26 April 2023

IQ-AI Ltd

("IQ-AI" or the "Company")

Publication of Annual Report

The Board of IQ-AI Ltd is pleased to announce the Company's audited financial statements for the year ended 31 December 2022.

The Annual Report will be available on the Company's corporate website at www.iq-ai.ltd.

--ENDS-

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

For further information, please contact:

Introduction

In essence, IQ-AI is an ideas incubator, a creative collaboration of dedicated medical scientists, clinicians, and software developers who are originating solutions and tools which are having a growing impact on the treatment and management of one of the most intractable cancers.

The key drivers are all shareholders, who have had to become accustomed to the vagaries of the stock market and how it values the Company`s shares. Oftentimes the market capitalization of the Company has changed over a small number of trading days by 10-25% without any discernable reason, however we remain firmly focused on the medium-term commercial prospects for our unique products and are confident that shareholder patience will be eventually rewarded. We will not deviate from our central aim of achieving commercial and medical success.

Operational Highlights

·      The Company launched an MR exam processing service and secured its first commercial contract. Revenue from this new service is anticipated to grow as further contracts are won.

·      The phase I clinical trial for oral gallium maltolate ("GaM") continues to track ahead of schedule. Orphan Drug Designation status has been granted to Imagining Biometrics ("IB") by the FDA. This designation offers several significant advantages to the Company including seven years market exclusivity post market approval, and reduced FDA fees.

·      IB Nimble, the handheld app which connects medical specialists in a secure environment and allows them to establish optimal treatment plans for their patients without having to physically meet, enabling for example a virtual 'tumour board'. IB Nimble is adaptable to any disease group. The Company has now secured its first commercial contract to install an operating network for clinical use of the app in a new disease area.  Interest from other potential users is being stimulated by this initial installation and we are hopeful that further contracts will ensue in due course.

·      The architecture of the IB automated processing pipeline has been re-engineered to provide significant additional commercial and operational benefit for existing and future clients. Specifically, the new platform reduces exposure to cybersecurity risks, enables more rapid and flexible integration of new algorithms, streamlines internal testing and debugging during product development, and enables cloud processing capability.   

·      Using patented artificial intelligence ("AI") technology, IB Zero G generates enhanced "with contrast" images using only non-contrast (0% gadolinium) images as input. The FDA's response to the FDA 510(k) submission concluded that IB Zero G™ was too novel and unique a product and subsequently directed IB to pursue a different regulatory clearance pathway. IB is compiling additional documentation in preparation for a pre-submission meeting with the FDA and plans to submit a "de novo" application in the second half of the year. The de novo request is a market clearance pathway designed for novel medical devices for which no legally marketed predicate device exists to demonstrate substantial equivalence.                

·      With an unprecedented and increasing number of trials currently underway, our focus in 2023 is to convert as many as possible of those trial sites to long-term customers.

IQ-AI's Products/Services:

IB Clinic

The automated imaging platform, IB Clinic, is ideally suited for high-volume cancer centers treating and monitoring brain tumor patients with a range of therapies. There are 71 such centers designated by the National Cancer Institutes ("NCI") in the USA, most of which are affiliated with university medical centers in larger metropolitan areas. These centers are funded by the NCI to deliver innovative treatments, such as IB's quantitative solutions, to patients.

To further capitalize on the unique capabilities of IB software and recognizing that smaller hospitals and imaging centers do not have the expertise or staff on hand to independently generate on-site advanced imaging, a processing service is now offered by the Company. The fee-per-exam processing solution is expected to launch at our first multi-site imaging center in early Q2. In the US alone there are 6,000 other independent diagnostic imaging centers who could potentially be interested in access to IB's advanced mapping solutions as a service.

The Company entered into agreements with two prominent players to expand our geographic footprint and outreach. Bayer (Calantic) and TeraRecon (Eureka) each have multi-site trials underway in the USA and UK that include IB products.

Driving the service demand is a peer-reviewed scientific publication by the RANO (response assessment in neuro oncology) resect group. This international publication, published in August 2022, proposes new guidance based on the prognostic value of quantifying residual tumor volume post-surgery. Intuitively, the more tumor tissue a surgeon can resect without compromising viable tissue, the better the outcome for the patient. IB's Delta T1 maps can measure these volumes and provide this information to neurosurgeons.

As a catalyst to the adoption of IB Clinic is the automatic generation of our perfusion-derived vascularity class maps (referred to in the literature as fractional tumor burden ("FTB"); https://pubmed.ncbi.nlm.nih.gov/35483909/ and https://pubmed.ncbi.nlm.nih.gov/31515215/. These maps, or computed medical images, classify blood volume measurements based on clinically validated thresholds. These thresholds have been shown to distinguish tumor from post-treatment radiation effect and aid clinicians in making treatment decisions.

The Company will release an automated processing pipeline in Q2 that shows great promise in overcoming long-standing challenges of auto-segmenting regions using AI technology alone. The processing workflow will be a hybrid approach that leverages AI plus Delta T1 technologies. The AI component of the solution is a result of the development efforts of IB Zero G and is expected to accurately segment a large percentage of brain tumor exams. This automation will provide a tremendous and highly anticipated boost in productivity for busy neuroradiologists and MR technologists who currently must manually segment each MRI exam to achieve the desired information.  Eliminating the manual processing step with this automation will also enable our internal staff to absorb a much higher volume of exams for the service business with far fewer resources.

IB Zero G

Over 450 million GBCA exams are performed globally each year in the USA alone. Once cleared by the FDA, IB Zero G will also provide a positive environmental benefit by reducing the use and disposal of gadolinium, which is becoming increasingly present in surface water near hospital MR departments.

The patented AI technology available in IB Zero G aims to provide an imaging alternative for patients who cannot, or at risk of, receiving gadolinium-based contrast during MRI exams. Various features of the AI technology are being leveraged in other products while the Company pursues regulatory clearance via the de novo pathway. The Company is receiving several hundred new datasets to further develop the technology. This additional work is necessary to satisfy the responses received by the FDA from the first 510(k) submission. The primary source of these datasets is from pediatric hospitals who are interested in the technology for use on MRI exams for children. The Company will request a Q-Submission ("Q-Sub") meeting with the FDA when the development and other criterion outlined by the FDA is nearing completion. Q-Sub meetings are voluntary and allow submitters to receive feedback prior to the premarket submission. The guidance received will be used to appropriately structure the FDA application. Once accepted for substantive review by the FDA, the cited review time for de novo applications is 150 days and can vary depending on the documentation required. This is longer than the review time for traditional 510(k)s as there is no cleared predicate device already on the market that can be used to prove substantial equivalence. The innovation truly represents a disruptive shift in technology and the Company is committed to completing the pre-submission work to help accelerate the review process.

IB Nimble

IB Nimble was added to our product portfolio in August 2022 to build on the impact it made at Froedtert Hospital (Milwaukee, WI) in treating metastatic brain tumor patients during the Covid-19 pandemic. Today, over 300 patients have benefitted from IB Nimble's ability to facilitate optimal treatment recommendations within hours as opposed to days. Moreover, the way clinicians prefer to perform their jobs is rapidly changing. Multi-disciplinary specialists do not want to be tethered to a computer, or even login to a website, to access pertinent information. Nor do they want to wait for days to collaborate with colleagues to identify an optimal treatment plan. IB Nimble is on the forefront of this transition. Other metastatic treatment teams have contacted the Company about adopting IB Nimble at their sites. In addition, two entirely different disease groups have met with our team to discuss integrating IB Nimble in their routine clinical workflows. Recently, one of them has chosen IB Nimble to fulfill their mobile app needs, representing the first commercial sale for the Company.

Oral GaM

In March of 2022, the Company sponsored a Phase I Clinical trial to study oral GaM for the treatment of recurrent GBM; a fast-growing and deadly brain tumor. Per the FDA, GBM is defined as an orphan disease affecting fewer than 200,000 people in the USA.

Orphan drugs are pharmaceutical agents which show promise in the treatment, prevention, or diagnosis of orphan diseases. In 1983, the Orphan Drug Act was passed by the US government to bring promising agents to patients faster. In December 2022, the Company requested Orphan Drug Designation (ODD) status with the FDA. The request was granted in February 2023.

The Company submitted its second Orphan Drug Designation request to the FDA for treating pediatric brain tumors with GaM. A decision is expected by early Q3. Motivation for this request was generated from two landmark pre-clinical studies completed by Dr. Mona Al-Gizawiy, PhD in the laboratory of Dr. Kathleen Schmainda, PhD at MCW. These studies demonstrated similar remarkable results of GaM in atypical teratoid/rhabdoid tumor (ATRT) and GBM in children as it did in the pre-clinical study for adult GBM. Current treatment protocols for pediatric brain tumors subject children to the same toxic, invasive, and harsh treatment protocols used to treat adult brain tumors.

The Company recognizes the interest and willingness of the FDA and the National Institutes of Health ("NIH") to help companies accelerate the delivery of promising new treatments to these patients and intends to form a close working relationship with the agencies in the coming months.

Outlook

It is five years since IQ-AI acquired Imaging Biometrics. Throughout that time the IB team have worked continuously and intensively to innovate and develop what has now become a valuable portfolio of medical IP. We believe that the cumulative accretion of value during this time is not adequately reflected in the current market valuation of the Company, and we are now considering how best to address this anomaly.

Trevor Brown

Chief Executive Officer

Consolidated Income Statement

For the year ended 31 December 2022

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2022

Consolidated Statement of Financial Position

As at 31 December 2022

Company Statement of Financial Position

As at 31 December 2022

Company Statement of Changes in Equity

For the year ended 31 December 2022

Company Statement of Changes in Equity

For the year ended 31 December 2022

Consolidated and Company Statement of Cash Flows

For the year ended 31 December 2022

1.      Summary of significant accounting policies

IQ-AI Limited (the "Company") is a limited liability company incorporated and domiciled in Jersey. The address of the registered office is given on page 46.

The financial statements are presented in pound sterling ("£") since that is the currency of the primary environment in which the Group and Company operates.

The principal accounting policies applied in the preparation of these financial statements are set out below.  These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

These financial statements have been prepared and approved by the Directors in accordance with the EU-endorsed international financial reporting standards. 

The financial statements have been prepared under the historical cost convention.

The preparation of financial statements in conformity with EU-endorsed IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2.

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. In addition, note 20 to the financial statements includes the Group's and Company's objectives, policies and processes for managing its capital and its financial risk management objectives.

The Group meets its day to day working capital requirements through its revenue generating cashflows, discrete fund raises and the issue of convertible loan notes.

The current economic conditions continue to create uncertainty, particularly over (a) the level of demand for the group's products; and (b) the availability of finance for the foreseeable future. The Directors are satisfied that the Group has sufficient resources to meet any obligations over the going concern period. At 31 December 2022, the Group had cash balances of £313,985 (2021: £728,586).

Additional financial support, if required, will be available from the Chief Executive Officer through the convertible loan facility. In addition, all existing convertible loans including accrued interest are not repayable in cash.

Taking in to account the comments above, the Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to adopt the going concern basis of accounting in preparing the financial statements. There has been no direct impact to the Company and the Group due to the war in the Ukraine.

New standards, amendments and interpretations adopted by the Group and Company

The following IFRS or IFRIC interpretations were effective for the first time for the financial year beginning 1 January 2022. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements:

New standards, amendments and interpretations not yet adopted

There are no IFRS's or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company or Group.

Basis of consolidation

The Group financial statements consolidate the financial statements of the Company and all its subsidiaries ("the Group"). Subsidiaries include all entities over which the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.  The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control commences until the date that control ceases. Intra-group balances and any unrealised gains and losses on income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

The acquisition method of accounting is used to account for business combinations. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange, and the equity interests issued. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. Acquisition related costs are expensed as incurred. Where necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.

Investments in subsidiaries

Investments in subsidiaries are held at cost less any impairment.

Goodwill

Goodwill on acquisition of subsidiaries represents the excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets and contingent liabilities acquired. Identifiable assets are those which can be sold separately, or which arise from legal rights regardless of whether those rights are separable. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but is tested annually, or when trigger events occur, for impairment and is carried at cost less accumulated impairment losses.

Foreign currency translation

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Foreign exchange gains and losses are presented in the income statement within 'finance income or costs.'

The results and financial position of Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

·      assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at the date of that Statement of Financial Position;

·      income and expenses for each Income Statement presented are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

·      all resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income.

Property, plant and equipment

Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:

        Furniture, fittings and equipment                 3 - 8 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Intangible assets - Intellectual property and internally generated software

Separately acquired intellectual property is shown at historic cost. Intellectual property acquired in a business combination is recognised at fair value at the acquisition date. Amortisation is calculated using the straight-line method over the estimated useful life of up to 5 years.

Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:

·      it is technically feasible to complete the software product so that it will be available for use;

·      management intends to complete the software product and use or sell it;

·      there is an ability to use or sell the software product;

·      it can be demonstrated how the software product will generate probable future economic benefits;

·      adequate technical, financial and other resources to complete the development and use or sell the software product are available; and

·      the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

Other development expenditure that does not meet these criteria is recognised as an expense as incurred.  Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed 5 years. Amortisation commences when regulatory approval is obtained, and the product is commercially available.

Impairment of non-financial assets

Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

Financial instruments

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

Financial assets

The Group classifies its financial assets in the following categories financial assets as "at fair value through profit and loss" and "loans and receivables". The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Management determines the classification of its financial assets at initial recognition.

Loans and receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. Trade receivables are held with the objective of collecting the contractual cash flows. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets.  If not, they are presented as non-current assets.

Trade receivables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method, less provision for impairment. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets.

Due to the short-term nature of the other current receivables, their carrying amount is considered to be the same as their fair value.

A financial asset is assessed at each reporting date to determine whether there is any evidence that it is impaired. A financial asset is considered impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.  Individual significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the consolidated income statement.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with maturities of three months or less.

Financial liabilities and equity instruments issued by the group

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. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issued costs.

Convertible loan notes

The convertible loan note ("CLN") is a compound financial instrument that can be converted to share capital at the option of the holder. As the CLN, and the accrued interest, can only be repaid by the issue of shares, it has been recognised in equity only, with no liability component. Interest is accounted for on an accruals basis and charged to the Consolidated Income Statement and added to the carrying amount of the equity component of the CLN.

Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.  Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer).  If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method. The carrying amounts of trade and other payables are considered to be the same as their fair values.

Segment reporting

An operating segment is a component of the Group that engages in business activity from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with and of the Group's other components. All operating segments' operating results, for which discrete financial information is available, are reviewed regularly by the Group's Board to make decisions about resources to be allocated to the segment and assess its performance. The Group reports on a two-segment basis - holding company expenses and medical software.

Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects, from the proceeds.

Share-based payments

The Company operates an equity-settled, share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the Company.  The fair value of the employee services received in exchange for the grant of the options is recognised as an expense.  The total amount to be expensed is determined by reference to the fair value of the options granted:

·      including any market performance conditions (for example, an entity's share price);

·      excluding the impact of any service and non-market performance vesting conditions (for example, profitability or sales growth targets, or remaining an employee of the entity over a specified time period); and

·      including the impact of any non-vesting conditions (for example, the requirement for employees to save or holding shares for a specific period of time).

At the end of each reporting period, the group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions and service conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

In addition, in some circumstances employees may provide services in advance of the grant date and therefore the grant date fair value is estimated for the purposes of recognising the expense during the period between service commencement period and grant date.

When the options are exercised, the company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution.  The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase in investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.

The social security contributions payable in connection with the grant of the share options is considered an integral part of the grant itself, and the charge will be treated as a cash-settled transaction.

Revenue recognition

The group derives revenue from the transfer of goods and services at a point in time and over time. Revenue from external customers arise on the sales of software licences, including associated maintenance, and consultancy services.

Revenue from licence sales is measured at the agreed transaction price at a point in time. A receivable is recognised when access to the software is granted, since this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. Support and maintenance services are provided on the product supplied; this is deemed to be a separately identifiable product and is recognised over time. Revenue from consulting services are recognised in the accounting period in which the services are rendered.

Taxation

The Company is registered in Jersey, Channel Islands and is taxed at the Jersey Company standard rate of 0%. However, the Company's subsidiaries are situated in jurisdictions where taxation may become applicable to local operations.

The major components of income tax on profit or loss include current and deferred tax.

The tax currently payable is based on the taxable profit for the period using the tax rates that have been enacted or substantially enacted by the balance sheet date. Taxable profit differs from the net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Group financial statements. Deferred tax is determined using tax rates that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised of the deferred tax liability is settled.

Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the asset can be utilised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity.

2.      Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future.  The resulting accounting estimates will, by definition, seldom equal the related actual results.  The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Impairment of intangible assets

The directors have reviewed the valuation of Stone Checker Software Limited in the year and valued the company based on the last offer that was received in the previous year for the company and its software. Since the offer, the software has continued to be improved upon and therefore the directors feel that this valuation is acceptable. The asset has been impaired accordingly. Refer to Note 11.

Critical judgments in applying the entity's accounting policies

The following are the critical judgements that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

Capitalisation of internally developed software

Distinguishing the research and development phases of the software suites and determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired.

3.  Segmental analysis

The Directors are of the opinion that under IFRS 8 - "Segmental Information" the Group operated in two primary business segments in 2022: being holding company expenses and medical software. The secondary segment is geographic.  The Group's losses and net assets by primary business segments are shown below.

Segmentation by continuing businesses:  

Segmentation by geographical area:

4.  Finance costs

5.      Operating loss

6.      Employee information

The average monthly number of employees (including Executive Directors) was:

Directors' remuneration and transactions 

7.      Income tax expense

8.      Earnings per share

Basic and diluted

Earnings per share is calculated by dividing the loss attributable to the equity holders of the Company by the weighted average number of Ordinary shares in issue during the period, excluding Ordinary shares purchased by the Company and held as treasury shares.

9.      Property, plant and equipment

10.  Goodwill

The goodwill at 31 December 2022 represents the goodwill recognised at the purchase of the Company's subsidiary companies Imaging Biometrics and Stone Checker Software Limited. The goodwill is not amortised but is reviewed on an annual basis for impairment, or more frequently if there are indications that goodwill might be impaired. The impairment review comprises a comparison of the carrying amount of the goodwill with its recoverable amount (the higher of fair value less costs to sell and value in use). No impairment was deemed necessary for the year ended 31 December 2022.

11.  Intangible assets - intellectual property, imaging and diagnostic software

The Directors have reviewed the valuation of Stone Checker Software Limited in the year and valued the company based on the last offer that was received in the previous year for the company and its software. Since the offer, the software has continued to be improved upon and therefore the directors consider that no additional impairment is required at this stage.

12.   Investments in subsidiaries

At 31 December 2022, the Group consisted of a parent company, IQ-AI Limited, registered in Jersey and its two wholly owned subsidiaries.

Subsidiaries:

13.   Trade and other receivables      

In the Directors' opinion, the carrying amounts of receivables is considered a reasonable approximation of fair value. The Group monitors on a monthly basis the receivable balance and makes impairment provisions when debt reaches a certain age. There are no significant known credit risks as at 31 December 2022 (2021: none).

14.   Trade and other payables

In the Directors' opinion, the carrying amount of payables is considered a reasonable approximation of fair value.

15.   Share capital

The movement in share capital is detailed below:

The movement in share capital of the previous year is detailed below:

16.   Reserves

The Group's reserves are made up as follows:

Share capital: Represents the nominal value of the issued share capital.

Share premium account: Represents amounts received in excess of the nominal value on the issue of share capital less any costs associated with the issue of shares.

Capital redemption reserve: Reserve created on the redemption of the Company's shares

Merger reserve: Represents the difference between the nominal value of the share capital issued by the Company and the fair value of Stone Checker Software Limited at the date of acquisition.

Convertible loan note reserve: Represents the equity portion of the Convertible Loan Notes issued by the Company.

Foreign currency translation reserve: Reserve arising from the translation of foreign subsidiaries at consolidation.

Retained earnings: Represents accumulated comprehensive income for the year and prior periods.

17.   Share-based payments

On 1 November 2018, 6,017,500 shares in IQ-AI Limited were granted under option to David Smith. The shares are exercisable at 2.60p and the option will vest over 3 years, with 1/3^rd vesting on 1 August 2019 and the remainder vesting at a rate of 1/36^th per month on the last day of each month, until the shares become fully vested. The option will be exercisable for 10 years and will lapse on 1 August 2028. There are no cash settlement alternatives. 

The fair value is estimated as at the date of grant using a Black-Scholes model, taking into account the terms and conditions upon which the options were granted.  The following table lists the inputs to the model.

On 20 September 2022, 775,000 shares in IQ-AI Limited were granted under option to employees of Imaging Biometrics LLC. The shares are exercisable at 2.253p and the options are exercisable over 10 years from the date of grant. The fair value is estimated as at the date of grant using a Black-Scholes model, taking into account the terms and conditions upon which the options were granted.  The following table lists the inputs to the model.

The total charge for the year relating to share-based payments was £9,888 (2021: £8,721).

18.   Convertible loan note reserve

The above reserve was created on the issue and conversions of the Convertible Loan Notes ("CLNs"). The above amount relates to the equity portion of the CLNs. The capital and accrued interest are wholly repayable by the issue of shares in the Company. Interest is charged to the company at 6%.

19.   Operating lease commitments

Financial commitments

The Group had no contracts in respect of lessee arrangements. The registered office is provided by the Company Secretary as part of their services. The contract has a cancellation policy of 3 months.

20.   Financial instruments

Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. 

The Group has exposure to the following risks from its use of financial instruments:

(a)   Credit risk

(b)   Liquidity risk

(c)    Market risk

(d)   Currency risk

(e)   Interest rate risk

(f)    Capital risk management

This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risks and the Group's management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities.

The Group Audit Committee oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework.

(a)   Credit risk

Credit risk is the risk of financial loss to the Group if a customer fails to meet its contractual obligations. Each local entity is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered.

Trade and other receivables

The Group's exposure to credit risk is influenced by the type of customer the Group contracts with. The Group has minimal trade receivables.

The immediate credit exposure of financial instruments is represented by those financial instruments that have a net positive fair value by counterparty at 31 December 2022. The Group considers its maximum exposure to be:

All cash balances and short-term deposits are held with an investment grade bank who is our principal banker (Barclays Bank PLC). Although the Group has seen no direct evidence of changes to the credit risk of its counterparties, the current focus on financial liquidity in all markets has introduced increased financial volatility. The Group continues to monitor the changes to its counterparties' credit risk.

(b) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The Board are jointly responsible for monitoring and managing liquidity and ensures that the Group has sufficient liquid resources to meet unforeseen and abnormal requirements. The current forecast suggests that the Group has sufficient liquid resources.

The following are the contractual maturities of financial liabilities:

Available liquid resources and cash requirements are monitored using detailed cash flow and profit forecasts which are reviewed at least quarterly, or more often as required. The Directors decision to prepare these accounts on a going concern basis is based on assumptions which are discussed in the going concern paragraph in note 1.

(c) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Given the Group began revenue generating operations in the year, the risk for the year was minimal.

(d) Currency risk

The Group is exposed to currency risk as the assets of its subsidiary, Imaging Biometrics LLC, are denominated in US Dollars. At 31 December 2022, the net foreign liabilities were £686,077 (2021: £519,216). Differences that arise from the translation of these assets from US Dollar to Pound Sterling are recognised in other comprehensive income and the cumulative effect as a separate component in equity.

 (e) Interest rate risk

The Group has no floating rate loans. Therefore, the Group has no exposure to interest rate risk.

(f) Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders as well as sustaining the future development of the business. In order to maintain or adjust the capital structure, the Group may adjust dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The capital structure of the Group consists of net debt, which includes loans, cash and cash equivalents, and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.

Fair value of financial assets and liabilities

21.   Related party transactions

At the year-end, the amount due to Michael Schmainda in respect of a loan provided to Imaging Biometrics LLC amounted to US$75,000 (2021: US$75,000). The loan is interest free and repayable on demand. This balance is included in note 14, trade and other payables.

Non-Executive Chairman, Brett Skelly, is also an employee of GBAC Limited. During the year GBAC Limited charged the Company a total of £30,000 (2021: £30,000) in respect of services provided by Mr Skelly. The balance outstanding at year end was £nil (2021: £nil).