Lunglife Ai Regulatory News (LLAI)

4 April 2024

LungLife AI, Inc. (the "Company" or "LungLife")

Preliminary audited results for year ended 31 December 2023

LungLife AI (AIM: LLAI), a developer of clinical diagnostic solutions for lung cancer, announces its audited preliminary results for the year ended 31 December 2023.

Summary and Highlights for the year and post-period end:

Commenting, Paul Pagano, Chief Executive Officer of LungLife, said: "2023 was a year of considerable achievement culminating in the conclusion of our multi-site clinical validation study, which was the primary objective at our IPO. A positive predictive value of over 80% in smaller indeterminate nodules is significant. This is where physicians consistently indicate the greatest unmet need and where currently available tools fall short.

"In March 2024 we concluded our fund raising to commence the commercialisation of our test. This enables us to initiate our Early Access Program, submit forms to MolDX for technical assessment for Medicare coverage consideration, and continue other matters necessary for commercialisation. We have also started the process of considering all strategic options to get the LungLB test into the hands of patients who need it most.

"Our revised cash runway to April 2025 has required significant cost reductions, the largest being to headcount and salaries for the executive team. We are now a smaller team focussed on the key commercialisation activities. Those who have left the Company played an important role in delivering our achievements to date and on behalf of the whole Board, I would like to thank them for their efforts."

For further information please contact:

1 Earnings before interest, tax, depreciation and amortisation, adjusted to exclude exceptional items, share based payments and other operating income.

About LungLife

LungLife AI is a developer of clinical diagnostic solutions designed to make a significant impact in the early detection of lung cancer, the deadliest cancer globally. Using a minimally invasive blood draw, the Company's LungLB® test is designed to deliver additional information to clinicians who are evaluating indeterminate lung nodules. For more information visit www.lunglifeai.com

Our Purpose is to be a driving force in the early detection to lung cancer. And our Vision is to invert the 20:80 ratio such that in years to come at least 80% of lung cancer is detected early.

Chairman's Statement

I am delighted to report on the Company's results for the year ended 31 December 2023. We have continued to deliver on the Company's objectives and remain committed to creating shareholder value as we proceed with the aim of being a driving force in the early detection of lung cancer through the completion of our LungLB® test multi-centre clinical validation study.

LungLB® test

According to the World Health Organization, over 2.2 million new cases of lung cancer were diagnosed in 2020 and approximately 1.8 million deaths from lung cancer were recorded in 2020 globally. Nearly 80% of all lung cancers in the United States are diagnosed in later stages when survival rates are low because the options for curative treatment are then limited. This is in part due to the lack of effective early detection solutions and the fact that lung cancer largely develops asymptomatically.

LungLB® is a blood-based test that uses Circulating Genetically Abnormal Cells ("CGAC"), which include circulating tumour cells ("CTC"), to stratify indeterminant lung nodules as either cancerous or benign following their identification by CT scan. Biopsy is currently part of the standard care pathway for lung nodules and the LungLB® test is designed to support the physician's decision to biopsy only when necessary, or to monitor non-invasively using additional imaging. There are estimated to be over 1.5 million indeterminant lung nodules identified each year in the United States and LungLife's estimated one week turnaround from receipt of the blood sample to results can save a significant amount of stressful waiting time for the participant as well as unnecessary costly and often dangerous procedures.

Progress this year

2023 has been an important year in the development of the Company, concluding with the announcement of the results of our multi-site, prospective clinical study on 2 January 2024.

Clinical validation study

We completed enrolment of the 425 participants in our clinical validation study in May and its findings were concluded by year end, being announced on 2 January 2024.

We were delighted by the findings showing a strong positive predictive value of 81% in discriminating benign from cancerous lung nodules in patients with smaller nodules (< 15mm).

Publications - Health economics study

We published two important documents in the period, both of which are important components in establishing the ability of the Company to be paid for its tests, known as "coverage".

The first publication was a cost-effectiveness analysis ("CEA") model on LungLB® which provides evidence that the test can be utilised as a cost-effective tool within the current diagnostic pathway.

The principal aim of the research was to explore the incremental cost-effectiveness of LungLB® when added to the current clinical diagnostic pathway for patients with lung nodules, as described in guidelines. The greater cost savings in the model were demonstrated by a reduction in unnecessary procedures and better patient outcomes from reduced delays in treatment.

Incremental Cost-Effectiveness Ratio ("ICER") is a key metric used in the publication to demonstrate cost effectiveness. Integration of LungLB® leads to improvement in outcomes and results in an ICER that was 25% below the willingness to pay ("WTP") threshold commonly considered by US commercial payors, suggesting overall savings when LungLB® is priced at $2,030 per test. ICERs remain below WTP thresholds at prices up to $3,647 per test.

Publication - Peer reviewed publication of our test

We also announced the peer-reviewed publication of the successful performance results for the Company's LungLB® test from a multi-site prospective study in patients with indeterminate pulmonary nodules. The pilot study was performed in collaboration with MD Anderson Cancer Center (Houston, TX) and Icahn School of Medicine at Mount Sinai (New York, NY) and appears in the journal BMC Pulmonary Medicine. The primary objective of the study was to compare the LungLB® test result with a lung biopsy diagnosis and assess performance in a patient cohort where commonly used nodule evaluation tools were not informative.

We are very pleased to have been able to achieve these important milestones in this year.

People

Our revised cash runway to April 2025 has required significant cost reductions, the largest being to headcount and salaries for the executive team. We are now a smaller team focussed on the key commercialisation activities. Those who have left the company played an important role in delivering our achievements to date and on behalf of the whole Board, I would like to thank them for their efforts.

Post balance sheet and outlook

On 22 March 2024 the Company issued 5,172,621 new common shares at a price of 35 pence per share, raising gross proceeds of US$2,280,000 (GBP1,810,000).

The Company intends to use the net proceeds of the funding, along with the Company's existing cash resources to establish the commercial proof of concept of the Company's LungLB® test, as detailed below:

· funding of evidence generating activities, including the Early Access Program ("EAP") and clinical utility studies, dependent on the factors noted below, to support reimbursement and test adoption;

· increasing expenditure to support engagement with payors and clinicians, and support the wider need to raise clinical awareness via key opinion leaders, publications and conferences; and

· accelerating the commercial pathway by pursuing licensing or other similar agreements.

The net proceeds of the Fundraising will allow the Company to consider all of its strategic options in order to maximise shareholder value and, in conjunction with the implementation of certain cost-cutting actions, is expected to provide the Company with a cash runway to early April 2025.

This is our focus in 2024 and we look forward to updating shareholders on our progress.

Roy Davis

Chairman

3 April 2024

Financial Review

The financial performance of the Company in the year to 31 December 2023 reflects the costs incurred in concluding the clinical validation study, and the continued groundwork in laying the foundations for commercialisation.

Statement of Comprehensive Income

The Company generated revenues of US$46,000 in the year (2022 - US$34,000) comprising wholly of royalty income from its sub licensee in China. The royalty income is calculated at 6% of underlying net sales, and the Company pays a 3% royalty on this income to MD Anderson Cancer Center.

The largest cost incurred in the year was employee expenses of US$2,908,000 (2022 - $3,264,000) followed by research and development costs US$1,308,000 (2022 - US$1,981,00), being those external costs incurred on our clinical validation trial and in the continued development of our LungLB® test. In the year, one of our part time employees was offered a full-time position, bringing our operational headcount to 15.

Other operating income of US$44,000 (2022 - US$102,000) relates to claims made under the US Government Employee Retention Credits scheme, designed as COVID related support for businesses. Finance income of US$223,000 (2022 - US$88,000) was generated from funds held on deposit, benefiting from high interest rates, and we incurred finance expense of US$41,000 (2022 - US$52,000). Finance expense in both years related to that arising on lease liabilities for certain tangible assets and the leasehold premises.

EBITDA loss for 2023 excluding share-based payments was $5,192,000 (2022 - EBITDA loss $6,841,000).

Statement of Financial Position

Cash and cash equivalents at the end of the year was US$2,724,000 (2022 - US$3,088,000). In addition, the Company holds money on short term deposit, on which notice is 95 days with the balance at year end US$104,000 (2022 - US$4,922,000). We continue to hold the cost of acquiring the option under the License Agreement with the Icahn School of Medicine of Mount Sinai ("Mount Sinai") at its original purchase cost, without amortisation. The option fee gives the Company access in the future to the de-identified participant records held by Mount Sinai to assist in the development of future products. As this asset is therefore not currently being utilised no amortisation has been charged to date.

Statement of Cash Flows

The net outflow from operating activities was US$5,020,000 (2022 - US$5,845,000), with minimal outflows for investing and financing activities such that net cash outflow for the year was US$364,000 (2022 - outflow of $6,129,000).

David Anderson

Chief Financial Officer

3 April 2024

Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 December 2023

Statement of Financial Position

As at 31 December 2023

Statement of Cash Flows

For the year ended 31 December 2023

Statement of changes in equity

for the year ended 31 December 2023

Statement of changes in equity

for the year ended 31 December 2023 (continued)

Notes to the financial statements

For the year ended 31 December 2023

LungLife AI, Inc, (the "Company") is a company based in Thousand Oaks, California which is developing a diagnostic test for the early detection of lung cancer. The Company was incorporated under the laws of the state of Delaware, USA, on 30 December 2009.

The Company's costs associated with developing and commercialising its test include costs associated with the development of intellectual property optimising the technology, and obtaining  regulatory approval. To complete clinical trials the Company will continue to require additional operating funds. The Company has raised funds through offerings of debt, common stock and Series A Preferred Shares.

There are no restrictions on the Company's ability to access or use its assets and settle its liabilities.

Information in this preliminary announcement does not constitute statutory accounts of the company. The financial information presented in this preliminary announcement is based on, and is consistent with, that in the company's audited financial statements for the year ended 31 December 2023, which will be delivered to shareholders for approval at the Company's Annual General Meeting. The independent auditors have reported on those financial statements and their report is unqualified.

The financial statements have been prepared in accordance with UK adopted International Accounting Standards ("UK IFRS").

These financial statements are prepared in accordance with UK IFRS under the historical cost convention, as modified by the use of fair value for certain financial instruments measured at fair value. The historical financial information is presented in United States Dollars ("US$") except where otherwise indicated.

The principal accounting policies adopted in the preparation of the financial statements are set out below.

The policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Going concern

These financial statements have been prepared on the going concern basis.

On 2 January 2024, LungLife reported positive validation study results for its LungLB® test, a minimally invasive blood draw test used for the early detection of lung cancer. These results are the catalyst for the Company to begin its commercialisation process for the test. In view of the early stage of its commercial development the group currently funds its activities from existing cash resources. In addition, it expects to generate cash receipts from commercial revenues in future periods and if required, from additional equity or debt funding for future working capital needs.

At 31 December 2023 the Company had available cash resources and short term deposits of $2.8 million (2022 - $8.0 million. The Company is focused on the commercial proof of concept of its test and expects minimal revenues in 2024. As there are uncertainties in relation to the quantum and timing of cash receipts the financial projections have been prepared without including any assumed receipts from commercial revenues.

As set out in note 23, on 21 March 2024 a special meeting of the Company approved the issue of 5,172,621 new shares of common stock of the Company at a price of 35 pence per share. The new shares represent approximately 16.9 per cent. of the enlarged share capital of the company. The issue of shares raised approximately £1.8 million (approximately US$2.3 million) (before fees and expenses). The net proceeds of the fundraising, along with the Company's existing cash resources, are expected to be utilised to establish the commercial proof of concept of the Company's LungLB® test, including:

· funding of evidence generating activities, including the Early Access Program and clinical utility studies to support reimbursement and test adoption;

· increasing expenditure to support engagement with payors and clinicians, and support the wider need to raise clinical awareness via key opinion leaders, publications and conferences; and

· accelerating the commercial pathway by pursuing licensing or other similar agreements.

The net proceeds of the fundraising will allow the Company to consider all of its strategic options in order to maximise shareholder value and, in conjunction with the implementation of certain cost-cutting actions, is expected to provide the Company with a cash runway to early April 2025.

Having taken into account the information and estimates available at the date of approving these financial statements, the directors consider it is appropriate to adopt the going concern basis in preparing the financial statements. Although the company's projections, including expected levels of revenue generation, indicate sufficient funds through to the second quarter of 2025, it is reasonably possible that the group will require additional funding during, or shortly after a period of 12 months from the date of approval of these financial statements. The directors will seek to put in place funding arrangements which may from time to time be required but such arrangements are not presently committed. This represents a material uncertainty in relation to the group's funding arrangements.

(b) New standards, amendments and interpretations

New standards are not expected to impact the Company as they are either not relevant to the Company's activities or require accounting which is consistent with the Company's current accounting policies.

The Directors have considered those standards and interpretations which have not been applied in these financial statements but which are relevant to the Company's operations that are in issue but not yet effective and do not consider that they will have a material effect on the future result of operations, statement of position or statement of cash flows of the Company.

(c) Revenue recognition

Royalty income

Under the terms of a patent and technology sub license agreement the company is entitled to receive royalty income at 6% of the quarterly net sales invoiced by the sub licensee in the relevant quarter. Income is recognised in the period in which the underlying net sales are generated.

Cash is received from revenues recognised according to terms of trade within the relevant  contractual relationship, usually in accordance with agreed events such as placing of order, fulfilment of order and delivery.

(d) Intangible assets

Licenses are measured at cost less accumulated amortization and any accumulated impairment losses.

(e) Property, plant and equipment

Owned assets

Items of property, plant and equipment are stated at cost less accumulated  depreciation and impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. When parts of an item of property, plant and equipment have different useful lives, those components are accounted for as separate items of property, plant and equipment.

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 Company and the cost of the item can be measured reliably.

(e) Property, plant and equipment (continued)

Depreciation

Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:

· computer and IT equipment - 33 per cent. straight line

· leasehold improvements - shorter of lease term and useful life

· plant and machinery - 20 per cent. straight line

· laboratory equipment - 20 per cent. straight line

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, or if there is an indication of a significant change since the last reporting date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within "other operating income" in the statement of income.

(f) Impairment of non-financial assets

Non-financial assets are reviewed for impairment annually in the case of not being available for use, and 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 considered at the lowest levels for which there are separately identifiable cash flows (cash- generating units).

(g) Financial assets

Classification

The Company classifies its financial assets as loans and receivables. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments. They are initially recognised at fair value and are subsequently stated at amortised cost using the effective interest method.

Impairment of financial assets

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay  in payment) that the Company will be unable to collect all of the amounts due under the term's receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired asset.

(h) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less.

(i) Financial liabilities

Trade and other payables

Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

(j) Provisions

A provision is recognised in the statement of financial position when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre- tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability. The increase in the provision due to the passage of time is recognised in finance costs.

(k) Share capital

Ordinary shares are classified as equity. There are various classes of ordinary shares in issue, as detailed in note 19. Incremental costs directly attributable to the issue of new shares are shown in share premium as a deduction from the proceeds.

(l) Net finance costs

Finance costs

Finance costs comprise interest payable on borrowings, direct issue costs and dividends on preference shares, and are expensed in the period in which they are incurred.

Finance income

Finance income comprises interest receivable on funds invested.

Interest income is recognised in the income statement as it accrues using the effective interest method.

(m)  Leases

All leases are accounted for by recognising a right-of-use asset and a lease liability except  for:

· Leases of low value assets; and

· Leases with a duration of 12 months or less.

Lease liabilities are measured at the present value of the contractual payments due to the  lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Company's incremental borrowing rate on commencement of the lease is used. Other variable lease payments are expensed in the period to which they relate.

On initial recognition, the carrying value of the lease liability also includes:

· amounts expected to be payable under any residual value guarantee

· the exercise price of any purchase option granted in favour of the Company if it is reasonably certain to assess that option

· any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

· lease payments made at or before commencement of the lease

· initial direct costs incurred; and

· the amount of any provision recognised where the Company is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations - see note 17).

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.

(n) Leases (continued)

When the company revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised) it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.

(o) Income tax

Income tax for the years presented comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the statement of financial position date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts.

The following temporary differences are not recognised if they arise from (a) the initial recognition of goodwill; and (b) for the initial recognition of other assets or liabilities in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred income 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 income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

(p) Foreign currency translation

i) Function and presentational currency

Items included in the financial statements of the Company are measured using USD, the currency of the primary economic environment in which the entity operates ('the functional currency'), which is also the Company's presentation currency.

ii) Transactions and balances

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 to USD, are recognised in the income statement.

The preparation of the Company's historical financial information under UK IFRS requires the directors to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. 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. Actual results may differ from these estimates.

The Directors consider that the following judgement is likely to have the most significant effect on the amounts recognised in the financial information.

Classification of the Mount Sinai License as an intangible asset

As set out in note 13, on 18 June 2021, the Company entered into the Mount Sinai License Agreement, pursuant to which Mount Sinai granted an option to the Company to obtain a licence, on a non-exclusive basis, to use certain information held by Mount Sinai. After considering the criteria in IAS38 the directors have judged that the recognition criteria therein have been met and classified the Mount Sinai license as an intangible asset.

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Company that are regularly reviewed by the chief operating decision maker (which takes the form of the Board of Directors) as defined in IFRS 8, in order to allocate resources to the segment and to assess its performance.

The chief operating decision maker has determined that the Company has one operating  segment, the development and commercialisation of its lung cancer early detection test. Revenues are reviewed based on the products and services provided. All revenue arises from the same customer in both years.

The Company operates in the United States of America. Revenue by origin of geographical  segment is as follows:

The Company is exposed through its operations to the following financial risks:

- Credit risk

- Foreign exchange risk and

- Liquidity risk

The Company is exposed to risks that arise from its use of financial instruments. This note describes the Company's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

(i) Principal financial instruments

The principal financial instruments used by the Company, from which financial instrument risk arises, are as follows:

- Cash and cash equivalents

- Short term cash deposits

- Trade and other payables

(ii) Financial instruments by category

Financial asset

Financial liabilities

(iii) Financial instruments not measured at fair value

Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables, and trade and other payables.

Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, and trade and other payables approximates their fair value.

See note 16 for information on lease liabilities.

(iv) Financial instruments

General objectives, policies and processes

The Board has overall responsibility for the determination of the Company's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company's finance function.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company's competitiveness and flexibility. Further details regarding these policies are set out below:

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Due to the current low level of revenue, the Company's exposure to credit risk is on cash at bank. The Company only deposits cash with major banks with high quality credit standing.

Cash in bank and short-term deposits

The credit quality of cash has been assessed by reference to external credit rating, based on Standard and Poor's long-term / senior issuer rating:

Foreign exchange risk

Foreign exchange risk arises when the Company enters into transactions denominated in a currency other than its functional currency. The Company's policy is, where possible, to settle liabilities denominated in its functional currency. Currently the Company's liabilities are either US dollar or UK sterling. No forward contracts or other financial instruments are entered into to hedge foreign exchange movements, with funds raised in the UK being transferred to fund US operations using spot rates.

As at 31 December 2023 assets held in Sterling amounted to US$79,000 (2022 - US$5,275,000) and liabilities held in Sterling amounted to US$92,000 (2022 - US$65,000).

The effect of a 5% strengthening of the Sterling against US dollar at the reporting date on the Sterling denominated net assets carried at that date would, all other variables held constant, have resulted in a decrease in post-tax loss for the year and decrease of net assets of US$1,000 (2022 - increase US$260,000). A 5% weakening in the exchange rate would, on the same basis, have increased post-tax loss and decreased net assets by US$1,000 (2022 - US$260,000).

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. This risk is managed by the production of annual cash flow projections. The Company's continued future operations depend on its ability to raise sufficient working capital through the issue of share capital and generating revenue.

The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities which can all be met from the cash resources currently available:

Capital Disclosures

The Company monitors its capital which comprises all components of equity (i.e., share capital, share premium, and accumulated losses).

The Company's objectives when maintaining capital are to safeguard the entity's ability to continue as a going concern.

Other operating income is claims made for Employee Retention Credits.

During the year the Company obtained the following services from the Company's auditor:

Key management personnel compensation

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, including the Directors of the Company.

The average number of employees (including Directors) in the Company in the year was 19 (2022 - 18).

There were no charges to current corporation taxation due to the losses incurred by the Company in the year. The reasons for the difference between the actual tax charge for the year and the US federal income tax rate of 21% and state of California income tax rate of 8.84% are as follows:

The unrecognised deferred tax is based on Federal taxable losses carried forward of US$56,623,000 (2022 - US$53,485,000) and a Federal capital loss of US$4,583,333 (2022 - US$4,583,333). No deferred tax asset is recognised for these losses due to early stage in the development of the Company's activities. Of the total Federal losses carried forward US$35,281,000 (2022 - US$35,281,000) expire in 2030 and can only be used against trading profits from the same trade. Losses of US$21,342,000 (2022 - US$18,204,000) do not expire but can only offset against 80% of taxable profits from the same trade.