Location Sciences - Annual Financial Report
30/03/2022 07:00
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RNS Number : 4697G Location Sciences Group PLC 30 March 2022
This announcement contains inside information for the purposes of Regulation
11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the
publication of this announcement via a Regulatory Information Service, this
inside information is now considered to be in the public domain.
Location Sciences Group PLC
("Location Sciences" or the "Company" or the "Group")
Audited Results for the year ended 31 December 2021
Location Sciences (AIM: LSAI), announces its audited results for the year
ended 31 December 2021.
Financial Performance
· The Company was recapitalised in May 2021 following an equity
fundraise which raised approximately £3.74m (before expenses).
· Disposed of the insights dashboard and certain contracts to
Digital Envoy, Inc. a leading US IP intelligence company for US$700,000
· Revenues from the Verify division in 2021 were £167,940 compared
to £318,572 in 2020 representing a 47% decrease in revenues year-on-year,
reflecting the headwinds faced by the business during the year.
· Administrative costs excluding depreciation and amortisation for
the year to 31 December 2021 £801,432 (2020: £565,202)
· Loss before exceptional items, amortisation and depreciation for
the year to 31 December 2021 £699,468 (2020: £322,098)
· Loss per share from continuing operations decreased from 0.24p in
2020 to 0.076p in 2021. This was primarily due to the issue of additional
shares in the May 2021 fundraise.
Financial Position at Year End
· Net assets were £5,178,571 (2020: £2,645,507)
· Net current assets were £4,641,080 (2020: £1,497,887)
· Cash and cash equivalents of £4,378,825 (2020:
£1,128,118)
· Borrowings were £Nil (2020: £Nil)
· Potential deferred tax asset of £3,977,000 (2020:
£3,840,000)
Board Changes
As announced on 25 May 2021, following the successful completion of the
fundraise, Simon Wilkinson and Dr Nigel Burton have been appointed to the
Board of the Company as Non-Executive Chairman and Non-Executive Director
respectively.
Simon Wilkinson is a highly experienced software executive and entrepreneur,
having been involved with a number of public and private companies over his
career. He was most recently Chairman then CEO of Mobica, a world-leading,
award-winning software services company offering bespoke development, QA and
consultancy. He was previously Chief Executive Officer of Myriad Group AG,
which was listed in Zurich, and founder and Chief Executive Officer of Magic4
Ltd, a mobile messaging software market leader, backed by 3i, Philips Ventures
and Motorola Ventures.
Dr Nigel Burton spent 14 years as an investment banker at leading City
institutions including UBS Warburg and Deutsche Bank, including as the
Managing Director responsible for the energy and utilities industries.
Following this he spent 15 years as Chief Financial Officer or Chief Executive
Officer of a number of private and public companies. He is currently a
Non-Executive Director of BlackRock Throgmorton Investment Trust plc,
DeepVerge plc, eEnergy Group plc, and Microsaic Systems plc.
As announced on 21 June 2021, notice was given to Mark Slade (CEO) and David
Rae (CFO) who have remained employees and members of the Board to assist the
Board to realise value from the existing businesses. Both have 12-month notice
periods which conclude on 21 June 2022.
Outlook
The Board is reviewing the strategic options available to the Company and how
best to maximise the value of the Company's remaining business unit. The
operating costs of the business have been significantly reduced during the
year and together with the cash resources provide a solid platform from which
to leverage the opportunities available to us.
A copy of this announcement and the Company's report & accounts are
available on the Company's website
https://www.locationsciencesgroup.ai/investor-relations/
For further information please contact:
Location Sciences Group PLC via
Allenby
Mark Slade, Chief Executive Officer
David Rae, Chief Financial Officer
Allenby Capital Limited (Nominated Adviser) Tel: +44 (0)20 3328
5656
David Hart
Vivek Bhardwaj
Turner Pope Investments (TPI) Ltd (Broker) Tel: +44 (0)20 3657
0050
James Pope
Andy Thacker
CHAIRMAN'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2021
Following the funding round in May 2021, which introduced new strategic
investors to the shareholder register and two new Board members, the remainder
of 2021 became a key period of transition for the Group, during which the new
Board reviewed the existing business units and made key strategic decisions
with the aim of increasing shareholder value in the medium to long term.
The traditional operating markets of Location Sciences, location data and
verification, have remained difficult markets to grow within due to the
ongoing regulatory headwinds and the deep market inertia faced. This has
slowed the adoption of the Group's market leading location verification
technology across the digital advertising industry. During the financial year,
the executive team successfully exited the location insights space selling the
Group's insights dashboard and certain customer contracts to Digital Envoy,
Inc, a leading IP intelligence business for US$700,000.
The proceeds from the aforementioned sale and the Group's share placing in May
2021, which raised approximately £3.74m (before expenses), provide the Group
with a solid financial platform from which to increase shareholder value which
management and the Board are fully engaged in.
I am excited for the future of the Group and believe that the new Board will
return real shareholder value in the foreseeable future.
CHIEF EXECUTIVE'S REVIEW FOR THE YEAR ENDED 31 DECEMBER 2021
Location data and verification continues to be a challenging space to do
business. However, the Board is pleased to have completed the strategic
fundraising in May 2021 which raised approximately £3.7 million (before
expenses), with the potential for further funding of a similar quantum should
all warrants issued in conjunction with the May 2021 fundraise be exercised.
The fundraising increased the cash reserves of the business and introduced new
directors and strategic shareholders to help shape a new direction for the
business. The Board continues to work with the new investors to explore
strategic options to maximise shareholder value.
The Board is pleased to have completed the sale of the insights business to
Digital Envoy, Inc. a leading US IP intelligence company, for the full
US$700,000 consideration. This business unit faced considerable headwinds
during the COVID-19 pandemic and going forward will face significant
challenges from changing privacy regulations. The Board believes that it was
the right decision to sell the division to a larger company that can absorb
these macro challenges.
During 2021, we have significantly reduced the Group's overheads while
ensuring that David and I continue to support the ongoing operations of the
Verify business. However, the Board expects the outlook for Verify in the
medium term to be challenging due to privacy related reductions of location
data within the digital advertising industry. As a result, the Board continues
to explore options for this division.
The Group ends the financial year, better capitalised, with a new Board and
strategic shareholding to take the business forward.
CHIEF FINANCIAL OFFICER'S REVIEW FOR THE YEAR ENDED 31 DECEMBER 2021
Financial Performance
During the financial year the Insights business was sold to Digital Envoy,
Inc. As a result, the financial performance below represents the Verify
division only.
Revenues from the Verify division in 2021 were £167,940 compared to £318,572
in 2020 representing a 47% decrease in revenues year-on-year.
Following the change in strategic direction of the Company, the Board
implemented measures to achieve significant overhead reductions. These
included a substantial reduction in the number of employees. In addition,
Location Sciences has terminated its relationship with one of its joint
brokers.
The administrative costs for continuing operations excluding associated
depreciation and amortisation were £801,432 in 2021 compared to £565,202
during 2020.
The Group received £11,267 of furlough income from the Coronavirus Job
Retention Scheme during 2021 (the "Job Retention Scheme"), compared to
£30,119 of grant income in 2020, which, included £20,119 of furlough income
from the Job Retention Scheme. The Board does not expect to receive further
grant income in the foreseeable future.
The continuing operations delivered a loss before exceptional items,
amortisation and depreciation of £699,468 (2020: £322,098), an operating
loss of £1,199,068 (2020: £507,362) and a loss after taxation of £1,085,197
(2020: £341,090).
Loss per share from continuing operations decreased from 0.24p in 2020 to
0.076p in 2021. This was primarily due to the issue of additional shares in
the May 2021 fundraise.
Statement of Financial Position
As at 31 December 2021, the Group's net assets were £5,178,571 (2020:
£2,645,507) of which £4,378,825 (2020: £1,128,118) were cash and cash
equivalents.
Net current assets were £4,641,080 as at 31 December 2021 compared to net
current assets of £1,497,887 as at 31 December 2020.
Group borrowings were £Nil as at 31 December 2021 (2020: £Nil).
The Directors consider the Company's net asset position as a solid platform
and the Directors are considering all strategic options available to maximise
shareholder value in the medium to long term.
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2021
The Directors present their strategic report for the year ended 31 December
2021.
Fair review of the business
The fair review of the business is set out in the Chief Executive Officer's
and Chief Financial Officer's reviews, which describe in detail the financial
results and future plans for Location Sciences.
The Board monitors progress on the overall Group strategy and the individual
strategic elements by reference to KPIs. The primary measures are revenue,
costs, EBITDA before exceptional items and working capital levels.
The impact of the COVID-19 pandemic is evident in the relatively poor
financial performance of the Group during 2020 and 2021. As a result, the
Board launched a business review early in 2021 to review the strategic options
available to the Group, which led to a refinancing of the business in May
2021. The refinancing brought new strategic shareholders and several Board
changes.
Following the refinancing of the Group, the Group's Insights dashboard was
sold, along with four contracts, to Digital Envoy, Inc. bringing in further
funds to the Group and reducing the operational cost of the business.
The Group continues to operate Verify and the Board is reviewing the strategic
options available to the Group.
Principal risks and uncertainties
The principal and commercial risks to the Group are as follows:
Description The Group does not achieve sufficient commercial success before existing
competitors or new entrants enter the market.
Impact The current plans of the Group may not be realised, and the Group may have to
re-evaluate its business plan.
Mitigation The operating costs of Verify are minimal compared to the cash resources of
the business.
Description Location Sciences Group PLC continues to be in a cash consumption phase.
Impact Going concern has been carefully considered and details are provided in the
Corporate Governance Report below and in note 2 of the Group's financial
statements.
Mitigation The Group had in excess of £4 million in net cash resources as at 31 December
2021, which is more than sufficient for the Groups requirements for the
foreseeable future.
Description Changes in regulation negatively impact the Group's market.
Impact The Group may find the demand for its products is reduced and / or the Group
may be forced to change or stop selling one or more of its products.
Mitigation The Board takes account of commentators and industrial bodies as to the
direction of policy change.
Description The impact of the COVID-19 pandemic on existing and potential customers.
Impact The Group may find the demand for their products reduce especially its
location verification solutions which rely to a large extent on people's
movement.
Mitigation The Board has commenced a business review and reduced its operational cost
base.
The Board meets regularly to review specific and general risks that face the
Group. The Board strives to position the Group in a way that any risks can be
minimised and met, should the need arise.
The Group's performance is dependent on its products and solutions keeping
pace with market. This includes technological developments, frequent
introduction of new services and products and evolving industry standards.
Advances in technology may result in changing customer preferences for
products and services and delivery formats. Any such change in preferences may
be rapid.
The Group manages this risk by a commitment to research and development,
combined with ongoing dialogue with key industry players and engagement with
the regulatory landscape. This includes monitoring requirements and compliance
for privacy regulations.
Strategic risks
In 2020, the Group responded to the COVID-19 pandemic with a substantial cost
reduction programme and shifted focus of the business towards the data and
insights solutions which are more resilient to effects of the pandemic. Due to
the continuing impact of the COVID-19 pandemic, the Group commenced a business
review in 2021 which has led to the refinancing of the business, new strategic
shareholders, new Board members, the sale of the Insights dash board and four
contracts and a further reduction of operational costs. This positions the
Group with considerable cash resources and broader strategic options for the
future. The Board continues to review the strategic options available to the
Group.
This report, in conjunction with the Chief Executive Officer's Report, form
the Strategic Report for the purposes of s414A of the Companies Act 2006.
Section 172 statement
The Directors believe that they have effectively implemented their duties
under section 172 of the Companies Act 2006 through adherence to the Quoted
Companies Alliance Corporate Governance Code, as disclosed in the report and
accounts and as published on our website:
www.locationsciencesgroup.ai/investor-relations/board-governance. The
Chairman's Report and Chief Executive's Review details the Group's future
plans to achieve its long-term strategy.
The Group is committed to maintaining an excellent reputation and strive for
high standards, while maintaining an awareness of the environmental impact of
the work that it does and strives to reduce its carbon footprint.
The Directors recognise the importance of the wider stakeholders in delivering
their strategy and achieving sustainability within the business; in ensuring
that all our stakeholders are considered as part of every decision process we
believe we act fairly between all members of the company.
CORPORATE GOVERNANCE
The application of the UK Corporate Governance Code ("Code") and corporate
governance during the period 1 January 2021 to 31 December 2021 ("Year").
The Board recognises the importance of good corporate governance in order to
protect and build upon the substantial investments made by our diverse
shareholder base. We have chosen to apply the Quoted Companies Alliance
Corporate Governance Code (the 'QCA Code'), which was developed by the QCA in
consultation with a number of significant institutional small company
investors, as an alternative corporate governance code applicable to AIM
companies. The underlying principle of the QCA Code is that "the purpose of
good corporate governance is to ensure that the company is managed in an
efficient, effective and entrepreneurial manner for the benefit of all
shareholders over the longer term". The Board anticipates that whilst the
Company will continue to comply with the QCA Code, given the Group's size and
plans for the future, it will also endeavour to have regard to the provisions
of the UK Corporate Governance Code as best practice guidance to the extent
appropriate for a company of its size and nature.
An explanation of how these principles have been applied is set out both below
and in the Directors' remuneration, Audit Committee and internal control
sections of this report.
Certain information required under the QCA code is included within the
Strategic report and the Directors Remuneration Report.
Name Date Appointed Date Resigned Role Committees
Simon Wilkinson 25/05/2021 Chairman Remuneration, Nomination,
Audit
Kelvin Harrison 15/02/2017 25/05/2021 Chairman Remuneration, Nomination,
Audit
Nigel Burton 25/05/2021 Non-Executive Director Remuneration, Nomination,
Audit
Benjamin Chilcott 21/03/2018 25/05/2021 Non-Executive Director Remuneration, Nomination,
Audit
Mark Slade 24/07/2017 CEO -
David Rae 12/02/2018 CFO -
The Board is responsible to the shareholders for the proper management of the
Group through setting the overall strategy of the business and to review the
people, performance, policies and budgets of the Group. The Board typically
meets bi-monthly and also meets for any other extraordinary matters as they
may arise. Detailed information on matters to be discussed during the meetings
are circulated in advance of the meeting to ensure non-executive directors can
contribute in an educated manner.
Independence of Chairman and Chief Executive Officer
The roles of the Chairman, Simon Wilkinson, and the Chief Executive Officer,
Mark Slade, have a formal division. The Chairman is responsible for overseeing
the Board and ensuring no individual or group takes control of the Board's
decision making and that all non-executive directors are fully briefed on
matters and their responsibilities. The Chief Executive Officer has the
responsibility of executing the strategy of the Board and running the
day-to-day activities of the business.
Board Balance
A minimum of 50% of the Board will always consist of non-executive directors
including the Chairman. All non-executive directors are independent of the
management team and are not involved in any other business or relationship,
both as an executive or non-executive, which may impair their independent
nature and judgement.
Nomination Committee
The Group's nomination committee is responsible for reviewing and making
proposals to the Board on the appointment of Directors and meets as necessary.
The Group's nomination committee consists of Simon Wilkinson, who acts as
Non-Executive Chairman of the committee, and Nigel Burton.
Performance Evaluation and Re-election
The Board has continued to evaluate its effectiveness and performance during
the year, taking into account the Financial Reporting Council's Guidance on
Board Effectiveness. It is anticipated that following the completion of the
Board strategic review director appraisals will be performed to ensure that
their performance is, and continues to be, effective, that where appropriate
they maintain their independence and that they are demonstrating continued
commitment to the role. The Directors will be evaluated internally based on
their responsibilities to the Board. New Directors resign and stand for
re-election at the Group's first AGM following their appointment. One-third of
continuing Directors stand for re-election on an annual basis.
The Directors carry out continued professional development throughout the year
where appropriate and each Director keeps up to date with market changes
through the use of market articles and industry contacts.
Remuneration Committee
The Group's remuneration committee is responsible for the specific
remuneration and incentive packages for each of the company's executive
directors, senior executives and managers. The Group's Remuneration Committee
consists of Nigel Burton and Simon Wilkinson, who acts as Non-Executive
Chairman of the committee. Further details of the Committee's remit are
contained in the Directors' Remuneration Report.
Relations with Shareholders
The Group encourages two-way communication with both its institutional and
private investors and responds promptly to all queries received. The CEO and
CFO communicate regularly with the Group's institutional shareholders and
ensure that their views are communicated fully to the Board. The Board
recognises the Group's AGM as an important opportunity to meet with the
Group's private shareholders. The Directors are available to listen to the
views of shareholders informally immediately following the AGM. The Directors
have also organised various events throughout the year (presentations,
seminars, webinars) for existing and potential shareholders to gain a greater
understanding of the Group's strategy, products and market.
Annual General Meeting
The Annual General Meeting of the Group provides shareholders with the
opportunity to be updated on the Group's progress and to ask questions of the
Board.
Financial Reporting and Internal Control
The Company has established policies covering the key areas of internal
financial control and the appropriate procedures, controls, authority levels
and reporting requirements which must be applied throughout the Group.
The key procedures that have been established in respect of internal financial
control are:
• An annual budget set by the Board
• Monthly management accounts with comparisons to budget
• Monthly forecast updates with comparisons to budget
• Monthly cashflow forecasts with comparisons to budget
• Weekly meetings of the Executive Directors and Senior Management to review
priorities and issues
• Restriction of user access to systems, including but not limited to
Financial, HR and Technology.
The above controls have been established to support the growth of the business
and to protect against future risks.
Corporate Culture
It is the Board's view that the Group's corporate culture is consistent with
its objectives, strategy and business model. The Board is aware that the
culture set by the Board will greatly impact all aspects of the Group and the
way that employees behave. The Board invites employees to provide feedback on
their peers and management.
Consolidated Accounts
The aforementioned Financial Reporting and Internal Controls apply to all
subsidiaries. The accounts of all subsidiaries are combined with those of the
Company to form consolidated accounts each month. The Chief Financial Officer
is responsible for producing the consolidated accounts, including the
elimination of intercompany transactions and balances.
Audit Committee
The Group's Audit Committee is responsible for ensuring the financial
performance of the Group is properly monitored and reported on, the
effectiveness of accounting systems and financial reporting procedures. The
Group's Audit Committee consists of Nigel Burton and Simon Wilkinson, who acts
as Non-Executive Chairman of the committee.
The Committee considers all proposals for non-audit services and ensures that
these do not impact on the objectivity and independence of the auditor. The
Audit Committee reviews, with the external auditor, the safeguards and
procedures developed by the auditor to counter threats or perceived threats to
their objectivity and independence. Non-audit services performed by the
external auditor are assessed for threats to objectivity and independence on a
case-by-case basis.
Board and Committee Attendance
Name Main Board Audit Committee Remuneration Committee Nomination Committee
Simon Wilkinson 8/8 1/1 1/1 1/1
Kelvin Harrison 4/4 1/1 1/1 1/1
Nigel Burton 8/8 1/1 1/1 1/1
Benjamin Chilcott 4/4 1/1 1/1 1/1
Mark Slade 12/12 - - -
David Rae 12/12 - - -
Going concern
The directors have taken a view of the Group as a whole.
The Group raised approximately £3.74 million (before expenses) in new funds
during the financial year through a placing, subscription and broker option.
Following the successful fundraising, the Board continued to review how best
to maximise the value of the Company's two core business units, namely
location verification and data and insights. As part of this business review,
the Board decided to sell its Insights dashboard and four contracts to Digital
Envoy, Inc. for a total consideration of US$700,000 of which US$575,000 was
received by the Company during the financial year and the remaining US$125,000
was received by the Company on 31 January 2022. The sale to Digital Envoy,
Inc. also allowed the Company to significantly reduce its ongoing operational
costs.
The Group continues to operate Verify which has a global client base with
customers in Europe, US and South Africa.
Despite the actions of the Board, the Group continued to operate with a
trading loss during the year and the same is expected throughout 2022. The new
funds raised during 2021 will be utilised for the operation of Verify and for
working capital purposes and future opportunities and enable the Group to also
remain debt free. The Board will continue to monitor cash resources and
progress the ongoing business review.
Based on the current status, after making enquiries and considering the
existing cash resources of the business and cost reductions made during 2021,
the Board has a reasonable expectation that the Group will be able to execute
its plans in the medium term such that the Group will have adequate resources
to continue in operational existence for the foreseeable future. This provides
the Board with assurance on the Group's ability to continue as a going
concern, and therefore adopt the going concern basis of accounting in
preparing the annual financial statements.
DIRECTORS' REMUNERATION REPORT
As a Company admitted to trading on AIM, Location Sciences Group PLC is not
required to present a directors' remuneration report, however, a number of
voluntary disclosures have been made. The Company has complied with the
disclosure requirements set out in the AIM Rules for Companies.
Remuneration Committee
The Remuneration Committee, consisting of the chairman Simon Wilkinson and
Nigel Burton, determines the Group's policy for executive remuneration and the
individual remuneration packages for executive directors. In setting the
Group's remuneration policy, the committee considers a number of factors
including:
• salaries and benefits available to executive directors of comparable
companies;
• the need to both attract and retain executives of appropriate calibre; and
• the continued commitment of executives to the Group's development through
appropriate incentive schemes (including the award of share options).
Remuneration of executive directors
Consistent with this policy, benefit packages awarded to executive directors
comprise a mix of basic salary and performance‐related remuneration that is
designed as an incentive. The remuneration packages can comprise the following
elements:
• base salary: the Remuneration Committee sets the base salaries to reflect
responsibilities and the skills, knowledge and experience of the individual;
• bonus scheme: the executive directors are eligible to receive a bonus
dependent on both individual and Group performance as determined by the
Remuneration Committee;
• equity: share options; and
• various other add on benefits such as private medical insurance.
The executive directors are engaged under separate contracts which require a
notice period of three or six months given at any time by the individual.
Remuneration of non-executive directors
The fees and equity awarded to non‐executive directors are determined by the
Board. The non‐executive directors do not receive any other forms of benefit
such as private medical insurance.
Year to 31 December 2021
Director Salary and fees Bonus Pension Benefits Share based payments Total
£ £ £ £ £ £
M Slade (Executive) 170,654 - 1,318 1,951 15,671 189,594
K Harrison* (Non-executive) 59,129 - - - - 59,129
D Rae (Executive) 157,837 - 1,318 - 10,241 169,396
B Chilcott* (Non-executive) 36,000 - - - - 36,000
S Wilkinson** (Non-executive) 165,000 - - - - 165,000
N Burton** (Non-executive) 115,500 - - - - 115,500
704,120 - 2,636 1,951 25,912 734,619
Included within directors' remuneration for S Wilkinson and Nigel Burton is
remuneration of £165,000 and £115,500 respectively that was settled by issue
of shares.
* Resigned 25 May 2021.
** Appointed 25 May 2021.
Year to 31 December 2020
Director Salary and fees Bonus Pension Benefits Share based payments Total
£ £ £ £ £ £
M Slade (Executive) 156,000 - 1,314 1,991 15,671 174,976
K Harrison (Non-executive) 45,000 - 179 - 304 45,483
D Rae (Executive) 85,800 50,000 1,314 2,668 10,241 150,023
B Chilcott (Non-executive) 24,000 - 103 - - 24,103
N Hogan* (Non-executive) 24,000 - - - - 24,000
D Williams* (Non-executive) 60,387 - - - - 60,387
395,187 50,000 2,910 4,659 26,216 478,972
Included within directors' remuneration for N Hogan and D Williams is
remuneration of £11,250, £11,000, £24,000 and £35,202 for K Harrison, B
Chilcott, N Hogan and D Williams respectively that was settled by issue of
shares.
* Resigned 11 February 2021.
Director Grant Date Exercise Price At 31 December 2021 At 31 December 2020
Number Number
M Slade (Executive) 29/11/2018 2.25p 15,555,556 15,555,556
D Rae (Executive) 29/11/2018 2.25p 7,333,333 7,333,333
K Harrison (Non-Executive) 29/11/2018 2.25p - 577,778
Notes: The options will vest in three equal tranches when certain share price
targets have been reached, the share price targets are as follows:
• 4.8 pence per New Ordinary Share
• 7.3 pence per New Ordinary Share
• 9.7 pence per New Ordinary Share
Director Warrants
Non-transferable warrants to subscribe for, in aggregate, 120,000,000 Ordinary
Shares were issued to the Executive Directors and the Non-Executive Directors,
exercisable at 0.20p for five years from 25 May 2021, provided that the
Ordinary Shares have traded at a Volume Weighted Average Price (VWAP) at or
above 0.30p for 20 consecutive Business Days, or on a change of control of the
Company.
Name
Number of Ordinary Shares subject to Director Warrants
Simon Wilkinson 30,000,000
Dr Nigel Burton 30,000,000
Mark Slade 30,000,000
David Rae 30,000,000
Broker Warrants
Transferable warrants to subscribe for, in aggregate, 41,250,000 Ordinary
Shares were issued to the Executive Directors and the Non-Executive Directors,
exercisable at 0.20p for five years from 25 May 2021.
Name
Number of Ordinary Shares
subject
to Broker Warrants
Dr Nigel Burton 25,000,000
Mark Slade 10,000,000
David Rae 6,250,000
Promoter Warrants
Promoter warrants were issued to certain investors in the fundraising
completed on 25 May 2021 in consideration of those persons assembling and
co-ordinating the Concert Party's investment in the Company. As part of this
issuance, non-transferable warrants to subscribe for, in aggregate,
500,000,000 Ordinary Shares were issued to Simon Wilkinson, exercisable at
0.20p for five years from 25 May 2021.
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2021
The Directors are pleased to present the annual report and audited financial
statements of Location Sciences Group PLC for the year ended 31 December 2021.
Dividends
The Directors do not recommend the payment of a dividend.
Board of Directors
Simon Wilkinson, Non-Executive Chairman
Simon joined Location Sciences as Non-Executive Chairman in May 2021. Simon is
a highly experienced software executive and entrepreneur, having been involved
with a number of public and private companies over his career. He was most
recently CEO then Chairman of Mobica, a world-leading, award-winning software
services company offering bespoke development, QA and consultancy. He was
previously Chief Executive Officer of Myriad Group AG, which was listed in
Zurich, and founder and Chief Executive Officer of Magic4 Ltd, a mobile
messaging software market leader, backed by 3i, Philips Ventures and Motorola
Ventures.
Nigel Burton, Non-Executive Director
Nigel was appointed as a Non-Executive Director in May 2021. Nigel spent 14
years as an investment banker at leading City institutions including UBS
Warburg and Deutsche Bank, including as the Managing Director responsible for
the energy and utilities industries. Following this he spent 15 years as
Chief Financial Officer or Chief Executive Officer of a number of private and
public companies. He is currently a Non-Executive Director of BlackRock
Throgmorton Investment Trust plc, DeepVerge plc, eEnergy Group plc, Mobile
Streams plc and Microsaic Systems plc.
Mark Slade, Chief Executive Officer
Mark joined the Board on 24 July 2017 as an Executive Director. Mark is one of
the advertising industry's leading lights with numerous senior relationships
across the ad tech and media giants. He joined from Opera Mediaworks, where he
was Managing Director, EMEA. Mark founded and sold his mobile advertising
business 4th Screen to Opera, and then helped grow the business to over $100
million in revenues. Mark's expertise is in executing in a high growth ad tech
sector as well as European acquisitions. Mark is also a founding member of the
IAB mobile council.
David Rae, Chief Financial Officer
David joined the Board in February 2018. David has enhanced the Board's
financial and strategic capabilities as well as bringing experience in
delivering rapid growth for ambitious companies and international business
experience within the technology and energy sectors. David began his career in
1992 with EY's Entrepreneurial Services team in London, where he focused on
fast growth companies. After leaving EY in 1999, David worked in corporate
finance where he advised both public and private companies on fundraising and
M&A activities. David is a Fellow of the Institute of Chartered
Accountants in England and Wales and holds a first-class honours degree in
Information Systems and Management Studies from the University of Leeds.
Research and development
Location Sciences continued to invest substantially in research and
development. £341,441 (2020: £471,019) of development expenditure has been
capitalised as "Intangible Assets". The Group continued to invest in the
development of its location intelligence products.
Financial Risk Management
The Group's financial instruments comprise cash and cash equivalents, trade
receivables and payables and borrowings. The main risks arising from the
Group's financial instruments are interest rate risk, credit risk, liquidity
risk and foreign currency risk.
Interest rate and credit risk - the principal assets of the Group are its cash
deposits. These are short-term liquid assets and as a result the exposure to
interest rate income risk is not considered significant. The principal focus
of the Directors has been to minimise any credit risk in relation to its cash
deposits even at the expense of interest income received. Borrowings include
financial instruments on fixed interest rate terms and a revolving credit
facility at a variable rate. As a result, the exposure to interest rate
expense risk is low and no active management of interest rate risk is
undertaken by the Board.
Foreign currency risk - the main functional currency is sterling. Throughout
2021, the Company's transactions have primarily been denominated in sterling
and the Group has had low exposure to foreign currency risk.
Liquidity risk - the Board's policy is to ensure that sufficient cash and cash
equivalents are held on a short-term basis at all times in order to meet the
Group's operational needs. The Group does actively raise funds through market
placings and other loan facilities.
The Group has been operating at a trading loss due to its stage of development
and seeks to ensure that its investments will deliver long term value to
shareholders. Liquidity risk is actively managed through regular review of
cash requirements of the business in conjunction with the strategic and
operational plans for the Group.
Substantial shareholdings
As at 29 March 2022 the Directors had been notified of the following holdings
representing 3% or more of the issued share capital of the Company:
Number of ordinary shares Percentage of issued share capital
Richard Hughes 200,000,000 7.68%
Mahmud Kamani 200,000,000 7.68%
Turner Pope Investments 132,750,000 5.10%
Darron Lee 125,000,000 4.80%
Directors
The Directors, who held office during the year, were as follows:
B Chilcott (resigned 25 May 2021)
K Harrison (resigned 25 May 2021)
N Burton (appointed 25 May 2021)
D Rae
M Slade
S Wilkinson (appointed 25 May 2021)
The Company maintains director and officers' liability insurance.
Statement of Directors' responsibilities
The Directors acknowledge their responsibilities for preparing the Annual
Report and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the
financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. Under company law the
directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the group and
company and of the profit or loss of the group and company for that period. In
preparing these financial statements, the directors are required to:
• select suitable accounting policies and apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable International Financial Reporting Standards (IFRSs)
as adopted by the European Union have been followed, subject to any material
departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the group's and the company's transactions and
disclose with reasonable accuracy at any time the financial position of the
group and the company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the group and the company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Directors' interests in shares
The directors held the following interests in Location Sciences Group PLC:
At 31 December 2021 At 31 December 2020
Ordinary Shares of 0.1p each Options over Ordinary Shares of 0.1p each Warrants over Ordinary Shares of 0.1p each Ordinary Shares of 0.1p each Options over Ordinary Shares of 0.1p each Warrants over Ordinary Shares of 0.1p each
M Slade 26,204,444 15,555,556 40,000,000 6,204,444 15,555,556 -
D Rae 13,666,667 7,333,333 36,250,000 1,166,667 7,333,333 -
S Wilkinson 75,000,000 - 530,000,000 - - -
N Burton 67,500,000 - 55,000,000 - - -
B Chilcott - - - 2,291,667 - -
K Harrison - - - 3,010,416 577,778 -
The market price of the Company's shares at the end of the financial year was
0.53p.
Disclosure of information to auditor
Each of the persons who are directors at the time when this director's report
is approved has confirmed that:
• so far as that director is aware, there is no relevant audit information of
which the Company's auditor is unaware; and
• that director has taken all the steps that ought to have been taken as a
director in order to be aware of any relevant audit information and to
establish that the auditor is aware of that information.
Annual General Meeting
Notice of the forthcoming Annual General Meeting of the Company together with
resolutions relating to the Company's ordinary business will be given to the
members separately.
Reappointment of auditors
The auditors, Hazlewoods LLP, will be proposed for reappointment in accordance
with section 485 of the Companies Act 2006.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF LOCATION SCIENCES GROUP PLC
Opinion
We have audited the financial statements of Location Sciences Group PLC (the
'parent company') and its subsidiaries (the 'group') for the year ended 31
December 2021, which comprise the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated Statement of Financial
Position, Statement of Financial Position, Consolidated Statement of Changes
in Equity, Statement of Changes in Equity, Consolidated Statement of Cash
Flows, Statement of Cash Flows, and Notes to the Financial Statements,
including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union.
In our opinion the financial statements:
• give a true and fair view of the state of the group's and the parent company's
affairs as at 31 December 2021 and of the group's loss for the year then
ended;
• have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's Ethical
Standard, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the company's ability to continue
as a going concern for a period of at least twelve months from when the
original financial statements were authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant section of this report.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Our application of materiality
We apply the concept of materiality in planning and performing our audit, in
evaluating the effect of any identified misstatements and in forming our
opinion. For the purpose of determining whether the group financial statements
are free from material misstatement, we define materiality as the magnitude of
a misstatement or an omission from the financial statements or related
disclosures that would make it probable that the judgement of a reasonable
person, relying on the information would have been changed or influenced by
the misstatement or omission. We also determine a level of performance
materiality, which we used to determine the extent of testing needed, to
reduce to an appropriately low level that the aggregate of uncorrected and
undetected misstatements exceed materiality of the group financial statements
as a whole.
We establish materiality for the financial statements as a whole to be
£55,000, which is 1% of the value of the trading subsidiary's total assets.
Key audit risks were identified as revenue recognition; internally developed
intangible assets; and going concern.
An overview of the scope of our audit
Our audit approach was based on a thorough understanding of the Group's
business and is risk based. In arriving at our opinions set out in this
report, we highlight the following risks that in our judgment, had the
greatest effect on the financial statements.
Audit risk How we responded to the risk
Recognition of revenue
Revenue consists of the value of services provided. Revenue recorded for Our audit work included but was not restricted to:
services is recorded to the extent that the Group has performed its
contractual obligations. We therefore identified revenue recognition as a risk - For revenue recognised in the year our audit work include, assessing whether
that required particular audit attention. the Group's accounting policy for revenue recognition was in accordance with
IFRS 15 'Revenue';
- Sampling service sales in the year and comparing them to usage reports and
stated performance dates;
- Performing cut-off testing of sales around the year end; and
- Analytical review of revenue recognised in the year including variance
review.
Internally generated intangible assets
The Group has £537,491 of development costs in the year on the balance sheet. Our audit work included, but was not restricted to:
The Group capitalises development costs when the following criteria have been
met: The product is technically viable, it is intended for sale, a market - Agreeing intangible asset additions to supporting documentation including
exists, expenditure can be measured reliably, and sufficient resources are employee costs and time spent on projects;
available to allow completion of the project. When the Board is sufficiently
confident that these criteria are met, the costs are capitalised. We therefore - Assessing the nature of the costs being capitalised to ensure they met the
identified internally generated intangibles as a risk that required particular required accounting criteria for capitalisation; and
audit attention.
- Discussions were held with management to ensure that all criteria for
capitalisation had been met and supporting evidence was obtained to
corroborate this.
- Considering whether there are any impairment indicators and, where these
exist, reviewing impairment reviews prepared by management.
Going concern
Trading performance of the Group has previously indicated the existence of Our audit work included, but was not limited to:
material uncertainty, which may cast significant doubt about the Company and
the Group's ability to continue as a going concern. - considering new funds raised in the year;
- review of forecasts prepared by management to support the going concern
assumption; and
- review of customer contracts to forecasts.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report, other than the
financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and Directors' Report for the
financial year for which the financial statements are prepared is consistent
with the financial statements; and
• the Strategic Report and Directors' Report have been prepared in accordance
with applicable legal requirements.
Matters on which we are required to report by exception
In the light of our knowledge and understanding of the group and the parent
company and its environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report and the Directors'
Report.
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or
returns adequate for our audit have not been received from branches not
visited by us; or
• the parent company financial statements are not in agreement with the
accounting records and returns; or
• certain disclosures of directors' remuneration specified by law are not made;
or
• we have not received all the information and explanations we require for our
audit.
Responsibilities of directors
As explained more fully in the Directors' Report, the directors are
responsible for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are responsible for
assessing the Group's and the parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or the parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
Based on our understanding of the company and its activities, we identified
that the principal risks of non-compliance with laws and regulations related
to UK tax legislation and money laundering, and we considered the extent to
which non-compliance might have a material effect on the financial statements.
We also considered those laws and regulations that have a direct impact on the
preparation of the financial statements such as UK GAAP and the Companies Act
2006. We evaluated management's incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of
controls), and determined that the principal risks were related to posting
inappropriate or fictitious journal entries to manipulate the financial
performance or financial position of the company.
As part of an audit in accordance with ISAs (UK), we exercise professional
judgement and maintain professional scepticism throughout the audit. We also
planned and performed audit procedures including:
• Gaining an understanding of the legal and regulatory framework and
considering the risk of any acts which may be contrary to applicable laws and
regulations, including fraud.
• Obtaining an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
company's internal control.
• Evaluation of the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
directors.
• Making inquiries with management including consideration of known or
suspected instances of non-compliance with laws and regulation and fraud.
• Testing journal entries and other adjustments for appropriateness and
evaluating the business rationale of any significant transactions outside the
normal course of business.
• Evaluation of the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that
achieves fair presentation.
• Conclusion on the appropriateness of the directors' use of the going
concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention
in our auditor's report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor's
report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
There are inherent limitations in the audit procedures described above. We are
less likely to become aware of instances of non-compliance with laws and
regulations that are not closely related to events and transactions reflected
in the financial statements. Also the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations or through collusion.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
A further description of our responsibilities is available on the Financial
Reporting Council's website at:www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Use of this report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Scott Lawrence (Senior Statutory Auditor)
For and on behalf of Hazlewoods LLP, Statutory Auditor
Staverton Court
Staverton
Cheltenham
GL51 0UX
Date: 29 March 2022
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2021
Continuing Operations Note 2021 2020
£
£
Revenue 4 167,940 318,572
Cost of sales (77,243) (105,587)
Gross profit 90,697 212,985
Administrative expenses (801,432) (565,202)
Other operating income 5 11,267 30,119
Operating loss before exceptional administrative expenses, amortisation and (699,468) (322,098)
depreciation
Amortisation and depreciation (216,392) (179,743)
Exceptional administrative expenses 7 (283,210) -
Operating loss 7 (1,199,070) (501,841)
Finance income 8 2 98
Finance costs 8 - (5,619)
Loss before tax (1,199,068) (507,362)
Income tax receipt 12 113,871 166,272
Loss for the year for the financial year from continuing operations (1,085,197) (341,090)
Discontinued operations
Loss for the year from discontinued operations 6 (298,161) (898,178)
Loss for the financial year (1,383,358) (1,239,268)
Earnings per share
Loss per share - basic and diluted (0.076p) (0.24p)
The above results were derived from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
2021
Note 2021 2020
£
£
Loss for the year (1,383,358) (1,239,268)
Other comprehensive income
Foreign currency translation loss (4,718) (10,475)
Total comprehensive income for the year attributable to owners of the parent (1,388,076) (1,249,743)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021
Note 2021 2020
£
£
Assets
Non-current assets
Intangible assets 14 537,491 1,141,792
Property, plant and equipment 15 - 5,828
537,491 1,147,620
Current assets
Trade and other receivables 17 331,559 415,104
Tax asset 12 113,871 166,272
Cash and cash equivalents 4,378,825 1,128,118
4,824,255 1,709,494
Current liabilities
Trade and other payables 19 (183,175) (211,607)
(183,175) (211,607)
Net current assets 4,641,080 1,497,887
Total assets less current liabilities 5,178,571 2,645,507
Net assets 5,178,571 2,645,507
Equity
Share capital 22 16,298,007 14,280,258
Share premium 20,034,993 19,315,231
Merger relief reserve 11,605,556 11,605,556
Capital reserve 209,791 209,791
Reverse acquisition reserve (9,225,108) (9,225,108)
Equity reserve 1,135,319 -
Retained earnings (34,879,987) (33,540,223)
Equity attributable to owners of the company 5,178,571 2,645,507
Approved by the Board on 29 March 2022 and signed on its behalf by:
Mark Slade
Director
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021
Note 2021 2020
£
£
Assets
Non-current assets
Investments 16 3,219,896 3,171,622
Current assets
Trade and other receivables 17 132,919 -
Current liabilities
Trade and other payables 19 (76,000) (19,037)
Net current assets 56,919 (19,037)
Total assets less current liabilities 3,276,815 3,152,585
Net assets 3,276,815 3,152,585
Equity
Share capital 22 16,298,007 14,280,258
Share premium 20,034,993 19,315,231
Merger relief reserve 11,605,556 11,605,556
Equity reserve 1,135,319 -
Retained earnings (45,797,060) (42,048,460)
Total equity 3,276,815 3,512,585
The Company has taken advantage of the exemption allowed under section 408 of
the Companies Act 2006 and has not presented its own statement of
comprehensive income in these financial statements. The loss after tax for the
parent Company for the year was £3,739,912 (2020: £1,808,132).
Approved by the Board on 29 March 2022 and signed on its behalf by:
Mark Slade
Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER
2021
Share capital Share premium Merger relief reserve Capital reserve Reverse acquisition reserve Equity reserve Retained earnings Total
£
£
£
£
£
£
£
£
At 1 January 2020 14,008,033 18,508,593 11,605,556 209,791 (9,225,108) - (32,338,792) 2,768,073
Loss for the year - - - - - - (1,239,268) (1,239,268)
Other comprehensive income - - - - - - (10,475) (10,475)
Total comprehensive income - - - - - - (1,249,743) (1,249,743)
New share capital subscribed 272,225 806,638 - - - - - 1,078,863
Share-based payments - - - - - - 48,312 48,312
At 31 December 2020 14,280,258 19,315,231 11,605,556 209,791 (9,225,108) - (33,540,223) 2,645,505
Share capital Share premium Merger relief reserve Capital reserve Reverse acquisition reserve Equity reserve Retained earnings Total
£
£
£
£
£
£
£
£
At 1 January 2021 14,280,258 19,315,231 11,605,556 209,791 (9,225,108) - (33,540,223) 2,645,505
Loss for the year - - - - - - (1,383,358) (1383,358)
Other comprehensive income - - - - - - (4,718) (4,718)
Total comprehensive income - - - - - - (1,388,076) (1,388,076)
New share capital subscribed 2,017,749 1,855,081 - - - - - 3,872,830
Warrants issued - (1,135,319) - - - 1,135,319 - -
Share-based payments - - - - - - 48,312 48,312
At 31 December 2021 16,298,007 20,034,993 11,605,556 209,791 (9,225,108) 1,135,319 34,879,987 5,178,571
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021
Share capital Share premium Merger relief reserve Equity reserve Retained earnings Total
£
£
£
£
£
£
At 1 January 2020 14,008,033 18,508,593 11,605,556 - (40,288,640) 3,833,542
Loss for the year - - - - (1,808,132) (1,808,132)
Total comprehensive income - - - - (1,808,132) (1,808,132)
New share capital subscribed 272,225 806,638 - - - 1,078,863
Share-based payments - - - - 48,312 48,312
At 31 December 2020 14,280,258 19,315,231 11,605,556 - (42,048,460) 3,152,585
Share capital Share premium Merger relief reserve Equity reserve Retained earnings Total
£
£
£
£
£
£
At 1 January 2021 14,280,258 19,315,231 11,605,556 - (42,048,460) 3,152,585
Loss for the year - - - - (3,796,912) (3,739,912)
Total comprehensive income - - - - (3,796,912) (3,739,912)
New share capital subscribed 2,017,749 1,855,081 - - - 3,872,830
Share-based payments - - - 48,312 48,312
Warrants issued - (1,135,319) - 1,135,319 - -
At 31 December 2021 16,298,007 20,034,993 11,605,556 1,135,319 45,797,060 3,276,815
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
Cash flows from operating activities Note 2021 2020
£
£
Loss for the year from continuing activities (1,085,197) (341,090)
Loss for the year from discontinued activities (298,161) (898,178)
Adjustments to cash flows from non-cash items:
Depreciation and amortisation 508,862 616,778
Impairment charge 283,210 -
Profit on disposal of discontinued operations (290,640) -
Foreign exchange gain (4,718) (10,475)
Finance income 6 (2) (98)
Finance costs 6 - 5,619
Share based payment transactions 48,312 48,312
Income tax expense (113,871) (166,272)
Shares issued other than for cash 120,000 158,362
Uplift in fair value of directors' fees 195,500 -
(636,705) (587,042)
Working capital adjustments
Decrease / (Increase) in trade and other receivables 88,225 (7,783)
Decrease in trade and other payables (33,114) (137,472)
Cash used in operations (581,594) (732,297)
Income taxes received 11 166,272 166,909
Net cash flow from operating activities (415,322) (565,391)
Cash flows from investing activities
Interest received 8 2 98
Disposals of discontinued operations 6 450,138 -
Acquisitions of property plant and equipment 14 - (1,278)
Acquisition of intangible assets 13 (341,441) (471,019)
Net cash flows from investing activities 108,699 (472,199)
Cash flows from financing activities
Proceeds from issue of ordinary shares, net of issue costs 3,557,330 920,504
IFRS 16 liability repayment - (80,537)
Net cash flows from financing activities 3,557,330 839,967
Net increase/(decrease) in cash and cash equivalents 3,250,707 (197,621)
Cash and cash equivalents at 1 January 1,128,118 1,325,739
Cash and cash equivalents at 31 December 4,378,825 1,128,118
2021 2020
£
£
Non-cash financing activities:
Share warrants exercised in year 10,000 -
Fees settled by share issues 120,000 76,923
Directors' fees settled by share issues 163,625 81,452
For full details on non-cash financing activities see note 21
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
£
£
Cash flows from operating activities
Loss for the year (3,796,912) (1,808,132)
Adjustments to cash flows from non-cash items
Non-cash impairments 3,314,312 1,557,859
Share issues other than for cash 120,000 158,375
Uplift in fair value of directors' fees 195,500 -
(167,100) (91,898)
Working capital adjustments
Decrease/(increase) in trade and other receivables (132,918) (803,099)
Increase / (decrease) in trade and other payables 57,000 (25,507)
Net cash flow from operating activities (243,018) (920,504)
Cash flows from financing activities
Proceeds from issue of ordinary shares, net of issue costs 3,557,330 920,504
Decrease in inter-company loans (3,314,312) -
Net cash flows from financing activities 243,018 920,504
Net increase in cash and cash equivalents - -
Cash and cash equivalents at 1 January - -
Cash and cash equivalents at 31 December - -
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
1 General information
The company is a public company limited by share capital, incorporated and
domiciled in England.
The address of its registered office is:
First Floor
St James' House
St James' Square
Cheltenham
Gloucestershire
GL50 3PR
The Company's ordinary shares are traded on the Alternative Investment Market
(AIM) of the London Stock Exchange.
Principal activity
Location Sciences has developed a global platform called Verify, which brings
transparency to the location based mobile advertising market. Verify allows
marketeers to authenticate where their adverts have been viewed and uses
proprietary technology to detect location ad-fraud, which would otherwise go
unnoticed.
2 Accounting policies
Statement of compliance
The group financial statements have been prepared in accordance with
International Financial Reporting Standards and its interpretations adopted by
the EU ("adopted IFRS's").
Summary of significant accounting policies and key accounting estimates
The principal accounting policies applied in the preparation of these
financial statements are set out below. These policies have been consistently
applied to all the years presented, unless otherwise stated.
Going concern
The directors have taken a view of the Group as a whole.
The Group raised approximately £3.74 million in new funds (before expenses)
during the financial year through a placing, subscription and broker option.
Following the successful fundraising, the Board continued to review how best
to maximise the value of the Company's two core business units, namely
location verification and data and insights. As part of this business review,
the Board decided to sell its Insights dashboard and four contracts to Digital
Envoy, Inc. for a total consideration of US$700,000 of which US$575,000 was
received by the Company during the year and the remaining US$125,000 was
received by the Company on 31 January 2022. The sale to Digital Envoy, Inc.
also allowed the Company to significantly reduce its ongoing operational
costs.
The Group continues to operate Verify which has a global client base with
customers in Europe, US and South Africa.
Despite the actions of the Board, the Group continued to operate with a
trading loss during the year and the same is expected throughout 2022. The new
funds raised during 2021 will be utilised for the operation of Verify and for
working capital purposes and the Group also remains debt free. The Board will
continue to monitor cash resources and progress the ongoing business review.
Based on the current status, after making enquiries and considering the
existing cash resources of the business and cost reductions made during 2021,
the Board have a reasonable expectation that the Group will be able to execute
its plans in the medium term such that the Group will have adequate resources
to continue in operational existence for the foreseeable future. This provides
the Board with assurance on the Group's ability to continue as a going
concern, and therefore adopt the going concern basis of accounting in
preparing the annual financial statements.
Basis of consolidation
The group financial statements consolidate the financial statements of the
company and its subsidiary undertakings drawn up to 31 December 2021 in
accordance with IFRS 10.
A subsidiary is an entity controlled by the company. Control is achieved where
the company has the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are
included in the income statement from the effective date of acquisition or up
to the effective date of disposal, as appropriate. Where necessary,
adjustments are made to the financial statements of subsidiaries to bring
their accounting policies into line with those used by the group.
The purchase method of accounting is used to account for business combinations
that result in the acquisition of subsidiaries by the group. The cost of a
business combination is measured as the fair value of the assets given, equity
instruments issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the business combination.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values
at the acquisition date. Any excess of the cost of the business combination
over the acquirer's interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised is recorded as goodwill.
Inter-company transactions, balances and unrealised gains on transactions
between the company and its subsidiaries, which are related parties, are
eliminated in full.
Intra-group losses are also eliminated but may indicate an impairment that
requires recognition in the consolidated financial statements.
Accounting policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the group. Non-controlling
interests in the net assets of consolidated subsidiaries are identified
separately from the group's equity therein. Non-controlling interests consist
of the amount of those interests at the date of the original business
combination and the non-controlling shareholder's share of changes in equity
since the date of the combination. Total comprehensive income is attributed to
non-controlling interests even if this results in the non-controlling
interests having a deficit balance.
Changes in accounting policy
For the purpose of the preparation of these consolidated financial statements,
the Group has applied all standards and interpretations that are effective for
accounting periods beginning on or after 1 January 2021. None of the
standards that have been applied have had a material effect on the financial
statements.
New standards, interpretations and amendments not yet effective
No new standards, amendments or interpretations to existing standards that
have been published and that are mandatory for the Group's accounting periods
beginning on or after 1 January 2022, or later periods, have been adopted
early.
None of the standards, interpretations and amendments which are effective for
periods beginning after 1 January 2022, and which have not been adopted early,
are expected to have a material effect on the financial statements.
Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker for the use in
strategic decision making and monitoring of performance. The Group considers
the chief operating decision maker to be the Executive Board.
Revenue recognition
Revenue represents the invoice value of services and software licences
provided to external customers in the period, stated exclusive of value added
tax.
Consideration received from customers in respect of services is only recorded
as revenue to the extent that the Group has performed its contractual
obligations in respect of that consideration. Management assess the
performance of the Group's contractual obligations against project milestones
and work performed to date.
Revenue from software licences sold in conjunction with services is invoiced
separately from those services and recognised over the period of the licence.
Revenue from software licences for the use of the technology platform is
recognised over the period of the license.
Revenue from software development is recognised to the extent that the Group
has obtained the right to consideration through its performance.
The IFRS 15 Practical expedient has been applied whereby the promised amount
of consideration has not been amended for the effects of a significant
financing component as at the contract inception there are no contracts where
the period between transfers of promised goods or services and customer
payment is expected to exceed one year.
Under the Group's standard contract terms, customers have a right of return
within 30 days. At the point of sale, a refund liability and a corresponding
adjustment to revenue is recognised for those products expected to be
returned. It is considered highly probable that a significant reversal in the
revenue recognised will not occur given the consistent low level of returns
over previous years.
Grants
Grants for revenue expenditure are presented as part of the Income Statement
in the periods in which the expenditure is recognised.
Foreign currency transactions and balances
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The consolidated financial
statements are presented in sterling, which is the Parent's presentational
currency.
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the rate of exchange ruling at the balance sheet
date.
The results and financial position of all Group entities that have a
functional currency different from the presentational currency of the Group
are translated into sterling follows:
• Assets and liabilities for each balance sheet presented are translated at
the closing rate at the date of the balance sheet;
• Income and expenses for each income statement are translated at the
average exchange rate for the month where these approximate the exchange rate
at the date of the transaction; and
• All resulting exchange differences are recognised within other
comprehensive income and taken to the foreign exchange reserve.
Tax
The current tax charge is calculated on the basis of tax rates and laws that
have been enacted or substantively enacted by the reporting date in the
countries where the group operates and generates taxable income.
Deferred tax is provided for using the liability method on temporary
differences at the balance sheet date between tax basis of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised in full for all temporary differences
other than those relating to goodwill on investments in subsidiaries. Deferred
tax assets are recognised for all deductible temporary differences carried
forward of unused tax credits and unused tax losses to the extent that it is
probable that taxable profit will be available against which the deductible
temporary differences and carry-forward of unused tax credits and unused tax
losses can be utilised.
The carrying amount of deferred tax assets is assessed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are reassessed at each
balance sheet date and are recognised to the extent that it is probable that
future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realised, or the liability
settled, based on tax rates that have been enacted or substantively enacted at
the balance sheet date.
The tax currently receivable is based on the taxable loss for the period and
relates to R&D tax credits. Taxable loss differs from net loss as reported
in the consolidated income statement because it excludes items of income or
expense that are taxable or deductible in other periods and it further
excludes items that are never taxable or deductible. This is calculated using
rates and laws enacted or substantively enacted at the reporting date
Financial instruments
The Group recognises financial instruments when it becomes a party to the
contractual arrangements of the instrument. Financial instruments are
de-recognised when they are discharged or when the contractual terms expire.
The Group's accounting policies in respect of financial instruments
transactions are explained below:
Financial assets
The Group classifies all of its financial assets as loans and receivables.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They arise
principally through the provision of goods and services to customers (e.g.
trade receivables), but also incorporate other types of contractual monetary
assets. They are initially recognised at fair value plus transaction costs
that are directly attributable to their acquisition or issue, and are
subsequently carried at amortised cost using the effective interest rate
method, less provision for impairment. Discounting is omitted where the effect
of discounting is immaterial.
Impairment provisions are recognised when there is objective evidence (such as
significant financial difficulties on the part of the counterpart or default
or significant delay in payment) that the Group will be unable to collect all
of the amounts due under the terms receivable, the amount of such a provision
being the difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired receivable. For
trade receivables, which are reported net, such provisions are recorded in a
separate allowance account with the loss being recognised within
administrative expenses in the Income Statement. On confirmation that the
trade receivable will not be collected, the gross carrying value of the asset
is written off against the associated provision.
Financial liabilities
The Group classifies all of its financial liabilities as liabilities at
amortised cost. Liabilities are classified as current liabilities when the
Group has an unconditional right to defer settlement of the liability for at
least 12 months after the balance sheet date.
Intangible assets
Internally developed software
Intangible assets are predominantly internally generated software development
costs for Location Sciences' technologies. Development costs are capitalised
when certain criteria are met. The product must be technically feasible, sale
is intended, a market exists, expenditure can be measured reliably, and
sufficient resources are available to complete the project. The extent of
capitalisation is limited to the amount, which taken together with further
related costs, will be recovered from the future economic benefits related to
the asset. When the Board is sufficiently confident that all of the criteria
for capitalisation are met, development costs are amortised over the expected
useful life, currently 5 years, from the date the asset is available for use.
Development costs that have been capitalised, but where amortisation has not
yet commenced are reviewed annually for impairment. If no intangible asset can
be recognised based on the above then development costs are recognised within
administrative expenses in the Consolidated Income Statement.
Amortisation
Asset class Amortisation method and rate
Development costs 20% straight line
Amortisation is recognised within administrative expenses and disclosed
separately on the Consolidated Income Statement.
Depreciation
Asset class Depreciation method and rate
Computer equipment 33.33% straight line
Office equipment 33.33% straight line
Right of Use assets Straight line over lease term
Depreciation is recognised within administrative expenses and disclosed
separately on the Consolidated Income Statement.
Impairment of non-financial assets
At each Statement of Financial Position date, the Group performs an impairment
review in respect of goodwill and any intangible assets not yet ready for use
and reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered any
impairment. If any such indication exists, the recoverable amount of the asset
(being the higher of fair value less costs to sell and value in use) is
estimated in order to determine the extent of any impairment. Any impairment
loss is recognised as an expense in the Consolidated Income Statement in the
period in which it was identified.
Investments
Investments are carried at cost, less any impairment in value.
The Company grants options over its equity investments to the employees of its
subsidiaries. The carrying value of the investment in this subsidiary is
increased by an amount equal to the value of the share-based payment charge
attributable to the option holder in the subsidiary.
Dividends on equity securities are recognised in income when receivable.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value,
and have a maturity of less than 3 months from the date of acquisition. For
the purpose of the statement of cash flows, cash and cash equivalents consist
of cash in hand and bank deposits.
Trade receivables
Trade receivables are amounts due from customers for licences sold or services
performed in the ordinary course of business. If collection is expected in one
year or less (or in the normal operating cycle of the business if longer),
they are classified as current assets. If not, they are presented as
non-current assets.
Trade receivables are recognised initially at the transaction price. They are
subsequently measured at amortised cost using the effective interest method,
less provision for impairment. A provision for the impairment of trade
receivables is established when there is objective evidence that the group
will not be able to collect all amounts due according to the original terms of
the receivables.
Trade payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities if payment is due within one year or
less (or in the normal operating cycle of the business if longer). If not,
they are presented as non-current liabilities.
Trade payables are recognised initially at the transaction price and
subsequently measured at amortised cost using the effective interest method.
Leases
Assets held under leases are recognised as assets of the Group at the fair
value at the inception of the lease or if lower, at the present value of the
minimum lease payments. The related liability to the lessor is included in the
Balance Sheet as a finance lease obligation. Lease payments are apportioned
between interest expenses and capital redemption of the liability. Interest is
recognised immediately in the Consolidated Income Statement, unless
attributable to qualifying assets, in which case they are capitalised to the
cost of those assets.
Exemptions are applied for short life leases and low value assets, with
payments made under operating leases charged to the Consolidated Income
Statement on a straight-line basis over the period of the lease.
Share capital
Ordinary shares are classified as equity. Equity instruments are measured at
the fair value of the cash or other resources received or receivable, net of
the direct costs of issuing the equity instruments. If payment is deferred and
the time value of money is material, the initial measurement is on a present
value basis.
Defined contribution pension obligation
A defined contribution plan is a pension plan under which fixed contributions
are paid into a separate entity and has no legal or constructive obligations
to pay further contributions if the fund does not hold sufficient assets to
pay all employees the benefits relating to employee service in the current and
prior periods.
For defined contribution plans contributions are paid publicly or privately
administered pension insurance plans on a mandatory or contractual basis. The
contributions are recognised as employee benefit expense when they are due. If
contribution payments exceed the contribution due for service, the excess is
recognised as an asset.
Share based payments
The Group operates an equity-settled, share-based compensation plan.
Equity-settled share-based payments are measured at fair value at date of
grant. The fair value determined at the grant date of the equity-settled share
based payments is expensed on a straight-line basis over the vesting period,
based on the Group's estimate of shares that will eventually vest. Fair value
is measured by use of the Black Scholes or a binomial options valuation model
as appropriate depending on the terms of the options.
Equity
Equity comprises:
Share capital - the nominal value of ordinary shares is classified as equity.
Share premium - represents the excess over nominal value of the fair value of
consideration received for equity shares, net of expenses of the share issue.
Merger relief reserve - the difference between cost or fair value and the
nominal value of shares issued on the exchange of shares with Location
Sciences AI Limited and on acquisition of subsidiaries where shares are issued
as part of the consideration.
Translation reserve - the foreign exchange difference arising on
consolidation.
Capital reserve - represents a capital contribution to the Company.
Equity reserve - represents the fair value of warrants over shares issued as
part of the May 2021 fundraise.
Reverse acquisition reserve - the balance of the amount recognised as issued
equity instruments arising on restatement of Location Sciences AI Limited to
reflect the parent equity structure, further to the reverse acquisition basis
of accounting adopted in 2013 on the share exchange by Location Sciences Group
Plc for 100% of the shares of Location Sciences AI Limited.
Retained earnings - includes all current and prior period retained
profits/(losses).
3 Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial information in conformity with IFRS requires the
directors to make critical accounting estimates and judgements that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. An assessment of the impact of these estimates and judgements on
the financial statements is set out below.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Actual results could differ
from these estimates and any subsequent changes are accounted for with an
effect on income at the time such updated information is available.
Fair values for employee share schemes
The establishment of fair values in respect of employee services received in
exchange for share options require the exercise of judgement and estimation in
respect of the life of the option, the expected dividend yield and, in
particular, the volatility of the underlying shares. A calculated value for
the latter may not accurately reflect the future share price movements given
the Group's stage of development.
Assessing whether development costs meet the criteria for capitalisation
The point at which development costs meet the criteria for capitalisation is
critically dependent on management's judgement of the point at which technical
feasibility is demonstrable. Commercial success of the development projects
remains uncertain at the time of recognition and therefore impairment reviews
are undertaken based on current estimates of future revenue streams. This
assessment has resulted in the impairment of £283,210 (2020: £nil) of
development costs.
3 Critical accounting judgements and key sources of estimation uncertainty
(continued)
Fair values of warrant instruments
Warrants issued in May 2021 are valued based on the fair value of the
underlying services received. The directors' warrant instruments have been
valued with reference to the fair value of the other warrants issued to third
parties.
Classification and valuation of financial instruments
The Group previously issued financial instruments including conversion
features and warrants. The valuation of these financial instruments, including
Level 3 fair values where there are no observable market inputs, are performed
in consultation with third party valuation specialists, with the overall aim
of maximising the use of market based information.
Assessing whether revenue meets the criteria for recognition
Contracts can include both the sale of licences and provision of services
including integration and development. Revenue is recognised based on the
analysis of individual contracts and the point at which significant risks and
reward of ownership transfer is dependent on the contractual terms. In respect
of a licence, this would usually be on delivery of the software. Software
development and other consulting services generally recognised on the basis of
work done but where issues of client acceptance are identified, then revenue
is deferred until issues are resolved.
4 Segmental analysis
Operating segments are based on internal reports about components of the
Group, which are regularly reviewed and used by the Board for strategic
decision making, to allocate resources across segments and to assess
performance by segment.
Since 2018 the Group maintained a holding company structure with one operating
subsidiary. For financial reporting, Location Sciences segments the Group
based on its two distinct products. Firstly, its UK Data and Insights
platform, which gives customers access to its data lake of over 36 billion
location data points. This helps customers in a variety of ways, for example,
competitor and footfall analysis, attribution services for advertisers, and
even the ability to enhance the sustainability of transport systems. Secondly,
Location Sciences has developed a global platform called Verify, which brings
transparency to the location based mobile advertising market. Verify allows
marketeers to authenticate where their adverts have been viewed and uses
proprietary technology to detect location ad-fraud, which would otherwise go
unnoticed. The Insights segment was disposed of during the year.
It should be noted that a segmental analysis of the Balance Sheet is not part
of routine management reporting and consequently no segmental analysis of
assets is shown here.
The analysis of the Group's revenue from contracts with customers for the year
is as follows:
2021 2020
£
£
Verify 167,940 318,572
Location Data and Insights* 373,448 762,170
541,388 1,080,742
* disclosed within discontinued operations
An analysis of the Group's revenue by geographical segment is as follows:
2021 2020
£
£
UK 383,003 578,697
ROW 158,385 502,045
541,388 1,080,742
All non-current assets of the Group are held in the UK.
During the year there was revenue from individual customers that represented
more than 10% of revenue as follows:
2021 2020
£
£
Verify - customer 1 113,120 -
Location Data and Insights - customer 1 141,480 385,074
Location Data and Insights - customer 2 163,871 132,242
Location Data and Insights - customer 3 84,000 -
Location Data and Insights - customer 4 63,710 -
Average payments terms are set out in note 17. There are no significant
financing components, nor variable consideration elements in customers'
contracts.
An analysis of EBITDA is as follows:
2021 2020
£
£
Location Data and Insights (299,972) (533,297)
Verify (682,706) (249,945)
Total EBITDA (982,678) (783,242)
An analysis of loss before tax is as follows:
2021 2020
£
£
Location Data and Insights (588,803) (898,178)
Verify (908,426) (507,362)
Total loss before tax (1,497,229) (1,405,540)
5 Other operating income
The analysis of the Group's other operating income for the year is as follows:
2021 2020
£
£
Government grants - 10,000
Furlough receipts 11,267 20,119
11,267 30,119
Furlough scheme
The furlough scheme is a government grant relating to a wage subsidiary
programme introduced in the United Kingdom in response to the COVID-19
coronavirus pandemic. The Company was entitled to the wage subsidy because it
had reduced operations in the United Kingdom as a result of the COVID-19
pandemic. The accounting policy adopted is set out in Note 2 to the financial
statements; the grant was recognised in the profit and loss in 'other income'
as the related wages and salaries for furloughed employees were recognised.
6 Discontinued operations
On 21 October 2021, Location Sciences AI Limited entered into an agreement for
the sale of the 'Insights business'.
Outlined below are the results for the year in relation to the portion of the
business sold.
2021 2020
£
£
Revenue 373,448 762,170
Direct expenditure (144,286) (252,609)
Gross profit from discontinued operations 229,162 509,561
Overheads (817,963) (1,407,739)
Loss before tax on discontinued operations (588,801) (898,178)
Sale proceeds received* 450,138 -
Net book value of assets sold (159,498) -
Profit on sale of discontinued operations 290,640 -
Total loss on discontinued operations (298,161) (898,178)
*The Company also received an additional US$125,000 in relation to the sale of
the Insights business which is not included in the above sale proceeds due to
not meeting the requirements for recognition within the accounting period.
This deferred consideration has been recognised post year end.
7 Loss before taxation
Arrived at after charging/(crediting)
2021 2020
£
£
Depreciation expense * 5,828 102,314
Amortisation expense 503,034 514,464
Research and development expenditure - 27,548
Impairment charge ** 283,210 -
Share based payments 48,312 48,312
Net foreign exchange losses 4,718 11,004
Auditors remuneration 10,000 10,000
- Company audit
- Subsidiary audit 15,000 15,000
Non-audit services: 7,750 12,750
- Tax and other compliance services
* Depreciation includes the charge arising on right-of-use assets arising upon
initial application of IFRS 16 totalling £ nil (2020: £93,879).
** Impairment of intangible assets is disclosed within exceptional items in
the Income Statement.
8 Finance income and costs
2021 2020
£
£
Finance income
Interest income on bank deposits 2 98
Finance costs
Interest on IFRS 16 lease liabilities - (5,619)
Net finance costs 2 (5,521)
9 Staff costs
The aggregate payroll costs (including directors' remuneration) were as
follows:
2021 2020
£
£
Wages and salaries 794,544 1,074,189
Social security costs 102,073 150,120
Pension costs, defined contribution scheme 8,790 13,017
Share-based payment expenses 48,312 48,312
Redundancy 19,035 -
972,754 1,285,638
The average number of persons employed by the group (including directors)
during the year, analysed by category was as follows:
2021 2020
No.
No.
Finance and operations 2 2
Research and development 4 8
Commercial and client services 1 4
Non-executive directors 2 4
9 18
The average number of persons employed by the company (including directors)
during the year, analysed by category was as follows:
2021 2020
No.
No.
Finance and operations 2 2
Non-executive directors 2 4
4 6
10 Key management compensation and directors' remuneration
Details of aggregate key management emoluments for the year are as follows:
2021 2020
£
£
Salaries and other short-term employee benefits 706,071 449,846
Pension costs 2,636 2,910
Expense of share-based payments 25,912 26,216
734,619 478,972
The directors are of the opinion that the key management of the Group
comprises the executive and the non-executive directors of Location Sciences
Group Plc. These persons have authority and responsibility for planning,
directing and controlling the activities of the entity, directly or
indirectly.
Directors' remuneration is disclosed in the Directors' Remuneration Report.
Directors' remuneration includes salaries settled by issue of shares, as
disclosed in note 21.
11 Auditors' remuneration
2021 2020
£
£
Audit of the Company's financial statements 10,000 10,000
Audit of the subsidiaries' financial statements 15,000 15,000
25,000 25,000
All other non-audit services comprising interim review and permitted tax 7,750
services
12,750
12 Income tax
Tax charged/(credited) in the income statement
2021 2020
£
£
Current taxation
UK R&D tax credit (113,871) (166,272)
The tax on profit before tax for the year is higher than the standard rate of
corporation tax in the UK (2021 - higher than the standard rate of corporation
tax in the UK) of 19% (2020 - 19%).
The differences are reconciled below:
2021 2020
£
£
Loss before tax (1,199,068) (507,362)
Corporation tax at standard rate (227,823) (96,399)
Effect of expenses not deductible 9,640 9,926
Unrecognised deferred tax asset 167,042 154,144
Surrender of tax losses for R&D tax credit 35,339 51,602
Additional deduction for research development expenditure (84,336) (123,146)
Discontinued operations (56,651) (170,654)
Other differences 42,918 8,255
Total tax credit (113,871) (166,272)
Subject to the UK tax authority's agreement, the Group has UK tax losses of
approximately £20,933,000 (2020: £20,200,000) available to carry forward and
offset against future taxable profits arising from the same trade. The Group
has a potential deferred tax asset of £3,977,000 (2020: £3,840,000) which
will not be recognised until it is regarded as more likely than not that there
will be sufficient taxable profits from which the tax losses can be deducted.
In addition, no deferred tax asset is recognised in respect of future tax
deductions on exercise of share options.
13 Loss per share
The calculation of loss per share is based on the loss of £1,383,358 (2020:
£1,239,268) and on the number of shares in issue, being the weighted average
number of equity shares in issue during the period of 1,814,571,645 0.1p
ordinary shares (2020: 513,986,630 0.1p ordinary shares).
2021 2020
£
£
Loss for the financial year (1,383,358) (1,239,268)
Earnings per share
Loss per share - basic and diluted (0.076p) (0.24p)
Dilutive instruments
Instruments that could potentially dilute basic loss per share in the future
but are not included in the calculation of diluted loss per share because they
are anti-dilutive.
14 Intangible assets
Group
Internally generated software development costs
£
Cost or valuation
At 1 January 2020 2,799,161
Additions 471,019
At 31 December 2020 3,270,180
At 1 January 2021 3,270,180
Additions 341,441
Disposal (2,306,381)
At 31 December 2021 1,305,240
Amortisation
At 1 January 2020 1,613,924
Amortisation charge 514,464
At 31 December 2020 2,128,388
At 1 January 2021 2,128,388
Amortisation Charge 503,034
Disposal during the year (2,146,883)
Impairment 283,210
At 31 December 2021 767,749
Carrying amount
At 31 December 2021 537,491
At 31 December 2020 1,141,792
At 1 January 2020 1,185,237
Internal development represents the cost incurred in developing the Group's
Verify proprietary location verification software with net book value of
£537,491 (2020: £590,369). These internal costs have been capitalised in
accordance with the Group's accounting policies where all the conditions for
capitalisation have been met.
The intangible assets have on average a remaining amortisation period of 4
years respectively.
Impairment of research and development is considered within the conditions of
capitalisation. Amortisation charges are included in administrative expenses,
disclosed separately on the Consolidated Income Statement.
15 Property, plant and equipment
Group
Computer Equipment Office Equipment IFRS 16 Right of Use Assets: Total
£
£
£
Property
£
Cost or valuation
At 1 January 2020 39,554 2,493 187,757 229,804
Additions 1,278 - - 1,278
Disposals - - (187,757) (187,757)
At 31 December 2020 40,832 2,493 - 43,325
Additions - - - -
Disposals (35,965) (2,493) - (38,458)
At 31 December 2021 4,867 - - 4,867
Depreciation
At 1 January 2020 28,507 554 93,879 122,940
Charge for year 7,605 831 93,878 102,314
Eliminated on disposal - - (187,757) (187,757)
At 31 December 2020 36,112 1,385 - 37,497
Charge for year 4,720 1,108 - 5,828
Eliminated on disposal (35,965) (2,493) - (38,458)
At 31 December 2021 4,867 - - 4,867
Carrying amount
At 31 December 2021 - - - -
At 31 December 2020 4,720 1,108 - 5,828
At 1 January 2020 11,047 1,939 93,878 106,864
16 Investments
Company
2021 2020
£
£
Investment in subsidiaries 2,045,589 2,045,627
Capital contribution arising from IFRS 2 share-based payments charge 1,174,307 1,125,995
3,219,896 3,171,622
Subsidiaries
£
Cost or valuation
At 1 January 2020 3,491,764
Revaluation 48,312
Impairment (368,454)
At 31 December 2020 3,171,622
Disposal (38)
Revaluation 48,312
At 31 December 2021 3,219,896
Carrying amount
At 31 December 2021 3,219,896
At 31 December 2020 3,171,622
At 1 January 2020 3,491,764
Details of the Group subsidiaries held as direct investments of the Company as
at 31 December 2021 are as follows:
Name of subsidiary Principal activity Registered office Proportion of ownership interest and voting rights held 2020
2021
Location Sciences AI Limited Verify Same registered office address as group 100% 100%
Location Sciences (US) Inc. Location Data and Insights and Verify within the US marketplace 1209 Orange Street, Wilmington, New Castle, Delaware, 19801 USA 0% 100%
Note, during the year Location Sciences (US) Inc. was dissolved on 25th March
2021
17 Trade and other receivables
Group Company
2021 2020 2021 2020
£
£
£
£
Trade receivables 175,875 258,468 - -
Receivables from related parties - - - -
Prepayments 149,403 6,837 132,919 -
Other receivables 6,281 149,799 - -
331,559 415,104 132,919 -
Trade and other receivables are all current and the net carrying amount of
trade receivables is considered a reasonable approximation of fair value.
Average credit terms were 45 days (2020: 45) and average debtor days
outstanding were 65 (2020: 73) excluding balances that have been fully
provided for.
All of the Group's trade and other receivables have been assessed for
impairment based upon the expected credit losses model. In order to manage
credit risk, the Directors set limits for customers based on a combination of
payment history and third party credit references. Credit limits are reviewed
on a regular basis in conjunction with debt ageing and collection history.
Trade receivables are regularly reviewed for bad and doubtful debts. The
Group's policy is to include a provision for impairment based on estimated
credit losses. This includes an assessment where relevant of forward-looking
information on macroeconomic factors that may affect the ability of customers
to settle receivables. Trade receivables are written off where is no
reasonable expectation or recovery, for example where the customer has entered
insolvency proceedings or where a customer has failed to make contractual
payments for an extended period.
The Group's exposure to credit and market risks, including impairments and
allowances for credit losses, relating to trade and other receivables is
disclosed in the financial risk management and impairment note.
Trade receivables above include amounts (detailed below) that are past due at
the end of the reporting period and which an allowance for doubtful debts has
not been recognised as the amounts are still considered recoverable and there
has not been a significant change in credit quality.
Age of trade receivables that are past due but not impaired Group
2021 2020
£
£
31 to 60 days 32,680 92,954
61 to 90 days 40,082 31,838
91 to 120 days 17,578 34,118
3 to 6 months 41,575 22,913
131,915 181,823
18 Trade and other payables
Group Company
2021 2020 2021 2020
£
£
£
£
Trade payables 18,699 45,458 - -
Payables to related parties - - - 38
Accrued expenses 79,872 117,208 19,000 18,999
Social security and other taxes 81,215 42,347 57,000 -
Other payables 3,389 6,594 - -
183,175 211,607 76,000 19,037
The directors consider that the carrying amount of trade and other payables
approximated their fair value.
Trade payables are paid between 30 and 60 days of receipt of the invoice.
The Group's exposure to market and liquidity risks, including maturity
analysis, related to trade and other payables is disclosed in the financial
risk management and impairment note.
19 Obligations under leases
IFRS 16
For the year ended 31 December 2021, the following amounts have been
recognised under IFRS 16 in relation to property leases:
2021 2020
£ £
Additions to 'right-of-use' assets - -
Depreciation charged on 'right-of-use' asset recognised - 93,878
Interest expense recognised on lease liability - 5,619
Expense incurred in relation to 'short-term' leases 14,563 19,200
Obligation at year end in relation to 'short-term' leases - -
Total cash outflow in year in relation to leases 14,563 99,737
20 Financial risk management and impairment of financial assets
Treasury risk management
The Group manages a variety of market risks, including the effect of changes
in foreign exchange rates, liquidity and counterparty risks.
Credit risk Credit risk
The Group's principal financial assets are bank balances, cash, trade and Currency risks
other receivables.
The credit risk on liquid funds is limited because the counterparties are UK
banks or "Blue Chip" companies with high credit ratings assigned by
international credit rating agencies.
The credit risk associated with trade receivables is minimal as invoices are
based on contractual agreements with long-standing customers. Credit losses
historically incurred by the Group have consequently been considered by the
Directors to be exceptional in their occurrence. The Group maintains a
provision against receivables, however, this is not necessarily linked to
credit risk and the ageing of receivables is not the most relevant indicator
to determine the potential impairment of a receivable. The nature of the
Group's operations is such that misunderstandings or minor disagreements may
arise during the course of contracts, which may sometimes require an
adjustment to be made to achieve settlement and the Group's provisions are
made on a case by case basis, based on Directors' knowledge of the
circumstances surrounding overdue balances as they arise.
As a result, investment returns and credit risk to the Group in this regard
are not material to the financial statements.
The Group's maximum exposure to credit risk is limited to the carrying amount
of financial assets at the reporting date. No collateral is held in respect of
these amounts which are expected to be received in full. In order to manage
credit risk, credit limits are reviewed on a regular basis in conjunction with
debt ageing and collection history.
The Company has significant credit risks associated with the inter-company
debt due from its subsidiary, which is fully provided for as at the year end.
As with the Group's policy for making provisions against trade receivables,
provisions against inter-company debt is considered based on the Directors'
knowledge of the subsidiary's trading activity and financial position.
Currency risk Credit risk
The Group's operations are primarily located in the United Kingdom. The
Group's transactions during 2021 were predominantly denominated in sterling,
with consequently little exposure to foreign currency risks. Due to the
limited risks to the Group, forward exchange contracts are not considered
necessary and are not used. At the year end, the Group operated both sterling
and dollar bank accounts. Going forward the Directors will continue to monitor
the currency risk.
The translation risk on the Group's foreign exchange payables and receivables Liquidity risk
is considered to be immaterial due to their short-term nature.
Liquidity risk Liquidity risk
The Group has sufficient capital resources to meet its external current
liabilities as they fall due in 2022.
Operational cash flow represents on going trading revenue and costs,
administrative costs and research and development activities. The Group
manages its liquidity requirements by the use of both short-term and long-term
cash flow forecasts. The Group's policy is to ensure facilities are available
as required or to issue equity share capital to ensure cash resources
available are in accordance with long-term cash flow forecasts. The Group
currently has no overdrawn committed facilities as at 31 December 2021.
The Group actively manages its working capital to ensure it has sufficient
funds for operations and planned research and development activities.
The Group's main financial liabilities include trade payables and operational
costs. All amounts for trade and other payables are due for payment in
accordance with agreed settlement terms with suppliers or statutory deadlines.
All such payment terms are within six months.
Capital management
The Group's activities are of a type and at a stage of development where the
most suitable capital structure is that of one primarily financed by equity.
The directors will reassess the future capital structure when projects under
development are sufficiently advanced.
The Group's financial strategy is to utilise its resources and current trading
revenue streams to commercialise its products and grow revenues. The Group
keeps investors informed of its progress with its projects through regular
announcements and raises additional equity finance at appropriate times.
The Group manages capital on the basis of the carrying amount of equity, and
debt with regard to maintaining sufficient liquidity to enable the Group to
continue to trade and invest in commercialisation. As at the year end the
equity to overall financing ratio, excluding IFRS 16 adjustments, is 1
(2020:1).
Categories of financial instruments
All of the Group's financial assets are classified as loans and receivables;
see note 17. The directors consider that the carrying amount of trade and
other receivables approximates their fair value.
All of the Group's financial liabilities are classified as liabilities at
amortised cost: see note 18. The directors consider that the carrying amount
of trade and other payables approximates their fair value. All financial
liabilities are due within one year.
The accounting policies applied are set out in note 2.
21 Share capital
Allotted, called up and fully paid shares
2021 2020
No. £ No. £
New Ordinary shares of 0.1p each 2,605,087,398 2,605,087 587,337,398 587,337
Deferred shares of 0.99p each 1,040,712,398 10,303,054 1,040,712,398 10,303,054
New deferred shares of 0.9p each 376,651,734 3,389,866 376,651,734 3,389,866
4,022,451,530 16,298,007 2,004,701,530 14,280,258
Reconciliation of shares
Number of shares
Total number of shares at 1 January 2021 2,004,701,530
25 May 2021 share issue: placing 1,842,500,000
25 May 2021 share issue: settlement of professional fees 132,750,000
25 May 2021 share issue: settlement of director fees 42,500,000
At 31 December 2021 4,022,451,530
Share issue
On 25 May 2021, 1,842,500,000 ordinary shares of 0.1p were issued at 0.2p
pursuant to a placing, subscription and broker option with a nominal value of
£1,842,500 for aggregate consideration of £3,685,000 before costs of the
placing, subscription and broker option, with an additional 132,750,000
ordinary shares issued at 0.2p to settle professional fees in relation to the
placing, subscription and broker option. At the same time 42,500,000 ordinary
shares were issued at the market value on day of admission of the shares at
0.66p to the non-executive directors as consideration for their first-year
fees.
At the same time various warrants were issued to certain parties as detailed
in the section below.
Share rights
Ordinary shares have attached to them full voting, dividend and capital
distribution (including on winding up) rights; they do not confer any rights
of redemption.
Deferred shares have attached to them no voting, dividend or capital
distribution (including on winding up) rights; they do not confer any rights
of redemption.
Warrants in Issue
1) Promoter Warrants - non-transferable warrants to subscribe for up to
1,500,000,000 Ordinary Shares, exercisable at the 0.20p for five years from 25
May 2021, were issued to certain members of the Concert Party in consideration
of those persons assembling and co-ordinating the Concert Party's investment
in the Company in May 2021 and facilitating the appointment of Simon Wilkinson
as Non-Executive Chairman.
Name
Number of Ordinary Shares subject to Promoter Warrants
Richard Hughes 500,000,000
Mahmud Kamani 500,000,000
Simon Wilkinson 500,000,000
2) Cornerstone Investor Warrants - non-transferable warrants to subscribe for
up to 250,000,000 Ordinary Shares, exercisable at 0.20p for five years from 25
May 2021, were issued to the Cornerstone Investors of the May 2021 placing.
Name
Number of Ordinary Shares subject to Cornerstone Investor Warrants
Ben Turner 50,000,000
Donna Turner 75,000,000
James Pope 50,000,000
Maxine Pope 75,000,000
3) Broker Warrants - transferable warrants to subscribe for up to 100,000,000
Ordinary Shares, exercisable at the 0.20p for five years from 25 May 2021 were
issued as shown below.
Name
Number of Ordinary Shares subject to Broker Warrants
Turner Pope 58,750,000
Dr Nigel Burton 25,000,000
Mark Slade 10,000,000
David Rae 6,250,000
4) Director Warrants - non-transferable warrants to subscribe for, in
aggregate, 120,000,000 Ordinary Shares were issued to the Executive Directors
and the Non-Executive Directors, exercisable at 0.20p for five years from 25
May 2021, provided that the Ordinary Shares have traded at a Volume Weighted
Average Price (VWAP) at or above 0.30p for 20 consecutive Business Days, or on
a change of control of the Company.
Name
Number of Ordinary Shares subject to Broker Warrants
Mark Slade 30,000,000
David Rae 30,000,000
Simon Wilkinson 30,000,000
Dr Nigel Burton
30,000,000
The expense recognised in respect of all warrants issued as part of the May
2021 fundraise has been recognised directly in the share premium reserve,
based on the fair value of the services received that are considered to
directly relate to the issuing of shares.
The pre-existing share warrants held by Mike Staten were surrendered on 25 May
2021 in consideration for the issue of 5 million Ordinary Shares at 0.20p
22 Share-based payments
The share option scheme was originally adopted by the company on 29 September
2011. It was established to attract and retain the best available personnel
for positions of responsibility, to provide additional incentive to employees,
officers or consultants of the company and to promote the success of the
company's business. Further to the acquisition of the business by Location
Sciences Group plc , the options were granted over shares in the parent
entity. The share option scheme was and continues to be administered by the
directors.
All outstanding options as at 1 January 2018 and outstanding options issued in
March 2018 and May 2018 were surrendered and replaced by options issued in
November 2018. Further in 2019 part of the outstanding share options issued in
November 2018 were surrendered and replaced by options issued in July 2019.
Share options surrendered are accounted for as modified options under IFRS 2.
The incremental value of the modified share options is not material.
Share options issued in November 2018, February 2019, May 2019 and October
2019 are to be settled by way of issues of Ordinary Shares. The options have
no vesting period but cannot be exercised until target share prices are
achieved and have a maximum term of 10 years.
The target share prices are as follows:
Target A: £0.048
Target B: £0.073
Target C: £0.097
The movements in the number of share options during the year were as follows:
2021 2020
Number
Number
Outstanding, start of period 26,222,222 29,773,278
Forfeited during the period (1,555,556) (3,551,056)
Outstanding, end of period 24,666,666 26,222,222
None of the options outstanding at the end of the period are yet exercisable
as the target share prices have not yet been achieved.
The movements in the weighted average exercise price of share options during
the year were as follows:
2021 2020
£
£
Outstanding, start of period 2.25 2.28
Forfeited during the period 2.25 2.49
Outstanding, end of period 2.25 2.25
The weighted average contractual life of options outstanding at the year-end
is 3 years (2020: 3 years).
The share-remuneration expense for the year recognised in the Profit and Loss
is £48,312 (2020: £48,312). Expenses are allocated to Location Sciences AI
Limited, the company that receives the employee services.
23 Commitments
No capital expenditure was committed to as at 31 December 2021 (2020: £Nil).
25 Related party transactions
During the year purchases of £59,129 (2020: £26,250) were made to Alderslade
Limited, a company of which K Harrison is a director. As at 31 December 2021,
the balance owed to Alderslade Limited was £Nil (2020: £3,000).
During the year purchases of £36,000 (2020: £Nil) were made to Chilkins
Limited, a company of which B Chilcott is a director. As at 31 December 2021,
the balance owed to Chilkins Limited was £Nil (2020: £Nil).
During the year, the Directors supported the Company and participated in the
placing and subscription in May 2021. The resulting shareholding and warrant
positions are disclosed in the Directors Remuneration Report, the Directors
Report and the Share Capital note.
During the year the subsidiary incurred expenses on behalf of the parent
company of £Nil (2020: £Nil) and the parent company advanced the subsidiary
funds, further to the May 2021 fundraise, of £3,650,000 (2020: £877,372).
As at the year end the net balance after bad debt provision owed by the
subsidiary to the parent company was £Nil (2020: £Nil), with a bad debt
expense of £3,314,312 (2020: £1,189,405) recognised in the year.
Key management personnel are considered to be the directors of the Company and
key management compensation is disclosed in note 10 to the financial
statements and in the Directors' Remuneration Report.
25 Net debt note
The Group and Company has no debt, thus no net debt note is presented.
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