actively engaged in two distinct and highly competitive sectors,
namely publishing and licensing royalties, rights management, and brand
compliance. It faces competition from a range of well-established enterprises
as well as innovative startups. The Digital Brand Compliance sector exhibits
fragmentation, with certain sub-sectors of the market, like content tracking,
still in their early stages of development.
Our platform sets itself apart through its unique technology, adaptable
solutions, and extensive industry expertise. It gains advantages from robust
customer connections, significant switching barriers, and economies of scale
specific to the platform.
FADEL's established sales and marketing strategy is a key differentiating
factor. The Group implements a well-established sales strategy that
encompasses both direct and indirect approaches. With salespersons located in
the US, UK, and France, the Group maintains a global presence. Indirect sales
are facilitated through established partnership and reseller arrangements,
further expanding the reach of our solutions. In terms of marketing, the
Company has traditionally prioritised initiatives that enhance brand awareness
through targeted campaigns. These efforts aim to promote the unique value of
our solutions in the market.
FADEL is recognised as a thought leader in its field, as evidenced by our
representatives' active participation in leadership events, research
contributions, and involvement in relevant industry boards, such as the BISG.
Our commitment to thought leadership allows the Group to stay at the forefront
of industry trends and developments. A big piece of our overall marketing
strategy is to educate the end user as to the underlying value of our
products.
Since inception, FADEL has maintained offshore R&D and delivery centres in
Lebanon and India. This strategic decision leverages the exceptional
educational standards in those countries, particularly in fields such as
Engineering and Business, and harnesses the multilingual capabilities of our
talented resources. This unique setup has become a key competitive advantage
for the Company, enabling it to broaden the range of products and services
while consistently delivering high customer satisfaction at a minimal
operating expense.
Post period update and outlook
The momentum experienced throughout 2022 has continued into 2023 with FADEL's
sales pipeline continuing to grow in line with management expectations as
announced at the time of our IPO. The Company is seeing increased demand for
products and technology as the market drivers persist and clients show
resilience to inflationary pressures through continued investments in
operational efficiencies. We entered FY23 with good visibility following a
number of contract renewals in December 2022 and with an encouraging pipeline
of opportunities including the recently announced rollout of PictureDesk for
Australia and New Zealand omnichannel content company, Are Media. The
successful execution of contracts such as this serve to highlight the
potential for FADEL as it expands within the market.
In order to fully capitalise on the rapidly expanding market opportunity, the
Company is investing the funds raised at IPO with a focus on R&D,
recruitment, sales and marketing activities. This investment strategy is
already proving successful with a number of tactical hires and strong
increases in demand for products, including the launch of a pilot scheme with
one of our biggest existing clients which will see FADEL track the content for
hundreds of thousands of assets which, if continued in full, will deliver a
substantial ARR for the Group. This serves to highlight the significant cross
sell opportunity within our existing customer base as we expand our services
and deliver greater future revenues.
To strengthen and complement our team, we have made several appointments
across sales and marketing, services, product management and QA functions.
These have included the strategic hiring of our Chief Revenue Officer, Global
VP of Demand Generation and UK Enterprise Sales Executive focused on Brand
Vision and IDS Platform and Content Sales, both of which will allow us to
increase the rate of scale as we achieve our growth ambitions.
The quality and leadership of our solutions and the underlying market drivers
provide us with confidence that the demand for our services will continue to
expand significantly. This, coupled with our extensive network and sector
expertise, positions us well to capitalise on the market opportunity ahead.
Tarek Fadel
Chief Executive Officer
21 June 2023
CFO's Review
2022 has been a year of consolidation and preparation for our growth
trajectory ahead. Having concluded the acquisition of IDS in Q4 of 2021, 2022
was a period spent integrating that business into the broader FADEL family and
combining a number of elements of the technology and IP of IDS into our
enlarged Marketing Technology "MarTech" offering called Brand Vision, which we
launched in Q4 2022. At the same time, we started the preparation phase for
our initial public offering on the AIM market. Given our multi-jurisdictional
organisational structure and the lack of surplus capacity in the accounting
and tax professions, the process took a little longer than originally
anticipated. Notwithstanding this we navigated the challenges and timelines
successfully and brought our successful IPO to its conclusion in early April
2023, despite unprecedented market headwinds. A great deal of thanks is due to
the dedication and hard work of the many teams internal to FADEL and to the
advisory groups who supported us throughout the process
Revenue
Our revenue grew 10% to $13.2m (2021: $12.0m) despite strong macro headwinds.
The split of revenue showed very encouraging trends as the recurring element
of our revenue increased 34% year on year to $8.7m (2021: $6.5m) reflecting
the first full year of contribution from IDS of £1.1m ($1.3m). Our service
revenue reduced to $4.5m from $5.5m reflecting positive progression with the
implementation process for a number of customers that completed as they went
live on IPM Suite through the course of 2022.
Expenditure highlights
We maintained strong cost control discipline with our total cost of sales
increasing only 5% to $5.2m (2021: $5.0m) despite our revenue growing by 10%.
Where we did spend more was on R&D as we integrated IDS into and developed
our Brand Vision product offering with an increase over the prior year of
$1.1m spend to a total of $3.7m (2021: $2.6M). Our SG&A increased to $5.8m
(2021: $3.6m) reflecting an increase in headcount, a number of costs
associated with the IPO workstreams and an increase in administration costs
associated with the addition of a new entity in the form of IDS.
Gross Profit
The gross profit generated in the period was $7.9m (2021: $7.0m) with a gross
profit margin of 60% (2021: 58%). We expect our margins to improve over time
as a greater proportion of our revenue should be derived from the higher
margin Brand Vision family of products.
Key Performance Indicators ("KPIs")
The Directors also consider certain business KPIs when assessing performance
and believe that these, in addition to US GAAP measures, provide an enhanced
understanding of the Company's results and related trends, increasing
transparency and clarity of the core results of the business. The Directors
believe these metrics are useful in evaluating FADEL's operating performance.
Adjusted EBITDA (Earnings before interest, tax, depreciation and amortisation)
Our adjusted EBITDA (a non-US GAAP measure is defined as earnings after
capitalised commission costs and before interest, tax, depreciation,
amortization, exceptional costs and share-based payments) decreased as a
result of the increased expenditure relating to planned investments for growth
to -$609k (2021: $359k). This metric is a conservative one, which if used for
comparison with other companies, needs to consider that in accordance with US
GAAP we fully expense our R&D costs which for 2022 were some $3.7m.
2021 2022
EBITDA $922,744 ($1,513,310)
Adjustments to operating expenses
Commissions Capitalised during the period ($684,223) ($323,209)
Exceptional items
IDS acquisition cost adjustments $131,113 -
IPO Expenses - $1,207,883
Share based payments ($10,576) $20,051
Total Adjustments ($563,686) $904,725
Adjusted EBITDA $359,058 ($608,585)
Customer numbers
FADEL 19 20
IDS 131 126
Cash and working capital
We ended the year with $1.2m of cash (2021: $2.0m) and a fully drawn line of
credit from Bank of America of $1.0m. Post year end we repaid $300k of the
line of credit and expect to pay this down during H2 2023. Following our
successful IPO in early April 2023, our cash balance exceeded $10.0m. We
consumed $2.1m of cash in our operating activities in 2022 (2021: generated
$3.4m), driven principally by a significant decline in accounts receivable and
deferred revenue, driven mostly by the timing of certain contract renewals
(typically we have a number of renewals that sign in December but that are not
paid until January). We also had some deferred consideration payments due as
part of our IDS acquisition in late 2021.
Taxation
The Income tax expense for the year is $786k. However, only $28k is a current
year tax expense. The remainder relates to the future tax consequences of
temporary differences between the carrying amounts of our deferred revenue
balances for financial reporting purposes versus their tax bases.
Vicary Gibbs
Chief Financial Officer
21 June 2023
Financial statements
FADEL PARTNERS INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS YEARS
ENDED DECEMBER 31, 2021 AND 2022
The audited, consolidated Statements of Comprehensive Income of the Group for
each of the years ended 31 December 2021 and 2022 are set out below:
Continuing operations Notes Year ended Year ended
31 December 31 December
2021 2022
$ $
License/subscription and Support 6,472,344 8,681,002
Professional services 5,498,528 4,501,551
Total revenue 4 11,970,872 13,182,553
Cost of fees and services 4,973,324 5,237,394
Research and development 2,560,219 3,693,655
Selling, general and administrative expenses 3,591,680 5,785,374
Depreciation and amortisation 456,535 655,753
Net Interest expense/(income) 3,692 150,892
Foreign exchange gains (876,217) 371,860
Other expense 20,176 (1,408)
Other income (336,139)
Total expenses 10,393,270 15,893,520
Income/(loss) before income taxes 1,577,602 (2,710,967)
Income tax (expense) 5 (361,943) (786,240)
Net income/(loss) after taxes 1,215,659 (3,497,207)
Total foreign currency gains 41,228 967,248
Total comprehensive income/(loss) 1,256,887 (2,529,959)
Net income attributable to non-controlling 96,550 23
interest
Net income/(loss) attributable to the Group 1,119,109 (3,497,230)
Net income/(loss) after taxes 1,215,659 (3,497,207)
Comprehensive income attributable to non-controlling interest 96,550 23
Comprehensive income/(loss) attributable to the Group 1,160,337 (2,529,982)
Total comprehensive income/(loss) 1,256,887 (2,529,959)
Basic earnings/(loss) per Share ($) 6 0.19 (0.37)
Diluted earnings/(loss) per Share ($) 0.08 (0.37)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
The audited, consolidated Statements of Financial Position of the Group for
each of the years as at 31 December 2021 and 2022 are set out below:
As at As at
31 December 31 December
2021 2022
Assets Notes $ $
Cash 1,967,937 1,181,371
Accounts receivable 8 3,245,833 1,863,394
Unbilled work-in-progress 826,418 929,715
Other current assets 198,533 209,556
Current assets 6,238,721 4,184,036
Intangible assets 7 2,797,036 2,242,598
Goodwill 7 2,342,348 2,100,432
Furniture and equipment 9 102,955 88,170
Contract costs 10 644,270 584,510
Deferred tax asset 5 1,712,941 954,771
Right of use Asset - 109,728
Other assets 4,838 4,838
Non-current assets 7,604,389 6,085,048
TOTAL ASSETS 13,843,110 10,269,084
Liabilities
Accounts payable and accrued expenses 4,104,703 3,174,313
Income tax payable 5 876,421 1,026,602
Deferred revenue 3,900,047 2,249,019
Notes payable - related parties 12 - 75,000
Line of Credit Bank of America 13 - 1,000,000
Current liabilities 8,881,171 7,524,934
Provisions-End of Services Indemnity 253,483 274,045
Deferred revenue 860,292 1,086,762
Lease Liability - 85,187
Non-current liabilities 1,113,775 1,445,994
Total liabilities 9,994,946 8,970,928
Shareholders' equity
Series A-1 Preferred Shares 14 1,068 7,552
Common stock 14 6,783 7,083
Additional paid-in capital 11,403,793 15,581,802
Accumulated deficit (11,665,797) (15,163,027)
Accumulated other comprehensive income/(loss) (103,562) 863,686
(357,715) 1,297,096
Non-controlling interest 4,205,879 1,059
Total Shareholders' equity 3,848,164 1,298,155
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 13,843,110 10,269,084
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
The audited, consolidated Statements of Changes in Equity of the Group for
each of the years 31 December 2021 and 2022 are set out below:
Preferred stock Preferred Common Common Additional paid in capital Accumulated deficit Accumulated other comprehensive income/(loss) Non-controlling interest Total
# stock stock stock $ $ $ $ $
$ # $
As at 31 December 2020 1,068,837 1,068 6,782,583 6,783 11,393,218 (12,784,906) (144,790) 4,109,329 2,580,702
Stock-based compensation - - - - 10,575 - - - 10,575
Net income - - - - - 1,119,109 - 96,550 1,215,659
Foreign exchange translation (expense)/income - - - - - - 41,228 - 41,228
As at 31 December 2021 1,068,837 1,068 6,782,583 6,783 11,403,793 (11,665,797) (103,562) 4,205,879 3,848,164
Stock-based compensation - - - - (20,051) - - - (20,051)
Change of control in Fadel Partners SAL from 59.2% to 99.99% 4,204,843 (4,204,843) -
Impact Fund by MEVP Holding SAL-Common 300,000 300 (300) -
Impact Fund by MEVP Holding SAL- Series A-2 1,436,260 1,436 (1,436) -
Impact Fund by MEVP Holding SAL- Series B 2,943,243 2,943 (2,943) -
Impact Fund by MEVP Holding SAL- Series B-1 1,117,318 1,117 (1,117) -
iSME SAL Holding-Series B-2 580,383 581 (581) -
B&Y Division One Holding SAL 406,268 407 (407) -
Net income - - - - - (3,497,230) - - (3,497,230)
Foreign exchange translation (expense)/income - - - - 967,248 - 967,248
As at 31 December 2022 7,552,309 7,552 7,082,583 7,083 15,581,802 (15,163,027) 863,686 1,059 1,298,155
CONSOLIDATED STATEMENTS OF CASH FLOWS
The audited, consolidated Statements of Cash Flows of the Group for each of
the years ended 31 December 2021 and 2022 are set out below:
Year ended Year ended
31 December 31 December
2021 2022
$ $
Net income (loss) after taxes 1,215,659 (3,497,207)
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortisation 456,535 655,753
Non-cash stock compensation 10,576 (20,051)
Loss on disposal of furniture and equipment - -
Forgiveness of Paycheck Protection Program Loan (336,139) -
Non-cash impact of foreign exchange on intangibles - 538,333
Changes in assets and liabilities
Accounts receivable (2,358,300) 1,380,395
Unbilled work-in-progress (493,047) (103,297)
Income tax receivable 519,687 -
Other current assets (4,390) (8,980)
Deferred tax asset (505,972) 758,169
Capitalisation of commissions (684,223) (323,210)
Right of use Assets - (109,728)
Accounts payable and accrued expenses 2,394,656 (105,691)
Income tax payable 840,220 150,181
Other liabilities 66,519 -
Deferred revenue 2,286,094 (1,424,557)
Net cash from/(used by) operating activities 3,407,874 (2,109,892)
Purchase of equipment (74,271) 24
Payment for intangibles (2,868,753) -
Payments for acquisition of subsidiaries (2,342,348) (718,948)
Net cash (used in)/from investing activities (5,285,372) (718,924)
Proceeds from Line of Credit - 1,000,000
Proceeds from related party Loan - 75,000
Net cash /from financing activities - 1,075,000
41,228 967,249
Effect of exchange rates on cash
Net decrease in cash (1,836,270) (786,567)
Cash, beginning of year 3,804,208 1,967,937
Cash, end of year 1,967,937 1,181,371
Notes to the financial statements
1. ORGANISATION AND NATURE OF BUSINESS
The Financial Information consolidates the financial information of the
Company and:
· its wholly-owned subsidiaries:
o Fadel Partners UK Limited ("Fadel UK"), and its wholly-owned subsidiary;
§ Image Data Systems (UK) Limited ("IDS");
o Fadel Partners France SAS ("Fadel France"); and
o Fadel Partners Canada Inc. ("Fadel Canada").
· its 99.99%-owned subsidiary, Fadel Partners SAL Lebanon ("Fadel Lebanon").
The Company is a New York Corporation formed in July 2003 and reincorporated
in Delaware in January 2014. Fadel Lebanon was incorporated in Lebanon in
August 2014, Fadel UK was formed in the UK in January 2015, Fadel Canada was
formed in Canada in June 2021, Fadel France was formed in France in February
2020 and IDS was formed in April 1992 in the UK, by an unrelated party, and
acquired on 1 October 2021. Together the entities are collectively referred to
herein as the "Group". The Group is headquartered in New York, with a presence
in Los Angeles, Montreal, London, Paris and Beirut (Lebanon) and is engaged in
providing and servicing its Intellectual Property Rights and Royalty
Management suite of software.
2. LIQUIDITY AND FINANCIAL CONDITION
Under Accounting Standards Update, or ASU, Presentation of Financial
Statements-Going Concern (Accounting Standard Codification ("ASC") Subtopic
205-40) ("ASC 205-40"), the Company has the responsibility to evaluate whether
conditions and/or events raise substantial doubt about the Group's ability to
meet its future financial obligations as they become due within one year after
the date that the Consolidated Financial Information is issued. As required by
ASC 205-40, this evaluation shall initially not take into consideration the
potential mitigating effects of plans that have not been fully implemented as
of the date the Consolidated Financial Information is issued. The Company has
assessed the Group's ability to continue as a going concern in accordance with
the requirement of ASC 205-40.
As reflected in the consolidated financial information, the Group had
approximately $1.2 million in cash on the Statement of Financial Position as
at 31 December 2022. As at 31 December 2022, the Group had negative working
capital of approximately $3.3 million and an accumulated deficit approximating
$15.2 million. Additionally, the Group had a net Loss of approximately $3.5
million and cash provided by operating activities of approximately ($2.1)
million during the year ended 31 December 2022.
As reflected in the consolidated financial information, the Group had
approximately $2.0 million in cash on the Statement of Financial Position as
at 31 December 2021. As at 31 December 2021, the Group had negative working
capital of approximately $2.6 million and an accumulated deficit approximating
$11.7 million. Additionally, the Group had a net profit of approximately $1.2
million and cash provided by operating activities of approximately $3.4
million during the year ended 31 December 2021.
Based on the results above, the Group believes there are sufficient funds to
provide the Group with sufficient liquidity for at least twelve months from
the date of this Document.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
The consolidated financial Information has been prepared in accordance with
accounting principles generally accepted in the United States of America ("US
GAAP"). They include the accounts of the Company, and interest owned in
subsidiaries as follows: 99.99% of Fadel Lebanon and 100% of Fadel UK, Fadel
France, Fadel Canada and IDS. All significant intercompany balances and
transactions are eliminated on consolidation. The non-controlling interest
represents the 0.00011% share of Fadel Lebanon owned by outside parties.
Use of estimates
The preparation of the consolidated financial Information in conformity with
US GAAP requires the Group to make estimates and assumptions that affect the
reported amounts of the Group's assets and liabilities and disclosure of
contingent assets and liabilities, at the date of the Consolidated Financial
Information, as well as the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from these estimates.
Fair value measurements
Generally accepted accounting principles require the disclosure of the fair
value of certain financial instruments, whether or not recognised on the
Statement of Financial Position, for which it is practicable to estimate fair
value. The Group estimated fair values using appropriate valuation
methodologies and market information available as of year-end. Considerable
judgment is required to develop estimates of fair value, and the estimates
presented are not necessarily indicative of the amounts that the Group could
realise in a current market exchange. The use of different market assumptions
or estimated methodologies could have a material effect on the estimated fair
values. Additionally, the fair values were estimated at year end, and current
estimates of fair value may differ significantly from the amounts presented.
Fair value is estimated by applying the following hierarchy, which prioritises
inputs used to measure fair value into three levels and bases categorisation
within the hierarchy upon the lowest level of input that is available and
significant to the fair value measurement:
Level 1: Quoted prices in active markets for identical assets or liabilities;
Level 2: Observable inputs other than quoted prices in active markets for identical
assets and liabilities, quoted prices for identical or similar assets or
liabilities in inactive markets, or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the
assets or liabilities; and
Level 3: Inputs that are generally unobservable and typically management's estimate of
assumptions that market participants would use in pricing the asset or
liability.
Cash and cash equivalents
All highly liquid investments with maturities of three months or less at the
date of purchase are classified as cash equivalents.
Concentrations of credit risk
Financial instruments that potentially subject the Group to concentrations of
credit risk consist primarily of cash, accounts receivable and unbilled
work-in-progress. The Company performs on-going evaluations of the Group's
customers' financial condition and, generally, requires no collateral from
customers.
The Group maintains its bank accounts with major financial institutions in the
United States, Lebanon, the UK, France and Canada. As at 31 December 2022, the
Group had cash balances in excess of the Federal or National insured limits at
financial institutions in the United States, France and the UK totalling some
US$657 thousand out of a total of US$1.18 million cash deposits. Cash amounts
held in Lebanon are not insured and as such minimal deposits are held in
Lebanese accounts, with payments transferred in country only on an as needed
basis. The Company believes the risk is limited as the institutions are large
national institutions with strong financial positions.
New Accounting Pronouncements:
In February 2016, the FASB issued ASU No. 2016-02 "Leases (Topic 842)" ("ASU
2016-02") that requires almost all lessees' operating leases to be recorded on
the Statement of Financial Position. The guidance specifies a lessee should
recognize a right-of-use asset and corresponding lease liability for those
leases.
classified as operating leases. ASU 2016-02 is effective beginning in fiscal
year 2022. Early adoption is permitted. During transition, lessees and lessors
are required to recognize and measure leases at the beginning of the earliest
period presented using a modified retrospective approach.
In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13
"Financial Instruments - Credit Losses" ("Topic 326"), which requires entities
to measure all expected credit losses for financial assets held at the
reporting date based on consolidated experience, current conditions and
reasonable and supportable financial projections.
The standard also requires additional disclosures related to significant
estimates and judgments used in estimating credit losses, as well as the
credit quality and underwriting standards of an entity's portfolio. Operating
lease receivables are excluded from the scope of this guidance. The amended
guidance is effective for the Group for fiscal years, and interim periods
within those years, beginning 1 January 2023. The Company is evaluating the
impact of adopting this new accounting standard on the Group's financial
information and related disclosures.
ASU 2020-06 is effective for all other entities aside from SEC-filers, for
fiscal years beginning after 15 December 2023, including interim periods
within those fiscal years. SEC-filers are required to adopt for fiscal years
beginning after 15 December 2021. This ASU simplifies the accounting for
certain financial instruments with characteristics of liabilities and equity,
including convertible instruments and contracts on an entity's own equity. The
Company is evaluating the impact that adopting this new accounting standard
will have on the Group's financial information and related disclosures.
The Company is evaluating the impact of adopting recently issued guidance on
the Group's consolidated financial condition, results of operations and cash
flows.
Effective 1 January 2022, the Group accounts for its leases under ASC 842
"Leases". Under this guidance, arrangements meeting the definition of a lease
are classified as operating or financing leases and are recorded on
the Statement of Financial Position as both a right of use asset and lease
liability, calculated by discounting fixed lease payments over the lease-term
at the rate implicit in the lease or the Group's incremental borrowing rate.
Lease liabilities are increased by interest and reduced by payments each
period, and the right of use asset is amortized over the lease-term. A
discount rate of 10% was used to determine the right of use assets for
operating leases. This was based on market rates for obligations with
comparable terms effective at the lease inception date. For operating leases,
interest on the lease liability and the amortization of the right of use asset
result in straight-line rent expense over the lease term. Variable lease
expenses, if any, are recorded when incurred.
In calculating the right of use asset and lease liability, the Company elected
to combine the Group's lease and non-lease components. The Company excluded
the Group's short-term leases having initial terms of 12 months or less from
the new guidance as an accounting policy election and recognized rent expenses
on a straight-line basis over the lease-term.
Accounts receivable, unbilled work-in-progress and allowance for doubtful
accounts
Accounts receivable are recorded at the invoiced amount and do not bear
interest. Credit is extended based on the evaluation of a customer's financial
condition and collateral is not required. Unbilled work-in-progress is revenue
which has been earned but not invoiced. An allowance is placed against
accounts receivable or unbilled work-in-progress for management's best
estimate of the amount of probable credit losses. The Company determines the
allowance based on historical write-off experience and information received
during collection efforts.
The Company reviews allowances monthly and past due balances over 90 days are
reviewed individually for collectability. Account balances are charged against
the allowance after all means of collection have been exhausted and the
potential for recovery is considered remote.
Revenue recognition
Since 1 January 2019, the Group has accounted for revenue recognition in line
with ASC 606 "Revenue from Contracts with Customers" and ASC 340 "Other Assets
and Deferred Cost."
The Group's revenue is derived from three primary sources:
· license fees;
· customer support; and
· services.
Revenue is recognised upon transfer of control of promised products and
services to customers in an amount that reflects the consideration the Group
expects to receive in exchange for those products or services. If the
consideration promised in a contract includes a variable amount, for example,
overage fees, contingent fees or service level penalties, the Group includes
an estimate of the amount it expects to receive for the total transaction
price if it is probable that a significant reversal of cumulative revenue
recognised will not occur.
The Group determines the amount of revenue to be recognised through the
application of the following steps:
· identification of the contract, or contracts, with a customer;
· identification of the performance obligations in the contract;
· determination of the transaction price;
· allocation of the transaction price to the performance
obligations in the contract; and
· recognition of revenue when or as the Group satisfies its
performance obligations.
The Group's offerings fall primarily under four contract categories:
· SaaS subscriptions;
· perpetual licenses;
· support; and
· services.
License/subscription and support revenues
License/subscription and support revenues are comprised of fees that provide
customers with access to cloud services, software licenses, related support
and updates during the term of the arrangement.
· SaaS subscriptions - Cloud services allow customers to use the Group's
multi-tenant software without taking possession of the software. Revenue is
generally recognised rateably over the contract term. Contracts are paid in
advance and typically are non-cancellable and do not contain refund-type
provisions.
· Licenses and Support - License/subscription and support revenues also include
revenues associated with term and perpetual software licenses that provide the
customer with a right to use the software as it exists when originally made
available. Revenue from term and perpetual software licenses are generally
recognised at the point in time when the software is made available to the
customer. Revenue from software support and updates is recognised as the
support and updates are provided, which is generally rateably over the
contract term. The Group typically invoices its customers annually and its
payment terms provide that customers pay within 30 days of invoice. Amounts
that have been invoiced are recorded in accounts receivable and in unearned
revenue or revenue, depending on whether transfer of control to customers has
occurred.
Professional services
The Group's professional services contracts are based on either a time and
materials, fixed fee or subscription basis. Revenue is recognised as the
services are rendered for time and materials contracts, on a proportional
performance basis for fixed price contracts or rateably over the contract term
for subscription professional services contracts. Other revenue consists
primarily of training revenue recognised as such services are performed.
Significant judgements - contracts with multiple performance obligations
The Group enters into contracts with its customers that may include promises
to transfer multiple performance obligations such as cloud services, software
licenses, support, updates, and professional services. Multiple performance
obligations are a promise in a contract with a customer to transfer products
or services that are concluded to be distinct. Determining whether products
and services are distinct performance obligations that should be accounted for
separately or combined as one unit of accounting may require significant
judgment. The Group accounts for these performance obligations under
individual contracts on an 'as combined' basis because the supplementary
product or services that accompany cloud services and or software licenses are
tailored and do not have a distinct fair market value.
As the Group's go-to-market strategies evolve, the Group may modify its
pricing practices in the future, which could result in distinct products or
services that require a standalone selling price.
The Group records amounts billed in advance of services being performed as
deferred revenue. Unbilled work-in-progress represents revenue earned but not
yet billable under the terms of the fixed-price contracts. Most of these
amounts are expected to be billed and collected within 12 months.
Costs of obtaining a revenue contract
The Group capitalises costs of obtaining a revenue contract. These costs
consist of sales commissions related to the acquisition of such contracts that
would not have been incurred if these contracts were not won.
For licenses, the Group estimated the amortisation period based on the
remaining expected life of the customer/the term for which it anticipates the
Group's contract will remain effective. It anticipates the term due to the
project size, terms, complexity and cost of implementation and transition,
making it less likely that a client will change vendors for this service.
During the implementation, the Group applied the guidance as of 1 January 2019
only to contracts that were either not completed as of that date, or that had
a life of customer that ended after 1 January 2019.
For service and support contracts, the amortisation period is based on the
duration of the contract in consideration that it would be less difficult and
costly for clients to transition to another vendor for continued service.
Amortisation periods for customer lives typically vary between 5 and 10 years.
The Group elected not to apply the practical expedient for contracts that have
a duration of less than one year.
Depreciation
Furniture and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, generally
three to seven years. When assets are retired or otherwise disposed of, the
cost and related accumulated depreciation are removed from the accounts and
any resulting gain or loss is reflected in operations for the period. The cost
of maintenance and repairs is charged to operations as incurred. Significant
renewals and betterments are capitalised.
Intangible assets - goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised.
Instead, goodwill is tested annually for impairment, or more frequently if
events or changes in circumstances indicate that it might be impaired and is
carried at cost less accumulated impairment losses. Impairment losses on
goodwill are taken to profit or loss and are not subsequently reversed.
Intangible assets other than goodwill
The Group has three categories of intangible assets:
Brand assets
The Group purchased IDS in October 2021 and with it acquired a
long-established and respected brand. At the time of purchase, the Group
estimated the useful life of the brand assets acquired for financial reporting
purposes and recognises amortisation on a straight-line basis over the useful
life of the asset, typically 10 years. Purchased brand assets are reviewed for
impairment at each reporting date or when events and circumstances indicate an
impairment. The Group determined that an impairment charge was not necessary
during the period covered by the accompanying Consolidated Financial
Information.
Customer relationships
The Group purchased IDS in October 2021 and with it acquired a number of
customer relationships. At the time of purchase, the Group estimated the
useful life of the customer relationships acquired for financial reporting
purposes and recognises amortisation on a straight-line basis over the useful
life of the asset, typically 10 years. Purchased customer relationships are
reviewed for impairment at each reporting date or when events and
circumstances indicate an impairment. The Group determined that an impairment
charge was not necessary during the period covered by the Consolidated
Financial Information.
Software and technology assets
The Group purchased IDS in October 2021 and with it acquired a number of
software and technology assets. At the time of purchase, the Group estimates
the useful life of the software and technology assets acquired for financial
reporting purposes and recognised amortisation on a straight-line basis over
the useful life of the asset, typically 10 years. Purchased software and
technology assets are reviewed for impairment at each reporting date or when
events and circumstances indicate an impairment. The Group determined that an
impairment charge was not necessary during the period covered by the
Consolidated Financial Information.
Billed accounts receivable and concentrations of credit risk
As at 31 December 2022, there were three significant customers (defined as
contributing at least 10%) that accounted for 68% of accounts receivable.
As at 31 December 2021, there was one significant customer that accounted for
80% of accounts receivable.
Accounts payable and accrued expenses
As at 31 December 2022, there were three significant vendors (defined as
contributing at least 10%) that accounted for 62% of accounts payable.
As at 31 December 2021, there was no significant vendor of accounts payable
and accrued expenses.
Unbilled work-in-progress and concentrations of credit risk
As at 31 December 2022, there were three significant customers that accounted
for 88% (17%, 27% and 44%) of unbilled work-in-progress.
As at 31 December 2021, there were three significant customers that accounted
for 83% (22%, 29% and 32%) of unbilled work-in-progress.
Segmental reporting
The Group reports its business activities in two areas:
· License/subscription and support revenue (recurring); and
· Professional services (non-recurring),
which are reported in a manner consistent with the internal reporting to the
Board, which has been identified as the chief operating decision maker.
Revenue concentrations
During 2022, the five largest customers accounted for an aggregate of
$8,411,729 of revenue, some 64% of revenue from continuing operations. This is
primarily due to a decline in services revenue, which is as expected, as it is
due to a number of customers completing an implementation phase.
During 2021, the five largest customers accounted for an aggregate of
$8,990,966 of revenue, some 75% of revenue from continuing operations.
Top 5 Customers' revenue concentration Revenue 2021 % of Total Revenue Revenue 2022 % of Total Revenue
$'000
License/subscription 2,503 21% 2,798 21%
Support 1,746 15% 2,073 16%
Services 4,742 40% 3,540 27%
Total 8,991 75% 8,412 64%
Advertising and promotion costs
Advertising and promotion costs are expensed as incurred. These costs totalled
$426,119 for the year ended 31 December 2021 and $536,552 for the year ended
31 December 2022.
Paycheck Protection Program loan
The Group's policy is to account for the Paycheck Protection Program loan as
debt (see Note 0 to the Consolidated Financial Information). The Group
recorded the loan as debt until it was forgiven in February 2021.
Income taxes
The Group records deferred tax assets and liabilities for the estimated future
tax effects of temporary differences between the tax bases of assets and
liabilities and amounts reported in the Group's consolidated Statements of
Financial Position, as well as operating loss and tax-credit carry-forwards.
The Group also measures deferred tax assets and liabilities using enacted tax
rates expected to be applied to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Deferred tax
assets are reduced by a valuation allowance if, based on available evidence,
it is more likely than not that these benefits will not be realised.
Stock-based compensation
The Group records stock-based compensation in accordance with FASB ASC Topic
718 "Compensation-Stock Compensation". The fair value of awards granted is
recognised as an expense over the requisite service period.
Foreign currency
The Group's reporting currency is the $. The functional currency of foreign
operations is the local currency for the foreign subsidiaries. Assets and
liabilities of foreign operations denominated in local currencies are
translated at the spot (historical) rate in effect at the applicable reporting
date. The Group's consolidated Statements of Comprehensive Income are
translated at the weighted average rate of exchange during the applicable
period. Realised and unrealised transaction gains and losses generated by
transactions denominated in a currency different from the functional currency
of the applicable entity are recorded in other income (expense) in the
consolidated statement of operations and comprehensive loss in the period in
which they occur.
The exchange rate used to translate the Lebanese pound ("LBP") into $ for the
purpose of preparing the Consolidated Financial Information has been fixed at
$1 = LBP 1,500. The exchange rate used to translate the sterling pound ("£"),
("EURO") and (CAD) into $ for the purpose of preparing the Consolidated
Financial Information uses the average rate for the consolidated Statements of
Comprehensive Income and consolidated Statements of Cash Flows and the rate at
the end of the reporting period for the Statement of Financial Position.
Starting in November 2019, the banking system in Lebanon imposed currency
controls to prevent $ flight from the country. As a result, customer deposits
in $ prior to the implementation from these controls were categorised as
current accounts. Customers who own current accounts are not allowed to
withdraw cash from such accounts, however, they are allowed to make payments
from these accounts.
In order to access $ from current accounts, bank customers must ask the bank
to convert the withdrawal amount into LBP using an official rate of $1 = LBP
3,900 determined by the Lebanese banking association. On 9 December 2021, the
Lebanese Central Bank issued intermediate circular No: 601 which increased the
value of $1 from LBP 3,900 to LBP 8,000.
New $ deposited into the bank accounts after the start of the currency
controls, generally from overseas sources, are considered to be external, and
can be used with minimum restrictions. The Group opened a new external account
during the year ended 31 December 2019 to deposit funds transferred from the
US and use those funds for operating expenses including payroll.
The official conversion rate set by the Lebanese government remains at $1 to
LBP 1,500. As at 31 December 2021, the Group had the $ equivalent of
approximately $34,500 and 29,700 at 31 December 2022 in external deposits
(accounts not subject to same restrictions as Lebanese Current Accounts
("LCAs")) and approximately $1,200 in current deposits (LCAs) at 31 December
2021 and $7,600 at 31 December 2022.
Comprehensive income/(loss)
Comprehensive income/(loss) consists of two components:
• net income/(loss); and
• other comprehensive income/(loss).
Other comprehensive income/(loss) refers to revenue, expenses, gains and
losses that are recorded as an element of Shareholder's equity but are
excluded from net income/(loss). Other comprehensive income/(loss) consists of
foreign currency translation adjustments from those subsidiaries not using the
$ as their functional currency.
Statement of cash flows
Cash flows from the Group's operations are calculated based upon the
functional currencies. As a result, amounts related to assets and liabilities
reported on the consolidated Statements of Cash Flows will not necessarily
agree with changes in the corresponding balances on the Statements of
Financial Position.
4. SEGMENTAL REPORTING
The Group reports its business activities in two areas:
· subscription and support revenue; and
· professional services,
which are reported in a manner consistent with the internal reporting to the
Board, which has been identified as the chief operating decision maker.
While the chief operating decision maker considers there to be only two
segments, the Group's revenue is further split between "license subscriptions
and support" (recurring in nature) and "professional services" (non-recurring)
and by key product families (IPM Suite and Brand Vision) and hence to aid the
readers understanding of our results, the split of revenue from these
categories is shown below:
Audited Audited
As at As at
31 December 31 December
2021 2022
$ $
Revenue
Licence/Subscription
IPM Suite 3,075,637 4,346,891
Brand Vision 759,036 1,902,979
Total Licence/Subscription 3,834,673 6,249,870
Support
IPM Suite 2,637,670 2,431,132
Brand Vision - -
Total Support 2,637,670 2,431,132
Licence/subscription and support 6,472,344 8,681,002
Professional services 5,498,528 4,501,401
Total Revenue 11,970,872 13,182,403
Cost of Sales
Subscription and support 1,599,027 2,371,550
Professional services 3,374,297 2,865,844
Total cost of sales 4,973,324 5,237,394
Gross Profit Margins
Profit margin Subscription and support 75% 73%
Profit margin Service 39% 36%
Total gross profit margin 58% 60%
5. INCOME TAXES
The components of income/(loss) before income taxes are as follows:
Audited Audited
As at As at
31 December 31 December
2021 2022
$ $
Domestic 1,577,895 (415,977)
Foreign 2,278,118 139,210
US taxable profit before income taxes 3,856,013 (276,767)
Provision for income taxes consisted of the following:
Provision components are as follows: Audited Audited
As at As at
31 December 31 December
2021 2022
$ $
Current:
Foreign 27,696 25,265
Federal 764,518 -
State 111,903 2,806
Total current expense 904,117 28,070
Deferred:
Foreign - -
Federal (475,988) 513,180
State (29,484) 244,989
Total deferred expense (505,472) 758,170
Provision for/ (benefit from) income taxes 398,644 786,240
The differences between income taxes expected at the U.S federal statutory
income tax rate and income taxes reported were as follows:
Audited Audited
As at As at
31 December 31 December
2021 2022
$ $
U.S federal income tax (benefit) at statutory rate 331,358 (58,121)
State tax (net of federal benefit) 58,919 68,795
Foreign tax rate differential - (4,133)
Meals and Entertainment 1,987 1,569
Change in valuation allowance - -
Subpart F income 33,817 653,618
Research & Development Credit - (50,000)
SALT Rate Change - 178,411
Other (61,754) (3,900)
Provision for (benefit from) income taxes 364,327 786,240
The Company is subject to taxation in the United States and certain foreign
jurisdictions. Earnings from non-U.S. activities are subject to local country
income tax.
The material jurisdictions where the Company is subject to potential
examination by tax authorities include the United States, Lebanon, Canada and
the UK.
The above amounts are recorded as Other Income in the Statement of
Comprehensive Income.
U.S Companies are eligible for a deduction that lowers the effective tax rate
on certain foreign income. This regime is referred to as the Foreign-Derived
Intangible Income deduction.
The Group records deferred tax assets and liabilities for the estimated future
tax effects of temporary differences between the tax bases of assets and
liabilities and amounts reported in the Group's consolidated Statements of
Financial Position, as well as operating loss and tax-credit carry-forwards.
The Group also measures the Group's deferred tax assets and liabilities using
enacted tax rates expected to be applied to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Deferred tax assets are reduced by a valuation allowance if, based on
available evidence, it is more likely than not that these benefits will not be
realized.
As at 31 December 2021, the Company had a US federal and state Net Operating
Losses ("NOL") carry forward of $0 and $4.0 million respectively. The state
NOL will expire beginning in 2037. As at 31 December 2021, the Company had
NOLs in New Jersey, Pennsylvania, New York, and New York City.
As at 31 December 2022, the Company had a US federal and state NOL carry
forward of approximately $612 thousand and $5.5 million respectively. The
state NOL will expire beginning in 2037. As of 12/31/2022, the Company had
NOLs in California, Florida, New Jersey and Pennsylvania
On 27 March 2020, the CARES Act was signed into law. The Act contains several
new or changed income tax provisions, including but not limited to the
following: increased limitation threshold for determining deductible interest
expense, class life changes to qualified improvements (in general, from 39
years to 15 years), and the ability to carry back net operating losses
incurred from tax years 2018 through 2020 up to the five preceding tax
years. Most of these provisions are either not applicable or have no material
effect on the Company.
The Tax Cuts and Jobs Act of 2017 (the "Tax Act") contains a provision which
subjects a U.S parent of a foreign subsidiary to current U.S. tax on its
global intangible low-taxed income ("GILTI"). The Company will report the tax
impact of GILTI as a period cost when incurred. In 2022, the company has a net
GILTI inclusion of approximately $3.1 million primarily due to Section 174
capitalization. Accordingly, the Company is not providing deferred taxes for
basis differences expected to reverse as GILTI.
In 2023, as a part of the 2022 tax return, the company will finalize an
R&D study and method change related to deferred revenue in order to defer
revenue expected to be received within 1 year. The 481(a)-adjustment benefit
is expected to be approximately $3.8 million (gross) and $817 thousand (net).
The R&D credit is expected to be $50 thousand and is carried forward for
up to 20 years.
Significant components of the Company's deferred tax assets and deferred tax
liabilities are as follows:
Audited Audited
As at As at
31 December 31 December
2021 2022
$ $
Depreciation
Amortisation 338,029
Net Operating loss carry forwards - 128,535
Net Operating loss carry forwards (state) 246,732 340,655
Reserves and accruals 151,092 90,612
Deferred revenue 1,321,422 205,909
R&D Credit - 50,000
Net deferred tax assets 1,719,246 1,153,741
Less valuation allowance - -
Total deferred tax assets 1,719,246 1,153,741
Total deferred tax liabilities (6,305) (198,969)
Deferred tax assets, net 1,712,941 954,772
Due to its current year earnings, the Company believes that it is
more-likely-than-not that substantially all of the deferred tax assets except
state net operating losses and capital loss carry forwards will be realised.
Therefore, the Company has released valuation allowance on U.S. deferred tax
assets other than those stated above.
The change in the valuation allowance is as follows:
Beginning of the Year Additions/ (Deductions) Balance at the end of the year
2021
Reserves Deducted from deferred income taxes, net: 1,206,967 505,972 1,712,941
Valuation Allowance - - -
2022
Reserves Deducted from deferred income taxes, net: 1,712,941 (758,169) 954,772
Valuation allowance - - -
As at 31 December 2022, the Company did not have any unrecognised tax benefits
and did not anticipate any significant changes to the unrecognised tax
benefits within twelve months of this reporting date. In the year ended 31
December 2022, the Company recorded no interest or penalties on income taxes.
At December 31, 2022, there was no accrued interest included in income taxes
payable.
6. EARNINGS PER SHARE
The Group reports basic and diluted earnings per Share. Basic earnings per
share is calculated by dividing the profit attributable to common Shareholders
by the weighted average number of Shares outstanding during the period.
Diluted earnings per share is determined by adjusting the profit attributable
to Shareholders by the weighted average number of Shares outstanding, taking
into account the effects of all potential dilutive Shares, including Preferred
Shares, warrants and Options.
Audited Audited
As at As at
31 December 31 December
2021 2022
$ $
Total comprehensive income attributable to Shareholders 1,256,887 (2,529,959)
Weighted average number of Shares 6,782,943 6,855,443
Basic earnings per share ($) 0.19 (0.37)
Audited Audited
As at As at
31 December 31 December
2021 2022
$ $
Total comprehensive income attributable to Shareholders 1,256,887 (2,529,959)
Weighted average number of shares 6,782,943 6,855,443
Dilutive effect of Options and warrants 8,918,860 8,530,997
Weighted average number of diluted shares 15,701,803 15,313,940
Diluted earnings per share ($) 0.08 (0.37)
7. BUSINESS COMBINATION
On 1 October 2021, Fadel UK Limited signed a Share Purchase Agreement to
acquire 100% of the ordinary shares of Image Data Systems (IDS), a UK based
business with over 30 years' experience in image and video management
providing production agencies and media publishers with a fast and scalable
cloud-based content services platform. The complementary nature of the IDS
content services platform, when combined with the digital rights management
system of FADEL will make an even more compelling offering for brand managers.
Fair Value of Purchase Consideration
The fair value of the purchase consideration on the acquisition date was £5.5
million ($7.4 million).
Fair Value of Assets Acquired and Liabilities Assumed
The Group accounted for the acquisition using the purchase method of
accounting for business combinations under ASC 805, Business Combinations. The
total purchase price was allocated to the tangible and identifiable intangible
assets acquired and liabilities based on their estimated fair values as at the
acquisition date.
Fair value estimates are based on a complex series of judgments about future
events and uncertainties and rely heavily on estimates and assumptions. The
Company's judgments used to determine the estimated fair value assigned to
each class of assets acquired and liabilities assumed, as well as asset lives
and the expected future cash flows and related discount rates, can materially
impact the Consolidated Financial Information. Significant inputs used for the
calculations included the amount of cash flows, the expected period of the
cash flows and the discount rates.
The allocation of the purchase price was based on the Company's estimate of
the fair values of the assets acquired and liabilities assumed on the
acquisition date, as follows:
· brand assets (£0.30 million ($0.4 million));
· customer relationships (£0.29 million ($0.4 million)); and
· software / technology assets (£1.53 million ($2.07 million)).
The following table shows the current carrying value of the intangible
assets. The information is presented in £ given the assets acquired were
paid for in £ and the resulting values arise on consolidation of our UK
entities.
Goodwill Customer Relationships Technology based assets Brand Assets Total
Cost £ £ £ £ £
As at 31 December 2020 - - - - -
Additions 1,735,463 294,932 1,534,440 296,000 3,860,835
As at 31 December 2021 1,735,463 294,932 1,534,440 296,000 3,860,835
Additions
As at 31 December 2022 1,735,463 294,932 1,534,440 296,000 3,860,835
Amortisation and impairment:
As at 31 December 2020
Amortisation charge for the period - 7,373 38,361 7,400 53,134
As at 31 December 2021 - 7,373 38,361 7,400 53,134
Amortisation charge for the period - 29,493 153,444 29,600 212,537
As at 31 December 2022 - 36,866 191,805 37,000 265,671
Carrying amount:
As at 31 December 2020
As at 31 December 2021 1,735,463 287,559 1,496,079 288,600 3,807,701
As at 31 December 2022 1,735,463 258,065 1,342,635 259,000 3,595,164
The approximate estimated future amortization expense is £ 212,537 each year,
for the next five years (2023-2027).
Goodwill represented the excess of the purchase price over the fair value of
the net assets acquired. The fair value of IDS net assets on the date of
acquisition was £1.69 million ($2.28 million) (of which £1.45 million ($1.96
million) was cash and £0.25 million ($0.34 million) was net working capital).
Goodwill was therefore determined to be £1.74 million ($2.34 million), which
reflects the perceived value of the employees and expected synergies the
combination of the two businesses will bring to the Group.
The consideration's fair value was estimated on the date of acquisition and
was to be paid out in a series of stage payments. As at 1 October 2021, the
total consideration paid to the sellers or transferred into escrow for future
payment was £5 million ($6.7 million). A final payment of £428,874 ($0.58
million), as assessed at 31 December 2021. A revised final payment of
£470,032 ($0.63 million) was agreed subsequently on 10 July 2022 and is
recognised as a liability within accounts payable and accrued expenses as at
31 December 2021. The final payment of £470,032 was paid on 30 December 2022.
Goodwill Impairment
The Company assesses its investment in IDS for impairment on at least an
annual basis. Based on projections of income, cash flows and the conditions of
current operations, it believes the fair value of the reporting unit is
greater than its carrying amount and no impairment is needed.
8. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
As at As at
31 December 2021 31 December 2022
$ $
Accounts receivable 3,267,852 1,885,414
Allowance for doubtful accounts (22,019) (22,019)
Accounts receivable 3,245,833 1,863,394
9. FURNITURE AND EQUIPMENT
Furniture and equipment consist of the following:
As at As at
31 December 2021 31 December 2022
$ $
Furniture and equipment 202,049 202,025
Accumulated depreciation (99,094) (113,855)
Furniture and equipment 102,955 88,170
The depreciation expense was $14,760 for the year ended 31 December 2022
(2021: $17,841).
10. CONTRACT COSTS
The Group applied ASC-606 with effect from 1 January 2019 to contracts that
were either not completed as of that date, or that had an expected customer
lifetime value that ended after 1 January 2019. This resulted in the
capitalisation of $283,106 in commission costs incurred prior to and during
2019. Accumulated amortisation as of 31 December 2021 was $710,998 and
$1,093,968 on 31 December 2022. Amortisation periods for customer lives
typically vary between 5 and 10 years. The Group elected not to apply the
practical expedient for contracts that have a duration of less than one year.
Contract costs consist of the following:
As at As at
31 December 2021 31 December 2022
$ $
Opening balance 327,049 644,270
Commissions capitalised during the year 684,223 323,209
Amortisation charge for the year (367,002) (382,969)
Accumulated contract costs 644,270 584,510
11. PAYCHECK PROTECTION PROGRAM
As a result of COVID-19, on 27 March 2020, the Coronavirus Aid, Relief, and
Economic Security (CARES) Act (the "Act") was signed into law. The Act amends
the Small Business Act to include a new guaranteed, unsecured loan program
(the "Paycheck Protection Program"). On 8 April 2020, the Group applied for a
loan under the Paycheck Protection Program. On 26 April 2020 the loan was
approved in the amount of $336,139.
The loan has a term of two years and is subject to interest of 1%. Interest
(and potential principal payments) is deferred for the first ten months.
Subject to certain conditions as defined in the Act, up to 100% of the loan
may be forgiven. On 19 February 2021, the Group received full forgiveness of
both the loan principal and applicable interest (recorded under other income
on the income statement).
12. RELATED PARTIES
Notes Payable:
In each of January 2020, January 2021, January 2022 and January 2023, the
Group entered into demand note agreements totalling up to $100,000, up to
$135,000 up to $75,000 and up to $50,000, respectively, with a Director in
Fadel Lebanon for facilitating banking transactions and working capital
purposes in Lebanon. The notes call for payment of interest at 0% per annum
compounded annually. The January 2020 and the January 2021 notes were paid in
full in each of the years ended 31 December 2020 and 31 December 2021. The
outstanding balance of all such loans as of 31 December 2022 was $75,000.
13. LINE OF CREDIT: Bank of America:
On 29 June 2022, the Company entered into a new $1 million note agreement for
a line of credit between the Company and Bank of America, N.A.. Advances under
the note bear interest at the bank's Prime Rate plus 0.7%. The expiration date
of the note is 31 May 2023. The outstanding balance as at 31 December 2022 was
$1,000,000. On 11 May 2023 the line of credit between the Company and Bank of
America, N.A. was extended until 31 May 2024.
14. COMMON AND PREFERRED STOCK
The Company has authority to issue 28,830,991 Shares, consisting of 20,000,000
Shares of $0.001 par value per Share and 8,830,991 Preferred Shares of $0.001
par value per Preferred Share.
The first series of Preferred Shares is designated "Series A-1 Preferred
Shares" and consists of 1,120,841 Preferred Shares with a conversion and
liquidation preference of $0.94 per Preferred Share.
The second series of Preferred Share is designated "Series A-2 Preferred
Shares" and consists of 1,506,181 Preferred Share with a conversion and
liquidation preference of $1.39 per Preferred Share.
The third series of Preferred Share is designated "Series B Preferred Shares"
and consists of 4,100,000 Preferred Share with a conversion and liquidation
preference of $1.79 per Preferred Share.
15. OPTIONS AND WARRANTS
Stock option plans
In 2014, the Directors approved the "2014 Equity Incentive Plan" with a
maximum of 1,620,366 shares reserved for issuance. As applicable, the exercise
price is as established between the Company and recipient. These options vest
over three or four years from date of grant. Options to acquire 1,548,191 and
1,614,696 shares were granted and remain outstanding as at 31 December 2022
and 2021, respectively.
Approximately 1,795,794 and 1,786,423 shares have vested as at 31 December
2022 and 2021, respectively.
During the year ended 31 December 2021, 65,000 Options were granted to
employees with an exercise price of approximately $0.895 under the plan. There
were no options granted during 2022.
Unrecognized compensation expense related to share options which will be
recognized through 2023 was $5,297 and $7,588 as at 31 December 2022 and 2021,
respectively.
A summary of the status of the Group's Option plan for the three years ended
31 December 2021 and 31 December 2022 is as follows:
Number of Options Weighted average exercise price
(in Shares)
Options outstanding
Options Outstanding
As at 31 December 2021 1,614,696 $1.15
Granted - -
Exercised
Forfeited or expired (66,505)
As at 31 December 2022 1,548,191 $1.14
Exercisable as at 31 December 2021 1,539,696 $1.15
Exercisable as at 31 December 2022 1,492,561 $1.25
Summary information regarding the Options outstanding and exercisable as at 31
December 2022 is as follows:
Outstanding Exercisable
Range of Exercise Prices Number Outstanding (in Shares) Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price
(in shares)
(In years)
$0.895- $1.430 1,548,191 2.11 $1.15 1,492,561 $1.15
Summary information regarding the Options outstanding and exercisable at 31
December 2021 is as follows:
Outstanding Exercisable
Range of Exercise Prices Number Outstanding (in Shares) Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price
(in shares)
(In years)
$0.89-$1.430 1,027,412 0.85 $1.23 1,158,923 $1.03
The intrinsic value of options exercisable as at 31, December 2022 ranged from
$0.24 to $1.08 and for options exercisable at 31 December 2021 ranged from
$0.35 to $1.08. The total value of shares vested during the year ended 31,
December 2022 was $2,291.
Warrants
The Group issued warrants to investors to purchase various classes of stock as
follows:
· on 20 July 2016, the Group issued to Hamed Moghaddam warrants to purchase
46,804 Series A-1 Preferred Shares for an exercise price of $0.961 per
Preferred Share, with an expiration date of 20 July 2023;
· on 20 July 2016, the Group issued to Hamed Moghaddam warrants to purchase
62,929 Series A-2 Preferred Shares for an exercise price of $1.430 per
Preferred Share, with an expiration date of 20 July 2023;
· on 20 July 2016, the Group issued to Arcadia warrants to purchase 5,200 Series
A-1 Preferred Shares for an exercise price of $0.961 per Preferred Share, with
an expiration date of 20 July 2023;
· on 20 July 2016, the Group issued to Arcadia warrants to purchase 6,992 Series
A-2 Preferred Shares for an exercise price of $1.430 per Preferred Share, with
an expiration date of 20 July 2023;
· during the years ended 31 December 2017 and 31 December 2018, the Group
entered into a series of capital increase agreements with MEVP, whereby MEVP
purchased 4,484 shares of Fadel Lebanon, 3,000,000 of the Company's Common 4C
Shares and warrants to acquire 1,436,260 Series A-2 Preferred Shares,
2,943,243 Series B Preferred Shares and 1,117,318 Series B-1 Preferred Shares.
In order to exercise the warrants, MEVP must surrender its ownership interests
in Fadel Lebanon; and
· During the year ended 31 December 2018, the Group entered into capital
increase agreements with ISME and B&Y, whereby these entities acquired
3,332 shares of Fadel Lebanon and warrants to acquire 982,651 Series B-2
Preferred Shares. In order to exercise the warrants, ISME and B&Y must
surrender their ownership interests in Fadel Lebanon.
· Effective as of 4 October 2022, all warrants held by MEVP, ISME and B&Y
were exercised and retired in exchange for the issuance of shares of the
Company's preferred and/or common stock, as follow:
- Impact Fund by MEVP Holding SAL
300,000 common shares
1,436,260 preferred shares "Series A-2"
2,943,243 preferred shares "Series B"
1,117,318 preferred shares "Series B-1"
- iSME SAL Holding
580,383 preferred shares "Series A-1"
- B&Y Division One Holding SAL
406,268 preferred shares "Series B21"
16. RETIREMENT PLAN
The Company has a 401(k) safe harbor plan that covers all employees at least
21 years of age who have worked for the Company for at least three months.
Employees vest immediately for all employer matching contributions. The
retirement plan expense was $80,680 for the year ended 31 December 2021 and
$87,251 for the year ended 31 December 2022.
17. LEASES
On 1 March 2019, the Group entered into a 36-month lease for the 2(nd) and
6(th) Floor offices in Beirut, Lebanon. The monthly lease payment is $4,902;
On 1 July 2021, the Group entered into a 12-month lease for the 7(th) Floor
office in Beirut, Lebanon. The monthly lease payment is $2,960;
On 1 May 2021, the Group entered into a 2-month lease for an apartment in
France, with monthly lease payments of €1,600 per month, and extended it to
a 12-month lease from 1 July 2021 at a monthly lease payment of €1,700 per
month. During 2022 the total lease payments was €20,900.
The Lease was terminated end of March 2023.
On January 2023, the Group entered into a 12-month lease for a work space
office in France. The total annual lease payment was €920 for a pack of
200 hours valid for one year.
On 1 March 2022, the Group entered into a 12-month lease for a work space
office in New York. The monthly lease payment is $1,647. The lease has been
renewed for a further 12 months.
On October 2022, the Group entered into a 12-month lease for a work space
office in the UK. The monthly lease payment is $ £650.00.
Total rental expense (USD) Consolidated
Year ending 31 December 2021 $92,272
Year ending 31 December 2022 $72,788
On 1 March 2022, the Group entered into a 2-year renewal operating lease
agreement for the 2(nd) and 6(th) floor office in Beirut. The initial present
value of the future lease payments was determined to be $102,091. The monthly
payment is $4,902.
The future minimum lease payments, exclusive of related costs, are
approximately as follows:
$ Payment Interest Principal
Maturity within 1 year 58,824 4,025 54,799
Maturity after 1 year 9,804 123 9,681
Total: 68,628 4,148 64,480
On 1 July 2022, the Group entered into a 2-year renewal operating lease
agreement for the 7(th) floor office in Beirut. The initial present value of
the future lease payments was determined to be $67,426. The monthly payment is
$3,238.
The future minimum lease payments, exclusive of related costs, are
approximately as follows:
$ Payment Interest Principal
Maturity within 1 year 38,850 3,856 34,994
Maturity after 1 year 19,425 560 18,865
Total: 58,275 4,416 53,859
Rent expense, including related costs, for the year ended 31 December 2021
aggregated approximately $92,272 and $72,788 for the year ended 31 December
2022.
18. SUBSEQUENT EVENTS
On 2 April 2023 the outstanding preferred shares of MEVP, BBEF, iSME and
B&Y were converted into common shares in accordance with the terms of
their agreements pursuant to the IPO. Impact Fund by MEVP Holding SAL
converted their Series A-2, B and B-1 preferred shares into 5,496,821 common
shares, BBEF (Holding) SAL converted their Series A-1 preferred shares into
1,068,837 common shares, iSME SAL Holding converted their Series A-1 preferred
shares into 580,383 common shares and B&Y Division One Holding SAL
converted their Series B-2 preferred shares into 406,268 common shares.
On 2 April 2023, Tarek Fadel and the Company entered into a loan agreement
whereby Mr Fadel agreed to advance a loan (the "Fadel Loan") of £451,346 to
the Company. The Fadel Loan is unsecured and bears no interest or fees. The
Fadel Loan is repayable only as and when, following Admission (and excluding
the issue of the New Shares in the Placing), the Company issues new Shares at
a price at or above the Placing Price.
On 3 April 2023 $300,000 of the line of credit between the Company and Bank of
America, N.A. was repaid leaving an outstanding balance of $700,000.
On 6 April 2023 the Company announced the admission of its entire issued share
capital to trading on AIM, a market operated by the London Stock Exchange.
In connection with its initial public offering the Company raised gross
proceeds of £8.0 million.
On 28 April 2023 the Company announced the issuance of 223,289 new depositary
interests over common shares at a price of £1.44 per share, raising $401,613
which was used to repay part of the Fadel Loan.
On 11 May 2023 the line of credit between the Company and Bank of America,
N.A. was extended until 31 May 2024.
On 20 June 2023 the withholding tax of £518,898 due in the UK was paid by
Image Data Systems (UK) Limited ("IDS") to HMRC. Upon repayment of the loan
between IDS and Fadel Partners UK Limited (expected to be repaid this year)
the withholding tax can be reclaimed from HMRC.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FTMATMTITMLJRecent news on Fadel Partners
See all newsREG - Fadel Partners Inc. - Holding(s) in Company
AnnouncementREG - Fadel Partners Inc. - Director Share Dealings
AnnouncementREG - Fadel Partners Inc. - Results for the year ended 31 December 2024
AnnouncementREG - Fadel Partners Inc. - EBT Share Purchase
AnnouncementREG - Fadel Partners Inc. - 2024 Trading Update and FY 2025 Outlook
Announcement