Intouch Insight Ltd. Annual Report 2022

Plain-text annual report

i - n e x u s G o b a l l p l c A n n u a l R e p o r t 2 0 2 2 Annual report and accounts 2022 i-nexus Global plc i-nexus, we believe Welcome to our 2022 Annual Report transforming At Strategy, our customers take control and ensure that every action, measurement and decision contributes to achieving organisational goals that by digitally Contents STRATEGIC REPORT 2022 Highlights Company Overview Chairman’s Statement Chief Executive Officer’s Report Chief Financial Officer’s Report Principal Risks and Uncertainties Stakeholder Engagement CORPORATE GOVERNANCE Board of Directors Corporate Governance Statement Directors’ Report FINANCIAL STATEMENTS Independent Auditor’s Report Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Statement of Cash Flows Note to the Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Company Information 01 02 04 06 09 11 17 22 23 28 34 40 41 42 43 44 45 46 47 76 i-nexus Global plc 2022 Highlights: Growing sales momentum through FY22 into FY23 • Secured record number of new customers in year, winning nine new logos (FY22: four) and delivering £30k of additional MRR. Three further logos secured this ﬁnancial year. New MRR (£000) 01 Renewals % • New deals business were deliberately positioned with the expectation of future growth through FY23, several account expansions have already been delivered in Q1 of this year totalling £8k MRR with a number of other well progressed opportunities being explored Continued development of our Go to Market strategy • Growing pipeline generation with marketing providing record levels of prospect engagement, reach and therefore leads. Predictable and repeatable conversion rates of leads into deals • Successfully delivered on our managed trials product roadmap, a key to securing a reliable number of deals, with over 50% of our current pipeline in active trials Deepening relationships with our customers • Renewed over 90% of our customers, a considerable improvement on the prior year, and expanded the use of our software within four existing accounts (FY21: two) A solid foundation for further growth • Strategic expansion of our product development, customer engagement and marketing teams to ensure we have suﬃcient depth to properly service both our existing customer base and future prospects Our expanding global customer base New customers United States (4) Germany (2) Belgium Finland Jamaica Expansions Germany (2) United States Norway Consolidated Financial Statements for the year ended 30 September 2022 02 STRATEGIC REPORT: Company Overview i-nexus provides strategy software to the world’s largest organisations who want to achieve more of their goals with less eﬀort, using i-nexus as the place to plan, execute, and track their strategic, transformational, and operational eﬀorts so that they can deliver the change they want to see. Our purpose We’re driven by our passion to help organisations thrive and deliver the change they want to see. Through our intuitive, powerful strategy software, we align everyone and everything in an organisation to help our customers achieve more of their goals with less eﬀort. Who we are Founded in 2001, i-nexus was created from a vision that a learning culture is for organisational the success. foundation Beginning with operational excellence at the core of the software, industry- leading practitioners drove adoption in global organisations, soon leading to key Hoshin Kanri functionality – the x-matrix and bowling chart. In 2018 the company was admitted to AIM, marking a key milestone in its mission to help organisations thrive and deliver change. Today, i-nexus is a G2 award-winning software provider, powering strategies around the world across manufacturing, industrial engineering, life sciences, and automotives. What we value To ensure we live and breathe our purpose, i-nexus believes that everyone has their PLACE. Every i-nexus employee represents these values, and it’s what helps us to support our customers in delivering the change they want to see: • Partnership We work with the spirit of partnership, seeing our colleagues, customers, and vendors as part of i- nexus, working with a common cause to learn and succeed. • Leadership We act with courage to lead by example to shape a better future. • Agility We strive for early and continuous delivery, breaking the complex down to the simple so that we can change with our customers. • Curiosity We are open minded and actively understand, explore, and try new approaches, with data and learning at the heart of our eﬀorts. • Empathy We appreciate that there is a person behind every organisation, so we take extra eﬀort to understand and support customers, and our vendors. colleagues, The problem we solve A survey of more than 400 global CEOs found that the ability to execute their goals – both strategic and operational – is the number one challenge facing leaders. This reality is crystallized with Gartner’s estimates that two thirds of well formulated strategies in their delivery phase. fail At the heart of the problem is a lack of a single source of truth. i-nexus Global plc i-nexus Global plc Organisations don’t have a place where the entire business can plan goals, execute portfolios of projects tightly aligned to these goals, and not only track, but measure, report, and replicate this across the organisation to create a culture of achievement. Getting everyone and everything focused and collaborating on goals isn’t easy. This iceberg exists for leaders in every business. Underneath the surface are issues in building shared purpose, aligning operational work to strategic portfolios, replicating best practices, bringing business and operating systems to life, over-engineering, and proving the impact and beneﬁts of programs and projects. The misalignment, planning silos, disconnected delivery of work, and is manual tracking and reporting worsened with the use of a patchwork of tools not ﬁt for purpose. Taking a strategy-to-action is hard. How we solve it for from solutions With the whole organisation, to i-nexus helps customers c-suite, embrace the challenges of strategy execution and operational excellence. shopﬂoor • Strategy execution i-nexus helps everyone focus and collaborate on delivering the strategy. Designed for strategy oﬃces and transformation teams, i-nexus links plans, portfolios, and performance metrics for a simpler strategy execution experience whether using Hoshin Kanri, Balanced Scorecard, or a custom business system. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 03 value • Operational excellence i-nexus helps businesses unlock repeatable from strategic operations. Built for PMOs and Lean, Six Sigma, and process professionals, i-nexus ensures goals across portfolios, programs, and projects are executed according to their approach, powering Kaizen, Lean, Six Sigma, project management, process risk governance, and custom operating systems. and • Strategic portfolio management i-nexus strategic portfolio management tools help leaders group and deliver projects and programs in portfolios across growth, CAPEX, transformation, Mergers & Acquisitions, Environmental- Social-Governance, and operational excellence. revenue How our tools help i-nexus gives its users a canvas for planning, executing, and tracking goals across the entire organisation in an aligned and transparent manner. • Plan Wherever in the organisation, our x- matrix, balanced scorecard, and portfolio tools support well-balanced, transparent plans. • We wrap around customers i-nexus wraps around how an organisation wants to deliver their goals. From bringing to life a business or operating system, to adapting to their diﬀerent locations, languages, products, and processes, i-nexus gives customers exactly what they want, how they want it, all inside one solution. • We support i-nexus customers rely on a G2 award- winning team with over ﬁfteen years of experience in strategy execution, Hoshin Kanri, Lean, and project management to overcome challenges, spot gaps, and accelerate success. • We integrate i-nexus is the single source of truth, project management connecting software, ERP, CRM, and other critical systems to give organisations a total view of what matters to delivering results, moving from patchwork technology slowing success. them away • Execute Whether controlling the portfolio, or contributing to a project, i-nexus gives user vast tools to align everyone to plans, ward oﬀ non-strategic disruptions, and build a stronger execution culture. • Track Whatever metric, goal, countermeasure, or team-focusing scorecards are needed, i- nexus makes it easy to enter data and build a crisp picture of performance, enabling the businesses to readily change direction. Why i-nexus? Every day, manufacturers, industrial engineers, automotives, FMCGs and beyond use i-nexus for their strategic, transformational, and operational goals so that they can deliver the change they want to see in the world. With 200,000+ strategic goals being delivered inside i-nexus, our customers choose us to help align their goals, engage in strategy teams execution, power their systems, and drastically reduce the time once spent on manual reporting. their Consolidated Financial Statements for the year ended 30 September 2022 04 STRATEGIC REPORT: Chairman’s Statement “We are back winning new customers and, although initial engagements are smaller, the opportunities to grow these accounts following successful initial deployments is, in many cases, contractually assured. New customers, growth from existing customers and improving partner sales all underpin our forecast for 2022/23. In challenging market conditions we have broadly achieved our aims for 2021/22 and look forward with optimism for the current year.” to the global pandemic. In my 2020/21 Chairman’s Report I commented on immediate challenges that i-nexus faced delivering its Business Improvement and Strategy Deployment large software enterprises beginning to recover from the Few commentators predicted that 2021/22 would be characterised by even greater economic and political uncertainty. Businesses such as ours beneﬁt from our customers looking forward with optimism and implementing clear long-term strategies across complex organisations. To do so successfully requires certainty and stability which are not conditions which currently prevail across the global economy. Nonetheless, against this challenging sales environment, the team delivered a record number of new logo wins and closed this year with a clear cash runway. While creating a challenging sales environment in the short-term, these have macro-economic highlighted the need for global strategy solutions across large enterprises. Issues such as faltering supply chains, changes i-nexus Global plc changing distribution models, price inﬂation, social and environmental factors, and changing working practices are just a few examples of factors inﬂuencing large enterprise strategies. Enterprises have learnt quickly that uncertainty is the new norm and that to succeed their strategies must be deployed faster, with more agility and that tools such as i-nexus can help them to do so. Last year our three strategic objectives were to manage our cash resources as eﬀectively as possible, while continuing to develop our i-nexus platform and drive our developing sales pipeline as hard as possible with our limited resources. We have not needed further working capital support from our shareholders and, although cash is tighter than we originally forecast, we remain conﬁdent given our current projections for FY23 that we will not require further working capital to deliver on our growth plans. If our ambitions change through accelerating sales or unequivocal demand for new product the Board will of course consider all options to fund such growth. It is the Board’s responsibility to ensure that i-nexus takes full advantage of the opportunities available to it. It is also incumbent upon the Board to ensure that i-nexus remains at the forefront of its chosen market. We will ﬁnd the necessary resources, within our limited overhead, to ensure we are looking forward with our customers and market analysts to ensure we can provide broader capability, unlocking a larger and potentially more dynamic market. Net retention is of course central to the success of any subscription business and we are pleased that this has seen a marked improvement in the year to 98% (FY21: 74%) (measured by the total of on-going MRR at the year-end from clients in place at the start of the year as a percentage of the opening MRR from those clients). We are conﬁdent that the positive increase we have seen is sustainable over the next 12 months. Importantly we are back winning new customers initial engagements are deliberately smaller, these the opportunities to grow although and, STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 05 is, accounts following successful initial deployments in many cases, contractually assured. New customers, growth from existing customers and improving partner sales all underpin our growth aspirations for 2022/23. In challenging market conditions we have broadly achieved our aims for 2021/22 and look forward with optimism for the current year. As we look forward it is clear that our current market capitalisation has little or no relationship to the underlying value of the business, its customer base, its well established technology or its ﬁnancial position. It is a reﬂection of the challenges that many small businesses quoted on AIM currently have. The Board will seek ways to reengage with the market to help awaken a greater appreciation of the value of the business, while considering all options in the best interest of all stakeholders. The management team has faced tough times over the last few years and have remained at the helm throughout, never faltering in the most harsh circumstances. During the year, Alyson Levett, our CFO, decided to step down to pursue her career as a pluralist non- executive director. She has been an outstandingly committed executive director, steering the business through its IPO and subsequent challenging economic times. I would like to thank Alyson for her contribution to the business and wish her well with her future endeavors. We are delighted to have found an exceptional CFO to take up the role, Drew Whibley, joining us from his role as Group Finance Manager at LSE listed software business Aptitude Software Group plc. Drew has ﬁtted into the management team with ease and has already proven a fantastic asset to us and we are delighted to have him on board. In addition I’d like to thank all our employees for their continued commitment to the business, their hard work and dedication. Without downplaying the obvious challenges ahead in any way, I look forward to the coming years with increased optimism underpinned by a small but exquisitely formed team, a growing market, a sound product, blue chip customers and “baked in” account growth. Richard Cunningham Chairman 6 January 2023 Consolidated Financial Statements for the year ended 30 September 2022 06 STRATEGIC REPORT: Chief Executive Oﬃcer’s Report “I am pleased to report on a year of solid progress at i- nexus, in which we delivered on all three areas of our strategic plan, resulting in growth in new business wins, a more stable cash runway, and greater clarity on our future direction. The sales successes in the year combined with the signiﬁcant improvement in customer renewals, enabled us to achieve our target of double- digit underlying MRR growth in the year.” Overview I am pleased to report on a year of solid progress at in which we i-nexus, delivered on all three areas of our strategic plan, resulting in growth in new business wins, a more stable cash runway, and greater clarity on our future direction. The sales successes in the year combined with the signiﬁcant improvement in customer renewals, enabled us to achieve our target of double-digit Underlying MRR growth in the year. The successful reignition of our marketing activities was key to building a strong sales pipe which we are conﬁdent will continue to deliver. We proved during the year we could convert these deals into new wins, and quickly demonstrate value to our customers, ensuring higher levels of renewals and expansion deals. The eﬀorts we made to re-build our sales momentum mean we are continuing to deliver a consistent volume of well veriﬁed leads each month and currently have trial implementations in progress, providing visibility on the pipeline into the new year. further ﬁfteen a For the i-nexus workbench product, we invested heavily in those areas that simplify use for quicker and easier adoption which has provided much deeper engagement during both the customer sales deployment. journey and Trading We secured a record number of new customers in the year, winning nine new logos (FY21: four), which along with the existing account upsells and lower levels of churn, delivered an exit Underlying MRR for the year uplift of 12% to £250k (FY21: £223k, Reported MRR £235k). As is typical with our new customers, each of these wins services limited business areas or teams within the customer and so each carry substantial expansion opportunities. We renewed over 90% of our customers, a considerable improvement on the prior year, and expanded the use of our software within four existing accounts (FY21: two). The improvement in renewal rates reﬂects the rigour and routine we have brought to the review of accounts with our customer stakeholders, and the release of enterprise software budgets following the freeze experienced during Covid times. Fundamental to these successes has been our increased understanding of where we sit within the competitive market landscape. We are now clearer on our diﬀerentiators and conﬁdent our platform is the best in class to level strategy support enterprise execution – a view conﬁrmed to us by our prospects. We continue to reﬁne our sales approach to ensure we are best placed to capture this growing market. Areas of improvement include streamlining the onboarding process to under 30 days, ensuring ROI and customer value are front and centre of the sales discussion and simpliﬁcation of our initial product demonstrations, particularly around our key diﬀerentiator: our ability to deliver Hoshin Kanri methodology. We continue to be approached by a range of potential partners and will consider ways to capitalise on this interest in the year ahead. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 07 Market opportunity All businesses set goals, plan how to deliver them and track performance. The challenge is if they can do this at pace, with insight and high levels of visibility complex ecosystems where i-nexus’ software delivers considerable value. across their and Our software category – Strategy (SEM) – Execution Management continues gain to evolve momentum as companies accelerate digitalising mission-critical processes in this post pandemic world. Faced with market uncertainty, this “new normal” future requires companies to increase dynamically responsiveness managing plan; something that we believe simply cannot be achieved on spreadsheets and other conventional productivity tools. strategic their by The growing importance of the SEM market has been acknowledged by leading analysts including Gartner Research, with SEM now considered an integral part of the new Strategy Portfolio Management (SPM) software category. We have seen greater demand for strategy execution post- Covid, in response to the “no normal” business environment. And while we have seen a higher level of smaller software providers entering the market, targeted oﬀerings, we with SME continue to dominate the enterprise level part of the market. Our competitive strength an seeing increased We are sophistication in our market, with prospects frequently now coming to us through with very well capability requirements, having pre- evaluated the i-nexus competition on a matrix of criteria. thought against our Hoshin leading We continue to see that i-nexus has several clear advantages in strategy execution against SPM vendors: the Kanri market capabilities built into our platform, including the conﬁgurability and ﬂexibility of the platform; the depth of functionality including powerful strategic planning and performance management capabilities that complement portfolio management features; and proven enterprise readiness. X-Matrix; In addition to the above, i-nexus’ customers beneﬁt from insight gained from over ﬁfteen years of market experience in strategy execution. Our experience and long-standing in the industry also mean our software is calibrated to integrate smoothly into an enterprise’s existing strategy processes. People We have a talented, committed team at i-nexus, all pulling in the same direction and now delivering better results. The results this year are even more impressive when taking into account the considerably reduced size of the team. Each person has gone above and beyond to grow sales momentum, develop our products and deepen customer relationships, and the Board would like to once again thank them all for their commitment. and During the year we spent time on various activities to help strengthen our team and ensure we have the right qualities and shared purpose to take us forward. These included deﬁning our Vision introducing Values, improvements to our employment packages, even more rigorous hiring processes and the select expansion of our teams to ensure we had suﬃcient depth to properly service our existing customer base. As a result of these measures, we have a strong, cohesive team, working together to deliver on our growth plan. Consolidated Financial Statements for the year ended 30 September 2022 08 STRATEGIC REPORT: Chief Executive Oﬃcer’s Report continued Being a software/product company, we continually look at product innovations in our space. This last year and next year are no diﬀerent. We have a number product candidates, currently being assessed for customer validation, that we hope to take through to a minimal viable product in the year ahead. potential of Current Trading and Outlook Following the growth in MRR and our careful management of the impacts of cost inﬂation on the business, we continue to have clear visibility of our cash runway. The growing in strategy interest software, the relaxation of enterprise software budgets, the enhancements we have made to our products and our increased sales and marketing skills, all combine to provide us with conﬁdence in our outlook and ability to deliver another year of double digit MRR growth. Simon Crowther Chief Executive Oﬃcer 6 January 2023 Strategic focus for the year ahead Our strategy for the current year is focused on three main programs of work: 1. To accelerate the landing of new logos – which we will achieve though continuing to reduce friction in buying i-nexus and enhancing the trial experience. 2. Prove our ability to expand within accounts – with nine new logos secured in FY22, proving we can grow these accounts is key. We are launching an updated set of value measures and increased customer marketing and forums. 3. Improve the customer experience within our Workbench product – developing key insights and output screens as requested by customers. We believe through continued focus on these programs, we will drive the success of the business. Innovation This year and next year we will continue to focus our innovation eﬀorts on increasing the usability of our platform and the delivery of valuable insights. Through this we intend to increase growth from existing customers which is a key component to our land and expand sales model; providing focus on giving the best user experience, eliminating waste and delivering valuable insight. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 09 STRATEGIC REPORT: Chief Financial Oﬃcer’s Report “During the year, we delivered on a key ﬁnancial objective, to become self-suﬃcient in working capital terms. This enabled us to complete a select number of additional one-oﬀ strategic investments from within our own cash resources, strengthening our team as we head into FY23.” Revenue Licence revenues Monthly recurring revenue (‘MRR’), the key ﬁnancial metric for the Group, grew by 12% in the year to £250k at 30 September 2022 (30 September 2021: £223k after adjusting foreign for exchange and IFRS adjustments, Reported MRR £235k) as the business secured a record nine new logos (FY21: four) alongside continuing to expand the use of our software in a growing number of accounts. These results represent a signiﬁcant turnaround from both 2021 and 2020 (reduction in MRR of 23% and 10% respectively) as the Group’s key markets were disrupted by the onset of the pandemic. the Highlighting both increasing strength of our client relationships and the release of enterprise software budgets freeze experienced during the last two years, net retention in the year was 98% (FY21: 74%). following the As expected, revenues recognised in 2022 reduced to £2,857k software (FY21: £3,333k) due to the lagged impact of the exceptional levels of non- renewing contracts the business experienced in the prior year. As a consequence of our subscription revenue model however, the new customer successes achieved in the year expansion growing opportunities in our base set the business up well to return to software revenue growth in FY23. and This view is further supported by the business securing three new logos and one account expansion in Q1 2023, delivering net MRR growth of £12k. Services revenues Revenue from associated professional services was broadly in line with prior year levels at £270k (FY21: £306k) despite the 40% reduction cited at the half year against H1 2021. The uplift in H2 reﬂects the timing of delivering new customer deployments and existing change orders, a trend expected to continue into H1 2023 underpinned by the deferred revenue balance related to services at 30 September 2022 being three times higher than at 30 September 2021. Gross Margin Gross margin in the year remained stable at 79% (FY21: 83%) with the reduction in revenue driving the fall from £3,004k to £2,461k. Reported Gross Margin the combined Gross Margin over both recurring software subscriptions and professional services. is Adjusted EBITDA Adjusted EBITDA (EBITDA excluding the impact of impairment, loss on disposal of assets, share-based payments and non-underlying items) totalled a loss of £552k for the period (FY21: £257k), with the fall in gross margin of £542k being constrained by a drop in overhead costs of £247k reﬂecting the full impact of initiatives undertaken last year. control cost the Whilst the Group’s continuing focus is to return to EBITDA breakeven, during the second half of 2022 the business decided to accelerate a select number Consolidated Financial Statements for the year ended 30 September 2022 10 of investments both in its existing employee base to preserve retention and in additional resource needed for operational delivery. The strengthening of considered fundamental to the Group realising the market opportunity and delivering on the next stage of its growth strategy. team was the There are currently no plans to make further investments in FY23 until such time as revenue growth is delivering a positive Adjusted EBITDA. Depreciation, amortisation and impairment Total costs in respect of depreciation, amortisation, and impairment were £385k in FY22 (FY21: £552k). With the business having low capital expenditure requirements, the value is principally made up of amortisation on intangible assets, being capitalised development costs, (£165k, FY21: £79k) and any subsequent charges (£155k, FY21: £294k). impairment These costs are reﬂective of the continual evolution of the market in which the Group operates, the needs of its customers, both present and prospective, and the Group’s agile approach to continually developing and improving its oﬀering. Non-underlying items Non-underlying items in the prior year totalling £144k comprise redundancy costs and professional and consultancy fees relating to the raising of ﬁnance. No such costs were incurred in FY22. Statutory results The Group reported a loss before taxation for the year of £1,105k (FY21: £1,133k). i-nexus Global plc Cash and cash equivalents The Group had cash & cash equivalents at 30 September 2022 of £99k (FY21: redemption date from 4 November 2023 to 4 November 2024, see note 22 for further details. The Group prepares budgets, cashﬂow forecasts and undertakes scenario planning to ensure that the Group can meet its liabilities as they fall due. The Board’s assessment in relation to going concern is included on page 32 of the ﬁnancial statements. Balance sheet Trade receivables (net) have increased to £604k due to the timing of receipt of annual licence fee and subscription invoices issued in the ﬁnal months of the year (FY21: £557k). The growth in the Group’s MRR and accompanying services resulted in deferred revenue increasing to £1,320k at 30 September 2022 (FY21: £1,030k). The Group’s cash collection disciplines remain strong with DSO (debtor days) at 30 September 2022 of 60 (2021: 70). Principal risks and uncertainties The Group’s principal risks and uncertainties are set out on pages 11 to 16. Drew Whibley Chief Financial Oﬃcer 6 January 2023 £575k), with the end of the ﬁnancial year representing a cash low point for the business given the seasonality in cash ﬂows arising from the timing of the invoicing and collection of the Group's recurring revenue, the majority of which is billed during Q1 and Q2. to objective, During the year, we delivered on a key ﬁnancial become self-suﬃcient in working capital terms. This enabled us to complete a select number of additional one-oﬀ strategic investments from within our own cash resources, strengthening our team as we head into FY23. Driving this outcome was a £725k reduction in the net outﬂow of funds from operating activities (FY22: (£237k, FY21: £962k) reﬂecting the impact of new business successes, improved service billing and a strong renewal performance. Careful cash management will continue to be a priority focus for the Board. As previously outlined, there are currently no plans to increase the existing cost base in the coming year until such time as revenue growth delivers a position of at least Adjusted EBITDA breakeven. The Group also continues to apply treasury and foreign currency exposure management policies where possible to minimise both the cost of ﬁnance and our exposure to foreign currency exchange rate ﬂuctuations. (FY21: Net debt at 30 September 2022 was On £1,710k 30 September 2022, the Company agreed with the holders of the £1,325k Convertible Loan Notes to extend the £1,321k). STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 11 STRATEGIC REPORT: Principal Risks and Uncertainties The Board of the Company regularly reviews business risk and the Group’s appetite for risk relative to its goals. There are a number of potential risks and uncertainties, some of which could have a material impact on the Group’s performance, and therefore could cause actual results to diﬀer materially from those expected. Set out below are the signiﬁcant business risk areas identiﬁed, together with an overview of the mitigating factors considered by the Board. This is not an exhaustive list of the risks faced by the Group and is not necessarily presented in order of priority. Mitigation Trend: Level risk The Group prepares regular business forecasts and monitors its projected cash ﬂows, which are reviewed by the Board. and scenarios The sensitivities demonstrate that there are mitigating actions management can implement should the plans not deliver the expected sales growth. Risk Description Working capital of Vulnerability Group’s working capital. long the term Whilst the Directors believe that the improvement in sales conversion seen in FY22 is sustainable, the Group’s working capital position is still exposed should this weaken and /or its expected growth with existing accounts be lower than planned in FY23. The Group’s continuing viability in the longer term remains critically dependent on its ability to secure new sales and expand the use of the software in existing accounts. It is possible that the Group will experience a slower and/or lower sales conversion rate than the Directors have modelled within their base case ﬁnancial projections. This could in turn have a material adverse eﬀect on the Group’s business, results of condition and operations, ﬁnancial prospects. Consolidated Financial Statements for the year ended 30 September 2022 12 STRATEGIC REPORT: Principal Risks and Uncertainties continued Risk Description Market & product development The strategy market may not evolve as expected or our products fail to meet the expectations of the market. Whilst the Board believes that there is strong evidence of an increasing trend to digitalise strategy by its target customers, a large proportion of the Group’s target market continues to use traditional methods and in-house developed systems. that Although the Group has achieved its through a deep market position understanding of the market, and the 10 years of development of its i-nexus software, there is no guarantee that either our product continues to meet customer expectations or the Group’s competitors and potential competitors (who may have signiﬁcantly greater ﬁnancial, marketing, service, support, technical and other resources than the Group) may be able to develop competing products, respond more quickly to changes in customer requirements and devote greater the enhancement, promotion and sale of their products, which could have a negative impact on the Group’s business. resources to Mitigation Trend: Level risk The Group has internal sales and marketing functions, which are also supported by a network of consulting that work with potential partners, customers to educate them on the beneﬁts of digitising strategy and the associated beneﬁts the product can oﬀer an organisation. The rate of incoming enquiries supports the view that recent events appear to have made the need to digitise strategy more widely accepted. that Board The recent feels enhancements along with the Group’s product strategy and R&D focus mitigates this risk. The Board monitors user satisfaction and the extent to which the software continues to meet customer expectation through various channels, including on the G2 platform. Account Proliferation Failure of our existing to grow as accounts from planned, resulting dissatisfaction with the product and/or deployment issues. An important aspect of the Group’s growth strategy is to proliferate sales of its i-nexus software with existing customers as a result of the natural evolution of the software use over time. Although the Group has a number of examples where this has occurred in the past, this is no guarantee that it will continue to happen at the increasing rate predicted. Any this anticipated account failure of proliferation occurring will impact the Group’s future success and adversely aﬀect its business, prospects and ﬁnancial position. i-nexus Global plc Trend: Reducing risk future deployment Many of the new logos signed in FY22 were “Land and Expand” opportunities with clear intent, whereby a smaller subset of a much have larger commenced using the product ﬁrst. The Board expect to see the beneﬁcial impact of this strategy in FY23 and have taken measures to increase the number of Success Managers in the year. This team’s eﬀorts at growing our existing accounts has been assisted by the recent product enhancements aimed at improving user experience. The Board continue to monitor the eﬃcacy and outcomes of the Group’s eﬀorts in growing existing accounts. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 13 Risk Description Dependence on key Customers Failure to retain our larger key customers. Security Breaches and Cyber Attacks of the Vulnerability Group’s to security breaches or cyber attacks. systems A small group of key customers provide approximately half of the Group’s MRR, with one representing nearly 20 per cent of closing MRR. The Group’s ﬁnancial performance partly dependent on the continued business relationship with these key customers. therefore is Failure to manage the ongoing renewal of the contracts with these key customers on a commercially acceptable basis could materially aﬀect the Group’s operations and/or its ﬁnancial condition. The Group is a Data Processor for its customers’ conﬁdential data. Although the Group is ISO27001 accredited and therefore employs security and testing measures for the software it deploys and the broader security environment is well documented, these measures may not protect it from all possible security breaches that could harm the Group or its customers’ business. Given the reliance of information the business on technology systems, the software is at risk from cyber attacks. Either of these security events may result in signiﬁcant costs being incurred and other negative consequences including reputational damage. its Mitigation Trend: Level risk The majority of this small group of customers are in contracts with a remaining term of more than one year and all bar one of them have been longstanding clients for a period of at least ﬁve years and, in the case of two of them, ten years. of team As previously reported, the Group has a dedicated long-standing experienced professionals acting as Success Managers. They have well- established processes and reporting that allow them to get early warning of any issues. Whilst this cannot guarantee renewal of all in the face of disruptive customers external factors that we cannot reasonably foresee or manage, the overall risk level is aligned with FY22 where the business achieved its highest retention rates. Trend: Level risk The Group takes its Information Security very seriously as demonstrated by its ISO27001 accreditation. Employees are trained in this area to ensure best practice measures are followed for Information Security. The Group utilises the latest security products such as end point security systems, with staﬀ receiving regular security awareness training and testing. The security regime is regularly reviewed, and the Group invests in state-of-the-art systems to keep both its cloud platform and oﬃce networks protected against cyber-attack. In addition, our systems are subjected to frequent third-party penetration testing to help ensure our system integrity. rigorous and The Group has cyber security insurance in place and the Group endeavors to secure its limitations of customer contracts. liability clauses in Consolidated Financial Statements for the year ended 30 September 2022 14 STRATEGIC REPORT: Principal Risks and Uncertainties continued Mitigation Trend: Level risk The Group works closely with external parties to ensure competitive pay and beneﬁts are being oﬀered to both attract and retain people. to invest opportunities We continue in people development and training initiatives to career provide fulﬁllment and progression. Wherever appropriate we seek to develop and promote from within the existing staﬀ pool. for The Group has invested heavily in this area in FY22 and is a continuing area of focus for FY23. Executive and staﬀ remuneration plans, incorporating long-term incentives, have been implemented to mitigate this risk. Trend: Level risk in relation to the Renewed eﬀorts evolution of this strategic theme will take place in FY23 as investment in resource is unlocked by growth. The Board will closely monitor progress. Risk Description Recruitment & retention Risk of failing to attract and/or key personnel. retain As the Group grows it has a dependence on the recruitment and retention of highly skilled employees and an ongoing reliance on a limited number of key personnel, including the Directors and senior management, who have signiﬁcant sector experience. The job market is increasingly competitive in the cloud technology sector, particularly following the pandemic and subsequent acceleration of cloud adoptions and digital transformation trends. The business requires specialist technical skills that can be scarce. If members of the Group’s key senior team depart, the Group may not be able to ﬁnd eﬀective replacements in a timely manner, or at all, and its business may be disrupted. Part of the Group’s strategy is to increasingly sell its software through There are no channel partners. guarantees channel partners will be found to sell the Group’s software at the rates planned. suﬃcient that conﬁdent The Directors are that engagements to date by existing and prospective channel partners provide strong evidence of the opportunity this available. However, unlocking potential has proven to be diﬃcult in recent years and to have productive channel partners in the future could aﬀect the Group’s future success. failing Dependence on Channel Partners Failure to develop this additional route to market eﬀectively. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 15 Risk Financial risk management The principal ﬁnancial instruments used by the which from Group, ﬁnancial risk arises, are trade receivables, cash at bank, trade and other payables. Description Credit risk Mitigation Trend: Level risk Credit risk is the risk of ﬁnancial loss to the Group if a partner or customer fails to meet its contractual obligations. The Group is principally exposed to credit risk from credit sales and/or bank default. It is Group policy to assess the credit risk of new customers and partners before entering new contracts and it has a frequent and proactive collections process. Under the terms of our contracts many services are charged for in advance of delivery, thus mitigating the risk further. Liquidity risk Trend: Level risk Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter its ﬁnancial diﬃculty obligations as they fall due. in meeting On a monthly basis, the Directors review the Group’s trading to date, the Group’s full year ﬁnancial projections as well as information regarding cash balances, debtors, trading and prospects. This allows the Directors to form an opinion as to the working capital of the Group and its likely future requirements in order to plan accordingly. Currency risk Trend: Level risk As a consequence of the Group’s exposure transacting in foreign currencies there are risks associated with changes in foreign currency exchange rates. is based The Group in the United Kingdom and presents its consolidated ﬁnancial statements in pounds Sterling. The Group’s current revenues are generated primarily in Sterling, US dollar and Euros. The Group also has some are obligations contractual denominated in US Dollars. that to rate All geographies addressed by the Group can be readily serviced from the UK. The Group applies treasury and foreign currency exposure management policies to minimise both the cost of ﬁnance and foreign currency our exposure ﬂuctuations. exchange hedging Notwithstanding arrangements, the Group does have exposure to translation eﬀects arising from movements in the relevant currency sterling. exchange Therefore, there can be no assurance that its future results or resources will not be signiﬁcantly aﬀected by ﬂuctuations in exchange rates. against these rates Consolidated Financial Statements for the year ended 30 September 2022 16 STRATEGIC REPORT: Principal Risks and Uncertainties continued Risk Description Inﬂation risk Mitigation Trend: Increasing risk Inﬂation risk has been very limited for most of the last decade. However, as with many technology businesses, the Group is inﬂationary increased experiencing pressures within its cost base. The timing of a customer’s invoice for their typically annually in advance software fee can also inﬂationary contribute to a delay pressures being passed to customers. in The Board acknowledge that inﬂationary pressure is now mounting with certain vendors already applying increases as a result. The Board have agreed that a review the Group’s vendor base and of accompanying be undertaken as a potential countermeasure to ensure margins are preserved. pricing model i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 17 STRATEGIC REPORT: Stakeholder Engagement During the year, the Board and its directors conﬁrm they have acted in a way that promotes the success of i-nexus Global plc for the beneﬁt of its members as a whole, and in doing so have had regard to the stakeholders and key matters set out in Section 172 of the Companies Act 2006. This duty underpins the Board’s decision-making processes and the Group’s strategic direction, with due consideration given to the long-term impact of its decisions on shareholders, employees, customers and wider stakeholders. Practical measures that the Board takes to ensure the interests of these stakeholders are reﬂected in the Board’s decision making process are as follows: Stakeholder Group Principal Methods of Engagement Shareholders Employees Customers The Board engages with shareholders throughout the year. During FY22, engagements with major shareholders and investors were as and when required which also included detailed feedback reports via our various advisors. This feedback is factored into the Board’s decision-making process and to ensure that the Group’s market communications meet investor needs. All shareholders are encouraged to submit questions prior to the Annual General Meeting and to lodge their votes ahead of the meeting to ensure that these are counted. The Annual Report is sent to shareholders at least 20 working days before the Annual General Meeting and each issue for consideration at the Annual General Meeting is proposed as a separate resolution. All Directors generally attend the Annual General Meeting. The Board is fully committed to ensuring that the opinions of employees across all business areas are regularly sought and factored into its decision-making process. Through these engagement activities, the Board is able to gather opinions and ideas from the wider workforce, identify any communication gaps or common areas of concern and address these through the Group’s activities. The Board engages with employees by maintaining a rotational schedule which sees department heads present at Board meetings, weekly Management Updates with the CEO and CFO along with monthly All Hands brieﬁng emails and meetings, currently being run virtually. We also hold an annual “Launch Event” whereby we review the year just gone and consider the targets and aspirations for the year ahead. The Group is proactive in engaging directly with its clients to monitor and continually improve its service delivery and client satisfaction levels. The Board receives monthly reports on client-related matters, including support ticket levels, service delivery and project status reports, which enable it to identify any trends or any areas requiring speciﬁc oversight or investment. In the event that any concerns are raised by clients, the Group ensures that these are addressed swiftly and that proactive engagement occurs to ensure ongoing high standards of service delivery. The Group seeks direct engagement with clients throughout their customer journey, providing opportunities to speak to their support team, account manager or a member of senior management. Consolidated Financial Statements for the year ended 30 September 2022 18 STRATEGIC REPORT: Stakeholder Engagement continued Stakeholder Group Principal Methods of Engagement Suppliers Environment The Group engages closely with its suppliers and has internal procedures to ensure that appropriate due diligence is undertaken on these vendors. Engagement with any new supplier is subject to a formal process and requires ﬁnal approval from an Executive Director. Signiﬁcant supplier contracts of a recurring nature require approval from the Board as a whole. Suppliers are chosen according to their ability to meet the Group’s own high standards and to demonstrate values that are consistent with those of the Group. Regular engagement takes place with key suppliers, monitoring their performance against contractual obligations and providing regular feedback in order to foster and support long-term relationships for the beneﬁt of the Group. In the event that delivery standards do not meet the Group’s expectations, proactive steps will be taken to communicate and address these directly with the supplier to ensure that there is no detrimental impact upon the Group’s activities. As a provider of software solutions, the Group’s operations have a relatively limited impact on the environment. However, the Board is committed to implementing measures that will result in incremental improvements to the Group’s environmental impact, such as avoiding unnecessary travel and using video-based meeting facilities where appropriate. The entire workforce is also provided the technology and ﬂexibility to work remotely to minimise travel. Environmental impact is also included in the decision-making process for new and existing suppliers, for example, Amazon Web Services, the provider of our hosting services are committed to running their business in the most environmentally friendly way possible and achieving 100% renewable energy usage for their global infrastructure. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 19 The Board held twelve board meetings in the year to address and meet its obligations under Section 172 of the Companies Act 2006. The following table covers the key decisions made during the year and the stakeholder group(s) impacted by these decisions Key Impact Key Decisions Made Key Stakeholder Group’s impacted Long Term Strategy At the end of each ﬁnancial year, the Board approves the annual budget, strategy and growth plans of the Group for the year ahead. Shareholders, Employees, Customers, Suppliers Performance of the Group Shareholders, Employees, Customers, Suppliers, Environment In October 2022, the Board approved the Budget for FY23 which incorporated a number of revenue growth and cost targets. It is felt that these are reasonable and achievable. On a monthly basis, the Board reviews the trading performance of the Group with detailed Board reports, including management accounts, provided by the Executive team covering trading in the month and year to date, with operational and ﬁnancial performance monitored against budget and the previous ﬁnancial year. These reports cover sales and forecast pipeline, customers and suppliers, data centre activity and various aspects of operational performance along with compliance with ISO requirements as applicable. During the year, the Board spent signiﬁcant time reviewing and agreeing the Group’s sales and product strategy alongside making a number of tactical decisions, for example on the timing and quantum of investment into the product development, customer engagement and marketing teams and the decision to seek approval from the holders of the Convertible Loan Notes to extend the ﬁnal redemption date by 12 months to 4 November 2024. Consolidated Financial Statements for the year ended 30 September 2022 20 STRATEGIC REPORT: Stakeholder Engagement continued Key Impact Key Decisions Made Key Stakeholder Group’s impacted Employees and Culture The Board seeks to ensure that the Group’s staﬀ policies and processes are aligned with the Group’s core values and promote the long-term strategy of the Group. Shareholders, Employees The Board continues to make decisions that encourage improvements in systems, processes and beneﬁts which impact the wellbeing of our employees. By way of example, at the Group’s recent employee wide annual “Launch Event” it included a dedicated Mental Health Workshop. The Remuneration Committee makes recommendations to the Board on the remuneration packages for the Executive Directors, including annual salary increase, performance related bonuses and options under our long term incentive plans. In June 2022, this process resulted in annual salary increases and improved pension packages for both Executive Directors and the wider employee base. Following the year-end, the Board issued 2,255,343 options to Directors and employees, see page 73 for details. Governance, Regulatory Requirements and Risk The Board reviews and approves the results announcements and trading updates, the half year and annual reports and the AGM statement. The Board receives regular brieﬁngs from the Chief Executive Oﬃcer and Chief Financial Oﬃcer and the Group’s brokers and public relations advisers. Shareholders, Employees, Customers, Suppliers, Environment investor roadshows, the Board are Through the half-year and annual year-end results process alongside any in communication with analysts and advisors to help understand shareholder views which contributes to the Group’s strategy and decision-making. The executive team presents investor feedback to the Board. A range of corporate information (including Group announcements) are available to all shareholders, investors and the public on the Group’s website www.i-nexus.com/investor-center. The Board takes regulatory responsibilities seriously and is committed to ensuring that it is open and transparent with regulators. In the current year, the Board received advice from our nominated adviser to obtain an update on changes to AIM rules and market abuse regulations to ensure compliance with requirements. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 21 Maintaining a reputation for high standards of business conduct The Board is mindful that the continued growth and success of the Group is dependent upon maintaining high standards of business conduct, including: • • • • the ability to successfully compete within the market, to attract and retain clients, and to service these clients to a high standard; the ability to attract and retain high quality employees; the ability to attract investors and to meet their expectations of good governance and sound business conduct; and the ability to meet the Group’s regulatory obligations, and to meet the expectations of relevant regulatory bodies. This awareness underpins the formulation of the Group’s strategy and is evident throughout the Board’s decision-making process. Ensuring that members of the Company are treated fairly The Board ensures that the Group’s shareholders are treated equally and fairly, regardless of the size of their shareholding or their status as a private or institutional shareholder. The Group provides clear and timely communications to all shareholders in their chosen communication medium, as well as via the Group’s website and via a Regulatory News Service. All holders of Ordinary shares are eligible to receive dividend payments and to vote at general meetings of the Company. By Order of the Board Drew Whibley Director 6 January 2023 Consolidated Financial Statements for the year ended 30 September 2022 22 CORPORATE GOVERNANCE: Board of Directors Richard Cunningham, Non-Executive Chairman Richard Cunningham is a technology entrepreneur who has built and sold a number of businesses and who has extensive experience in equity research, ﬁnancial analysis and corporate ﬁnance, focusing on technology companies. He built one of the UK’s leading independent corporate telecommunications service providers, Project Telecom Plc, before listing it on the London Stock Exchange and eventually selling it to Vodafone. Richard also founded Octium Ltd to “buy and build” a digital connectivity and applications business, which was exited successfully through a sale to MDNX. He is currently Chairman of two private technology businesses, CommonTime Ltd and Viewber Ltd. Richard also sits on the investment committee of Herald Ventures, the venture capital business of Herald Investment Management. Simon Crowther, Chief Executive Oﬃcer Simon Crowther joined the Group as Software Development Manager in 2006 and has worked within every key area of the business prior to becoming COO in 2013 and led a process of change and refocus of the business since becoming CEO in 2016. Simon has a background in software development, having also spent almost three years at Intascape (a division of See Tickets) as a senior software architect. He has two masters degrees from Birmingham University: one in mathematics and the second in computer science. Drew Whibley, Chief Financial Oﬃcer Drew Whibley joined the Group as Finance Director in 2022, assuming a strategic role and day-to- day responsibility for planning, implementing, managing, and controlling all ﬁnance-related activities. A Chartered Accountant, most recently Drew spent ﬁve years with LSE listed software business Aptitude Software Group plc, during which he, as Group Finance Manager, oversaw both the internal and external reporting and budgetary requirements while playing a key role in delivering on the Group’s strategy. David Firth, Independent Non-Executive Director David is a Fellow of the Institute of Chartered Accountants in England and Wales and is a highly experienced PLC board member with a strong understanding of the software industry. His current directorships include Parity Group plc, an IT services and data consultancy business, Best of the Best plc, an organiser of weekly competitions on-line to win cars and other luxury prizes and Celadon Pharmaceuticals plc, a UK based pharmaceutical company focused on the research, cultivation, manufacturing, and supply of cannabis-based medicines. He is chairman of the remuneration and audit committees at all three companies. David was previously Finance Director of Penna Consulting plc from 1999 to 2016 and has held a number of board positions in public companies over the past 30 years across various sectors including HR consultancy and recruitment, IT services, ﬁnancial markets, motor retailing and advertising. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 23 CORPORATE GOVERNANCE: Corporate Governance Statement Chairman’s Introductory Statement on Corporate Governance As the Chairman of the Board I must ensure its eﬀectiveness and that it has Directors with the right balance of skills, diversity and experience. The Board is collectively responsible for the long-term success of the Group and for setting and approving the business strategy and its subsequent execution. I believe our culture is consistent with the Group’s objectives, strategy and business model and supports the requirement to minimise our principal risks and uncertainties. Good corporate governance forms a key part of our business ethos and eventual success and we have in place a strong and eﬀective governance framework and associated practices to ensure that the highest standards are applied throughout the Group in a consistent manner leading to the right behaviours across it. All of these are critical to business integrity and maintaining the trust of all stakeholders in i-nexus. The following Corporate Governance Report contains a summary of the Company's governance arrangements and the regulatory assurances required under the UK Corporate Governance Code. Overview The Directors recognise the value and the importance of high standards of corporate governance. All AIM companies are required to apply a recognised corporate governance code. The Company has adopted and complies with all 10 principles of the Corporate Governance Code published by the Quoted Companies Alliance (the QCA Code). The ways in which the Company complies with the QCA Code are identiﬁed below and can also be found on our website. 1. Long-term Value and Strategy The Company’s business model is designed to promote long-term value for all stakeholders. It is explained more in the Chief Executive Oﬃcer’s Report and Stakeholder Engagement section of the Strategic Report. 2. Shareholder Engagement The Company actively engages in dialogue with shareholders. The Chief Executive Oﬃcer and Chief Financial Oﬃcer regularly meet with institutional shareholders and analysts as required, including after the announcement of full year and half-year results, and are responsible for ensuring that their expectations are understood by the Board. In addition, the Chairman is available should shareholders need his input whilst the AGM provides an opportunity for all shareholders to engage and to ask questions of the Board. The Group also engages with its shareholders through its RNS communications to provide updates on ﬁnancial and commercial matters. 3. Stakeholders The Board considers the interests of shareholders and all relevant stakeholders in line with section 172 of the Companies Act 2006. The Group focuses on building strong and sustainable relationships with a range of diﬀerent stakeholders in order to support the long-term success of the Group. Details on this are included in the Stakeholder Engagement section of the Strategic report on pages 17 to 18. Consolidated Financial Statements for the year ended 30 September 2022 24 CORPORATE GOVERNANCE: Corporate Governance Statement continued 4. Risk Management The Group is exposed to a number of potential risks which may have a material eﬀect on its reputation, ﬁnancial or operational performance. The Board has overall responsibility for risk management and internal controls and is fully supported by the Audit Committee. More detail about the identiﬁed principal risks and uncertainties can be found on pages 11 to 16. The Board has overall responsibility for the Group’s system of internal control and for reviewing its eﬀectiveness. The processes to identify and manage the key risks of the Group are an integral part of the internal control environment. Such processes, which are regularly reviewed and improved as necessary, include strategic planning, approval of annual budgets, regular monitoring of performance against budget (including full investigation of signiﬁcant variances), control of capital expenditure, ensuring proper accounting records are maintained, the appointment of senior management and the setting of high standards for health, safety and environmental performance. 5. Board Practice The Board consists of the Chairman, two Executive Directors and one Non-Executive Director. The biographical details of the Board members can be found on page 22. The Board has determined David Firth is independent in character and judgement. The Chairman, Richard Cunningham, is not considered to be independent, however the Board considers that his long experience as Chairman of the Board of i-solutions Global Limited (which is the operating entity of i-nexus Global plc) is of beneﬁt to the Board in providing continuity of knowledge and additional industry expertise to the Group. The Board meets suﬃciently regularly, at least ten times throughout the year. Meetings of the Non-Executive Directors without the Executive Directors being present are held regularly. Further information on the Board, its constitution and procedures can be found below. 6. Board Composition and Performance The Board considers its overall size and current composition to be suitable and have an appropriate balance of sector, ﬁnancial and public markets skills and experience as well as an appropriate balance of personal qualities and capabilities. Further details on our compliance in this area can be found on page 22. 7. Board Evaluation The Board recognises that it continually needs to monitor and improve its performance. This is achieved through an informal annual performance evaluation, full induction of new Board members and ongoing Board development activities. The Chairman is responsible for ensuring that all Non-Executive Directors receive ongoing training and development. Our Non- Executive Directors are conscious of the need to keep themselves properly briefed and informed about current issues. 8. Company Culture During the year, the Group formally communicated its company values to all employees after seeking input from several areas of the business. These include but are not limited to the following behaviours and attitudes; ego-less, customer centric, high integrity, respectful, supportive, caring, professional, quality driven, passionate, think for themselves. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 25 These values are reﬂected in everything that we do, beginning with the selection criteria used in the employee recruitment process and continuing throughout all elements of the Group’s business. The Board ensures that ethical behaviours are expected and followed by approving a set of internal policies on matters such as anti-bribery and whistleblowing, and by implementing appropriate systems and controls to ensure compliance with those policies. 9. Governance Whilst the Board is collectively responsible for deﬁning corporate governance arrangements, the Chairman is ultimately responsible for corporate governance. The governance structures within the Group have been assessed by the Board and are considered appropriate for the size, complexity and risk proﬁle of the Group, these will continue to be reviewed by the Board to ensure they remain appropriate as the business changes over time. There is a formal schedule of matters reserved for the decision of the Board that covers the key areas of the Group’s aﬀairs. The schedule includes approval of the Annual Report and any other ﬁnancial statements, the adoption of the budgets and business plans, material ﬁnancial commitments, and the release of inside information. 10. Communication The Company is committed to open communications with all its shareholders. Communication is primarily through the Company’s website and the Annual General Meeting alongside each receiving a copy of the Annual Report. Copies of historical Annual Reports and notices of general meetings covering the period since the shares of the Company were admitted to trading on AIM are also available on the Company’s website. The Company reports on the responsibilities and activities of each of the Committees in the Annual Report. Board Constitution and Procedures As at 30 September 2022, the Board comprised the Non-Executive Chairman, the Chief Executive Oﬃcer, the Chief Financial Oﬃcer, and one Non-Executive Director. The Directors, together, act in the best interests of the Group via the Board and its Committees, devoting suﬃcient time and consideration as necessary to fulﬁl their duties. Each Director brings diﬀerent skills, experience and knowledge to the Group, with the Non-Executive Directors providing independent thought and judgement. The Non-Executive Directors are considered by the Board to be independent of management and freely able to exercise their judgement in all matters related to the Board. Any conﬂicts of interest are declared at the start of each Board meeting. Board meetings are convened monthly where all Directors are provided with comprehensive information to digest and discuss. Any speciﬁc actions arising during meetings agreed by the Board are followed up and reviewed at subsequent Board meetings to ensure their completion. Attendance at Meetings Since the issue of the last Annual Report there were 12 Board Meetings. The details of attendees are shown below: BOARD REMUNERATION AUDIT NOMINATION MEETINGS COMMITTEE COMMITTEE COMMITTEE Richard Cunningham 12/12 2/2 3/3 1/1 David Firth 12/12 2/2 3/3 1/1 Simon Crowther 12/12 – 3/3 1/1 Alyson Levett (resigned 1 August 2022) 10/10 – 2/2 1/1 Drew Whibley (appointed 1 August 2022) 2/2 – 1/1 1/1 Roles and Responsibilities The roles of the Chairman and Chief Executive Oﬃcer are separated and clearly deﬁned. Consolidated Financial Statements for the year ended 30 September 2022 26 CORPORATE GOVERNANCE: Corporate Governance Statement continued The Chairman provides leadership to the Board by ensuring that there is suﬃcient time to discuss issues on the agenda and facilitates constructive discussion on these items. The Chief Executive provides day to day management of the Group’s employees and is responsible for the leadership of the i-nexus Senior Management team. He is responsible, along with the Senior Management team, for the execution of strategy approved by the Board and the implementation of Board decisions. Internal Control Management has considerable autonomy to run and develop the Group’s business. The Board believes that a well-designed system of internal reporting and control is necessary. The Board has overall responsibility to develop and strengthen internal controls as required. The Audit Committee, on behalf of the Board, has the responsibility for reviewing internal controls. The system is designed to provide reasonable, but not absolute, assurance that the assets of the Group are safeguarded, that proper accounting records are maintained, and that reliable ﬁnancial information is produced. Audit Committee The Audit Committee has responsibility for monitoring the integrity of the Group’s ﬁnancial statements, reviewing signiﬁcant ﬁnancial reporting issues, the eﬀectiveness of the Group’s internal control and risk management systems, assessing the need for internal audit and overseeing the relationship with the external auditor, including advising on their appointment, reviewing the scope of their audit and their fees and ensuring their independence. The Audit Committee comprises the Non-Executive Directors. David Firth, a Chartered Accountant who brings a high level of ﬁnancial and corporate governance experience, chairs the Committee. The Board is satisﬁed that he has recent and relevant ﬁnancial experience. The Chief Financial Oﬃcer and External Auditor are invited to attend the meetings. The External Auditor throughout the ﬁnancial year was Saﬀery Champness LLP, who conducted the external audit. The Committee meets at least three times a year to review the interim results, the external audit plan and the full year results and external audit report. The Committee reviewed the annual report and accounts before submission to the Board, including reviewing the reports from Saﬀery Champness LLP on their work and ﬁndings from the external audit and compliance with the Group’s policies and procedures and applicable accounting standards and legislation. Topics discussed included the Group’s management of compliance with accounting standards on software revenue recognition, capitalisation of software development costs and other key management estimates, compound instruments and the Group’s going concern assumption and related disclosures. These signiﬁcant issues were discussed by the Committee taking guidance from the ﬁndings reported by the Independent Auditor and discussions with the Chief Financial Oﬃcer. The Committee reviewed the eﬀectiveness of the Group’s internal controls, including enquiry of the Independent Auditor and concluded that they were appropriate for a business of the size, scale and complexity of i-nexus. The Committee also determined that a separate internal audit function was not required during the year, but this decision will be kept under review. The independence and objectivity of the Independent Auditor were considered and found to be satisfactory. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 27 Independence and objectivity The Committee has a policy that aligns with current ethical standards in prohibiting the engagement of the external auditor to provide non-audit services. Safeguards are in place to preserve Auditor independence; use of separate teams for tax compliance, and the production of the Financial Statements. The Board and Committee are satisﬁed by these safeguards. The Committee also received conﬁrmation from Saﬀery Champness LLP that there are no relationships between the Group and Saﬀery Champness LLP or its associates that may have a bearing on its independence. Further details of the audit fees paid, to Saﬀery Champness LLP for the 2022 and 2021 ﬁnancial years can be found in note 8 to the ﬁnancial statements. To comply with the FRC Revised Ethical Standards 2019 Saﬀery Champness LLP did not undertake any non-audit services in FY22. Those relating to the Group's Tax services, speciﬁcally those relating to the 2022 Tax compliance and advisory services were provided by Azets. The Independent Auditor also met with the Chairman of the Committee without management present. The eﬀectiveness of the annual audit process was also reviewed and the quality of delivery and service levels provided were assessed. Remuneration Committee The Remuneration Committee was comprised of Richard Cunningham (Chairman) and David Firth. The Committee meets at least annually and reviews the performance of the Executive Directors and makes recommendations to the Board on matters relating to the remuneration of the Executive Directors and Senior Management, including bonus awards, share incentive plans and objectives. The Committee also reviews and makes recommendations to the Board on the overall remuneration policy of the Group, including the design of any performance related pay schemes, share incentive schemes and employee beneﬁt structures. Nomination Committee In the event of any new Director appointments being proposed, the Board will meet as a whole to discuss. During the year the Committee met and approved the appointment of Drew Whibley as a Director from 1 August 2022 following Alyson Levett’s decision to step down from the Board in order to pursue her career as a pluralist non-executive director. Consolidated Financial Statements for the year ended 30 September 2022 28 CORPORATE GOVERNANCE: Directors’ Report For the year ended 30 September 2022 Group Directors’ Report The Directors of i-nexus Global plc (the “Company”) present their report and the Financial Statements of the Company and its subsidiary undertakings (together the “Group” or “i-nexus”) for the year to 30 September 2022. Directors The Directors who served on the Board during the year and to the date of this report are as follows: Richard Cunningham David Firth Simon Crowther Drew Whibley (appointed 1 August 2022) Alyson Levett (resigned 1 August 2022) Directors’ Responsibilities The Directors are responsible for preparing the Strategic Report, the Corporate Governance Report and the Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Company ﬁnancial statements for each ﬁnancial year. The Directors have elected under company law and are required under the Listing Rules of the Financial Conduct Authority to prepare the Group ﬁnancial statements in accordance with UK-adopted International Accounting Standards. 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 for that period. The Directors are also required to prepare Financial Statements in accordance with the Rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing these Financial Statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether they have been prepared in accordance UK-adopted International Accounting Standards, subject to any material departures disclosed and explained in the Financial Statements; • 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 transactions and disclose with reasonable accuracy at any time the ﬁnancial position of the Group and 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 hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Matters covered in the Strategic Report Details of the likely future developments and activities in the ﬁeld of research and development are not disclosed in the Directors' Report, as under s414C(11) they are instead considered to be of strategic importance and are covered in the Strategic Report. Further details on the Group's policies on ﬁnancial risk management are disclosed in note 23 to the ﬁnancial statements. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 29 Policy on Executive Directors and Senior Management Remuneration When determining the Board policy for remuneration, the Remuneration Committee considers all factors which it deems necessary including relevant legal and regulatory requirements and the provisions and recommendations of relevant guidance. The objective of this policy is to help attract, retain and motivate the Executive and Senior Management of the Group without paying more than necessary. The remuneration policy bears in mind the Group’s appetite for risk and is aligned to the Group’s long term strategic goals. A signiﬁcant proportion of remuneration is structured to link rewards to corporate and individual performance and be designed to promote the long-term success of the Group. Base Salary Review Having taken external advice the Remuneration Committee developed its 2022 remuneration proposals based on what the Remuneration Committee believe to be appropriate remuneration levels for the Group at its current stage of development. During the year the salaries of the Directors were increased from 1 June 2022 in conjunction with the review of salaries for the wider workforce. Simon Crowthers’ salary was increased by 8% with eﬀect from 1 June 2022, taking this from £175,800 to £190,071. This salary increase is aligned with the increases that were received by the Group’s wider workforce. Bonus Payments All Executive Directors and Senior Management are eligible for a discretionary annual bonus. Annual cash bonuses are paid on the achievement of pre-set ﬁnancial objectives. The Committee, in conjunction with the Board reviews and sets these objectives at the start of each ﬁnancial year, the primary objective being to deliver on the annual budget targets which are approved at the start of each ﬁnancial year. In 2022, the Executive Management team did not achieve the pre-set objectives and have received 0% of their target cash bonus. Long Term Incentives The Company has adopted both a Long Term Incentive Plan and an Employee Share Option Plan (the “Plans”) with all Directors, Senior Management and employees of the Company eligible to receive awards on the Plans. 2,668,738 options were granted under the plans in January 2021, 50% of which were due to vest at the end of FY21 and the other 50% at the end of FY22 based on continued employment and certain performance conditions surrounding revenue growth being met. These amounts included 1,270,578 to Directors at the time of grant. Whilst none of the LTIP awards granted to Directors vested in respect of the performance in 2021, the Remuneration Committee concluded on an overall vesting level of 50% on the awards held by Simon Crowther and Alyson Levett based on the Groups performance in 2022. Shares subject to Vesting Vested award percentage shares Director Mr S Crowther 266,144 50% 133,072 Ms A Levett (resigned 1 August 2022) 251,359 50% 125,680 Total 517,503 50% 258,752 Value £ – – – The value included in the single total ﬁgure of remuneration is based on the estimated vesting outturn and the estimated value of a share at vesting calculated by reference to the three-month average share price up to 30 September 2022 less the per share exercise price (10 pence). Consolidated Financial Statements for the year ended 30 September 2022 30 CORPORATE GOVERNANCE: Directors’ Report continued Following the year end, on 3 October 2022 and 11 November 2022, the Group granted 2,255,343 share options of which 1,044,883 were awarded to Directors. Each award was granted in the form of an option with an exercise price of 10p per share. The vesting of these options to Directors is subject to the satisfaction of the performance conditions based on continued employment and a revenue growth target. 396,260 of these awards are subject to vest at the end of 2023 with the remainder at the end of 2024. Director Mr S Crowther Mr D Whibley Total Shares subject to award 702,075 342,808 1,044,883 In accordance with UK best practice on corporate governance, it is the Company’s current policy not to award share options to Non-Executive Directors. Directors’ Remuneration The remuneration of Directors for the year ended 30 September 2022 and 2021 was as follows 2021 2022 Total cash Total cash & cash & cash Beneﬁts equivalent equivalent Salary in Kind Pension remuneration remuneration £ Director £ £ £ £ Mr S Crowther 180,140 – 15,674 195,814 Ms A Levett (resigned 1 August 2022) 106,813 – 9,734 116,547 Mr R Cunningham 48,000 – 1,253 49,253 Mr D Firth 30,000 – – 30,000 Mr D Whibley (appointed 1 August 2022) 21,671 – 2,167 23,838 Mr N Halkes (resigned 31 March 2021) – – – – Total 386,624 – 28,828 415,452 181,033 143,876 49,148 18,308 – 20,125 412,490 In addition to the above remuneration, the directors have been granted share options with fair value as shown in the below table below. These options are presently out of the money but are ascribed a fair value and included as a component of directors’ remuneration in line with the requirements of IFRS 2. 2021 2022 Fair value of Total Total share options remuneration remuneration £‘000’s Director £‘000’s £‘000’s Mr S Crowther 2,706 198,520 Ms A Levett (resigned 1 August 2022) 1,951 118,498 Mr R Cunningham – 49,253 Mr D Firth – 30,000 Mr D Whibley (appointed 1 August 2022) – 23,838 Mr N Halkes (resigned 31 March 2021) – – Total 4,657 420,109 185,638 147,196 49,148 18,308 – 20,125 420,415 i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 31 Directors and their Interests Interest in ordinary shares of 10p The Directors of the Company held the following interest in the ordinary shares of i-nexus Global plc: Director Simon Crowther Richard Cunningham David Firth 30 September 30 September 2022 % 2022 Number 868,475 1,083,100 180,000 2.94 3.66 0.61 In addition to the interest in shares directly owned, Richard Cunningham also has an interest resulting from his participation in the issue of the 2020 and 2021 Fixed Rate Unsecured Convertible Redeemable Loan Notes. His participation represents a maximum interest of 3,765,000 in new Ordinary Shares that could be issued pursuant to the 2020 and 2021 Convertible Loan Note Instruments. Fees Retained for External Non-Executive Directorships Executive Directors may hold positions in other companies as Non-Executive Directors and retain the fees. Non-Executive Directors may hold positions in other companies as either Executive or Non-Executive Directors and retain the fees. Simon Crowther and Drew Whibley held no external Non-Executive Directorships in the period. Richard Cunningham, David Firth and Alyson Levett prior to her resignation from the Board held external Non-Executive Directorships in the period. Results and Dividends The results for the year are set out on page 40 and are also discussed in the Strategic Report. The Directors do not recommend payment of a dividend (FY21: nil). Share Capital Structure The Company’s ordinary shares of 10p are listed on the Alternative Investment Market (“AIM”) market of the London Stock Exchange (ticker: INX). At the date of this report, 29,571,605 ordinary shares of 10p each were in issue. There were no share issues and changes to the capital structure during the year. Consolidated Financial Statements for the year ended 30 September 2022 32 CORPORATE GOVERNANCE: Directors’ Report continued Substantial Shareholdings The Company is aware that the following had an interest of 3% or more in the issued ordinary share capital of the Company: Rank Investor 1 Hargreaves Lansdown Asset Mgt (Bristol) 2 Herald Investment Mgt (London) 3 Abrdn plc 4 Antrak Limited (UK) 5 Gresham House (London) 6 Bury Fitzwilliam-Lay and Partners LLP (UK) 7 Private Stakeholders (UK) 8 BPCE (Paris) 9 Eiﬀel Investment Group 10 Richard Cunningham 30 September 30 September 2022 % 2022 Number 4,227,771 4,031,490 3,110,492 1,852,210 1,582,279 1,459,460 1,389,965 1,250,000 1,150,000 1,083,100 14.30 13.63 10.52 6.26 5.35 4.94 4.70 4.23 3.89 3.66 There were no notiﬁed changes in these holdings in the period after year end to the date of signing the ﬁnancial statements. Qualifying Indemnity Provision The Group has in place insurance protection, including a Directors and Oﬃcers liability policy, to cover the risk of loss when management deems it appropriate and cost eﬀective; however in some cases risks cannot be eﬀectively covered by insurance and the cover in place may not be suﬃcient to cover the extent of potential liabilities. Going Concern After reviewing the Group’s forecasts and projections, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of at least twelve months from the date of approval of these ﬁnancial statements. The Group therefore continues to adopt the going concern basis in preparing its ﬁnancial statements. Information used to make this decision is detailed below. A scenario testing exercise, in which the Directors prepared detailed cash ﬂow forecasts for the period covered by the going concern forecast, was performed. The forecasts take into account the Directors’ views of current and future economic conditions that are expected to prevail over the period including assumptions regarding the sales pipeline, future revenues and costs with various scenarios which reﬂect growth plans, opportunities, risks and mitigating actions. Alongside managements base case forecast, the Group prepared an extreme downside scenario where, outside of the deals secured in Q1 2023, any growth in MRR across the period would be oﬀset by non-renewals, reducing total billing across recurring and services revenue by £510k. Under this extreme scenario, the Group has given consideration to the potential actions available to management to mitigate the impact of these sensitivities, in particular the discretionary nature of costs incurred by the Group, in order to ensure the continued availability of funds. Financial performance in 2023 is not expected to be materially impacted from current year levels due to the long-range revenue visibility achieved through the recurring revenue business model. These recurring revenues, representing 90% of total revenue, are considered resilient given the majority are on multi- year terms. The forecast also assumed that the Group does not have access to any further external funding. Based on current trading, the stress test scenario is considered very unlikely. The Group continues to monitor the collection of monies from clients with no material delays in payment being cited. The business beneﬁts from an Annual Licence Fee Model in which software licence fees are received annually in advance. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 33 Events After the Reporting Period Details of events after the reporting period for the Group are detailed within note 33 to the ﬁnancial statements. Auditors The Board are recommending Saﬀery Champness LLP for re-appointment as auditor of the Company, Saﬀery Champness LLP have expressed their willingness to accept this appointment and a resolution re-appointing them will be submitted to the forthcoming Annual General Meeting. Disclosure of Information to the Auditors All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Group’s auditors for the purposes of their audit and to establish that the auditors are aware of that information. The Directors are not aware of any relevant audit information of which the auditors are unaware. Equality and Diversity The Group operates an equal opportunities policy which endeavours to treat individuals fairly and not to discriminate on the basis of gender, disability, race, national or ethnic origin, sexual orientation or marital status. Applications for employment are fully considered on their merits, and employees are given appropriate training and equal opportunities for career development and promotion. Website Publication The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Group’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the on-going integrity of the Financial Statements contained therein. Annual General Meeting The Company will hold the 2022 AGM on Monday 27 February 2023. The Notice of the Meeting accompanies the Annual Report and Accounts. By Order of the Board Drew Whibley Director 6 January 2023 Consolidated Financial Statements for the year ended 30 September 2022 34 FINANCIAL STATEMENTS: Independent Auditor’s Report For the year ended 30 September 2022 Opinion We have audited the ﬁnancial statements of i-nexus Global Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 30 September 2022 which comprise the consolidated statement of comprehensive income, the consolidated statement of ﬁnancial position, the company statement of ﬁnancial position, the consolidated statement of changes in equity, the company statement of changes in equity, the consolidated statement of cash ﬂows and notes to the ﬁnancial statements, including signiﬁcant accounting policies. The ﬁnancial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards. In our opinion the ﬁnancial statements: • give a true and fair view of the state of aﬀairs of the group and of the parent company as at 30 September 2022 and of the group’s loss for the year then ended; • have been properly prepared in accordance with UK-adopted international accounting standards; 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 and the parent company in accordance with the ethical requirements that are relevant to our audit of the ﬁnancial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulﬁlled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is suﬃcient and appropriate to provide a basis for our opinion. Our approach to the audit We tailored the scope of our audit to ensure that we obtained suﬃcient evidence to support our opinion on the ﬁnancial statements as a whole, taking into account the structure of the group, the accounting processes and controls and the industry in which the group and company operates. As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the ﬁnancial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of signiﬁcant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. The risks of material misstatement that had the greatest eﬀect on our audit, including the allocation of our resources and eﬀort, are discussed under “Key audit matters” within this report. Our group audit scope included an audit of the group and parent company ﬁnancial statements. Based on our risk assessment, we determined that two components, i-nexus Global plc and i-Solutions Global Limited, represented the principal business units within the group. A full scope audit was undertaken on each component. The group manages its operations centrally and has common ﬁnancial systems, processes and controls covering all signiﬁcant components. The audit of both signiﬁcant components was performed by the same audit team. The extent to which our audit work on the components was based on our assessment of the risk of material misstatement and of the materiality of that components. The components within the scope of our audit work therefore covered more than 90% of group revenue, group proﬁt before tax and group net assets. At group level we also tested the consolidation process to conﬁrm our conclusion that there were no signiﬁcant risks of material misstatement in the consolidated ﬁnancial information 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. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 35 Key Audit Matter How our scope addressed this matter Revenue recognition The group’s revenue is generated from the development and licencing of cloud-based software and associated maintenance, support, software customisation and professional consultancy services. Revenue of £3,126,804 and deferred revenue of £1,319,674 have been recognised during the year. Revenue is recognised in accordance with IFRS 15 ‘Revenue from contracts with customers’ and through application of the 5-step model, there is signiﬁcant judgement as to: • Identifying performance obligations; • Allocating transaction price to performance obligations; and • Determining when performance obligations are satisﬁed. The signiﬁcance of revenue and deferred revenue to the group and the judgements involved regarding recognition have led us to identify this as a key audit matter. Going concern is a The going concern assumption fundamental and pervasive principle in the preparation of ﬁnancial statements. The requirement to extend the redemption date on certain loan notes as disclosed in note 22, together with the trading result and cash utilisation in the year give rise to greater inherent risk and raise the concern as to whether the group has suﬃcient resources to continue to meet its liabilities as they fall due for a period of at least 12 months from the date of approval of the ﬁnancial statements. As such, signiﬁcant audit time was devoted to testing of the going concern assessment and the going concern assumption is considered to be a key audit matter. Our audit procedures included the following: • We reviewed the revenue recognition policy to ensure it is appropriate and compliant with IFRS 15; • We substantively tested revenue streams on a sample basis by reference to purchase orders, customer contracts and time records for accuracy; • We checked performance obligations within contracts had been satisﬁed and re-performed the arithmetical calculations that allocate price to performance obligations satisﬁed to ensure the accuracy and completeness of revenue recognised and the contract liability in each instance; Based on the procedures performed, we have not identiﬁed any material misstatement arising from revenue recognition. Our audit procedures included the following: • We obtained and reviewed the working capital presentation, ﬁnancial models and forecast scenarios prepared by the management team to support their conclusion that the business is a going concern for a period in excess of twelve months from the date of approval of these ﬁnancial statements • We reviewed the sensitivities adopted by management, challenging the feasibility and likelihood of each scenario, including that deemed to be the ‘worst case’ as set out in note 1.4; • We considered the feasibility and reviewed the mathematical accuracy of the modelled impact of proposed mitigating actions; • We assessed the historic accuracy of management’s forecasting process and reconciled the opening forecast cash and monthly recurring revenue to the historic information and underlying records; • We evaluated management’s plans for future actions and assessed that management’s assessment included all relevant information, including that concerning the future; • We considered how the impact of the current economic climate has been factored into the forecasts including mitigating actions taken to reduce the impact and the timing of such measures; and • We reviewed the disclosures in the annual report, speciﬁcally in note 1.4, to assess that these disclosures are appropriate. Based on our procedures performed, we concluded that there is no materiality uncertainty relating to going concern and that the continued adoption of the going concern basis in these ﬁnancial statements remains appropriate. Consolidated Financial Statements for the year ended 30 September 2022 36 FINANCIAL STATEMENTS: Independent Auditor’s Report continued Key Audit Matter How our scope addressed this matter The recognition and capitalisation of development costs, and review of the carrying value for impairment The group carries out research and development of its internally generated software. At the balance sheet date, the carrying value of capitalised development was £802,803. An impairment charge of £154,689 was also recorded during the year. There is signiﬁcant judgement as to: • Whether costs meet the recognition criteria of development assets under IAS 38; • The recoverable amount of the software being developed; and • The asset life once complete. The signiﬁcance of capitalised development costs to the group and the judgements involved regarding the recognition of development assets and impairment assessments have led us to determine that this is a key audit matter. Impairment of intercompany receivables The assessment of expected credit losses in relation to intercompany receivables requires assumptions and judgements concerning the future and is therefore subject to estimation uncertainty. The impairment charge recorded during the year in the parent company’s ﬁnancial statements amounts to £1,792,684 and is therefore signiﬁcant to the parent company’s balance sheet. This had led us to identify this as a key audit matter. Our audit procedures included the following: • We considered and challenged management’s assessment of how the criteria for capitalisation set out in IAS 38 had been met; and • We tested a sample of amounts capitalised during the period to payroll records and reviewed the assumptions applied for evidence of management bias; and • We considered and challenged the determination that certain assets were not available for use at the reporting date; and the appropriateness of • We critically appraised management’s assessment of recoverable amount, comprising incremental trading forecasts for the individual assets concerned. This included challenging management regarding critical assumptions as disclosed in note 3, critically assessing corroborative evidence and considering the likelihood of meeting forecasts based upon our understanding of the business, the trading history of the group and the current prospects. Based on our procedures performed we have not identiﬁed any material misstatement arising impairment of development costs. the recognition and from Our audit procedures included the following: • We considered the appropriateness of the methodology and approach applied by management in determining the impairment charge with reference to the requirements of IFRS 9; and • We critically appraised management’s assessment of recoverable amount, comprising 5 year trading forecasts for the subsidiary from which this receivable is due. This included challenging management regarding critical assumptions as disclosed in note 3, obtaining corroborative evidence and considering the likelihood of meeting forecasts based upon our understanding of the business, the trading history of the group and the current prospects. Based on our procedures performed we have not identiﬁed any material misstatement arising from the impairment of intercompany receivables. 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. Our overall objective as auditor is to obtain reasonable assurance that the ﬁnancial statements as a whole are free from material misstatement, whether due to fraud or error. We consider a misstatement to be material where it could reasonably be expected to inﬂuence the economic decisions of the users of the ﬁnancial statements. In order to reduce to an appropriately low level the probability that any misstatements exceeds materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below this level will not necessarily be evaluated as immaterial as we also take into accounts of the qualitative nature of identiﬁed misstatements, and the particular circumstances of their occurrence, when evaluating their eﬀect on the ﬁnancial. Based on our professional judgment and taking into account the possible metrics used by investors and other readers of the accounts, we have determined an overall group materiality of £85,000 based on 2.75% of revenue. Materiality of £77,000 was used for the parent company based on 1% of gross assets. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 37 Group performance materiality was set at £77,000 representing 90% of overall materiality. The parent company performance materiality was set at £69,000. We agreed with the Audit Committee to report all individual audit diﬀerences in excess of £4,000 in relation to the group and £4,000 for the parent company, being the level below which misstatements are considered to be clearly trivial. We also agreed to report any other identiﬁed misstatements that warranted reporting on qualitative grounds. Conclusions relating to going concern In auditing the ﬁnancial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the ﬁnancial statements is appropriate. Our evaluation of the directors’ assessment of the group and the parent company’s ability to continue to adopt the going concern basis of accounting is set out in the ‘Key audit matters’ section above. 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 group or the parent company’s ability to continue as a going concern for a period of at least twelve months from when the ﬁnancial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. 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. 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 course of 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 this gives rise to a material misstatement in the ﬁnancial statements themselves. 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. Opinions on other matters 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 the Directors’ Report for the ﬁnancial year for which the ﬁnancial statements are prepared is consistent with the ﬁnancial statements; and the Strategic Report and the 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 the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identiﬁed material misstatements in the Strategic Report or the Directors’ Report. We have nothing to report in respect of the following matters in relation to which 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. Consolidated Financial Statements for the year ended 30 September 2022 38 FINANCIAL STATEMENTS: Independent Auditor’s Report continued Responsibilities of directors As explained more fully in the Directors’ Responsibilities Statement set out on page 28, 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 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 group and parent company 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 speciﬁc procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below. Identifying and assessing risks related to irregularities: We assessed the susceptibility of the group and parent company’s ﬁnancial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the ﬁnancial statements. We identiﬁed laws and regulations that are of signiﬁcance in the context of the group and parent company by discussions with directors and by updating our understanding of the sector in which the group and parent company operate. Laws and regulations of direct signiﬁcance in the context of the group and parent company include The Companies Act 2006, the AIM Rules for Companies and UK Tax legislation. In addition, the group is subject to other laws and regulations that do not have a direct eﬀect on the ﬁnancial statements but compliance with which may be fundamental to its ability to operate or to avoid a material penalty. These include ISO 27001 regulations and employment law. Audit response to risks identiﬁed: We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related ﬁnancial statement items including a review of group and parent company ﬁnancial statement disclosures. We reviewed the parent company’s records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the parent company’s policies and procedures for compliance with laws and regulations with members of management responsible for compliance. During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any signiﬁcant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 39 As group auditors, our assessment of matters relating to non-compliance with laws or regulations and fraud diﬀered at group and component level according to their particular circumstances. Our communications included a request to identify instances of non-compliance with laws and regulations and fraud that could give rise to a material misstatement of the group ﬁnancial statements in addition to our risk assessment. There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reﬂected in the ﬁnancial statements, the less likely we would become aware of it. 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. further description of our responsibilities A www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. is available on the Financial Reporting Council’s website at: Use of our report This report is made solely to the parent 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 parent 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 parent company and the parent company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Michael Strong (Senior Statutory Auditor) for and on behalf of Saﬀery Champness LLP Chartered Accountants Statutory Auditors St Catherine’s Court Berkeley Place Clifton Bristol BS8 1BQ 6 January 2023 Consolidated Financial Statements for the year ended 30 September 2022 40 Consolidated Statement of Comprehensive Income For the year ended 30 September 2022 Revenue Cost of sales Gross proﬁt Other operating income Administrative expenses Operating loss Adjusted EBITDA Depreciation, amortisation, impairment and proﬁt/loss on disposal Share based payment expense Non-underlying items Investment revenues Finance costs Other gains and losses Loss before taxation Income tax income Loss for the year Other comprehensive income: Items that will not be reclassiﬁed to proﬁt or loss Currency translation diﬀerences Total items that will not be reclassiﬁed to proﬁt or loss Total other comprehensive income for the year Total comprehensive income for the year Earnings per share Basic Diluted Notes 4 4 6 5 11 12 13 14 Notes 15 2022 £ 3,126,804 (666,280) 2,460,524 – (3,408,424) 2021 £ 3,639,111 (635,532) 3,003,579 88,316 (4,062,295) (947,900) (970,400) (552,357) (384,975) (10,568) – 68 (231,288) 73,845 (256,873) (551,862) (17,181) (144,484) 65 (162,855) – (1,105,275) (1,133,190) 234,391 398,258 (870,884) (734,932) (486) (486) 17,346 17,346 (486) 17,346 (871,370) (717,586) 2022 £ 2021 £ (0.03) (0.02) (0.03) (0.02) Proﬁt and total comprehensive income for the ﬁnancial year is all attributable to the owners of the parent company. All results are derived from continuing operations. The notes on pages 47 to 76 form part of these Group ﬁnancial statements. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 41 Consolidated Statement of Financial Position As at 30 September 2022 Non-current assets Intangible assets Property, plant and equipment Current assets Trade and other receivables Current tax recoverable Cash and cash equivalents Total assets Current liabilities Trade and other payables Borrowings Deferred revenue Net current liabilities Non-current liabilities Trade and other payables Borrowings Convertible loan notes Total liabilities Net liabilities Equity Called up share capital Share premium account Foreign exchange reserve Share option reserve Equity reserve Merger reserve Retained earnings Total equity Notes 16 17 19 24 21 26 24 21 22 29 30 32 28 31 32 2022 £ 915,696 26,413 942,109 781,838 224,000 98,987 1,104,825 2,046,934 682,840 9,707 1,319,674 2,012,221 (907,396) 254,407 32,387 1,766,925 2,053,719 4,065,940 (2,019,006) 2021 £ 1,099,313 67,111 1,166,424 791,948 275,000 575,203 1,642,151 2,808,575 952,157 71,425 1,030,315 2,053,897 (411,746) 88,330 42,094 1,782,458 1,912,882 3,966,779 (1,158,204) 2,957,161 7,256,188 1,390 20,062 231,851 10,653,881 (23,139,539) (2,019,006) 2,957,161 7,256,188 1,876 12,989 231,851 10,653,881 (22,272,150) (1,158,204) The ﬁnancial statements were approved by the board of directors and authorised for issue on 6 January 2023 and are signed on its behalf by: Mr S P Crowther Director The notes on pages 47 to 76 form part of these Group ﬁnancial statements. Consolidated Financial Statements for the year ended 30 September 2022 42 Company Statement of Financial Position As at 30 September 2022 2022 2021 Notes £ £ £ £ Non-current assets Investments 37 1,682,519 1,671,951 Current assets Trade and other receivables 38 5,437,142 6,888,516 Cash and cash equivalents 545 426,487 5,437,687 7,315,003 Current liabilities Trade and other payables 40 101,746 205,883 Net current assets 5,335,941 7,109,120 Total assets less current liabilities 7,018,460 8,781,071 Non-current liabilities 39 2,021,332 1,870,788 Net assets 4,997,128 6,910,283 Equity Called up share capital 29 2,957,161 2,957,161 Share premium account 30 7,256,188 7,256,188 Equity reserve 31 231,851 231,851 Share option reserve 28 20,062 12,989 Retained earnings (5,468,134) (3,547,906) Total equity 4,997,128 6,910,283 As permitted by s408 Companies Act 2006, the company has not presented its own income statement and related notes. The company’s loss for the year was £1,923,723 (2021 - £2,872,499). The ﬁnancial statements were approved by the board of directors and authorised for issue on 6 January 2023 and are signed on its behalf by: Mr S P Crowther Director Company Registration No. 11321642 The notes on pages 47 to 76 form part of these Group ﬁnancial statements. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 43 Consolidated Statement of Changes In Equity For the year ended 30 September 2022 Share Foreign Share Share premium Equity Merger exchange option Retained capital account reserve reserve reserve reserve earnings Total Notes £ £ £ £ £ £ £ £ Balance at 1 October 2020 2,957,161 7,256,188 – 10,653,881 (15,470) – (21,541,410) (689,650) Year ended 30 September 2021: Loss for the year – – – – – – (734,932) (734,932) Other comprehensive income: Exchange diﬀerences on foreign operations – – – – 17,346 – – 17,346 Total comprehensive income for the year – – – – 17,346 – (734,932) (717,586) Transactions with owners in their capacity as owners Issue of convertible loan 22 – – 231,851 – – – – 231,851 Share option expense in the year 28 – – – – – 17,181 – 17,181 Share options cancelled 28 – – – – – (4,192) 4,192 – Total contributions by and distributions to owners of the Company recognised directly in equity – – 231,851 – – 12,989 4,192 249,032 Balance at 30 September 2021 2,957,161 7,256,188 231,851 10,653,881 1,876 12,989 (22,272,150) (1,158,204) Year ended 30 September 2022: Loss for the year – – – – – – (870,884) (870,884) Other comprehensive income: Exchange diﬀerences on foreign operations – – – – (486) – – (486) Total comprehensive income for the year – – – – (486) – (870,884) (871,370) Transactions with owners in their capacity as owners Share option expense in the year 28 – – – – – 10,568 – 10,568 Share options cancelled 28 – – – – – (3,495) 3,495 – Total contributions by and distributions to owners of the Company recognised directly in equity – – – – – 7,073 3,495 10,568 Balance at 30 September 2022 2,957,161 7,256,188 231,851 10,653,881 1,390 20,062 (23,139,539) (2,019,006) The notes on pages 47 to 76 form part of these Group ﬁnancial statements. Consolidated Financial Statements for the year ended 30 September 2022 44 Company Statement of Changes in Equity For the year ended 30 September 2022 Share Share Share premium Equity option Retained capital account reserve reserve earnings Total Notes £ £ £ £ £ £ Balance at 1 October 2020 2,957,161 7,256,188 – – (679,599) 9,533,750 Year ended 30 September 2021: Loss and total comprehensive income for the year – – – – (2,872,499) (2,872,499) Transactions with owners in their capacity as owners Issue of convertible loan – – 231,851 – – 231,851 Share option expense in the year 28 – – – 17,181 – 17,181 Share options cancelled 28 – – – (4,192) 4,192 – Total contributions by and distributions to owners of the Company recognised directly in equity – – 231,851 12,989 4,192 249,032 Balance at 30 September 2021 2,957,161 7,256,188 231,851 12,989 (3,547,906) 6,910,283 Year ended 30 September 2022: Loss and total comprehensive income for the year – – – – (1,923,723) (1,923,723) Transactions with owners in their capacity as owners Share option expense in the year 41 – – – 10,568 – 10,568 Share options cancelled 41 – – – (3,495) 3,495 – Total contributions by and distributions to owners of the Company recognised directly in equity – – – 7,073 3,495 10,568 Balance at 30 September 2022 2,957,161 7,256,188 231,851 20,062 (5,468,134) 4,997,128 The notes on pages 47 to 76 form part of these Group ﬁnancial statements. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 45 Consolidated Statement of Cash Flows For the year ended 30 September 2022 2022 2021 Notes £ £ £ £ Operating activities Loss after tax (870,884) (734,932) Adjusted for non-cash items: Taxation credit 14 (234,391) (398,258) Amortisation, depreciation, and adjustments on disposal 6 384,975 551,862 Share-based payment expense 28 10,568 17,181 Finance income 11 (68) (65) Finance charges 12 231,288 162,855 Decrease in provisions – (80,702) Other gains 13 (73,845) – (552,357) (482,059) Decrease in trade and other receivables 19 10,126 78,059 Increase/(decrease) in trade and other payables 24 20,043 (980,799) Cash used in operations (522,188) (1,384,799) Income tax refunded 285,391 423,258 Net cash outﬂow from operating activities (236,797) (961,541) Investing activities Purchase of intangible assets - internally generated 16 (136,234) (335,446) Purchase of property, plant and equipment 17 (24,443) (1,171) Proceeds on disposal of property, plant and equipment – 1,180 Interest received 68 65 Net cash used in investing activities (160,609) (335,372) Financing activities Issue of convertible loans 22 – 1,937,500 Repayment of borrowings 21 (71,425) (179,981) Proceeds of new bank loans 21 – 50,000 Payment of lease liabilities – (37,467) Interest paid (6,899) (35,216) Net cash (used in)/generated from ﬁnancing activities (78,324) 1,734,836 Net (decrease)/increase in cash and cash equivalents (475,730) 437,923 Cash and cash equivalents at beginning of year 575,203 120,011 Eﬀect of foreign exchange rates (486) 17,269 Cash and cash equivalents at end of year 98,987 575,203 The notes on pages 47 to 76 form part of these Group ﬁnancial statements. Consolidated Financial Statements for the year ended 30 September 2022 46 Note to the Consolidated Statement of Cash Flows For the year ended 30 September 2022 Changes in liabilities arising from ﬁnancing activities The table below details changes in the Group's liabilities arising from ﬁnancing activities, including both cash and non-cash changes. Liabilities arising from ﬁnancing activities are those for which cash ﬂows were, or future cash ﬂows will be, classiﬁed in the Group's Consolidated Statement of Cash Flows as cash ﬂows from ﬁnancing activities. At At 1 October Financing Convertible Other 30 September 2021 cash ﬂows element movements* 2022 £ £ £ £ £ Bank loans 50,000 (7,906) – – 42,094 Convertible loan notes 1,782,458 – – (15,533) 1,766,925 Other loans 63,519 (63,519) – – – 1,895,977 (71,425) – (15,533) 1,809,019 At At 1 October Financing Convertible Other 30 September 2020 cash ﬂows element movements* 2021 £ £ £ £ £ Bank loans – 50,000 – – 50,000 Convertible loan notes – 1,937,500 (231,851) 76,809 1,782,458 Other loans 243,500 (179,981) – – 63,519 Leases 37,467 (37,467) – – – 280,967 1,770,052 (231,851) 76,809 1,895,977 *Other movements in the year ended 30 September 2022 includes; (1) Interest charged to the statement of comprehensive income of £224,389; (2) Accrued interest payable of £166,077 based on the convertible loan coupon rate of 8%; and (3) Gain on modiﬁcation of tranche one of the convertible loan note liability, credited to the statement of comprehensive income of £73,845. *Other movements in the year ended 30 September 2021 includes; (1) Accrued proceeds of £37,500 which was contractually agreed but unpaid at the year end; (2) Interest charged to the statement of comprehensive income of £127,639; and (3) Accrued interest payable of £88,330 based on the convertible loan coupon rate of 8%. The notes on pages 47 to 76 form part of these Group ﬁnancial statements. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 47 Notes to the Consolidated Financial Statements For the year ended 30 September 2022 1 Accounting policies Company information i-nexus Global Plc is a public company limited by shares incorporated in England and Wales. The registered oﬃce is 27-28 Eastcastle Street, London, W1W 8DH. The Group’s principal activities and nature of its operations are disclosed in the Strategic Report. The Group consists of i-nexus Global Plc and all of its subsidiaries as listed in note 18. 1.1 Accounting convention The ﬁnancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the United Kingdom and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The ﬁnancial statements are prepared in sterling, which is the functional currency of the Group. Monetary amounts in these ﬁnancial statements are rounded to the nearest £1. The ﬁnancial statements have been prepared under the historical cost convention, modiﬁed to include the revaluation of certain ﬁnancial instruments at fair value. The principal accounting policies adopted are set out below. The individual parent company meets the deﬁnition of a qualifying entity under FRS 101 Reduced Disclosure Framework. As permitted by FRS 101, the company has taken advantage of the following disclosure exemptions from the requirements of IFRS: (a) the requirements of IFRS 7 ‘Financial Instruments: Disclosure’; (b) the requirements within IAS 1 relating to the presentation of certain comparative information; (c) the requirements of IAS 7 ‘Statement of Cash Flows’ to present a statement of cash ﬂows; (d) paragraphs 30 and 31 of IAS 8 ‘Accounting policies, changes in accounting estimates and errors’ (requirement for the disclosure of information when an entity has not applied a new IFRS that has been issued but it not yet eﬀective); and (e) the requirements of IAS 24 ‘Related Party Disclosures’ to disclose related party transactions and balances between two or more members of a Group. (f) disclosure of key management personnel compensation As permitted by S408 Companies Act 2006, the Company had not presented its own Statement of Comprehensive Income. The company’s loss for the period was £1,923,723. 1.2 Business combinations The cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identiﬁable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for ﬁnal fair values determined in the 12 months following the acquisition date. The accounting treatment in relation to the additions of i-nexus Global plc as a new UK holding company of the Group fell outside the scope of IFRS 3 ‘Business Combinations’. The share scheme arrangement constituted a common control combination of the entities. This was as a result of all the shareholders of i-nexus Global plc being issued shares in the same proportion, and the continuity of ultimate controlling parties. The directors believed that this approach presents fairly the ﬁnancial performance, ﬁnancial position and cash ﬂows of the Group. Consolidated Financial Statements for the year ended 30 September 2022 48 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 1 Accounting policies (continued) The reconstructed group was consolidated using merger accounting principles, as outlined in the Financial Reporting Standard FRS 102 (“FRS”), and the reconstructed Group treated as if it had always been in existence. There was no diﬀerence between the nominal value of the shares issued in the share exchange and the book value of the shares obtained. 1.3 Basis of consolidation The consolidated Group ﬁnancial statements consist of the ﬁnancial statements of the parent company i-nexus Global plc together with all entities controlled by the parent company (its subsidiaries) and the Group’s share of its interests in joint ventures and associates. All ﬁnancial statements are made up to 30 September 2022. Where necessary, adjustments are made to the ﬁnancial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group. All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Subsidiaries are consolidated in the Group’s ﬁnancial statements from the date that control commences until the date that control ceases. The Group’s interest in i-solutions Global Limited has been consolidated as set out in the ‘Business combinations’ policy above. 1.4 Going concern After reviewing the Group’s forecasts and projections, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of at least twelve months from the date of approval of these ﬁnancial statements. The Group therefore continues to adopt the going concern basis in preparing its ﬁnancial statements. Information used to make this decision is detailed below. A scenario testing exercise, in which the Directors prepared detailed cash ﬂow forecasts for the period covered by the going concern forecast, was performed. The forecasts take into account the Directors’ views of current and future economic conditions that are expected to prevail over the period including assumptions regarding the sales pipeline, future revenues and costs with various scenarios which reﬂect growth plans, opportunities, risks and mitigating actions. Alongside managements base case forecast, the Group prepared an extreme downside scenario where, outside of the deals secured in Q1 2023, any growth in MRR across the period would be oﬀset by non-renewals, reducing total billing across recurring and services revenue by £510k. Under this extreme scenario, the Group has given consideration to the potential actions available to management to mitigate the impact of these sensitivities, in particular the discretionary nature of costs incurred by the Group, in order to ensure the continued availability of funds. Financial performance in 2023 is not expected to be materially impacted from current year levels due to the long-range revenue visibility achieved through the recurring revenue business model. These recurring revenues, representing 90% of total revenue, are considered resilient given the majority are on multi-year terms. The forecast also assumed that the Group does not have access to any further external funding. Based on current trading, the stress test scenario is considered very unlikely. The Group continues to monitor the collection of monies from clients with no material delays in payment being cited. The business beneﬁts from an Annual Licence Fee Model in which software Licence fees are received annually in advance. 1.5 Revenue The Group applies IFRS 15 ‘Revenue from contracts with customers’. Under IFRS 15, the Group applies the 5-step method to identify contracts with its customers, determine performance obligations arising under those contracts, set an expected transaction price, allocate that price to the performance obligations, and then recognises revenues as and when those obligations are satisﬁed. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 49 Revenue is measured based on the consideration speciﬁed in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a product or service to a customer. When cash inﬂows are deferred and represent a ﬁnancing arrangement, the fair value of the consideration is the present value of the future receipts. The diﬀerence between the fair value of the consideration and the nominal amount received is recognised as interest income. The nature of revenues is licence fee income on a software-as-a-service (SaaS) basis and professional services. Licence fee Revenue for annual licences, support and maintenance is recognised on a straight-line basis over the duration of the contract. Professional services Conﬁguration and software customisation revenue is recognised on a percentage completion basis over the period during which the conﬁguration or software customisation is completed, in line with IFRS 15. Setup, deployment, migration and report development revenue are recognised at the point of setup, deployment, migration or report development is completed. In the circumstances where an event spans two or more accounting periods, the revenue is recognised in the period when the event is completed and the software has been accepted by the customer. Revenue for training events is recognised at the point the training event is completed. 1.6 Intangible assets other than goodwill Research expenditure is recognised as an expense when it is incurred. Development expenditure is recognised as an expense except that costs incurred on development projects are capitalised as intangible assets to the extent that such expenditure is expected to generate future economic beneﬁt. Development expenditure is capitalised if, and only if, an entity within the Group can demonstrate all of the following: (a) its ability to measure reliably the expenditure attributable to the asset under development; (b) the product or process is technically and commercially feasible; (c) its future economic beneﬁts are probable; (d) its ability to use or sell the developed asset; (e) the availability of adequate technical, ﬁnancial and other resources to complete the asset under development; and (f) its intention to use of sell the developed asset. Amortisation is recognised so as to write oﬀ the cost or valuation of assets less their residual values over their useful lives on the following bases: Development costs 5 years straight line 1.7 Property, plant and equipment Property, plant and equipment are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses. Depreciation is recognised so as to write oﬀ the cost or valuation of assets less their residual values over their useful lives on the following bases: Fixtures and ﬁttings 25% straight line Computers 33% straight line Consolidated Financial Statements for the year ended 30 September 2022 50 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 1 Accounting policies (continued) The gain or loss arising on the disposal of an asset is determined as the diﬀerence between the sale proceeds and the carrying value of the asset, and is recognised in the income statement. 1.8 Non-current investments Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in the income statement. A subsidiary is an entity controlled by the parent company. Control is the power to govern the ﬁnancial and operating policies of the entity so as to obtain beneﬁts from its activities. 1.9 Impairment of tangible and intangible assets At each reporting end date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suﬀered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Intangible assets with indeﬁnite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash ﬂows are discounted to their present value using a pre-tax discount rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the asset for which the estimates of future cash ﬂows have not been adjusted. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in proﬁt or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in proﬁt or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. 1.10 Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities. 1.11 Financial assets Financial assets are recognised in the Group’s statement of ﬁnancial position when the Group becomes party to the contractual provisions of the instrument. Financial assets are classiﬁed into speciﬁed categories, depending on the nature and purpose of the ﬁnancial assets. At initial recognition, ﬁnancial assets classiﬁed as fair value through proﬁt and loss are measured at fair value and any transaction costs are recognised in proﬁt or loss. Financial assets not classiﬁed as fair value through proﬁt and loss are initially measured at fair value plus transaction costs. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 51 Financial assets at fair value through proﬁt or loss Financial assets measured at fair value through proﬁt or loss are recognized initially at fair value and any transaction costs are recognised in proﬁt or loss when incurred. A gain or loss on a ﬁnancial asset measured at fair value through proﬁt or loss is recognised in proﬁt or loss, and is included within ﬁnance income or ﬁnance costs in the statement of income for the reporting period in which it arises. Financial assets held at amortised cost Financial instruments are classiﬁed as ﬁnancial assets measured at amortised cost where the objective is to hold these assets in order to collect contractual cash ﬂows, and the contractual cash ﬂows are solely payments of principal and interest. They arise principally from the provision of goods and services to customers (eg trade receivables). They are initially recognised at fair value plus transaction costs directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the eﬀective interest rate method, less provision for impairment where necessary. Financial assets at fair value through other comprehensive income Debt instruments are classiﬁed as ﬁnancial assets measured at fair value through other comprehensive income where the ﬁnancial assets are held within the Group’s business model whose objective is achieved by both collecting contractual cash ﬂows and selling ﬁnancial assets, and the contractual terms of the ﬁnancial asset give rise on speciﬁed dates to cash ﬂows that are solely payments of principal and interest on the principal amount outstanding. A debt instrument measured at fair value through other comprehensive income is recognised initially at fair value plus transaction costs directly attributable to the asset. After initial recognition, each asset is measured at fair value, with changes in fair value included in other comprehensive income. Accumulated gains or losses recognised through other comprehensive income are directly transferred to proﬁt or loss when the debt instrument is derecognised. Impairment of ﬁnancial assets Financial assets, other than those measured at fair value through proﬁt or loss, are assessed for indicators of impairment at each reporting end date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the ﬁnancial asset, the estimated future cash ﬂows of the investment have been aﬀected. Derecognition of ﬁnancial assets Financial assets are derecognised only when the contractual rights to the cash ﬂows from the asset expire, or when it transfers the ﬁnancial asset and substantially all the risks and rewards of ownership to another entity. 1.12 Financial liabilities The Group recognises ﬁnancial debt when the Group becomes a party to the contractual provisions of the instruments. Financial liabilities are classiﬁed as either ‘ﬁnancial liabilities at fair value through proﬁt or loss’ or ‘other ﬁnancial liabilities’. Financial liabilities at fair value through proﬁt or loss Financial liabilities are classiﬁed as measured at fair value through proﬁt or loss when the ﬁnancial liability is held for trading. A ﬁnancial liability is classiﬁed as held for trading if: • it has been incurred principally for the purpose of selling or repurchasing it in the near term, or • on initial recognition it is part of a portfolio of identiﬁed ﬁnancial instruments that are managed together and has a recent actual pattern of short-term proﬁt taking, or • it is a derivative that is not a ﬁnancial guarantee contract or a designated and eﬀective hedging instrument. Financial liabilities at fair value through proﬁt or loss are stated at fair value with any gains or losses arising on remeasurement recognised in proﬁt or loss. Consolidated Financial Statements for the year ended 30 September 2022 52 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 1 Accounting policies (continued) Other ﬁnancial liabilities Other ﬁnancial liabilities, including borrowings, trade payables and other short-term monetary liabilities, are initially measured at fair value net of transaction costs directly attributable to the issuance of the ﬁnancial liability. They are subsequently measured at amortised cost using the eﬀective interest method. For the purposes of each ﬁnancial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding. Convertible loan notes are measured at amortised cost using the eﬀective interest method at initial inception and subsequent measurement (note 22). Derecognition of ﬁnancial liabilities Financial liabilities are derecognised when, and only when, the Group’s obligations are discharged, cancelled, or they expire. 1.13 Compound instruments The component parts of compound instruments issued are classiﬁed separately as ﬁnancial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the eﬀective interest method until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity net of income tax eﬀects and is not subsequently remeasured. 1.14 Equity instruments Equity instruments issued by the parent company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer payable at the discretion of the company. Share capital represents the nominal value of shares that have been issued. Share premium includes all current and prior period premiums on shares allotted. Equity reserve represents the equity element of the unsecured convertible redeemable loan stock issued. Merger reserve represents the carrying value of the investment in the subsidiary undertaking at the point of the share for share exchange. Foreign exchange reserve relates to the exchange diﬀerences arises on the translation of the foreign subsidiary. Share based payment reserve relates to amounts recognised for the fair value of share options granted in accordance with IFRS 2. Retained earnings include all current and prior period retained earnings. 1.15 Taxation The tax expense represents the sum of the tax currently payable and deferred tax. Current tax The tax currently payable is based on taxable proﬁt for the year. Taxable proﬁt diﬀers from net proﬁt as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 53 Deferred tax Deferred tax is the tax expected to be payable or recoverable on diﬀerences between the carrying amounts of assets and liabilities in the ﬁnancial statements and the corresponding tax bases used in the computation of taxable proﬁt, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary diﬀerences and deferred tax assets are recognised to the extent that it is probable that taxable proﬁts will be available against which deductible temporary diﬀerences can be utilised. Such assets and liabilities are not recognised if the temporary diﬀerence arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that aﬀects neither the tax proﬁt nor the accounting proﬁt. The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that suﬃcient taxable proﬁts will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are oﬀset when the Group has a legally enforceable right to oﬀset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority. 1.16 Employee beneﬁts The costs of short-term employee beneﬁts are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of inventories or non-current assets. The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received. Termination beneﬁts are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination beneﬁts. 1.17 Retirement beneﬁts Payments to deﬁned contribution retirement beneﬁt schemes are charged as an expense as they fall due. 1.18 Share-based payments Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the Black-Scholes model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity. Full disclosure of the calculation model is given in note 28. 1.19 Leases At inception, the Group assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identiﬁed asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the Group recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment, apart from those that meet the deﬁnition of investment property. The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in proﬁt or loss on a straight-line basis over the lease term. 1.20 Grants Government grants are recognised when there is reasonable assurance that the grant conditions will be met and the grants will be received. Grant income recognised in the prior year comprises the Covid-19 job retention scheme grant and is recorded in other operating income. Consolidated Financial Statements for the year ended 30 September 2022 54 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 1 Accounting policies (continued) 1.21 Foreign exchange Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in proﬁt or loss. Overseas operations which have a functional currency diﬀerent to the Group presentation currency have been translated using the monthly average exchange rate for consolidation into the statement of comprehensive income. The amounts included in the group statement of ﬁnancial position have been translated at the exchange rate ruling at the statement date. All resulting exchange diﬀerences are reported in other comprehensive income. 2 Adoption of new and revised standards and changes in accounting policies The current standards, amendments and interpretations have been adopted in the year and have not had a material impact on the reported results in the Group’s ﬁnancial statements: • Covid-19 related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) • Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) • Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4) Standards, amendments and interpretations in issue but not yet eﬀective At the authorisation of these ﬁnancial statements, the Group has not applied the following new and revised standards that have been issued but are not eﬀective yet: Classiﬁcation of Liabilities as Current or Non-Current (Amendments to IAS 1) and Deferral of Eﬀective Date Amendment Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) Deﬁnition of Accounting Estimates (Amendments to IAS 8) Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12 Income Taxes) IFRS 17 Insurance Contracts Amendments to IFRS 17 Initial Application of IFRS 17 and IFRS 9 – Comparative information Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards – Subsidiary as First-time Adopter Amendment to IFRS 9 Financial Instruments—Fees in the ‘10 percent’ Test for Derecognition of Financial Liabilities. Onerous Contracts—Cost of Fulﬁlling a Contract (Amendments to IAS37) Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) Reference to the Conceptual Framework (Amendments to IFRS 3) Eﬀective date – period beginning on or after 1 January 2024 * 1 January 2023 * 1 January 2023 * 1 January 2023 * 1 January 2023 * 1 January 2022 1 January 2022 1 January 2022 1 January 2022 1 January 2022 1 January 2022 1 January 2022 * These standards, amendments and interpretations have not yet been endorsed by the UK and the dates shown are the expected dates. The adoption of all above standards is not expected to have any material impact on the Group’s ﬁnancial statements. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 55 3 Critical accounting estimates and judgements In the application of the Group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may diﬀer from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision aﬀects only that period, or in the period of the revision and future periods if the revision aﬀects both current and future periods. The estimates and assumptions which have a signiﬁcant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below. Key sources of estimation uncertainty Impairment of investments and intercompany debtors A subsidiary of the parent company has sustained losses and the balance sheet is in deﬁcit. This is a indicator of potential impairment. The recoverability of the intercompany debtor and the cost of investment is dependent on the future proﬁtability of the entity, as whilst the debtor is repayable on demand the directors are intending to allow the subsidiary to continue to trade in order to generate suﬃcient proﬁts and cash to render this balance recoverable. Management have made assumptions concerning future trading performance and EBITDA, the anticipated period of recovery and the appropriate level of discount rate to be applied. A provision for impairment of £1,724,886 (2021 - £2,895,000) has been recognised in the parent company and is a signiﬁcant judgement (note 36). The impairment has been eliminated on consolidation in the Group accounts. Impairment During the year, the directors considered the recoverability of the capitalised development costs, which are included in its balance sheet at £915,696 (2021 - £1,099,313) after impairment. For individual assets net yet available for use or where indicators of impairment existed, the directors carried out a detailed net present value assessment of the future expected revenue and net proﬁt stream over a ﬁve year period. The discount rate used in calculating the recoverable amount of each project using present value techniques was 11%. Following the assessment two projects were held at higher than their recoverable amount and hence an impairment of £154,689 (2021 - £293,878) has been recognised. The directors came to this conclusion as a consequence of the pace of change inherent in technology businesses which has been enhanced since the onset of the pandemic, shifting focus away from these projects. The recoverable amounts in both cases are calculated as the value in use. Critical judgments Capitalised development costs Development expenditure is recognised as an expense except that costs incurred on development projects are capitalised as intangible assets to the extent that such expenditure is expected to generate future economic beneﬁts. Signiﬁcant judgement is applied in determining if development costs meet the criteria to be capitalised as intangible assets. IAS 36 also requires that an assessment of recoverable amount is prepared for all intangible assets not available for use at the reporting date, and for any intangible asset where there is an indicator of impairment. Useful lives Amortisation is provided so as to write down the development costs capitalised to their residual values over their estimated useful lives as set out in the Group’s accounting policy. The selection of estimated life requires the exercise of management judgement. Useful lives are regularly reviewed and should management’s assessment of useful lives shorten/increase then amortisation charges in the ﬁnancial statements would increase/decrease and carrying amounts of intangible assets would change accordingly. Consolidated Financial Statements for the year ended 30 September 2022 56 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 4 Revenue The Group has one single business segment and therefore all revenue is derived from the rendering of services as stated in the principal activity. The Group operates in six geographical segments, as set out below. This is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance, has been identiﬁed as the management team comprising the executive directors who make strategic decisions. Revenue analysed by class of business Licence Services Revenue analysed by geographical market United Kingdom USA Switzerland Germany Rest of Europe Rest of the World Other income Grants received 2022 £ 2021 £ 2,856,720 270,084 3,126,804 2022 £ 716,295 882,707 639,380 538,561 190,976 158,885 3,126,804 2022 £ 3,333,407 305,704 3,639,111 2021 £ 853,663 1,211,192 629,921 329,959 476,513 137,863 3,639,111 2021 £ – 88,316 During the year there were two key customers (2021 - two key customers) that accounted for over 10% of revenue each. Revenue for each of these customers is £639,380 and £324,936 respectively (2021 - £629,921 and £451,702 respectively). All revenue recognised is in relation to contracts held with customers. Amounts of revenue recognised in the period that was included as a contract liability balance at the beginning of the previous period was £1,030,315 (2021 - £1,723,661), see note 26. The total amount of revenue deferred and recognised as a contract liability at the year end is £1,319,674 (2021 - £1,030,315) as shown in note 26. Invoices for licence revenue are issued annually in advance and recognised as deferred revenue as the performance obligation has not yet been satisﬁed at that point in time. Services income relates to prepaid, part upfront/part upon completion and other amounts linked to key milestones as set out in the contract. This is recognised as deferred revenue and increase in debtors where the performance obligation has been met but not yet invoiced. The performance obligations of the licence revenue are satisﬁed on a monthly basis and as such revenue for this stream is recognised monthly as and when the licence period is satisﬁed. The service performance obligations vary and the contract value is recognised over the duration of each project. All warranties are included within the subscription agreements with each client and are therefore not a separate performance obligation. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 57 The transaction price is determined by the contractual value agreed with the client. It is deemed that all professional services, including those in respect of deployment, represent a distinct performance obligation from the software licence. Grants of £nil (2021 - £88,316) were received as part of the Government’s initiatives to provide immediate ﬁnancial support as a result of the COVID-19 pandemic. There are no future related costs associated with these grants which were received solely as compensation for costs incurred in the year. 5 Adjusted EBITDA Operating loss Add back: Depreciation, amortisation, impairment and proﬁt/loss on disposal Share based payment expense Non-underlying items Adjusted EBITDA 2022 £ 2021 £ (947,900) (970,400) 384,975 10,568 – 551,862 17,181 144,484 (552,357) (256,873) The calculation of Adjusted Earnings is consistent with the presentation of Adjusted Earnings before Interest, Tax, Depreciation, and Amortisation, as presented on the face of the Group Statement of Comprehensive Income. This adjusted element also removes non-underlying items which, in the prior year, comprise Covid-19 related redundancy costs and professional and consultancy fees relating to the raising of ﬁnance during the year. There were no such costs in the current year. The Directors have presented this Alternative Performance Measure (“APM”) because they feel it most suitably represents the underlying performance and cash generation of the business, and allows comparability between the current and comparative period in light of the rapid changes in the business, and will allow an ongoing trend analysis of this performance based on current plans for the business. 6 Operating loss Operating loss for the year is stated after charging/(crediting): Exchange losses Research and development costs Government grants Fees payable to the Company’s auditors for the audit of the Parent Company, consolidated ﬁnancial statements and audit of the Company’s subsidiaries Depreciation of property, plant and equipment Loss on disposal of property, plant and equipment Amortisation of intangible assets Impairment of intangible assets Share-based payments 2022 £ 15,697 676,504 – 54,550 43,239 21,885 165,162 154,689 10,568 2021 £ 93,995 523,653 (88,316) 49,550 141,827 37,094 79,063 293,878 17,181 Consolidated Financial Statements for the year ended 30 September 2022 58 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 7 Impairments Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in proﬁt or loss: In respect of: Intangible assets Recognised in: Administrative costs 8 Auditor’s remuneration Fees payable to the company’s auditor and associates: For audit services Audit of the ﬁnancial statements of the company’s subsidiaries 2022 £ 2021 £ 154,689 293,878 154,689 293,878 2022 £ 2021 £ 54,550 49,550 The audit fee for the parent company, i-nexus Global plc, is borne by its subsidiary, i-solutions Global Limited. 9 Employees The average monthly number of persons (including directors) employed by the Group during the year was: Senior management and directors Development global services and other Total Their aggregate remuneration comprised: Wages and salaries Social security costs Pension costs 2022 Number 2021 Number 9 21 30 12 27 39 2022 £ 1,942,085 251,229 104,623 2,297,937 2021 £ 2,504,068 286,670 84,550 2,875,288 Included within wages and salaries is £10,568 (2021 - £17,181) relating to equity settled share based payment expense, as explained further in note 28. Included in the above is aggregate remuneration relating to capitalised development costs (note 16) amounting to £136,234 (2021 - £335,446). i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 59 10 Directors’ remuneration Remuneration for qualifying services Company pension contributions to deﬁned contribution schemes 2022 £ 391,281 28,828 420,109 2021 £ 403,933 16,482 420,415 The number of directors for whom retirement beneﬁts are accruing under deﬁned contribution schemes amounted to 4 (2021 - 3). The number of directors who are entitled to receive shares under long term incentive schemes during the year was 2 (2021 - 2). Remuneration disclosed above includes the following amounts paid to the highest paid director: Remuneration for qualifying services Company pension contributions to deﬁned contribution schemes During the year to 30 September 2022 the Directors received remuneration as follows: Salary Director £ Mr S Crowther 180,140 Ms A Levett (resigned 1 August 2022) 106,813 Mr R Cunningham 48,000 Mr D Firth 30,000 Mr D Whibley (appointed 1 August 2022) 21,671 Total 386,624 No share options were exercised in the year. Beneﬁts in kind £ – – – – – – 2022 £ 182,846 15,674 Pension £ 15,674 9,734 1,253 – 2,167 28,828 2021 £ 177,155 8,483 Total £ 195,814 116,547 49,253 30,000 23,838 415,452 In addition to the above remuneration, the ascribed fair value of the share options, granted to the directors during the prior year, is shown in the following table as a component of directors’ remuneration in line with the requirements of IFRS 2. These options are presently out of the money and the associated growth based vesting conditions have not been met. However, the remuneration committee have decided a percentage will vest, even though certain performance conditions were not met, in recognition of the directors’ performance throughout the period, see page 29 for details. Consolidated Financial Statements for the year ended 30 September 2022 60 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 10 Directors’ remuneration (continued) Director Mr S Crowther Ms A Levett (resigned 1 August 2022) Mr R Cunningham Mr D Firth Mr D Whibley (appointed 1 August 2022) Total During the year to 30 September 2021 the Directors received remuneration as follows: Salary Beneﬁts in kind £ Director £ Mr S Crowther 172,550 Ms A Levett 137,025 Mr R Cunningham 48,000 Mr D Firth (appointment 18 February 2021) 18,308 Mr N Halkes (resigned 31 March 2021) 20,125 Total 396,008 – – – – – – No share options were exercised in the year. Fair value of Total share options remuneration £ £ 2,706 1,951 – – – 4,657 Pension £ 8,483 6,851 1,148 – – 16,482 198,520 118,498 49,253 30,000 23,838 420,109 Total £ 181,033 143,876 49,148 18,308 20,125 412,490 In addition to the above remuneration, the directors have been granted share options with fair value as shown in the below table for the year ended 30 September 2021. These options were out of the money as at 30 September 2021 and the associated growth based vesting conditions have not been met. These are however ascribed a fair value and included as a component of directors’ remuneration in line with the requirements of IFRS 2, in spite of the inherent uncertainty as to whether they will eventually vest. Director Mr S Crowther Ms A Levett Mr R Cunningham Mr D Firth (appointment 18 February 2021) Mr N Halkes (resigned 31 March 2021) Total Fair value of share options £ Total remuneration £ 4,605 3,320 – – – 7,925 185,638 147,196 49,148 18,308 20,125 420,415 i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 61 11 Investment income Interest income Financial instruments measured at amortised cost: Bank deposits 12 Finance costs Interest on lease liabilities Other interest payable Interest on convertible loan notes Total interest expense 13 Other gains and losses Other gains 2022 £ 2021 £ 68 65 2022 £ – 6,899 224,389 231,288 2022 £ 73,845 2021 £ 6,887 28,329 127,639 162,855 2021 £ – On 30 September 2022, the redemption date of the ﬁrst tranche of convertible loan notes was extended by a further year (note 22). At this date, the existing liability has been re-calculated as the present value of the revised future cash ﬂows discounted at the original eﬀective interest rate and a gain of £73,845 has been recognised. 14 Taxation Current tax UK corporation tax on proﬁts for the current period Adjustments in respect of prior periods Total UK current tax Foreign taxes and reliefs 2022 £ 2021 £ (224,000) (10,391) (234,391) – (234,391) (275,000) (122,815) (397,815) (443) (398,258) Consolidated Financial Statements for the year ended 30 September 2022 62 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 14 Taxation (continued) The credit for the year can be reconciled to the loss per the income statement as follows: Loss before taxation Expected tax credit based on a corporation tax rate of 19% (2021: 19%) Eﬀect of expenses not deductible in determining taxable proﬁt Income not taxable Deferred tax not recognised on unutilised tax losses carried forward Adjustment in respect of prior years Enhanced relief on research and development tax credit Other Taxation credit for the year The UK corporation tax rate was 19% throughout the year. 2022 £ 2021 £ (1,105,275) (1,133,190) (210,002) 11,079 (14,031) 203,705 (10,391) (224,000) 9,249 (234,391) (215,306) 6,277 – 129,903 (122,815) (206,382) 10,065 (398,258) The adjustment in respect of prior periods relates to enhanced relief on the Group’s research and development activity, where the actual R&D claim exceeded management’s estimate in the prior year. In the March 2021 Budget, a change to the future UK corporation tax rate was announced, indicating that the rate will increase to 25% from April 2023. Deferred tax balances at the reporting date are therefore measured at 25% (2022 - 19%), being the substantively enacted rate at the balance sheet date. 15 Earnings per share Number of shares Weighted average number of ordinary shares for basic earnings per share 2022 2021 29,571,605 29,571,605 Weighted average number of ordinary shares for diluted earnings per share 29,571,605 29,571,605 Earnings (all attributable to equity shareholders of the company) Loss for the period Basic earnings per share From continuing operations Diluted earnings per share From continuing operations 2022 £ 2021 £ (870,884) (734,932) (0.03) (0.02) (0.03) (0.02) The Diluted EPS is the same as the Basic EPS in the current and comparative year as the Group has incurred losses in each of the periods concerned. The Group has a number of potentially dilutive share options (note 28) and convertible redeemable loan stock (note 22) that could dilute the earnings per share should the Group become proﬁtable. As at 30 September 2022 both the share options and the convertible loan stock are out of the money. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 63 16 Intangible assets Cost At 1 October 2020 Additions - internally generated At 30 September 2021 Additions - internally generated At 30 September 2022 Amortisation and impairment At 1 October 2020 Charge for the year Impairment loss At 30 September 2021 Charge for the year Impairment loss At 30 September 2022 Carrying amount At 30 September 2022 At 30 September 2021 At 30 September 2020 Development costs £ 1,246,819 335,446 1,582,265 136,234 1,718,499 110,011 79,063 293,878 482,952 165,162 154,689 802,803 915,696 1,099,313 1,136,808 The useful economic life of each of the individual assets is deemed to be 5 years. The additions in the year of £136,234 relate to speciﬁc products being developed. These products are deemed to provide future economic beneﬁts to the Group. The impairment of £154,689 was as a result of an impairment review carried out by the directors at the balance sheet date. Amortisation and impairment charges are recognised within administrative expenses. Consolidated Financial Statements for the year ended 30 September 2022 64 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 17 Property, plant and equipment Leasehold land and buildings £ Fixtures and ﬁttings £ Computers £ Total £ Cost At 1 October 2020 215,880 Additions – Disposals (215,880) At 30 September 2021 – Additions – Disposals – At 30 September 2022 – Accumulated depreciation and impairment At 1 October 2020 147,973 Charge for the year 44,028 Eliminated on disposal (192,001) Foreign currency adjustments – At 30 September 2021 – Charge for the year – Eliminated on disposal – At 30 September 2022 – Carrying amount At 30 September 2022 – At 30 September 2021 – At 30 September 2020 67,907 Leasehold land and buildings includes right-of-use assets, as follows: 214,661 – (150,490) 64,171 648 (54,044) 10,775 156,054 12,365 (137,099) – 31,320 8,300 (32,159) 7,461 3,314 32,851 58,607 Right-of-use assets Cost of disposals Property Depreciation charge for the year Property 563,203 1,171 (273,356) 291,018 23,795 (235,194) 79,619 443,754 85,434 (272,352) (78) 256,758 34,939 (235,177) 56,520 23,099 34,260 119,449 2022 £ – – 993,744 1,171 (639,726) 355,189 24,443 (289,238) 90,394 747,781 141,827 (601,452) (78) 288,078 43,239 (267,336) 63,981 26,413 67,111 245,963 2021 £ (120,552) 40,184 The Group vacated the oﬃce premises in March 2021 when the lease term ended and therefore disposed of the leasehold land and buildings, including the right-of-use asset and the lease liability, in the prior year. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 65 18 Subsidiaries Details of the company’s subsidiaries at 30 September 2022 are as follows: Class of % Held Name of undertaking Registered oﬃce Principal activities shares held Direct Indirect i-solutions Global Limited England and Wales (1) The development and sale Ordinary 100.00 of Enterprise cloud based software on a software-as-service (SaaS) basis and professional consultancy services i-nexus (America) Inc USA (2) Dormant Ordinary – – 100.00 (1) The registered oﬃce address of i-solutions Global Limited is: 27-28 Eastcastle Street, London, W1W 8DH. (2) The registered oﬃce address of i-nexus (America) Inc is: i-nexus, 245 First Street, Suite 1800, Cambridge, MA 02142, USA. 19 Trade and other receivables Trade receivables Provision for bad and doubtful debts VAT recoverable Other receivables Prepayments 20 Trade receivables - credit risk Ageing of past due but not impaired receivables 30 days or less Between 31 and 60 days Between 61 and 90 days Over 90 days 2022 £ 608,560 (4,390) 604,170 50,440 2,390 124,838 781,838 2022 £ 538,320 18,362 – 51,878 608,560 2021 £ 557,220 – 557,220 35,486 40,528 158,714 791,948 2021 £ 529,510 8,286 6,037 13,387 557,220 Consolidated Financial Statements for the year ended 30 September 2022 66 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 20 Trade receivables - credit risk (continued) All opening and closing trade receivables balances arise from contracts with customer. All other receivables outside of general terms of business are immaterial to the Group and are within the parent company. No signiﬁcant receivable balances are impaired at the reporting end date. The Group applies the IFRS 9 simpliﬁed approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. The ageing analysis of the trade receivables and expected credit loss provision rates as at 30 September 2022 are as follows: Less than 30 days 31 - 60 days £ £ 61 - 90 days Over 90 days £ £ Expected credit loss percentage 0.10% 0.25% Gross receivable subject to ECL 538,320 18,362 Expected credit loss 538 46 0.50% – – 0.75% 51,878 389 Total £ 608,560 973 Based on the above, the directors have not recognised the expected credit loss on grounds of triviality to the Group. The directors consider the credit quality of trade and other receivables that are neither past due nor impaired to be good. The Group has however recognised a speciﬁc provision as follows: Movement in the allowances for doubtful debts Balance at 1 October Additional allowance recognised Balance at 30 September 21 Borrowings 2022 £ – 4,390 4,390 2021 £ – – – Current Non-current 2022 £ 2022 £ 2021 £ 2021 £ Borrowings held at amortised cost: Bank loans 9,707 Other loans – 9,707 7,906 63,519 71,425 32,387 – 32,387 42,094 – 42,094 The Group had the following borrowings at 30 September 2022: • A Bounce Back Loan Scheme loan within bank loans which has an interest rate of 2.5% payable from November 2021 when the government grant incentive period expires. The loan is carried at £42,094 in the ﬁnancial statements. This loan is unsecured. • Venture debt, within other loans in the prior year, has a ﬁxed interest rate of the higher of 11.5% per annum or LIBOR plus 8% per annum and is measured at amortised cost. The venture debt is secured by way of ﬁxed and ﬂoating charges over the title of all assets held by the Group. The venture debt has been repaid in full during the current year. The directors consider the value of all ﬁnancial liabilities to be equivalent to their fair value. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 67 22 Convertible loan notes The convertible loan notes consist of two tranches issued during the prior year. The ﬁrst tranche was issued on 4 November 2020 with total proceeds of £1,325,000 and the second tranche was issued on 29 September 2021 with total proceeds of £650,000. When issued, both tranches had a redemption date 3 years following their date of issue. The loan note holders are entitled, before the redemption date, to convert all or part of their holding of loan notes into fully paid Ordinary Shares on the basis of 1 Ordinary Share for every 10p of principal nominal amount of loan notes held, or, convert all or part of their holding of loan notes into fully paid Ordinary Shares at the conversion rate; and/or redeem all or part of their holding of loan notes. At the issue date the net proceeds received were split between the ﬁnancial liability element of £1,743,149 and an equity component of £231,851, representing the fair value of the embedded option to convert the ﬁnancial liability into equity. The equity component of the convertible loan notes has been credited to the equity reserve (note 31). On 30 September 2022, the redemption date of the ﬁrst tranche was extended by a further year, to give a revised redemption date of four years following the original date of issue, being November 2024. This modiﬁcation was not considered to be substantial, as deﬁned in IFRS 9, therefore the existing liability was re-calculated as the present value of the revised future cash ﬂows discounted at the original eﬀective interest rate. A gain of £73,845 on the modiﬁcation of the liability has been recognised in other gains and losses (note 13). The extension to the redemption date is a modiﬁcation only of the existing convertible loan notes and therefore has no impact on the equity element. The liability component is measured at amortised cost, and the diﬀerence between the carrying amount of the liability at the date of issue and the amount reported in the statement of ﬁnancial position represents the eﬀective interest rate less interest paid to that date. The convertible loan notes carry a coupon rate of 8% and are recognised at their net present value using a discount rate of 12%. Movements and balance at the period end Issue of convertible loan notes Interest charged Interest accrued Liability component at 30 September 2021 Interest charged Interest accrued Gain on modiﬁcation Liability component at 30 September 2022 Liability component due within 12 months Liability component due after 12 months Liability £ 1,743,149 127,639 (88,330) 1,782,458 224,389 (166,077) (73,845) 1,766,925 – 1,766,925 Consolidated Financial Statements for the year ended 30 September 2022 68 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 23 Financial risk management Market risk management The Group’s activities expose it to a variety of ﬁnancial risks: foreign exchange risk, interest rate risk, liquidity risk and credit risk. Risk management is carried out by the board of directors. The Group uses ﬁnancial instruments to provide ﬂexibility regarding its working capital requirements and to enable it to manage speciﬁc ﬁnancial risks to which it is exposed. Foreign exchange risk The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the reporting date are as follows: Trade and other receivables Cash and cash equivalents Trade and other payables As at 30 September 2022 Trade and other receivables Cash and cash equivalents Trade and other payables As at 30 September 2021 US Dollars £ 224,217 733 (53,086) 171,864 US Dollars £ 185,662 665 (33,871) 152,456 Euros £ 338,752 – (2,632) 336,120 Euros £ 262,354 – – 262,354 Total £ 562,969 733 (55,718) 507,984 Total £ 448,016 665 (33,871) 414,810 Foreign currency risk refers to the risk that the value of a ﬁnancial commitment or recognised asset or liability will ﬂuctuate due to changes in foreign exchange rates. The Group is also exposed to foreign exchange risk as a result of transactions denominated in US Dollars and Euros. The Group maintains bank accounts in US Dollars and Euros in order to mitigate this risk. If Sterling had depreciated by 10% against US Dollars and Euros as at 30 September 2022, the Group would have recognised an increase in its reported proﬁts and net assets of approximately £50,798 (2021 - £41,481). If Sterling had appreciated by 10% against US Dollars and Euros as at 30 September 2022, the Group would have recognised an equivalent decrease in its reported proﬁts and net assets across both periods. Interest rate risk The carrying amounts of ﬁnancial liabilities which expose the Group to cash ﬂow interest rate risk are as follows: Venture debt 2022 £ – 2021 £ 63,519 The venture debt has been repaid in full during the year. The weighted average cost of ﬁxed rate borrowing for venture debt in the prior year was 11.5%. The convertible loan notes (note 22) carry a coupon rate of 8% and are recognised at their net present value using a discount rate of 12%. The 8% interest is ﬁxed for the life of the loan and therefore does not convey interest rate risk for the Group. Interest rate risk is the risk that the value of a ﬁnancial instrument or cash ﬂows associated with the instrument will ﬂuctuate due to changes in market interest rates. Interest bearing assets including cash and cash equivalents are considered to be i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 69 short term liquid assets. It is the Group’s policy to settle trade payables within the credit terms allowed and the Group does therefore not incur interest on overdue balances. As the interest rates on both venture debt and shareholders loans are ﬁxed, interest rate risk is considered to be very low and no sensitivity analysis has been prepared as the impact on the historical ﬁnancial information would not be signiﬁcant. Liquidity risk The Group seeks to maintain suﬃcient cash balances. Management reviews cash ﬂow forecasts on a regular basis to determine whether the Group has suﬃcient cash reserves to meet future working capital requirements and to take advantage of business opportunities. A maturity analysis of the Group’s borrowings, being a Bounce Back Loan Scheme loan and the liability element of the convertible loan notes, is shown below: Less than one year One to two years Two to ﬁve years Capital risk management 2022 £ 9,707 9,950 1,789,362 1,809,019 2021 £ 19,522 21,297 5,373,099 5,413,918 The Group is both equity and debt funded and these two elements combine to make up the capital structure of the business. Equity comprises share capital, share premium, convertible loan notes and retained losses and is equal to the amount shown as ‘Equity’ in the balance sheet. Debt comprises various items which are set out in further detail above. The Group’s current objectives when maintaining capital are to: • Safeguard the Group’s ability as a going concern so that it can continue to pursue its growth plan; • Provide a reasonable expectation of future returns to shareholders; and • Maintain adequate ﬁnancial ﬂexibility to preserve its ability to meet ﬁnancial obligations, both current and long term. The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of underlying assets. In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets to reduce debt. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in ﬁnancial loss to the Group. In order to minimise the risk, i-nexus Global Plc endeavours only to deal with companies which are demonstrably creditworthy and this, together with the aggregate ﬁnancial exposure, is continuously monitored. The maximum exposure to credit risk is the carrying value of its ﬁnancial receivables, trade and other receivables and cash and cash equivalents as disclosed in the notes. i-nexus Global Plc does not consider that there is any concentration of risk within either trade or other receivables and any bad debt provisions in the years presented are not for signiﬁcant amounts. The Group holds no collateral or other credit enhancements. The receivables age analysis is also evaluated on a regular basis for potential doubtful debts. It is the i-nexus directors’ opinion that no further provision for doubtful debts is required. Credit risk on cash and cash equivalents is considered to be very low as the counterparties are all substantial banks with high credit ratings. Consolidated Financial Statements for the year ended 30 September 2022 70 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 Further disclosures for credit risk are shown in note 20. 23 Financial risk management (continued) The carrying amount of ﬁnancial instruments is shown below: Financial assets held at amortised cost Financial liabilities held at amortised cost 24 Trade and other payables 2022 £ 2021 £ 606,560 (2,576,928) 597,748 (2,609,435) (1,970,368) (2,011,687) Current Non-current 2022 £ 2022 £ 2021 £ 2021 £ Trade payables 255,570 Accruals 186,504 Social security and other taxation 169,495 Other payables 71,271 682,840 300,797 235,631 274,989 140,740 952,157 25 Deferred taxation Deferred tax liabilities Deferred tax assets – 254,407 – – 254,407 2022 £ 231,700 (231,700) – – 88,330 – – 88,330 2021 £ 407,176 (407,176) – The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period. ACAs Tax losses £ £ Deferred tax liability/(asset) at 1 October 2020 258,152 (349,705) Deferred tax movements in prior year Charge/(credit) to proﬁt or loss (40,025) 549,171 Eﬀect of change in tax rate - proﬁt or loss 68,873 (600,442) Deferred tax liability/(asset) at 1 October 2021 287,000 (400,976) Deferred tax movements in current year Charge/(credit) to proﬁt or loss (284,300) 178,676 Retirement beneﬁt obligations £ Capitalised R&D £ (6,905) 98,458 Total £ – 2,195 (1,490) (7,124) 28,842 504,217 (504,217) (6,200) 120,176 (3,200) 108,824 – – i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 71 Deferred tax liability/(asset) at 30 September 2022 2,700 (222,300) (9,400) 229,000 – The Group has estimated tax losses of £10,700,000 (2021 - £10,000,000) of which approximately £9,800,000 (2021 - £8,900,000) have not been recognised as a deferred tax asset due to uncertainty over the timing and extent of the company’s ability to utilise these against future taxable proﬁts. Recognised deferred tax assets have been included only to the extent that these oﬀset other temporary timing diﬀerences which will unwind against the losses. If a deferred tax asset was recognised in full in respect of this, the Group’s net assets would increase by approximately £2,400,000 (2021 - £2,200,000). 26 Deferred revenue Arising from contracts with customers All deferred revenues are expected to be settled within 12 months from the reporting date. 27 Retirement beneﬁt schemes Deﬁned contribution schemes Charge to proﬁt or loss in respect of deﬁned contribution schemes Capitalised as intangible asset 2022 £ 2021 £ 1,319,674 1,030,315 2022 £ 75,150 29,473 104,623 2021 £ 61,669 22,881 84,550 The Group operates a deﬁned contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the Group in an independently administered fund. The liability at the year end is £38,113 (2021 - £25,559). 28 Share-based payment transactions Number of share Weighted average options exercise price 2022 2021 2022 £ 2021 £ Outstanding at 1 October 2,390,060 Granted in the period – Forfeited in the period (99,820) Lapsed in the period (1,588,444) Outstanding at 30 September 701,796 Exercisable at 30 September 701,796 – 2,668,738 (278,678) – 2,390,060 1,334,369 0.10 – 0.10 0.10 0.10 0.10 – 0.10 0.10 – 0.10 0.10 The options outstanding at 30 September 2022 had an exercise price of £0.10 and have reached the end of their remaining contractual life by the year end. The options can be exercised at certain dates proportionately to the Monthly Recurring Revenues ("MRR") which are achieved over a ﬁxed period, at ﬁxed amounts and growth rates. The options were granted, during the prior year, on 13 January 2021. The weighted average fair value of the options on the measurement date was £37,530. Fair value was measured using Black-Scholes Option-pricing model. Fair value was measured using Black-Scholes, with the volatility input being based solely on the Group’s average historical volatility over equivalent recent periods. The risk-free rate is negative, being the rate of comparable government bonds available as at the grant date. Consolidated Financial Statements for the year ended 30 September 2022 72 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 28 Share-based payment transactions (continued) Inputs were as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk free rate Expected dividends yields 2021 0.06 0.10 59.41% 1 (0.01)% – 2021 £ 2022 £ Expenses Related to equity settled share based payments 10,568 17,181 During the year a transfer of £3,495 (2021 - £4,192) was made from the share option reserve to retained earnings in relation to share options cancelled. 29 Share capital 2022 Ordinary share capital Number 2021 Number 2022 £ 2021 £ Issued and fully paid Ordinary shares of 10p each 29,571,605 29,571,605 2,957,161 2,957,161 Fully paid shares carry one vote per share and carry rights to a dividend. 30 Share premium account At the beginning and end of the year 2022 £ 2021 £ 7,256,188 7,256,188 The share premium represents the excess of the subscription price over the par value of shares issued. 31 Equity reserve At the beginning of the year Arising in the year At the end of the year 2022 £ 231,851 – 231,851 2021 £ – 231,851 231,851 During the prior year i-nexus Global Plc issued two instruments constituting; • £1,325,000 ﬁxed rate unsecured convertible redeemable loan stock on 4 November 2020; and • £650,000 ﬁxed rate unsecured convertible redeemable loan stock on 29 September 2021. The equity reserve solely represents the equity element of the above instruments at their respective issue dates. The fair value of the liability can be seen in note 22. i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 73 32 Other reserves Merger reserve 2022 £ 2021 £ 10,653,881 10,653,881 The merger reserve represents the carrying value of the investment in the subsidiary undertaking at the point of the share for share exchange. Foreign exchange reserve 2022 £ 1,390 2021 £ 1,876 The foreign exchange reserve relates to the exchange diﬀerences arises on the translation of the foreign subsidiary. The retained earnings reserve represents all current and prior period retained proﬁts and losses. 33 Events after the reporting date On 3 October 2022 and 11 November 2022 the Company granted share options to a number of its key employees and directors. This gave rights over 2,420,939 Ordinary shares. The vesting period of the options ranges between 11 months and 2 years. At grant date the options are signiﬁcantly out of the money, and as such the total fair value of share options issued is £4,458, with these values having been determined using a Black-Scholes valuation. 34 Related party transactions Remuneration of key management personnel The remuneration of key management personnel, including directors, is set out below in aggregate for each of the categories speciﬁed in IAS 24 Related Party Disclosures. Salary and short-term employee beneﬁts Post-employment beneﬁts Share-based payments Other information 2022 £ 897,333 54,317 7,242 958,892 2021 £ 887,767 34,015 12,672 934,454 During the year directors provided unsecured short term loans to the Group amounting to £nil (2021 - £35,000). These were fully repaid at the balance sheet date. Interest was charged at a rate of 0%. No guarantees have been given or received. Mr R Cunningham, a director of the company, subscribed for convertible loan notes from the company and proceeds of £nil (2021 - £287,500) were received and shown within note 22. The interest charge attributable to these loan notes amounted to £31,879 (2021 - £22,838) and is payable on redemption. The cumulative value of unpaid interest included within creditors amounted to £54,716 (2021 - £22,838). 35 Controlling party There is no ultimate controlling party of i-nexus Global Plc. Consolidated Financial Statements for the year ended 30 September 2022 74 Notes to the Consolidated Financial Statements continued For the year ended 30 September 2022 36 Impairments Company Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in proﬁt or loss: In respect of: Intercompany receivable Recognised in: Exceptional items 37 Investments 2022 £ 2021 £ 1,724,886 2,895,000 1,724,886 2,895,000 Current Non-current 2022 Company £ 2022 £ 2021 £ 2021 £ Investments in subsidiaries – Capital contribution – – – – – 1,654,770 27,749 1,682,519 1,654,770 17,181 1,671,951 Fair value of ﬁnancial assets carried at amortised cost Except as detailed below the directors believe that the carrying amounts of ﬁnancial assets carried at amortised cost in the ﬁnancial statements approximate to their fair values. Investment in subsidiary undertakings Details of the company’s principal operating subsidiaries are included in note 18. Movements in non-current investments Cost or valuation At 1 October 2021 Additions regarding share based payment At 30 September 2022 Shares in subsidiaries £ Capital contribution £ Total £ 1,654,770 – 1,654,770 17,181 10,568 27,749 1,671,951 10,568 1,682,519 Carrying amount At 30 September 2022 At 30 September 2021 1,654,770 1,654,770 27,749 17,181 1,682,519 1,671,951 i-nexus Global plc STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 75 38 Trade and other receivables Company Amounts owed by subsidiary undertakings Other receivables Prepayments 2022 £ 5,377,765 – 59,377 5,437,142 2021 £ 6,774,358 37,501 76,657 6,888,516 Amounts owed by subsidiary undertakings are non-interest bearing, unsecured and repayable on demand. This balance is stated after a provision for bad and doubtful debts amounting to 4,565,859 (2021 - £2,773,175). 39 Convertible loan notes Company The company information for convertible loan notes is the same as the group information and is shown in note 22. Carrying value of convertible loan note Accrued interest on convertible loan note 40 Trade and other payables 2022 £ 1,766,925 254,407 2,021,332 2021 £ 1,782,458 88,330 1,870,788 Current Non-current 2022 Company £ 2021 £ 2022 £ 2021 £ Trade payables 84,419 Accruals 10,644 Social security and other taxation 6,196 Other payables 487 101,746 170,623 30,600 3,738 922 205,883 – 254,407 – – 254,407 – 88,330 – – 88,330 41 Share-based payment transactions Company The company information for share-based payments is the same as the Group information and is shown in note 28. Consolidated Financial Statements for the year ended 30 September 2022 76 Company Information Directors Mr D D Whibley (Appointed 1 August 2022) Mr S P Crowther Mr R H Cunningham Mr D S P Firth Secretary Mr D D Whibley Company number 11321642 Registered Oﬃce 27-28 Eastcastle Street London W1W 8DH Auditor Saﬀery Champness LLP St Catherine’s Court Berkeley Place Clifton Bristol BS8 1BQ i-nexus Global plc Designed and produced by Perivan 264669 i - n e x u s G l o b a l p l c A n n u a l R e p o r t 2 0 2 2

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