STATEMENTS OF CONSOLIDATED CASH FLOWS

The unaudited, consolidated Statements of Cash Flows of the Group for the six-month period ended 30 June 2022 and 30 June 2023 are set out below:

NOTES TO THE GROUP INTERIM FINANCIAL INFORMATION

1.    ORGANISATION AND NATURE OF BUSINESS

The interim financial information consolidates the financial information of the Company and:

●     its wholly-owned subsidiaries:

o  Fadel Partners UK Limited ("Fadel UK"), and its wholly-owned subsidiary;

▪      Image Data Systems (UK) Limited;

o  Fadel Partners France SAS ("Fadel France"); and

o  Fadel Partners Canada Inc. ("Fadel Canada").

●     its 99.99%-owned subsidiary, Fadel Partners SAL Lebanon ("Fadel Lebanon").

The Company is a New York Corporation formed in July 2003 and reincorporated in Delaware in January 2014. Fadel Lebanon was incorporated in Lebanon in August 2014, Fadel UK was formed in the UK in January 2015, Fadel Canada was formed in Canada in June 2021, Fadel France was formed in France in February 2020 and IDS was formed in April 1992 in the UK by an unrelated party and acquired on 1 October 2021. Together the entities are collectively referred to herein as the "Group". The Group is headquartered in New York, with a presence in Los Angeles, Montreal, London, Paris and Beirut (Lebanon) and is engaged in providing and servicing its intellectual property rights and royalty management suite of software.

On 6 April 2023, the Company was listed and started trading on AIM, a market operated by the London Stock Exchange plc ("AIM").

2.    LIQUIDITY AND GOING CONCERN

Under Accounting Standards Update Presentation of Financial Statements "Going Concern (Subtopic 205-40)" ("ASC 205-40"), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about the Group's ability to meet its future financial obligations as they become due, within one year after the date that the interim financial information is issued. As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date of this interim financial information. Management has assessed the Company's ability to continue as a going concern in accordance with the requirement of ASC 205-40.

As reflected in the interim financial information, the Group had $8.2 million in cash (31 December 2022: $1.2 million) and negative working capital of $2.6 million as at 30 June 2023 (31 December 2022: negative $3.3 million). For the six-month period ended 30 June 2023, the Group reported a net loss of approximately $1.3 million (30 June 2022: net loss of $1.1 million) and cash used by operating activities of approximately $1.4 million (30 June 2022: cash provided by operating activities of approximately $0.6 million).

The Company has historically funded its operations through the sale of preferred stock and common stock, and lines of credit from shareholders and banks. In the six-month period ended 30 June 2023, the Company raised gross proceeds of £8,000,000 from its successful initial public offering to AIM, including £451,346 ($564,009) by way of a loan from Tarek Fadel (the "Fadel Loan"). Also, during the six-month period ended 30 June 2023 the Company issued 223,289 common shares at a price of £1.44 per share to employees and friends, resulting in a cash receipt of $401,245. This cash was used to part repay the Fadel Loan.

Based on the results above, the Company believes that the Group has enough funds to provide sufficient liquidity for at least twelve months from the date of thee results.

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principle of consolidation

The interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). They include the accounts of the Company, and interest owned in subsidiaries as follows: 99.99% of Fadel Lebanon and 100% of Fadel UK, Fadel France, Fadel Canada and IDS. All significant intercompany balances and transactions are eliminated on consolidation. The non-controlling interest represents the 0.00011% share of Fadel Lebanon owned by outside parties.

Use of estimates

The preparation of the interim financial information in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of the Group's assets and liabilities and disclosure of contingent assets and liabilities, as at the reporting dates, as well as the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.

Fair Value Measurements

US GAAP requires the disclosure of the fair value of certain financial instruments, whether or not recognized on the Statement of Financial Position, for which it is practicable to estimate fair value. The Group estimate fair values using appropriate valuation methodologies and market information available as at each reporting date. Considerable judgment is required to develop estimates of fair value, and the estimates presented are not necessarily indicative of the amounts that the Group could realize in a current market exchange. The use of different market assumptions or estimated methodologies could have a material effect on the estimated fair values. Additionally, the fair values were estimated at year end, and current estimates of fair value may differ significantly from the amounts presented.

Fair value is estimated by applying the following hierarchy, which prioritizes inputs used to measure fair value into three levels and bases categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1:        Quoted prices in active markets for identical assets or liabilities;

Level 2:        Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3:        Inputs that are generally unobservable and typically management's estimate of assumptions that market participants would use in pricing the asset or liability.

Cash and Cash Equivalents

All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents.

Concentrations of Credit Risk

Financial instruments that potentially subject the Group to concentrations of credit risk consist primarily of cash, accounts receivable and unbilled work-in-progress. The Company performs on-going evaluations of the Group's customers' financial condition and, generally, requires no collateral from customers.

The Group maintains its bank accounts with major financial institutions in the United States, Lebanon, the UK, France and Canada. As at 30 June 2023, the Group had cash balances in excess of the Federal or National insured limits at financial institutions in the United States, France and the UK totalling some US$6.75 million out of a total of US$8.23 million cash deposits. Cash amounts held in Lebanon are not insured and as such minimal deposits are held in Lebanese accounts, with payments transferred in country only on an as needed basis. The Company believes the risk is limited as the institutions are large national institutions with strong financial positions.

Accounts receivable, unbilled work-in-progress and allowance for doubtful accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest. Credit is extended based on the evaluation of a customer's financial condition and collateral is not required. Unbilled work-in-progress is revenue which has been earned but not invoiced. An allowance is placed against accounts receivable or unbilled work-in-progress for management's best estimate of the amount of probable credit losses. Management determines the allowance based on historical write-off experience and information received during collection efforts.

Management reviews allowances monthly and past due balances over 90 days are reviewed individually for collectability. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. See Note 5 for more details.

Revenue recognition

Since 1 January 2019, the Group has accounted for revenue recognition in line with ASC 606 "Revenue from Contracts with Customers" and ASC 340 "Other Assets and Deferred Cost."

The Group's revenue is derived from three primary sources:

●     licence fees;

●     customer support; and

●     services.

Revenue is recognized upon transfer of control of promised products and services to customers in an amount that reflects the consideration the Group expects to receive in exchange for those products or services. If the consideration promised in a contract includes a variable amount, for example, overage fees, contingent fees or service level penalties, the Group includes an estimate of the amount it expects to receive for the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur.

The Company determines the amount of revenue to be recognized through the application of the following steps:

●     identification of the contract, or contracts, with a customer;

●     identification of the performance obligations in the contract;

●     determination of the transaction price;

●     allocation of the transaction price to the performance obligations in the contract; and

●     recognition of revenue when or as the Group satisfies the performance obligations.

The Group's offerings fall primarily under four contract categories:

●     SaaS subscriptions;

●     perpetual licences;

●     support; and

●     services.

Licence/subscription and support revenues

License/subscription and support revenues are comprised of fees that provide customers with access to cloud services, software licences, related support and updates during the term of the arrangement.

●     SaaS subscriptions cloud services allow customers to use the Group's multi-tenant software without taking possession of the software. Revenue is generally recognized rateably over the contract term. Substantially all of the Group's subscription service arrangements are non-cancellable and do not contain refund-type provisions.

●  Licence/subscription and support revenues also include revenues associated with term and perpetual software licences that provide the customer with a right to use the software as it exists when originally made available. Revenue from term and perpetual software licences are generally recognized at the point in time when the software is made available to the customer. Revenue from software support and updates is recognized as the support and updates are provided, which is generally rateably over the contract term. The Group typically invoices its customers annually and its payment terms provide that customers pay within 30 days of invoice. Amounts that have been invoiced are recorded in accounts receivable and in unearned revenue or revenue, depending on whether transfer of control to customers has occurred.

Professional Services

The Group's professional services contracts are either on a time and materials, fixed fee or subscription basis. These revenues are recognized as the services are rendered for time and materials contracts, on a proportional performance basis for fixed price contracts or rateably over the contract term for subscription professional services contracts. Other revenues consist primarily of training revenues recognized as such services are performed.

Significant judgments - contracts with multiple performance obligations

The Group enters into contracts with its customers that may include promises to transfer multiple performance obligations such as cloud services, software licences, support, updates, and professional services. Multiple performance obligations are milestones in a contract with a customer to transfer products or services that are concluded to be distinct. Determining whether products and services are distinct performance obligations that should be accounted for separately or combined as one unit of accounting may require significant judgment. The Company accounts for these performance obligations under individual contracts as combined as the supplementary product or services that accompany cloud services and or software licence are tailored and would not have a distinct fair market value.

As the Group's go-to-market strategies evolve, the Group may modify its pricing practices in the future, which could result in distinct products or services that require a standalone selling price.

The Group records amounts billed in advance of services being performed as deferred revenue. Unbilled work-in-progress represents revenue earned but not yet billable under the terms of the fixed-price contracts. Most of these amounts are expected to be billed and collected within 12 months.

Costs of obtaining a revenue contract

The Group capitalizes costs of obtaining a revenue contract. These costs consist of sales commissions related to the acquisition of such contracts that would not have been incurred if these contracts were not won.

For licences, the Group estimated the amortization period based on the remaining expected life of the customer/the term for which it anticipates the contract will remain effective. It anticipates the term due to the project size, terms, complexity and cost of implementation and transition, making it less likely that a client will change vendors for this service.

During the implementation, the Group applied the guidance as of 1 January 2019 only to contracts that were either not completed as of that date, or that had a life of customer that ended after 1 January 2019.

For service and support contracts, the amortization period is based on the duration of the contract in consideration that it would be less difficult and costly for clients to transition to another vendor for continued service.

Amortization periods for customer lives typically vary between 5 and 10 years. The Group elected not to apply the practical expedient for contracts that have a duration of less than one year.

Contract Balances

Contract assets represent the Company's rights to consideration in exchange for services transferred to a customer that have not been billed as of the reporting date. While the Company's rights to consideration are generally unconditional at the time its performance obligations are satisfied, under certain circumstances the related billing occurs in arrears, generally within one month of the services being rendered. The asset, "Unbilled work-in-progress", represents revenues recognized in excess of amounts billed.

Contract liabilities relate to advance consideration received or the right to consideration that is unconditional from customers for which revenue is recognized when the performance obligation is satisfied and control transferred to the customer. The liability, "deferred revenue", represents billings in excess of revenues recognized to the extent the performance criteria has not yet been met.

Research and development

Research and development costs are charged to operations as incurred and include costs associated with the design of software.

Depreciation

Furniture and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to seven years. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations for the period. The cost of maintenance and repairs is charged to operations as incurred. Significant renewals and betterments are capitalized.

Intangible assets - goodwill

Goodwill arises on the acquisition of a business. Goodwill is not amortized. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.

Intangible assets other than goodwill

The Group has three categories of intangible assets:

Brand assets

The Group purchased IDS in October 2021 and with it acquired a long established and respected brand. At the time of purchase, the Group estimated the useful life of the brand assets for financial reporting purposes and recognizes amortization on a straight-line basis over the useful life of the asset, typically 10 years. Purchased brand assets are reviewed for impairment at each reporting date or when events and circumstances indicate an impairment. The Group determined that an impairment charge was not necessary during the period covered by the interim financial information.

Customer relationships

The Group purchased IDS in October 2021 and with it acquired a number of customer relationships. At the time of purchase, the Group estimated the useful life of the customer relationships acquired for financial reporting purposes and recognizes amortization on a straight-line basis over the useful life of the asset, typically 10 years. Purchased customer relationships are reviewed for impairment at each reporting date or when events and circumstances indicate an impairment. The Group determined that an impairment charge was not necessary during the period covered by the interim financial information.

Software and technology assets

The Group purchased IDS in October 2021 and with it acquired a number of software and technology assets.  At the time of purchase, the Group estimates the useful life of the software and technology assets acquired for financial reporting purposes and recognizes amortization on a straight-line basis over the useful life of the asset, typically 10 years. Purchased software and technology assets are reviewed for impairment at each reporting date or when events and circumstances indicate an impairment. The Group determined that an impairment charge was not necessary during the period covered by the interim financial information.

Billed accounts receivable and concentrations of credit risk

As at 30 June 2023, there were three significant customers (defined as contributing at least 10%) that accounted for 69% (33%, 20% and 16%) of accounts receivable.

As at 30 June 2022, there were three significant customers (defined as contributing at least 10%) that accounted for 69% (33%, 20% and 16%) of accounts receivable.

As at 31 December 2022, there were three significant customers (defined as contributing at least 10%) that accounted for 68% of accounts receivable.

Accounts payable and concentrations of credit risk

As at 30 June 2023, there was one significant vendor (defined as contributing at least 10%) that accounted for 40% of accounts payable and accrued expenses.

As at 30 June 2022, there were two significant vendors (defined as contributing at least 10%) that accounted for 41% (26% and 15%) of accounts payable and accrued expenses.

As at 31 December 2022, there were three significant vendors (defined as contributing at least 10%) that accounted for 62% of accounts payable.

Unbilled work-in-progress and concentrations of credit risk

As at 30 June 2023, there were three significant customers (defined as contributing at least 10%) that accounted for 90% (21%, 26% and 43%) of unbilled work-in-progress.

As at 30 June 2022, there were three significant customers (defined as contributing at least 10%) that accounted for 75% (29%, 26% and 20%) of unbilled work-in-progress.

As at 31 December 2022, there were three significant customers that accounted for 88% (17%, 27% and 44%) of unbilled work-in-progress.

Revenue concentrations

As at 30 June 2023, the five largest customers accounted for $2,913,462 of revenue, some 54% of revenue from continuing operations.

As at 30 June 2022, the five largest customers accounted for $4,360,714 of revenue, some 65% of revenue from continuing operations.

Advertising and promotion costs

Advertising and promotion costs are expensed as incurred. These costs totalled approximately $297,362 for the six-month period ended 30 June 2023 (30 June 2022: $221,453).

Segmental reporting

The Group reports its business activities in two areas: Licence/subscription and support revenue (recurring) and professional services (non-recurring), which is reported in a manner consistent with the internal reporting to the Board, which has been identified as the chief operating decision maker.

Income taxes

The Group records deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the Group's consolidated Statements of Financial Position, as well as operating loss and tax-credit carry-forwards. The Group also measures the Group's deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that these benefits will not be realized.

Stock-based compensation

The Group records stock-based compensation in accordance with FASB ASC Topic 718 "Compensation-Stock Compensation". The fair value of awards granted is recognized as an expense over the requisite service period.

Leases

In February 2016, Financial Accounting Standards Board ("FASB") issued guidance Accounting Standards Codification ("ASC") 842, Leases, to increase transparency and comparability among organizations by requiring the recognition of right-of-use ("ROU") assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted FASB ASC 842 effective 1 January 2022.

The Company determines if an arrangement is a lease at inception. If applicable, operating leases are included in operating lease ROU assets, other current liabilities, and operating lease liabilities on the accompanying balance sheet. If applicable, finance leases are included in property and equipment, other current liabilities, and other long-term liabilities on the accompanying balance sheet.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Foreign currency

The Company's functional currency is United States Dollar ("$"). The functional currency of foreign operations is the local currency for the foreign subsidiaries. Assets and liabilities of foreign operations denominated in local currencies are translated at the spot (historical) rate in effect at the applicable reporting date. The Group's consolidated Statements of Comprehensive Income are translated at the weighted average rate of exchange during the applicable period. Realized and unrealized transaction gains and losses generated by transactions denominated in a currency different from the functional currency of the applicable entity are recorded in other income (expense) in the consolidated Statement of Comprehensive Income in which they occur.

The exchange rate used to translate the Lebanese pound ("LBP") into $ for the purpose of preparing the interim financial information has been fixed at $1 = LBP 1,500. The exchange rate used to translate the sterling pound ("£"), Euro ("€") and Canadian dollar into $ for the purpose of preparing the interim financial information uses the average rate for the Statement of Comprehensive Income and Statement of Cash Flows and the historical rate at the end of the reporting period for the Statement of Financial Position.

Starting in November 2019, the banking system in Lebanon imposed currency controls to prevent $ flight from the country. As a result, customer deposits in $ prior to the implementation from these controls were categorized as current accounts. Customers who own current accounts are not allowed to withdraw cash from such accounts, however, they are allowed to make payments from these accounts.

In order to access $ from current accounts, bank customers must ask the bank to convert the withdrawal amount into LBP using an official rate of $1 = LBP 3,900 determined by the Lebanese banking association. On 9 December 2021, the Lebanese Central Bank issued intermediate circular No: 601 which increased the value of $1 from LBP 3,900 to LBP 8,000.

On 1 February 2023, the Lebanese Central Bank issued intermediate circular No: 151 which increased the value of $1 from LBP 8,000 to LBP 15,000.

New $ deposited into the bank accounts after the start of the currency controls, generally from overseas sources, are considered to be external and can be used with minimum restrictions. The Group opened a new external account during the year ended 31 December 2019 to deposit funds transferred from the US and use those funds for operating expenses including payroll.

The official conversion rate set by the Lebanese government changed from $1 to LBP 1,500 to $1 to LBP 15,000 effective 1 February 2023. As at 30 June 2023, the Group had the $ equivalent of approximately $158,800 in external deposits (accounts not subject to same restrictions as Local Currency Accounts ("LCAs")) and $2,100 in LCAs (31 December 2022: approximately $29,700 in external deposits and approximately $7,600 in current deposits).

"Foreign exchange gains / (losses)" include gains on payments in Lebanon at rates of LBP 1,500 per $ as of January 2023 and LBP 15,000 per $ effective 1 February 2023 and losses on the decline in the £ vs $ rates as applied against the capitalized loan (£10,143,073) in Fadel UK in favour of the Company.

The currency exchange rates to the $ as at 30 June 2023 were 0.791 for £, 0.922 for € and for 1.325 CAD. The currency exchange rates to the $ as at 30 June 2022 were 0.824 for £, 0.959 for € and for 1.120 CAD.

Comprehensive income/(loss)

Comprehensive income/(loss) consists of two components:

•      net income/(loss); and

•      other comprehensive income/(loss).

Other comprehensive income/(loss) refers to revenue, expenses, gains and losses that are recorded as an element of shareholder's equity but are excluded from net income/(loss). Other comprehensive income/(loss) consists of foreign currency translation adjustments from those subsidiaries not using the $ as their functional currency.

Statement of cash flows

Cash flows from the Group's operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the Statement of Cash Flows will not necessarily agree with changes in the corresponding balances on the Statements of Financial Position.

New Accounting Pronouncements:

In February 2016, the FASB issued ASU No. 2016-02 "Leases (Topic 842)" ("ASU 2016-02") that requires almost all lessees' operating leases to be recorded on the Statement of Financial Position. The guidance specifies a lessee should recognize a right-of-use asset and corresponding lease liability for those leases classified as operating leases. ASU 2016-02 is effective beginning in fiscal year 2022. Early adoption is permitted. During transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.

In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13 "Financial Instruments - Credit Losses" ("Topic 326"), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable financial projections.

The standard also requires additional disclosures related to significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity's portfolio. Operating lease receivables are excluded from the scope of this guidance. The amended guidance is effective for the Group for fiscal years, and interim periods within those years, beginning 1 January 2023. The Company is evaluating the impact of adopting this new accounting standard on the Group's financial information and related disclosures.

ASU 2020-06 is effective for all other entities aside from SEC-filers, for fiscal years beginning after 15 December 2023, including interim periods within those fiscal years.  SEC-filers are required to adopt for fiscal years beginning after 15 December 2021. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. The Company is evaluating the impact that adopting this new accounting standard will have on the Group's financial information and related disclosures.

The Company is evaluating the impact of adopting recently issued guidance on the Group's consolidated financial condition, results of operations and cash flows.

Effective 1 January 2022, the Group accounts for its leases under ASC 842 "Leases". Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the Statement of Financial Position as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease-term at the rate implicit in the lease or the Group's incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease-term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term. Variable lease expenses, if any, are recorded when incurred.

In calculating the right of use asset and lease liability, the Company elected to combine the Group's lease and non-lease components. The Company excluded the Group's short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election and recognized rent expenses on a straight-line basis over the lease-term.

4.    SEGMENTAL REPORTING

The Group reports its business activities in two areas:

●     subscription and support revenue; and

●     professional services,

which are reported in a manner consistent with the internal reporting to the Board, which has been identified as the chief operating decision maker.

While the chief operating decision maker considers there to be only two segments, the Group's revenue is further split between "licence subscriptions and support" (recurring in nature) and "professional services" (non-recurring) and by key product families (IPM Suite and Brand Vision) and hence to aid the readers understanding of our results, the split of revenue from these categories is shown below:

5.    ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

The accounts receivable balance as at 31 December 2022 was $1,863,394 whilst at 31 December 2021 was $3,245,833.

6. EARNINGS PER SHARE

The Group reports basic and diluted earnings per share. Basic earnings per share is calculated by dividing the profit attributable to common Shareholders by the weighted average number of Shares outstanding during the period.

Diluted earnings per share is determined by adjusting the profit attributable to Shareholders by the weighted average number of Shares outstanding, taking into account the effects of all potential dilutive shares, including warrants and Options.

Due to the Group having losses in all years presented, the fully diluted loss per share for disclosure purposes, as shown in the statement of consolidated comprehensive income, is the same as for the basic loss per share due to the anti-dilutive nature of the calculations.

7. FURNITURE AND EQUIPMENT

Furniture and equipment consist of the following:

The total depreciation charge in 1H23 was $7,050, compared to $nil in 1H22.

8. CONTRACT COSTS

The Group applied ASC-606 as at 1 January 2019 to contracts that were either not completed as of that date, or that had a life of customer that ended after 1 January 2019. This resulted in the capitalization of $283,106 in commission expenses incurred prior to, and during the year ended 31 December 2019. Accumulated amortization as at 30 June 2023 was $1,259,120 (31 December 2022: $1,093,968, 30 June 2022: $862,997). Amortization periods for customer lives typically vary between 5 and 10 years. The Group elected not to apply the practical expedient for the Group's contracts that have a duration of less than one year.

Contract costs consist of the following:

9. EQUITY

The Company has authority to issue 28,830,991 Shares, consisting of 20,000,000 Shares of $0.001 par value per Share and 8,830,991 Preferred Shares of $0.001 par value per Preferred Share.

On 2 April 2023 the outstanding preferred shares of MEVP, BBEF, iSME and B&Y were converted into common shares in accordance with the terms of their agreements pursuant to the IPO. Impact Fund by MEVP Holding SAL converted their Series A-2, B and B-1 preferred shares into 5,496,821 common shares, BBEF (Holding) SAL converted their Series A-1 preferred shares into 1,068,837 common shares, iSME SAL Holding converted their Series A-1 preferred shares into 580,383 common shares and B&Y Division One Holding SAL converted their Series B-2 preferred shares into 406,268 common shares.

On 6 April 2023 the Company announced the admission of its entire issued share capital to trading on AIM, a market operated by the London Stock Exchange. In connection with its initial public offering the Company raised gross proceeds of £8.0 million. On 2 May 2023, the Company announced the issuance of 223,289 new depositary interests over common shares at a price of £1.44 per share, raising $401,245.

As at 30 June 2023 the Company had 20,191,292 common shares issued and outstanding.

Warrants:

The Group issued warrants to investors to purchase various classes of stock as follows:

10. RELATED PARTIES

NOTES PAYABLE:

In each of January 2020, January 2021, January 2022 and January 2023, the Group entered into demand note agreements totalling up to $100,000, up to $135,000 up to $75,000 and up to $100,000, respectively, with a Director in Fadel Lebanon for facilitating banking transactions and working capital purposes in Lebanon. The notes call for payment of interest at 0% per annum compounded annually. The outstanding balance of all such loans was $75,000 and $100,000 as at 31 December 2022 and 30 June 2023 respectively. The remaining £100k will be fully paid prior to 31 December 2023.

On 2 April 2023, Tarek Fadel and the Company entered into a loan agreement whereby Mr. Fadel agreed to advance a loan (the "Fadel Loan") of £451,346 to the Company equivalent to $564,009. The Fadel Loan is unsecured and bears no interest or fees. The Company made a loan repayment of $401,613 on 28 April 2023 after the issuance of 223,289 new depositary interests ("New Shares") over common shares at a price of £1.44 per share (the "Placing"). The remaining balance on the Fadel Loan is repayable only as and when, following Admission (and excluding the issue of the New Shares in the Placing), the Company issues new shares at or above the placing price.

11. LINE OF CREDIT - BANK OF AMERICA

On 3 April 2023, $300,000 of the $1 million line of credit between the Company and Bank of America, N.A. was repaid leaving an outstanding balance of $700,000 as at 30 June 2023. On 11 May 2023, the line of credit between the Company and Bank of America, N.A. was extended until 31 May 2024. Subsequent to 30 June 2023 the facility was repaid in full on 26 September 2023.

12. LEASES

On 1 March 2019 the Group entered into a 36-month lease for the 2^nd and 6^th floor offices in Beirut, Lebanon. The monthly lease payment is $4,902.

On 1 July 2021 the Group entered into a 12-month lease for the 7^th floor office in Beirut, Lebanon. The monthly lease payment is $2,960.

On 1 May 2021, the Group entered into a 2-month lease for an apartment in France, at a monthly lease payment of €1,600 per month, and extended it to a 12-month lease from 1July 2021 at a monthly lease payment of €1,700 per month. During 2022 the total lease payments was €20,900.

The Lease was terminated end of March 2023.

In January 2023, the Group entered into a 12-month lease for a workspace office in France. The total annual lease payment was €920 for a pack of 200 hours valid for one year.

On 1 March 2022 the Group entered into a 12-month lease with Convene for a workspace office in New York (USA). The monthly lease payment is approximately $1,647. The lease has been renewed for a further 12 months.

On 1 February 2023 the Group entered into a 12-month lease with Serendipity Labs, Inc. for a workspace office in Rye New York (USA). The monthly lease payment is approximately $597.

On October 2022, the Group entered into a 12-month lease for a workspace office in the UK. The monthly lease payment is £650.

On 1 March 2022, the Group entered into a 2-year renewal operating lease agreement for the 2^nd and 6^th floor office in Beirut. The initial present value of these future lease payments was determined to be $102,091. The monthly payment is $4,902.

The current and future minimum lease payments, exclusive of related costs, are approximately as follows:

On 1 July 2022, the Group entered into a 2-year renewal operating lease agreement for the 7^th floor office in Beirut. The initial present value of the future lease payments was determined to be $67,426. The monthly payment is $3,238.

The current and future minimum lease payments, exclusive of related costs, are approximately as follows:

13. SUBSEQUENT EVENTS

The withholding tax amount associated with the acquisition of IDS that was paid in June 2023 for GBP 518,898 will be reclaimable, by 30 September 2024.

Following receipt of two notices to exercise warrants over a total of 121,925 common shares of $0.001 in the Company on a net exercise basis, the Company concluded the exercise, resulting in the issuance of 39,958 Common Shares.

The Bank of America loan facility was repaid in full on 26 September 2023.