CTEA.L Regulatory News (CTEA)

30 June 2020

Catenae Innovation PLC

("Catenae", the "Company" or the "Group")

Final Results

Catenae Innovation PLC (AIM: CTEA), the AIM quoted provider of digital media and technology, is pleased to announce its full year results for the twelve months ended 30 September 2019.

Financial overview

· The Company had a net loss for the year of £825,230 (2018: £1,106,788). Revenues for the year were £102,549 (2018: £157,218).

· The Company has a statement of financial position at the year-end showing net liabilities of £727,077 (2018: £891,929).

· On 26 March 2020, the Company announced it had agreed a loan facility of £150,000 from Brian Thompson.

Operational overview

· Appointment of Guy Meyer to the Board as Interim Chief Executive Officer

· Resignation of Tony Sanders as Chief Executive Officer and Chairman from the Board

· Appointment of Kevin Everett to Interim Non-Executive Chairman

· Reset of business strategy with operational costs significantly reduced

· Progression of Charlton Athletic Community Trust and FireDoor Guardian Ltd contracts to year two of agreed periods

Guy Meyer, Interim Chief Executive Officer of Catenae, said: "The Board recognises that the Company's 2019 final results are disappointing and reflect the challenging business conditions we faced during the course of last year. We were encouraged by the progression of the Charlton Athletic Community Trust and FireDoor Guardian contracts to year two of the agreed periods.

"With the corporate restructuring now complete, the Company is in a more stable position and is confident in its ability to seek new growth opportunities to enhance shareholder value. We look forward to keeping the market updated with our progress."

Chairman's Statement

Business and performance review

The trading year was challenging as the Company fought for greater market share against the backdrop of slowing market activity caused by the lack of political certainty produced by Brexit. With the under-achievement of significant sales, the Company managed its finances prudently by further streamlining its operations and significantly reduced its cash burn, leading to the stabilisation of the Company through further consolidation.

The past 12 months have seen Charlton Athletic Community Trust move into year two of its three- year contract with the Company and FireDoor Guardian Ltd. progress into its second contract year with the Company.

Board changes

In July 2019 Tony Sanders, the former Chief Executive Officer and Chairman, stepped down as a director of the Company and Guy Meyer, the Business Development Director at the time, assumed the role of Interim Chief Executive Officer. For corporate governance best practice, Kevin Everett was appointed Interim Non-Executive Chairman. Anthony Flynn also joined the Board in July 2019 and resigned in December 2019.

On 24 April 2020, Kevin Everett stepped down from the Board, and was replaced by Brian Thompson as Non-executive Chairman. John Farthing, the Company's Chief Financial Officer, also joined the Board on 24 April 2020.

Financial Overview

The Company had a net loss for the year of £825,230 (2018: £1,106,788). Revenues for the year were £102,549 (2018: £157,218).

The Company has a statement of financial position at the year-end showing net liabilities of £727,077 (2018: £891,929).

On 26 March 2020, the Company announced it had agreed a loan facility of £150,000 from Brian Thompson.

The results are presented under European Union Adopted International Financial Reporting Standards ("EU Adopted IFRS").

Working capital and fund raisings

During the year, the Company issued 1,145,000,000 new ordinary shares for a total gross consideration of £1,245,000, of which £1,122,810 was received in cash and £122,190 to settle existing liabilities.

Post period end, the Company announced various issuance of shares, including

On 31 January 2020 the Company significantly improved its balance sheet through agreeing the settlement of £404,250 of liabilities by converting them into 36,750,000 new ordinary shares in the Company, also on that date the Company also raised £153,000 through the issue of 38,250,000 new ordinary shares.

On 14 May 2020, the Company raised £320,000 through the subscription of 320,000,000 new ordinary shares

On the 21 May 2020 the Company raised £25,000 through the subscription of 6,250,000 new ordinary shares and a further £65,485 of liabilities were converted into 3,341,057 new ordinary shares.

On 10 June 2020, the Company raised £187,500 through the exercise of a warrant over 15,000,000 new ordinary shares and on the same date £35,000 of liabilities were converted into 2,083,333 new ordinary shares.

On 12 June 2020, £47,000 of liabilities were converted in 2,350,000 new of new ordinary shares concurrent with the raising of £703,000 through the subscription of 37,500,000 new ordinary shares.

All of the above actions, along with a significant reduction in operating costs, have given the Company the strongest balance sheet in recent history with approximately £1,046,000 in cash at the bank on 26 June 2020.

COVID-19

Notwithstanding the current market developments in relation to the spread of COVID-19 and its impact on the global economy, the Company has confidence in its business continuity arrangements. At the end of January 2020, the Company had reduced its premises rental contract to zero cost by having all employees working remotely. Currently, where needed, all business meetings are held using video conferencing platforms. The Company sees that for the foreseeable future, this will now be standard operational practice.

Summary

The new Board saw that the stabilisation of the business was critical in getting the Company to a position where it could reset its business strategy. The Company is focused on seeking new opportunities that give shareholders the best chance of a return on their investments.

The Board is pleased that the business has finally reached a point where the legacy challenges that it inherited are now well and truly behind it, giving the Company the bandwidth to focus on the future.

Brian Thompson

Chairman

Statement of comprehensive income for the year ended 30 September 2019

Statement of financial position at 30 September 2019

Statement of cash flows for the year ended 30 September 2019

Statement of changes in equity for the year ended 30 September 2019

The principal activity of Catenae Innovation Plc is the provision of multimedia and technology solutions.

Catenae Innovation Plc is incorporated in the United Kingdom with registration number 04689130. Catenae Innovation Plc is domiciled in the United Kingdom and has its registered office at 27 Old Gloucester Street, London WC1N 2AX. The principal place of business for the Company moved after the year ended to 26-27 Lansdowne Terrace, Gosforth, Newcastle Upon Tyne, NE3 1HP.

Catenae Innovation Plc is a public limited company, limited by shares and its shares are quoted on the AIM market of the London Stock Exchange.

Catenae Innovation Plc's financial statements are presented in Pounds Sterling.

1) Principal accounting policies

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 period presented unless otherwise stated.

Statement of compliance

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs) and International Financial Reporting Interpretations Committee (IFRIC) interpretations (collectively 'IFRSs') as adopted for use in the European Union and as issued by the International Accounting Standards Board and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Going concern

The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's statement and below. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the financial statements. In addition, note 16 to the financial statements includes the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and exposures to credit risk and liquidity risk.

The net liability position as at 30 September 2019, being the Company's financial year-end, was £727,077 (2018: £891,929). Subsequent to the reporting date, the Board has been able to agree funding in the form of further share issues raising £1.4m in cash and clearing £0.6m worth of creditors through share issue.

The Directors note that the World Health Organisation declared a pandemic relating to COVID-19 on 11 March 2020, and social distancing measures were introduced in the UK during March 2020. The Directors have assessed the impact of incorporating additional COVID-19 risk factors in the Going Concern assessment over a period of 18 months after the signing of these financial statements.

Key assumptions considered by management when assessing going concern include adjusting managements best estimate of forecasted performance for factors including the length and extent of current lockdown restrictions, the resulting general business environment, the speed of recovery of trading after lockdown restrictions ease and utilisation of relevant government support schemes. These have been estimated for their respective impacts on the Company's revenues, fixed and variable costs and resultant expected cash flow requirements. 

The Company's forecasts and projections, taking into account reasonable estimate of a possible downturn in trading performance arising from the COVID-19 outbreak, show that the Company has sufficient financial resources for the going concern period. The Company does not believe that the COVID-19 outbreak represents a material uncertainty about the entity's ability to continue as a going concern. Accordingly, the Directors have adopted the going concern basis in preparing these consolidated financial statements.

Revenue recognition

The Company provides software licencing and support services.

The weighting of these and pricing of these services (which drives the revenue recognition) depends on the service level required by the client, and on the commercial imperatives and pricing sensitivities of the client.

The contractual performance obligations will typically be embedded in an agreement with the client.

Where that agreement is detailed, the revenue recognition will follow the allocation of fees and revenues against the completion of the agreed performance milestones in the accounting period.

Where the agreement is not specific, the revenue recognition will be in proportion to the completion of performance milestones in the relevant accounting period against the internal costings prepared in advance for each project.

(i) Software licencing contracts

Revenue from software licencing contracts is recognised when the customer takes possession of and accepts the software licence products which is the point in time when the customer has the ability to direct the use of the product and obtain substantially all of the benefits of the products.

(ii) Ongoing support and maintenance contracts

Revenue from ongoing support and maintenance contracts is recognised over the contractual term when the customer simultaneously receives and consumes the benefits provided by the Company's performance, as the Company performs. The Company recognises contract liabilities for any revenue not yet provided to the customer as of the year end.

Research and development

Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset arising from the Company's development activity is recognised only if all the following conditions are met:

• an asset is created that can be identified (such as a website);

• it is probable that the asset created will generate future economic benefits: and,

• the development cost of the asset can be measured reliably.

Internally-generated intangible assets are amortised on a straight line basis over their useful lives. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

Intangible assets

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their estimated useful economic lives. The amortisation expense is included within the other administrative expenses line of the statement of comprehensive income.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights.

Impairment of non-current assets

For the purposes of assessing impairment, assets are grouped into separately identifiable cash-generating units. At the end of each reporting period, the Company reviews the carrying amounts of its non-current assets, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

An impairment loss is recognised for the amount by which the assets or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use based on an internal discounted cash flow evaluation.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and on demand deposits.

Equity

Equity comprises the following:

• Share capital represents the nominal value of issued ordinary shares and deferred shares.

• Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

• Shares to be issued reserve represents cash received for the purchase of shares yet to be issued at the period end and for creditors who have agreed to convert their debt to shares yet to be issued at the period end.

• Merger reserve represents the excess over nominal value of the fair value of consideration received for equity shares issued on acquisition of subsidiaries, net of expenses of the share issue.

• Share reserve represents shares held in treasury at nominal value following the conclusion of the defaulting shares from October 2016.

• Capital redemption reserve represents the nominal value of shares repurchased by the Company.

• Retained earnings represent retained profits and losses.

Deferred taxation

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

Financial assets

On initial recognition, financial assets are classified as either financial assets at fair value through the statement of profit or loss, held-to-maturity investments, loans and receivables financial assets, or available-for-sale financial assets, as appropriate.

Loans and receivables

The Company classifies all its financial assets as trade and other receivables. The classification depends on the purpose for which the financial assets were acquired.

Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables financial assets. Loans and receivables financial assets are measured at amortised cost using the effective interest method, less any impairment loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

For trade receivables and other receivables due in less than 12 months, the Company applies the simplified approach in calculating Expected Credit Losses ("ECL's"), as permitted by IFRS 9. Therefore, the Company does not track changes in credit risk, but instead, recognises a loss allowance based on the financial asset's lifetime ECL at each reporting date. For any other financial assets carried at amortised cost (which are due in more than 12 months), the ECL is based on the 12-month ECL. The 12-month ECL is the proportion of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months after the reporting date. However, when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company's historical experience and informed credit assessment including forward-looking information.

Financial liabilities

Financial liabilities are recognised when, and only when, the Company becomes a party to the contracts which give rise to them and are classified as financial liabilities at fair value through the profit and loss or loans and payables as appropriate. The Company's loans and payable comprise trade and other payables.

When financial liabilities are recognised initially, they are measured at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method other than those categorised as fair value through income statement.

Fair value through the income statement category comprises financial liabilities that are either held for trading or are designated to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for trading unless they are designated as hedges. There were no financial liabilities classified under this category.

The Company determines the classification of its financial liabilities at initial recognition and re-evaluate the designation at each financial year end.

A financial liability is de-recognised when the obligation under the liability is discharged, cancelled or expires.

When an existing financial liability is replaced by another from the same party on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

Equity instruments

Equity instruments issued by the Company are recorded as the proceeds received, net of direct costs.

Share-based payments

When share options and warrants are awarded, the fair value of the options and warrants at the date of grant is charged to the statement of comprehensive income over the vesting period. Non-market conditions are taken into account by adjusting the number of equity instruments expected to vest at each end of reporting period, so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options and warrants that eventually vest.

Market conditions are factored into the fair value of the options and warrants granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms and conditions of options and warrants are modified before they vest, the increase in fair value of the options and warrants, measured immediately before and after the modification, is also charged to the statement of comprehensive income over the remaining vesting period.

Where equity instruments are granted to persons other than employees, the full cost of services provided is recognised as a current liability and as a charge in the statement of comprehensive income. When shares are issued to settle the obligation, the liability is extinguished and the share issue is reflected in equity as an issue of share capital.

Upon exercise of share options and warrants, the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate share premium.

New and amended Standards and Interpretations adopted by the Company

The following standards and interpretations to published standards have been adopted during the year and have had a significant impact on the company's accounting policies:

IFRS 15 establishes a comprehensive framework for recognising revenue and some costs from contracts with customers. IFRS 15 replaces IAS 18, Revenue, which covered revenue arising from sale of goods and rendering of services, and IAS 11, Construction contracts, which specified the accounting for construction contracts.

IFRS 15 also introduces additional qualitative and quantitative disclosure requirements which aim to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

Under IAS 18, revenue arising from construction contracts and provision of services was recognised over time, whereas revenue from sale of goods was generally recognised at a point in time when the risks and rewards of ownership of the goods had passed to the customers.

Under IFRS 15, revenue is recognised when the customer obtains control of the promised good or service in the contract. This may be at a single point in time or over time. IFRS 15 identifies the following three situations in which control of the promised good or service is regarded as being transferred over time:

A. When the customer simultaneously receives and consumes the benefits provided by the entity's performance, as the entity performs;

B. When the entity's performance creates or enhances an asset (for example work in progress) that the customer controls as the asset is created or enhanced;

C. When the entity's performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.

If the contract terms and the entity's activities do not fall into any of these 3 situations, then under IFRS 15 the entity recognises revenue for the sale of that good or service at a single point in time, being when control has passed. Transfer of risks and rewards of ownership is only one of the indicators that is considered in determining when the transfer of control occurs.

(i) Software licencing contracts (within the scope of IFRS15)

Revenue from software licencing contracts is recognised when the customer takes possession of and accepts the software licence products which is the point in time when the customer has the ability to direct the use of the product and obtain substantially all of the benefits of the products. Revenue for software licencing contracts was recognised over the licence term in the comparative period under IAS18.

(ii) Ongoing support and maintenance contracts (within the scope of IFRS15)

Revenue from ongoing support and maintenance contracts is recognised over the contractual term when the customer simultaneously receives and consumes the benefits provided by the company's performance, as the company performs. Revenue from ongoing support and maintenance contracts was recognised on the same basis in the comparative period under IAS18.

IFRS 9 has not had any material impact on the Company's financial performance or position since adoption.

New and amended Standards and Interpretations issued but not effective for the financial year beginning 1 October 2018

At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective:

IFRS 16 Lease, effective date 1 January 2019 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer ('lessee') and the supplier ('lessor'). IFRS 16 completes the IASB's project to improve the financial reporting of leases and replaces the previous leases Standard, IAS 17 Leases, and related Interpretations.

IFRIC 23 "Uncertainty over Income Tax Treatments", effective date 1 January 2019 clarifies application of recognition and measurement requirements in IAS 12 Income Taxes when there is uncertainty over income tax treatments.

IFRS 17 "Insurance Contracts", effective date 1 January 2021 applies a model that combines a current balance sheet measurement of insurance contracts with recognition of profit over the period that services are provided.

The impact of the above standards on the financial statements is expected to be insignificant. The effect of all other new and amended Standards and Interpretations which are in issue but not yet mandatorily effective is not expected to be material. The Directors will continue to monitor the effect of this and should the effect become material, more detailed notes will be provided.

2) Loss per share

The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The calculation of diluted loss per share is based on the basic loss per share, adjusted to allow for the issue of shares and the post tax effect of dividends and interest, on the assumed conversion of all other dilutive options and other potential ordinary shares.

There were 162,191,116 share options and 1,027,764,797 share warrants outstanding at the year-end (2018: 162,191,116 and 432,764,797). However, the figures for 2019 and 2018 have not been adjusted to reflect conversion of these share options, as the effects would be anti- dilutive.

3) Posting of Accounts

The Reports and Accounts of Catenae Innovation Plc have been posted to shareholders.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014. The person who arranged for release of this announcement on behalf of the Company was Guy Meyer, Interim Chief Executive Officer of the Company.

- Ends -

For further information please contact:

Notes to Editors:

About Catenae Innovation PLC

Catenae Innovation is an AIM quoted provider of digital media and technology services. The Company specialises in Distributed Ledger Technology solutions that solve commercial challenges and create opportunities for its clients. The Company has an experienced IT team of project managers and integrators who have deployed systems across corporate, government and educational sectors.

www.catenaeinnovation.com