Notes to the group and parent company financial statements

 

1.         General information

Insig AI plc is a public company limited by shares, domiciled and incorporated in England and Wales.   The principal activity of Insig AI Plc during the period was the provision of sports coaching in schools.  Since the completion of the acquisition of Insight on 10 May 2021, the legacy sports coaching business has continued.

 

The Chairman's and Chief Executive Officer's statements provide a review of the business and future prospects.

 

 

These financial statements are prepared in pounds sterling being the currency of the primary economic environment in which the Group operates. Monetary amounts are rounded to the nearest thousand. 

 

 

2.         Basis of Accounting

The consolidated financial statements of the Group and the financial statements of the parent company for the 15-month period ended 31 March 2021 have been prepared under the historical cost convention and are in accordance with International Financial Reporting standards ("IFRS") as adopted by the EU. These policies have been applied consistently except where otherwise stated.

 

In preparing these consolidated financial statements, the Group has applied all standards and interpretations that are effective for accounting periods beginning on or after 1 January 2020.  The adoption of new standards and interpretations in the year has not had a material impact of the Group's financial statements.

 

There are 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 April 2021, or later periods, that have been adopted early and there are no new Standards amendments or interpretations that will materially affect the Group's financial statements.

 

 

3.         Significant accounting policies

 

(a)        Basis of consolidation

The financial statements of the Group incorporate the financial statements of the Company and entities controlled by the Company, which are its subsidiary undertakings, in accordance with IFRS 10.  Control is achieved where the Company has the power to govern the financial and operating policies of its subsidiary undertakings to benefit from their activities.

 

Details of subsidiary undertakings are set out in note 16 B.

 

All intra-group transactions and balances have been eliminated in preparing the consolidated financial statements.

 

(b)        Revenue recognition

Revenue arises from income from sports and leisure activities undertaken by the Group; representing invoiced and accrued amounts for services supplied in the year, 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 assesses the performance of the Group's contractual obligations against the sports and leisure activities as they are delivered.

 

Revenue from sports and leisure activities is recognised as the activity is provided, with payment due in advance of the performance obligations.

 

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 services and customer payment is expected to exceed one year.

 

Under the Group's standard contract terms, customers may be offered refunds for cancellation of sports and leisure activities.  It is considered highly probable that a significant reversal in the revenue recognised will not occur given the consistent low level of refunds in prior years.

 

(c)        Government grants

Government grants are recognised based on the accrual model and are measured at the fair value of the asset received or receivable. Grants are classified as relating either to revenue or to assets. Grants relating to revenue are recognised in income over the period in which the related costs are recognised. Grants relating to assets are recognised over the expected useful life of the asset. Where part of a grant relating to an asset is deferred, it is recognised as deferred income.

 

(d)        Intangible assets

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of subsidiary entities at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in the statement of comprehensive income and is not subsequently reversed.

 

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash generating units expected to benefit from synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

 

On disposal of a subsidiary, associate or jointly controlled entity, the amount of goodwill is included in the determination of the profit or loss on disposal.

 

Goodwill arising on acquisitions before the date of transition to IFRS's has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date.

 

            Development costs are expensed in arriving at the operating profit or loss for the year unless the Directors are satisfied as to the technical, commercial and financial viability of individual project. In this situation, the expenditure is recognised as an asset and is reviewed for impairment on an annual basis.

 

Any impairment is recognised immediately in the income statement in administrative expenses and is not subsequently reversed.

 

(e)        Plant and equipment

            Plant and equipment is stated at cost less depreciation.  Depreciation is provided at rates calculated to write off the cost less their estimated residual value over their expected useful lives.

 

               The rates applied to these assets are as follows:

 

Plant & equipment	25% & 10% straight line
Motor vehicles	33.3% - straight line

 

(f)        Operating 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 Statement of Financial Position 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 payment made under operating leases charged to the Consolidated Statement of Comprehensive Income on a straight-line basis of the period of the lease.

 

(g)        Deferred taxation

            Deferred taxation is provided in full in respect of timing differences between the treatment of certain items for taxation and accounting purposes.  The deferred tax balance is not discounted.

           

The recognition of deferred tax assets is limited to the extent that the group anticipates making sufficient taxable profits in the future to absorb the reversal of the underlying timing differences.

 

(h)        Trade receivables

            Trade receivables are recognised at fair value.  A provision for impairment of trade receivables is established where there is objective evidence that the company or Group will not be able to collect all amounts due according to the original terms of the receivables.  Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or liquidation and default or delinquency of payments are considered indicators that the trade receivable is impaired.  The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement within administrative expenses.  When a trade receivable is uncollectable it is written off against the allowance account for trade receivables.

 

(i)         Investments

            Investments in subsidiary and other undertakings are stated at cost less provision for impairment in the parent company balance sheet.

 

(j)         Cash and cash equivalents

            Cash and cash equivalents include cash in hand and deposits held at call with banks.  Bank overdrafts are shown as borrowings within current liabilities.

3.         Significant accounting policies (continued)

 

(k)        Financial liabilities and equity

            Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.  An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

           

            Ordinary shares are classified as equity. Incremental costs directly attributable to new shares are shown in equity as a deduction from the proceeds.

           

            Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

 

                Borrowings are recognised initially at fair value, net of transaction costs incurred.  Borrowings are subsequently stated at amortised cost, any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowing using the effective interest method.

 

            Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the date of the statement of financial position.

 

(l)         Compound instruments

The component parts of compound instruments (convertible loan notes) issued by the group are classified separately as financial liabilities and equity in accordance with the substance of the contractual agreement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest rate method until extinguished on conversion or at the instruments maturity date. The equity component is determined by deducting the amount of the liability component from the compound financial instrument as a whole. This is recognised and included in equity and is not subsequently re-measured.

 

4.  Critical accounting judgements and key sources of estimation uncertainty

 

The preparation of the Group's financial statements requires the Directors to make judgements, estimates and assumptions that effect the application of policies and reported amounts in the financial statements. These judgements and estimates are based on the Director's best knowledge of the relevant facts and circumstances. Information about such judgements and estimation is contained in the accounting policies and/or notes to the financial statements.

 

 Deferred tax asset

At the present time the Directors' do not consider that there is sufficient certainty regarding the utilisation of tax losses available in the Group. As a result, no deferred tax asset has been recognised.

 

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which the goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill is the deemed cost on first time application of IFRS.

 

Details of the carrying value of goodwill at the period end and the impairment review calculation are given in note 15.

 

 

 

4.         Critical accounting judgements and key sources of estimation uncertainty (continued)

 

Impairment of intangible assets

The carrying value of intangible assets comprising unamortised website costs are determined by reference to an assessment of future income generated by the UltimatePlayer.me platform. Having regard to the Board's decision in 2017 to delay future plans for further website development, all unamortised costs have already been fully impaired.

 

Compound instruments

The allocation of the amount advanced between debt and equity is determined by the prevailing market interest rate for a similar non-convertible instrument. Clearly there is no one market rate that applies and the rate will also be driven by commercial considerations such as the risk perceived by the market in the issuing entity. The Directors have applied an interest rate of 10% as affair assessment of a prevailing market rate.  See note 20 for details of the carrying value.

 

Valuation of share-based payments

The Company has granted options to acquire its shares to a Director. On valuing the fair value of the share options granted and hence the cost charged to profit or loss, judgements are required regarding key assumptions applied. See note 26 for further information relating to the assumptions applied.

 

 

5.         Going concern         

 

The Directors have prepared financial forecasts covering the 12 month period following approval of these financial statements including different scenarios to demonstrate how costs can be managed if forecast revenue were to be delayed such that the Enlarged Group will remain cash positive.

 

The Enlarged Group is currently operating with expenditure exceeding revenues, but has recently signed a major contract already announced by Insig and the customer, which will alleviate, but not eliminate, the rate cash is absorbed. The Company is pursuing several significant sales leads and the Directors have prepared sales forecasts adopting prudent assumptions showing that provided a number of these target customers convert into contracts, additional revenues will produce a positive cash flow for the Company over the next 12 months.

 

Should anticipated sales be delayed or if Covid-19 impacts sales, the Directors will consider implementing measures to reduce costs that would include deferring product development expenditure and they believe that there is sufficient flexibility in the Group's cost structure to manage operating costs within current cash resources.  This position will be carefully managed by the Board and conversion of sales leads and costs closely monitored to ensure that the Group can continue to meet its liabilities as they fall due.

 

So far as the Group's sports coaching business is concerned, the re-opening of schools in September 2020 has meant revenues have begun to recover and forecasts prepared by SSL management show SSL returning to profit and remaining cash positive.

 

Based on the forecasts prepared by the Directors, the Board consider it reasonable to conclude that the Group will be able to continue to operate as going concern. 

 

 

6.         Business segment analysis

Business segments are identified according to the different trading activities in the Group.

 

During the 15-month period, the Group's only trading segment was its sports and leisure activities, comprising sports tuition at schools representing its revenue of £1,042,000 (12 months to 31 December 2019 - £1,683,000) and profit of £42,000. (12 months to 31 December 2019 - £120,000).

 

All revenue was generated in the UK.

 

 

7.         Other operating income

			Period ended 31 March 2021		Year ended 31 December 2021
			£000		£000
Coronavirus Job Retention Scheme			575		-
Local Government grants			20		-
Government support towards CBILS loan interest			7		-
			602		-

 

The Coronavirus Job Retention Scheme is a government grant relating to a wage subsidiary programme introduced in the UK in response to the Covid-19 pandemic. The Group was entitled to the wage subsidy because of reduced operations in the UK resulting from the pandemic. The accounting policy as set out in note 3 to the financial statements; the grant is recognised as other operating income and the related wages and salaries for furloughed employees were recognised in direct costs and administrative expenses in the consolidated statement of comprehensive income.

 

 

8.         Operating loss

				Period ended 31 March 2021		Year ended 31 December 2019
The operating loss is stated after charging				£000		£000
Auditors' remuneration - audit services				21		19
Operating lease rentals - land and buildings				41		16
Depreciation of property, plant and equipment				19		19

 

Included in the audit fee for the group is an amount of £9,000 (2019: £7,000) in respect of the Company.

 

The auditors received fees of £3,000 (12 months to 31 December 2019 - £1,000) in respect of the provision of services in connection with advice relating to the Group's interim results, and general advice.

 

 

9.         Exceptional Item

 

During the 15-month period ended 31 March 2021, the Group incurred professional fees of £336,000 in relation to the acquisition of the remaining share capital of Insight.

 

Included in that cost were professional fees of £314,000 attributable to the reverse takeover and readmission to trading on AIM, which are recognised as an exceptional cost in the Consolidated Statement of Comprehensive Income. Fees of £22,000 relating directly to shares issued post year end have been recognised as a deduction from reserves, to be aggregated with other share issue costs post year end. Further information relating to share issue costs and professional fees incurred after date are given in note 29 relating to post balance sheet events.

 

 

10.       Staff Costs

Group Employee and benefits costs were as follows:
					Period ended 31 March 2021		Year ended 31 December 2019
					£000		£000
Wages and salaries					1,643		1,271
Social security costs					108		74
Pension contributions					29		22
Share based payment - share options					23		19
					1,803		1,386

 

 

The average numbers of employees, including Directors during the period were

					No.		No.
Directors of the Company					5		6
Directors of subsidiary undertakings					2		2
Senior management and operatives					4		2
Sports coaches					98		117
Sales					1		3
Administration					3		3
Average number of personnel in the year					113		133

 

 

The following amounts were paid for the services of the Directors in the period:

 

Salaries and benefits			Period ended 31 March 2021		Year ended 31 December 2019
			£000		£000
R L Owen			5		20
M Farnum-Schneider			313		5
G Simmonds			-		3
D Hillel			9		8
J Murray			-		-
J Zucker			6		5
D J Coldbeck			6		5
			339		46

 

During the period under review R L Owen and G Simmonds, both former Directors of the Company, exercised their rights under warrant instruments to subscribe for shares at 10p and 25p per share giving rise to a national insurance cost to the company of £26,000.

 

There were no Directors' benefits in the 15-month period to 31 March 2021 (12 months to 31 December 2019 - Nil).

 

Defined pension contributions of £2,000 were paid in the 15-month period to 31 March 2021 (12 months to 31 December 2019 - less than £1,000) and related to M Farnum-Schneider.

 

 

 

 

 

 

11.       Finance costs

					Period ended 31 March 2021		Year ended 31 December 2019
			Note		£000		£000
Bank loan interest *					7		-
Effective interest on convertible loan notes			20		38		-
Interest on IFRS 16 lease liability					3		2
					48		2

 

*The Group has recognised as a cost the interest borne by Central Government during the period on the CBILS loan granted to its trading subsidiary. The same sum has been included as part of other operating income in note 7.

 

 

12.       Taxation

 

No income tax charge arises based on the loss for the 15-month period to 31 March 2021 (12 months to 31 December 2019 - £nil).

 

The Group has unutilised tax losses of £6,610,000 (2019 - £5,245,000) including £960,000 (2019 - £960,000) in relation to the Company's subsidiary undertakings. Where it is anticipated that future taxable profits will be available to utilise these losses a deferred tax asset or a reduction in deferred tax liability is recognised as appropriate.

 

Factors affecting the tax charge in the period

				Period ended 31 March 2021		Year ended 31 December 2019
				£000		£000
Loss on ordinary activities before taxation				(1,062)		(218)
Loss on ordinary activities before taxation at the standard rate of UK corporation tax of 19% (2019 19%)				(202)		(41)
Effects of:
Expenses not deductible for tax purposes				71		19
Share based payments				5		4
Temporary differences in respect of depreciation and capital allowances not reflected in deferred tax				1		1
Unutilised tax losses not recognised as a deferred tax asset				125		17
Tax charge/credit				-		-

 

 

 

 

 

 

 

 

 

 

13.       Loss per share

 

Basic loss per share has been calculated on the Group's loss attributable to equity holders of the parent company of £1,060,000 (12 months to 31 December 2019 - £213,000) and on the weighted average number of shares in issue during the period, which was 39,689,000 (2019: 34,438,000).

 

Comprehensive loss per share is based on the same number of shares and on the comprehensive loss for the period attributable to the equity holders in the parent company of £1,060,000 (12 months to 31 December 2019 - £213,000).

 

In view of the group loss for the period, share options to subscribe for ordinary shares in the Company are anti-dilutive and therefore diluted earnings per share information is not presented. There were options outstanding at 31 March 2021 on 4,000,000 ordinary shares.

 

Post year end warrants granted and shares issued, referred to in note 29, are also antidilutive and are therefore disregarded for the purposes of calculating a diluted loss per share.  

 

14.       Loss for the financial period

As permitted by Section 400 of the Companies Act 2006, the profit and loss account for the parent company is not presented as part of these financial statements.

 

The consolidated loss for the 15-month period of £1,062,000 (12 months to 31 December 2019 - loss for the year of £218,000) includes a loss of £1,050,000 (12 months to 31 December 2019 - loss of £234,000) dealt with in the accounts of the parent company.

 

 

15.       Goodwill and other intangibles

	Goodwill and other intangibles 31 March 2021		Website development31 March 2021		Total 31 March 2021		Total 31 December 2019
	£000		£000		£000		£000
Cost at 1 January 2020	60		587		647		647
Additions in the period	-		-		-		-
Cost at 31 March 2021	60		587		647		647
Amortisation at 1 January 2020	-		587		587		587
Impairment	-		-		-		-
Amortisation at 31 March 2021	-		587		587		587
Carrying value at 31 March 2021 and 31 December 2019	60		-		60		60

 

       

·    Goodwill of £59,954 included above relates to the acquisition of Pantheon Leisure Plc which is included at its deemed cost on first time application of IFRS.

·    The Group acquired intangible assets costing £100 in 2013 following the acquisition of a subsidiary. The asset was fully impaired and written off in 2018.

Goodwill acquired in a business combination is allocated, at acquisition, to cash generating units ("CGUs") that are expected to benefit from that business combination. The carrying amount of goodwill relates wholly to the leisure activities business segment.

 

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding forecast revenues and operating costs. Management have considered the following two elements:

 

(i)   Based on current assessments of the Sport in Schools activities made by the Directors they consider that revenues will return to pre-Covid-19 pandemic levels and grow in 2022 and beyond; and

(ii)  Operational costs are monitored and controlled

 

Development costs

Ultimate Player Limited continued to operate the UltimatePlayer.me platform during the year.  As a result of the decision taken by the Board in 2017 to delay future plans for further website development, unamortised development costs were fully impaired and written off in that year.

 

16.       Investments

 

A.        Investment in unlisted company

In March 2020, the company acquired a 9.1% interest in the ordinary share capital of Insight for £1,500,000 in line with the strategy to focus on investing in quality fast growing companies, with an option to increase its holding to 30.2%.  In 2021, the Company began discussions with respect to acquiring the balance of issued share capital of Insig Partners Limited (formerly Insight Capital Partners Limited) which culminated in the acquisition of the remaining 90.1% of the ordinary shares which took place in May 2021. Details relating to this acquisition in May 2021 are set out in public releases and the Company's admission document, summarised information about this post balance sheet event is described in note 29.

 

 

 

 

B.        Investments in subsidiaries

Parent Company				31 March 2021		31 December 2019
Cost				£000		£000
Shares				1,948		1,948
Shares in companies removed from the register at Companies House				(1,848)		-
Loan notes*				220		220
At 31 March 2021				320		2,168
Provision for impairment
At 1 January 2020				1,662		1,662
Impairment for companies removed from the Register at Companies House				(1,562)		-
At 31 March 2021				100		1,662
Carrying value at 31 December				220		506

 

The costs of shares at 31 March represents the Company's investment in Westside Sports Ltd. This investment has been fully impaired in prior years.

 

*Included in investments is £220,000 of loan notes in Pantheon Leisure Plc which carry an interest coupon of 7.5% and are repayable on demand at par. 

 

The following companies were subsidiaries at the balance sheet date and the results and year end position of these companies has been included in these consolidated financial statements. The registered office for all the companies listed below is at 30 City Road, London EC1Y 2AB.

Subsidiary undertakings	Description and proportion of share capital owned	Country of incorporation or registration	Nature of business
Westside Sports Limited	Ordinary 100%	England & Wales	Holding company
Ultimate Player Limited	Ordinary 100%	England & Wales	Inactive
Pantheon Leisure Plc *	Ordinary 85.87%	England & Wales	Holding company
Sport in Schools Limited **	Ordinary 85.87%	England & Wales	Sports coaching in schools
The Elms Group Limited **	Ordinary 85.87%	England & Wales	Inactive

 

*           shares held indirectly through Westside Sports Limited

**         shares held indirectly through Pantheon Leisure Plc

 

B.        Investments in subsidiaries (continued)

 

During the year, as part of an exercise to simplify the group structure, the following dormant or inactive companies listed below were removed from the register of companies at Companies House:

 

Westside Acquisitions Limited, Reverse Take-Over Investments Limited, Westsidetech Limited, Football Data Services Limited, Footballfanatix Limited, Football Partners Ltd and Football Directory.co.uk Limited.

 

The carrying value of the investments in the subsidiary companies written off is reported in profit and loss and is offset by inter-company balances waived.

 

 

 

 

17.       Property, plant and equipment

Group	Plant and equipment		Right of Use Assets: Property		Total
	£000		£000		£000
Cost
At 1 January 2019	101		-		101
Adjustment for leased assets	-		154		154
Additions in the year	3		-		3
Cost at 1 January 2020	104		154		258
Additions in the period	2		-		2
At 31 March 2021	106		154		260
Depreciation
At 1 January 2019	87		-		87
Adjustment for leased assets	-		80		80
Charge for the year	9		10		19
At 1 January 2020	96		90		186
Charge for the period	7		13		20
At 31 March 2021	103		103		206
Carrying value
At 31 March 2021	3		51		54
At 31 December 2019	8		64		72

 

Right of Use Assets represent leasehold premises from which the Group operates in relation to its sports and leisure activities.

 

All tangible assets shown above are assets in use by the Group's subsidiary undertakings.

 

 

 

 

18.       Trade and other receivables

 

Non-current assets

 

Parent company

As at 31 March 2021, amounts due within one year included £220,000 in loan notes (31 December 2019 - £220,000). The loan notes are convertible into 50 million new shares in Pantheon Leisure Plc at any time before redemption. The loan notes carry an interest coupon of 7.5% and are repayable on demand at par.

 

Pantheon Leisure Plc is a subsidiary undertaking of Insig AI Plc.

 

The loan notes are included in investments referred to in note 16 above.

 

Group

The Group has no receivables from third parties classified as non-current assets.

 

Current assets

		Group				Parent Company
		31 March 2021		31 December 2019		31 March 2021		31 December 2019
	Note	£000		£000		£000		£000
Trade receivables		79		82				-
Other receivables		85		22		75		5
Amounts due from subsidiary undertakings*		-		-		382		324
Due from related company**	25	220		-		220
Prepayments and deferred expenditure		13		5		8		-
		397		109		685		329

 

* Amounts due from subsidiary undertakings are stated net of provisions for irrecoverable amounts which total £1,626,000 (31 December 2019 - £1,537,000).

 

**The Company entered into a loan agreement with Insig Partners Limited on 8 March 2021 under the terms of which the Company agreed to lend Insig Partners Limited up to £400,000 for working capital purposes. The Loan outstanding at 31 March of £220,000 is unsecured and is repayable on demand. The loan attracts interest at a rate of 3 per cent. above the Bank of England's Base Rate which accrues daily and is payable on the repayment date.

 

 The ageing analysis of trade receivables, all of which are due and not impaired is as follows:

	<3 months £000		>3 months £000		Total £000
31 March 2021	74		5		79
31 December 2019	82		-		82

 

 

 

 

19.       Current and non-current liabilities other payables

 

Due within one year:		Group				Parent Company
		31 March 2021		31 December 2019		31 March 2021		31 December 2019
	Note	£000		£000		£000		£000
Trade payables		10		5		-		-
Other payables		150		14		147		-
Taxes and social security		257		99		135		-
Amounts due to subsidiary undertakings		-		-		-		287
Accruals and deferred income		149		149		22		26
Loans and borrowings	20	450		-		414		-
IFRS 16 lease liability	27	8		8		-		-
		1,024		275		718		313

 

Due after one year:		Group				Parent Company
		31 March 2021		31 December 2019		31 March 2021		31 December 2019
		£000		£000		£000		£000
IFRS 16 lease liability		38		49		-		-
Loans and borrowings	20	204		-		-		-
		242		49		-		-

 

The average credit period taken for trade payables at the end of the year is 7 days (31 December 2019 - 12 days).

 

Further information regarding IFRS 16 lease liabilities is provided in note 24.

 

20.       Loans and borrowings

 

	Group				Parent Company
	31 March 2021		31 December 2019		31 March 2021		31 December 2019
	£000		£000		£000		£000
Due within one year:
Bank loan	36		-		-		-
Convertible loan note	414		-		414		-
Due after one year:
Bank loan	204		-		-		-
	654		-		414		-

 

            Bank loan

On 20 May 2020, the Group was granted and in June took up a 6 year Coronavirus Business Interruption Loan of £240,000.  Repayments of capital of £4,000 per month commenced in July 2021 with full repayment due by June 2026.

 

                Whist the UK Government has provided the bank with a guarantee, the Group is responsible for repaying the loan in full. Except for the first year of the loan, interest will be payable by the Group based on the bank's margin of 2.99% per annum over base rate.  The loan is secured by a fixed and floating charge over the assets the subsidiary company that is party to the loan.

 

           

20.       Loans and borrowings (continued)

 

            Convertible loan notes 2023

            A loan note instrument dated 3 March 2020 was drawn up creating unsecured convertible loan notes up to a nominal amount of £2,000,000.  Convertible loan notes were issued on 4 March 2020 at an issue price of £500,000.  The notes are convertible into ordinary shares of the Company at any time between the date of issue of the notes and their redemption date. On issue, the loan notes were convertible at 1 share per £0.25 loan note.  The conversion price is at a 9 per cent discount to the share price of the ordinary shares at the date the convertible loan notes were issued.

 

            If the notes had not been converted, they would have been redeemed on 4 March 2023 at par.  No interest is charged on the loan notes.

 

            The net proceeds received from the issue of the convertible loan nots have been split between the financial liability element, representing the net present value of the liability element and an equity component, representing the fair value of the embedded option to convert the financial liability into equity of the Company, as follows:

        

							£000
Proceeds of issue of convertible loan notes							500
Equity component							(124)
Liability component at date of issue							376
Interest charged							38
Interest paid							-
Liability component at 31 March 2021							414

 

            The equity component of £124,000 has been credited to equity reserve (see Note 23).

           

            The interest expensed for the year is calculated by applying an effective interest rate of 10 per cent to the liability component for the 12 months period since the loan notes were issued.  The liability component is measured at amortised costs.  The difference between the carrying amount of the liability component at the date of issue and the amount reported in the balance sheet at 31 March 2021 represent s the effective interest rate less interest paid to that date.

 

                Further to the reverse takeover of Insig Partners Limited (formerly Insight Capital Partners Limited) post year end, as described in Note 29, the £500,000 of issued loan notes were converted into 2,000,000 New Ordinary Shares as fully paid-up shares.

 

                21.   Deferred tax

There were no deferred tax liabilities or assets recognised by the Group during the current and previous year.
 

 

22.     Issued and fully paid share capital

Ordinary shares	Number of ordinary 1p shares	Number of deferred 9p shares		£000
At 1 January 2019	33,561,638	22,811,638		2,389
New 1p shares issued in the year	2,000,000	-		20
At 1 January 2020	35,561,638	22,811,638		2,409
New shares issued in the period	7,100,000	-		71
At 31 March 2021	42,661,638	22,811,638		2,480

 

Details in relation to ordinary shares issued in the 15-month period were:

·    March 2020, the company raised £1,000,000 from the issue of 4,000,000 1p shares for 25p per share.

·    October 2020, the company raised £800,000 from the issue of 1,600,000 1p shares for 50p per share.

·    February and March 2021, a further £263,000 was raised from the 2018 A & B warrant holders exercising their rights under warrant instruments granted in 2018 resulting in share issues of 750,000 1p shares for 10p per share and 750,000 shares for 25p per share.

Ordinary shares of 1p each:

Shareholders are entitled to receive dividends or distributions in the event of a winding up with rights to attend and vote at general meetings. 

 

Deferred shares of 9p each:

Shareholders are entitled to receive 0.1p for each £999,999 of dividends or other distributions in the event of a winding up with no rights to attend and vote at general meetings. 

 

At 31 March 2021 the Company's issued shares carry no rights to fixed income.

 

The market price of the Company's shares at 31 March 2021 and at the date the shares were suspended in September 2020 was 59p and the price range during the 15 month financial period was between 20.5p and 59p.

 

23.         Reserves

 

Retained earnings

Retained earnings represent the cumulative retained profit or loss of the Group.

 

Share premium

Share premium is the amount subscribed for share capital more than the nominal value and is a capital reserve required by UK company law.

 

Merger reserve

The merger reserve is a non-statutory reserve and represents the difference between the fair value and nominal value of the shares exchanged for shares on acquisition of Reverse Take-Over Investments Plc which took place in 2003.

 

 

 

23.         Reserves (continued)

 

Other reserves

 

			Share issue costs £000		Convertible loan equity £000		Total Other reserves £000
At 1 January 2019 and 1 January 2020			-		-		-
Share issue costs incurred			(22)		-		(22)
Equity component of loan note at date of issue			-		124		124
Liability component at 31 March 2021			(22)		124		102

 

 

Share issue costs relate to professional fees incurred in the 15 months to 31 March of £22,000 (12 months to 31 December 2019 - £nil) incurred directly in connection with share placings post year end.  These costs have been recognised as a deduction from reserves and are to be aggregated with other issue costs after date which will be offset against the share premium reserve following the share issue after date. Further information relating to share issue costs and professional fees incurred after date are given in note 29.

 

Convertible loan note equity represents the component of convertible debt instruments (see note 20).

 

24.  Obligations under leases

Group

 

For the 15 month period ended 31 March 2021, the following amounts have been recognised under IFRS 16 in relation to property leases:

	15 months ended 31 March 2021		12 months ended 31 December 2019
	£000		£000
'Right-of-use' assets upon adoption of IFRS 16	154		154
Depreciation brought forward	90		80
Depreciation charged on 'right-of-use' assets recognised	13		10
Interest expense recognised on lease liability	3		2
Expenses incurred in relation to 'short-term' leases	27		21
Obligation at the year end in relation to 'short-term' leases	7		3
Total cash outflow in the year in relation to leases	41		31

 

 

 

 

25.       Related parties

Details of the remuneration of Directors is given in note 10. In addition to the information given in that note, the following provides further details of related party transactions involving the Company and its Directors.

 

The Directors are the key management personnel of the Group for the period under review.

 

M Farnum-Schneider - former Director

Following his appointment as Director on 1 August 2019, the Company granted options to acquire 4,000,000 ordinary shares in the Company with exercise prices ranging from 20 pence per share to 60 pence per share between 2020 and 2025.  More detailed information is given in note 26 below.

 

G Simmonds - former Director

Following his resignation as a Director on 1 August 2019, his practice continued to receive monthly fees for consultancy services and made payments to him totalling £13,000 (12 months ended 31 December 2019 - £6,000).

 

In February 2021, G Simmonds exercised his rights to acquire shares in the company from his ownership of 125,000 A Warrants and 125,000 B Warrants granted to him in 2018 at 10p and 25p per share respectively. Further details relating to the exercise of these warrants is given in note 10, the terms relating to these warrants are given in note 26 below.

 

R Owen - former Director

In March 2021, R Owen exercised his rights to acquire shares in the company from his ownership of 125,000 A Warrants and 125,000 B Warrants granted to him in 2018 at 10p and 25p per share respectively. Further details relating to the exercise of these warrants is given in note 10, the terms relating to these warrants are given in note 26 below.

 

For the 15 months ended 31 March 2021 R Owen received monthly fees for consultancy services and made payment to him totalling £12,000 (12 months ended 31 December 2019 - £nil).

 

Insig Partners Limited (formerly Insight Capital Partners Limited)

In March 2021, a loan to cover operating costs was provided to Insight Capital from Insi AI PLC totalling £220,000, the terms relating to this loan are given in note 18.  The balance outstanding as at 31 March 2021 was £220,000 (31 December 2019 - £nil).

 

 

 

 

 

 

 

 

26.       Share-based payment transactions

 

Warrants

In March 2018, the Company issued new warrants to subscribe for shares. 750,000 A Warrants and 750,000 B Warrants were issued exercisable at a price of 10p and 25p respectively per new ordinary share.

 

Warrants are valued using the Black-Scholes option pricing model. The fair value per option granted and the assumptions used in the calculation are as follows:

 

Grant date	13 March 2018	13 March 2018
Share price at grant date	15p per share	15p per share
Exercise price	10p per share	25p per share
Shares under warrant	250,000	250,000
Expected volatility	100.0%	100.0%
Warrant life (years)	3 years	3 years
Expected life (years)	3 years	3 years
Risk-free interest rate	1.25%	1.25%
Fair value per warrant	3.15p	2.8p

 

In accordance with IFRS2, the fair value of the warrants issued and recognised as a charge in the accounts for the 15 month period is £Nil (12 months ended 2019 - £Nil). In arriving at this amount, the expected volatility is based on historical volatility, the expected life is the average expected period to exercise, and the risk-free rate of return is the yield on a zero-coupon UK government bond for a term consistent with the assumed option life.

 

The warrants referred to above were exercised into ordinary shares in February and March 2021 and none are outstanding as at 31 March 2021.

 

Options

In January 2011, the Company adopted an unapproved share option scheme and on 1 August 2019, the Company granted options over 4,000,000 ordinary shares in the Company as part of a Director's compensation agreement.  Details of the options are set out below: 

	2021		2019
	£000		£000
Outstanding at start of period/year	4,160		308
Granted during the period/year	-		4,000
Lapsed during the period/year	(160)		(148)
Outstanding at the end of the period/year	4,000		4,160
Exercisable at the end of the year	-		160

 

The movements in the weighted average exercise price of the options were as follows:

	2021		2019
Outstanding at start of the year	44.3		26.4
Granted during the year	-		45.0
Lapsed during the year	26.6		26.2
Outstanding at the end of the year	45.0		44.3
Exercisable at the end of the year	-		26.6

 

The weighted average contractual life of options outstanding on 31 March 2021 was 3.4 Years (December 2019: 4.5 years).

 

26.       Share-based payment transactions (continued)

 

The fair value of the equity instruments granted was determined using the Black Scholes Model.  This model was selected as it is an industry standard model.  The only conditions attached to the options is continuing employment.  The inputs into the model for options outstanding at the year-end were as follows:

 

Share options granted on 1 August 2019 to M Farnum-Schneider:

 

Grant date	1 August 2019	1 August 2019	1 August 2019
Share price at grant date	17p per share	17p per share	17p per share
Exercise price	20p per share	40p per share	60p per share
Shares under option	1,000,000	1,000,000	2,000,000
Expected volatility	43.1%	43.1%	43.1%
Option life (years)	3 years	3 years	3 years
Expected life (years)	3 Years	3 Years	3 Years
Vesting period (years)	0.5 to 1 Years	1 to 2 years	2 to 3 Years
Risk-free interest rate	0.57%	0.57%	0.57%
Small company discount factor	35%	35%	35%
Fair value per option	2.5p	2.5p	0.7p

 

The expected volatility is based on historical volatility, the expected life is the average expected period to exercise, and the risk-free rate of return is the yield on a zero-coupon UK government bond for a term consistent with the assumed option life.

 

In accordance with IFRS 2, the fair value of the share options issued and recognised as a charge in the accounts for the 15 month period is £23,750 (12 months to 31 December 2019 - £19,000).

 

27.       Capital management and financial instruments 

The Group is funded by both equity and debt which represents the Group's capital.

 

The Group's objectives when maintaining capital are:

-    To safeguard the entity's ability to continue as a going concern, so that it can begin to provide returns for shareholders and benefits for other stakeholders; and

-    To provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

 

The Group sets the amounts of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustment it considering changes in economic conditions and risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

 

Capital for the Group comprises components of equity - share capital of £2,480,000 (31 December 2019 - £2,409,000), share premium of £3,040,000 (31 December 2019 - £1,048,000), other reserves of £304,000 (31 December 2019 - £326,000), and the retained deficit of £4,164,000 (31 December 2019 - £3,165,000) as well as debt represented by £414,000 of convertible loan notes (31 December 2019 - £nil) and a £240,000 bank loan (31 December 2019 - £nil).

 

During the period ended 31 March 2021 the Group's strategy was to preserve net cash resources by limiting cash absorbed from losses and through good cash management.

 

 

 

27.       Capital management and financial instruments (continued)

 

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provision of the instrument.

 

At 31 March 2021 and 31 December 2019, there were no material differences between the fair value and the book value of the Group's financial assets and liabilities. All financial assets and liabilities are measured at amortised cost.  Relevant financial assets and liabilities are set out below.

	Group				Company
	31 March 2021		31 December 2019		31 March 2021		31 December 2019
	£000		£000		£000		£000
Financial assets
Cash and cash equivalents	935		637		484		511
Due from subsidiary undertakings	-		-		382		324
Due from loans	220		-		220		-
Trade and other short- term receivables	134		99		46		-
	1,289		736		1,132		835
Financial liabilities (which are included at amortised cost)
Trade and other short- term payables	159		20		147		-
IFRS 16 lease liabilities	47		58		-		-
Loans and borrowings	654		-		414		-
Due to subsidiary undertakings	-		-		-		287
	860		78		561		287

 

The Group's financial instruments comprise cash and cash equivalents, receivables, payables, loan obligations that arise directly from its operations

 

Amounts shown in trade and other short-term receivables exclude prepayments and deferred expenditure for the Group of £13,000 (31 December 2019 - £5,000) and VAT recoverable of £30,000 (31 December 2019 - £5,000) for the Group and for the Company of £7,000 (31 December 2019 - £3,000) of short-term receivables and VAT recoverable of £30,000 (31 December 2019 - £2,000).

 

Trade and short-term payables referred to above excludes deferred income and accruals of £149,000 (31 December 2019 - £149,000), and tax and social security creditors of £257,000 (31 December 2019 - £99,000).  For the parent company, trade and short-term payables excludes tax and accruals of £157,000 (31 December 2019 - £26,000).

 

The Group has not adopted a policy of using financial derivatives and does not rely on the use of interest rate hedges.

 

In common with other businesses, the Group is exposed to risks that arise from its use of financial instruments.  There have been no substantive changes to the Group's response to financial instrument risk and the methods used to measure them from previous periods.

 

The main risks arising from the Group's financial instruments are credit and liquidity risks.

 

Credit risk arises from trade receivables where the party fails to discharge their obligation in relation to the instrument. To minimise this risk, management have appropriate credit assessment methods to establish credit worthiness of new customers and monitor receivables by regularly reviewing aged receivable reports. There is no concentration of credit risk other than in respect to cash held on deposit at the company's bank as set out above.

 

27.       Capital management and financial instruments (continued)

 

The amount exposed to risk in respect of trade receivables at 31 March 2021 was £79,000 (31 December 2019 - £82,000).

 

Liquidity risk arises in relation to the Group's management of working capital and the risk that the Company or any of its subsidiary undertakings will encounter difficulties in meeting financial obligations as and when they fall due.  To minimise this risk the liquidity position and working capital requirements are regularly reviewed by management. 

 

The Directors do not consider changes in interest rates have a significant impact on the Group's cost of finance or operating performance.

 

All financial assets are due within one year.  The maturity analysis can be seen in note 18.

 

As the Group's operations are conducted in the United Kingdom, risks associated with foreign currency fluctuations are not relevant.

 

 

28.         Notes to statement of cash flows

 

a)         Analysis of net funds

	At 1 January 2020 £000	Cash Flow £000	Non cash movements £000	At 31 March 2021 £000
Group
Cash and cash equivalents	637	298	-	935
Borrowings	-	(740)	86	(654)
Net funds	637	(442)	86	281
Company
Cash and cash equivalents	511	(27)	-	484
Borrowings	-	(500)	86	(414)
Net funds	511	(527)	86	70

 

 

 

 

28.         Notes to statement of cash flows (continued)

 

(b) Statement of cash flows from discontinued activities - Ultimate Player Limited

 

				2021		2019
				£000		£000
Cash flow from discontinued activities
loss before tax				-		(30)
Adjustments for:
Increase in debtors				-		(1)
Decrease/(Increase) in creditors				(1)		30
Cash generated/absorbed from operations				-		(1)
Investing activities				-		-
Net cash used in investing activities				-		-
Financing activities
Additional borrowings				-		-
Net cash from financing activities				-		-
Net cash decrease in cash and cash equivalents				(1)		(1)
Cash and cash equivalents at the beginning of the period				1		2
Cash and cash equivalents at the end of the period				-		1

 

29.         Post balance sheet events

 

During the period ended 31 March 2021, the Company acquired a 9.1 per cent. interest (on a fully diluted basis) of the ordinary shares of Insig Partners Limited (formerly Insight Capital Partners Limited) along with an option to increase the interest owned to 32.5 per cent.

 

On 10 May 2021, the Company acquired the balance of Insig Partners Limited's shares not already owned and obtained control.

 

Insig Partners Limited is a data science and machine learning solutions company that combines quantitative research, machine learning and technology infrastructure to deliver bespoke analytical tools to clients enabling them to extract data from outdated platforms and improve the accessibility and insight locked within.  Machine learning is widely recognised as having the potential to fundamentally benefit performance and profitability in many, if not all, industries.  The investment is in line with the Company's refocused strategy of investing in quality, fast growing companies and is the Company's first step toward a broader strategy to capitalise on growth opportunities in AI and machine learning.

 

In order to facilitate the acquisition of Insig Partners Limited, in May 2021 the Group raised £6.1 million (before expenses) via a placing of 9,172,375 new ordinary shares at 67 pence per share, a 14 per cent. premium to the closing share price of the shares in the Company which was 59 pence per share on 3 September 2020, being the last business day before the Company's ordinary shares were suspended from trading.

 

The funds were used to pay the £1.5 million cash element of the consideration paid to acquire the Insig Partners Limited shares, to settle the further professional costs relating to the acquisition and issue of the shares which were incurred after 31 March 2021 of £667,000 and for general working capital purposes, namely investing in the enlarged Group's team of developers, engineers and sales and marketing employees to accelerate product growth and business development activities. 

 

 

 

29.         Post balance sheet events (continued)

 

In addition to the cash consideration, 44,819,161 new ordinary shares were issued at 59 pence per share, the closing middle market price of 59 pence per Ordinary Share on 3 September 2020 (being the last business day before the Ordinary Shares were suspended) as consideration shares to the owners of Insig Partners Limited.

 

The convertible loan notes issued by the Company in the period (see Note 20) were converted on the same date, resulting in 2,000,000 new ordinary shares issued at 25 pence per share, a 58 per cent. discount to closing share price of the Company of 59 pence per share on 3 September 2020, being the last business day before the Company's ordinary shares were suspended from trading. 

 

The following number of ordinary Shares were admitted to trading on AIM on 10 May 2021:

 

Placing Shares	9,172,375
Consideration Shares	44,819,161
Convertible Loan Note Shares	2,000,000

Following the issue of the new Ordinary Shares, the Company has 98,653,174 ordinary shares in issue with full voting rights.

 

Share issue costs relating to the placing, readmission to AIM and acquisition were settled by cash consideration of £1,006,000, of which £336,000 was incurred prior to 31 March 2021 (Note 9 and Note 23). The remaining £667,000 paid after date will be allocated between costs arising in relation to the acquisition and readmission to AIM and will be charged as a cost against profit and loss and costs arising in relation to the placing and the element that relates specifically to the placing will be taken directly to equity and offset against the share premium reserve.  £22,000 of costs recognised within other reserves in the year will be offset against the share premium further to the issue of new shares in May 2021.

 

In addition to costs settled by cash, warrants were issued to settle costs of the acquisition, readmission and placing to subscribe for 396,582 ordinary shares in the Company at an exercise price of 83.75p per share. These warrants are exercisable in whole or in part between the first and sixth anniversary following the re-admission of the Company's shares trading on AIM.   The fair value of the warrants issued will be recognised as an expense against profit and loss as at the date of issue in May 2021.

 

Connected to the acquisition of Insig Partners Limited are post year end changes in directors and change in Company name, as detailed in the Directors Report.

 

The acquisition is classified as a reverse takeover under the AIM rules.  The directors have given consideration of the method of accounting to be applied and concluded that it meets the definition of a business combination under IFRS 3 and Insig AI Plc has been identified as the accounting acquirer for the purposes of IFRS 3.  In determining the accounting treatment to be applied, the directors have carefully reviewed the relevant factors to be considered in determining whether a business has been acquired and the change in control, including consideration, inter-alia, of the voting rights held by the former Insig Partners shareholders after the Business combination was completed, the composition of the new Board and rights relating to appointments to the Board.  As a result the Company will reflect an investment in Insig Partners Limited as a wholly owned subsidiary on its Balance Sheet and the Group will account for the acquisition by applying the acquisition method of accounting, rather than applying reverse accounting rules under IFRS 3.

 

 

 

 

 

 

29.         Post balance sheet events (continued)

 

The investment in Insig Partners Limited will be recognised at the fair value of the consideration given:

	£ 000
Consideration shares issued (44,819,161)	30,029,000
Cash consideration	1,500,000
Total consideration	31,289,000

The value of the consideration shares has been determined in accordance with IFRS 3 applying the acquisition-date fair values of the equity interests issued by the acquirer.  The fair value on the acquisition date is considered to be 67 pence per share, being the price at which the placing shares were issued on the same day.

 

As the Company held an interest in Insig Partners Limited prior to the acquisition in May 2021, the fair value of which amounted to £2,936,000.  The Group effectively recognised a gain of £1,436,000 over the original cost of investment as a result of measuring at fair value its 9 per cent. equity interest in Insig Partners Limited held before the business combination.  The gain will be included in other income in the Company's statement of comprehensive income for the year ending 31 March 2022.

 

The identifiable assets acquired and liabilities assumed upon acquisition comprise:

	Book value £000
Cash	180,000
Financial assets	1,083,000
Property, plant and equipment	345,000
Identifiable intangible *	4,749,000
Financial liabilities	(2,829,000)
Total consideration	3,528,000

 

No fair value adjustments are considered necessary at the date of these financial statements other than potentially in relation to identifiable intangible assets as referred to below, this will however be considered further over the twelve months review period permitted to consider whether fair value adjustments are required.

 

The fair value of the receivables is considered to equate to the gross contractual amount receivable.  The acquired receivable is £1,083,000, of which £nil is expected to be uncollectable.

 

Identifiable intangible assets include developed technology that has not yet been assessed for any fair value adjustments that may impact the value of the identifiable intangible asset and deferred tax; in calculating goodwill the book value (which represents amortised cost) as at the date of acquisition has been applied.

 

Goodwill of £27,761,000 that would arise from the acquisition based on the book values of Insig Partners Limited as set out above arises largely from the expected growth in the AI and machine learning industry and collective expertise of the workforce in developing and delivering the Business's product range. The allocation between amounts recognised as goodwill and amounts recognised as other identifiable intangible assets is pending fair value adjustments for the developed technology as noted above.  None of the goodwill recognised is expected to be deductible for income tax purposes.

 

In addition to this acquisition, as part of the growth strategy of the enlarged group, a wholly owned subsidiary has been incorporated in the US, which to date remains inactive.