This announcement contains inside information for the purposes of Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

 

Location Sciences Group PLC

("Location Sciences" or the "Company" or the "Group")

 

Audited Results for the year ended 31 December 2021

 

 

 

Location Sciences (AIM: LSAI), announces its audited results for the year ended 31 December 2021.

 

 

Financial Performance

 

·      The Company was recapitalised in May 2021 following an equity fundraise which raised approximately £3.74m (before expenses).

 

·      Disposed of the insights dashboard and certain contracts to Digital Envoy, Inc. a leading US IP intelligence company for US$700,000

 

·      Revenues from the Verify division in 2021 were £167,940 compared to £318,572 in 2020 representing a 47% decrease in revenues year-on-year, reflecting the headwinds faced by the business during the year.

 

·      Administrative costs excluding depreciation and amortisation for the year to 31 December 2021 £801,432 (2020: £565,202)

 

·      Loss before exceptional items, amortisation and depreciation for the year to 31 December 2021 £699,468 (2020: £322,098)

 

·      Loss per share from continuing operations decreased from 0.24p in 2020 to 0.076p in 2021. This was primarily due to the issue of additional shares in the May 2021 fundraise.

 

 

Financial Position at Year End

 

·          Net assets were £5,178,571 (2020: £2,645,507)

 

·          Net current assets were £4,641,080 (2020: £1,497,887)

 

·          Cash and cash equivalents of £4,378,825 (2020: £1,128,118)

 

·          Borrowings were £Nil (2020: £Nil)

 

·          Potential deferred tax asset of £3,977,000 (2020: £3,840,000)

 

 

Board Changes

 

As announced on 25 May 2021, following the successful completion of the fundraise, Simon Wilkinson and Dr Nigel Burton have been appointed to the Board of the Company as Non-Executive Chairman and Non-Executive Director respectively.

 

Simon Wilkinson is a highly experienced software executive and entrepreneur, having been involved with a number of public and private companies over his career. He was most recently Chairman then CEO of Mobica, a world-leading, award-winning software services company offering bespoke development, QA and consultancy. He was previously Chief Executive Officer of Myriad Group AG, which was listed in Zurich, and founder and Chief Executive Officer of Magic4 Ltd, a mobile messaging software market leader, backed by 3i, Philips Ventures and Motorola Ventures.

 

Dr Nigel Burton spent 14 years as an investment banker at leading City institutions including UBS Warburg and Deutsche Bank, including as the Managing Director responsible for the energy and utilities industries.  Following this he spent 15 years as Chief Financial Officer or Chief Executive Officer of a number of private and public companies. He is currently a Non-Executive Director of BlackRock Throgmorton Investment Trust plc, DeepVerge plc, eEnergy Group plc, and Microsaic Systems plc.

 

As announced on 21 June 2021, notice was given to Mark Slade (CEO) and David Rae (CFO) who have remained employees and members of the Board to assist the Board to realise value from the existing businesses. Both have 12-month notice periods which conclude on 21 June 2022.

 

Outlook

 

The Board is reviewing the strategic options available to the Company and how best to maximise the value of the Company's remaining business unit. The operating costs of the business have been significantly reduced during the year and together with the cash resources provide a solid platform from which to leverage the opportunities available to us.

 

A copy of this announcement and the Company's report & accounts are available on the Company's website https://www.locationsciencesgroup.ai/investor-relations/

 

 

For further information please contact:

 

Location Sciences Group PLC                      via Allenby

 

Mark Slade, Chief Executive Officer

David Rae, Chief Financial Officer

 

Allenby Capital Limited (Nominated Adviser)        Tel: +44 (0)20 3328 5656

David Hart

Vivek Bhardwaj

 

Turner Pope Investments (TPI) Ltd (Broker)         Tel: +44 (0)20 3657 0050

James Pope

Andy Thacker

 

CHAIRMAN'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2021

Following the funding round in May 2021, which introduced new strategic investors to the shareholder register and two new Board members, the remainder of 2021 became a key period of transition for the Group, during which the new Board reviewed the existing business units and made key strategic decisions with the aim of increasing shareholder value in the medium to long term.

 

The traditional operating markets of Location Sciences, location data and verification, have remained difficult markets to grow within due to the ongoing regulatory headwinds and the deep market inertia faced. This has slowed the adoption of the Group's market leading location verification technology across the digital advertising industry. During the financial year, the executive team successfully exited the location insights space selling the Group's insights dashboard and certain customer contracts to Digital Envoy, Inc, a leading IP intelligence business for US$700,000.

 

The proceeds from the aforementioned sale and the Group's share placing in May 2021, which raised approximately £3.74m (before expenses), provide the Group with a solid financial platform from which to increase shareholder value which management and the Board are fully engaged in.

 

I am excited for the future of the Group and believe that the new Board will return real shareholder value in the foreseeable future.

 

CHIEF EXECUTIVE'S REVIEW FOR THE YEAR ENDED 31 DECEMBER 2021

 

Location data and verification continues to be a challenging space to do business. However, the Board is pleased to have completed the strategic fundraising in May 2021 which raised approximately £3.7 million (before expenses), with the potential for further funding of a similar quantum should all warrants issued in conjunction with the May 2021 fundraise be exercised. The fundraising increased the cash reserves of the business and introduced new directors and strategic shareholders to help shape a new direction for the business. The Board continues to work with the new investors to explore strategic options to maximise shareholder value.

 

The Board is pleased to have completed the sale of the insights business to Digital Envoy, Inc. a leading US IP intelligence company, for the full US$700,000 consideration. This business unit faced considerable headwinds during the COVID-19 pandemic and going forward will face significant challenges from changing privacy regulations. The Board believes that it was the right decision to sell the division to a larger company that can absorb these macro challenges.

 

During 2021, we have significantly reduced the Group's overheads while ensuring that David and I continue to support the ongoing operations of the Verify business. However, the Board expects the outlook for Verify in the medium term to be challenging due to privacy related reductions of location data within the digital advertising industry. As a result, the Board continues to explore options for this division.

 

The Group ends the financial year, better capitalised, with a new Board and strategic shareholding to take the business forward.

 

 

CHIEF FINANCIAL OFFICER'S REVIEW FOR THE YEAR ENDED 31 DECEMBER 2021

Financial Performance

 

During the financial year the Insights business was sold to Digital Envoy, Inc. As a result, the financial performance below represents the Verify division only.

 

Revenues from the Verify division in 2021 were £167,940 compared to £318,572 in 2020 representing a 47% decrease in revenues year-on-year.

 

Following the change in strategic direction of the Company, the Board implemented measures to achieve significant overhead reductions. These included a substantial reduction in the number of employees. In addition, Location Sciences has terminated its relationship with one of its joint brokers.

 

The administrative costs for continuing operations excluding associated depreciation and amortisation were £801,432 in 2021 compared to £565,202 during 2020.

 

The Group received £11,267 of furlough income from the Coronavirus Job Retention Scheme during 2021 (the "Job Retention Scheme"), compared to £30,119 of grant income in 2020, which, included £20,119 of furlough income from the Job Retention Scheme. The Board does not expect to receive further grant income in the foreseeable future.

 

The continuing operations delivered a loss before exceptional items, amortisation and depreciation of £699,468 (2020: £322,098), an operating loss of £1,199,068 (2020: £507,362) and a loss after taxation of £1,085,197 (2020: £341,090).

 

Loss per share from continuing operations decreased from 0.24p in 2020 to 0.076p in 2021. This was primarily due to the issue of additional shares in the May 2021 fundraise.

 

Statement of Financial Position

 

As at 31 December 2021, the Group's net assets were £5,178,571 (2020: £2,645,507) of which £4,378,825 (2020: £1,128,118) were cash and cash equivalents.

 

Net current assets were £4,641,080 as at 31 December 2021 compared to net current assets of £1,497,887 as at 31 December 2020.

 

Group borrowings were £Nil as at 31 December 2021 (2020: £Nil).

 

The Directors consider the Company's net asset position as a solid platform and the Directors are considering all strategic options available to maximise shareholder value in the medium to long term.

 

 

STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2021

The Directors present their strategic report for the year ended 31 December 2021.

Fair review of the business

The fair review of the business is set out in the Chief Executive Officer's and Chief Financial Officer's reviews, which describe in detail the financial results and future plans for Location Sciences.

The Board monitors progress on the overall Group strategy and the individual strategic elements by reference to KPIs. The primary measures are revenue, costs, EBITDA before exceptional items and working capital levels.

The impact of the COVID-19 pandemic is evident in the relatively poor financial performance of the Group during 2020 and 2021. As a result, the Board launched a business review early in 2021 to review the strategic options available to the Group, which led to a refinancing of the business in May 2021. The refinancing brought new strategic shareholders and several Board changes.

Following the refinancing of the Group, the Group's Insights dashboard was sold, along with four contracts, to Digital Envoy, Inc. bringing in further funds to the Group and reducing the operational cost of the business.

The Group continues to operate Verify and the Board is reviewing the strategic options available to the Group.

Principal risks and uncertainties

The principal and commercial risks to the Group are as follows:
 

Description		The Group does not achieve sufficient commercial success before existing competitors or new entrants enter the market.
Impact		The current plans of the Group may not be realised, and the Group may have to re-evaluate its business plan.
Mitigation		The operating costs of Verify are minimal compared to the cash resources of the business.
Description		Location Sciences Group PLC continues to be in a cash consumption phase.
Impact		Going concern has been carefully considered and details are provided in the Corporate Governance Report below and in note 2 of the Group's financial statements.
Mitigation		The Group had in excess of £4 million in net cash resources as at 31 December 2021, which is more than sufficient for the Groups requirements for the foreseeable future.
Description		Changes in regulation negatively impact the Group's market.
Impact		The Group may find the demand for its products is reduced and / or the Group may be forced to change or stop selling one or more of its products.
Mitigation		The Board takes account of commentators and industrial bodies as to the direction of policy change.
Description		The impact of the COVID-19 pandemic on existing and potential customers.
Impact		The Group may find the demand for their products reduce especially its location verification solutions which rely to a large extent on people's movement.
Mitigation		The Board has commenced a business review and reduced its operational cost base.

 

The Board meets regularly to review specific and general risks that face the Group. The Board strives to position the Group in a way that any risks can be minimised and met, should the need arise.

 

The Group's performance is dependent on its products and solutions keeping pace with market. This includes technological developments, frequent introduction of new services and products and evolving industry standards. Advances in technology may result in changing customer preferences for products and services and delivery formats. Any such change in preferences may be rapid.

 

The Group manages this risk by a commitment to research and development, combined with ongoing dialogue with key industry players and engagement with the regulatory landscape. This includes monitoring requirements and compliance for privacy regulations.

Strategic risks

In 2020, the Group responded to the COVID-19 pandemic with a substantial cost reduction programme and shifted focus of the business towards the data and insights solutions which are more resilient to effects of the pandemic. Due to the continuing impact of the COVID-19 pandemic, the Group commenced a business review in 2021 which has led to the refinancing of the business, new strategic shareholders, new Board members, the sale of the Insights dash board and four contracts and a further reduction of operational costs. This positions the Group with considerable cash resources and broader strategic options for the future. The Board continues to review the strategic options available to the Group.

This report, in conjunction with the Chief Executive Officer's Report, form the Strategic Report for the purposes of s414A of the Companies Act 2006.

 

Section 172 statement

The Directors believe that they have effectively implemented their duties under section 172 of the Companies Act 2006 through adherence to the Quoted Companies Alliance Corporate Governance Code, as disclosed in the report and accounts and as published on our website: www.locationsciencesgroup.ai/investor-relations/board-governance. The Chairman's Report and Chief Executive's Review details the Group's future plans to achieve its long-term strategy.

 

The Group is committed to maintaining an excellent reputation and strive for high standards, while maintaining an awareness of the environmental impact of the work that it does and strives to reduce its carbon footprint.

 

The Directors recognise the importance of the wider stakeholders in delivering their strategy and achieving sustainability within the business; in ensuring that all our stakeholders are considered as part of every decision process we believe we act fairly between all members of the company.

 

CORPORATE GOVERNANCE

The application of the UK Corporate Governance Code ("Code") and corporate governance during the period 1 January 2021 to 31 December 2021 ("Year").

 

The Board recognises the importance of good corporate governance in order to protect and build upon the substantial investments made by our diverse shareholder base. We have chosen to apply the Quoted Companies Alliance Corporate Governance Code (the 'QCA Code'), which was developed by the QCA in consultation with a number of significant institutional small company investors, as an alternative corporate governance code applicable to AIM companies. The underlying principle of the QCA Code is that "the purpose of good corporate governance is to ensure that the company is managed in an efficient, effective and entrepreneurial manner for the benefit of all shareholders over the longer term". The Board anticipates that whilst the Company will continue to comply with the QCA Code, given the Group's size and plans for the future, it will also endeavour to have regard to the provisions of the UK Corporate Governance Code as best practice guidance to the extent appropriate for a company of its size and nature.

 

An explanation of how these principles have been applied is set out both below and in the Directors' remuneration, Audit Committee and internal control sections of this report.

 

Certain information required under the QCA code is included within the Strategic report and the Directors Remuneration Report.

Name	Date Appointed	Date Resigned	Role	Committees
Simon Wilkinson	25/05/2021		Chairman	Remuneration, Nomination,
				Audit
Kelvin Harrison	15/02/2017	25/05/2021	Chairman	Remuneration, Nomination,
				Audit
Nigel Burton	25/05/2021		Non-Executive Director	Remuneration, Nomination,
				Audit
Benjamin Chilcott	21/03/2018	25/05/2021	Non-Executive Director	Remuneration, Nomination,
				Audit
Mark Slade	24/07/2017		CEO	-
David Rae	12/02/2018		CFO	-

 

The Board is responsible to the shareholders for the proper management of the Group through setting the overall strategy of the business and to review the people, performance, policies and budgets of the Group. The Board typically meets bi-monthly and also meets for any other extraordinary matters as they may arise. Detailed information on matters to be discussed during the meetings are circulated in advance of the meeting to ensure non-executive directors can contribute in an educated manner.

Independence of Chairman and Chief Executive Officer

The roles of the Chairman, Simon Wilkinson, and the Chief Executive Officer, Mark Slade, have a formal division. The Chairman is responsible for overseeing the Board and ensuring no individual or group takes control of the Board's decision making and that all non-executive directors are fully briefed on matters and their responsibilities. The Chief Executive Officer has the responsibility of executing the strategy of the Board and running the day-to-day activities of the business.

Board Balance

A minimum of 50% of the Board will always consist of non-executive directors including the Chairman. All non-executive directors are independent of the management team and are not involved in any other business or relationship, both as an executive or non-executive, which may impair their independent nature and judgement.

Nomination Committee

The Group's nomination committee is responsible for reviewing and making proposals to the Board on the appointment of Directors and meets as necessary. The Group's nomination committee consists of Simon Wilkinson, who acts as Non-Executive Chairman of the committee, and Nigel Burton.

Performance Evaluation and Re-election

The Board has continued to evaluate its effectiveness and performance during the year, taking into account the Financial Reporting Council's Guidance on Board Effectiveness. It is anticipated that following the completion of the Board strategic review director appraisals will be performed to ensure that their performance is, and continues to be, effective, that where appropriate they maintain their independence and that they are demonstrating continued commitment to the role. The Directors will be evaluated internally based on their responsibilities to the Board. New Directors resign and stand for re-election at the Group's first AGM following their appointment. One-third of continuing Directors stand for re-election on an annual basis.

 

The Directors carry out continued professional development throughout the year where appropriate and each Director keeps up to date with market changes through the use of market articles and industry contacts.

Remuneration Committee

The Group's remuneration committee is responsible for the specific remuneration and incentive packages for each of the company's executive directors, senior executives and managers. The Group's Remuneration Committee consists of Nigel Burton and Simon Wilkinson, who acts as Non-Executive Chairman of the committee. Further details of the Committee's remit are contained in the Directors' Remuneration Report.

Relations with Shareholders

The Group encourages two-way communication with both its institutional and private investors and responds promptly to all queries received. The CEO and CFO communicate regularly with the Group's institutional shareholders and ensure that their views are communicated fully to the Board. The Board recognises the Group's AGM as an important opportunity to meet with the Group's private shareholders. The Directors are available to listen to the views of shareholders informally immediately following the AGM. The Directors have also organised various events throughout the year (presentations, seminars, webinars) for existing and potential shareholders to gain a greater understanding of the Group's strategy, products and market.

Annual General Meeting

The Annual General Meeting of the Group provides shareholders with the opportunity to be updated on the Group's progress and to ask questions of the Board.

Financial Reporting and Internal Control

The Company has established policies covering the key areas of internal financial control and the appropriate procedures, controls, authority levels and reporting requirements which must be applied throughout the Group.

 

The key procedures that have been established in respect of internal financial control are:

 

• An annual budget set by the Board

• Monthly management accounts with comparisons to budget

• Monthly forecast updates with comparisons to budget

• Monthly cashflow forecasts with comparisons to budget

• Weekly meetings of the Executive Directors and Senior Management to review priorities and issues

• Restriction of user access to systems, including but not limited to Financial, HR and Technology.

 

The above controls have been established to support the growth of the business and to protect against future risks.

Corporate Culture

It is the Board's view that the Group's corporate culture is consistent with its objectives, strategy and business model. The Board is aware that the culture set by the Board will greatly impact all aspects of the Group and the way that employees behave. The Board invites employees to provide feedback on their peers and management.

Consolidated Accounts

The aforementioned Financial Reporting and Internal Controls apply to all subsidiaries. The accounts of all subsidiaries are combined with those of the Company to form consolidated accounts each month. The Chief Financial Officer is responsible for producing the consolidated accounts, including the elimination of intercompany transactions and balances.

Audit Committee

The Group's Audit Committee is responsible for ensuring the financial performance of the Group is properly monitored and reported on, the effectiveness of accounting systems and financial reporting procedures. The Group's Audit Committee consists of Nigel Burton and Simon Wilkinson, who acts as Non-Executive Chairman of the committee.

 

The Committee considers all proposals for non-audit services and ensures that these do not impact on the objectivity and independence of the auditor. The Audit Committee reviews, with the external auditor, the safeguards and procedures developed by the auditor to counter threats or perceived threats to their objectivity and independence. Non-audit services performed by the external auditor are assessed for threats to objectivity and independence on a case-by-case basis.

Board and Committee Attendance

Name	Main Board	Audit Committee	Remuneration Committee	Nomination Committee
Simon Wilkinson	8/8	1/1	1/1	1/1
Kelvin Harrison	4/4	1/1	1/1	1/1
Nigel Burton	8/8	1/1	1/1	1/1
Benjamin Chilcott	4/4	1/1	1/1	1/1
Mark Slade	12/12	-	-	-
David Rae	12/12	-	-	-

Going concern

The directors have taken a view of the Group as a whole.

 

The Group raised approximately £3.74 million (before expenses) in new funds during the financial year through a placing, subscription and broker option. Following the successful fundraising, the Board continued to review how best to maximise the value of the Company's two core business units, namely location verification and data and insights. As part of this business review, the Board decided to sell its Insights dashboard and four contracts to Digital Envoy, Inc. for a total consideration of US$700,000 of which US$575,000 was received by the Company during the financial year and the remaining US$125,000 was received by the Company on 31 January 2022. The sale to Digital Envoy, Inc. also allowed the Company to significantly reduce its ongoing operational costs.

 

The Group continues to operate Verify which has a global client base with customers in Europe, US and South Africa.

 

Despite the actions of the Board, the Group continued to operate with a trading loss during the year and the same is expected throughout 2022. The new funds raised during 2021 will be utilised for the operation of Verify and for working capital purposes and future opportunities and enable the Group to also remain debt free. The Board will continue to monitor cash resources and progress the ongoing business review.

 

Based on the current status, after making enquiries and considering the existing cash resources of the business and cost reductions made during 2021, the Board has a reasonable expectation that the Group will be able to execute its plans in the medium term such that the Group will have adequate resources to continue in operational existence for the foreseeable future. This provides the Board with assurance on the Group's ability to continue as a going concern, and therefore adopt the going concern basis of accounting in preparing the annual financial statements.

 

 

DIRECTORS' REMUNERATION REPORT

As a Company admitted to trading on AIM, Location Sciences Group PLC is not required to present a directors' remuneration report, however, a number of voluntary disclosures have been made. The Company has complied with the disclosure requirements set out in the AIM Rules for Companies.

 

Remuneration Committee

The Remuneration Committee, consisting of the chairman Simon Wilkinson and Nigel Burton, determines the Group's policy for executive remuneration and the individual remuneration packages for executive directors. In setting the Group's remuneration policy, the committee considers a number of factors including:

 

• salaries and benefits available to executive directors of comparable companies;

• the need to both attract and retain executives of appropriate calibre; and

• the continued commitment of executives to the Group's development through appropriate incentive schemes (including the award of share options).

 

Remuneration of executive directors

Consistent with this policy, benefit packages awarded to executive directors comprise a mix of basic salary and performance‐related remuneration that is designed as an incentive. The remuneration packages can comprise the following elements:

 

• base salary: the Remuneration Committee sets the base salaries to reflect responsibilities and the skills, knowledge and experience of the individual;

• bonus scheme: the executive directors are eligible to receive a bonus dependent on both individual and Group performance as determined by the Remuneration Committee;

• equity: share options; and

• various other add on benefits such as private medical insurance.

 

The executive directors are engaged under separate contracts which require a notice period of three or six months given at any time by the individual.

 

Remuneration of non-executive directors

The fees and equity awarded to non‐executive directors are determined by the Board. The non‐executive directors do not receive any other forms of benefit such as private medical insurance.

 

Year to 31 December 2021

Director	Salary and fees	Bonus	Pension	Benefits	Share based payments	Total
	£	£	£	£	£	£
M Slade (Executive)	170,654	-	1,318	1,951	15,671	189,594
K Harrison* (Non-executive)	59,129	-	-	-	-	59,129
D Rae (Executive)	157,837	-	1,318	-	10,241	169,396
B Chilcott* (Non-executive)	36,000	-	-	-	-	36,000
S Wilkinson** (Non-executive)	165,000	-	-	-	-	165,000
N Burton** (Non-executive)	115,500	-	-	-	-	115,500
	704,120	-	2,636	1,951	25,912	734,619

 

Included within directors' remuneration for S Wilkinson and Nigel Burton is remuneration of £165,000 and £115,500 respectively that was settled by issue of shares.

 

* Resigned 25 May 2021.

** Appointed 25 May 2021.

 

Year to 31 December 2020

 

Director	Salary and fees	Bonus	Pension	Benefits	Share based payments	Total
	£	£	£	£	£	£
M Slade (Executive)	156,000	-	1,314	1,991	15,671	174,976
K Harrison (Non-executive)	45,000	-	179	-	304	45,483
D Rae (Executive)	85,800	50,000	1,314	2,668	10,241	150,023
B Chilcott (Non-executive)	24,000	-	103	-	-	24,103
N Hogan* (Non-executive)	24,000	-	-	-	-	24,000
D Williams* (Non-executive)	60,387	-	-	-	-	60,387
	395,187	50,000	2,910	4,659	26,216	478,972

 

Included within directors' remuneration for N Hogan and D Williams is remuneration of £11,250, £11,000, £24,000 and £35,202 for K Harrison, B Chilcott, N Hogan and D Williams respectively that was settled by issue of shares.

 

* Resigned 11 February 2021.

 

Director	Grant Date	Exercise Price	At 31 December 2021 Number	At 31 December 2020 Number
M Slade (Executive)	29/11/2018	2.25p	15,555,556	15,555,556
D Rae (Executive)	29/11/2018	2.25p	7,333,333	7,333,333
K Harrison (Non-Executive)	29/11/2018	2.25p	-	577,778

 

Notes: The options will vest in three equal tranches when certain share price targets have been reached, the share price targets are as follows:

 

• 4.8 pence per New Ordinary Share

• 7.3 pence per New Ordinary Share

• 9.7 pence per New Ordinary Share

 

Director Warrants

 

Non-transferable warrants to subscribe for, in aggregate, 120,000,000 Ordinary Shares were issued to the Executive Directors and the Non-Executive Directors, exercisable at 0.20p for five years from 25 May 2021, provided that the Ordinary Shares have traded at a Volume Weighted Average Price (VWAP) at or above 0.30p for 20 consecutive Business Days, or on a change of control of the Company.

 

Name                                     Number of Ordinary Shares subject to Director Warrants

 

Simon Wilkinson                 30,000,000

Dr Nigel Burton                   30,000,000

Mark Slade                          30,000,000

David Rae                           30,000,000

           

Broker Warrants

 

Transferable warrants to subscribe for, in aggregate, 41,250,000 Ordinary Shares were issued to the Executive Directors and the Non-Executive Directors, exercisable at 0.20p for five years from 25 May 2021.

 

Name                                     Number of Ordinary Shares

                                               subject to Broker Warrants

 

Dr Nigel Burton                    25,000,000

Mark Slade                          10,000,000

David Rae                             6,250,000

 

Promoter Warrants

 

Promoter warrants were issued to certain investors in the fundraising completed on 25 May 2021 in consideration of those persons assembling and co-ordinating the Concert Party's investment in the Company. As part of this issuance, non-transferable warrants to subscribe for, in aggregate, 500,000,000 Ordinary Shares were issued to Simon Wilkinson, exercisable at 0.20p for five years from 25 May 2021.

 

 

DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2021

The Directors are pleased to present the annual report and audited financial statements of Location Sciences Group PLC for the year ended 31 December 2021.

Dividends

The Directors do not recommend the payment of a dividend.

 

Board of Directors

 

Simon Wilkinson, Non-Executive Chairman

Simon joined Location Sciences as Non-Executive Chairman in May 2021. Simon is a highly experienced software executive and entrepreneur, having been involved with a number of public and private companies over his career. He was most recently CEO then Chairman of Mobica, a world-leading, award-winning software services company offering bespoke development, QA and consultancy. He was previously Chief Executive Officer of Myriad Group AG, which was listed in Zurich, and founder and Chief Executive Officer of Magic4 Ltd, a mobile messaging software market leader, backed by 3i, Philips Ventures and Motorola Ventures. 

 

Nigel Burton, Non-Executive Director

Nigel was appointed as a Non-Executive Director in May 2021. Nigel spent 14 years as an investment banker at leading City institutions including UBS Warburg and Deutsche Bank, including as the Managing Director responsible for the energy and utilities industries.  Following this he spent 15 years as Chief Financial Officer or Chief Executive Officer of a number of private and public companies. He is currently a Non-Executive Director of BlackRock Throgmorton Investment Trust plc, DeepVerge plc, eEnergy Group plc, Mobile Streams plc and Microsaic Systems plc.

 

Mark Slade, Chief Executive Officer

Mark joined the Board on 24 July 2017 as an Executive Director. Mark is one of the advertising industry's leading lights with numerous senior relationships across the ad tech and media giants. He joined from Opera Mediaworks, where he was Managing Director, EMEA. Mark founded and sold his mobile advertising business 4th Screen to Opera, and then helped grow the business to over $100 million in revenues. Mark's expertise is in executing in a high growth ad tech sector as well as European acquisitions. Mark is also a founding member of the IAB mobile council.

 

David Rae, Chief Financial Officer

David joined the Board in February 2018. David has enhanced the Board's financial and strategic capabilities as well as bringing experience in delivering rapid growth for ambitious companies and international business experience within the technology and energy sectors. David began his career in 1992 with EY's Entrepreneurial Services team in London, where he focused on fast growth companies. After leaving EY in 1999, David worked in corporate finance where he advised both public and private companies on fundraising and M&A activities. David is a Fellow of the Institute of Chartered Accountants in England and Wales and holds a first-class honours degree in Information Systems and Management Studies from the University of Leeds.

 

Research and development

Location Sciences continued to invest substantially in research and development. £341,441 (2020: £471,019) of development expenditure has been capitalised as "Intangible Assets". The Group continued to invest in the development of its location intelligence products.

Financial Risk Management

The Group's financial instruments comprise cash and cash equivalents, trade receivables and payables and borrowings. The main risks arising from the Group's financial instruments are interest rate risk, credit risk, liquidity risk and foreign currency risk.

Interest rate and credit risk - the principal assets of the Group are its cash deposits. These are short-term liquid assets and as a result the exposure to interest rate income risk is not considered significant. The principal focus of the Directors has been to minimise any credit risk in relation to its cash deposits even at the expense of interest income received. Borrowings include financial instruments on fixed interest rate terms and a revolving credit facility at a variable rate. As a result, the exposure to interest rate expense risk is low and no active management of interest rate risk is undertaken by the Board.

Foreign currency risk - the main functional currency is sterling. Throughout 2021, the Company's transactions have primarily been denominated in sterling and the Group has had low exposure to foreign currency risk.

Liquidity risk - the Board's policy is to ensure that sufficient cash and cash equivalents are held on a short-term basis at all times in order to meet the Group's operational needs. The Group does actively raise funds through market placings and other loan facilities.

The Group has been operating at a trading loss due to its stage of development and seeks to ensure that its investments will deliver long term value to shareholders. Liquidity risk is actively managed through regular review of cash requirements of the business in conjunction with the strategic and operational plans for the Group.

 

Substantial shareholdings

As at 29 March 2022 the Directors had been notified of the following holdings representing 3% or more of the issued share capital of the Company:

	Number of ordinary shares	Percentage of issued share capital
Richard Hughes	200,000,000	7.68%
Mahmud Kamani	200,000,000	7.68%
Turner Pope Investments	132,750,000	5.10%
Darron Lee	125,000,000	4.80%

Directors

The Directors, who held office during the year, were as follows:

 

B Chilcott (resigned 25 May 2021)

K Harrison (resigned 25 May 2021)

N Burton (appointed 25 May 2021)

D Rae

M Slade

S Wilkinson (appointed 25 May 2021)

 

The Company maintains director and officers' liability insurance.

Statement of Directors' responsibilities

The Directors acknowledge their responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the 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 apply them consistently;
•	make judgements and accounting estimates that are reasonable and prudent;
•	state whether applicable International Financial Reporting Standards (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 company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group's and the company's transactions and disclose with reasonable accuracy at any time the financial position of the group and the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Directors' interests in shares

The directors held the following interests in Location Sciences Group PLC:

	At 31 December 2021			At 31 December 2020
	Ordinary Shares of 0.1p each	Options over Ordinary Shares of 0.1p each	Warrants over Ordinary Shares of 0.1p each	Ordinary Shares of 0.1p each	Options over Ordinary Shares of 0.1p each	Warrants over Ordinary Shares of 0.1p each
M Slade	26,204,444	15,555,556	40,000,000	6,204,444	15,555,556	-
D Rae	13,666,667	7,333,333	36,250,000	1,166,667	7,333,333	-
S Wilkinson	75,000,000	-	530,000,000	-	-	-
N Burton	67,500,000	-	55,000,000	-	-	-
B Chilcott	-	-	-	2,291,667	-	-
K Harrison	-	-	-	3,010,416	577,778	-

 

The market price of the Company's shares at the end of the financial year was 0.53p.

Disclosure of information to auditor

Each of the persons who are directors at the time when this director's report is approved has confirmed that:

•	so far as that director is aware, there is no relevant audit information of which the Company's auditor is unaware; and
•	that director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the auditor is aware of that information.

Annual General Meeting

Notice of the forthcoming Annual General Meeting of the Company together with resolutions relating to the Company's ordinary business will be given to the members separately.

Reappointment of auditors

The auditors, Hazlewoods LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.

 

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF LOCATION SCIENCES GROUP PLC

Opinion

We have audited the financial statements of Location Sciences Group PLC (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2021, which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Statement of Financial Position, Consolidated Statement of Changes in Equity, Statement of Changes in Equity, Consolidated Statement of Cash Flows, 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's and the parent company's affairs as at 31 December 2021 and of the group's loss for the year then ended;
•	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
•	have been prepared in accordance with the requirements of the Companies Act 2006.

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 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, 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
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the original financial statements were authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant section of this report.

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) we identified, including 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.

Our application of materiality

We apply the concept of materiality in planning and performing our audit, in evaluating the effect of any identified misstatements and in forming our opinion. For the purpose of determining whether the group financial statements are free from material misstatement, we define materiality as the magnitude of a misstatement or an omission from the financial statements or related disclosures that would make it probable that the judgement of a reasonable person, relying on the information would have been changed or influenced by the misstatement or omission. We also determine a level of performance materiality, which we used to determine the extent of testing needed, to reduce to an appropriately low level that the aggregate of uncorrected and undetected misstatements exceed materiality of the group financial statements as a whole.

 

We establish materiality for the financial statements as a whole to be £55,000, which is 1% of the value of the trading subsidiary's total assets. Key audit risks were identified as revenue recognition; internally developed intangible assets; and going concern.

An overview of the scope of our audit

Our audit approach was based on a thorough understanding of the Group's business and is risk based. In arriving at our opinions set out in this report, we highlight the following risks that in our judgment, had the greatest effect on the financial statements.

 

Audit risk	How we responded to the risk
Recognition of revenue
Revenue consists of the value of services provided. Revenue recorded for services is recorded to the extent that the Group has performed its contractual obligations. We therefore identified revenue recognition as a risk that required particular audit attention.	Our audit work included but was not restricted to: - For revenue recognised in the year our audit work include, assessing whether the Group's accounting policy for revenue recognition was in accordance with IFRS 15 'Revenue'; - Sampling service sales in the year and comparing them to usage reports and stated performance dates; - Performing cut-off testing of sales around the year end; and - Analytical review of revenue recognised in the year including variance review.
Internally generated intangible assets
The Group has £537,491 of development costs in the year on the balance sheet. The Group capitalises development costs when the following criteria have been met: The product is technically viable, it is intended for sale, a market exists, expenditure can be measured reliably, and sufficient resources are available to allow completion of the project. When the Board is sufficiently confident that these criteria are met, the costs are capitalised. We therefore identified internally generated intangibles as a risk that required particular audit attention.	Our audit work included, but was not restricted to: - Agreeing intangible asset additions to supporting documentation including employee costs and time spent on projects; - Assessing the nature of the costs being capitalised to ensure they met the required accounting criteria for capitalisation; and - Discussions were held with management to ensure that all criteria for capitalisation had been met and supporting evidence was obtained to corroborate this. - Considering whether there are any impairment indicators and, where these exist, reviewing impairment reviews prepared by management.
Going concern
Trading performance of the Group has previously indicated the existence of material uncertainty, which may cast significant doubt about the Company and the Group's ability to continue as a going concern.	Our audit work included, but was not limited to: - considering new funds raised in the year; - review of forecasts prepared by management to support the going concern assumption; and - review of customer contracts to forecasts.

Other information

The directors are responsible for the 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 and, except to the extent otherwise explicitly stated in our report, 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.

 

Opinion on other matter prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

•	the information given in the Strategic Report and Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
•	the Strategic Report and Directors' Report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of our knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Directors' Report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

•	adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
•	the parent company financial statements are not in agreement with the accounting records and returns; or
•	certain disclosures of directors' remuneration specified by law are not made; 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' Report, 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 the parent 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 the parent 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.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

Based on our understanding of the company and its activities, we identified that the principal risks of non-compliance with laws and regulations related to UK tax legislation and money laundering, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as UK GAAP and the Companies Act 2006. We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate or fictitious journal entries to manipulate the financial performance or financial position of the company.

As part of an audit in accordance with ISAs (UK), we exercise professional judgement and maintain professional scepticism throughout the audit. We also planned and performed audit procedures including:

• Gaining an understanding of the legal and regulatory framework and considering the risk of any acts which may be contrary to applicable laws and regulations, including fraud.

• Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control.

• Evaluation of the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Making inquiries with management including consideration of known or suspected instances of non-compliance with laws and regulation and fraud.

• Testing journal entries and other adjustments for appropriateness and evaluating the business rationale of any significant transactions outside the normal course of business.

• Evaluation of the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Conclusion on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations or through collusion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

A further description of our responsibilities is available on the Financial Reporting Council's website at:www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

 

Use of this report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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.

 

Scott Lawrence (Senior Statutory Auditor)

For and on behalf of Hazlewoods LLP, Statutory Auditor

 

Staverton Court

Staverton

Cheltenham

GL51 0UX

Date: 29 March 2022

 

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2021

Continuing Operations	Note	2021 £	2020 £
Revenue	4	167,940	318,572
Cost of sales		(77,243)	(105,587)
Gross profit		90,697	212,985
Administrative expenses		(801,432)	(565,202)
Other operating income	5	11,267	30,119
Operating loss before exceptional administrative expenses, amortisation and depreciation		(699,468)	(322,098)
Amortisation and depreciation		(216,392)	(179,743)
Exceptional administrative expenses	7	(283,210)	-
Operating loss	7	(1,199,070)	(501,841)
Finance income	8	2	98
Finance costs	8	-	(5,619)
Loss before tax		(1,199,068)	(507,362)
Income tax receipt	12	113,871	166,272
Loss for the year for the financial year from continuing operations		(1,085,197)	(341,090)
Discontinued operations
Loss for the year from discontinued operations	6	(298,161)	(898,178)
Loss for the financial year		(1,383,358)	(1,239,268)

 

Earnings per share
Loss per share - basic and diluted	(0.076p)	(0.24p)

The above results were derived from continuing operations.

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021

	Note	2021 £	2020 £
Loss for the year		(1,383,358)	(1,239,268)
Other comprehensive income
Foreign currency translation loss		(4,718)	(10,475)
Total comprehensive income for the year attributable to owners of the parent		(1,388,076)	(1,249,743)

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021

	Note	2021 £	2020 £
Assets
Non-current assets
Intangible assets	14	537,491	1,141,792
Property, plant and equipment	15	-	5,828
		537,491	1,147,620
Current assets
Trade and other receivables	17	331,559	415,104
Tax asset	12	113,871	166,272
Cash and cash equivalents		4,378,825	1,128,118
		4,824,255	1,709,494
Current liabilities
Trade and other payables	19	(183,175)	(211,607)
		(183,175)	(211,607)
Net current assets		4,641,080	1,497,887
Total assets less current liabilities		5,178,571	2,645,507
Net assets		5,178,571	2,645,507
Equity
Share capital	22	16,298,007	14,280,258
Share premium		20,034,993	19,315,231
Merger relief reserve		11,605,556	11,605,556
Capital reserve		209,791	209,791
Reverse acquisition reserve		(9,225,108)	(9,225,108)
Equity reserve		1,135,319	-
Retained earnings		(34,879,987)	(33,540,223)
Equity attributable to owners of the company		5,178,571	2,645,507

Approved by the Board on 29 March 2022 and signed on its behalf by:

Mark Slade

Director

 

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021

	Note	2021 £	2020 £
Assets
Non-current assets
Investments	16	3,219,896	3,171,622
Current assets
Trade and other receivables	17	132,919	-
Current liabilities
Trade and other payables	19	(76,000)	(19,037)
Net current assets		56,919	(19,037)
Total assets less current liabilities		3,276,815	3,152,585
Net assets		3,276,815	3,152,585
Equity
Share capital	22	16,298,007	14,280,258
Share premium		20,034,993	19,315,231
Merger relief reserve		11,605,556	11,605,556
Equity reserve		1,135,319	-
Retained earnings		(45,797,060)	(42,048,460)
Total equity		3,276,815	3,512,585

 

The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own statement of comprehensive income in these financial statements. The loss after tax for the parent Company for the year was £3,739,912 (2020: £1,808,132).

Approved by the Board on 29 March 2022 and signed on its behalf by:

 

Mark Slade

Director