Iq-ai Ltd Regulatory News (IQAI)

IQ-AI Ltd

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

Publication of Annual Report

The Board of IQ-AI Ltd are pleased to announce that the Company's audited financial statements for the year ended 31 December 2018 have been published.

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

--ENDS--

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

For further information, please contact:

The Company's financial statements have been extracted, without material change, from the Company's Annual Report and reproduced without material change:

Chief Executive Officer's Statement

Annual Report and Financial Statements

For the year ended 31 December 2018

To the members of IQ-AI Limited

I am pleased to present the Company's results for the twelve months ended 31 December 2018.

IQ-AI's vision is to become a leader in the field of medical imaging diagnostics. The Company currently comprises Stone Checker Software Limited ("StoneChecker"), and since March 2018, Imaging Biometrics LLC ("IB") suite of advanced imaging diagnostic software products.

StoneChecker is a predictive diagnostic software product that assists urologists in establishing the likelihood that a kidney stone will disintegrate under vibration induced by sound wave energy (lithotripsy). This predictive capability becomes important in determining whether to subject a patient to multiple rounds of lithotripsy or send them straight to surgery for stone removal. StoneChecker offers possible economic benefits by avoiding unnecessary lithotripsy procedures and reducing the time a patient may spend in pain awaiting stone removal.

IB is an established provider of advanced imaging software products used by leading brain cancer institutions in the USA, including The Mayo Clinic (AZ), Barrow Neurological Institute and Stanford University Medical Centre. More recently, IB have begun to assist in the translation of novel imaging technologies into commercialised products. One application aids in the detection and staging of chronic liver disease and another leverages deep learning algorithms for breast cancer screening. 

IQ-AI's objectives in 2018 were to develop the existing suite of products in preparation for their introduction to wider markets in 2019.

Operational report - David Smith

I joined the Company as Chief Executive Officer of the two operating subsidiaries, Imaging Biometrics LLC and Stone Checker Software Limited, in August 2018. During the year, new products have been introduced and new appointments were made in the fields of Artificial Intelligence and Deep Learning. These appointments increase our product development and marketing capacity, and we are poised for an exciting 2019.

The Company is in the final stages of securing FDA approval for the StoneChecker software product and we hope to announce marketing clearance shortly, which would give the Company an additional and important revenue stream in the US during the 2nd half of 2019.

The Company will focus on four areas of revenue development in 2019:

1. Sales development of existing products

During 2018, the Company sold or trialled software at many of the United States' most well-regarded hospitals and specialist clinics. IB Neuro remains the only 'biopsy confirmed' neuro perfusion software available on the market. Publicising this to all potential users is a key element of the Company's 2019 plans. We also intend to explore collaborative business relationships where our sales reach can be expanded by encouraging other companies' sales teams to promote our product for financial reward. This work is already underway with a series of resellers such as aycan Medical Systems, QMENTA, Blackford and Medimsight.

Subsequent to the year end, the Company sold an instance of the IB Neuro product suite to Dr Marion Smits of Erasmus University, Rotterdam. Dr Smits, one of the world's leading researchers in the field of neuroradiology, is Professor of Applied Physiological Imaging and Neuroradiologist at Erasmus MC, Vice President of the European Society for Magnetic Resonance in Medicine and Biology, and Chair of Neuroradiology of the Radiological Society of The Netherlands.

Dr Smits stated, "We appreciate IB Neuro's ability to accurately create quantitative perfusion maps for detecting regions of aggressive tumour and for longitudinal assessment of treatment response which will ultimately influence how we diagnose, track and treat brain tumour patients." Dr Smits added, "It is critical to know if a change in an imaging biomarker accurately represents a tumour's biological background and whether changes in the tumour's appearance are due to tumour growth or response to treatment. Without it, surgeons, radiotherapists and oncologists may require more tests or require more time to follow-up on the patients and to know, with confidence, that a treatment protocol is effective."

Dr Smits' comments echo those made by other leaders in the field of neuroradiology.

The Company sold and installed its first StoneChecker software in South Korea through its distributor, demonstrating that the remote sale and servicing of the product is a viable business model. The Company will make international expansion a key objective for 2019.

In the first quarter of 2019 the Company completed its first sale of StoneChecker in the United Kingdom to the National Health Service.

2. Development of new products

In 2019, the Company expects to make significant progress in developing new products 'in-house' and through selective revenue generating corporate collaborations.

· Fee per Click Service

The capital cost of the Company's products can often exceed $30,000 per installation. This amount typically requires approval on annual capital budgeting forecasts which substantially lengthens the overall sales cycle. To make IB's products more economically accessible and to promote immediate widespread distribution, the Company is developing a "Fee per Click" service model. This service application would leverage the same proven code libraries as IB's products and would reside on an external server networked to transmit datasets to/from a site's IT infrastructure. The application would anonymize and encrypt datasets to comply with patient privacy laws and process the data without any manual intervention. Diagnostic results would be available to the clinician within seconds. Each time an IB core algorithm is executed, an associated fee would be incurred.

· IB Server

IB Server is an application that provides immediate access to IB's clinically-validated processing algorithms available in IB products: IB Neuro, IB Diffusion, IB DCE, and IB Delta Suite (Delta T1 maps). The automated generation of IB's quantitative parameter maps eliminates the post-processing steps frequently performed by neuroradiologists or MR technologists.

IB Server can be installed on any existing computer platform and can be readily integrated within a site's network. Once integrated, relevant studies are automatically detected, the appropriate IB software algorithm is executed, and the processed parameter maps and QA information are sent to the resident PACS for viewing and interpretation.

Analogous to the "Fee per Click" model, the Company has developed an application that avoids sending Protected Health Information ("PHI") offsite. The IB Server has been developed in recognition that many hospitals need to be confident that the anonymisation procedure is effective and sufficiently protective for patients. IB Server is a subscription model of the Fee per Click Service and offers the same automated processing options.

Customers identify the volume of patient studies and the algorithms they intend to apply using IB Server. Based on those projections, a subscription rate is negotiated, the application is configured to output the desired information, and a corresponding license is issued. This option ensures the PHI remains within a site's IT infrastructure while all processing is automatically routed to and from the application for instantaneous results. The software is continuously updated by IB to ensure the hospital is using the latest version and patients get the benefit of IB's quantitative results. The IB server is currently being tested at a major US neurological institution with one other beta site currently being deployed.

· Artificial Intelligence ("AI")

IB has recently expanded its development team with software engineers experienced in artificial intelligence ("AI"). The Company intends to strategically incorporate AI to further enhance and automate its fractional tumour burden ("FTB") mapping for brain tumour treatment monitoring. IB's FTB maps distinguishes viable brain tumour from treatment associated changes. Currently, FTB map generation involves the manual identification of contrast enhancing regions of interest (ROI). While this step is greatly simplified using IB's Delta T1 maps, it does require knowledge of brain anatomy and may take in excess of 15 minutes to complete, depending on the invasiveness of the tumour. Leveraging AI to automate this step will provide clinicians with a fully-automated process of generating a biologically-based quantitative imaging biomarker, and a validated measure of tumour burden, on a per-voxel basis. In addition, the Company will leverage AI to enhance current intermediate steps including automated brain masking and segmentation capabilities.

· PC-based version of IB Plugins

Designed as platform independent plugins, IB's products were initially integrated into the Apple Mac Computer based DICOM viewer, OsiriX. The plugin approach allowed IB to align and focus resources on the development of niche and sophisticated algorithms and not on the development of commonly available applications. While OsiriX remains a proven and extremely robust host environment for IB, it is not available on common Microsoft Windows Corporation PC platforms. This presented a sales impediment as some sites were reluctant to support an Apple Mac Computer-based platform Software in their PC-dominated environments. In 2018, IB completed the integration of its products into the PC-based DICOM platform ClearCanvas (Synaptive Medical, Toronto, CA). Once validation is complete, the release of IB Software within the ClearCanvas environment will give institutions a PC-based option to access and leverage IB's quantitative biomarkers.

· Gadolinium free imaging

Gadolinium is a rare earth metal which has paramagnetic properties. When used in conjunction with Magnetic Resonance Imaging ("MRI"), it can enhance the visualisation of soft tissues such as those found in the brain. Compounds formulated using gadolinium are the primary contrast agents used in radiology. The clinical literature is replete with articles highlighting Nephrogenic Systemic Fibrosis (NSF) and recent findings about gadolinium deposition in the brain.

While concerns about the long-term toxicity effects of gadolinium-based contrast agents ("GBCA") are unknown and more research is needed to substantiate any link to health issues, radiologists would like to move away from using GBCAs if a suitable alternative could be offered. This would eliminate any potential risks of using GBCAs, streamline clinical workflows and save significant material expense. 

IB has filed a patent for gadolinium free imaging. Using deep learning networks, analogous images can be generated from anatomical and functional images acquired without any exogenous contrast material. Though the development and regulatory timelines are significant, the Company already has technologies that reduce the use of GBCAs. Specifically, the Company's patented Simultaneous Perfusion Imaging with Consecutive Echoes ("SPICE") technology eliminates one (preload) dose of the required two administrations of GBCA during image acquisition for brain tumour perfusion analysis. This patent has the additional benefit of providing both dynamic susceptibility ("DSC") and dynamic contrast enhanced ("DCE") parameter maps using a single MR acquisition. Both DSC and DCE imaging provide biological and physiological information about the brain.

In addition, one of IB's founders, Kathleen Schmainda PhD, was the lead author for a study that appeared in the American Journal of Neuro Radiology in April 2019, "Moving Towards a Consensus DSC-MRI Protocol: Validation of A Low Flip Angle Single Dose Option as a Reference Standard for Brain Tumours". This study identified that using IB Software to process data acquired on 3T MRI systems configured with low-flip angle settings produced output comparable to the accepted double contrast dose method. Thus, the preload dose of contrast can be eliminated without compromising image quality. Moreover, the output was further enhanced when IB's exclusive machine-learned calibration technology was applied. The results of this study were presented at the 2018 ASNR Meeting and, more importantly, offers clinicians immediate access to a lower GBCA alternative.

While these two approaches offer instant reductions to GBCA use and improved workflows, the Company is committed to ultimately introducing a GBCA free product.

Outlook

The Company's products are now sold in the USA, UK, The Netherlands, Switzerland, Germany, Greece and South Korea. Our objectives for 2019 are to expand sales and continue to develop new products which utilise areas of our expertise where we believe we have scientific and technological leadership.

As a result of product development and new users, sales have continued to accelerate in 2019. We expect sales for the full year 2019 to more than double those for 2018. The future looks to be an exciting place for IQ-AI.

Trevor BrownChief Executive Officer

Strategic Report

Annual Report and Financial Statements

For the year ended 31 December 2018

The Directors present their strategic report on the group for the year ended 31 December 2018.

Principal activities

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

Strategy

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

Event since the year end

In March 2019, the Company issued £268,500 in nominal amounts of 6% unsecured convertible loan notes, convertible into 13,425,000 ordinary shares of 0.1p each in the Company ("Ordinary Shares") at a price of 2 pence per share ("CLNs"). The funds raised as a result of the issue of the CLNs will be used to provide additional working capital for the Company.

Results for the 2018 financial period

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

In summary:

· The net interest cost for the Group for the period was £15,662 (2017: £23,087)

· Group revenue for the year was £164,971 (2017: £nil)

· Administrative expenses from continuing operations increased to £878,648 (2017: £257,725)

· Group loss after tax from continuing operations was £764,080 (2017: £280,812)

· Taxation charge was £nil for the period (2017: £nil)

· Basic and diluted loss per share from continuing operations was 0.82p (2017: 0.56p loss)

· As at 31 December 2018, the Group had cash and cash equivalents of £28,783 (2017: £386,954)

· The Group's net assets increased to £762,884 (2017: £589,839)

· Intangible assets, comprising intellectual property, imaging and diagnostic software and goodwill, increased to £922,543 (2017: £294,595)

Key performance indicators

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

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

Future developments

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

Principal risks and uncertainties

This section describes the principal risk factors that the Directors believe could materially affect the Group Risk and Performance. Information relating to financial risk management is included in note 22 to the financial statements.

Liquidity risk

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

The Board reviews cash flow projections at periodic intervals during the year as well as information regarding cash balances. At the balance sheet date, the Group had cash balances of £28,783 (2017: £386,954). The financial forecasts indicate that the Group is expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances but may need additional borrowing facilities to do so.

Interest rate risk

The Group has Convertible Loan Notes totalling £145,033, including accrued interest, outstanding as at 31 December 2018 (2017: £368,933). The Notes accrue interest at a fixed rate of 6.75%p.a. and, as such, carries a limited interest rate risk. 

Cash resources are held in current, floating rate accounts.

Market risk

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

Risk Table

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

Going concern

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

The financial position of the Group, its cash flows and liquidity position are described in this business review. In addition, note 22 to the financial statements include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposure to credit risk and liquidity risk. As highlighted in note 22, the Group meets its day to day working capital requirements through its revenue generating cash flows, discrete fund raises and the issue of convertible loan notes.

The Directors have prepared Group forecasts and projections, which show that the Group has a reasonable expectation of maintaining sufficient working capital to enable the Group to meet its liabilities as they fall due for the foreseeable future, being a period of not less than 12 months from the date of approval of this report. The Chief Executive Officer has provided a letter of financial support to the Group to make sufficient funds available, if required, to ensure the Group can meet its obligations over the going concern period.

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

This report was approved by the board of directors on 30 April 2019 and signed on behalf of the board by:

Trevor Brown

Director

Directors' and Corporate Governance Report

Annual Report and Financial Statements

For the year ended 31 December 2018

The Directors present their annual report and audited financial statements for the year ended 31 December 2018.

Incorporation

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

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

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

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

Full details of the movement in share capital are given in note 16 to the financial statements.

Results and dividends

The audited financial statements for the year for the Group and Company are set out on pages 24 to 46.

No dividends will be distributed for the year ended 31 December 2018 (2017: £nil).

Directors

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

Biographical details of the Directors are given on page 17.

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

Dr Qu Li resigns at the AGM and, being eligible, offers herself for re-election.

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

Substantial shareholdings

As at 13 March 2019, other than the Directors' holdings, the Company has been notified, in accordance with the Disclosure Guidance and Transparency Rules, of the following interests in 3% or more of its issued share capital:

Capital expenditure

During the year, the Group did not invest in any capital expenditure (2017: £nil). The Group made an investment in product development during the period of £62,147 (2017: £46,716).

During the year, the Company acquired 100% of the issued share capital of Imaging Biometrics LLC by the issue of 8 million shares in IQ-AI Limited at a price of 3p per ordinary share.

The Group held no bank debt at 31 December 2018 (2017: £nil). Currently, the Group retains clearing facilities with the bank.

Share capital

Details of the authorised and issued share capital, together with details of the movements in the Company's issued share capital during the year, are shown in note 16. Each share carries the right to one vote at general meetings of the Company and carries no right to fixed income.

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

Significant agreements/takeovers directive

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

Charitable and political donations

The Company did not make any political or charitable donation during the year ended 31 December 2018 (2017: £nil).

Employees

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

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

Ratio of men to women

At 31 December 2018, there were two women (2017: 1) employed across the Group making 32% (2017: 16%) of our Group-wide employee base.

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

Health and safety

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

Greenhouse gas emissions 

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

Statement of Directors' responsibilities

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company, and of the profit or loss of the Group and Company for that period.

In preparing these financial statements the directors are required to:

Select suitable accounting policies and then apply them consistently;

Make judgements and estimates that are reasonable and prudent;

State whether the IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and

Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

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

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors' report, Directors' remuneration report and corporate governance statement that comply with that law and those regulations.

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

Statement of disclosure to independent auditors

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

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

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

Independent auditor

PKF Littlejohn LLP were appointed as auditor on 2 January 2019.

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

Corporate governance

IQ-AI has a standard listing on the London Stock Exchange and is thus not required to comply with the requirements of the 2016 U.K. Corporate Governance Code ("the Code") as issued by the Financial Reporting Council. The disclosures below are required by the UKLA's Disclosure and Transparency Rule 7.

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

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

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

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

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

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

Meetings of the Board of Directors

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

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

Re-election

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

On an annual basis, the Chairman considers the performance of the Board and discusses with the Company Secretary the re-election process. Given the performance of the Company, the Chairman has confirmed that the Directors being submitted for election in 2019 continue to be highly effective, qualified and committed to their respective roles.

Insurance cover

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

Board objectives and operation

The key objectives of the Board are as follows:

· The agreement of strategy.

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

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

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

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

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

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

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

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

· Approval of all external announcements.

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

The Board formally met four times in 2019 (2018: 4), the Executive Director attended every meeting during the year while in office and the Non-Executive Directors' attendance is summarised on page 13.

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

Nominations Committee

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

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

Appraisal of Non-Executive Directors

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

Remuneration Committee

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

Audit Committee

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

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

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

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

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

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

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

· To establish and monitor whistle blowing procedures.

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

The Audit Committee met three times during the year and after the year end. Matters considered at these meetings included: reviewing and approving the report and financial statements for the year ended 31 December 2017, the half year results to 30 June 2018 and the report and financial statements for the year ended 31 December 2018; discussion with the external auditors to confirm their independence and scope for audit work; considering the reports from external auditors identifying any accounting or judgemental issues requiring the board's attention and the auditors' assessment of internal controls; reviewing the company's risk register and business continuity procedures; and considering the adequacy of the whistle-blowing facility, the anti-bribery training and monitoring and data protection policy and procedures.

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

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

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

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

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

Internal controls

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

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

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

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

Dialogue with major shareholders

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

Annual general meeting

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

The Directors consider that all the resolutions to be put to the AGM, to be held in May/June 2019, are in the best interests of the Company and its shareholders. The Board will be voting in favour of them and unanimously recommends that shareholders do also.

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

We confirm that to the best of our knowledge:

(i) the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

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

This report was approved by the board of directors on 30 April 2019 and signed on behalf of the board by:

Trevor Brown

Director

Directors' Information

Annual Report and Financial Statements

For the year ended 31 December 2018

Trevor Brown

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

Dr Qu Li

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

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

Vinod Kaushal

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

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

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

Remuneration Committee Report

Annual Report and Financial Statements

For the year ended 31 December 2018

The Remuneration Committee presents its report for the year ended 31 December 2018.

Membership of the Remuneration Committee

The Remuneration Committee is currently comprised of Dr Li and V Kaushal.

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

Remuneration policy

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

Policy Table:

Share options

No share option scheme is provided to the Directors.

Directors' pensions

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

Remuneration policy for Executive Directors

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

Consistent with this policy, the benefit packages awarded to Executive Directors comprise a mix of performance and non-performance elements. During 2018, the Executive Directors pay was not based on the Group achieving financial targets.

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

*Includes shares held by Free Association Books Limited.

Directors' emoluments

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

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

Dr Qu Li

Chairman of the Remuneration Committee

30 April 2019

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

Annual Report and Financial Statements

For the year ended 31 December 2018

Opinion

We have audited the financial statements of IQ-AI Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2018 which comprise of the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated and Company Statements of Financial Position, Consolidated and Company Statements of Changes in Equity, Consolidated Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion:

· the financial statements give a true and fair view of the state of the group and company's affairs as at 31 December 2018 and of the group and company's loss for the period then ended;

· the group and company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and

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

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

· the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

· the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group's or the parent company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Our application of materiality

The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. The materiality applied to the Group financial statements was £36,200 based on 5% of the loss before tax. The performance materiality was £25,300. The materiality applied to the Company financial statements was £22,675 based on 5% of the loss before tax. The performance materiality was £15,875. For each component in the scope of our group audit, we allocated a materiality that was less than our overall group materiality.

An overview of the scope of our audit

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

In addition to the parent company, two material components were identified. One component was subject to a full scope audit conducted directly by PKF Littlejohn LLP. The other component is located in the US and was audited by a component auditor under our instruction and supervision under ISA 600.

An overview of the scope of our audit (continued)

The Senior Statutory Auditor interacted regularly with the component audit team during all stages of the audit and was responsible for the scope and direction of the audit process. This, in conjunction with additional audit procedures performed at a consolidation level, gave us sufficient appropriate evidence for our opinion of the group and company financial statements.

Key audit matters

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

Key audit matters (continued)

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information except to the extent otherwise specifically stated in our report, and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Matters on which we are required to report by exception

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

· proper accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

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

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

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group's and company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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

Use of our report

This report is made solely to the company's members, as a body, in accordance with Article 113A of the Companies (Jersey) Law, 1991. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

David Thompson (Senior Statutory Auditor)

for and on behalf of PKF Littlejohn LLP

Statutory Auditor

1 Westferry Circus

Canary Wharf

London

E14 4HD

30 April 2019

Consolidated Income Statement

For the year ended 31 December 2018

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2018

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

Consolidated Statement of Financial Position

As at 31 December 2018

The financial statements on pages 24 to 46 were approved by the Board of Directors on 30 April 2019 and signed on its behalf by:

T Brown Dr Q Li

Director Director

Company Registration Number: 2044

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

Company Statement of Financial Position

As at 31 December 2018

The financial statements on pages 24 to 46 were approved by the Board of Directors on 30 April 2019 and signed on its behalf by:

T Brown Dr Q Li

Director Director

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

Consolidated Statement of Changes in Equity

For the year ended 31 December 2018

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

Company Statement of Changes in Equity

For the year ended 31 December 2018

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

Consolidated Statement of Cash Flows

For the year ended 31 December 2018

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

Notes to the financial statements

Annual Report and Financial Statements

For the year ended 31 December 2018

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 47.

The financial statements are presented in pounds 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 International Financial Reporting Standards (IFRS) and IFRIC interpretations (IFRS IC) as adopted by the European Union.

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

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 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 22 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 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 group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that additional funding will be required either via an issue of equity or through the issuance of convertible loan notes. The Directors are reasonably confident that funds will be forthcoming if and when they are required. The Chief Executive Officer has provided a letter of financial support to the Group to make sufficient funds available, if required, to ensure the Group can meet its obligations over the going concern period.

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

New standards, amendments and interpretations adopted by the Group

The group and company have applied the following new and amended standards for the first time for its annual reporting period commencing 1 January 2018:

· IFRS 9 Financial Instruments;

· IFRS 15 Revenue from contracts with customers;

· Amendment to IFRS 2 Classification and measurement of Share-based Payment Transactions

· Annual improvements to IFRS Standards 2014-2016 Cycle

IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 has superseded the previous revenue recognition guidance including IAS 18 Revenue. The group has adopted IFRS 15 for the year ended 31 December 2018. There has been no material impact to the recognition of revenue relating to the adoption of IFRS 15.

1. Summary of significant accounting policies (continued)

New standards, amendments and interpretations adopted by the Group (continued)

The Group has applied IFRS 9 from 1 January 2018. The Group has elected not to restate comparatives on initial application of IFRS 9 as there is no impact on the opening balances.

With respect to the classification and measurement of financial assets, the number of categories of financial assets under IFRS 9 has been reduced compared to IAS 39. Under IFRS 9 the classification of financial assets is based both on the business model within which the asset is held and the contractual cash flow characteristics of the asset. There will be no change in the accounting for any other financial liabilities.

The impairment model under IFRS 9 reflects expected credit losses, as opposed to only incurred credit losses under IFRS 9. Under the impairment approach in IFRS 9, it is not necessary for a credit event to have occurred before credit losses are recognised. Instead, an entity always accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses should be updated at each reporting date.

The new impairment model applies to the Group's financial assets that are debt instruments measured at amortised costs or FVTOCI.

The Group has applied the simplified approach to recognise lifetime expected credit losses for its trade receivables, as required or permitted by IFRS 9. The impact is immaterial to the Group.

New standards and interpretations not yet adopted

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

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.

1. Summary of significant accounting policies (continued)

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. As a result of the acquisition during the year, the Group reports on a two-segment basis - holding company expenses and medical software.

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.

1. Summary of significant accounting policies (continued)

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. 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.

1. Summary of significant accounting policies (continued)

Loans and receivables (continued)

Trade receivables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

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 includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with maturities of three months or less. In the consolidated Statement of Financial Position, bank overdrafts are shown within borrowings in current liabilities.

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

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.

Repurchase of share capital (treasury shares)

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/from retained earnings.

1. Summary of significant accounting policies (continued)

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. Revenue from external customers arise on the sales of software licences and consultancy thereon.

Software licences

The revenue is measured at the agreed transaction price. 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 services are provided on the product supplied; this is not deemed to be a separately identifiable product.

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 the profit or loss include current and deferred tax.

1. Summary of significant accounting policies (continued)

Taxation (continued)

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 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.

Classification of the excess of consideration over net asset value acquired

Separately identifiable intangible assets recognised in a business combination, comprising intellectual property and internally generated software is based upon the Directors knowledge, experience and judgement regarding the attribution of value to the acquired entity. These allocations require the use of judgements and estimates.

Useful lives of intangible assets are based on historical experience and market knowledge, and subject to yearly evaluation. As the assumptions used may change, the useful life and therefore annual amortisation charge may change.  

3. Segmental analysis

The Directors are of the opinion that under IAS 14 - "Segmental Information" the Group operated in two primary business segments in 2018; 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. Business combination

On 13 March 2018, the Company acquired 100% of the issued share capital of Imaging Biometrics LLC ("Imaging Biometrics") for a consideration of US$750,000.

In accordance with IFRS 3 'Business Combinations', this transaction has been accounted for using the acquisition method of accounting. The consolidated income statement for the year ended 31 December 2018 includes the results of Imaging Biometrics from 13 March 2018, the date of the acquisition. The assets and liabilities of Imaging Biometrics have been consolidated from the date of the acquisition using the fair value of their assets and liabilities at that date.

10. Business combination (continued)

The recognised value of assets purchased were as follows.

The excess of the consideration over the net assets is classified as an intangible asset at acquisition.

The Directors conclude that the intangible asset comprises two parts, namely goodwill and software intellectual property ("IP"). By completing the purchase, the group now has control over the IP produced, Imaging Biometrics' expertise, as well as access to the US medical market.

The revenue included in the consolidated income statement since 13 March 2018 contributed by Imaging Biometrics was £164,971. Imaging Biometrics also reported a loss of £165,291 over the same period.

11. Goodwill

The goodwill arising on the purchase of Stone Checker and Imaging Biometrics is not being amortised but will be 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).

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

13. Investments

At 31 December 2018, the Group consisted of a parent company, IQ-AI Limited, registered in Jersey and its two wholly owned subsidiaries:

Subsidiaries:

13. Investments (continued)

14. Trade and other receivables