REG - Fadel Partners Inc. - Results for the year ended 31 December 2024
30/04/2025 07:00
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RNS Number : 7216G Fadel Partners Inc. 30 April 2025
30 April 2025
Fadel Partners, Inc.
('FADEL', the 'Company' or, together with its subsidiaries, the 'Group')
Results for the year ended 31 December 2024
FADEL, the developer of cloud-based brand compliance and rights and royalty
management software is pleased to announce its full year results for the year
ended 31 December 2024. The Company's full Annual Report and Audited
Financial Statements for the year ended 31 December 2024 will be published and
made available on the Company's website (www.fadel.com) by 7 May 2025.
Financial highlights
· Annual Recurring Revenue (ARR) grew by 10% year-on-year to $9.9
million (FY23: $9.0 million), driven by growth in both IPM Suite and Brand
Vision platforms.
· Revenue decreased by 10% to $13.0 million (FY23: $14.5 million),
in line with expectations given the timing of certain license revenue
recognition events in FY23.
· Gross profit of $8.0 million, with a gross profit margin
maintained at 62%, reflecting continued operational efficiency.
· Adjusted EBITDA loss widened to $(3.9) million (FY23: $(1.7)
million), impacted by strategic investment in sales and marketing expansion
post-IPO, partially offset by cost savings implemented in H2 2024.
· Cash and Cash Equivalents at 31 December 2024 of $2.6 million,
with an undrawn $1.0 million credit facility available for further liquidity.
US Dollars ($) 2023 2024 Change (%)( 4 )
Group revenue 14,486,789 13,022,201 (10%)
License/Subscription and Support revenue ( 1 ) 11,395,295 9,665,773 (15%)
Services revenue 3,091,494 3,356,428 9%
Gross profit 9,019,811 8,048,971 (11%)
Gross profit margin (%) 62% 62% -
Adjusted EBITDA( 2 ) (1,731,678) (3,907,271) (126%)
Cash and Cash Equivalents 3,191,458 2,607,422 (18%)
ARR( 3 ) $9.0M $9.9M (10%)
( 1 )Previously titled 'recurring revenue', see Financial Review for more
detail
( 2 ) Earnings after capitalised commission costs and before interest, tax,
depreciation, amortization, exceptional costs and share-based payments.
( 3 ) ARR is the annual recurring revenue for all active customers at each
period end for all license contracts, and subscription and support revenue
that is deemed recurring in nature.
( 4 ) Change % compares 31 December 2023 31 December 2024.
Operational highlights
· Expansion of Brand Vision Client Base: Brand Vision client logos
increased by 67% year-on-year (from 9 to 15), driven by new wins including
L'Oréal US, Los Angeles Tourism & Convention Board, Hanes Brands, Studio
RX and others.
· Expansion of IPM Client Base: IPM Suite client logos increased by
44% year-on-year (from 16 to 22), with new wins including Sanoma, Mad Engine,
Ata-Boy, American Hospital Association and Yoto Play.
· Launch of LicenSee™: In Q2 2024, the Company officially
launched LicenSee™, a purpose-built, mid-market royalty automation solution,
securing strong early customer adoption and building a robust sales pipeline.
· Product Innovation Initiatives: Released enhanced video matching,
audio recognition, and expanded AI-driven content tracking features across
Brand Vision to address broader marketing media monitoring needs.
· Operational Efficiency Gains: Over $1.5 million in annualized
cost savings going into 2025, including the opening of a new R&D delivery
center in Jordan, enabling a shift of R&D resources to a cost-effective
jurisdiction.
· Enhanced Financial Resilience: Conducted a full operational
review resulting in cost optimization programs implemented in Q4 2024 without
compromising ARR goals or client success initiatives.
· Board Strengthening: Appointed Simon Wilson as Chair and Ian
Flaherty as CFO.
Post period end highlights
· Strategic Options Review Underway: In early 2025, the Company
initiated a formal process, working with Oaklins DeSilva+Phillips, to explore
strategic alternatives aimed at enhancing shareholder value.
· Expansion of Commercial Infrastructure: Website redesign and
expanded digital marketing initiatives launched in Q1 2025 have resulted in
increased inbound lead generation and better pipeline quality.
· Launch of Product Approvals Module: Development commenced on a
native Product Approvals module within IPM Suite, scheduled for release in H2
2025, aimed at deepening brand compliance capabilities for Licensors and
expanding mid-market adoption.
· Line of Credit Renewal: In April 2025, the Company's $1.0 million
Bank of America credit facility was successfully renewed through May 2026,
maintaining full availability to support ongoing operations.
· Leadership Enhancements: Joe Gruttadauria assumed an interim
operating role as Head of Sales while remaining a Non-executive Director. The
Company also strengthened its various Board committees, by redistributing
responsibilities across the Non-executive Directors to support governance best
practices.
Tarek Fadel, Chief Executive Officer of FADEL, commented: "In 2024, we
sharpened our focus on operating with discipline and scaling with purpose.
Throughout the year, we took proactive steps to align our cost structure with
growth priorities, enhance capital efficiency, and position FADEL for
sustainable, recurring revenue growth. We made meaningful progress in
expanding our IPM and Brand Vision client bases, investing in product
innovation, and entering the mid-market with our new LicenSee™ offering -
all while navigating a dynamic macro environment. As we look to 2025 and
beyond, we are building a stronger, more resilient FADEL, anchored by a
disciplined operating model, a robust product roadmap, and an unwavering
commitment to creating long-term value for our customers and shareholders."
For further information please contact:
Tarek Fadel, Chief Executive Officer
Ian Flaherty, Chief Financial Officer
Cavendish Capital Markets Limited (Nomad & Broker) Tel: +44(0)20 7220 0500
Jonny-Franklin Adams, Rory Sale (Corporate Finance)
Tim Redfern, Sunila De Silva (ECM)
FADEL Strategic Communications
Devi Gupta - press@fadel.com (mailto:press@fadel.com)
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 main solutions, being IPM Suite (for rights and royalty
management for publishing and licensing) and Brand Vision (an integrated
platform for Brand Compliance & Monitoring that includes Digital Asset
Management, Digital Rights Management, AI-Powered Content Tracking, and a
Content Aggregation platform with over 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, France, Lebanon, Jordan and India.
For more information, please visit the Group's website at: www.fadel.com
(http://www.fadel.com/) .
CHAIR'S STATEMENT
Introduction
I am privileged to provide an update on the progress of Fadel Partners, Inc.
as the new Chairman. I would like to take this opportunity to thank Ken West,
the outgoing Chairman, for his ten years of service to the Company since 2015.
His contributions and support of the senior management team will be missed.
Ken formally resigned from the Board effective January 31, 2025
2024 has been a financially challenging year for the Company due in no small
part to the difficulties in expanding its go to market team leading to new
business sales growth falling short of expectations. Despite this the Company
achieved strong customer retention metrics, especially within its Enterprise
customer segments and converted over fourteen net new customer accounts, in
both the mid-market and enterprise segments. These challenges and successes
were against a background of the human suffering and uncertainty for the
people of Lebanon for many months of the year, and therefore also for our
employees in that region. Future business risk has been ameliorated by the
opening of a new R&D delivery center in Jordan in March of 2024.
During the year the Company reduced its market forecasts and reorganized key
areas of the business to drive more efficient delivery against the revised
forward expectations. An even sharper focus on operating cash flow and capital
efficiency was introduced through process tightening and enhancing resource
allocation. These reorganizational steps and cost reductions were carefully
considered against the need to remain focused on executing our strategy,
especially in the context of continuing product innovation and the use of AI
to enhance customer value through efficient and accurate identification of
licensing breaches.
I am pleased to report that the team has been able to both meet its revised
forecast for 2024, as well as make encouraging progress with product
development to meet the needs of both enterprise and mid-market customers.
On behalf of the Board, I would like to extend my thanks to our employees for
their hard work and commitment during this important phase of the Company's
journey. Also, to some for demonstrating admirable resilience and bravery in
the face of disruption to their daily lives. All their contributions have been
instrumental in delivering the operational and strategic progress that we
report today.
Strategic Direction
The Company remains very focused on improving its mid-market offerings to
incorporate the strength and robustness of its flagship enterprise solution,
IPM, into a more easily consumed mid-market version called Licensee. Together
with a refreshed sales and marketing approach for Picture Desk, the Company
has been able to expand its new logo business growth opportunity through a
broader addressable end customer market. At the same time, the Company has
continued to allocate resources to enhance its products and to meet the rising
demand for AI-driven content monitoring and tracking. Early successes have
been achieved by attracting both notable new clients such as L'Oreal US and
Yves Rocher, as well as expanding existing clients like Philip Morris. This
focus on strategic product enhancements is the foundation for our growth goals
in 2025 and beyond.
In early 2025, the Board initiated a review, in conjunction with its advisors
Oaklins DeSilva+Phillips, of the Company's strategic options to consider the
full range of opportunities to enhance shareholder value. The Company has to
date received a certain level of interest, and his provided high level
information summaries to a targeted group of potentially interested parties.
If the Board feels the structure and pricing is in the interest of all
stakeholders , the process is expected to proceed into the management meeting
phase, followed by a period of due diligence. This review is being conducted
alongside the Board's ongoing commitment to executing against the Company's
long-term strategy of continued product innovation to meet the growing market
demand for the management of the proliferation of digital asset rights.
Further updates will be provided in due course.
Corporate Governance
I am mindful of the fact that as an international organisation I must ensure
that our organisational structure and corporate processes are robust so that
we can continue to deliver against our goals for all stakeholders. At the same
time, we must not diminish the entrepreneurial culture and be able to continue
to move quickly as a technology company. The Group must therefore be
supported by a nimble and broadly experienced Board of Directors who are also
experienced in international software and technology businesses, as well as
the London AIM market. During the year we made several changes to further
strengthen the Board and Executive Directors.
On 24 February, Ian Flaherty, Chief Financial Officer, was appointed to the
Board of the Company. Ian is a Certified Public Accountant in the United
States and previously held various financial management positions within
publicly listed technology companies with direct relevance to Fadel.
On 1 July 2024, I was honoured to be appointed Chair of the Board following a
formal search process. I bring board and advisory experience from a range of
public and private international software businesses and am excited to support
FADEL's continued maturation as a listed company, through my experience with
the AIM market, international cross border software businesses, and M&A.
As noted earlier, effective January 31, 2025 Ken West the outgoing Chair
stepped down from the Board.
Following the year end, we made two further changes to the Board's structure.
First, as announced on 27 January 2025, Joe Gruttadauria assumed the
additional operating role of Interim Head of Sales. Joe's deep career
experience in B2B Enterprise sales has already had a quick and positive impact
on the operations of the Company's go-to-market motions, and on behalf of the
Board I would like to thank him for stepping up to directly assist the
Executive team in this way. While Joe continues to serve as a Non-Executive
Director, he is no longer deemed independent under applicable governance
guidelines. Considering this, Sally Tilleray was appointed Chair of the
Remuneration Committee instead of Joe, in addition to her existing role as
Chair of the Audit Committee. Joe remains a member of the Remuneration
Committee, and I, Simon Wilson, have joined both committees to support their
work.
Second, effective 30 April 2025 Paul Jourdan resigned his Observer seat from
the Board which he has held since the time of the IPO. On behalf of the Board,
I'd like to thank him for his valued time, advice and assistance over the last
two years.
The Board is confident that it has retained an appropriate balance of cost,
skills, experience, and independence to effectively govern the Company. The
Board also recognises the value and importance of high standards of corporate
governance and has, since its IPO, observed the requirements of the Quoted
Companies Alliance ("QCA") Corporate Governance Code.
I believe we have a balanced business that can continue to grow within
acceptable levels of risk tolerance.
ESG
FADEL remains committed to conducting its business responsibly and minimising
environmental impacts across its operations. While we are a small SaaS
business and therefore have a small environmental footprint, it is important
that these values are demonstrated to our customers and other key
stakeholders, and we continue to promote them throughout our workforce and
wider network of commercial partners. The Board continues to assess metrics
for disclosure that appropriately describes progress with ESG.
We also continued to uphold strong social and governance principles, including
a focus on ethical business practices, employee well-being, equal opportunity,
and responsible supplier engagement across all jurisdictions in which we
operate. We remain committed to enhancing transparency and oversight over
time.
Stakeholder Communications
As a board, we are focused on improving clear and regular communications to
all investors and expanding disclosures and key metrics to support enhanced
understanding of the performance of the business. For example, the Company
is now disclosing the key SaaS metric of Annual Recurring Revenue or ARR.
We utilise phone and video briefings and the CEO and CFO offer regular
in-person meetings. As Chair, I am available as a direct line of communication
to all shareholders in case other questions arise that need to be answered
independently, as is our Senior Independent Director, Sally Tilleray.
Looking Forward
We remain mindful of the complexities of the broader macroeconomic and
geo-political environment and continue to manage the business with a clear
focus on capital efficiency and long-term value creation. Our recurring
revenue model and broadening market reach provide a solid foundation for
continued growth in 2025 as we strive to reach and then deliver sustainable
profitability.
Simon Wilson
Chair of the Board
30 April 2025
CEO's STATEMENT
Overview
2024 marked our first full calendar year as a publicly listed company on AIM,
following our IPO in April 2023. Throughout the year, we remained focused on
executing against our strategic priorities while laying the groundwork for
sustainable long-term value creation, amid a complex macro and operating
environment.
We delivered 10% growth in Annual Recurring Revenue (ARR), reaching $9.9
million. This growth was underpinned by client demand across both our IPM
Suite and Brand Vision offerings. Our recurring revenue base continued to
strengthen, supported by new client additions across enterprise and mid-market
segments - including names such as Sanoma, Yoto Players, Hanes Brands, Mad
Engine, Studio RX, L'Oréal US and Yves Rocher. These wins reinforce the
adaptability of our solutions across diverse verticals.
That said, we faced several headwinds during the year. Enterprise sales cycles
continued to lengthen, impacting the timing of deal closures and new client
onboarding. In parallel, building out our sales organization presented
challenges, particularly in recruiting and fully ramping up new sales by the
need for industry-specific domain knowledge, which extends training and
onboarding periods. Additionally, managing operations in our Lebanon office
proved increasingly difficult in 2024 due to geopolitical volatility, which
introduced uncertainty and operational constraints at various points
throughout the year. Despite these external pressures, the team showed
remarkable resilience in maintaining service continuity and client support.
To strengthen our operational position heading into 2025, we undertook a
disciplined review of our cost structure - right-sizing our sales and
marketing teams and improving overall efficiency. These actions, while
difficult, have placed us on more stable footing. Encouragingly, we've seen a
marked improvement in the quality and volume of new pipeline opportunities,
and we are now better positioned to capitalize on them with a leaner, more
focused go-to-market approach.
In early 2025, we also initiated a strategic options review process and
appointed Oaklins DeSilva + Phillips as our advisors, to evaluate avenues that
could further enhance shareholder value.
Importantly, we are seeing signs of political stabilization in Lebanon, which
has eased operational pressures. At the same time, we are expanding our
R&D footprint in Jordan, where we are building new technical capabilities
to support product innovation and scale.
We remain cautiously optimistic about the year ahead - grounded in prudent
financial management, focused execution, and a steadily improving operating
environment. That said, we are mindful of global macroeconomic risks,
including the potential impact of new or evolving tariff regimes, which could
affect some customer purchasing decisions, and potentially elements of our
cost base. We will continue to monitor these developments.
Product Portfolio Expansion
Our strategy remains anchored in continuous innovation across our product
families - IPM Suite, Brand Vision, and PictureDesk - each serving a distinct
but complementary set of market needs. Through targeted development and
investment, we have continued to scale our value proposition and extend our
reach across enterprise and mid-market segments.
Accelerating Adoption of Brand Vision
Brand Vision gained strong momentum in 2024, underpinned by growing demand for
AI-powered tools that help global brands monitor, manage, and enforce content
compliance across an increasingly fragmented digital landscape. Adoption of
our Content Tracking solution accelerated during the year, as enterprise
marketers sought greater visibility into how creative assets were being used
across channels and regions.
We secured several notable new wins, including L'Oréal US, Studio RX, Hanes
Brands, Yves Rocher, and the Los Angeles Tourism & Convention Board, and
saw material expansion from existing clients such as Philip Morris, who
extended their use of Content Tracking into additional business units. These
wins reflect Brand Vision's relevance across key verticals including beauty,
consumer electronics, apparel, and travel, where brand consistency and
speed-to-compliance are essential.
During the year, we also delivered several meaningful product enhancements. We
introduced enhanced video matching capabilities, enabling Brand Vision to
support a wider range of dynamic content use cases, and released new audio and
music recognition functionality - extending our AI-powered tracking
capabilities across multiple media formats. These innovations further position
Brand Vision as a differentiated platform capable of supporting
enterprise-wide brand governance initiatives.
Importantly, we are beginning to see cross-functional adoption of Brand Vision
across marketing, legal, and licensing teams within client organisations. This
shift not only improves retention but also opens new expansion pathways,
especially when paired with our broader IPM and rights management
capabilities.
Launch of LicenSee™ and IPM Mid-Market Expansion
In March 2024, we launched LicenSee™, our purpose-built royalty automation
solution designed to serve smaller licensees and emerging rights holders with
simpler, lower-volume royalty requirements. The product was built to deliver
enterprise-grade automation and accuracy - without the overhead or complexity
of a full-scale IPM Suite deployment. Since launch, LicenSee has gained strong
early traction and continues to build momentum through short sales cycles and
streamlined onboarding.
LicenSee validates our belief that a substantial portion of the licensing
market is underserved - especially among organisations that need to automate
royalty calculations and manage contractual obligations but lack the resources
for complex systems integration. The success of these early deployments
reinforces the scalability of this model and positions LicenSee as a
high-margin, repeatable growth engine at the lower end of the client spectrum.
At the same time, we are seeing growth in demand from the broader
mid-market-organisations that are larger and more complex than LicenSee's core
target, but not yet ready for a full enterprise implementation of IPM Suite.
These companies, often regional brand owners or multi-line licensors, face
sophisticated royalty tracking and product approvals requirements but seek
faster implementation timelines, lower IT overhead, and greater
configurability than traditional enterprise solutions offer.
This segment represents an important strategic focus area for FADEL in FY25
and beyond. In response, we are actively developing packaging and deployment
options that allow for modular adoption of IPM Suite features - bringing the
robustness of our enterprise platform to a wider addressable market with
mid-sized budgets and teams.
Together, LicenSee and our evolving mid-market IPM offerings are enabling us
to serve the full spectrum of client needs, from fast-moving, small-scale
licensees to diversified rights holders managing global licensing portfolios.
These developments materially expand our addressable market and support our
long-term strategy of building a scalable, recurring revenue business with
broad market relevance.
Reinvigorating PictureDesk
PictureDesk remains a core component of FADEL's rights and content portfolio
and continues to offer a compelling solution for publishers, brand owners, and
content-driven organisations. While growth in this product line lagged our IPM
Suite and Brand Vision families in 2024, we believe this reflects relative
prioritisation rather than any decline in market relevance. In fact, we see
renewed opportunity for PictureDesk as market demand for intuitive, AI-driven
media asset management continues to rise.
PictureDesk's underlying technology - particularly its visual search and
metadata automation - has already proven valuable in strengthening our Brand
Vision platform. However, the product also delivers clear standalone value
through:
· Centralised Asset Management: Supporting the ingestion,
organisation, and retrieval of licensed, commissioned, and published assets
across departments and content workflows.
· AI-Powered Visual Search: Enabling creative teams to find the
right image faster using similarity-based search capabilities.
· Content Syndication & Monetisation: Providing content owners
and publishers with a portal to distribute and monetise editorial packages and
digital rights across partners and licensees.
In Q3 2024, we took meaningful steps to reinvest in this business line by
hiring a dedicated sales representative to lead PictureDesk pipeline
development and market engagement. This move reflects our growing confidence
in the segment's long-term potential and our intent to increase visibility and
traction in 2025.
Looking ahead, we anticipate that PictureDesk will benefit from both direct
go-to-market activity and increased cross-sell opportunities, particularly as
content licensing and digital publishing workflows converge. With a refreshed
commercial approach and strong product foundation, we believe PictureDesk can
return to growth and contribute meaningfully to our recurring revenue profile
over time.
Advancing Our Product Strategy
As we continue to build FADEL into the leading platform for rights and royalty
management, product innovation remains central to our strategy. Our 2025
roadmap focuses on two key priorities: expanding platform capabilities to meet
evolving customer expectations and improving operational efficiency through
embedded intelligence and automation.
Firstly, we are investing in the development of a native Product Approvals
module within IPM Suite. Product approvals - used to validate licensed
merchandise against brand guidelines and contractual obligations - are a
critical part of the licensing workflow, especially for IP owners with
physical product lines. Historically, this function has often been managed
through third-party systems, creating inefficiencies and gaps in compliance
tracking.
By bringing this capability into the core IPM Suite platform, we aim to offer
a truly end-to-end solution: from contract execution to royalty processing to
brand compliance. This enhancement is particularly valuable to mid-sized
licensors, who seek the power of an enterprise-grade platform with the
simplicity of a single system. The Product Approvals module is scheduled for
release in H2 2025, and we believe it will materially improve both adoption
and retention in the mid-market segment.
Secondly, we are developing a suite of AI Product Enablements designed to
streamline implementation and increase customer ROI. These capabilities
include:
· Intelligent data mapping to accelerate onboarding and reduce
configuration time
· Predictive analytics to surface usage trends, anomalies, and
revenue leakage risks
· Optimisation insights to help clients refine licensing terms and
maximise value capture
These features will begin rolling out in Q2 2025, and are expected to reduce
onboarding costs, enhance stickiness, and differentiate our offering further
in a competitive market.
Both roadmap tracks are designed not just to deliver feature depth, but to
scale the business more efficiently enabling us to serve more clients, with
greater value, using fewer resources.
Together, these product investments reinforce our commitment to innovation,
customer success, and long-term market leadership in rights, royalties, and
content governance.
Investing in Operational Efficiency and Strategic Alignment
In 2024, we made strides in strengthening our financial position through
decisive, proactive measures aimed at enhancing operational efficiency and
long-term sustainability. These efforts were shaped by a clear focus on
aligning our cost structure with strategic priorities, preserving investment
capacity for growth, and ensuring responsible stewardship of capital as a
publicly listed company.
Key initiatives included:
· Commercial organisation realignment: We right sized our Sales and
Marketing structure to better match near-term sales execution needs while
laying the groundwork for higher productivity and digital lead generation.
This included the deployment of automated sales enablement tools and
performance analytics to improve ROI on commercial spend.
· Optimisation of global delivery capacity: We expanded our R&D
footprint in Jordan, allowing us to shift key operational responsibilities to
lower-cost jurisdictions without compromising service quality. This global
delivery strategy has created greater flexibility and resilience while
improving gross margin potential over time.
· Targeted reductions in operating expenses: We completed a
company-wide review of discretionary spend and headcount utilisation. As a
result, we delivered more than $1.5 million in annualised OPEX and
cost-of-sales savings, with a substantial portion of these savings reinvested
into high-impact growth initiatives, such as product innovation and demand
generation.
· Cash discipline and capital efficiency: Our operating plan for
FY25 has been designed to be fully funded through existing resources, with no
current debt drawn on our Bank of America Credit line. We have maintained
robust cash management throughout the year and remain focused on maintaining
adequate reserves to support future growth opportunities.
These actions reflect our commitment to creating a lean, agile, and scalable
operating model. Importantly, they also reinforce our belief that sustainable
growth is best achieved through balanced execution - maintaining growth
investment while improving profitability and extending our financial runway.
Delivery against growth strategy
In 2024, we laid critical groundwork to advance our long-term growth
objectives - expanding our mid-market presence, strengthening client
relationships, and enhancing recurring revenue potential through more targeted
execution. With IPM Suite and Brand Vision now serving both enterprise and
mid-sized organizations, we have strategically repositioned our product
portfolio to scale more efficiently across diverse verticals.
Our go-to-market strategy continues to centre on three key pillars:
• Purpose-built solutions enabling lower and mid-market expansion across all
product families,
• Land-and-expand execution within our established enterprise customer base,
and
• Strategic product innovation designed to increase retention and create
cross-sell momentum.
We delivered 10% ARR growth in 2024 - a modest result that reflects both
progress and the challenges of an evolving market environment. While the
outcome fell short of our original goals, it highlights the necessity of the
foundational work completed this year. Enhancements in product positioning,
pricing strategy, and commercial execution have begun to show early impact and
leave us better positioned to scale effectively in the periods ahead.
Looking ahead, we remain committed to deepening client engagement, aligning
product delivery more closely with mid-market needs, and reinforcing the
recurring revenue mix that supports scalable, high-margin growth.
Land and Expand
Our ability to grow recurring revenue from existing customers remains a
cornerstone of our model. In 2024, total ARR rose to $9.9 million,
representing 10% year-over-year growth. This performance was underpinned by
continued expansion in our two core platforms:
· IPM Suite ARR increased 5% to $6.9 million, reflecting strong
retention and a healthy cadence of upsells and new deals.
· Brand Vision ARR grew 80% to $2.1 million, demonstrating
deepening customer investment, especially in our Content Tracking solution.
We added seven new IPM Suite clients in the year, including Sanoma, Mad
Engine, Ata-Boy, American Hospital Association, and Yoto Play. These wins
reflect our ability to serve both enterprise and mid-market clients through
scalable implementations. The Sanoma contract, valued at $1.5 million,
includes multi-year licensing and professional services and exemplifies the
depth and durability of our enterprise relationships.
On the Brand Vision side, we welcomed six new customers in 2024, including
L'Oréal US, and Los Angeles Tourism & Convention Board, Hanes Brands and
other existing customers also expanded their usage, extending into Rights
Cloud and Content Tracking. The Brand Vision logo count grew 67%
year-over-year, from 9 to 15 clients.
We note that Marvel Entertainment, while still a client, consolidated its
usage of IPM Suite into the broader Disney platform in 2024. This was the only
client count reduction recorded in the IPM Suite portfolio during the year. In
contrast, Brand Vision experienced no client losses in 2024, with all existing
customers retained and several expanding their usage of the platform.
Our progress in expanding across product lines is also accelerating. Existing
clients increasingly engage with multiple components of our portfolio - using
Brand Vision for creative compliance while simultaneously managing royalties
and contracts through IPM Suite. These cross-sell motions are expected to
scale further as more clients adopt LicenSee and future IPM product
enhancements.
Pipeline
We exited 2024 with sales processes being well defined and we right sized our
sales and marketing expenditures going into 2025. Following our IPO, we
invested in and trained an automation-enabled go-to-market team supported by
multiple lead generation channels. This structure was recently strengthened by
the launch of our redesigned website in Q1-2025 and an expanded digital
marketing program, both of which are now contributing to increased inbound
engagement and qualified pipeline development. We also spent a considerable
amount of time revising and optimizing our lead to opportunity conversion
processes.
We're now seeing more actionable opportunities for IPM Suite in the
mid-market, where these deals typically execute faster than in the enterprise
segment. In the enterprise segment, we continue to engage in Brand Vision and
PictureDesk discussions that reflect the growing demand for rights management
and content management solutions.
However, recent uncertainty around macroeconomic conditions caused by the
rapidly evolving U.S. tariff policy has introduced a degree of caution among
certain customer segments. While FADEL's products and services are not
directly impacted by tariffs, some of our end customer target industries -
such as publishing and licensed consumer goods manufacturing - are affected.
We have observed a shift in some client conversations to a more measured
approach to new business decision cycles.
Despite this, we believe the enhancements made across our commercial
organization and product capabilities, and actual improvements in recent lead
generation activities, continue to support our ability to meet our 2025 ARR
growth targets. We therefore remain cautiously optimistic, but also alert to
potential changes in buying behavior in some of the sectors we serve.
Current trading and outlook
Building on our 10% ARR growth in FY24, FADEL enters 2025 with a solid
operational foundation and disciplined commercial focus. The strategic
decisions taken throughout 2024, including platform investment, cost
optimisation, and commercial realignment, have positioned the Company for a
new phase of scalable growth.
Looking ahead, we expect to deliver the following in FY25:
· Continuing ARR growth, supported by broader product adoption and
deeper client penetration
· Significant improvement in LBITDA, as the benefits of our FY24
cost reduction programme flow through to the bottom line
· Sufficient net cash to fund operations, with no outstanding
balance on the Company's $1M credit facility, which was renewed in April 2025
and remains in place through to May 2026.
While we remain confident in our ability to achieve these goals and meet
market expectations, we are mindful of the increased uncertainty facing our
clients, including the impact of evolving tariff policies across the world. We
continue to monitor these developments closely and will adjust our commercial
approach as needed to sustain momentum and manage risk. We believe the
platform we've built - technologically, organizationally, and commercially
places FADEL in a strong position to adapt and deliver long-term value for
shareholders.
Tarek Fadel
Chief Executive Officer
30 April 2025
CFO's Review
Since joining FADEL as CFO in February 2024, my early focus has been on
strengthening the Company's financial resilience while supporting scalable
growth. Against a complex macroeconomic backdrop, we acted decisively to
improve operational efficiency and align our cost base with long-term
strategic goals. This included a detailed review of our global delivery model,
commercial structure, and discretionary spending.
During the year, we launched a restructuring initiative aimed at reducing
overhead and enhancing margin leverage. A key part of this was the expansion
of our Jordan R&D center, which enabled us to shift delivery capacity to a
more cost-efficient location without compromising service quality. We also
streamlined our commercial support model and implemented cross-functional
systems to increase productivity and transparency across teams.
These actions were taken as part of a broader push across the business to
drive cost diligence and cash efficiency - principles that have been echoed
throughout the organization and reinforced by the Board. At the same time, we
remained committed to funding high-impact growth initiatives, including
product innovation and sales enablement. This disciplined approach to
financial management has laid the foundation for improved operating leverage
and will continue to guide our decision-making as we enter FY25.
Revenue
Revenue for the year was $13.0 million, a decrease of 10% compared to $14.5 million in FY23. As previously disclosed in our 2023 Half-Year Report, this year-on-year reduction reflects an uplift in one-time license revenues in H2 2023 related to a group of IPM Suite clients who transitioned from FADEL-hosted environments to client-hosted or on-premise deployments. In line with US GAAP, license revenue for these customers was recognised in full at contract signing in 2023, whereas in prior periods it would have been amortised across the contract term. This created a one-time benefit in FY23 that was not repeated at the same scale in FY24.
A similar revenue recognition event occurred in H2 2024, although at a lower dollar value due to fewer high-value transitions. These shifts were driven by customer-specific compliance requirements-particularly security and GDPR. As of year-end, we are not aware of any additional customers planning to move from hosted to client-managed environments.
Excluding the impact of these timing differences, underlying performance remained steady, supported by double-digit growth in ARR with customer additions across our IPM Suite and Brand Vision platforms. Service revenue increased by 10% to $3.4 million (2023: $3.1 million), reflecting increased implementation activity, including large-scale rollouts for new IPM clients like Sanoma, and expanded professional services engagements with existing clients such as Pearson.
Expenditure highlights
We maintained cost discipline throughout the year, even as we continued
investing in strategic growth initiatives.
Cost of sales decreased by 9% to $5.0 million (2023: $5.5 million), reflecting
efficiency gains in service delivery and improved resource allocation,
allowing gross margin to remain flat at 62% (2023: 62%).
Research and development expenses remained stable at $3.5 million (2023: $3.8
million), supported by favourable currency movements and allowing for
continued commitment to quarterly product releases and new feature development
across IPM Suite and Brand Vision.
It is important to note that, under US GAAP, we fully expense R&D costs,
whereas many peers using IFRS accounting standards capitalise a portion of
their development spend. This results in a more conservative expense profile
and impacts direct comparison of EBITDA margins.
SG&A increased to $8.6 million (2023: $7.1 million), driven primarily by
planned expansion of our Sales and Marketing function, which accounted for
$4.2 million (2023: $2.9 million) of this increase. These investments were
aligned with the Company's go-to-market expansion following our IPO.
Gross Profit
Gross profit was $8.0 million (2023: $9.0 million), with a gross margin of
62%, consistent with the prior year. While total revenue declined, our ability
to maintain margin percentage reflects ongoing cost control and operational
efficiency.
We expect margins to remain in the 62-67% range going forward, with periodic
fluctuations based on the balance of high-margin license revenue and
lower-margin professional services.
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 Loss
Our adjusted EBITDA loss (a non-U.S. GAAP measure), defined as earnings after
capitalized commission costs and before interest, tax, depreciation,
amortization, exceptional costs, and share-based payments, decreased to $3.9M
(2023: $1.8M) as a result of increased expenditure related to planned growth
investments. This metric is conservative, and when used for comparison with
other companies, it should be noted that, in accordance with U.S. GAAP, we
fully expense our R&D costs, which totalled $3.5M in 2024.
2023 2024
EBITDA (1,990,482) (3,959,347)
Adjustments to operating expenses
Commissions Capitalized during the period (546,048) (474,965)
Exceptional items
IPO Expenses 262,443 -
Restructuring expenses ((1)) - 251,398
Share based payments 542,409 275,643
Total Adjustments 258,804 52,076
Adjusted EBITDA (1,731,678) (3,907,271)
((1)) (primarily consist of severance payments made to employees affected by
our workforce reduction as part of cost-cutting initiatives.) (The
restructuring was necessary to reduce overhead costs, and ensure long-term
financial sustainability)
Annual recurring revenue (ARR)
During 2024, we introduced Annual Recurring Revenue (ARR) as a core internal
and external performance metric, in line with SaaS industry standards. While
ARR is a non-US GAAP measure, it provides a forward-looking view of contracted
subscription and support revenues, offering clearer insight into the scale and
trajectory of our software business. As part of this initiative, we also
calculated ARR retroactively as of 31 December 2023 to provide comparative
context.
We report ARR across three categories: IPM Suite (including LicenSee™),
Brand Vision, and PictureDesk. In 2024, total ARR grew 10%, increasing from
$9.0 million to $9.9 million, driven by solid retention, new client wins, and
continued expansion across our two core platforms:
$ (in millions) As at As at ARR Growth Rate
31 December
31 December
2023
2024
IPM Suite 6.6 6.9 5%
Brand Vision 1.1 2.1 91%
PictureDesk 1.3 0.9 -31%
Total 9.0 9.9 10%
Growth in Brand Vision ARR was particularly strong, reflecting six new client
wins and deepening adoption of our Content Tracking capabilities within the
installed base. IPM Suite delivered steady growth across enterprise and
mid-market segments. As anticipated, PictureDesk ARR declined, largely due to
reduced commercial prioritisation relative to our other product families. This
shift in emphasis-rather than any erosion in market relevance-reflected a
strategic focus on scaling IPM and Brand Vision.
Recognizing the long-term potential of PictureDesk, we completed a major UI
refresh for the product line and subsequently ramped up sales and marketing
efforts in Q4 2024. This investment included hiring a dedicated sales lead and
refining our go-to-market strategy. These early actions are already yielding
results: in the first quarter of 2025, we significantly expanded the
PictureDesk pipeline, including multiple "Private Cloud" installation
opportunities with major magazine publishers. These opportunities typically
range from $75K to $150K in ARR, with some significantly larger. Importantly,
PictureDesk already offers the capabilities required to support these types of
installations, capabilities that have been successfully deployed for existing
clients. These developments position us to reaccelerate PictureDesk growth in
2025 and capture emerging demand for AI-powered media asset management
solutions.
Customer numbers
As with ARR metrics, we track our active client base across the same three core categories: IPM Suite, Brand Vision and PictureDesk. In 2024, total net customer count increased marginally to 140 (2023: 139), driven by new logo additions in IPM and Brand Vision, offset by attrition in PictureDesk.
2023 Wins Loss Merged 2024 Net logo ((1)) expansion (reduction)
IPM Suite 16 7 - (1) 22 44%
Brand Vision 9 6 - - 15 67%
PictureDesk 114 9 (19) (1) 103 -9%
Total 139 22 (19) (2) 140 2%
((1)()) excludes the impact of merged clients
The decline in PictureDesk client count primarily reflected two trends. One
lost client was a "Private Cloud" installation client, which represented the
vast majority of the associated ARR decline. The remaining churn came from
smaller "Public Cloud" instance clients, whose ARR contributions generally
ranged from $3K to $8K per client. In Q1 2025, we successfully renewed our
largest "Private Cloud" client contract, representing over $0.2 million in
annual license value. In parallel, we continued to observe a consistent
pattern of churn and additions among our smaller "Public Cloud" PictureDesk
clients - a dynamic that remains typical of this segment due to their lower
ARR contributions and more variable usage needs.
Cash and working capital
We ended FY24 with $2.6 million in cash (2023: $3.2 million) and no borrowings
under our $1.0 million line of credit, refreshing its full available for
future use. Total receivables stood at $3.0 million (2023: $6.0 million), with
the majority collected shortly after year-end.
Net cash at year-end was $2.4 million which exceeded previously revised
internal forecasts. This was supported by proactive engagement with renewing
clients, improved contract finalisation cycles, and more timely collections.
Cash used in operations totalled $0.6 million (2023: $5.5 million generated),
with the prior year figure notably including proceeds from our IPO. The 2024
outflow reflects revenue timing, investment spend, and normalised working
capital flows.
Ian Flaherty
Chief Financial Officer
30 April 2025
Financial statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
The consolidated Statements of Comprehensive Income of the Group for each of
the years ended 31 December 2023 and 2024 are set out below:
Continuing operations Notes Year ended Year ended
31 December 31 December
2023 2024
$ $
License/subscription and Support 11,395,295 9,665,773
Professional services 3,091,494 3,356,428
Total revenue 4 14,486,789 13,022,201
Cost of fees and services 5,466,978 4,973,230
Gross Profit 9,019,811 8,048,971
Research and development 3,833,225 3,456,310
Selling, general and administrative expenses 7,177,068 8,552,008
Depreciation and amortisation 647,640 700,851
Net interest expense 62,550 72,583
Foreign exchange (gains) / losses (846,035) 275,075
Other income - -
Total operating expenses 10,874,448 13,056,827
Loss before income taxes (1,854,637) (5,007,856)
Income tax (gain) / expense 5 (307,015) 818,485
Net loss after taxes (1,547,622) (5,826,341)
Total foreign currency (losses) / gains (501,406) 134,999
Total comprehensive loss (2,049,028) (5,691,342)
Net income attributable to non-controlling 1 23
interest
Net loss attributable to the Group (1,547,623) (5,826,364)
Net loss after taxes (1,547,622) (5,826,341)
Comprehensive income attributable to non-controlling interest 1 23
Comprehensive loss attributable to the Group (2,049,029) (5,691,365)
Total comprehensive loss (2,049,028) (5,691,342)
Basic and diluted loss per Share ($) 6 (0.12) (0.28)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
The consolidated Statements of Financial Position of the Group for each of the
years as at 31 December 2023 and 31 December 2024 are set out below:
As at As at
31 December 31 December
2023 2024
Assets Notes $ $
Cash and cash equivalents 3,191,458 2,607,422
Accounts receivable, net 8 2,308,580 1,839,305
Unbilled work-in-progress 3,703,895 1,160,680
Income tax receivable 17 660,624 -
Other current assets 298,574 275,984
Current assets 10,163,131 5,883,391
Intangible assets, net 7 2,112,018 1,800,613
Goodwill 7 2,209,470 2,178,198
Furniture, equipment and purchased software 9 136,212 206,678
Contract costs (#Contractcosts) 10 763,323 835,521
Deferred tax asset 5 830,778 -
Right-of-use asset 16 202,228 134,777
Non-current assets 6,254,029 5,155,787
TOTAL ASSETS 16,417,160 11,039,178
Liabilities
Accounts payable and accrued expenses 2,299,550 2,542,049
Income tax payable 5 1,262,702 1,021,905
Deferred revenue 2,642,005 2,849,163
Notes payable - related parties 11 162,396 162,396
Current lease liability 16 67,447 74,248
Current liabilities 6,434,100 6,649,761
Provisions - end of services indemnity 15 467,225 308,824
Deferred revenue 391,090 445,799
Non-current-Lease liability 16 134,781 60,529
Non-current liabilities 993,096 815,152
Total liabilities 7,427,196 7,464,913
Shareholders' equity
Series A-1 Preferred Shares 13 - -
Common shares 13 20,231 20,231
Additional paid-in capital 25,317,043 25,592,686
Accumulated deficit (16,710,650) (22,537,014)
Cumulative translation adjustment 362,280 497,279
8,988,904 3,573,182
Non-controlling interest 1,060 1,083
Total Shareholders' equity 8,989,964 3,574,265
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 16,417,160 11,039,178
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
The consolidated Statements of Changes in Equity of the Group for each of the
years 31 December 2023 and 31 December 2024 are set out below:
Preferred Preferred Common Common Additional paid in capital Accumulated Cumulative translation adjustment Non-controlling interest Total
shares shares shares shares $ deficit $ $ $
# $ # $ $
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
Converting Preferred shares to common (7,552,309) (7,552) 7,552,309 7,552 - - - - -
Issuance of IPO shares - - 5,242,121 5,242 9,438,161 - - - 9,443,403
Capitalization of direct IPO costs - - - - (808,350) - - - (808,350)
Issuance of common shares - - 223,289 223 401,022 - - - 401,245
Commission shares - - 90,630 91 162,039 - - - 162,130
Non-controlling interest - - - - - - - 1 1
Adjustment of common stock - - 360 - - - - - -
Exercise of warrants - - 39,958 40 (40) - - - -
Stock-based compensation - - - - 542,409 - - - 542,409
Net loss - - - - - (1,547,623) - - (1,547,623)
Foreign exchange translation expense - - - - - - (501,406) - (501,406)
As at 31 December 2023 - - 20,231,250 20,231 25,317,043 (16,710,650) 362,280 1,060 8,989,964
Non-controlling interest - - - - - - - 23 23
Stock-based compensation - - - - 275,643 - - - 275,643
Net loss - - - - - (5,826,364) - - (5,826,364)
Foreign exchange translation expense - - - - - - 134,999 - 134,999
As at 31 December 2024 - - 20,231,250 20,231 25,592,686 (22,537,014) 497,279 1,083 3,574,265
CONSOLIDATED STATEMENTS OF CASH FLOWS
The consolidated Statements of Cash Flows of the Group for each of the years
ended 31 December 2023 and 2024 are set out below:
Year ended Year ended
31 December 31 December
2023 2024
$ $
Net loss after taxes (1,547,622) (5,826,341)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortisation 647,640 700,851
Non-cash stock compensation 542,409 275,643
Non-cash commission shares 162,130 -
Non-cash impact of foreign exchange on intangibles (242,518) 71,102
Changes in assets and liabilities
Accounts receivable (445,186) 469,275
Unbilled work-in-progress (2,774,180) 2,543,215
Income tax receivable (660,624) 660,624
Other current assets (84,179) 22,590
Deferred tax asset 123,933 830,778
Capitalisation of commissions (546,048) (474,965)
Right of use assets (92,500) 67,451
Accounts payable and accrued expenses (564,542) 16,647
Income tax payable 236,100 (240,797)
Deferred revenue (302,686) 261,867
Net cash used in operating activities (5,547,873) (622,060)
Purchase of furniture, equipment and software (64,328) (96,975)
Net cash used by investing activities (64,328) (96,975)
Proceeds with issuance of IPO common shares 8,635,053 -
Cash received from issuance of common shares 401,245 -
Proceeds from shareholder loan 564,009 -
Repayment of shareholder loan (401,613) -
Proceeds from line of credit - 300,000
Repayment of line of credit (1,000,000) (300,000)
Proceeds/(repayment) from related party Loan (75,000) -
Net cash provided by financing activities 8,123,694 -
(501,406) 134,999
Effect of exchange rates on cash
Net (decrease)/increase in cash and cash equivalents 2,010,087 (584,036)
Cash and cash equivalents, beginning of year 1,181,371 3,191,458
Cash and cash equivalents, end of year 3,191,458 2,607,422
Supplemental disclosure of cash flow information
Cash paid for interest 72,155 59,792
Cash received from interest 22,622 3,000
Cash paid for income taxes 21,415 207,782
Conversion of preferred stock to common shares 7,552 -
Conversion of warrants to common shares 40 -
Commissions and fees paid through issuance of common shares 970,480 -
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") disolved November 2023.
· 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 United Kingdom ("UK") in January 2015,
while Fadel Canada was formed in Canada in June 2021 and subsequently
dissolved in November 2023. The primary reason for this dissolution was to
initiate investment in the UK and expand our workforce there, following our
decision to go public in that market. Consequently, it's more logical to close
the entity in Canada and concentrate on strengthening our operations in the
UK. Fadel France was formed in France in February 2020. IDS was formed in
April 1992 in the UK, by an unrelated party, and acquired by the company 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, London, Paris and Beirut (Lebanon) and is engaged in providing and
servicing its Intellectual Property Rights and Royalty Management suite of
software.
On 6 April 2023, the Company was listed and started trading on AIM, a market
operated by the London Stock Exchange plc ("AIM").
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 $2.6 million in cash and cash equivalents on the Statement of
Financial Position as at 31 December 2024. As at 31 December 2024, the Group
had negative working capital of approximately $0.8 million and an accumulated
deficit approximating $22.5 million. Additionally, the Group had a net loss of
approximately $5.8 million and cash used in operating activities of
approximately $0.6 million during the year ended 31 December 2024.
During Q4 2024, the Company undertook a comprehensive operational and
structural review which led to significant cost-saving measures across key
functions. These included the realignment and optimization of the Sales and
Marketing and Services teams, along with transitioning certain delivery
functions to lower-cost regions. These actions are expected to result in a
reduction in annualized cost of sales and operating expenses exceeding $1.5
million, while continuing to support revenue growth and high service levels.
The leaner cost structure meaningfully extends the Company's cash runway and
supports its strategic path to cash flow breakeven.
The Group continued to expand its Annual Recurring Revenue (ARR), growing
approximately 10% year over year in 2024. The Group also maintains access to
an undrawn $1.0 million credit facility, providing additional liquidity if
required.
Taking into account the Company's cash position, access to additional
liquidity, continued ARR expansion, and the substantial cost reductions
implemented in Q4 2024, management believes the Group has sufficient resources
to meet its obligations and continue as a going concern for a period of at
least twelve months from the date of issuance of these consolidated financial
statements. Accordingly, the financial statements have been prepared on a
going concern basis.
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 (dissolved November 2023) 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
Consolidated 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 and cash equivalents, 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, and France. At 31 December 2024, 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$1.8 million out of a total of US$2.6 million cash deposits. The Company
believes the risk is limited as the institutions are large national
institutions with strong financial positions. 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.
Accounts receivable, unbilled work-in-progress and credit losses
Accounts receivable is 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.
Credit losses to date have been insignificant and within management's
expectations. The company provides an allowance for credit losses that is
based upon a review of outstanding receivables, historical collection
information, expected future losses, and existing economic conditions. Account
balances are charged against the allowance after all means of collection have
been exhausted and the potential for recovery is considered remote. See Note 8
for more details.
Revenue Recognition
The Group follows the guidance of ASC 606, "Revenue from Contracts with
Customers," and ASC 340, "Other Assets and Deferred Cost," to account for
revenue from 1 January 2019 onward.
Sources of Revenue
The Group's revenue is primarily derived from the following sources:
1. License Fees
2. Subscription Fees
3. Customer Support
4. Professional Services
Recognition Criteria
Revenue is recognized when control of the promised goods or services is
transferred to customers in an amount that reflects the consideration the
Group expects to receive in exchange for those goods or services. When a
contract includes variable consideration, such as overage fees, contingent
fees, or service level penalties, the Group estimates the amount to include in
the transaction price only if it is probable that a significant reversal of
cumulative revenue will not occur once the uncertainty associated with the
variable consideration is resolved.
The Group applies the following five steps to determine the amount of revenue
to recognize:
1. Identify the contract(s) with a customer.
2. Identify the performance obligations in the contract.
3. Determine the transaction price.
4. Allocate the transaction price to the performance obligations in the
contract.
5. Recognize revenue when or as the Group satisfies a performance
obligation.
Performance Obligations and Timing of Revenue Recognition
ASC 606 requires the identification of distinct performance obligations within
a contract. The Group customer agreements primarily fall into the three
distinct contract structures:
1. SaaS Offerings (Brand Vision, Picture Desk, LicenSee)
2. IPM Suite: FADEL Hosted
3. IPM Suite: Client Hosted
Each of these contract structures includes various promised goods and services
that have been assessed to determine if they are distinct or not:
Contract Structures Promised Goods and Services Distinct Performance Obligations Revenue Recognition
1- SaaS Products - SaaS Subscriptions SaaS subscription, support, and software updates are highly interdependent and Over Time
interrelated, forming a single performance obligation.
- Support
- Software Updates
- Services Services can be provided independently of the SaaS product functionality, As Delivered
either by the customer or other third parties.
2- IPM Suite: FADEL Hosted - Software License The software license and hosting are highly interdependent and are treated as Over Time
a single performance obligation.
- Hosting
- Support / ESS Support and ESS provide additional, but not essential, benefits separate from Over Time
the software license and hosting.
- Software Updates Software updates are considered separate, allowing customers to decide on Over Time
implementation independently.
- Services Additional services are not essential to the core functionality of the As Delivered
software license and hosting.
3 - IPM Suite: Client Hosted - Software License The software license is distinct since it does not depend on other As Delivered
FADEL-managed services.
- Support / ESS These remain separate from the software license, enhancing customer experience Over Time
but not critical for core software operation.
- Software Updates Clients can choose whether to implement updates, keeping this service separate Over Time
from the primary software license obligation.
- Services Additional services are not essential to the core functionality of the As Delivered
software license and hosting.
The Group allocates the transaction price first by considering if standalone
sales data is available for each identified performance obligation. Based on a
review of historical subscription agreements, the combined Software License or
SaaS Subscription is sold and renewed on a standalone basis. Consequently, the
Group utilizes these observable inputs to develop the standalone selling
prices of these services.
The Group typically invoices customers annually, with payment terms requiring
settlement within 30 days of invoicing. Amounts invoiced are recorded as
accounts receivable and as either unearned revenue or revenue, depending on
whether control has transferred to the customer.
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 at 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. The Group has also elected to not include
amortisation of the costs of obtaining a revenue contract within gross profit
in order to help the reader see the business through the eyes of management.
Research and Development Costs:
The Company incurs research and development ("R&D") costs related to the
development of software products that are marketed externally as well as
internally hosted cloud-based solutions. As such, the Company evaluates its
software development activities under both ASC 985-20 (Software to be Sold,
Leased, or Marketed) and ASC 350-40 (Internal-Use Software).
In accordance with these standards, the Company historically expenses all
R&D costs as incurred. While certain costs could potentially qualify for
capitalization under the applicable guidance, management has determined that,
due to the integrated nature of development activities and the inability to
reasonably segregate capitalizable costs from non-capitalizable costs on a
cost-effective basis, all costs are expensed as incurred.
Deferred Revenues
FADEL's contract liabilities primarily consist of amounts invoiced to
customers in advance of the delivery of services or the satisfaction of
performance obligations under licensing and professional services agreements.
As of January 1, 2024 and 2023, deferred revenue balances were $3,033,095 and
$3,335,781, respectively. During the year ended December 31, 2024, $2,650,934
of the deferred revenue was recognized as revenue (2023: $2,348,899).
Unbilled Work-in-Progress
Unbilled work-in-progress represents revenue recognized over time under ASC
606, for performance obligations satisfied but not yet invoiced as of the
reporting date, and is included in contract assets on the balance sheet.
As of January 1, 2024 and 2023, unbilled work-in progress balances were
$3,703,895 and $729,915 respectively. During the year ended December 31, 2024,
$1,800,426 of the unbilled revenues was billed (2023: $287,697).
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 amortized.
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. The
Group determined that an impairment charge was not necessary during the years
ended 31 December 2023 and 2024.
Intangible assets other than goodwill
The Group has three categories of intangible assets other than goodwill:
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 years ended 31 December 2023 and 2024.
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 years ended 31 December 2023 and 2024.
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 years ended 31 December 2023
and 2024.
Billed accounts receivable and concentrations of credit risk
As at 31 December 2024, there were two significant customers (defined as
contributing at least 10%) that accounted for 49% of accounts receivable.
As at 31 December 2023, there were two significant customers (defined as
contributing at least 10%) that accounted for 72% of accounts receivable
Accounts payable and concentrations of credit risk
As at 31 December 2024, there were two significant vendors (defined as
contributing at least 10%) that accounted for 44% of accounts payable.
As at 31 December 2023, there were three significant vendors (defined as
contributing at least 10%) that accounted for 58% of accounts payable.
Unbilled work-in-progress and concentrations of credit risk
As at 31 December 2024, there were two significant customers that accounted
for 69% (34% and 35%) of unbilled work-in-progress.
As at 31 December 2023, there were three significant customers that accounted
for 76% (39%, 19% and 18%) of unbilled work-in-progress.
Segmental reporting
The Group reports its business activities in two areas:
· License/subscription and support revenue; and
· Professional services,
which are reported in a manner consistent with the internal reporting to the
CEO, who has been identified as the chief operating decision maker.
Revenue concentrations
During 2024, the five largest customers accounted for an aggregate of
$6,379,336 of revenue, some 49% of revenue from continuing operations
During 2023, the five largest customers accounted for an aggregate of
$8,769,838 of revenue, some 61% of revenue from continuing operations
Top 5 Customers' revenue concentration Revenue 2023 % of Total Revenue Revenue 2024 % of Total Revenue
$'000
License/subscription $ 5,944 41% $ 4,004 31%
Support 720 5% 455 3%
Services 2,106 15% 1,920 15%
Total $ 8,770 61% $ 6,379 49%
Advertising and promotion costs
Advertising and promotion costs are expensed as incurred. These costs totalled
$781,410 for the year ended 31 December 2023 and $1,001,898 for the year ended
31 December 2024.
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.
Leases
In February 2016, Financial Accounting Standards Board ("FASB") issued
guidance Accounting Standards Codification ("ASC") 842, "Leases", to increase
transparency and comparability among organizations by requiring the
recognition of right-of-use ("ROU") assets and lease liabilities on the
Consolidated Statements of Financial Position. Most prominent among the
changes in the standard is the recognition of ROU assets and lease liabilities
by lessees for those leases classified as operating leases. Under the
standard, disclosures are required to meet the objective of enabling users of
financial statements to assess the amount, timing, and uncertainty of cash
flows arising from leases. The Company adopted FASB ASC 842 effective 1
January 2022.
The Company determines if an arrangement is a lease at inception. If
applicable, operating leases are included in operating lease ROU assets, other
current liabilities, and operating lease liabilities on the accompanying
Consolidated Statements of Financial Position. If applicable, finance leases
are included in property and equipment, other current liabilities, and other
long-term liabilities on the accompanying Consolidated Statements of Financial
Position.
ROU assets represent the right to use an underlying asset for the lease term
and lease liabilities represent our obligation to make lease payments arising
from the lease. Operating lease ROU assets and liabilities are recognized at
commencement date based on the present value of lease payments over the lease
term.
Foreign currency
The Group's reporting currency is the US Dollar. The functional currency of
foreign operations, excluding the Lebanon entity, is the local currency for
the foreign subsidiaries. Assets and liabilities of those 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 Statements of Comprehensive Income in the
period in which they occur.
The exchange rate used to translate the sterling pound ("£"), ("EURO") and
(CAD) into $ for the purpose of preparing the 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 Consolidated Statements of Financial Position.
In accordance with applicable US GAAP, on January 1, 2023, our company
transitioned Fadel Lebanon to a USD functional currency entity due to the
hyperinflationary conditions prevalent in the Lebanese currency. As a result,
all financial statements for periods end 31 December 2023 and 2024, reflect
the Lebanon subsidiary's operations and financial position in USD.
Comprehensive loss
Comprehensive loss consists of two components:
• net loss; and
• other comprehensive loss.
Other comprehensive loss refers to revenue, expenses, gains and losses that
are recorded as an element of Shareholder's equity but are excluded from net
loss. Other comprehensive 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 Consolidated
Statements of Financial Position.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or
other standard setting bodies and adopted by the Company as at the specified
date. Unless otherwise discussed, the Company believes that the impact of
recently issued standards that are not yet effective will not have a material
impact on the Group's Consolidated Statements of Financial Position,
Consolidated Statements of Comprehensive Income or Consolidated Statements of
Cash Flows.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU
2016-13)". ASU 2016-13 requires that credit losses be reported as an allowance
using an expected losses model, representing the entity's current estimate of
credit losses expected to be incurred. The accounting guidance currently in
effect is based on an incurred loss model. For available-for-sale debt
securities with unrealized losses, this standard now requires allowances to be
recorded instead of reducing the amortized cost of the investment. The
amendments under ASU 2016-13 are effective for interim and annual fiscal
periods beginning after 15 December 2022. The Company adopted this standard as
of 1 January 2023, with no material impact on its consolidated financial
statements.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic
280): Improvements to Reportable Segment Disclosure". This standard requires
disclosure of significant segment expenses that are regularly provided to the
chief operating decision maker ("CODM") and included within each reported
measure of segment profit or loss, an amount and description of its
composition for other segment items to reconcile to segment profit or loss and
the title and position of the entity's CODM. The amendments in this update
also expand the interim segment disclosure requirements. This standard is
effective for fiscal years beginning after 15 December 2023, and interim
periods within fiscal years beginning after 15 December 2024 and early
adoption is permitted. The Company is currently evaluating the potential
impact that this new standard will have on our consolidated financial
statement disclosures.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740):
Improvements to Income Tax Disclosures", which is intended to provide
enhancements to annual income tax disclosures. In particular, the standard
will require more detailed information in the income tax rate reconciliation,
as well as the disclosure of income taxes paid disaggregated by jurisdiction,
among other enhancements. The standard is effective for years beginning after
15 December 2024 and early adoption is permitted. The Company is currently
evaluating the impact of the standard on the presentation of its consolidated
financial statements and footnotes.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting
Comprehensive Income - Expense Disaggregation Disclosures (Topic 220):
Disaggregation of Income Statement Expenses. This standard enhances the
transparency of financial reporting by requiring public entities to disclose
additional information about the nature of certain expense line items
presented in the income statement. FADEL is currently evaluating the impact of
this standard on its financial statement disclosures.
4. SEGMENTAL REPORTING
The Group reports its business activities in two areas:
· License/subscription and support revenue; and
· professional services,
which are reported in a manner consistent with the internal reporting the
Chief Executive Officer, 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 (which includes
PictureDesk) and hence to aid the readers understanding of our results, the
split of revenue from these categories is shown below:
As at As at
31 December 31 December
2023 2024
$ $
Revenue
Licence/Subscription
IPM Suite 7,407,547 6,432,379
Brand Vision 2,312,778 2,559,367
Total Licence/Subscription 9,720,325 8,991,746
Support
IPM Suite 1,674,970 674,027
Brand Vision
Total Support 1,674,970 674,027
Licence/subscription and support 11,395,295 9,665,773
Professional services 3,091,494 3,356,428
Total Revenue 14,486,789 13,022,201
Cost of Sales
License/Subscription and support 3,010,432 3,394,219
Professional services 2,456,546 1,579,011
Total cost of sales 5,466,978 4,973,230
Gross Profit Margins
Profit margin licence/subscription and support 74% 65%
Profit margin service 21% 53%
Total gross profit margin 62% 62%
5. INCOME TAXES
The components of income/(loss) before income taxes are as follows:
As at As at
31 December 31 December
2023 2024
$ $
Domestic (3,437,382) (4,817,109)
Foreign 1,101,596 (83,175)
US taxable profit before income taxes (2,335,786) (4,900,284)
Provision for income taxes consisted of the following:
Provision components are as follows:
As at As at
31 December 31 December
2023 2024
$ $
Current:
Foreign (454,704) 90,025
Federal 16,283 7,041
State 7,223 (109,360)
Total current expense/(income) (431,198) (12,294)
Deferred:
Foreign (39,542) 39,732
Federal 6,541 587,582
State 157,184 203,465
Total deferred expense 124,183 830,779
Provision for/(benefit from) income taxes (307,015) (818,485)
Deferred:
The differences between income taxes expected at the U.S federal statutory
income tax rate and income taxes reported were as follows:
Effective Tax Rate Reconciliation Tax Rate As at Tax Rate As at
As at 31 December As at 31 December
31 December 2023 31 December 2024
2023 % 2024 %
$ $
U.S federal income tax (benefit) at statutory rate (490,515) 21 (1,029,060) 21
State tax (net of federal benefit) 143,385 (6) (186,769) 4
Foreign tax rate differential (624,689) 27 (8,785) -
Meals and entertainment 3,343 0 - -
GILTI income 599,441 0 459,569 (9)
Stock Compensation - - 57,885 (1)
Change in Valuation Allowance - - (316,895) 6
True Ups - - 1,894,965 (39)
Research & development credit - - - -
SALT rate change 19,504 (1) - -
Other 42,014 (2) (42,692) 1
Provision for/(benefit from) income taxes (307,015) 13 828,218 (17)
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, France, Lebanon and
the UK.
U.S Companies are eligible for a deduction that lowers the effective tax rate
on certain foreign income. This treatment is referred to as the
Foreign-Derived Intangible Income deduction.
As at 31 December 2023, the Company had a federal, state, and foreign NOL
carry forwards of approximately $135 thousand, $1.5 million, and $40 thousand,
respectively. The state NOL will begin to expire in 2037. As at 31 December
2023, the Company had foreign NOLs in the UK and state NOLs in California,
Connecticut, Florida, Massachusetts, New York and Pennsylvania.
As at 31 December 2024, the Company had a federal and state NOL carry forward
of approximately $2.5 million and $2.8 million. The state NOL will expire
beginning in 2037. As at 31 December 2024, the Company had NOLs in California,
Connecticut, Florida, Massachusetts, New York and Pennsylvania.
The TCJA introduced a provision to tax global intangible low-taxed income
("GILTI") of foreign subsidiaries. For the years ended 31 December, 2024 and
2023, the Company had to include GILTI relating to the Company's foreign
subsidiaries. The Company elected to account for GILTI as a current period
cost.
Significant components of the Company's deferred tax assets and deferred tax
liabilities are as follows:
Deferred Tax Table
As at As at
31 December 31 December
2023 2024
$ $
Amortisation 629,016 780,186
Net Operating loss carry forwards 28,306 525,250
Net Operating loss carry forwards (state) 96,109 175,098
Net Operating loss carry forwards (foreign) 2,744,200 675,799
Reserves and accruals 117,276 78,839
Deferred revenue 97,894 111,410
R&D credit - -
Net deferred tax assets 3,712,801 2,346,582
Less valuation allowance (2,704,468) (2,346,582)
Total deferred tax assets (1,008,333) -
Total deferred tax liabilities (177,555) -
Deferred tax assets, net 830,778 -
As required by the authoritative guidance on accounting for income taxes, the
Company evaluates the realizability of deferred tax assets on a jurisdictional
basis at each reporting date. Accounting for income taxes requires that a
valuation allowance be established when it is more likely than not that all or
a portion of the deferred taxes will not be realized. The Company considers
all positive and negative evidence in determining if, based on the weight of
such evidence, a valuation allowance is required. In circumstances where there
is sufficient negative evidence indicating that the deferred tax assets are
not more likely than not realizable, the Company establishes a valuation
allowance. The significant 2024 pre-tax loss, coupled with cumulative book
losses projected in early future years, was significant negative evidence
considered by the Company. As a result, the Company's valuation balance as of
31 December 2024 is $2.3M.
The change in the valuation allowance is as follows:
Beginning of the Year Additions/ (Deductions) Balance at the end of the year
2023
Reserves Deducted from deferred income taxes, net: 954,941 (2,580,475) 3,535,416
Valuation Allowance - (2,704,638) (2,704,638)
2024
Reserves Deducted from deferred income taxes, net: 3,535,416 (1,147,674) 2,387,742
Valuation allowance (2,704,468) (316,895) (2,387,572)
At 31 December 2024, the Company did not have any unrecognized tax benefits
and did not anticipate any significant changes to the unrecognized tax
benefits within twelve months of this reporting date. In the year ended 31
December 2024, the Company recorded no interest and penalties on income taxes.
At 31 December 2024, there was no accrued interest included in income taxes
payable.
The Company considers the earnings of its foreign entities to be permanently
reinvested outside the United States based on estimates that future cash
generation will be sufficient to meet future domestic cash needs. Accordingly,
deferred taxes have not been recorded for the $2.1 million of undistributed
earnings of the Company's foreign subsidiaries. As a result of the Tax Cuts
and Jobs Act ("TCJA") and the current U.S. taxation of deemed repatriated
earnings, the additional taxes that might be payable upon repatriation of
foreign earnings are not significant. All other outside basis differences not
related to earnings were impractical to account for at this period of time and
are currently considered as being permanent in duration.
6. EARNINGS PER SHARE
The Company computes earnings (loss) per share in accordance with ASC 260,
Earnings per Share, which requires presentation of both basic and diluted
earnings per share on the face of Consolidated Statements of Comprehensive
Income. Basic earnings (loss) per share is computed by dividing net income
(loss) available to common shareholders by the weighted average number of
outstanding shares during the period.
Diluted earnings (loss) per share gives effect to all dilutive potential
common shares outstanding during the period. Due to their anti-dilutive
effect, the calculation of diluted net loss per share for the years ended 31
December 2023 and 31 December 2024 does not include stock options and
warrants. The number of dilutive shares would have been 1,846,296 and
1,689,826 as at 31 December 2024 and 31 December 2023, respectively.
As at As at
31 December 31 December
2023 2024
$ $
Total comprehensive income attributable to Shareholders (2,049,028) (5,691,342)
Weighted average number of Shares 16,772,311 20,231,250
Basic and diluted earnings per share ($) (0.12) (0.28)
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 ($7.4
million (£5.5 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 ($0.4 million (£0.30 million));
· customer relationships ($0.4 million ((£0.29 million)); and
· software / technology assets ($2.07 million (£1.53 million)).
The following table shows the current carrying value of the intangible
assets. The information is presented in US Dollar 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 2022 2,100,432 356,956 1,857,133 358,249 4,672,770
Additions
As at 31 December 2023 2,209,470 375,487 1,953,542 376,847 4,915,346
Additions
As at 31 December 2024 2,178,198 370,172 1,925,890 371,513 4,845,773
Amortisation and impairment:
As at 31 December 2022 - 45,757 238,060 45,923 329,740
Amortisation charge for the period - 36,651 190,683 36,784 264,118
As at 31 December 2023 - 82,408 428,743 82,707 593,858
Amortisation charge for the period - 38,234 196,635 38,235 273,104
As at 31 December 2024 - 120,642 625,378 120,942 866,962
Carrying amount:
As at 31 December 2022 2,100,432 311,199 1,619,073 312,326 4,343,030
As at 31 December 2023 2,209,470 293,079 1,524,799 294,140 4,321,488
As at 31 December 2024 2,178,198 249,530 1,300,512 250,571 3,978,811
The approximate estimated future amortization expense is $261,000 (£212,537)
each year, for the next five years
(2025-2029).
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 $2.28 million (£1.69 million) (of which $1.96 million (£1.45
million) was cash and $0.34 million (£0.25 million) was net working capital).
Goodwill was therefore determined to be $2.34 million (£1.74 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 $6.7 million (£5 million). A final payment of $0.58 million
(£428,874), as assessed at 31 December 2021. A revised final payment of $0.63
million (£470,032) 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 $568,867 (£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 it carrying amount and no impairment is needed.
8. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
As at As at
31 December 2023 31 December 2024
$ $
Accounts receivable 2,330,600 1,952,329
Allowance for doubtful accounts (22,020) (113,024)
Accounts receivable, Net 2,308,580 1,839,305
9. FURNITURE, EQUIPMENT AND PURCHASED SOFTWARE
Furniture, equipment and purchased software consist of the following:
As at As at
31 December 2023 31 December 2024
$ $
Furniture, equipment and purchased software 266,353 363,328
Accumulated depreciation (130,141) (156,650)
Furniture and equipment 136,212 206,678
The depreciation expense was $26,003 and $16,286 for the years ended 31
December 2024 and 2023,
respectively.
10. CONTRACT COSTS
The Group accounts for commission costs in accordance with ASC 606, Revenue
from Contracts with Customers, which requires the capitalization of
incremental costs of obtaining a contract when the expected amortization
period is greater than one year. These costs are amortized on a systematic
basis consistent with the pattern of transfer of the goods or services to
which the asset relates. Amortization periods for customer lives typically
range from 5 to 10 years.
As of 31 December 2024, and 2023, the Group recorded accumulated amortization
of $1,863,969 and $1,461,203, respectively. The Group has elected not to apply
the practical expedient available under ASC 606 for contracts with a duration
of less than one year.
Contract costs consist of the following:
As at As at
31 December 2023 31 December 2024
$ $
Contract Costs - Opening balance 584,510 763,323
Commissions capitalised during the year 546,048 474,965
Amortisation charge for the year (367,235) (402,767)
Contract costs - Ending Balance 763,323 835,521
11. RELATED PARTIES
In January 2023, the Group entered into a demand note agreement totalling up
to $50,000 with a Director of Fadel Lebanon for the purpose of facilitating
banking transactions and supporting working capital needs in Lebanon. The note
carries 0% interest per annum, compounded annually. The outstanding balance
was fully repaid during the year ended 31 December 2023. 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
equivalent to $564,009. The Fadel Loan is unsecured and bears no interest or
fees. The Company made a loan repayment of $401,613 on 28 April 2023 after the
issuance of 223,289 new depositary interests ("New Shares") over common shares
at a price of £1.44 per share (the "Placing"). As of 31 December 2024, the
remaining balance on the Fadel Loan is $162,396 and 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 or above the placing price.
12. LINE OF CREDIT: Bank of America
The Group maintains access to a revolving credit facility with Bank of
America, N.A., originally established in June 2022 and renewed on an annual
basis. The facility provides for borrowings of up to $1.0 million to support
working capital and general corporate purposes.
In 2023, the Group repaid $1.0 million in outstanding borrowings originally
drawn under the facility in 2022. During the year ended 31 December 2024, the
Group drew $300,000 on the facility, which was fully repaid prior to year-end.
Borrowings during the year bore interest at a variable rate equal to the U.S.
Prime Rate plus 0.95%.
The facility is secured by substantially all assets of Fadel Partners, Inc.,
and is further supported by a personal guarantee from the Group's Chief
Executive Officer, Tarek Fadel.
Subsequent to year end, on April 4, 2025, the facility was renewed and
extended through 31 May 2026.
13. COMMON AND PREFERRED STOCK
The Company has authority to issue up to 150,000,000 shares at a par value of
$0.001 per share. As of 31 December 2023, there were no preferred shares
outstanding. A total of 6,385,937 preferred shares previously issued were
converted into common shares in connection with the Company's initial public
offering during 2023.
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 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 2 May 2023, the Company announced the issuance of 223,289
new depositary interests over common shares at a price of £1.44 per share,
raising $401,245.
On 4 August 2023 the company announced that following receipt of two notices
to exercise warrants over a total of 121,925 common shares of $0.001 in the
Company (the "Common Shares") on a net exercise basis, the Company has
concluded the exercise resulting in the issuance of 39,958 Common Shares.
These warrants were issued in July 2016 as part of a previous capital raising
process. As the warrants were exercised on a net exercise basis there are no
proceeds due to the company and following the exercise, no warrants remain
outstanding in the Company.
As at 31 December 2023 and 2024, the Company had 20,231,250 common shares of
$0.001 each in issue. No additional shares were issued during the year ended
31 December 2024. Shareholders may use this figure as the denominator by which
they are required to notify their interest in, or any change to their interest
in, the Company under the Disclosure Guidance and Transparency Rules.
14. 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 961,267 shares
were granted and remain outstanding as at 31 December 2023 and 793,830 remain
outstanding as at 31 December 2024. Following Admission to AIM on 6 April
2023, the Company does not intend to operate the 2014 Equity Incentive Plan to
grant further options, as it was superseded by the 2023 Equity Incentive Plan.
Outside of the above 2014 Equity Incentive Plan, are 576,924 non-plan options
with an exercise price of $1.03. These non-plan options were fully vested at
31 December 2021 and expired in February 2023. On 2 April 2023, the Board
approved the reissuance of these non-plan options in the same amount (with a
ten- year term and an exercise price of £1.44 per share. As at 31 December
2024, the 576,924 non-plan options remained outstanding.
On 2 April 2023, the Directors approved the "2023 Equity Incentive Plan" which
supersedes the 2014 Plan. Options may be granted at an exercise price
determined by the Remuneration Committee which will be not less than the fair
market value of a share on the date of grant (i.e. the current market price).
Options may not be exercised later than the tenth anniversary of the date of
the grant (or such earlier date specified when granted). These options vest
over four years from date of grant. For the year ended 31 December 2024,
557,920 options were granted under the "2023 Equity Incentive Plan" and
1,723,952 remain outstanding.
Determining the appropriate fair value model and the related assumptions
requires judgment. The fair value of each option granted is estimated using a
Black-Scholes option-pricing model on the date of grant as follows:
For the year ended 31 December 2023 For the year ended 31 December 2024
Estimated dividend yield 0% 0%
Expected stock price volatility 34% 30%
Risk-free interest rate 3.57% 4.19%
Expected life of option (in years) 6.4 7
Weighted-average fair value per share $0.75 $0.62
A summary of the status of the Group's option plans for the year ended 31
December 2024 is as follows
2014 plan Non-plan 2023 plan Total
Options outstanding Number of Weighted Number of Weighted Number of Weighted Number of Weighted
Options
average
Options
average
Options
average
Options
average
(in Shares)
exercise price
(in Shares)
exercise price
(in Shares)
exercise price
(in Shares)
exercise price
As at 31 December 2023 961,267 $1.21 576,924 $1.78 1,186,032 $1.81 2,724,223 $1.59
Granted - $- - $- 557,920 $1.73 557,920 $1.73
Exercised - $- - $- - $- - $-
Forfeited or (167,437) $1.19 - $- (20,000) $1.73 (187,437) $1.25
expired
As at 31 December 2024 793,830 $1.19 576,924 $1.78 1,723,952 $1.73 3,094,706 $1.60
Exercisable as at 31 961,267 $1.21 576,924 $1.78 151,635 $1.79 1,689,826 $1.46
December 2023
Exercisable as at 31 December 2024 793,830 $1.21 576,924 $1.78 475,542 $1.81 1,846,296 $1.54
Stock option expense for the year ended 31 December 2024 was $275,643 and
$542,409 for the year ended 31 December 2023. Unrecognized compensation
expense related to share options which will be recognized through 2025 was
$272,980 as at 31 December 2024, compared to $229,224 as at 31 December 2023.
15. RETIREMENT PLAN
The Company has a 401(k) safe harbor plan that covers all employees of the
U.S. entity 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 $112,333 for the year ended 31
December 2024 and $90,299.45 for the year ended 31 December 2023.
The Group also maintains a provision for end-of-service indemnity for
employees of its Lebanese subsidiary, in accordance with local labor
regulations. This liability reflects the estimated obligation for benefits
payable to employees upon separation from service. During 2024, the Company
adopted a refined approach to estimating this provision, representing a change
in accounting estimate. The updated methodology incorporates a forfeiture rate
of 8.11%, derived from historical employee turnover data, and applies a
present value discounting approach using a 10% discount rate, consistent with
prevailing economic conditions in Lebanon. These changes enhance the accuracy
of the estimate by reflecting both expected employee behavior and the time
value of money. As at 31 December, 2024 the liability to end of services
indemnity was $308,824 (2023: $467,225)
16. LEASES
A lease is defined as a contract that conveys the right to control the use of
identified property, plant or equipment for a period of time in exchange for
consideration. The Company accounts for its leases in accordance with the
guidance in Accounting Standards Codification ("ASC") 842 ("ASC 842").
Substantially all of the leases in which the Company is the lessee are
comprised of real estate property for remote office spaces and corporate
office space. Substantially all of the leases are classified as operating
leases.
As at the year ended 31 December 2024 and 31 December 2023, the Company had
approximately $134,777 and $202,228, respectively, of operating lease ROU
assets and $134,777 and $202,228, respectively of operating lease liabilities
on the Group's Consolidated Statements of Financial Position. The Company has
elected not to recognize right-of-use ("ROU") assets and lease liabilities
arising from short-term leases, leases with initial terms of twelve months or
less, or equipment leases (deemed immaterial) on the Group's Consolidated
Statements of Financial Position.
As at 30 December 2024, these leases do not contain material residual value
guarantees or impose restrictions or covenants related to dividends or the
Company's ability to incur additional financial obligations. The discount rate
for operating leases was based on market rates from a bank for obligations
with comparable terms effective at the lease inception date.
The following table presents lease costs, future minimum lease payments and
other lease information as of 31 December of the remaining years under lease:
Year Ending 31 December, Operating
2025 74,248
2026 60,529
Total Operating Lease Liabilities 134,777
Less amounts representing interest 10,917
Present Value of Future Minimum Lease Payments 123,860
Less current maturities 74,248
Long-term Lease Liability 49,612
Lease Cost:
2023 2024
Operating lease - operating cash flows (fixed payments) 41,625 62,438
Weighted average remaining lease term -operating 2.7 years 1.7 years
Weighted average discount rate - operating 10% 10%
17. INCOME TAX RECEIVABLE
On 30 September 2022, a withholding tax liability of 32.5% became payable in
the UK in connection with an intercompany loan of $2,032,690 between Image
Data Systems (UK) Limited ("IDS") and Fadel UK, related to the acquisition of
IDS. This resulted in a withholding tax obligation of $660,624, which became
reclaimable on the condition that the intercompany loan was repaid or
cancelled by 31 December 2023. The tax was paid by IDS to HMRC on 21 June
2023. As the conditions for reclaim were met, the amount was recognized as a
receivable as of 31 December 2023, and the refund of $660,624 was received on
25 October 2024.
18. EMPLOYEE BENEFIT TRUST (THE "EBT")
In August 2024, FADEL established an Employee Benefit Trust (EBT) to support
the administration of employee equity awards, including the exercise of stock
options and acquisition of common shares. The EBT is intended to facilitate
employee participation in the Company's equity programs and enhance long-term
alignment with shareholder interests.
As of 31 December 2024, the EBT had been formed but had not yet conducted any
transactions.
19. SUBSEQUENT EVENTS
In April 2025, the company extended the line of credit with Bank of America,
N.A for one more year until May 2026.
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