Location Sciences - Annual Financial Report
26/06/2023 07:00
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RNS Number : 8105D Location Sciences Group PLC 26 June 2023
This announcement contains inside information for the purposes of Regulation
11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the
publication of this announcement via a Regulatory Information Service, this
inside information is now considered to be in the public domain.
Location Sciences Group PLC
("Location Sciences" or the "Company" or the "Group")
Audited Results for the year ended 31 December 2022
Location Sciences (AIM: LSAI), announces its audited results for the year
ended 31 December 2022.
Financial Performance
· Revenues from the Verify division in 2022 were £110,856 compared
to £167,940 in 2021 representing a 33.99% decrease in revenues year-on-year,
reflecting the continued headwinds faced by the business during the year
· Administrative costs excluding depreciation and amortisation for
the year to 31 December 2022 £723,149 (2021: £801,432)
· Loss before exceptional items, amortisation and depreciation for
the year to 31 December 2022 £641,651 (2021: £699,468)
· Loss per share from continuing operations decreased from 0.076p
in 2021 to 0.029p in 2022
Financial Position at Year End
· Net assets were £4,330,452 (2021: £5,178,571)
· Net current assets were £4,195,778 (2021: £4,641,080)
· Cash and cash equivalents of £4,125,571 (2021:
£4,378,825)
· Borrowings were £Nil (2021: £Nil)
· Potential deferred tax asset of £5,423,000 (2021:
£3,977,000)
A copy of this announcement and the Company's report & accounts are
available on the Company's website
https://www.locationsciencesgroup.ai/investor-relations/
For further information please contact:
Location Sciences Group PLC
via Allenby Capital
Simon Wilkinson, Chairman
Allenby Capital Limited (Nominated Adviser)
Tel: +44
(0)20 3328 5656
David Hart
Vivek Bhardwaj
Turner Pope Investments (TPI) Ltd
(Broker)
Tel: +44 (0)20 3657 0050
James Pope
Andy Thacker
CHAIRMAN'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2022
Dear Shareholders,
I write to you today to present the Chairman's statement for the Location
Sciences Group PLC 2022 report and accounts. It is with a mix of challenges
and opportunities that I update you on the progress we made during the past
year.
The year 2022 marked a significant turning point for Location Sciences Group
PLC as we undertook a thorough review of our strategic options. Amidst market
volatility and evolving industry dynamics, we recognised the need to
reevaluate our strategies and ensure the long-term viability of our company.
Financially, the year presented its share of challenges, with a decline in
revenue compared to the previous year. However, I am pleased to report that we
entered 2022 with a solid financial foundation. The successful fundraise in
2021 provided us with ample resources, enabling us to pursue our strategic
objectives and navigate the complex business landscape.
Furthermore, in our pursuit of strategic optimisation, we took decisive action
to streamline our operations. The disposal of our Insights business to Digital
Envoy Inc during 2021 was a key milestone in this journey. Not only did it
allow us to focus on our core offerings, but it also significantly reduced our
overheads and cash burn. As a result, we are well-funded and with a solid
platform to deliver shareholder value going forward.
Throughout this process, we have remained committed to our key stakeholders,
in particular our shareholders. We recognise that change brings uncertainty,
and we have made every effort to navigate these challenges with transparency
and fairness. Our team has shown remarkable resilience and adaptability during
this period of transition, and we are grateful for their dedication to our
shared vision.
Looking forward, we remain cautiously optimistic. The strategic review process
has provided us with valuable insights into our strengths, weaknesses, and
potential growth opportunities. Armed with this knowledge, we are actively
exploring avenues for sustainable expansion and enhancement of our offerings.
Finally, I would like to express my heartfelt gratitude to our shareholders,
clients, and partners for their unwavering support throughout this
transformative period. Your confidence in our ability to navigate these
challenges and capitalise on emerging opportunities has been instrumental in
our progress.
In conclusion, while 2022 presented its fair share of hurdles, we are
well-funded and strategically positioned for the future. With a solid
financial foundation, streamlined operations, and a focus on delivering a new
strategic path going forward, we are confident in our ability to create
long-term value for our shareholders.
Thank you for your continued trust and support.
INDEPENDENT DIRECTORS FINANCIAL REVIEW FOR THE YEAR ENDED 31 DECEMBER 2022
Dear Shareholders,
As the Independent Director of Location Sciences Group PLC, I am pleased to
present my report alongside the Chairman's statement for the 2022 report and
accounts. As a member of the Board, my role is to provide an unbiased
perspective and act in the best interests of the company and its shareholders.
Throughout 2022, I actively participated in the strategic review process and
monitored the company's performance, governance, and risk management. I have
assessed the decisions made and actions taken by the Board, ensuring that they
align with the company's values and objectives.
Financial Performance
The financial performance of Location Sciences Group PLC in 2022 reflected the
challenges faced by the company and the broader market environment. I have
scrutinised the financial statements and worked closely with the team to
understand the underlying causes and evaluate the appropriateness of the
strategic initiatives undertaken. I have enclosed below a summary of the
Group's financial performance and statement of financial position at the end
of the year:
Year to Six months to Year to Comparison
31 December 2022
30 June 2022
31 December 2021
to prior year
All figures in £GBP (unless otherwise stated)
Revenue 110,856 53,073 167,940 (34.0%)
Administrative costs 723,149 489,552 801,432 (9.8%)
Loss before tax 850,578 492,353 1,199,068 (29.1%)
Loss per share 0.029p 0.020p 0.076p (61.8%)
Net assets 4,330,452 4,805,999 5,178,571 (16.4%)
Net current assets 4,195,778 4,399,032 4,641,080 (9.6%)
Cash at bank 4,125,571 4,227,685 4,378,825 (5.8%)
Group borrowings Nil Nil Nil -
The Board made further overhead reductions during the year and the impact of
these can be seen in the decreased administration costs in H2 2022 of
£233,597 compared to H1 2022 of £489,552, representing a 52.3% reduction.
The loss per share was negatively impacted in H2 2022 by a further right down
of our intangible assets of £143,482 (2021: £283,210).
Strategic Review and Actions Taken
The Board conducted a thorough strategic review during the year to identify
the most viable options for sustainable growth and shareholder value creation.
This review included the disposal of the Insights business to Digital Envoy
Inc, which significantly reduced overheads and cash burn, as well as
refocusing the company on its core offerings. We closely scrutinised this
disposal and believe it was a prudent decision that will help streamline
operations and allocate resources more efficiently. We have also assessed the
effectiveness of the board's decision-making process, ensuring that all
potential risks and opportunities were duly considered.
Corporate Governance
We are committed to upholding the highest standards of corporate governance.
Throughout the year, we monitored the company's compliance with applicable
laws, regulations, and best practices. We reviewed the effectiveness of
internal controls, risk management systems, and ethical practices. We are
pleased to report that Location Sciences Group PLC has maintained a robust
governance framework, with appropriate checks and balances in place to
safeguard shareholder interests.
Stakeholder Relations
As the Independent Director, I place great importance on the company's
relationships with its key stakeholders. I have closely monitored the
engagement efforts undertaken by the team to foster a positive team culture,
ensure fair treatment, and provide opportunities for professional growth.
Furthermore, I have assessed the company's relationships with clients,
suppliers, and other stakeholders, ensuring that open lines of communication
are maintained and that their expectations are being met.
Looking Ahead
As the Independent Director, I remain committed to our fiduciary duties and to
serving the best interests of Location Sciences Group PLC and its
shareholders. I will continue to provide oversight, guidance, and independent
perspectives to the Board as the company navigates the evolving landscape. I
will monitor progress against strategic objectives, evaluate risk management
practices, and advocate for responsible and sustainable business practices.
In conclusion, I express our appreciation for the trust placed in us by the
shareholders of Location Sciences Group PLC. I believe that the company's
strategic initiatives, including the disposal of the Insights business and the
ongoing commitment to find a new strategic direction for the Group, will
position it for long-term success. I remain vigilant in our oversight role and
are dedicated to the company's continued growth and value creation.
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2022
The Directors present their strategic report for the year ended 31 December
2022.
Fair review of the business
The fair review of the business is set out in the Chairman's and Independent
Director's reviews, which describe in detail the financial results and future
plans for Location Sciences.
The Board monitors progress on the overall Group strategy and the individual
strategic elements by reference to KPIs. The primary measures are revenue,
costs, EBITDA before exceptional items and working capital levels.
The Group is in a transition stage with the benefits of the refinancing,
reorganisation of the Group and the Board's strategic review yet to deliver
the value the Board expects to shareholders.
Principal risks and uncertainties
The principal and commercial risks to the Group are as follows:
Description The Group's strategic review does not deliver the expected improved
shareholder returns
Impact The Group may not deliver shareholder value
Mitigation The Board conducted a thorough strategic review during the year to identify
the most viable options for sustainable growth and shareholder value creation.
Description Location Sciences Group PLC continues to be in a cash consumption phase.
Impact Going concern has been carefully considered and details are provided in the
Corporate Governance Report below and in note 2 of the Group's financial
statements.
Mitigation The Group had in excess of £4 million in net cash resources as at 31 December
2022, which is more than sufficient for the Groups requirements for the
foreseeable future.
Description Changes in regulation negatively impact the Group's market.
Impact The Group may find the demand for its products is reduced and / or the Group
may be forced to change or stop selling one or more of its products.
Mitigation The Board takes account of commentators and industrial bodies as to the
direction of policy change.
The Board meets regularly to review specific and general risks that face the
Group. The Board strives to position the Group in a way that any risks can be
minimised and met, should the need arise.
The Group's performance will be dependent on the outcome of the strategic
review and the implementation of the results of this review. As part of our
strategic review, we have thoroughly analysed market trends, customer needs,
and emerging opportunities to ensure the long-term success and sustainable
growth of the company.
The Group is managing this risk by reducing the overheads of the Group and
continuing to analyse new opportunities as they arise. The Board are committed
to delivering shareholder value in the long-term.
Strategic risks
Following the strategic review, Location Sciences Group PLC has identified key
initiatives, such as seeking acquisition targets and optimising operational
efficiency. However, a strategic risk lies in the effective execution of these
initiatives. Ensuring successful implementation, alignment across the
organisation, and timely delivery of desired outcomes require careful
planning, resource allocation, and effective management of change. Any delays,
misalignment, or inadequate execution could impede the company's ability to
achieve its strategic objectives and may result in lost opportunities, lower
competitiveness, and suboptimal financial performance.
It is important for Location Sciences Group PLC to establish clear goals,
allocate appropriate resources, and monitor the progress of these strategic
initiatives. The company should implement robust project management practices,
establish effective communication channels, and regularly evaluate and adjust
the execution plan as needed. Additionally, strong leadership and stakeholder
engagement are crucial to drive alignment and foster a culture of
accountability throughout the organisation.
By proactively addressing this strategic risk and implementing effective
execution strategies, Location Sciences Group PLC can enhance its chances of
successfully realising the desired outcomes of the strategic initiatives and
drive long-term value for shareholders.
This report, in conjunction with the Chairman's statement and Independent
Directors report, form the Strategic Report for the purposes of s414A of the
Companies Act 2006.
Section 172 statement
The Directors believe that they have effectively implemented their duties
under section 172 of the Companies Act 2006 through adherence to the Quoted
Companies Alliance Corporate Governance Code, as disclosed on pages 14 to 16
and as published on our website:
www.locationsciencesgroup.ai/investor-relations/board-governance. The
Chairman's Report and Chief Executive's Review details the Group's future
plans to achieve its long-term strategy.
The Group is committed to maintaining an excellent reputation and strive for
high standards, while maintaining an awareness of the environmental impact of
the work that it does and strives to reduce its carbon footprint.
The Directors recognise the importance of the wider stakeholders in delivering
their strategy and achieving sustainability within the business; in ensuring
that all our stakeholders are considered as part of every decision process we
believe we act fairly between all members of the company.
CORPORATE GOVERNANCE
The Board recognises the importance of good corporate governance in order to
protect and build upon the substantial investments made by our diverse
shareholder base. We have chosen to apply the Quoted Companies Alliance
Corporate Governance Code (the 'QCA Code'), which was developed by the QCA in
consultation with a number of significant institutional small company
investors, as an alternative corporate governance code applicable to AIM
companies. The underlying principle of the QCA Code is that "the purpose of
good corporate governance is to ensure that the company is managed in an
efficient, effective and entrepreneurial manner for the benefit of all
shareholders over the longer term". The Board anticipates that whilst the
Company will continue to comply with the QCA Code, given the Group's size and
plans for the future, it will also endeavour to have regard to the provisions
of the UK Corporate Governance Code as best practice guidance to the extent
appropriate for a company of its size and nature.
An explanation of how these principles have been applied is set out both below
and in the Directors' remuneration, Audit Committee and internal control
sections of this report.
Certain information required under the QCA code is included within the
Strategic report and the Directors Remuneration Report.
Name Date Appointed Date Resigned Role Committees
Simon Wilkinson 25/05/2021 Chairman Remuneration, Nomination,
Audit
Nigel Burton 25/05/2021 Non-Executive Director Remuneration, Nomination,
Audit
Mark Slade 24/07/2017 22 June 2022 CEO -
David Rae 12/02/2018 22 June 2022 CFO -
The Board is responsible to the shareholders for the proper management of the
Group through setting the overall strategy of the business and to review the
people, performance, policies and budgets of the Group. The Board typically
meets bi-monthly and also meets for any other extraordinary matters as they
may arise. Detailed information on matters to be discussed during the meetings
are circulated in advance of the meeting to ensure non-executive directors can
contribute in an educated manner.
Independence of Chairman
The roles of the Chairman, Simon Wilkinson, and the Independent Director, Dr
Nigel Burton, have a formal division. The Chairman is responsible for
delivering the outcome of the strategic review and ensure the adequate and
effective resources are in place to deliver shareholder value. The Independent
Director is responsible for monitoring the Board and ensuring no individual or
group takes control of the Board's decision making and that all key
stakeholders are fully briefed on matters and their responsibilities.
Board Balance
A minimum of 50% of the Board will always consist of non-executive directors
including the Chairman. All non-executive directors are independent of the
management team and are not involved in any other business or relationship,
both as an executive or non-executive, which may impair their independent
nature and judgement.
Nomination Committee
The Group's nomination committee is responsible for reviewing and making
proposals to the Board on the appointment of Directors and meets as necessary.
The Group's nomination committee consists of Simon Wilkinson, who acts as
Non-Executive Chairman of the committee, and Nigel Burton.
Performance Evaluation and Re-election
The Board has continued to evaluate its effectiveness and performance during
the year, taking into account the Financial Reporting Council's Guidance on
Board Effectiveness. It is anticipated that following the completion of the
Board strategic review director appraisals will be performed to ensure that
their performance is, and continues to be, effective, that where appropriate
they maintain their independence and that they are demonstrating continued
commitment to the role. The Directors will be evaluated internally based on
their responsibilities to the Board. New Directors resign and stand for
re-election at the Group's first AGM following their appointment. 50% of
continuing Directors stand for re-election on an annual basis.
The Directors carry out continued professional development throughout the year
where appropriate and each Director keeps up to date with market changes
through the use of market articles and industry contacts.
Remuneration Committee
The Group's remuneration committee is responsible for the specific
remuneration and incentive packages for each of the company's executive
directors, senior executives and managers. The Group's Remuneration Committee
consists of Nigel Burton and Simon Wilkinson, who acts as Non-Executive
Chairman of the committee. Further details of the Committee's remit are
contained in the Directors' Remuneration Report on pages 11 to 13.
Relations with Shareholders
The Group encourages two-way communication with both its institutional and
private investors and responds promptly to all queries received. The
Non-Executive Directors communicate regularly with the Group's institutional
shareholders and ensure that their views are communicated fully to the Board.
The Board recognises the Group's AGM as an important opportunity to meet with
the Group's private shareholders. The Directors are available to listen to the
views of shareholders informally immediately following the AGM.
Annual General Meeting
The Annual General Meeting of the Group provides shareholders with the
opportunity to be updated on the Group's progress and to ask questions of the
Board.
Financial Reporting and Internal Control
The Company has established policies covering the key areas of internal
financial control and the appropriate procedures, controls, authority levels
and reporting requirements which must be applied throughout the Group.
The key procedures that have been established in respect of internal financial
control are:
• An annual budget set by the Board
• Monthly management accounts with comparisons to budget
• Monthly forecast updates with comparisons to budget
• Monthly cashflow forecasts with comparisons to budget
• Weekly meetings of the Executive Directors and Senior Management to review
priorities and issues
• Restriction of user access to systems, including but not limited to
Financial, HR and Technology.
The above controls have been established to support the growth of the business
and to protect against future risks.
Corporate Culture
It is the Board's view that the Group's corporate culture is consistent with
its objectives, strategy and business model. The Board is aware that the
culture set by the Board will greatly impact all aspects of the Group and the
way that employees behave. The Board invites employees to provide feedback on
their peers and management.
Consolidated Accounts
The aforementioned Financial Reporting and Internal Controls apply to all
subsidiaries. The accounts of all subsidiaries are combined with those of the
Company to form consolidated accounts each month. The Chief Financial Officer
is responsible for producing the consolidated accounts, including the
elimination of intercompany transactions and balances.
Audit Committee
The Group's Audit Committee is responsible for ensuring the financial
performance of the Group is properly monitored and reported on, the
effectiveness of accounting systems and financial reporting procedures. The
Group's Audit Committee consists of Nigel Burton and Simon Wilkinson, who acts
as Non-Executive Chairman of the committee.
The Committee considers all proposals for non-audit services and ensures that
these do not impact on the objectivity and independence of the auditor. The
Audit Committee reviews, with the external auditor, the safeguards and
procedures developed by the auditor to counter threats or perceived threats to
their objectivity and independence. Non-audit services performed by the
external auditor are assessed for threats to objectivity and independence on a
case-by-case basis.
Board and Committee Attendance
Name Main Board Audit Committee Remuneration Committee Nomination Committee
Simon Wilkinson 4/4 1/1 1/1 1/1
Nigel Burton 4/4 1/1 1/1 1/1
Mark Slade 2/4 - - -
David Rae 2/4 - - -
Going concern
The directors have taken a view of the Group as a whole.
The Group ended 2022 with cash resources of £4,125,571, no debt and an
annualised cash burn of less than £0.5 million. The Group continues to
operate Verify which has a global client base with customers in Europe and
South Africa and is seeking strategic alternatives to deliver shareholder
value in the long term.
However, despite the actions of the Board, the Group continued to operate with
a trading loss during the year and the same is expected throughout 2023. The
new funds raised during 2021 will be utilised for the operation of Verify and
for working capital purposes and future opportunities and enable the Group to
also remain debt free. The Board will continue to monitor cash resources and
progress the ongoing business review.
Based on the current status, after making enquiries and considering the
existing cash resources of the business and the further cost reductions made
during 2022, the Board has a reasonable expectation that the Group will be
able to execute its plans in the medium term such that the Group will have
adequate resources to continue in operational existence for the foreseeable
future. This provides the Board with assurance on the Group's ability to
continue as a going concern, and therefore adopt the going concern basis of
accounting in preparing the annual financial statements.
DIRECTORS' REMUNERATION REPORT
As a Company admitted to trading on AIM, Location Sciences Group PLC is not
required to present a directors' remuneration report, however, a number of
voluntary disclosures have been made. The Company has complied with the
disclosure requirements set out in the AIM Rules for Companies.
Remuneration Committee
The Remuneration Committee, consisting of the chairman Simon Wilkinson and
Nigel Burton, determines the Group's policy for executive remuneration and the
individual remuneration packages for executive directors. In setting the
Group's remuneration policy, the committee considers a number of factors
including:
• salaries and benefits available to executive directors of comparable
companies; and
• the need to both attract and retain executives of appropriate calibre
Remuneration of executive directors
Consistent with this policy, benefit packages awarded to executive directors
comprise a mix of basic salary and performance‐related remuneration that is
designed as an incentive. The remuneration packages can comprise the following
elements:
• base salary: the Remuneration Committee sets the base salaries to reflect
responsibilities and the skills, knowledge and experience of the individual;
• bonus scheme: the executive directors are eligible to receive a bonus
dependent on both individual and Group performance as determined by the
Remuneration Committee;
• equity: share options; and
• various other add on benefits such as private medical insurance.
The executive directors are engaged under separate contracts which require a
notice period of three or six months given at any time by the individual.
Remuneration of non-executive directors
The fees and equity awarded to non‐executive directors are determined by the
Board. The non‐executive directors do not receive any other forms of benefit
such as private medical insurance.
Year to 31 December 2022
Director Salary and fees Bonus Pension Benefits Share based payments Total
£ £ £ £ £ £
M Slade (Executive)* 77,600 - 660 - - 78,260
D Rae (Executive)* 64,667 - 660 - - 65,327
S Wilkinson (Non-executive) 101,563 - - - - 101,563
N Burton (Non-executive) 71,094 - - - - 71,094
314,924 - 1,320 - - 316,244
Included within directors' remuneration for S Wilkinson and Nigel Burton is
remuneration of £101,563 and £71,094 respectively that was settled by issue
of shares.
* Resigned 22 June 2022.
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.
Director Grant Date Exercise Price At 31 December 2022 At 31 December 2021
Number Number
M Slade (Executive) 29/11/2018 2.25p - 15,555,556
D Rae (Executive) 29/11/2018 2.25p - 7,333,333
Notes: The options were to vest in three equal tranches when certain share
price targets have been reached, the share price targets are as follows:
• 4.8 pence per New Ordinary Share
• 7.3 pence per New Ordinary Share
• 9.7 pence per New Ordinary Share
The options in place at the end of 31 December 2021 were forfeit on 22 June
2022 when the option holders ceased to hold office.
Director Warrants
Non-transferable warrants to subscribe for, in aggregate, 120,000,000 Ordinary
Shares were issued to the Executive Directors and the Non-Executive Directors,
exercisable at 0.20p for five years from 25 May 2021, provided that the
Ordinary Shares have traded at a Volume Weighted Average Price (VWAP) at or
above 0.30p for 20 consecutive Business Days, or on a change of control of the
Company.
Name
Number of Ordinary Shares subject to Director Warrants
Simon Wilkinson 30,000,000
Dr Nigel Burton 30,000,000
Mark Slade 30,000,000
David Rae 30,000,000
Broker Warrants
Transferable warrants to subscribe for, in aggregate, 41,250,000 Ordinary
Shares were issued to the Executive Directors and the Non-Executive Directors,
exercisable at 0.20p for five years from 25 May 2021.
Name
Number of Ordinary Shares subject to Broker Warrants
Dr Nigel Burton 25,000,000
Mark Slade 10,000,000
David Rae 6,250,000
Promoter Warrants
Promoter warrants were issued to certain investors in the fundraising
completed on 25 May 2021 in consideration of those persons assembling and
co-ordinating the Concert Party's investment in the Company. As part of this
issuance, non-transferable warrants to subscribe for, in aggregate,
500,000,000 Ordinary Shares were issued to Simon Wilkinson, exercisable at
0.20p for five years from 25 May 2021.
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2022
The Directors are pleased to present the annual report and audited financial
statements of Location Sciences Group PLC for the year ended 31 December 2022.
Dividends
The Directors do not recommend the payment of a dividend.
Board of Directors
Simon Wilkinson, Non-Executive Chairman
Simon joined Location Sciences as Non-Executive Chairman in May 2021. Simon is
a highly experienced software executive and entrepreneur, having been involved
with a number of public and private companies over his career. He was most
recently CEO then Chairman of Mobica, a world-leading, award-winning software
services company offering bespoke development, QA and consultancy. He was
previously Chief Executive Officer of Myriad Group AG, which was listed in
Zurich, and founder and Chief Executive Officer of Magic4 Ltd, a mobile
messaging software market leader, backed by 3i, Philips Ventures and Motorola
Ventures.
Nigel Burton, Non-Executive Director
Nigel was appointed as a Non-Executive Director in May 2021. Nigel spent 14
years as an investment banker at leading City institutions including UBS
Warburg and Deutsche Bank, including as the Managing Director responsible for
the energy and utilities industries. Following this he spent 15 years as
Chief Financial Officer or Chief Executive Officer of a number of private and
public companies. He is currently a Non-Executive Director of BlackRock
Throgmorton Investment Trust plc, DeepVerge plc, eEnergy Group plc, Mobile
Streams plc and Microsaic Systems plc.
Research and development
Due to the reorganisation of the business following the Board's strategic
review, Location Sciences ceased investing into research and development.
£Nil (2021: £341,441) of development expenditure has been capitalised as
"Intangible Assets".
Financial Risk Management
The Group's financial instruments comprise cash and cash equivalents, trade
receivables and payables and borrowings. The main risks arising from the
Group's financial instruments are interest rate risk, credit risk, liquidity
risk and foreign currency risk.
Interest rate and credit risk - the principal assets of the Group are its cash
deposits. These are short-term liquid assets and as a result the exposure to
interest rate income risk is not considered significant. The principal focus
of the Directors has been to minimise any credit risk in relation to its cash
deposits even at the expense of interest income received. Borrowings include
financial instruments on fixed interest rate terms and a revolving credit
facility at a variable rate. As a result, the exposure to interest rate
expense risk is low and no active management of interest rate risk is
undertaken by the Board.
Foreign currency risk - the main functional currency is sterling. Throughout
2022, the Company's transactions have primarily been denominated in sterling
and the Group has had low exposure to foreign currency risk.
Liquidity risk - the Board's policy is to ensure that sufficient cash and cash
equivalents are held on a short-term basis at all times in order to meet the
Group's operational needs. The Group does actively raise funds through market
placings and other loan facilities.
The Group has been operating at a trading loss due to its stage of development
and seeks to ensure that its investments will deliver long term value to
shareholders. Liquidity risk is actively managed through regular review of
cash requirements of the business in conjunction with the strategic and
operational plans for the Group.
Substantial shareholdings
As at 26 June 2023 the Directors had been notified of the following holdings
representing 3% or more of the issued share capital of the Company:
Number of ordinary shares Percentage of issued share capital
Richard Hughes 200,000,000 7.55%
Mahmud Kamani 200,000,000 7.55%
Turner Pope Investments 132,750,000 5.01%
Darron Lee 125,000,000 4.72%
Simon Wilkinson 100,000,000 3.78%
Dr Nigel Burton 85,000,000 3.21%
Directors
The Directors, who held office during the year, were as follows:
S Wilkinson
N Burton
D Rae (resigned 22 June 2022)
M Slade (resigned 22 June 2022)
The Company maintains director and officers' liability insurance.
Statement of Directors' responsibilities
The Directors acknowledge their responsibilities for preparing the Annual
Report and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the
financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. Under company law the
directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the group and
company and of the profit or loss of the group and company for that period. In
preparing these financial statements, the directors are required to:
• select suitable accounting policies and apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable International Financial Reporting Standards (IFRSs)
as adopted by the European Union have been followed, subject to any material
departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the group's and the company's transactions and
disclose with reasonable accuracy at any time the financial position of the
group and the company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the group and the company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Directors' interests in shares
The directors held the following interests in Location Sciences Group PLC:
At 31 December 2022 At 31 December 2021
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
S Wilkinson 100,000,000 - 530,000,000 75,000,000 - 530,000,000
N Burton 85,000,000 - 55,000,000 67,500,000 - 55,000,000
The market price of the Company's shares at the end of the financial year was
0.13p.
Disclosure of information to auditor
Each of the persons who are directors at the time when this director's report
is approved has confirmed that:
• so far as that director is aware, there is no relevant audit information of
which the Company's auditor is unaware; and
• that director has taken all the steps that ought to have been taken as a
director in order to be aware of any relevant audit information and to
establish that the auditor is aware of that information.
Annual General Meeting
Notice of the forthcoming Annual General Meeting of the Company together with
resolutions relating to the Company's ordinary business will be given to the
members separately.
Reappointment of auditors
The auditors, Hazlewoods LLP, will be proposed for reappointment in accordance
with section 485 of the Companies Act 2006.
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 2022, which comprise the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated Statement of Financial
Position, Statement of Financial Position, Consolidated Statement of Changes
in Equity, Statement of Changes in Equity, Consolidated Statement of Cash
Flows, Statement of Cash Flows, and Notes to the Financial Statements,
including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and UK adopted international accounting standards.
In our opinion the financial statements:
• give a true and fair view of the state of the group's and the parent company's
affairs as at 31 December 2022 and of the group's loss for the year then
ended;
• have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Our approach to the audit
Our audit approach was based on a thorough understanding of the Group's
business and is risk based. In arriving at our opinions set out in this
report, we highlight the key audit matters that in our judgment, had the
greatest effect on the financial statements.
Key audit matters How our scope addressed this matter
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Recognition of revenue
Revenue consists of the value 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 £134,674 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 - Assessing the nature of the costs capitalised to ensure they met the
exists, expenditure can be measured reliably, and sufficient resources are required accounting criteria for capitalisation;
available to allow completion of the project. When the Board is sufficiently
confident that these criteria are met, the costs are capitalised. We therefore - Discussions with management to ensure that all criteria for capitalisation
identified internally generated intangibles as a risk that required particular had been met and supporting evidence was obtained to corroborate this.
audit attention.
- 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 funds and resources available to the Group in the year;
- review of forecasts prepared by management to support the going concern
assumption; and
- consideration of customer contracts.
Our application of materiality
We apply the concept of materiality in planning and performing our audit, in
evaluating the effect of any identified misstatements and in forming our
opinion. For the purpose of determining whether the group financial statements
are free from material misstatement, we define materiality as the magnitude of
a misstatement or an omission from the financial statements or related
disclosures that would make it probable that the judgement of a reasonable
person, relying on the information would have been changed or influenced by
the misstatement or omission. We also determine a level of performance
materiality, which we used to determine the extent of testing needed, to
reduce to an appropriately low level that the aggregate of uncorrected and
undetected misstatements exceed materiality of the group financial statements
as a whole.
We establish materiality for the financial statements as a whole to be
£45,000, which is 1% of the value of the trading subsidiary's total assets.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
Our evaluation of the directors' assessment of the company's ability to
continue to adopt the going concern basis of accounting included discussions
with management to support assumptions included in forecasts and the Group
ongoing strategy and assessing the level of resource available to the Group.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the company's ability to continue
as a going concern for a period of at least twelve months from when the
original financial statements were authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant section of this report.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report, other than the
financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and Directors' Report for the
financial year for which the financial statements are prepared is consistent
with the financial statements; and
• the Strategic Report and Directors' Report have been prepared in accordance
with applicable legal requirements.
Matters on which we are required to report by exception
In the light of our knowledge and understanding of the group and the parent
company and its environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report and the Directors'
Report.
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or
returns adequate for our audit have not been received from branches not
visited by us; or
• the parent company financial statements are not in agreement with the
accounting records and returns; or
• certain disclosures of directors' remuneration specified by law are not made;
or
• we have not received all the information and explanations we require for our
audit.
Responsibilities of directors
As explained more fully in the Directors' Report set out on page 16, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group's and the parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or the parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
Based on our understanding of the company and its activities, we identified
that the principal risks of non-compliance with laws and regulations related
to UK tax legislation and money laundering, and we considered the extent to
which non-compliance might have a material effect on the financial statements.
We also considered those laws and regulations that have a direct impact on the
preparation of the financial statements such as UK GAAP and the Companies Act
2006. We evaluated management's incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of
controls), and determined that the principal risks were related to posting
inappropriate or fictitious journal entries to manipulate the financial
performance or financial position of the company.
As part of an audit in accordance with ISAs (UK), we exercise professional
judgement and maintain professional scepticism throughout the audit. We also
planned and performed audit procedures including:
• Gaining an understanding of the legal and regulatory framework and
considering the risk of any acts which may be contrary to applicable laws and
regulations, including fraud.
• Obtaining an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
company's internal control.
• Evaluation of the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
directors.
• Making inquiries with management including consideration of known or
suspected instances of non-compliance with laws and regulation and fraud.
• Testing journal entries and other adjustments for appropriateness and
evaluating the business rationale of any significant transactions outside the
normal course of business.
• Evaluation of the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that
achieves fair presentation.
• Conclusion on the appropriateness of the directors' use of the going
concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention
in our auditor's report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor's
report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
There are inherent limitations in the audit procedures described above. We are
less likely to become aware of instances of non-compliance with laws and
regulations that are not closely related to events and transactions reflected
in the financial statements. Also the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations or through collusion.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
A further description of our responsibilities is available on the Financial
Reporting Council's website at:www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Use of this report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Ryan Hancock (Senior Statutory Auditor)
For and on behalf of Hazlewoods LLP, Statutory Auditor
Staverton Court
Staverton
Cheltenham
GL51 0UX
Date: 26 June 2023
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2022
Continuing Operations Note 2022 2021
£
£
Revenue 4 110,856 167,940
Cost of sales (29,358) (77,243)
Gross profit 81,498 90,697
Administrative expenses (723,149) (801,432)
Other operating income 5 - 11,267
Operating loss before exceptional administrative expenses, amortisation and (641,651) (699,468)
depreciation
Amortisation and depreciation (259,335) (216,392)
Exceptional administrative expenses 7 42,040 (283,210)
Operating loss 7 (858,946) (1,199,070)
Finance income 8 8,368 2
Loss before tax (850,578) (1,199,068)
Income tax receipt 12 - 113,871
Loss for the year for the financial year from continuing operations (850,578) (1,085,197)
Discontinued operations
Profit (loss) for the year from discontinued operations 6 92,357 (298,161)
Loss for the financial year (758,221) (1,383,358)
Earnings per share
Loss per share - basic and diluted 13 (0.029p) (0.076p)
The above results were derived from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
2022
2022 2021
£
£
Loss for the year (758,221) (1,383,358)
Other comprehensive income
Foreign currency translation loss - (4,718)
Total comprehensive income for the year attributable to owners of the parent (758,221) (1,388,076)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022
Note 2022 2021
£
£
Assets
Non-current assets
Intangible assets 14 134,674 537,491
Property, plant and equipment 15 - -
134,674 537,491
Current assets
Trade and other receivables 17 228,072 331,559
Tax asset 12 - 113,871
Cash and cash equivalents 4,125,571 4,378,825
4,353,643 4,824,255
Current liabilities
Trade and other payables 18 (157,864) (183,175)
Net current assets 4,195,778 4,641,080
Total assets less current liabilities 4,330,453 5,178,571
Net assets 4,330,453 5,178,571
Equity
Share capital 21 16,340,507 16,298,007
Share premium 20,088,118 20,034,993
Merger relief reserve 11,605,556 11,605,556
Capital reserve 209,791 209,791
Reverse acquisition reserve (9,225,108) (9,225,108)
Equity reserve 1,135,319 1,135,319
Retained earnings (35,823,730) (34,879,987)
Equity attributable to owners of the company 4,330,453 5,178,571
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022
Note 2022 2021
£
£
Assets
Non-current assets
Investments 16 3,034,374 3,219,896
Current assets
Trade and other receivables 17 58,797 132,919
Current liabilities
Trade and other payables 18 (76,000) (76,000)
Net current assets (17,203) 56,919
Total assets less current liabilities 3,017,171 3,276,815
Net assets 3,017,171 3,276,815
Equity
Share capital 21 16,340,507 16,298,007
Share premium 20,088,118 20,034,993
Merger relief reserve 11,605,556 11,605,556
Equity reserve 1,135,319 1,135,319
Retained earnings (46,152,329) (45,797,060)
Total equity 3,017,171 3,276,815
The Company has taken advantage of the exemption allowed under section 408 of
the Companies Act 2006 and has not presented its own statement of
comprehensive income in these financial statements. The loss after tax for the
parent Company for the year was £169,747 (2021: £3,796,912).
Approved by the Board on 26 June 2023 and signed on its behalf by:
Simon Wilkinson
Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER
2022
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) (1,383,358)
Other comprehensive income - - - - - - (4,718) (4,718)
Total comprehensive income - - - - - - (1,388,076) (1,388,076)
New share capital subscribed 2,017,749 1,855,081 - - - - - 3,872,830
Warrants issued - (1,135,319) - - - 1,135,319 - -
Share-based payments - - - - - - 48,312 48,312
At 31 December 2021 16,298,007 20,034,993 11,605,556 209,791 (9,225,108) 1,135,319 (34,879,987) 5,178,571
Share capital Share premium Merger relief reserve Capital reserve Reverse acquisition reserve Equity reserve Retained earnings Total
£
£
£
£
£
£
£
£
At 1 January 2022 16,298,007 20,034,993 11,605,556 209,791 (9,225,108) 1,135,319 (34,879,987) 5,178,571
Loss for the year - - - - - - (758,221) (758,221)
Total comprehensive income - - - - - - (758,221) (758,221)
New share capital subscribed 42,500 53,125 - - - - - 95,625
Share-based payment credit - - - - - - (185,522) (185,522)
At 31 December 2022 16,340,507 20,088,118 11,605,556 209,791 (9,225,108) 1,135,319 (35,823,730) 4,330,453
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2022
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) (3,796,912)
Total comprehensive income - - - - (3,796,912) (3,796,912)
New share capital subscribed 2,017,749 1,855,081 - - - 3,872,830
Share-based payments - - - 48,312 48,312
Warrants issued - (1,135,319) - 1,135,319 - -
At 31 December 2021 16,298,007 20,034,993 11,605,556 1,135,319 (45,797,060) 3,276,815
Share capital Share premium Merger relief reserve Equity reserve Retained earnings Total
£
£
£
£
£
£
At 1 January 2022 16,298,007 20,034,993 11,605,556 1,135,319 (45,797,060) 3,276,815
Loss for the year - - - - (169,747) (169,747)
Total comprehensive income - - - - (169,747) (169,747)
Share-based payment credit - - - - (185,522) (185,522)
New share capital subscribed 42,500 53,125 - - - 95,625
At 31 December 2022 16,340,507 20,088,118 11,605,556 1,135,319 (46,152,329) 3,017,171
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
Cash flows from operating activities Note 2022 2021
£
£
Loss for the year from continuing activities (850,758) (1,085,197)
Loss for the year from discontinued activities 92,537 (298,161)
Adjustments to cash flows from non-cash items:
Depreciation and amortisation 7 259,335 508,862
Impairment charge 7 143,482 283,210
Profit on disposal of discontinued operations - (290,640)
Foreign exchange gain - (4,718)
Finance income 8 (8,368) (2)
Share based payment transactions (185,522) 48,312
Income tax expense - (113,871)
Shares issued other than for cash 85,000 120,000
Uplift in fair value of directors' fees 10,625 195,500
(453,669) (636,705)
Working capital adjustments
Decrease / (Increase) in trade and other receivables 103,487 88,225
Decrease in trade and other payables (25,310) (33,114)
Cash used in operations (375,492) (581,594)
Income taxes received 113,871 166,272
Net cash flow from operating activities (261,622) (415,322)
Cash flows from investing activities
Interest received 8 8,368 2
Disposals of discontinued operations - 450,138
Acquisition of intangible assets 14 - (341,441)
Net cash flows from investing activities 8,368 108,699
Cash flows from financing activities
Proceeds from issue of ordinary shares, net of issue costs - 3,557,330
Net cash flows from financing activities - 3,557,330
Net increase/(decrease) in cash and cash equivalents (253,254) 3,250,707
Cash and cash equivalents at 1 January 4,378,825 1,128,118
Cash and cash equivalents at 31 December 4,125,571 4,378,825
2022 2021
£
£
Non-cash financing activities:
Share warrants exercised in year - 10,000
Fees settled by share issues - 120,000
Directors' fees settled by share issues 95,625 163,625
For full details on non-cash financing activities see note 21
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
£
£
Cash flows from operating activities
Loss for the year (169,747) (3,796,912)
Adjustments to cash flows from non-cash items
Non-cash impairments - 3,314,312
Share issues other than for cash 85,000 120,000
Uplift in fair value of directors' fees 10,625 195,500
(74,122) (167,100)
Working capital adjustments
Decrease/(increase) in trade and other receivables 74,122 (132,918)
Increase / (decrease) in trade and other payables - 57,000
Net cash flow from operating activities - (243,018)
Cash flows from financing activities
Proceeds from issue of ordinary shares, net of issue costs - 3,557,330
Decrease in inter-company loans - (3,314,312)
Net cash flows from financing activities - 243,018
Net increase in cash and cash equivalents - -
Cash and cash equivalents at 1 January - -
Cash and cash equivalents at 31 December - -
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2022
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 ended 2022 with cash resources of £4,125,571, no debt and an
annualised cash burn of less than £0.5 million. The Group continues to
operate Verify which has a global client base with customers in Europe and
South Africa and is seeking strategic alternatives to deliver shareholder
value in the long term.
However, despite the actions of the Board, the Group continued to operate with
a trading loss during the year and the same is expected throughout 2023. The
new funds raised during 2021 will be utilised for the operation of Verify and
for working capital purposes and future opportunities and enable the Group to
also remain debt free. The Board will continue to monitor cash resources and
progress the ongoing business review.
Based on the current status, after making enquiries and considering the
existing cash resources of the business and the further cost reductions made
during 2022, the Board has a reasonable expectation that the Group will be
able to execute its plans in the medium term such that the Group will have
adequate resources to continue in operational existence for the foreseeable
future. This provides the Board with assurance on the Group's ability to
continue as a going concern, and therefore adopt the going concern basis of
accounting in preparing the annual financial statements.
Basis of consolidation
The group financial statements consolidate the financial statements of the
company and its subsidiary undertakings drawn up to 31 December 2022 in
accordance with IFRS 10.
A subsidiary is an entity controlled by the company. Control is achieved where
the company has the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are
included in the income statement from the effective date of acquisition or up
to the effective date of disposal, as appropriate. Where necessary,
adjustments are made to the financial statements of subsidiaries to bring
their accounting policies into line with those used by the group.
The purchase method of accounting is used to account for business combinations
that result in the acquisition of subsidiaries by the group. The cost of a
business combination is measured as the fair value of the assets given, equity
instruments issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the business combination.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values
at the acquisition date. Any excess of the cost of the business combination
over the acquirer's interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised is recorded as goodwill.
Inter-company transactions, balances and unrealised gains on transactions
between the company and its subsidiaries, which are related parties, are
eliminated in full.
Intra-group losses are also eliminated but may indicate an impairment that
requires recognition in the consolidated financial statements.
Accounting policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the group. Non-controlling
interests in the net assets of consolidated subsidiaries are identified
separately from the group's equity therein. Non-controlling interests consist
of the amount of those interests at the date of the original business
combination and the non-controlling shareholder's share of changes in equity
since the date of the combination. Total comprehensive income is attributed to
non-controlling interests even if this results in the non-controlling
interests having a deficit balance.
Changes in accounting policy
For the purpose of the preparation of these consolidated financial statements,
the Group has applied all standards and interpretations that are effective for
accounting periods beginning on or after 1 January 2022. None of the
standards that have been applied have had a material effect on the financial
statements.
New standards, interpretations and amendments not yet effective
No new standards, amendments or interpretations to existing standards that
have been published and that are mandatory for the Group's accounting periods
beginning on or after 1 January 2022, or later periods, have been adopted
early.
None of the standards, interpretations and amendments which are effective for
periods beginning after 1 January 2022, and which have not been adopted early,
are expected to have a material effect on the financial statements.
Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker for the use in
strategic decision making and monitoring of performance. The Group considers
the chief operating decision maker to be the Executive Board.
Revenue recognition
Revenue represents the invoice value of services and software licences
provided to external customers in the period, stated exclusive of value added
tax.
Consideration received from customers in respect of services is only recorded
as revenue to the extent that the Group has performed its contractual
obligations in respect of that consideration. Management assess the
performance of the Group's contractual obligations against project milestones
and work performed to date.
Revenue from software licences sold in conjunction with services is invoiced
separately from those services and recognised over the period of the licence.
Revenue from software licences for the use of the technology platform is
recognised over the period of the license.
Revenue from software development is recognised to the extent that the Group
has obtained the right to consideration through its performance.
The IFRS 15 Practical expedient has been applied whereby the promised amount
of consideration has not been amended for the effects of a significant
financing component as at the contract inception there are no contracts where
the period between transfers of promised goods or services and customer
payment is expected to exceed one year.
Under the Group's standard contract terms, customers have a right of return
within 30 days. At the point of sale, a refund liability and a corresponding
adjustment to revenue is recognised for those products expected to be
returned. It is considered highly probable that a significant reversal in the
revenue recognised will not occur given the consistent low level of returns
over previous years.
Grants
Grants for revenue expenditure are presented as part of the Income Statement
in the periods in which the expenditure is recognised.
Foreign currency transactions and balances
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The consolidated financial
statements are presented in sterling, which is the Parent's presentational
currency.
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the rate of exchange ruling at the balance sheet
date.
The results and financial position of all Group entities that have a
functional currency different from the presentational currency of the Group
are translated into sterling follows:
• Assets and liabilities for each balance sheet presented are translated at
the closing rate at the date of the balance sheet;
• Income and expenses for each income statement are translated at the
average exchange rate for the month where these approximate the exchange rate
at the date of the transaction; and
• All resulting exchange differences are recognised within other
comprehensive income and taken to the foreign exchange reserve.
Tax
The current tax charge is calculated on the basis of tax rates and laws that
have been enacted or substantively enacted by the reporting date in the
countries where the group operates and generates taxable income.
Deferred tax is provided for using the liability method on temporary
differences at the balance sheet date between tax basis of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised in full for all temporary differences
other than those relating to goodwill on investments in subsidiaries. Deferred
tax assets are recognised for all deductible temporary differences carried
forward of unused tax credits and unused tax losses to the extent that it is
probable that taxable profit will be available against which the deductible
temporary differences and carry-forward of unused tax credits and unused tax
losses can be utilised.
The carrying amount of deferred tax assets is assessed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are reassessed at each
balance sheet date and are recognised to the extent that it is probable that
future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realised, or the liability
settled, based on tax rates that have been enacted or substantively enacted at
the balance sheet date.
The tax currently receivable is based on the taxable loss for the period and
relates to R&D tax credits. Taxable loss differs from net loss as reported
in the consolidated income statement because it excludes items of income or
expense that are taxable or deductible in other periods and it further
excludes items that are never taxable or deductible. This is calculated using
rates and laws enacted or substantively enacted at the reporting date
Financial instruments
The Group recognises financial instruments when it becomes a party to the
contractual arrangements of the instrument. Financial instruments are
de-recognised when they are discharged or when the contractual terms expire.
The Group's accounting policies in respect of financial instruments
transactions are explained below:
Financial assets
The Group classifies all of its financial assets as loans and receivables.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They arise
principally through the provision of goods and services to customers (e.g.
trade receivables), but also incorporate other types of contractual monetary
assets. They are initially recognised at fair value plus transaction costs
that are directly attributable to their acquisition or issue, and are
subsequently carried at amortised cost using the effective interest rate
method, less provision for impairment. Discounting is omitted where the effect
of discounting is immaterial.
Impairment provisions are recognised when there is objective evidence (such as
significant financial difficulties on the part of the counterpart or default
or significant delay in payment) that the Group will be unable to collect all
of the amounts due under the terms receivable, the amount of such a provision
being the difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired receivable. For
trade receivables, which are reported net, such provisions are recorded in a
separate allowance account with the loss being recognised within
administrative expenses in the Income Statement. On confirmation that the
trade receivable will not be collected, the gross carrying value of the asset
is written off against the associated provision.
Financial liabilities
The Group classifies all of its financial liabilities as liabilities at
amortised cost. Liabilities are classified as current liabilities when the
Group has an unconditional right to defer settlement of the liability for at
least 12 months after the balance sheet date.
Intangible assets
Internally developed software
Intangible assets are predominantly internally generated software development
costs for Location Sciences' technologies. Development costs are capitalised
when certain criteria are met. The product must be technically feasible, sale
is intended, a market exists, expenditure can be measured reliably, and
sufficient resources are available to complete the project. The extent of
capitalisation is limited to the amount, which taken together with further
related costs, will be recovered from the future economic benefits related to
the asset. When the Board is sufficiently confident that all of the criteria
for capitalisation are met, development costs are amortised over the expected
useful life, currently 5 years, from the date the asset is available for use.
Development costs that have been capitalised, but where amortisation has not
yet commenced are reviewed annually for impairment. If no intangible asset can
be recognised based on the above then development costs are recognised within
administrative expenses in the Consolidated Income Statement.
Amortisation
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 £143,482 (2021: £283,210) of
development costs.
Fair values of warrant instruments
Warrants issued in May 2021 are valued based on the fair value of the
underlying services received. The directors' warrant instruments have been
valued with reference to the fair value of the other warrants issued to third
parties.
Classification and valuation of financial instruments
The Group previously issued financial instruments including conversion
features and warrants. The valuation of these financial instruments, including
Level 3 fair values where there are no observable market inputs, are performed
in consultation with third party valuation specialists, with the overall aim
of maximising the use of market based information.
Assessing whether revenue meets the criteria for recognition
Contracts can include both the sale of licences and provision of services
including integration and development. Revenue is recognised based on the
analysis of individual contracts and the point at which significant risks and
reward of ownership transfer is dependent on the contractual terms. In respect
of a licence, this would usually be on delivery of the software. Software
development and other consulting services generally recognised on the basis of
work done but where issues of client acceptance are identified, then revenue
is deferred until issues are resolved.
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:
2022 2021
£
£
Verify 110,856 167,940
Location Data and Insights* - 373,448
110,856 541,388
* disclosed within discontinued operations
An analysis of the Group's revenue by geographical segment is as follows:
2022 2021
£
£
UK 60,249 383,003
ROW 50,607 158,385
110,856 541,388
All non-current assets of the Group are held in the UK.
During the year there was revenue from individual customers that represented
more than 10% of revenue as follows:
2022 2021
£
£
Verify - customer 1 58,109 113,120
Verify - customer 2 50,607 -
Average payments terms are set out in note 17. There are no significant
financing components, nor variable consideration elements in customers'
contracts.
5 Other operating income
The analysis of the Group's other operating income for the year is as follows:
2022 2021
£
£
Furlough receipts - 11,267
Furlough scheme
The furlough scheme is a government grant relating to a wage subsidiary
programme introduced in the United Kingdom in response to the COVID-19
coronavirus pandemic. The Company was entitled to the wage subsidy because it
had reduced operations in the United Kingdom as a result of the COVID-19
pandemic. The accounting policy adopted is set out in Note 2 to the financial
statements; the grant was recognised in the profit and loss in 'other income'
as the related wages and salaries for furloughed employees were recognised.
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.
2022 2021
£
£
Revenue - 373,448
Direct expenditure - (144,286)
Gross profit from discontinued operations - 229,162
Overheads - (817,963)
Loss before tax on discontinued operations - (588,801)
Sale proceeds received* 92,357 450,138
Net book value of assets sold - (159,498)
Profit on sale of discontinued operations 92,357 290,640
Total loss on discontinued operations 92,357 (298,161)
On the 31(st) January 2022 the Company received US$125,000 in relation to the
sale of the Insights business which was announced on 22 October 2021. This
deferred consideration was not included in the sale proceeds recognised during
2021 as they did not meet the requirements for recognition within the
accounting period.
7 Loss before taxation
Arrived at after charging/(crediting)
2022 2021
£
£
Depreciation expense - 5,828
Amortisation expense 259,335 503,034
Research and development expenditure - -
Exceptional administrative expenses* (42,040) 283,210
Share based payments - 48,312
Net foreign exchange losses - 4,718
Auditors remuneration 10,000 10,000
- Company audit
- Subsidiary audit 15,000 15,000
Non-audit services: 7,750 7,750
- Tax and other compliance services
*Exceptional administrative expenses includes impairment of intangible assets
of £143,482 (2021 - £283,210) and a credit on the reversal of share-based
payments on the forfeit of share options of £185,522 (2021 - £nil).
8 Finance income and costs
2021 2021
£
£
Finance income
Interest income on bank deposits 8,368 2
9 Staff costs
The aggregate payroll costs (including directors' remuneration) were as
follows:
2022 2021
£
£
Wages and salaries 331,703 794,544
Social security costs 38,899 102,073
Pension costs, defined contribution scheme 1,431 8,790
Share-based payment expenses (credit) - see note 7 (185,522) 48,312
Redundancy - 19,035
186,511 972,754
The average number of persons employed by the group (including directors)
during the year, analysed by category was as follows:
2022 2021
No.
No.
Finance and operations 1 2
Research and development - 4
Commercial and client services - 1
Non-executive directors 2 2
3 9
The average number of persons employed by the company (including directors)
during the year, analysed by category was as follows:
2022 2021
No.
No.
Finance and operations 1 2
Non-executive directors 2 2
3 4
10 Key management compensation and directors' remuneration
Details of aggregate key management emoluments for the year are as follows:
2022 2021
£
£
Salaries and other short-term employee benefits 314,924 706,071
Pension costs 1,320 2,636
Expense of share-based payments - 25,912
316,244 734,619
The directors are of the opinion that the key management of the Group
comprises the executive and the non-executive directors of Location Sciences
Group Plc. These persons have authority and responsibility for planning,
directing and controlling the activities of the entity, directly or
indirectly.
Directors' remuneration is disclosed in the Directors' Remuneration Report on
pages 11 to 13. Directors' remuneration includes salaries settled by issue
of shares, as disclosed in note 21.
11 Auditors' remuneration
2022 2021
£
£
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 12,750
services
7,750
12 Income tax
Tax charged/(credited) in the income statement
2022 2021
£
£
Current taxation
UK R&D tax credit - (113,871)
The tax on profit before tax for the year is higher than the standard rate of
corporation tax in the UK (2022 - higher than the standard rate of corporation
tax in the UK) of 19% (2021 - 19%).
The differences are reconciled below:
2022 2021
£
£
Loss before tax (858,946) (1,199,068)
Corporation tax at standard rate (163,200) (227,823)
Effect of expenses not deductible - 9,640
Unrecognised deferred tax asset 145,652 167,042
Surrender of tax losses for R&D tax credit - 35,339
Additional deduction for research development expenditure - (84,336)
Discontinued operations 17,548 (56,651)
Other differences - 42,918
Total tax credit - (113,871)
Subject to the UK tax authority's agreement, the Group has UK tax losses of
approximately £21,690,000 (2021: £20,933,000) available to carry forward and
offset against future taxable profits arising from the same trade. The Group
has a potential deferred tax asset of £5,423,000 (2021: £3,977,000) which
will not be recognised until it is regarded as more likely than not that there
will be sufficient taxable profits from which the tax losses can be deducted.
In addition, no deferred tax asset is recognised in respect of future tax
deductions on exercise of share options.
13 Loss per share
The calculation of loss per share is based on the loss of £758,221 (2021:
£1,383,358) and on the number of shares in issue, being the weighted average
number of equity shares in issue during the period of 2,629,956,603 0.1p
ordinary shares (2021: 1,814,571,645 0.1p ordinary shares).
2022 2021
£
£
Loss for the financial year (758,221) (1,383,358)
Earnings per share
Loss per share - basic and diluted (0.029p) (0.076p)
Dilutive instruments
Instruments that could potentially dilute basic loss per share in the future
but are not included in the calculation of diluted loss per share because they
are anti-dilutive.
14 Intangible assets
Group
Internally generated software development costs
£
Cost or valuation
At 1 January 2021 3,270,180
Additions 341,441
Disposal (2,306,381)
At 31 December 2021 1,305,240
At 1 January 2022 1,305,240
Additions -
At 31 December 2022 1,305,240
Amortisation
At 1 January 2021 2,128,388
Amortisation charge 503,034
Disposal during the year (2,146,883)
Impairment 283,210
At 31 December 2021 767,749
At 1 January 2022 767,749
Amortisation Charge 259,335
Impairment 143,482
At 31 December 2022 1,170,566
Carrying amount
At 31 December 2022 134,674
At 31 December 2021 537,491
At 1 January 2021 1,141,792
Internal development represents the cost incurred in developing the Group's
Verify proprietary location verification software with net book value of
£134,674 (2021: £537,491). These internal costs have been capitalised in
accordance with the Group's accounting policies where all the conditions for
capitalisation have been met.
The intangible assets have on average a remaining amortisation period of 2
years.
Impairment of research and development is considered within the conditions of
capitalisation. Amortisation charges are included in administrative expenses,
disclosed separately on the Consolidated Income Statement.
15 Property, plant and equipment
Group
Computer Equipment Office Equipment Total
£
£
£
Cost or valuation
At 1 January 2021 40,832 2,493 43,325
Additions - - -
Disposals (35,965) (2,493) (38,458)
At 31 December 2021 4,867 - 4,867
Additions - - -
Disposals (4,867) - (4,867)
At 31 December 2022 - - -
Depreciation
At 1 January 2021 36,112 1,385 37,497
Charge for year 4,720 1,108 5,828
Eliminated on disposal (35,965) (2,493) (38,458)
At 31 December 2021 4,867 - 4,867
Charge for year - - -
Eliminated on disposal (4,867) - (4,867)
At 31 December 2022 - - -
Carrying amount
At 31 December 2022 - - -
At 31 December 2021 - - -
At 1 January 2021 4,720 1,108 5,828
16 Investments
Company
2022 2021
£
£
Investment in subsidiaries 2,045,589 2,045,589
Capital contribution arising from IFRS 2 share-based payments charge 988,785 1,174,307
3,034,374 3,219,896
Subsidiaries
£
Cost or valuation
At 1 January 2021 3,171,622
Revaluation (38)
Impairment 48,312
At 31 December 2021 3,219,896
Revaluation (185,522)
At 31 December 2022 3,034,374
Carrying amount
At 31 December 2022 3,034,374
At 31 December 2021 3,219,896
At 1 January 2021 3,171,622
Details of the Group subsidiaries held as direct investments of the Company as
at 31 December 2022 are as follows:
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%
17 Trade and other receivables
Group Company
2022 2021 2022 2021
£
£
£
£
Trade receivables 160,892 175,875 - -
Prepayments 47,534 149,403 58,797 132,919
Other receivables 19,646 6,281 - -
228,072 331,559 58,797 132,919
Trade and other receivables are all current and the net carrying amount of
trade receivables is considered a reasonable approximation of fair value.
Average credit terms were 60 days (2021: 45) and average debtor days
outstanding were 80 (2021: 65) excluding balances that have been fully
provided for.
All of the Group's trade and other receivables have been assessed for
impairment based upon the expected credit losses model. In order to manage
credit risk, the Directors set limits for customers based on a combination of
payment history and third party credit references. Credit limits are reviewed
on a regular basis in conjunction with debt ageing and collection history.
Trade receivables are regularly reviewed for bad and doubtful debts. The
Group's policy is to include a provision for impairment based on estimated
credit losses. This includes an assessment where relevant of forward-looking
information on macroeconomic factors that may affect the ability of customers
to settle receivables. Trade receivables are written off where is no
reasonable expectation or recovery, for example where the customer has entered
insolvency proceedings or where a customer has failed to make contractual
payments for an extended period.
The Group's exposure to credit and market risks, including impairments and
allowances for credit losses, relating to trade and other receivables is
disclosed in the financial risk management and impairment note.
Trade receivables above include amounts (detailed below) that are past due at
the end of the reporting period and which an allowance for doubtful debts has
not been recognised as the amounts are still considered recoverable and there
has not been a significant change in credit quality.
Age of trade receivables that are past due but not impaired Group
2022 2021
£
£
31 to 60 days 18,738 32,680
61 to 90 days 12,068 40,082
91 to 120 days 6,711 17,578
3 to 6 months 103,253 41,575
140,771 131,915
18 Trade and other payables
Group Company
2022 2021 2022 2021
£
£
£
£
Trade payables 7,170 18,699 - -
Payables to related parties - - - -
Accrued expenses 89,660 79,872 19,000 19,000
Social security and other taxes 57,000 81,215 57,000 57,000
Other payables 4,034 3,389 - -
157,864 183,175 76,000 76,000
The directors consider that the carrying amount of trade and other payables
approximated their fair value.
Trade payables are paid between 30 and 60 days of receipt of the invoice.
The Group's exposure to market and liquidity risks, including maturity
analysis, related to trade and other payables is disclosed in the financial
risk management and impairment note.
19 Obligations under leases
IFRS 16
For the year ended 31 December 2022, the following amounts have been
recognised under IFRS 16 in relation to property leases:
2022 2021
£ £
Expense incurred in relation to 'short-term' leases - 14,563
Total cash outflow in year in relation to leases - 14,563
20 Financial risk management and impairment of financial assets
Treasury risk management
The Group manages a variety of market risks, including the effect of changes
in foreign exchange rates, liquidity and counterparty risks.
Credit risk
The Group's principal financial assets are bank balances, cash, trade and
other receivables.
The credit risk on liquid funds is limited because the counterparties are UK
banks or "Blue Chip" companies with high credit ratings assigned by
international credit rating agencies.
The credit risk associated with trade receivables is minimal as invoices are
based on contractual agreements with long-standing customers. Credit losses
historically incurred by the Group have consequently been considered by the
Directors to be exceptional in their occurrence. The Group maintains a
provision against receivables, however, this is not necessarily linked to
credit risk and the ageing of receivables is not the most relevant indicator
to determine the potential impairment of a receivable. The nature of the
Group's operations is such that misunderstandings or minor disagreements may
arise during the course of contracts, which may sometimes require an
adjustment to be made to achieve settlement and the Group's provisions are
made on a case by case basis, based on Directors' knowledge of the
circumstances surrounding overdue balances as they arise.
As a result, investment returns and credit risk to the Group in this regard
are not material to the financial statements.
The Group's maximum exposure to credit risk is limited to the carrying amount
of financial assets at the reporting date. No collateral is held in respect of
these amounts which are expected to be received in full. In order to manage
credit risk, credit limits are reviewed on a regular basis in conjunction with
debt ageing and collection history.
The Company has significant credit risks associated with the inter-company
debt due from its subsidiary, which is fully provided for as at the year end.
As with the Group's policy for making provisions against trade receivables,
provisions against inter-company debt is considered based on the Directors'
knowledge of the subsidiary's trading activity and financial position.
Currency risk
The Group's operations are primarily located in the United Kingdom. The
Group's transactions during 2022 were predominantly denominated in sterling,
with consequently little exposure to foreign currency risks. Due to the
limited risks to the Group, forward exchange contracts are not considered
necessary and are not used. At the year end, the Group operated both sterling
and dollar bank accounts. Going forward the Directors will continue to monitor
the currency risk.
The translation risk on the Group's foreign exchange payables and receivables
is considered to be immaterial due to their short-term nature.
Liquidity risk
The Group has sufficient capital resources to meet its external current
liabilities as they fall due in 2022.
Operational cash flow represents on going trading revenue and costs,
administrative costs and research and development activities. The Group
manages its liquidity requirements by the use of both short-term and long-term
cash flow forecasts. The Group's policy is to ensure facilities are available
as required or to issue equity share capital to ensure cash resources
available are in accordance with long-term cash flow forecasts. The Group
currently has no overdrawn committed facilities as at 31 December 2022.
The Group actively manages its working capital to ensure it has sufficient
funds for operations and planned research and development activities.
The Group's main financial liabilities include trade payables and operational
costs. All amounts for trade and other payables are due for payment in
accordance with agreed settlement terms with suppliers or statutory deadlines.
All such payment terms are within six months.
Capital management
The Group's activities are of a type and at a stage of development where the
most suitable capital structure is that of one primarily financed by equity.
The directors will reassess the future capital structure when projects under
development are sufficiently advanced.
The Group's financial strategy is to utilise its resources and current trading
revenue streams to commercialise its products and grow revenues. The Group
keeps investors informed of its progress with its projects through regular
announcements and raises additional equity finance at appropriate times.
The Group manages capital on the basis of the carrying amount of equity, and
debt with regard to maintaining sufficient liquidity to enable the Group to
continue to trade and invest in commercialisation. As at the year end the
equity to overall financing ratio, excluding IFRS 16 adjustments, is 1
(2021:1).
Categories of financial instruments
All of the Group's financial assets are classified as loans and receivables;
see note 17. The directors consider that the carrying amount of trade and
other receivables approximates their fair value.
All of the Group's financial liabilities are classified as liabilities at
amortised cost: see note 18. The directors consider that the carrying amount
of trade and other payables approximates their fair value. All financial
liabilities are due within one year.
The accounting policies applied are set out in note 2.
21 Share capital
Allotted, called up and fully paid shares
2022 2021
No. £ No. £
New Ordinary shares of 0.1p each 2,647,587,398 2,647,587 2,605,087,398 2,605,087
Deferred shares of 0.99p each 1,040,712,398 10,303,054 1,040,712,398 10,303,054
New deferred shares of 0.9p each 376,651,734 3,389,866 376,651,734 3,389,866
4,064,951,530 16,340,506 4,022,451,530 16,298,007
Reconciliation of shares
Number of shares
Total number of shares at 1 January 2022 4,022,451,530
25 May 2022 share issue: settlement of director fees 42,500,000
At 31 December 2022 4,064,951,530
Share issue
On 25 May 2022, 42,500,000 ordinary shares were issued at the market value on
day of admission of the shares at 0.225p to the non-executive directors as
consideration for their second-year fees.
On 25 May 2021 various warrants were issued to certain parties as detailed in
the section below.
Share rights
Ordinary shares have attached to them full voting, dividend and capital
distribution (including on winding up) rights; they do not confer any rights
of redemption.
Deferred shares have attached to them no voting, dividend or capital
distribution (including on winding up) rights; they do not confer any rights
of redemption.
Warrants in Issue
1) Promoter Warrants - non-transferable warrants to subscribe for up to
1,500,000,000 Ordinary Shares, exercisable at the 0.20p for five years from 25
May 2021, were issued to certain members of the Concert Party in consideration
of those persons assembling and co-ordinating the Concert Party's investment
in the Company in May 2021 and facilitating the appointment of Simon Wilkinson
as Non-Executive Chairman.
Name
Number of Ordinary Shares subject to Promoter Warrants
Richard Hughes 500,000,000
Mahmud Kamani 500,000,000
Simon Wilkinson 500,000,000
2) Cornerstone Investor Warrants - non-transferable warrants to subscribe for
up to 250,000,000 Ordinary Shares, exercisable at 0.20p for five years from 25
May 2021, were issued to the Cornerstone Investors of the May 2021 placing.
Name
Number of Ordinary Shares subject to Cornerstone Investor Warrants
Ben Turner 50,000,000
Donna Turner 75,000,000
James Pope 50,000,000
Maxine Pope 75,000,000
3) Broker Warrants - transferable warrants to subscribe for up to 100,000,000
Ordinary Shares, exercisable at the 0.20p for five years from 25 May 2021 were
issued as shown below.
Name
Number of Ordinary Shares subject to Broker Warrants
Turner Pope 58,750,000
Dr Nigel Burton 25,000,000
Mark Slade 10,000,000
David Rae 6,250,000
4) Director Warrants - non-transferable warrants to subscribe for, in
aggregate, 120,000,000 Ordinary Shares were issued to the Executive Directors
and the Non-Executive Directors, exercisable at 0.20p for five years from 25
May 2021, provided that the Ordinary Shares have traded at a Volume Weighted
Average Price (VWAP) at or above 0.30p for 20 consecutive Business Days, or on
a change of control of the Company.
Name
Number of Ordinary Shares subject to Broker Warrants
Mark Slade 30,000,000
David Rae 30,000,000
Simon Wilkinson 30,000,000
Dr Nigel Burton 30,000,000
The expense recognised in respect of all warrants issued as part of the May
2021 fundraise has been recognised directly in the share premium reserve,
based on the fair value of the services received that are considered to
directly relate to the issuing of shares.
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:
2022 2021
Number
Number
Outstanding, start of period 24,666,666 26,222,222
Forfeited during the period (24,666,666) (1,555,556)
Outstanding, end of period - 24,666,666
All remaining share options were forfeited during the year.
The movements in the weighted average exercise price of share options during
the year were as follows:
2022 2021
£
£
Outstanding, start of period 2.25 2.25
Forfeited during the period 2.25 2.25
Outstanding, end of period - 2.25
All remaining share options were forfeited during the year.
There was a credit on the reversal of share-based payments on the forfeit of
share options of £185,522 during the period (2021: share-remuneration expense
£48,312).
23 Commitments
No capital expenditure was committed to as at 31 December 2022 (2021: £Nil).
24 Related party transactions
None during the period.
25 Net debt note
The Group and Company has no debt, thus no net debt note is presented.
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