Insig Ai Plc Regulatory News (INSG)

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. It forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

9 September 2022

Insig AI plc

("Insig AI" or the "Company")

Final results for the year ended 31 March 2022

and

Posting of the Annual Report and Accounts and Notice of General Meeting

Insig AI plc (AIM:INSG), the data science and machine learning solutions company  and its subsidiaries (the "Group") is pleased to announce its results for the year ended 31 March 2022.

The Group's Annual Report & Accounts, along with the Company's Notice of General Meeting ("GM") will be posted to shareholders later today and will be available shortly on the Group's website: www.insg.ai/investor-relations/. The GM will be held at 9:45 a.m. on 30 September 2022 at 48 Warwick Street, London, W1B 5AW.

Highlights

· Loss for the year after income tax £4.2 million after charging depreciation and amortisation of £2.2 million

· New Funds Launch division in discussions with asset managers with combined AUM of over $1 trillion dollars: Now targeting £4 million per annum run rate of recurring revenues by end of next financial year from this division

· Forecasting significant jump in second half revenues and for following financial year and beyond

· A number of contract wins expected by the end of next month

Insig AI's Chief Executive, Colm McVeigh commented: "Over the last year, we have transformed and repositioned the business converting a strong machine learning AI capability into customer focused solutions which form the basis for asset management partnerships, fintech data science high impact projects, and ESG disclosure diagnostic reporting for the corporate market. We anticipate that this will be reflected in strong and sustainable revenue growth."

For further information, please visit www.insg.ai or contact:  

Chairman's statement

The year under review has been one of considerable change for the Company as we have evolved and refined our technology offerings and sales processes to better position us to take advantage of the considerable opportunities available to us in our addressable markets.

When I was appointed Chairman last August, two separate elements of the business became clear. Firstly, that the Company has developed scalable machine learning technology with a skilled, talented and dedicated workforce. Secondly, that the executive team at the time lacked experience in selling scalable software, being more skilled in delivering consultancy and complex projects. The business required commercial focus and leadership. I am pleased to report that under Colm McVeigh, initially as Chief Commercial Officer and now as CEO, this is what we now have. It is common for young businesses to make missteps. What is important is that swift and decisive action is taken. That is what we have done.

As the asset management industry itself increasingly uses technology to deliver competitive differentiation and adapts to evolving standards, we are able to apply our advanced analytical tools, machine learning innovative data gathering and processing in ways that can benefit our target customer base, offering asset managers competitive advantage as well as efficiencies. We apply our deep domain expertise in ESG, data science, machine learning and cloud data infrastructure so our customers can achieve sustainable investment decisions and high impact operational transformation through AI and data solutions.

We have focused our strategy on securing high quality, substantial recurring revenue, prioritising this over more modest one-off contract wins. Whilst the former has a longer sales cycle, if successfully delivered will, we believe, form the bedrock of a valuable business.

Partnership opportunities with asset managers as they launch new funds across the ESG spectrum provide potential revenues that are of a magnitude several times more than the traditional product licence sale. I am pleased to report tangible success in this regard. In February, we announced a landmark agreement with CarVal Investors, L.P. ("CarVal") to develop and launch a new line of high yield ("HY") and investment grade ("IG") ESG scoring tools to be used by CarVal to optimise HY and/or IG portfolios based on ESG considerations. In April, these scoring tools were successfully delivered. We now expect the coming quarters to begin the payback of our considerable investment. Our share of fees are based on CarVal's assets under management ("AUM") raised in connection with these HY and/or IG focused investment pools. We anticipate that as CarVal secures mandates, our fees will increase commensurably and continue for several years.

In July, CarVal was acquired by Alliance Bernstein which we hope will provide further opportunities.

In March, we announced that we were in early stage discussions with a UK based investment manager with the objective of launching an ESG Global Opportunities Equities Fund. The investment manager undertook a detailed review of our entire fintech and machine learning capability. This has included involvement from not only the Head of Equities but also the CEO. I am pleased to report that feedback from the CEO and investigating team was favourable, that discussions continue and indeed have extended beyond a potential fund launch.

In March, we also reported that we were establishing a New Funds Launch division. In recent weeks, we have commenced early stage discussions with two further investment asset managers, with combined AUM of over $1 trillion dollars. Whilst it is important to manage expectations as to the timelines and pathways required to secure such substantial agreements, the transformation in our ability to engage with and hopefully conclude and deliver such agreements augurs well.

Alongside our desire and focus to conclude agreements with other asset managers, we are now targeting recurring revenues of £4 million per annum from new fund launches. Taking account of lead times and in particular those of establishing a new fund, we believe that this run rate can be achieved before the end of our next financial year. Of course, our longer-term aspirations are to continue growing revenues substantially beyond this, but we need to remain focused on the more immediate hurdles to overcome, not least securing sufficient working capital and retaining the dedicated and skilled team that Colm, Steve and Warren in particular have put together.

Whilst our fintech capability can be applied to markets beyond ESG disclosures, focus is critical. It is important to realise not only our capability but our capacity. A year ago, our discussions with a number of asset managers were met with the requirement to go away with portfolio details and develop a data base of scores and analysis for their portfolios. Then we had just 200 companies in our database. Now, our repository stands at more than 2,000 companies. Using natural language processing machine readable classifiers, we have an accessible and detailed analysis and scoring of every public disclosure made by these companies dating back several years. Source data can be instantly accessed. As a result, now when we demonstrate our offering, we are able to show portfolio constituents there and then.

Why does this matter? It is because it is all too easy for an asset manager to label a fund "ESG compliant" but to do so, without a methodology that drills down to each element of ESG, exposes the asset manager to a lack of evidence of compliance . This can expose not only a business but also its directors to immense reputational and financial damage. In May 2022, the US Securities and Exchange Commission ("SEC") fined investment adviser BNY Mellon. The SEC stated that at the time of investment, 67 out of 185 investments made by a mutual fund advised by BNY Mellon, allegedly lacked any ESG quality review score. That did not prevent BNY Mellon profiting by charging fees to manage these so called ESG compliant investments. In June 2022, the SEC launched an investigation into the asset management division of Goldman Sachs regarding potential "greenwashing."

Regulatory oversight is not confined to the US. In Europe, a combined 50 officials from BaFin, the German regulator, the federal criminal police office and the public prosecutor's office searched the offices of Deutsche Bank and DWS regarding alleged false ESG claims. In June 2022, DWS's Chief Executive resigned.

Whilst there is no shortage of asset managers who are responsible investors, Insig AI is at the "coal face" of this ESG mine(field) of corporate disclosures. The most reliable, comparable and objective evidence based diagnosis of ESG compliance is how a business sets out and explains its ESG credentials. This is our positioning.

Our close interaction with asset managers allows us to differentiate between those investment advisers who regard responsible investing as both a commercial opportunity as well as being a good corporate citizen and those making such claims but lack the tools to do so. We consider that it will still be a number of years until the global regulatory framework is sufficiently advanced to provide comparable disclosure requirements. A generation ago, international accounting standards required developing and extending. ESG adherence will also adapt to evolving standards of what is regarded as good practice. Until then, we believe that our ESG scoring tools and machine learning based analysis provide an essential measure of ESG corporate conduct.

We are also seeing the emergence of progressive asset managers who are creating innovative ESG high impact thematic funds based on selecting companies whose strategies are to substantially improve their ESG outcomes. For such investment managers, our technologies facilitate deep detailed analysis of company ESG issues, optimisation for financial and ESG outcomes when creating the fund, and in-life management for performance. 

The year under review has been transformative. On 10 May 2021, the Company acquired the entire issued share capital of Insight Capital Partners Limited ("Insight"). The business is transitioning from consulting as its sole revenue source to one with a higher quality, recurring value stream, capable of delivering visible and reliable growth over the medium and long term. In the shorter term, this transition has had a disproportionate impact on our results as we have increased our investment in sales and marketing alongside the product development required to secure significant and sustainable revenues.

Financial performance

For the year ended 31 March 2022, we are reporting a total comprehensive loss from all activities of £4.2 million which includes depreciation and amortisation of £2.2 million and a profit from the Group's school sport coaching facility, Sport in Schools Limited ("SSL") of £0.2 million. The Directors are not recommending the payment of a dividend.

Board restructure

During the early part of the year under review, upon the acquisition of Insight, directors David Hillel, David Coldbeck and John Zucker resigned. The Company appointed two new Executive Directors and one new Non-Executive Director. Steve Cracknell, the Chief Executive of Insight was appointed as Chief Executive of the Company and Warren Pearson was appointed as Chief Technology Officer. Peter Rutter was also appointed as a Non-Executive Director. In August 2021, Matthew Farnum-Schneider resigned as Executive Chairman and I was appointed as interim Non-Executive Chairman.

Shortly after my appointment, it was clear that changes were required: most importantly, the need to bring greater commercial focus. Having a strong machine learning capability and scalable technology is a necessary condition for success. However, it is an insufficient condition on its own. Hence in November, Colm McVeigh was appointed to the Board, initially as Chief Commercial Officer and in April 2022, as Chief Executive. This has enabled Colm to lead the business, whilst Steve, as Chief Product Officer, is able to focus on product development and delivery.

In December 2021, Peter Rutter stepped down as a director due to his increasing responsibilities and workload as Head of Equities at Royal London Asset Management. In April 2022, we were pleased to announce that Richard Cooper was appointed to the Company's board of directors as an independent non-executive director and chair of the Audit Committee. Richard has over 25 years' experience as a Chief Financial Officer across both publicly-traded and privately-owned companies in a variety of service industries, including gaming and financial services. He is currently CFO of Equals Group plc, an AIM-quoted fintech company.

Acquisition of FDB Systems Limited

In November, the Company announced that it had entered into a conditional share purchase agreement to acquire the entire issued share capital of FDB Systems Limited ("FDB Systems"). FDB Systems specialises in the collection and structuring of financial market data for investors and other capital markets participants. which is the process of transforming raw data so that it can be more easily and effectively used as an input to machine learning, data science and AI processes.

The initial consideration comprised £0.3 million cash plus the issue of 7,022,471 ordinary shares at 52.7p per share.

FDB Systems has been successfully integrated allowing the Company to offer a complete end-to-end financial data solution to its customers. FDB Systems no longer operates as a stand alone business and all of its activities have been combined with those of Insig AI. The combination has directed greater focus to Insig AI's existing clients as opposed to exclusively the FDB Systems clients acquired.

Pantheon Leisure Plc ("Pantheon")

Insig holds 85.87% of the issued share capital of Pantheon which in turn owns 100% of Sport in Schools Limited ("SSL"). Pantheon as a group made a profit for the year ended 31 March 2022 of £0.1 million (15 months ended 31 March 2021: loss £0.01 million). Pantheon's results are consolidated into the Group accounts.

Sport in Schools Limited ("SSL")

Profit recognised in the year was £0.2 million compared with £0.1 million during the comparable pre-Covid 12 months.

Funding

In March 2022, we announced that the Board had decided to secure a long-term revenue agreement based on AUM at the expense of revenues that could have been recognised in the year under review. Whilst this had a detrimental effect on immediate cash flows, the quantum and longevity of receipts is expected to be considerably more than those foregone short term revenues.

The Company ended its financial year on 31 March 2022 with net cash of £0.5 million. In March 2022, the Company announced that I was providing an unsecured convertible loan facility of £1.0 million. The key terms that the independent directors considered to be fair and reasonable were conversion at the higher of 35p per share and the prevailing share price at the time of conversion and a coupon of 5 per cent. per annum on funds drawn down. The first draw down took place in early May. In June, the Company announced that it had been approached by David Kyte, a long term shareholder with an offer of funding of £0.5 million, on the same terms as my own facility. As at 8 September 2022, Group cash was approximately £0.12 million and £0.31 million remained available for draw down.

The Board recognises that further working capital is required to support the Group over both the short and potentially medium term. The Board notes that despite no adverse news announcements, since the end of May, the share price has halved. Therefore, the Board believes that it would not be in the best interests of all stakeholders to carry out an equity raise in the very short term. Instead, the Board is considering a proposal with regard to a new convertible loan facility from myself of £0.75 million. The facility terms include a conversion price of 35p, which represents a premium of 62 per cent. to the current share price, interest of 5 per cent. per annum on amounts drawn down. The facility would also be secured on the Group's shareholding in Sport in Schools Limited. Based upon the board's cash flow projections, which includes the anticipated receipt of a substantial R&D Tax Credit, this facility is expected to provide sufficient working capital through to Q2 (calendar) 2023, by which time, the Company will hopefully have secured and announced substantial contracts providing the necessary visibility of the Company's sales growth trajectory. 

Prospects

The corrective action we took is now expected to convert into a number of contract wins: these are anticipated to close before the end of October. Today, we have set out our expectations for revenue from asset management partnerships: a run rate of £4 million per annum before the end of our next financial year. We are also now receiving positive feedback from the corporate market, with our ESG proprietary scoring and comparison capabilities assisting disclosure reporting requirements. Of greater significance will be our ability to sell bespoke data science fintech projects which can develop into long term partnerships. We therefore are expecting to report a significant jump up in our second half revenues and for the following financial year and beyond. Despite the current unhelpful macro-economic background, the scale of our opportunity combined with the solutions that we provide, gives us confidence for the future.

Richard Bernstein

Chairman

8 September 2022

Consolidated statement of financial position

The Company has elected to take the exemption under Section 408 of the Companies Act 2006 from presenting the Parent Company Income Statement and Statement of Comprehensive Income. The profit for the Company for the year ended 31 March 2022 was £269,000 (15 months ended 31 March 2021: loss of £1,050,000).

The Financial Statements were approved and authorised for issue by the Board of Directors on 8 September 2022 and were signed on its behalf by:

Colm McVeighChief Executive Officer

Consolidated Income statement

Consolidated statement of changes in equity

Major Non-Cash Transactions:

On 10 May 2021, 44,819,161 new ordinary shares were issued at 59 pence per share, as consideration shares to the owners of Insig Partners Limited for total consideration of £26,448,000.

On 10 May 2021, convertible loan notes issued by the Company were converted, resulting in 2,000,000 new ordinary shares issued at 25 pence per share for a total consideration of £500,000.

1. General information

Insig AI plc is a public company limited by shares, domiciled and incorporated in England and Wales and its activities are as described in the strategic report on pages 7 to 12.

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

2. Summary of significant accounting policies

The principal Accounting Policies applied in the preparation of these Consolidated Financial Statements are set out below. These Policies have been consistently applied to all the periods presented, unless otherwise stated.

2.1. Basis of preparation of Financial Statements

The Group and Company Financial Statements have been prepared in accordance with UK-adopted international accounting standards. The Group and Company Financial Statements have also been prepared under the historical cost convention, except as modified for assets and liabilities recognised at fair value on an asset acquisition.

The Financial Statements are presented in Pound Sterling rounded to the nearest pound.

The preparation of Financial Statements in conformity with 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 Group and Company Financial Statements are disclosed in Note 4.

2.2. New and amended standards

(i) New and amended standards adopted by the Group and Company

The International Accounting Standards Board (IASB) issued various amendments and revisions to International Financial Reporting Standards and IFRIC interpretations. The amendments and revisions were applicable for the period ended 31 March 2022 but did not result in any material changes to the financial statements of the Group or Company.

Of the other IFRS and IFRIC amendments, none are expected to have a material effect on future Group or Company Financial Statements. 

(ii) New standards, amendments and interpretations in issue but not yet effective or not yet endorsed and not early adopted

Standards, amendments and interpretations that are not yet effective and have not been early adopted are as follows:

None are expected to have a material effect on the Group or Company Financial Statements.

2.3. Basis of Consolidation

The Consolidated Financial Statements consolidate the financial statements of the Company and its subsidiaries made up to 31 March 2022. Subsidiaries are entities over which the Group has control. Control is achieved when 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.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

· The contractual arrangement with the other vote holders of the investee;

· Rights arising from other contractual arrangements; and

· The Group's voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the period are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Investments in subsidiaries are accounted for at cost less impairment within the parent company financial statements. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by other members of the Group. All significant intercompany transactions and balances between Group enterprises are eliminated on consolidation.

2.4. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and represent amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. Under IFRS 15 there is a five-step approach to revenue recognition which is adopted across all revenue streams. The process is: 

· Step 1: Identify the contract(s) with a customer; 

· Step 2: Identify the performance obligations in the contract; 

· Step 3: Determine the transaction price; 

· Step 4: Allocate the transaction price to the performance obligations in the contract; and 

· Step 5: Recognise revenue as and when the entity satisfies the performance obligation.

The Group has two types of revenue streams being machine learning and data services and sports activities.

Machine learning and Data services revenue comprises of:

1. ESG Research Tool

Charged on a licence fee basis and the fees are recognised once the services have been provided to the client over the period of time the work is conducted.

2. Machine Readable Data

Charged on a licence fee basis and the fees are recognised once the services have been provided to the client over the period of time the work is conducted.

3. Bespoke Data Science Solutions

Charged on a project basis and includes work related to data migration, design fees, communication fees and technological services. The fees are recognised once the services have been provided to the client over the period of time the work is conducted. 

Sports activities revenue is recognised once performance obligations have been satisfied and work is completed with payment due in advance of the performance obligations. Under the Group's standard contract terms, customers may be offered refunds for cancellation of sports and leisure activities. It is considered highly probable that a significant reversal in the revenue recognised will not occur given the consistent low level of refunds in prior years.

2.5. Going concern

The preparation of financial statements requires an assessment on the validity of the going concern assumption. The Directors have reviewed projections for a period of at least 12 months from the date of approval of the financial statements as well as potential opportunities. Any potential short falls in funding have been identified and the steps to which Directors are able to mitigate such scenarios and/or defer or curtail discretionary expenditures should these be required have been considered.

In approving the financial statements, the Board have recognised that these circumstances create a level of uncertainty. However, having made enquiries and considered the uncertainties outlined above, the Directors have a reasonable expectation that the Group will continue to be able to raise finance as required over this period to enable it to continue in operation and existence for the foreseeable future. Accordingly, the Board believes it is appropriate to adopt the going concern basis in the preparation of the financial statements.

2.6. Foreign currencies

(a) Functional and presentation currency

Items included in the Financial Statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the 'functional currency'). The functional currency of the UK parent entity and UK subsidiaries is Pounds Sterling, The Financial Statements are presented in Pounds Sterling which is the Company's functional and Group's presentational currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where such items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

2.7. Intangible assets

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

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

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

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

Development costs are expensed in arriving at the operating profit or loss for the year unless the Directors are satisfied as to the technical, commercial and financial viability of individual project. In this situation, the expenditure is recognised as an asset and is reviewed for impairment on an annual basis. Amortisation is provided on all development costs to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight line basis at the following annual rates:

Technology assets - 7 years straight line

Customer relationships - 13 years straight line

Databases - 7 years straight line

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

2.8. Investments in subsidiaries

Investments in Group undertakings are stated at cost, which is the fair value of the consideration paid, less any impairment provision.

2.9. Property, plant and equipment

Property, Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided on all property, plant and equipment to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight line basis at the following annual rates:

Office Equipment - 25% and 10% straight line

Plant and Equipment - 25% and 10% straight line

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.

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

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. If an impairment review is conducted following an indicator of impairment, assets which are not able to be assessed for impairment individually are assessed in combination with other assets within a cash generating unit.

Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised within 'Other (losses)/gains' in the Income Statement.

2.10. Impairment of non-financial assets

Assets that have an indefinite useful life, for example, intangible assets not ready to use, and goodwill, are not subject to amortisation and are tested annually for impairment. Property, plant and equipment is 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 to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

2.11. Financial Instruments

Financial assets and financial liabilities are recognised in the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are only offset and the net amount reported in the consolidated statement of financial position and income statement when there is a currently enforceable legal right to offset the recognized amounts and the Group intends to settle on a net basis or realise the asset and liability simultaneously.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Debt instruments are classified as financial assets measured at fair value through other comprehensive income where the financial assets are held within the company's business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt instrument measured at fair value through other comprehensive income is recognised initially at fair value plus transaction costs directly attributable to the asset. After initial recognition, each asset is measured at fair value, with changes in fair value included in other comprehensive income. Accumulated gains or losses recognised through other comprehensive income are directly transferred to profit or loss when the debt instrument is recognised.

Financial assets

All Group's recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.

Classification of financial assets

Financial assets that meet the following conditions are measured subsequently at amortised cost using the effective interest rate method:

• the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount  outstanding

The company classifies the following financial assets at fair value through profit or loss (FVPL):

•  debt instruments that do not qualify for measurement at either amortised cost (see above) or FVOCI;

•  equity investments that are held for trading; and 

•  equity investments for which the entity has not elected to recognised fair value gains and losses through OCI.

The Group does not hold any financial assets that meet conditions for subsequent recognition at fair value through other comprehensive income ("FVTOCI").

The Group recognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. 

Financial liabilities

The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its characteristics. All purchases of financial liabilities are recorded on trade date, being the date on which the Group becomes party to the contractual requirements of the financial liability. Unless otherwise indicated the carrying amounts of the Group's financial liabilities approximate to their fair values.

The Group's financial liabilities consist of financial liabilities measured at amortised cost and financial liabilities at fair value through profit or loss.

Financial liabilities measured subsequently at amortised cost

Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination, (ii) held for trading, or (iii) designated as at FVTPL, are measured subsequently at amortised cost using the effective interest method. The Group's financial liabilities measured at amortised cost comprise convertible loan notes, trade and other payables, and accruals.

The effective interest method is a method of calculating the amortised cost of a financial asset/liability and of allocating interest income/expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash receipts/payments through the expected life of the financial asset/liability or, where appropriate, a shorter period.

A financial liability (in whole or in part) is recognised when the Group has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the income statement.

•  inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (level 2); and

• inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

2.12. Leases

The Group leases certain property, plant and equipment.

The lease liability is initially measured at the present value of the lease payments that are not paid. Lease payments generally include fixed payments less any lease incentives receivable. The lease liability is discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The Group estimates the incremental borrowing rate based on the lease term, collateral assumptions, and the economic environment in which the lease is denominated. The lease liability is subsequently measured at amortized cost using the effective interest method. The lease liability is remeasured when the expected lease payments change as a result of new assessments of contractual options and residual value guarantees.

The right-of-use asset is recognised at the present value of the liability at the commencement date of the lease less any incentives received from the lessor. Added to the right-of-use asset are initial direct costs, payments made before the commencement date, and estimated restoration costs. The right-of-use asset is subsequently depreciated on a straight-line basis from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in lease liabilities, split between current and non-current depending on when the liabilities are due. The interest element of the finance cost is charged to the Statement of Profit and Loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Assets obtained under finance leases are depreciated over their useful lives. The lease liabilities are shown in Note 18.

Exemptions are applied for short life leases and low value assets, with payment made under operating leases charged to the Consolidated Statement of Comprehensive Income on a straight-line basis of the period of the lease.

2.13. Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand.

2.14. Equity

Equity comprises the following:

· "Share capital" represents the nominal value of the Ordinary shares;

· "Share Premium" represents consideration less nominal value of issued shares and costs directly attributable to the issue of new shares;

· "Other reserves" represents the merger reserve, revaluation reserve and share option reserve where;

o  "Merger reserve" represents the difference between the fair value of an acquisition and the nominal value of the shares allotted in a share exchange;

o  "Revaluation reserve" represents a non-distributable reserve arising on the acquisition of Insig Partners Limited;

o  "Share option reserve" represents share options awarded by the group;

· "Retained earnings" represents retained losses.

2.15. Share capital and share premium

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity, as a deduction, net of tax, from the proceeds provided there is sufficient premium available. Should sufficient premium not be available placing costs are recognised in the Income Statement.

2.16. Share based payments

The Group operates a number of equity-settled, share-based schemes, under which the Group receives services from employees or third party suppliers as consideration for equity instruments (options and warrants) of the Group. The fair value of the third party suppliers' services received in exchange for the grant of the options is recognised as an expense in the Income Statement or charged to equity depending on the nature of the service provided. The value of the employee services received is expensed in the Income Statement and its value is determined by reference to the fair value of the options granted:

· including any market performance conditions;

· 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).

The fair value of the share options and warrants are determined using the Black Scholes valuation model.

Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense or charge is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Income Statement or equity as appropriate, with a corresponding adjustment to a separate reserve in equity.

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

2.17. Taxation

No current tax is yet payable in view of the losses to date.

Deferred tax is recognised for using the liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets (including those arising from investments in subsidiaries), are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be used.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Deferred tax is calculated at the tax rates (and laws) that have been enacted or substantively enacted by the statement of financial position date and are expected to apply to the period when the deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets and liabilities are not discounted.

3. Financial risk management

3.1. Financial risk factors

The Group's activities expose it to a variety of financial risks: market 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. None of these risks are hedged.

Risk management is carried out by the management team under policies approved by the Board of Directors.

Market risk

The Group is exposed to market risk, primarily relating to interest rate and foreign exchange. The Group has not sensitised the figures for fluctuations in interest rates and foreign exchange as the Directors are of the opinion that these fluctuations would not have a significant impact on the Financial Statements at the present time. The Directors will continue to assess the effect of movements in market risks on the Group's financial operations and initiate suitable risk management measures where necessary.

Credit risk

Credit risk arises from cash and cash equivalents as well as loans to subsidiaries and outstanding receivables. Management does not expect any losses from non-performance of these receivables. The amount of exposure to any individual counter party is subject to a limit, which is assessed by the Board.

The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk.

Impairment provisions for loans to subsidiaries are recognised based on a forward-looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. At year end it was assessed credit risk was low due to future profits forecast therefore no provision was required.

For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised. At year end all receivables were less than 60 day outstanding and deemed highly likely to be received therefore no provision was required.

Liquidity risk

In keeping with similar sized groups, the Group's continued future operations depend on the ability to raise sufficient working capital through the issue of equity share capital or debt. The Directors are reasonably confident that adequate funding will be forthcoming with which to finance operations. Controls over expenditure are carefully managed.

With exception to deferred taxation, financial liabilities are all due within one year.

3.2. Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, to enable the Group to continue its activities, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the issue of shares or sell assets to reduce debts.

The Group defines capital based on the total equity of the Company. The Group monitors its level of cash resources available against future activities and may issue new shares in order to raise further funds from time to time.

4. Critical accounting estimates and judgements

The preparation of the Financial Statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the period.

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

Items subject to such 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 years, include but are not limited to:

Impairment of goodwill

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

Details of the carrying value of goodwill at the period end and the impairment review assessment are given in Note 13.

Identification of intangible assets

The Company follows the guidance of IAS 36 to determine when impairment indicators exist for its intangible assets. When impairment indicators exist, the Company is required to make a formal estimate of the recoverable amount of its intangible assets.This determination requires significant judgement. In making this judgement, management evaluates external and internal factors, such as significant adverse changes in the technological market, economic or legal environment in which the Company operates as well as the results of its ongoing development programs. Management also considers the carrying amount of the Company's net assets in relation to its market capitalisation as a key indicator.

Share based payment transactions

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

The valuation of these options and warrants involves making a number of critical estimates relating to price volatility, future dividend yields, expected life of the options and forfeiture rates. These assumptions have been described in more detail in Note 22.

Deferred tax asset

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

Intangibles

The allocation of the value of the excess consideration less the net assets acquired are identified as intangible assets arising as part of a business combination; these require judgement in respect of the separately identifiable intangible assets that have been acquired. These judgements are based upon the directors' opinion of the identifiable assets from which economic benefits are derived.

5. Segment information

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

During the year, the Group's trading segments were machine learning and data services representing revenue of £374,000 and its sports and leisure activities, comprising sports tuition at schools representing its revenue of £1,334,000 (15 months to 31 March 2021: £1,043,000). All revenue was generated in the UK. The prior period had one segment which was sports and leisure activities, therefore no comparative has been provided.

6. Administrative expenses

Services provided by the Company's auditor and its associates

During the year, the Group (including overseas subsidiaries) obtained the following services from the Company's auditors and its associates:

7. Other gain/(losses)

8. Other operating income

9. Finance income/costs

10. Exceptional Items

11. Property, plant and equipment

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

12. Right of use Assets

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

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

13. Intangible assets

Intangible assets comprise goodwill and development costs.

· Goodwill of £60,000 included above relates to the acquisition of Pantheon Leisure Plc which is included at its deemed cost on first time application of IFRS.

· Goodwill of £19,041,000 included above relates to the acquisition of Insig Partners Limited (see Note 30)

· Goodwill of £2,520,000 included above relates to the acquisition of Insig Data (formerly FDB Systems Limited) (see Note 30)

Development costs are predominantly capitalised staff costs associated with enhancements to the technology being developed by Insig Partners Limited. The Group's technology, customer relationships and database technology are acquired from the acquisitions undertaken during the period. During the year a purchase price allocation exercise relating to the purchase of Insig Partners Limited and Insig Data Limited by the Company was completed as per the requirements of IFRS 3 which valued the Group's technology, customer relationships and database technology at £16,486,000.

Goodwill is recognised when a business combination does not generate cash flows independently of other assets or groups of assets. As a result, the recoverable amount, being the value in use, is determined at a cash-generating unit (CGU) level. These CGUs represent the smallest identifiable group of assets that generate cash flows. Our CGUs are deemed to be the assets within the operating units. Each CGU to which goodwill is allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes.

The total intangible value in use for each CGU, incorporating goodwill and the intangible asset value, is determined using discounted cash flow projections derived from the total historical revenue profile of each identifiable CGU. The assumptions which are applied to each CGU including the useful economic life are set out in Note 2.7.

The key assumptions for the value in use calculations are those regarding growth rates particularly in respect of the growth in revenue and discount rates. The discount rate is reviewed annually to take into account the current market assessment of the time value of money and the risks specific to the cash generating units and rates used by comparable companies. The discount rate used to calculate the value in use is 20%. The long term growth rate used for the terminal value calculation was 2%.

An impairment review of the Group's development costs, technology, customer relationships and database technology is carried out on an annual basis.  The recoverable amounts of the cash-generating units are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding forecast revenues and operating costs. Management have considered the following elements:

(i) Based on current assessments of the Insig Partners and Insig Data activities made by the Directors they consider that revenues will grow in 2023 and exponentially grow from 2024-2027;

(ii) Operational costs are monitored and controlled

Further, given both acquisitions took place during the financial year at arms length, it is deemed reasonable there has been no diminution in the carrying values. Following their assessment, the Directors concluded that no impairment charge was required at 31 March 2022.

14. Investments in subsidiary undertakings

Investments in Group undertakings are stated at cost, which is the fair value of the consideration paid, less any impairment provision. Please refer to Note 30 for details of the investments in Insig Partners Limited and Insig Data Limited.

The Company has provided a guarantee in respect of the outstanding liabilities of the subsidiary companies listed below in accordance with Section 479A - 479C of the Companies Act 2006 as these subsidiary companies of the Group are exempt from the requirements of the Companies Act 2006 relating to the audit of the accounts by virtue of Section 479A of this Act.

Subsidiaries

The following companies were subsidiaries at the balance sheet date and the results and year end position of these companies have been included in these consolidated financial statements.

* Shares held indirectly through Westside Sports Limited

** Shares held indirectly through Pantheon Leisure Plc

*** Shares held indirectly by Insig Partners Limited

15. Trade and other receivables

The ageing of trade receivables is as follows:

16. Cash and cash equivalents

17. Trade and other payables

The ageing of trade and other payables is as follows:

18. Loan and borrowings

Bank loan

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

This loan was fully repaid during the year.

Convertible loan notes

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

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

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