Commercial Credit Assessment: IPROOV LIMITED

1. Credit Opinion: CONDITIONAL

Rationale: iProov presents a classic venture-backed technology company profile—strong liquidity cushion but persistent losses and cash burn. The £3.89m cash position provides a reasonable runway, and net current assets of £4.05m offer short-term comfort. However, the accumulated P&L deficit of £2.31m, ongoing cash consumption of approximately £1.13m annually, and absence of disclosed revenue or profitability metrics create uncertainty around sustainable debt servicing capacity. Any credit facility should be conditional upon covenants protecting against further balance sheet erosion and requiring visibility on revenue traction.

2. Financial Strength

Balance Sheet Summary (2020):

Key Observations:

• Equity base supported by share premium: Called-up share capital of just £33,940 sits alongside a share premium reserve of £6.14m, confirming significant equity investment rather than organic profit generation. This is typical of growth-stage technology businesses but means the balance sheet strength is dependent on continued investor confidence rather than trading performance.

• Accumulated losses deepening: The P&L reserve deteriorated from -£1.37m to -£2.31m, representing a £945k loss for 2020. The company has never generated retained profits across its nine-year history.

• Modest fixed asset base: Intangible assets of £123k and tangible assets of £61k are minimal relative to the overall balance sheet. The business is people and technology-driven with limited collateral value—unsecured creditors would have limited recovery prospects.

• Long-term liabilities stable: The £378k creditor amount falling due after more than one year is unchanged year-on-year, suggesting a term loan or similar facility on fixed terms.

Trajectory: The balance sheet weakened by approximately £945k during 2020, consistent with operational losses consuming cash reserves. This erosion rate requires monitoring.

3. Cash Flow Assessment

Liquidity Position:

Cash Burn Analysis:

• Cash declined by £1.13m during 2020 (from £5.02m to £3.89m)
• At this burn rate, the remaining cash provides approximately 3.4 years of runway, though this assumes constant expenditure levels
• Current liabilities increased by £1.5m (from £1.11m to £2.61m), partially offsetting the cash outflow and suggesting the company is extending payment terms to creditors

Debtors Concern: Debtors more than doubled from £1.1m to £2.77m. This could indicate: - Revenue growth (positive) - Extended payment terms to customers (neutral to negative) - Collection difficulties (negative) - Without a P&L account, the revenue trajectory cannot be independently verified

Working Capital: Net current assets remain strong at £4.05m, but the current ratio dropped from 5.53x to 2.55x. While still adequate, the trajectory is deteriorating.

COVID-19 Note: Directors have assessed going concern and believe sufficient working capital exists within existing facilities. This is welcome but relies on management judgment rather than quantitative sensitivity analysis.

4. Monitoring Points

Priority Metrics:

1. Cash Position Monthly: The cash burn rate and trajectory are the primary indicators of financial health. Request monthly management accounts to track actual versus projected consumption.

2. Revenue and Margin Disclosure: The company files as a small entity and does not disclose turnover or profit. Request detailed P&L information as a condition of any facility—understanding whether debtor growth reflects revenue growth is critical.

3. Debtor Days and Collection: With debtors doubling, establish whether this reflects genuine sales growth or deteriorating collection. Calculate and monitor debtor days.

4. Funding Requirements: The share premium reserve suggests past equity raises. Clarify with management whether further equity funding is anticipated or required to reach profitability, and the status of any existing investor commitments.

5. Current Liability Composition: The £1.5m increase in current liabilities requires explanation—determine the split between trade creditors, accruals, and any related-party balances.

6. Group Structure: Accounts are filed as "Group" category. Understand the subsidiary structure and any intercompany positions that may affect cash flow availability to the parent entity.

7. Path to Profitability: Request a cash flow forecast demonstrating when the business expects to become cash-generative. The current model of burning investor capital cannot continue indefinitely.

8. Related Party Transactions: The filed accounts note should be examined for any director loans or related-party balances that could affect creditor priorities.