Speech Graphics Ltd Financials - SC388915

These financial statements have been prepared in accordance with FRS 102 the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland as adapted by Section 1A of FRS 102 and the Companies Act 2006.

The nature of the company's operations and principal activities was being involved in the development of vocal driven facial animation solutions during the year.

Defined contribution plans

Contributions to defined contribution plans are recognised as an expense in the period in which the related service is provided.

The company has taken advantage of the option not to prepare consolidated financial statements contained in Section 398 of the Companies Act 2006 on the basis that the company and its subsidiary undertakings comprise a small group.

Government grants are recognised at the fair value of the asset received or receivable. Grants are not recognised until there is reasonable assurance that the company will comply with the conditions attaching to them and the grants will be received. Government grants are recognised using the accrual model. Under the accrual model, government grant relating to revenue are recognised on a systematic basis over the periods in which the company recognises the related costs for which the grant is intended to compensate. Grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs are recognised in income in the period in which it becomes receivable. Grants relating to assets are recognised in income on a systematic basis over the expected useful life of the asset. Where part of a grant relating to an asset is deferred, it is recognised as deferred income and not deducted from the carrying amount of the asset.

The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

Financial Statements for the year ended 31 December 2024

NOTES TO THE FINANCIAL STATEMENTS

The company reported a net current liability position of £285,781 at 31 December 2024 (31 December 2023: net current asset £2,796,163) and a net asset position of £25,633 (31 December 2023: £3,217,023). Due to the continued support of investors, the board of directors has a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future and they therefore continue to adopt the going concern basis of accounting in preparing the financial statements.

Financial Statements for the year ended 31 December 2024

NOTES TO THE FINANCIAL STATEMENTS

1.2

Intangible assets - other

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised only when all of the following criteria are met:

• It is technically feasible to complete the intangible asset so that it will be available for use or sale;

• There is the intention to complete the intangible asset and use or sell it;

• There is the ability to use or sell the intangible asset;

• The use or sale of the intangible asset will generate probable future economic benefits;

• There are adequate technical, financial and other resources available to complete the development and to use or sell the intangible asset; and

• The expenditure attributable to the intangible asset during its development can be measured reliably.

Expenditure that does not meet the above criteria is expensed as incurred.

1.3

Tangible fixed assets

Tangible fixed assets are stated at cost (or deemed cost) or valuation less accumulated depreciation and accumulated impairment losses. Cost includes costs directly attributable to making the asset capable of operating as intended.

Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost, less estimated residual value, of each asset on a systematic basis over its expected useful life as follows:

Asset class

Useful life / depreciation rate

Leasehold property

20% straight line

Fixtures and fittings

25% straight line

Equipment

33% straight line

Fixed asset investments are initially recorded at cost, and subsequently stated at cost less any accumulated impairment losses.

Financial Statements for the year ended 31 December 2024

NOTES TO THE FINANCIAL STATEMENTS

1.5

Financial instruments

A financial asset or a financial liability is recognised only when the entity becomes a party to the contractual provisions of the instrument.

Other financial assets, including trade debtors for goods sold to customers on short-term credit, are initially measured at the transaction price including transaction costs, and are subsequently measured at the transaction price plus transaction costs not yet recognised, cumulative interest income less repayments and impairment, where there is evidence of impairment.

Other financial liabilities

Other financial liabilities, including trade creditors, are initially measured at transaction price less transaction costs, and are subsequently measured at the transaction price less transaction costs not yet recognised in profit or loss and repayments plus cumulative interest expenses incurred.

Impairment of financial assets

At the end of each reporting period, the company assesses whether there is evidence of impairment of any financial assets, including investments, loans, trade debtors and cash. If there is evidence of impairment, impairment losses are recognised in the Profit and Loss account in that financial year.

Assets not measured at fair value are reviewed for any indication that the asset may be impaired at each balance sheet date. If such indication exists, the recoverable amount of the asset, or the asset's cash generating unit, is estimated and compared to the carrying amount. Where the carrying amount exceeds its recoverable amount, an impairment loss is recognised in profit or loss unless the asset is carried at a revalued amount where the impairment loss is a revaluation decrease.

Rentals payable and receivable under operating leases are charged to the profit and loss account on a straight line basis over the period of the lease. The aggregate benefit of lease incentives is recognised as a reduction to expense over the lease term, on a straight-line basis.

Taxation for the year comprises current and deferred tax. Tax is recognised in the Profit and Loss Account, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, tax is recognised in other comprehensive income or directly in equity, respectively.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

With effect from the year ended 31 December 2021, any research and development tax credit will be recognised in the year to which it relates.

Financial Statements for the year ended 31 December 2024

NOTES TO THE FINANCIAL STATEMENTS

1.9

Turnover and other income

Turnover is measured at the fair value of the consideration received or receivable net of VAT and trade discounts. The policies adopted for the recognition of turnover are as follows:

Rendering of services

When the outcome of a transaction can be estimated reliably, turnover from rendering of services is recognised by reference to the stage of completion at the end of the reporting period.

Where the outcome cannot be measured reliably, turnover is recognised only to the extent of the expenses recognised that are recoverable.

1.10

Foreign currency

Foreign currency transactions are initially recorded in the functional currency, by applying the spot exchange rate as at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling at the reporting date, with gains or losses being taken to the profit and loss account.

1.11

Share-based payment

The cost and corresponding increase in equity in respect of equity-settled share-based payment transactions with employees are measured by reference to the fair value of equity instruments issued at the date of grant. Amounts are expensed on a straight line basis over the vesting period based on the estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. The cost and fair value of the liability incurred in respect of cash-settled transactions is measured using an appropriate option pricing model with changes in fair value recognised in profit or loss for the period. Further detail is provided in note 29.

Fair value is determined using an appropriate pricing model. All market conditions and non-vesting conditions are taken into account when estimating the fair value of the shares or share options. As long as all other vesting conditions are satisfied, no adjustment is made irrespective of whether market or non-vesting conditions are met.

Where the terms of an equity-settled transaction are modified, an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the fair value of the transaction, as measured at the date of modification.

Where an equity-settled transaction is cancelled or settled, it is treated as if it had vested on the date of cancellation or settlement, and any expense not yet recognised in profit or loss is expensed immediately.

Cash-settled share-based payment transactions are measured at the fair value of the liability. Until the liability is settled, the fair value of the liability is re-measured at each reporting date and at the date of settlement, with any changes in fair value recognised in profit or loss for the period.

The average monthly number of employees, including directors, during the year was as follows:

Financial Statements for the year ended 31 December 2024

NOTES TO THE FINANCIAL STATEMENTS

Balances at year end and movements for the year

Leasehold property £

Fixtures and fittings £

Equipment £

Total £

At 01 January 2024

195,718

191,242

225,292

612,252

Additions

3,116

109

28,877

32,102

Disposals

(1,107)

At 31 December 2024

198,834

191,351

253,062

643,247

At 01 January 2024

(24,571)

(41,855)

(132,525)

(198,951)

Charge for the year

(39,544)

(43,873)

(57,359)

(140,776)

Eliminated on disposals

335

At 31 December 2024

(64,115)

(85,728)

(189,549)

(339,392)

At 01 January 2024

171,147

149,387

92,767

413,301

At 31 December 2024

134,719

105,623

63,513

303,855

Financial Statements for the year ended 31 December 2024

NOTES TO THE FINANCIAL STATEMENTS

Movement in investments

Shares in group undertakings £

At 01 January 2024

7,559

At 31 December 2024

7,559

At 01 January 2024

At 31 December 2024

At 31 December 2023

7,559

At 31 December 2024

7,559

The company owns 100% of the issued share capital of the following subsidiaries:

• Speech Graphics USA Inc, a company incorporated in the state of Delaware.

• Speech Graphics Hungary Korlátolt Felelosségu Társaság, a Hungarian limited company.

• Speech Graphics Asia Pte Ltd, a company incorporated in the Republic of Singapore.

Trade debtors

342,415

223,039

Other debtors

199,439

227,554

Value added tax

42,618

19,064

Amounts owed by group undertakings

652,967

635,725

Corporation tax

1,304,739

2,542,178

1,105,382

Creditors: amounts falling due within one year

Trade creditors

279,077

92,338

Other creditors

2,050,695

1,786,155

Social security and other taxes

85,428

93,632

Amounts owed to group undertakings

74,365

2,415,200

2,046,490

Financial Statements for the year ended 31 December 2024

NOTES TO THE FINANCIAL STATEMENTS

Called up share capital

Issued, called up and fully paid

Number

Ordinary shares of £0.0001 each

1,680,566

168

1,680,566

168

Series A1 shares of £0.0001 each

500,055

391,961

Series A2 shares of £0.0001 each

117,448

2,298,069

230

2,189,975

219

The advanced subscription shares of $2,000,000 that were issued on 20 June 2022 were converted into 108,094 series A1 shares in the company on 14 October 2024.

Share-based payments

Certain employees had been granted options to subscribe for shares in the company under share option schemes as follows: Details of the number and weighted average exercise prices (WAEP) of share options during the year are as follows:

Weighted average exercise price in £ 2024

Options 2024

Weighted average exercise price in £ 2023

Options 2023

Outstanding at the beginning of the period

84,460

85,520

Granted during the period

1,700

Forfeited during the period

Expired during the period

(2)

(7,300)

(2)

(1,060)

Outstanding at the end of the period

78,860

84,460

The total expense recognised during the year in respect of share based payments totalled £13,583 (2023 - £30,938).

The estimated fair values were calculated by applying Black-Scholes option pricing model. The model inputs were:

Exercise price

£1.28 - £1.93

Expected volatility

70%

Expected life

10 years

Risk free interest rate

0.505-3.946%

Financial Statements for the year ended 31 December 2024

NOTES TO THE FINANCIAL STATEMENTS

Related party transactions

The company has taken advantage of the exemption under FRS 102 33.1A from disclosing transactions entered into between wholly-owned members of the group.

Securities granted

HSBC Innovation Bank Limited (HSBC Innovation Banking) holds a fixed charge dated 17 August 2023, which creates a security interest in favour of HSBC Innovation Banking over specified accounts held by the company at HSBC Innovation Banking to secure the company's current and future obligations to HSBC Innovation Banking.