Trading and operations update

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. It forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain. 

21 March 2022

Insig AI plc

("Insig AI" or the "Company")

Trading and operations update,

indicative terms for £1.0m Convertible Loan Facility agreed and

Board composition update

Insig AI plc (AIM: INSG), the data science and machine learning solutions company serving the asset management industry, is pleased to announce the launch of a New Funds division and provide a wider operations update, a trading update for the financial year ending 31 March 2022 ("FY-22")and to advise that it has agreed indicative terms for a £1.0m convertible loan facility to be provided by Richard Bernstein, non-executive chairman of the Company ("Convertible Loan").

Trading update

Group revenue (unaudited) for FY-22 is expected to be not less than £1.8m comprising approximately £1.4m from the Group's legacy Sport In Schools business and £0.4m from Insig AI businesses. Cash as at 31 January 2022 was £1.1m and is expected to be approximately £0.5m as at 31 March 2022. In addition, an R&D tax refund of approximately £0.8m is expected once the Company has published its audited accounts for FY-22.

The focus of the Group during the last several months has been on both broadening its universe of data and on securing the recently announced CarVal partnership. The Board believes that such partnership agreements can deliver significant and growing revenue streams in the medium term.  During December 2021, the Board decided to secure a long-term revenue agreement based on assets under management at the expense of material revenues that could have been recognised in the current quarter.

The Board recognises that further working capital is required to support the Group as it commercialises its suite of AI/machine learning and data tools. Furthermore, given recent progress, the Board believes that as well as satisfying working capital requirements, there should be a greater focus on sales and marketing.  Accordingly, the Group has agreed indicative terms for the Convertible Loan, further details of which are set out in the section below.

Should the Company enter into a legally binding agreement with regards to the Convertible Loan, it will be deemed a Related Party Transaction under AIM Rule 13. As matters currently stand, the Board (except for Richard Bernstein who would be involved in the proposed transaction) consider that the proposed transaction would be fair and reasonable insofar as the Company's shareholders are concerned.

Operations update

The omicron variant of Covid and more recently, the war in Ukraine, has understandably resulted in fund managers and other decision makers prioritising more immediate needs of their own businesses. This has inevitably caused some disruption and delays in closing some smaller prospects. In spite of these challenges, the notable success in securing the CarVal High Yield ESG partnership agreement and the signing of a number of smaller contracts demonstrates that we offer compelling solutions to our target investment management market. The pipeline of opportunities continues to develop across the Group's offerings of ESG disclosures research tool, data science bespoke solutions and alternative dataset for investment managers.

Establishment of New Funds Launch division

In September 2021, Insig AI announced that it had secured the ability and expertise to partner with asset managers as they launch new funds across the ESG spectrum. We also stated that these partnership opportunities provide the Group with potential revenues of a magnitude several times more than the traditional licence sale to an asset manager and that the business was directing its focus principally to this source of revenue and that converting these large opportunities would be the key driver to the Group's longer-term success.

On 25 February 2022, Insig AI announced that it had entered into a long-term services agreement to develop and launch a new line of high yield and investment grade ESG scoring tools with CarVal. The agreement entitled Insig AI to fees based on CarVal's assets under management ("AUM").

Insig AI notes and welcomes last week's announcement that CarVal has been acquired by Alliance Bernstein. We believe that this transaction will not only accelerate the timing and quantum of fees earned by Insig AI but it should also allow us to access other funds within the combined entity.

Furthermore, Insig AI is pleased to announce that it is in early stage discussions with a UK based investment manager with AUM in excess of £40 billion, with the objective of launching an ESG Global Opportunities Equities Fund.

These discussions, together with the recent CarVal agreement have given Insig AI confidence to establish a New Funds Launch division. Based on our success in securing the partnership with CarVal, we now have visibility that the scale of these new funds can provide Insig AI with recurring revenues of several million pounds per annum.

Convertible Loan facility

The Board has agreed the Convertible Loan in principle. Should the Board proceed and formally enter into the Convertible Loan agreement, the funds will provide the Group with sufficient working capital to enable the Group to convert some of the current key customer engagements and potential consultancy projects and increase its sales and marketing resource such that there is continued improvement in revenue and revenue visibility. This would allow for another financing, likely an equity financing.  It should be noted however, that the Convertible Loan amount will not meet the Group's total working capital requirement as set out in its current business plan, and is considered by the Board to be of a suitable amount and period that will enable further operational progress to be made.

Sport In Schools

Separately, following the easing of lock down restrictions, the Sport In Schools business has recovered to broadly pre-pandemic levels. The Board has received an expression of interest for the business which is being actively considered. Further announcements will be made on this as appropriate in due course.

Convertible loan facility

The Group has agreed indicative terms for the Convertible Loan, and more specifically that:

-     the loan facility is unsecured and will be repayable on or before 31 December 2022

-     interest will be accrued from the date monies are drawn down under the facility at a rate of 5.0 per cent. and repayable at the end of the term

-     the loan will be redeemable or convertible purely at the discretion of Richard Bernstein, at the earlier of the completion of an equity placing by the Company raising not less than £2.0m gross proceeds; and 31 December 2022

-     If converted, the conversion price will be the higher of 35.0 pence per ordinary share of the Company and the prevailing share price at the date of conversion.  A conversion price of 35.0 pence per ordinary share represents a premium of approximately 35 per cent. to the closing share price of 26.0 pence on 18 March 2022.

Revenue forecasts

With the adoption of our new commercial strategy, Insig AI's revised business plan forecasts revenues of £2.4 million for the year to March 2023, rising to £6.2 million in the year to March 2024, to £12.5 million in the year to March 2025 and to £19.0 million in the year to March 2026. An estimate of the CarVal revenues are the only revenues included for the New Funds Launch division. These forecasts exclude the Sport in Schools business.

Board composition

The Board is pleased to announce that it is in advanced discussions with highly qualified and experienced candidates with the intention of making up to two non-executive director appointments.

Richard Bernstein, Insig AI Chairman, said: "Since joining the Board last August, the business has been transformed into a commercially focussed data solutions provider. It is unsurprising that the transition of the original Insight Capital business from a consultancy, project-based solutions provider to a SaaS focused provider of a suite of AI and machine learning solutions has taken longer that envisaged. Looking forward, the CarVal partnership together with the recent selection within PWC FinTech programme are tangible milestones that should lead to significant revenue and partnership opportunities. Insig AI's product offerings are ideally positioned for its evolving and fast-growing markets. That is why I am pleased to be able to offer this funding facility that should provide the time the Group needs to capitalise on its solutions."

Steve Cracknell, Insig AI CEO, said "We have achieved some significant commercial milestones in the last few months. However, whilst these will undoubtedly underpin our medium and longer term growth ambitions, we are also focused on securing annuity revenue streams and other contracts to ensure we move successfully through FY-23 and beyond through to break even and of course, sustained cash generation thereafter."

"In addition, and on behalf of the Board, I wish to thank Richard Bernstein for his continued support for Insig AI, both in terms of his valued business expertise but for the offering of this additional convertible loan facility."

Colm McVeigh, Insig AI CCO, said: "The success of Insig AI's commercial strategy will be a combination of building annuity revenue streams by winning multiple long-term SaaS contracts for our ESG disclosures research tool and alternative datasets products, alongside much larger partnering arrangements with clients like CarVal. Whilst commercial progress has been made in the last months, we have not converted sufficient current pipeline to sales as the attention of our customers has inevitably been focused on recent geopolitical events.  However, in just the short time since I joined the Board in December, my assessment is that Insig AI offers strong and unique propositions capable of transforming how investment managers bring competitively differentiated ESG investment products to market and how they use AI technology to optimise their investment portfolios for out-performance. With this in mind, I believe that the enhanced focus on business development and sales execution will deliver a rapid acceleration in this area in the coming 12 months and beyond."