28 April 2022

IQ-AI Ltd

("IQ-AI", the "Company" and, together with its subsidiaries, the "Group")

Publication of Annual Report

The Board of IQ-AI Ltd are pleased to present announce that the Company's audited financial statements for the year ended 31 December 2021.

The Annual Report will be available on the Company's corporate website.

The Directors of the Company accept responsibility for the contents of this announcement

For further information, please contact:

Chief Executive Officer's Statement

To the Members of IQ-AI Limited

We are delighted to present the annual report for the twelve months ended 31 December 2021 for IQ-AI Limited.

Operational Progress

2021 was a transformational year for IQ-AI. We had record revenue of £521,069 (2020: £255,314), an annual growth rate of 104%, secured several new patents, made the strategic decision to sponsor a Phase I therapeutic clinical trial, and achieved new product development milestones. Several factors, both internal and external, drove these accomplishments. Hospitals and healthcare providers were able to resume the sales conversations that were postponed due to the pandemic, while IQ-AI's operating subsidiaries, Imaging Biometrics, LLC (IB) and Stone Checker Software Limited (SC), remained fully functional throughout this difficult period and were able to continue the development of new products.

Major Highlights

·      Early in 2021, we aligned and focused resources to accelerate the development of IB Zero G™, the Artificial Intelligence (AI) model for generating simulated "with contrast" images using non-contrast (0% gadolinium) images as input. The effort included the labelling of many datasets necessary to be used to perfect the AI model. Sufficient progress was made throughout the year and a 510(k) application to the US FDA is in now in preparation with submission for approval anticipated in May '22.

·      Last April 2021, we announced the sponsorship of a Phase I clinical trial. The trial follows a successful pre-clinical study that showed that the potential therapeutic compound Gallium Maltolate (GaM) shrunk glioblastoma (GBM) cells in animal models. In June 2021, the FDA approved the investigational new drug (IND) application for GaM and the treatment of the most aggressive form of brain cancer, GBM, and the first-in-human trial of an oral form of GaM has now commenced in the USA.

·      In April 2021, a $3 million grant was awarded in collaboration with Professor Kathleen Schmainda, PhD, from the Medical College of Wisconsin (MCW). The National Institutes of Health (NIH)-funded grant will be used to validate and translate an AI model that can detect infiltrating tumour cells before they are visible on standard imaging. This would represent the ultimate in early detection.

·      In June 2021, we were awarded a US patent for the AI technology contained in IB Zero G™. This 0% contrast media dose approach has the potential of offering remarkable benefits which include a more comfortable patient experience, more productive radiology departments, and reduced risks associated from the long-term, albeit uncertain, side effects of repeated GBCA use.

·      In September 2021, we received a European patent for IB's "dual-echo" technology. Previously patented in the US, this technology combines MR scanner data acquisition and post-processing to generate two unique sets of data that currently require two independent MR exams. In addition, the technology eliminates the need for the commonly accepted "pre-load" dose of gadolinium-based contrast agent and minimizes other imaging artefacts inherent with this type of imaging. The advancement of this technology is being done in collaboration with the Barrow Neurological Institute under a funded NIH grant. An additional aim of the grant is to harmonize this approach across all major scanner platforms.

·      In November 2021, MD Anderson Cancer Centre (University of Texas, Houston) adopted IB Clinic - container edition. MD Anderson is consistently ranked as the #1 cancer centre in the USA and is a recognized leader in using cutting edge technologies in an attempt to improve patient outcomes. This installation again underscores the significance of the automated and quantitative capability of IB Clinic - container edition.

Impacting Decisions, Impacting Lives

The limitations of conventional brain tumour imaging are well acknowledged. The inability to accurately distinguish between tumour and treatment effect can lead to erroneous decisions and suboptimal care. Yet, even today, the current standard to monitor treatment response in brain tumours relies exclusively on conventional imaging. Since our inception, we have maintained close collaborative relationships with scientific and clinical experts who have worked to establish a better way of monitoring treatment response. Leading this effort is Professor Kathleen Schmainda at MCW. The pioneering work conducted in her laboratory has paved the way for significant developments in MR quantitative imaging. Today, the proliferation of that foundational science continues to drive ground-breaking advances which have the potential to establish an entirely new standard in brain tumour imaging and application. These extended collaborative relationships, many of which are funded by various NIH grant mechanisms, leave us ideally positioned to selectively identify promising new advances which can be translated into new product opportunities. By doing so, we can help bridge the gap between the laboratory and routine clinical care and deliver products that make a difference in the lives of patients and their families.

The 2021 Inflection Point

One of the causes of an increase in revenue during the period was the effects of our fully automated processing enhancements. This new product packaging provided an opportunity to implement an annual subscription payment model based on procedural volume. Therefore, any size organization can benefit from our solutions. Prior to this, our products were solely packaged as "plugins" to the Apple® Mac platform and required manual user operation (e.g., an MR Technologist or neuroradiologist) to process the datasets. Because most hospitals use Windows™ PCs and busy neuroradiologists want all information available from a single workstation, our sales were limited hitherto. Since we made our products available as fully automated and platform-independent solutions, interest has grown. Now, high-volume cancer centres, located in large metropolitan areas, can take advantage of our advanced imaging solutions. Our competitors offer automated processing too. However, we are unique, as nobody else offers quantitative information that has been correlated with actual tissue samples. Our challenge is to make clinicians and patients aware of this unparalleled capability.

Focus areas 2022:

Business Growth

Building upon the record revenue levels established last year remains a priority. To meet this challenge and, as previously noted, we have added a Client Relations Manager with prior "blue chip company" and radiology technician experience. More recently, we have enlisted a marketing-advertising agency to help us heighten brand awareness to clinicians, patients, and administrators. Our core imaging platform, IB Clinic, is clinically validated, mature, and primed to scale rapidly.

In addition to our internal sales efforts, we continue to strengthen our channel partners' sales and marketing teams' understanding of our software products. And, as appropriate, we are asked to join sales calls and product demonstrations initiated by our partners. This puts prospective clients in direct contact with us and allows us to better explain the underlying technology and proven science of our applications. In effect, our partners act as an extension of our own sales and marketing teams and are introducing the unique aspects of our imaging platforms to new prospects around the world.

Our NIH-funded grants continue to fuel product development. These funds provide a significant boost to companies working to bring novel technologies to the market. Without resources such as these, the pathway to commercialization would be much longer and more burdensome for small to medium-sized companies. The specialized expertise we offer, such as making laboratory code "industrial-strength", regulatory experience, and distribution, helps ensure novel technologies will continue to find their way from the laboratory bench to the patient.

As we look forward and plan for 2022, we are planning to exhibit at several tradeshows this coming year. Our team, medical collaborators, and members of the Schmainda Lab at MCW have submitted abstracts to upcoming meetings scheduled for this spring and summer, many of which have been accepted for oral or poster presentations. For the past few years, COVID's impact on in-person meetings has limited exhibit opportunities and we look forward to "shaking hands" with clinical decision makers once again.

Finally, our growing collaborative networks, client base, and continued participation in the National Cancer Institute's (NCI) Quantitative Imaging Network (QIN), of which we are the only industrial member, continue to open new opportunities for joint development of novel solutions. As we selectively explore these opportunities, we focus on synergistic applications with potential to disrupt current clinical practice and "create the standard". While we think big, we also recognize that sometimes simple solutions can also be the most elegant. 

Product Development

We remained focused on new product initiatives that have real potential for shifting the way healthcare is practiced today. Our experience and knowledge of the full spectrum of brain tumour care has identified gaps that need to be filled - from diagnosis, to therapy, and beyond. These initiatives are listed below:

·      IB Trax™:  Under a development agreement with The Mayo Clinic, IB Trax is a new product platform that will leverage the Company's existing quantitative solutions to streamline the identification and reporting of metastatic lesions. Metastatic brain cancer is 10x more prevalent than primary brain tumours. Moreover, improvements made in the treatment of lung, liver, bone, and other common cancers have resulted in the brain becoming a sanctuary site for these cancers. Again, conventional imaging makes the identification of these lesions challenging, and a systematic way to organize and report information is lacking. Which lesions are new? Which lesions have grown or shrunk? How much have the lesions changed? All these questions result in error rates as high as 30% using available tools. IB Trax will provide a solution that leverages IB's quantitative Delta T1 maps, and the longitudinal reporting capability being developed as part of IB Trax will be ported to other IB platforms. A beta version of the platform is due for completion by the end of September 2022.

·      IB Zero G™:  The US patent for the underlying technology of IB Zero G was a milestone achievement. From May through August 2021, many new datasets were labelled and made available to the development team for refining the AI model, advancements were made, and a 510(k) application is being prepared for submission with a target submission date of May 2022. The 0% dose of gadolinium-based contrast agent (GBCA) capability of IB Zero G has immediate application for patients who are at risk when, or have valid concerns of, receiving GBCA.

·      Automated "FTB" Maps: Since the development of Fractional Tumour Burden (FTB) maps, award-winning papers and a growing body of literature have been generated showing the impact these maps have on clinical decision making. The maps require inputs from IB Delta T1 and IB Neuro perfusion maps where the measurements of relative cerebral blood volume (rCBV) are stratified into user-defined classifications. The built-in standardization technology, which automatically calibrates the values to a fixed and consistent scale, enables volumetric assessment of change and makes the visualization of the classification volumes easy. The fully automated workflow, which uses technology contained in IB Zero G, has been implemented and is ready for beta deployment. The initial use will be for high-grade brain tumours. These types of brain tumours are highly invasive and present a challenge when attempting to automatically generate FTB maps. Thus, there may be a small percentage of maps that may still require a user to manually complete the processing. Internal testing, however, is showing that a large majority of cases processed by the automated workflow appear to be working quite well. This represents a significant time saving for the high-volume sites that are using the current semi-automated workflow.

·      Simultaneous Perfusion Imaging with Consecutive Echoes (SPICE): With expanded patent protection awarded by the European Patent Office, this dual-echo technology is well-positioned for commercial success. This technology is a combined MR acquisition and post-processing approach that has several distinct advantages. First, it requires only a single dose of GBCA (not the accepted two-dose standard) which represents a 50% reduction in GBCA administration for perfusion DSC imaging. It also generates both dynamic susceptibility contrast (DSC) and dynamic contrast enhanced (DCE) parameter maps from a single MRI scan and, at the same time, eliminates challenging acquisition issues associated with DCE exams.  From the patient's perspective, two sets of rich information could be generated from the same MR scan, each of which provides useful physiologic information for brain tumour assessment. In addition, SPICE generates high-quality maps more consistently. To our knowledge, we are the only company that offers multiple options to reduce GBCA exposure. Along with IB Zero G, the SPICE dual-echo and the low flip angle (LFA) methods each provide low dose or no dose alternatives for neuro exams. Currently, the DCE component of the SPICE dual-echo approach is being validated under an NIH-funded grant with Barrow Neurological Institute (BNI) which also includes standardizing MR acquisition and post-processing across all vendor platforms.

·      IB CAD™:  This AI solution will identify areas of infiltrating cancer cells invisible using current imaging techniques. While much more work and validation is needed, we believe the ability to "detect the undetectable" has the potential of revolutionizing the way brain cancer is monitored and how treatment platforms work. Funding for development continues under an NIH grant awarded to Professor Kathleen Schmainda.

Gallium Maltolate (GaM)

During the period, we announced our engagement with a team from the Medical College of Wisconsin Cancer Centre (MCWCC) and our commitment to sponsor an FDA Phase I clinical trial. The study is being led by Dr Jennifer Connelly, MD, and Dr Christopher Chitambar, MD, both from MCW and both long-standing collaborators with Professor Schmainda. Encouraged by the results of the pre-clinical animal study, we decided to financially sponsor the trial, the first trial at the MCWCC for in-human-use of an oral agent to combat GBM.

At the time of writing, all necessary approvals have been obtained and the trial is open for enrolment. While the primary aim of Phase I trials is to determine safe dosing levels for Phase II, we will be closely monitoring the response of these patients to the agent using our imaging technology. Our hope for Phase 1 is that we see the encouraging results in human subjects that were demonstrated in the pre-clinical study. Upon receiving positive feedback from the Phase I, we plan to continue to develop GaM with the aspiration to improve prognosis for patients suffering this disease. 

Outlook

There is much going on and the range of potential outcomes from our projects and activities has never been wider. I anticipate an interesting and exciting future and to be communicating regularly with shareholders as events unfold.

Trevor Brown
Chief Executive Officer

Strategic Report

The Directors present their strategic report on the group for the year ended 31 December 2021.

Principal activities

The principal activity of the Group is the provision of convenient, cost-effective and clinical treatments to patients in the field of medical imaging diagnostics, based on proven technologies. A review of the business is included within the Chief Executive Officer's Statement on page 2.

Strategy

IQ-AI's vision is to become a leader in the field of medical imaging diagnostics. The Company purchased 100% of the equity in Stone Checker Software Limited in June 2017, and in March 2018 purchased Imaging Biometrics LLC ("IB") with its suite of advanced imaging diagnostic software products.

Event since the year end

Events since the year end are reported under Note 22 to the financial statements.

Results for the 2021 financial period

The summary results are found in the primary statements of the Group, primarily being the Income Statement, the Statement of Comprehensive Income and Statement of Financial Position.

In summary:

·      The net interest cost for the Group for the period was £10,710 (2020: £31,812)

·      Group revenue for the year was £521,069 (2020: £255,314)

·      Administrative expenses from continuing operations increased to £994,388 (2020: £933,462)

·      Group loss after tax from continuing operations was £501,058 (2020: £717,534)

·      Taxation charge was £nil for the period (2020: £nil) 

·      Basic and diluted loss per share from continuing operations was 0.29p (2020: 0.48p loss)

·      As at 31 December 2021, the Group had cash and cash equivalents of £728,586 (2020: £478,910)

·      The Group's net assets increased to £1,190,691 (2020: £1,071,354)

·      Intangible assets, comprising intellectual property, imaging and diagnostic software and goodwill, decreased to £772,263 (2020: £889,177)

Key performance indicators

The main KPI for the Group is achieving its cash flow forecasts whilst efforts continue to implement the new investing policy.

The Board monitors its cash flow carefully to ensure that it has the funds necessary to meet its on-going working capital requirements, and planned product development costs. Detailed forecasts are produced and reported against on a regular basis. 

Future developments

With the encouraging results from the clinical studies, the Company is in an excellent position to deliver benefits to patients, as well as generate value for stakeholders. Further commentary on the Group's future developments can be found in the Chief Executive's Statement on page 2.

Principal risks and uncertainties

This section describes the principal risk factors that the Directors believe could materially affect the Group's risk and performance. Information relating to financial risk management is included in note 20 to the financial statements.

Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

The Board reviews cash flow projections at periodic intervals during the year as well as information regarding cash balances.  At balance sheet date, the Group had cash balances of £728,586 (2020: £478,910). The financial forecasts indicate that the Group is expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances.

Interest rate risk

The Group has convertible loan notes totalling £207,074, including accrued interest, outstanding as at 31 December 2021 (2020: £196,364). The notes accrue interest at a fixed rate of 6% p.a. and, as such, carries a limited interest rate risk. 

Cash resources are held in current, floating rate accounts.

Market risk

Market price risk arises from uncertainty about the future valuations of financial instruments held in accordance with the Group's investment objectives.  These future valuations are determined by many factors but include the operational and financial performance of the underlying investee companies, as well as market perceptions of the future of the economy and its impact upon the economic environment in which these companies operate. 

Risk Table

The following table, whilst not an exhaustive list as other risks may arise or existing risks may materially increase in the future, sets out the principal risks and uncertainties to the continuing Group. These are listed in no order of priority, and alongside the description of each risk is a note of the main mitigating factors and actions the Group is taking to address that risk.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chief Executive Officer's Statement on page 2.

The financial position of the Group, its cash flows and liquidity position are described in this business review. In addition, note 20 to the financial statements include the Group's objectives, policies and processes for managing its capital, the financial risk management objectives, details of its financial instruments and its exposure to credit risk and liquidity risk.  As highlighted in note 20, the Group meets its day to day working capital requirements through its revenue generating cash flows, discrete fund raises and the issue of convertible loan notes.

The Company's employees carry out their duties remotely, via the network infrastructure in place. As a result, there was no disruption to the operational activities of the Company during the COVID-19 social distancing and working from home restrictions. All key business functions continue to operate at normal capacity.

The Directors have prepared Group forecasts and projections, which show that the Group has a reasonable expectation of maintaining sufficient working capital to enable the Group to meet its liabilities as they fall due for the foreseeable future, being a period of not less than 12 months from the date of approval of this report. At 31 December 2021, the Group had cash balances of £728,586 (2020: £478,910). Additional financial support, if required, will be available from the Chief Executive Officer through the convertible loan facility.

After making appropriate enquiries, the Directors continue to adopt the going concern basis in preparing the annual report and accounts.

This report was approved by the board of directors on 28 April 2022 and signed on behalf of the board by:

Trevor Brown

Chief Executive Officer

Directors' Report

The Directors present their annual report and audited financial statements for the year ended 31 December 2021.

Incorporation

IQ-AI Limited is incorporated in Jersey, Channel Islands.

During 1996, the Group created a twinned share structure with IQ-AI Holdings (UK) plc to enable UK based shareholders to receive a UK dividend and thereby avoid being double taxed on the Jersey dividend.

As a result of a General Meeting held in June 2017, the twinned share structure has been discontinued. Shareholders now only hold shares in IQ-AI Limited, which are listed on the Main Market (standard segment) of the London Stock Exchange.

In January 2018, IQ-AI Holdings (UK) plc was dissolved and removed from the register at Companies House in the United Kingdom.

Full details of the share capital are provided in note 15 to the financial statements.

Results and dividends

The audited financial statements for the year for the Group and Company are set out on pages 25 to 46.

No dividends will be distributed for the year ended 31 December 2021 (2020: £nil). 

Directors

The directors, who served throughout the year, were as follows:

Biographical details of the Directors are given on page 17.

The interests of the Directors in the shares of the company and their service contracts are noted in the Remuneration Committee report on pages 18 to 19. The Directors have no interests in share options and awards.

The Directors have sought to ensure that the financial statements of the Company and the Group comply with the disclosure requirements of Jersey Company Law and the listing requirements of the UK Listing Authority.

Capital expenditure

During the year, the Group invested £5,874 in capital expenditure (2020: £nil). The Group made an investment in product development during the period of £50,691 (2020: £68,962).

Except for the loan received under the Paycheck Protection Program, the Group held no bank debt at 31 December 2021 (2020: £nil). Currently, the Group retains clearing facilities with the bank.

Share capital

Details of the authorised and issued share capital, together with details of the movements in the Company's issued share capital during the year, are shown in note 15. Each share carries the right to one vote at general meetings of the Company and carries no right to fixed income.

There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements between holders of the Company's shares that may result in restrictions on the transfer of securities or on voting rights.  No person has any special rights of control over the Company's share capital and all issued shares are fully paid.

Significant agreements/takeovers directive

There are a number of agreements that take effect, alter or terminate upon a change of control of the Group such as commercial contracts and employee share option/award schemes. None of these are deemed to be significant in terms of their potential impact on the business of the Group as a whole.

Charitable and political donations

The Company did not make any political or charitable donations during the year ended 31 December 2021 (2020: £nil).

Employees

The Company's policy is to provide equal opportunities to all present and potential employees, including, where practical, those who are disabled.

The Group believes in respecting individuals and their rights in the workplace. With this in mind, specific policies are in place covering harassment and bullying, whistle blowing, equal opportunities and data protection.

Ratio of men to women

At 31 December 2021, there were two women (2020: 2) employed across the Group making 32% (2020: 32%) of our Group-wide employee base.

The Board is satisfied that it has the appropriate balance of skills, experience and expertise necessary, and will give due regard to diversity in the event of further changes to both its own membership and/or the membership of the senior management team.

Health and safety

The Group is committed to providing a safe place of work for employees. Group policies are reviewed on a regular basis to ensure that policies regarding training, risk assessment, safe working and accident management are appropriate. There are designated officers responsible for health and safety and issues are reported at each board and executive meeting.

Greenhouse gas emissions 

The Group is aware that it needs to measure its operational carbon footprint in order to limit and control its environmental impact. However, given the very limited nature of its operations during the year under review, it has not been practical to measure its carbon footprint. In the future, the Group will only measure the impact of its direct activities, as the full impact of the entire supply chain of its suppliers cannot be measured practically.

Statement of disclosure to independent auditors

Each of the persons who is a Director at the date of approval of this annual report confirms that:

·     so far as the Director is aware, there is no relevant audit information of which the Company's auditor is unaware; and

·     the Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Independent auditor

PKF Littlejohn LLP have expressed their willingness to continue in office as auditor and will be proposed for reappointment at the next Annual General Meeting.

This report was approved by the board of directors on 28 April 2022 and signed on behalf of the board by:

Trevor Brown

Chief Executive Officer

Statement of Directors' Responsibilities

The Directors are responsible for preparing the annual report and the financial statements in accordance with the applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the Group and Company financial statements in accordance with EU-endorsed international financial reporting standards (EU-endorsed IFRS). 

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 then apply them consistently.

·      Make judgements and estimates that are reasonable and prudent.

·      State whether the EU-endorsed IFRS 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 Group and Company will continue in business.

The Directors are responsible for keeping accounting records that are sufficient to show and explain the Group's and Company's transactions. These records must disclose with reasonable accuracy at any time the financial position of the Group and Company and to enable the Directors to ensure that any financial statements prepared comply with the Companies (Jersey) Law 1991, as amended. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud, error, non-compliance with law and regulations and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors' report, Directors' Remuneration report and Corporate Governance statement that comply with that law and those regulations.

The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in Jersey governing the preparation and dissemination of financial statements, which may vary from the legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Corporate Governance Report

IQ-AI has a standard listing on the London Stock Exchange and is thus not required to comply with the requirements of the U.K. Corporate Governance Code ("the Code") as issued by the Financial Reporting Council. The disclosures below are required by the UKLA's Disclosure and Transparency Rule 7.

The Board is committed to ensuring the highest standards of corporate governance, and voluntarily complies with, subject to a small number of exceptions listed below, the supporting principles and provisions set out in the Code.

In order to implement its business strategy, the Company has adopted a corporate governance structure whereby the key feature is a board of directors comprising at present one executive and three non-executives, where despite the Company's early stage of development, and its registration being in Jersey, the board strives to observe the Quoted Companies Alliance revised Corporate Governance Code for Small and Mid-Size Quoted Companies ('the QCA Code') which the Company has voluntarily adopted. The voluntary adoption of the QCA Code is over and above the requirements of Jersey law.

The Company regularly updates its corporate governance policies and procedures to reflect the changes made to corporate governance guidelines. The following describes the ways in which the Company complies with the detailed provisions of the Code. It includes full disclosure of the limited number of areas in which the Company is non-compliant and explanations why this is so.

The two areas of non-compliance with the Code are:

·      neither the Chairman, nor the other member of the Audit Committee, has any relevant accounting experience; and

·      the Audit Committee is made up of only two members and not at least three independent non-executive Directors.

Meetings of the Board of Directors

Four Board meetings were held during the year. The Directors' attendance record during the year are as follows:

The terms of appointment of the Non-Executive Directors are made available for inspection at the AGM, along with the service contract for the Executive Director. The Non-Executives do not have a fixed term of office in their letters of appointment.

Re-election

The articles of association require each director to retire and submit themselves for re-election every three years, but also that at least one third of the Directors must be submitted for re-election every year.

On an annual basis, the Chairman considers the performance of the Board and discusses with the Company Secretary the re-election process. Given the performance of the Company, the Chairman has confirmed that the Directors being submitted for election in 2022 continue to be highly effective, qualified and committed to their respective roles.

Insurance cover

The Company maintains insurance with a limit of £5m to cover its Directors and officers against the cost of defending themselves against civil legal proceedings taken against them. To the extent permitted by law, the Company also indemnifies its Directors and officers. Neither protection applies in the event of fraud or dishonesty.

Board objectives and operation

The key objectives of the Board are as follows:

·      The agreement of strategy.

·      The agreement of the detailed set of objectives and policies that facilitate the achievement of strategy.

·      Monitoring the performance of executive management in the delivery of objectives and strategy.

·      Monitoring and safeguarding the financial position of the Company and Group to ensure that objectives and strategy can be delivered.

·      Approval of major capital expenditure and other expenditure that is not part of the defined objectives or strategic plan.

·      Approving corporate transactions - this includes any potential acquisition or disposal.

·      Delegating clear levels of authority to the Executive management team. This is represented by the defined system of internal controls which is reviewed by the Audit Committee.

·      Providing the appropriate framework of support and remuneration structures to encourage and enable Executive management to deliver the objectives and strategies of the Company.

·      Monitoring the risks being entered into by the Company and ensuring that all of these are properly evaluated.

·      Approval of all external announcements.

A schedule is maintained of matters reserved to the Board for decision.

The Board formally met five times in 2021 (2020: 4); the Directors' attendance is summarised on page 13.

For each Board meeting, each Board member receives a pack of information, including financial reports, project updates and a formal agenda together with any relevant documentation.

Nominations Committee

The committee consists of the Chairman and the Chief Executive.  The committee meets as required to fulfil its duties of reviewing the Board structure and composition and identifying and nominating candidates to fill Board vacancies as they arise.

No formal induction process exists for new Directors, but the Chairman ensures that each individual is given a tailored introduction to the Company and fully understands the requirements of the role.

Appraisal of Non-Executive Directors

The Chief Executive normally carries out an annual formal appraisal of the performance of the Non-Executive Directors which takes into account the objectives set in the previous year and the individual's performance in the fulfilment of these objectives. However, given the CEO is the only Executive Director, a formal annual appraisal of the Chief Executive is carried out by the Non-Executive Chairman. All the appraisals of the Non-Executive Directors are provided to the Remuneration Committee.

Remuneration Committee

The report of the Remuneration Committee is included in this annual report.  Formal terms of reference for the Remuneration Committee have been documented and are made available for review at the AGM.

Audit Committee

Formal terms of reference for the committee have been documented and are made available for review at the AGM.

The terms of reference of the Audit Committee include the following requirements:

·      To monitor the integrity of financial statements and of any formal announcements relating to the Company's financial performance.

·      To review the Company's internal controls and risk management systems.

·      To make recommendations to the Board in relation to internal control matters that require improvement or modification.

·      To make recommendations to the Board in relation to the appointment, re-appointment and removal of the external auditor and to approve remuneration.

·      To review and monitor the external auditor's independence and objectivity and the effectiveness of the audit process.

·      To establish and monitor whistle blowing procedures.

No internal audit function exists due to the size of the Group. This is reviewed annually by the Audit Committee which reflects on any increased risk or regulatory changes in the period under review in making their recommendation to the Board.

The Audit Committee met three times during the year and after the year end. Matters considered at these meetings included: reviewing and approving the report and financial statements for the year ended 31 December 2020, the half year results to 30 June 2021 and the report and financial statements for the year ended 31 December 2021; discussion with the external auditors to confirm their independence and scope for audit work; considering the reports from external auditors identifying any accounting or judgemental issues requiring the board's attention and the auditors' assessment of internal controls; reviewing the company's risk register and business continuity procedures; and considering the adequacy of the whistle-blowing facility, the anti-bribery training and monitoring and data protection policy and procedures.

The Audit Committee chairman has maintained dialogue with the auditors outside of the scheduled meetings and meets with the auditors without the presence of the Executive Director and members of the finance team.

The company did not engage its auditor for any non-audit services, which has safeguarded the Auditor's objectivity and independence.

The Audit Committee considers independence from a number of perspectives, not only the materiality of fee income to the audit firm in question.  It is only after considering these aspects (along with a report on independence from the external auditor) does it conclude and make recommendations to the Board.

None of the members of the Audit Committee have a formal accounting qualification though all have operated at the highest levels of businesses. The Board is content that the overall level of qualification within the Audit Committee is currently sufficient to enable it to discharge satisfactorily its obligations. 

In addition to the Non-Executive Director and the Chief Executive, the external auditor was invited to attend part of the meetings where relevant. 

Internal controls

The Board is responsible for the Group and Company's system of internal control and for reviewing its effectiveness. Given the size of the organisation and the level of transactions involved there are limited controls documented and in operation which is appropriate for the Group in its current state.

The Audit Committee consider each year if the current level of internal control is appropriate. On advice from the Audit Committee, the Board does not consider any additional independent verification of the system of internal control to be required, based on the size of the Company and the Group, and the non-complex nature of both its management systems and financial structure.

The Group operates certain controls specifically relating to the production of consolidated financial information, covering operational procedures, validation and review.

The above procedures reflect the Group's commitment to ensuring it has policies in place that ensure high standards of integrity and transparency throughout its operations. Further, when these procedures detect unauthorised practises, the Group is committed to correction of such events. The Group is committed to analysing its internal controls to make them more robust and further limit the risk of such incidents. The Board believes such action properly reflects the Group's commitment to financial discipline and integrity at all levels. The Board has reviewed the effectiveness of internal control systems in operation during the financial period in accordance with the guidelines set out in the FRC's Risk Guidance report, through the processes set out above and no weaknesses or failings were identified.

Dialogue with major shareholders

The Company places considerable importance on communications with shareholders. Discussions take place with major shareholders with the Company's delegating authority to the Chairman and Chief Executive to present the strategy and financial results of the Group.

Annual general meeting

At its AGM the Company complies with the provisions of the Code relating to the disclosure of proxy votes, the separation of resolutions and attendance of Directors, particularly committee chairpersons.  The timing of the despatch of the formal notice of the AGM also complies with the Code.

The Directors consider that all the resolutions to be put to the AGM, to be held in May/June 2022, are in the best interests of the Company and its shareholders. The Board will be voting in favour of them and unanimously recommends that shareholders do also.

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

(i)            the financial statements, prepared in accordance with EU-endorsed IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

(ii)           the annual report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

This report was approved by the board of directors on 28 April 2022 and signed on behalf of the board by:

Trevor Brown

Chief Executive Officer

Directors' Information 

Trevor Brown

Trevor has been a strategic investor in equities and real estate for more than 30 years.  He is currently a Director of Chamberlain plc and Braveheart Group plc.

Dr Qu Li (resigned on 2 September 2021)

Qu Li is a Non-Executive Director of IQ-AI Limited. With over 25 years of experience in international mergers, acquisitions and joint ventures, Dr Li has completed turnkey transactions ranging from $5m-$200m and raised more than $300 million over the last 10 years. Dr Li is the founder and Chairman of China Ventures Ltd, a leading consultancy and venture capital company, specialising in Sino/Western business and offering a wide range of skills associated with international business transactions. Dr Li relocated to the UK over 20 years ago, where she obtained her Doctor of Philosophy at Leeds University and then established her business base. She is a qualified engineer and a successful business entrepreneur who has worked on activities related to government, industry and commerce in China, Southeast Asia, South America, Europe and the US for over 20 years.

Apart from her business commitments, Dr Li devotes great effort, interest and financial support to the development of young entrepreneurs across the globe. She sits on the advisory board of the Business School of Leeds University and is one of the Leaders in Resident for the postgraduates.

Vinod Kaushal

Vinod is a Non-Executive Director of IQ-AI Limited. Vinod is a well-seasoned healthcare industry executive with nearly 30 years' experience in predominantly commercial and general management roles. He has worked nationally, regionally and globally for several blue chip and SME companies.

Having been a member of the team which orchestrated the international launch of Losec®/Prilosec® at Astra to its place as the global No. 1 selling pharmaceutical, Vinod was Head of Global Marketing at Novo Nordisk, Senior Vice President Fresenius Kabi, Vice President of Amersham/GE Health's Neurology business, Vice President at Royal Numico/Danone and CEO of SPL amongst other pivotal roles.

Since leaving Big Pharma, Vinod has recently been focused on entrepreneurial activities with several successful SMEs in the Pharma/Healthcare space. With an impressive deal sheet to his name, Vinod has been involved in various IP and business acquisitions. His career has seen him relate to investors on several global stock exchanges and he is an accomplished external speaker. Vinod holds a BSc (Hons) in Biochemistry from Warwick University and an MBA from Henley Business School.

Michael Schmainda

Michael was appointed as a Non-Executive Director of IQ-AI Limited on 18 December 2019. Michael has a 20-year history of successfully building global medical imaging businesses including Prism Clinical Imaging and Imaging Biometrics. As co-founder of IB, and has overseen all aspects of the company's development, operation, and growth since its inception. He has established strong collaborative relationships with leaders in the medical imaging field who drive new product development and has led the translation and commercialisation of sophisticated imaging solutions, achieved regulatory approvals in the US and Europe, and global product adoption.

Michael's career began with 3M Company, a company renowned for bringing new products to market, where he held leadership roles across multiple industries including the life science sector. Prior to IB, Michael was a foundational member of Prism Clinical Imaging, secured the initial investment for the company, and served as president and COO. 

Brett Skelly (appointed on 2 September 2021)

Brett has been working in the financial sector for GBAC Limited for over 17 years, carrying out various roles including preparing accounts and auditing a wide range of large and SME companies as well as preparing management information and forecasts. He has been involved in developing business plans and has also been involved in a number of company sales and MBOs over the years. In December 2017, Brett became the outsourced financial controller of Braveheart Investment Group Plc and is also the outsourced financial controller at Anticus Partners Limited.

Remuneration Committee Report

The Remuneration Committee presents its report for the year ended 31 December 2021.

Membership of the Remuneration Committee

The Remuneration Committee is currently comprised of B Skelly and V Kaushal.

Subject to what appears below, no other third parties have provided advice that materially assisted the Remuneration Committee during the period.

Remuneration policy

The Group's remuneration policy is to retain and motivate its staff with rewards linked to performance and results which promote the interest of the shareholders. Bonus awards for employees are assessed annually taking into account the Group results.

Policy Table:

Share options

No share option scheme is provided to the Directors of the Company.

Directors' pensions

The Company does not provide a pension scheme. Additionally, no dependent pensions or benefits are provided.

Remuneration policy for Executive and Non-Executive Directors

The Remuneration Committee seeks to provide the remuneration packages necessary to attract, retain and motivate Executive and Non-Executive Directors of the quality required to manage the business of the Group and seeks to avoid paying more than is necessary for this purpose. In establishing the level of remuneration of each director, the committee has regard to packages offered by similar companies.

Consistent with this policy, the benefit packages awarded to Executive and Non-Executive Directors comprise a mix of performance and non-performance elements. During 2021, the Executive and Non-Executive Directors' pay was not based on the Group achieving financial targets.

Directors' interests (held directly or indirectly) in the Company's shares

* Includes shares held by related parties

Directors' emoluments

The following table summarises the emoluments of Directors during the year.

*Dr Qu Li's services were invoiced by China Ventures Limited.

** Brett Skelly's services were invoiced by GBAC Limited.

Brett Skelly

Chairman of the Remuneration Committee

28 April 2022

Independent auditor's report to the members of IQ-AI Limited

Opinion

We have audited the financial statements of IQ-AI Limited  (the 'parent company') and its subsidiaries (the 'group')  for the year ended 31 December 2021 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the Consolidated and Parent Company Statements of Changes in Equity, the Consolidated and Parent Company Statements of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and EU-endorsed International Financial Reporting Standards.

In our opinion, the financial statements:

·      give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2021 and of the group's loss for the year then ended;

·      have been properly prepared in accordance with EU-endorsed IFRS; and

·      have been properly prepared in accordance with the requirements of the Companies (Jersey) Law 1991.

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 and parent company 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 public interest 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.

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 group's and parent company's ability to continue to adopt the going concern basis of accounting included:

·      Reviewing management's assessment of going concern.

·      Determining if all relevant information has been included in the assessment of going concern including completeness of forecast expenditure.

·      Analysing cash flow forecasts and budgets, reviewing the underlying assumptions in relation to revenue and expenditure and checking mathematical accuracy.

·      Considering the cash position at and after the year end.

·      Reviewing and stress-testing the reasonable worst-case forecast scenario prepared by management and the financial resources available to deal with this outcome.

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 group's or parent company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Our application of materiality

The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. The materiality applied to the group financial statements was £21,000 (2020: £27,000) based on 5% of the loss before tax. The performance materiality for the group was set at £14,700 (2020: £17,900), which is 70% of the financial statement's materiality. We have selected 70% because of the good control environment, and relatively few errors found in previous years.

The materiality applied to the parent company financial statements was £18,000 (2020: £17,000) based on 5% of the loss before tax. The performance materiality for the parent company was determined to be £14,400 (2020: £13,600). As a group whose trade is in the process of expanding through product development and existing product revenue streams, loss before tax was considered the most appropriate benchmark to shareholders. For each component in the scope of our group audit, we allocated a materiality that was less than our overall group materiality.

We agreed with those charged with governance that we would report all differences identified during the course of our audit in excess of £1,050 (2020: £1,350) for the group, and £900 (2020: £850) for the parent company. We also agreed to report any other differences below that threshold that we believe warrant reporting on qualitative grounds.

Our approach to the audit

Our audit is risk based and is designed to focus our efforts on the areas at greatest risk of material misstatement, aspects subject to significant management judgement as well as greatest complexity, risk and size.

In designing our audit, we determined materiality and assessed the risk of material misstatement in the group and parent company financial statements. We looked at areas involving significant accounting estimates and judgements by the directors and considered future events that are inherently uncertain, in particular with regard to the recognition and valuation of intangible assets. We also assessed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

In addition to the parent company, two material components were identified. Both components were subject to an audit conducted directly by us.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the group and parent company financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters in relation to which the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:

·      adequate accounting records have not been kept by the group and parent company, or returns adequate for our audit have not been received from branches not visited by us; or

·      the group and parent company financial statements are not in agreement with the accounting records and returns; or

·      we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation of the group and parent company 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 group and parent company 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:

·      We obtained an understanding of the group and parent company and the sector in which they operate to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management and the application of our cumulative audit knowledge and experience of the sector. 

·      We determined the principal laws and regulations relevant to the group and parent company sin this regard to be those arising from the LSE listing rules on the standard segment, the Companies (Jersey) Law 1991 and regulations applicable to the US subsidiary. The group's products are classified as medical software in the US which require the lowest level of regulatory oversight as they are non-invasive, non-sterile and primarily used for diagnosis.

·      We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the group and parent company with those laws and regulations. These procedures included, but were not limited to:

·   enquiries of management;

·   review of minutes and RNS announcements; and

·   review of legal and regulatory correspondence.

·      We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, that the potential for management bias was identified in relation to the impairment assessment of goodwill and intangible assets. We addressed this by challenging the assumptions and judgements made by management when evaluating any indicators of impairment. 

·      As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to the testing of journals, reviewing accounting estimates for evidence of bias and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation.  This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991.  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.

David Thompson (Engagement Partner)                                                                                                              15 Westferry Circus

For and on behalf of PKF Littlejohn LLP                                                                                                                           Canary Wharf

Statutory Auditor                                                                                                                                                           London E14 4HD

28 April 2022

Consolidated Income Statement

For the year ended 31 December 2021

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2021

The accompanying accounting policies and notes are an integral part of these financial statements.

Consolidated Statement of Financial Position

As at 31 December 2021

The financial statements on pages 25 to 46 were approved by the Board of Directors on 28 April 2022 and signed on its behalf by:

T Brown                                                                                  B Skelly

Director                                                                                  Director

Company Registration Number: 2044

The accompanying accounting policies and notes are an integral part of these financial statements.

Company Statement of Financial Position

As at 31 December 2021

The financial statements on pages 25 to 46 were approved by the Board of Directors on 28 April 2022 and signed on its behalf by:

T Brown                                                                                  B Skelly

Director                                                                                  Director

Company Registration Number: 2044

The accompanying accounting policies and notes are an integral part of these financial statements.