CHAIRMAN'S STATEMENT

FOR THE SIXTH MONTH PERIOD ENDED 31 DECEMBER 2022

I am pleased to present the interim unaudited accounts for the six-month period ended 31 December 2022 for Iconic Labs PLC and its subsidiaries (together, "Iconic "or the "Company"). 

Details surrounding the appointment of joint administrators on 4 June 2021 and suspension of the trading of Iconic's shares on 7 June 2021 can be found in the Audited Annual Report and Accounts for the year ended 30 June 2022.

With the administration still in effect on 1 July 2022, the Company continued (i) negotiating settlements to all outstanding disputes; (ii) finalizing a CVA with the Joint Administrators and the critical, preferential, secured, and unsecured creditors; and (iii) agreeing to financing terms with European High Growth Opportunities Securitization Fund ("EHGOSF") to support the Company upon exiting from administration. This process took until August 2022.

Under the terms of the 23 August 2022 Settlement Deed, the Company had to issue £750,000 in convertible notes ("Notes") to EHGOSF and £750,000 in convertible notes to Linton Capital LLP ("Linton"), which the Company did pursuant to the terms of the Deed of Issuance and Subscription in respect of notes convertible into new shares also dated 23 August 2022 (the "Deed of Issuance").

EHGOSF and Linton were each issued 150 Notes with a nominal value of £5,000 per Note. The Notes have a maturity date that is 18 months from the date of the publication of a prospectus. EHGOSF and Linton can each only convert 15 Notes, or £75,000 in nominal value, per month, for a total of 30 Notes and £150,000 in nominal value per month. The number of shares to be issued pursuant to a conversion notice shall be determined as the nominal value converted divided by the conversion price where the conversion price shall be the higher of (a) the nominal value of the Iconic shares; or (b) 90% of the lowest VWAP of the Iconic shares during the 15 trading days preceding the date of the conversion notice.

During the Creditors' Meeting held on 22 September 2022, the unsecured creditors voted to discount all of their claims against Iconic by 75% and exchange those claims into new shares at a rate of £0.00016/share resulting in the necessity of issuing 1,674,130,609 shares to the unsecured creditors under the CVA. The Company anticipates issuing these shares in the first half of 2023.

On 28 September 2022 Iconic entered into the Financing Facility with EHGOSF. The Financing Facility can be drawn down in up to 14 sequential tranches over a maximum period of 18 months and each Note has a duration of 24 months as from its date of issue. 

Under the Financing Facility, EHGOSF will provide Iconic with up to £3 million by subscribing for up to 3,000 Notes, each with a par value of £1,000, convertible into new ordinary shares in the Company, with Warrants attached.

For the period ended 31 December 2022, Iconic had drawn down a total of £550,000 in three tranches under the Financing Facility (minus £30,000 from the first tranche of £250,000 for fees to EHGOSF) and issued a corresponding 550 Notes along with warrants.

The funds that the Company drew down from EHGOSF were used to meet its obligations under the CVA as well as pay operational expenses.

On 21 October 2022, the first payments due to critical and preferential creditors under the CVA were paid as scheduled. In addition, on the same day, the challenge period to the CVA expired without any challenges having been made. As such, the CVA was final, and the Joint Administrators submitted the requisite filings with Companies House to this effect.

On 29 October 2022, the second payments due to critical and preferential creditors under the CVA were made as scheduled.

On 8 November 2022, the Joint Administrators submitted their Final Report to Companies House and the High Court of Justice, Business & Property Courts seeking to exit the administration and return control of the Company to the Directors.

On 28 November, the third payments due to critical and preferential creditors under the CVA were made as scheduled.

On 29 November, Companies House and the High Court of Justice, Business & Property Courts confirmed and acknowledged the Joint Administrators' Final Report such that the administration ended, and control of the Company was returned to the Directors.     

On 28 December 2022, the fourth payments due to critical and preferential creditors under the CVA were made as scheduled.

Post period end

Following, inter alia, the publication of the Company's Audited Annual Report & Accounts for the years ended 30 June 2021 and 30 June 2022, the suspension of the listing in the Company's shares was lifted on 24 January 2023 and trading resumed on the main market of the London Stock Exchange.    

Between 1 January 2023 and 31 March 2023, the Company has drawn down an additional £300,000 in two tranches under the Financing Facility and issued a corresponding 300 Notes along with warrants.

Since trading has resumed, EHGOSF has converted £450,000 of Notes under the Financing Facility resulting in the Company issuing a total of 5,701,668,621 new shares to EHGOSF, or 15.24% of the shares issued and outstanding when the Company resumed trading. In addition, the Company has also issued 3,458,946,078 warrants to EHGO.

On 28 January, the fifth payments due under the CVA were made as scheduled, on 28 February 2023, the sixth payments due under the CVA were made as scheduled, and final payments of £65,000 shall be made in April at which time the Company can begin the process of issuing as scheduled. A final payment of £15,000 is due under the CVA on 28 April 2023 at which time the Company can begin the process of issuing the 1,674,130,609 shares to the unsecured creditors thereby meeting all its obligations under the CVA, and the CVA will then be closed.   

Going Concern Assessment

The Board of Directors has carefully considered the financial position of Iconic Labs regarding the events during the six months ended 31 December 2022, with particular focus on the new Financing Facility with EHGOSF, its obligations under the Settlement Deed, and its obligations under the CVA. We have concluded that Iconic Labs remains a going concern.

PRINCIPAL RISKS AND UNCERTAINTIES FOR THE SIX-MONTH PERIOD

FROM 1 JANUARY 2023 TO 30 JUNE 2023

The following risks are considered by the Board to be the most significant to the business:

Revenue and Profitability Risk

Iconic has only recently exited administration and remains at an early stage of development with only one asset, GSN. Since the balance sheet date, it has had to rebalance all previous activities and is focusing on compliance with the terms of the CVA.   

Company Voluntary Arrangement Risk

While Iconic has exited administration, it continues to have payment obligations under the CVA that it needs to make and also must issue shares to the unsecured creditors. In the event the Company's trading is suspended, then there is a risk that EHGOSF will cease financing, the Company will be unable to meet its payment obligations under the CVA, and the Company would have to examine alternative financing strategies or undergo liquidation proceedings should it not be able to comply with its financial obligations under the CVA.

There is also a risk that Iconic will not be able to publish a prospectus such that it will be able to issue the requisite shares to unsecured creditors under the CVA. 

Key Executive Risk

Given the wholesale change in the Board of Directors and executive team in February and March of 2021, coupled with the complexity of the restructuring, administration, CVA, and relisting processes, there is a risk of Iconic not being able to retain key executives, which could adversely affect Iconic's operating and financial performance.

Retaining and motivating key executives, particularly those who worked diligently with the Joint Administrators, EHGOSF, and the various parties involved in disputes with the Company, to successfully restructure Iconic is a critical component of the future success of the business. Without the participation of these key executives, it is highly unlikely that the execution of the CVA, continued trading of the Company's shares, financing with EHGOSF, and implementation of its strategic vision will be implemented. The departure of any of Iconic's executive officers would have a significant negative impact on its operations and likely result in the liquidation of Iconic.

Funding Risk

Iconic is at an early stage of development, with only a single asset, and is not currently profitable. While Iconic has entered into a £3million financing facility with EHGOSF there are numerous conditions to the financing that if not met will result in EHGOSF suspending or terminating its financing of the Company. In the short term, the highest risk affecting this financing from EHGOSF is getting a prospectus published. In the event the prospectus cannot be published, the likelihood of future financing from EHGSOF or any other financing partner will be difficult if not impossible. 

Market Risk

The online media and publishing, technology, artificial intelligence, and data gathering, processing, and analytics sectors are continually changing and have a significant amount of competition. Iconic has identified various acquisition targets, but until such time as the prospectus is published, the CVA obligations are met, and Iconic's financing situation can correspondingly be solidified, it is difficult to predict the likelihood of these acquisition targets remaining interested. Until such time, Iconic will also be materially affected by the actions of competitors, partners and suppliers. As a Company at an early stage of development, Iconic's competitors could offer superior scale and put pressure on prices which could affect Iconic's revenues and profit margins.

Global Economic Risk

The online media and publishing, technology, artificial intelligence, and data gathering, processing, and analytics sectors are susceptible to adverse developments in the global economy and particularly the UK economy where Iconic is located. The continued uncertainty over Brexit and risk of COVID resurging, for example, may continue to delay spending by potential clients which may have a negative effect on the demand for services which could affect Iconic's revenues.

Potential Unrecorded Legacy Liabilities

As evidenced by the administration and disputes involving various key parties, there were significant legacy issues that predated the new management's arrival when they took control of the business. Following the exit from administration and the entering into of confidential settlement agreements with various parties, it is highly unlikely that there are any material unknown liabilities of Iconic.

Financial Risk Management

The Board monitors the internal risk management function across Iconic and advises on all relevant risk issues. There is regular communication with internal departments, external advisors and regulators. Iconic's policies on financial instruments and the risks pertaining to those instruments are set out in the accounting policies in note 1 of the financial statements.

CHAIRMAN'S STATEMENT AND DIRECTORS' REPORT

The directors present their report together with the unaudited interim financial statements of Iconic Labs PLC and its subsidiaries for the period ending 31 December 2022. 

Directors

The Directors as of 31 December 2022 were:

Brad Taylor

David Stybr

Marija Hrebac

Directors' Responsibilities

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

Company law requires the directors to prepare financial statements for each financial period.  Under that law, the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the United Kingdom.  The financial statements are required by law to give a true and fair view of the state of affairs of the Company and the Group and of the Group's results for that period. 

In preparing these financial statements, the directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgments and estimates that are reasonable and prudent;

·      state whether the financial statements comply with IFRS as adopted by the United Kingdom; and

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

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group 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 hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Bradley Taylor

On behalf of the Board

Date 31th of March 2023