REG - C4X Discovery - Full Year Results
15/12/2022 07:00
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RNS Number : 7655J C4X Discovery Holdings PLC 15 December 2022
This announcement contains inside information
C4X Discovery Holdings plc
("C4XD", "C4X Discovery" or the "Company")
Full Year Results
Building on our partnered portfolio
AstraZeneca agreement showcases depth of C4XD scientific expertise and
early-stage revenue-generating partnering strategy
15 December 2022 - C4X Discovery Holdings plc (AIM: C4XD), a pioneering Drug
Discovery company, today announces its full year audited results for the year
ended 31 July 2022.
Dr Clive Dix, CEO of C4X Discovery, said: "This third agreement across our
partnered programmes with truly world-renowned industry leader, AstraZeneca,
brings the total potential value of our deals to $1.2 billion, and our
ambitious strategy and vision is now validated and visible. With our
partnered programmes making good progress, we now look to advance the lead
programmes in our portfolio to a partnerable stage and transition our
early-stage programmes into the next phase where we will be able to provide
more detail on the targets and our ambitions for the portfolio. C4XD is in
its strongest position ever, with supportive investors and a reputation for
unique expertise in Drug Discovery, attracting world-class partners in the
pharmaceutical industry."
Operational Highlights (including post-period events)
· Post-period: Exclusive worldwide licensing agreement with
AstraZeneca in November 2022 for C4XD's NRF2 Activator programme worth up to
$402 million including:
§ Pre-clinical milestone payments worth up to $16 million including $2
million upfront, ahead of the first clinical trial
§ In addition, a further $385.8 million in potential development, regulatory
and commercialisation milestones, and the potential for tiered single-digit
royalties
· Progression of Indivior's Phase 1 with C4X_3256 (INDV-2000) oral
Orexin-1 receptor antagonist for the treatment of addiction with commencement
of the multiple ascending dose (MAD) study in Q3 2022, under the out-licensing
agreement worth up to $294 million, entered into in March 2018
· Achievement of first milestone payment of €3 million from
Sanofi under the out-licensing agreement worth up to a total of €414 million
for its IL-17A inhibitor programme, entered into in April 2021
· Significant progress in the MALT-1 inhibitor programme for
haematological and solid tumours with compounds that match the leading
clinical candidate in terms of in vitro and in vivo profile and transitioning
of two chemical series into Lead Optimisation
· Significantly more potent compounds in the lead series of the
α4β7 integrin programme in a human whole blood assay than representative
compounds from the leading clinical programme. Progression of C4XD compounds
into pharmacodynamic models via oral route of administration
· Commencement of six early-stage programmes (three oncology, three
inflammation-immunology) into the Hit Identification phase, with one programme
transitioned into the Hit-to-Lead phase
· Research project agreement with HitGen, a Shanghai listed, world
leader in DNA-encoded libraries to identify novel, small molecule hits against
an inflammatory target
· Appointment of Bhavna Hunjan as Chief Business Officer and
Executive Director and Dr Mario Polywka as Non-Executive Director
Financial Highlights
· Revenue of £2.7 million (2021: £5.6m)
· Total loss after tax of £8.2 million or 3.57 pence per share
(2021: £3.8m or 1.96 pence per share)
· R&D expenses increased by 14% to £9.4 million (2021:
£8.3m), reflecting focused investment in key Drug Discovery programmes
· Net assets of £11.8 million (2021: £19.3m)
· Net cash as at 31 July 2022: £5.1 million (31 July 2021:
£17.1m)
· Post-period, successful £5.7 million investor-led fundraise
(before expenses) with a total of 22,781,200 Placing Shares issued to
institutional shareholders
· Post-period, £2.1 million R&D tax credit received
Analyst Webcast Today
Dr Clive Dix, Chief Executive Officer, and members of the management team will
host a live webcast for analysts at 9:30am GMT today to discuss the results.
The webcast can be accessed online at:
https://www.lsegissuerservices.com/spark/C4xDiscoveryHolding/events/add39e84-79c5-41b8-a497-f14f787e5d1d
(https://www.lsegissuerservices.com/spark/C4xDiscoveryHolding/events/add39e84-79c5-41b8-a497-f14f787e5d1d)
A copy of the final results presentation will be released later this morning
on the Company website at www.c4xdiscovery.com (http://www.c4xdiscovery.com)
.
Contacts
C4X Discovery Holdings
Mo Noonan, Communications +44 (0)787 6444977
Panmure Gordon (UK) Limited (NOMAD and Broker)
Freddy Crossley, Emma Earl (Corporate Finance) +44 (0)20 7886 2500
Rupert Dearden (Corporate Broking)
C4X Discovery Media - Consilium Strategic Communications
Mary-Jane Elliott, Chris Gardner, Matthew Neal +44 (0)203 709 5700
Notes to Editors:
About C4X Discovery
C4X Discovery ("C4XD") is a pioneering Drug Discovery company combining
scientific expertise with cutting-edge Drug Discovery technologies to
efficiently deliver world leading medicines, which are developed by our
partners for the benefit of patients. We have a highly valuable and
differentiated approach to Drug Discovery through our enhanced DNA-based
target identification and candidate molecule design capabilities, generating
small molecule drug candidates across multiple disease areas including
inflammation, oncology, neurodegeneration and addictive disorders. Our
commercially attractive portfolio ranges from early-stage novel target
opportunities to late-stage Drug Discovery programmes ready for out-licensing
to partners and we have three commercially partnered programmes with one
candidate in clinical development.
We collaborate with leading pharmaceutical and life sciences companies to
enrich our expertise and take our assets through pre-clinical and clinical
development. Through early-stage revenue-generating licensing deals, we
realise returns from our high value pre-clinical assets which are reinvested
to maximise the value of our Drug Discovery portfolio. For further
information see www.c4xdiscovery.com (http://www.c4xdiscovery.com)
Chair's Statement
Strength and breadth across our portfolio of innovative small molecule
programmes
"I am delighted that we have entered into a licence agreement with
AstraZeneca, for our oral small molecule NRF2 preclinical programme. This is
C4X Discovery's third licence agreement."
During the last twelve months C4X Discovery has continued to advance and
broaden its proprietary portfolio of small molecule drugs, while remaining
focused on its business model of successfully applying our unique technology
to create differentiated, licensable small molecule drugs for diseases where
there is a high unmet need.
We are delighted to have entered into a licence agreement with AstraZeneca,
post-period in November 2022, for our oral small molecule NRF2 programme. This
is C4XD's third licensing deal and we are particularly pleased to be working
with AstraZeneca. Under the terms of this deal C4XD is entitled to payments up
to a total value of $402 million with pre-clinical payments of $16 million
plus royalties on net sales. AstraZeneca will now advance NRF2 towards the
clinic to develop and commercialise this novel programme.
After entering the licence agreement with Sanofi in April 2021 for our oral
IL-17A programme, we were pleased to see the important first milestone of €3
million in July this year. This deal is worth up to a total of €414 million
plus royalties on future net sales.
During the year, we saw a change to our Board of Directors as Dr Harry Finch
took the decision after eleven years as an independent Non-Executive director
to step down from the Board to pursue other interests. We thank Harry for his
guidance and significant contributions, in particular in the early days of
growing the Company.
We had the opportunity to welcome Dr Mario Polywka as Non-Executive Director
and Bhavna Hunjan as Chief Business Officer, to the Board of Directors. Mario
joined us with significant operational, commercial, strategic and drug
discovery expertise and he holds a number of Non-Executive Board Director
positions in other biotech companies. Since joining the Company in 2016,
Bhavna has played a critical role in a series of successful licensing deals
and strategic partnerships, as well as driving business growth and capital
raising. Her promotion to Chief Business Officer is a reflection of the
integral and positive impact she has made to the success of the Company.
During the year, our CEO, Clive Dix was recognised for his achievements
through his life-long career in biotech and pharma by receiving the Scrip
Lifetime Achievement Award 2021 and the OBN Special Recognition Award 2021. He
was also awarded Honorary Fellowship by the British Pharmacological Society.
Throughout his impressive career, Clive has contributed significantly to the
industry and to C4XD. His drive and determination to best serve patients is
what makes Clive the great leader and CEO that he is.
Environmental, social and governance (ESG) helps C4XD to address risks while
also capitalising on opportunities. We take our ESG responsibilities very
seriously and we have established an ESG policy to ensure that we stay
committed to deliver exemplary environmental, social and governance
performance, building a strong and inclusive culture. Our integrated approach
to ESG principles shapes how we design and build projects, conduct our
portfolio, collaborate with all of our stakeholders and report progress,
providing a foundation for C4XD to deliver long-term sustainable value
creation.
Despite the difficult financial markets, C4XD has successfully maintained its
focus to broaden its proprietary pipeline of differentiated small molecule
drugs while continuing to enter into partnerships allowing the programmes to
advance into the clinic for further development and commercialisation. This
has partly been possible due to an additional £5.7 million raised post-period
from our existing shareholders. We are grateful for their support and belief
in our vision.
On behalf of the Board of Directors, I would like to thank our inspiring and
dedicated team at C4X Discovery for their commitment and drive during the last
year. We'd like to thank you, our Shareholders for your continued support,
allowing us to broaden and advance our proprietary pipeline.
Eva-Lotta Allan
Non-Executive Chair
14 December 2022
CEO Statement
Progress in expanded portfolio demonstrates scientific expertise with NRF2
out-licensing to AstraZeneca for up to $402 million
"We continued to make strong progress as we grow and advance our portfolio of
novel small molecule candidates for out-licensing. The AstraZeneca deal
validates both our Drug Discovery expertise and our strategy of collaborating
through early-stage, revenue- generating licensing deals with leading
pharmaceutical companies to deliver therapeutics of the future."
As each of our programmes advance, we demonstrate the unique expertise that
the C4XD team brings to Drug Discovery. Through this year we have made
strong progress across the portfolio leading to the out-licensing of our NRF2
Activator programme to AstraZeneca, post-period in November 2022 for up to
$402 million.
NRF2 is thought to be a critical but challenging target for anti-inflammatory
response, and C4XD has secured a broad stable of IP for this programme. Under
an exclusive worldwide licensing agreement, AstraZeneca will develop and
commercialise an oral therapy for the treatment of inflammatory and
respiratory diseases with a lead focus on chronic obstructive pulmonary
disease (COPD), a market worth close to $20 billion and rising.(1)
C4XD will receive upfront and pre-clinical milestone payments worth up to $16
million including an upfront of $2 million, ahead of the first clinical
trial. In addition, C4XD will receive a further potential $385.8 million in
development and commercial milestones and tiered mid-single digit royalties
upon commercialisation.
Each of our programmes showcase our expertise in challenging areas of Drug
Discovery research. From development of oral small molecules against
antibody-validated targets (our IL-17A Inhibitor and α4β7 integrin inhibitor
programmes), to drugging targets previously considered highly challenging (our
Orexin 1 and NRF2 Activator programmes), and these skills are reflected across
our portfolio of novel, small molecule discovery programmes.
In our core programmes, work is progressing very nicely. In July, we
received the first milestone payment of €3 million in our out-licensing
agreement with Sanofi for our IL-17A oral inhibitor programme. Under the
license, Sanofi will develop and commercialise an oral therapy for the
treatment of inflammatory diseases, a multi-billion dollar market, with the
IL-17 pathway implicated in psoriasis, psoriatic arthritis and ankylosing
spondylitis.
Indivior has made an important step forward with the start of the Phase I
multiple ascending dose (MAD) study of C4XD's oral Orexin-1 receptor
antagonist C4X_3256, also known as INDV-2000, for the treatment of addiction.
We out-licensed this programme to Indivior in 2018 for a total value up to
$294 million. We look forward to seeing this programme progress through
development towards the market.
Elsewhere in our pipeline, we have continued to advance each programme and
during the year we have focused on expanding our portfolio with six new
early-stage programmes, three in oncology and three in
inflammation-immunology. These are currently progressing through our
rigorous Drug Discovery process.
Use of cutting-edge innovative technology is a core element of our Drug
Discovery process, enabling our highly skilled scientists to progress each
programme. In line with our strategy to access Drug Discovery technologies,
post period in October 2022, we announced a research project agreement with
HitGen, a Shanghai-listed, world leader in DNA-encoded libraries (DEL). The
aim of the project is to identify novel, small molecule hits against an
inflammatory target for further C4XD development using our own molecule design
technology, Conformetrix. If successful, the project has the potential to lead
to a further, more expansive collaboration.
Our technology experts continue to enhance our own Drug Discovery technologies
to ensure our scientists have access to the very latest and best in
technological advances. Following an intriguing study with the Garvan
Institute of Medical Research, we have identified the potential for
Taxonomy3® analysis to be used for patient stratification in clinical trials,
in addition to target identification. We are investigating the potential of
this platform to enable future partners to genetically identify patients that
are most likely to benefit from the treatment in clinical trials and offering
the potential in rescuing of failed clinical trials or for drug repurposing.
None of this work can be done however, without the financial support of our
shareholders. We thank them for their continued confidence in our vision
and, in August 2022, through an investor-led fund raise, we raised an
additional £5.7 million. We are living through very turbulent times and
markets, and both their support, and these funds, keep C4XD in a financially
stable position.
I would also like to recognise the C4XD team for their hard work, innovation
and talent - it is truly a great team to work with - thank you.
Portfolio Review
A validated and growing portfolio
Addictive disorders (Orexin-1 Antagonist)
Phase 1 MAD clinical trial initiated
C4XD completed its first licensing deal in March 2018 with Indivior UK Limited
("Indivior") to further develop and commercialise C4XD's oral Orexin-1
receptor antagonist C4X_3256, also known as INDV-2000, for the treatment of
addiction. Under the terms of the agreement, C4XD received an upfront payment
of US$10 million and could receive up to US$284 million in development,
regulatory and commercialisation milestones in addition to royalties. In turn,
Indivior received a global and exclusive licence to C4X_3256 and all other
compounds in the same patent family and is responsible for the cost and
execution of the development of C4X_3256 in multiple indications. This patent
family is now granted in the main commercially relevant territories of the US,
Europe, Japan and China.
INDV-2000 completed a Phase I first in human Single Ascending Dose (SAD)
clinical trial with 8 doses (1, 5, 20, 50, 120, 180, 360, 720 mg) showing
encouraging tolerability and pharmacokinetics in healthy volunteers. Indivior
presented a poster on the results from this study at the College on Problems
of Drug Dependence conference in June 2022. Following completion of an
additional nonclinical toxicology study required by the FDA and subsequent FDA
clearance, the Phase I Multiple Ascending Dose (MAD) study commenced in Q3
2022. Indivior have also made major progress on the formulation and chemical
development fronts. To find out more information, please follow this link
(https://www.indivior.com/resources/dam/id/948/INDV%20H1%20Q2%202022%20Results%20Investor%20Presentation.pdf)
.
Inflammation (NRF2 Activator)
Exclusive global agreement with AstraZeneca
C4XD signed an exclusive worldwide licensing agreement with AstraZeneca, post
period in November 2022, worth up to $402 million, for its NRF2 Activator
programme. AstraZeneca will develop and commercialise an oral therapy for
the treatment of inflammatory and respiratory diseases with a lead focus on
chronic obstructive pulmonary disease (COPD). Under the terms of the
agreement, C4XD will receive pre-clinical milestone payments worth up to $16
million including $2 million upfront, ahead of the first clinical trial. In
addition, C4XD will receive a further potential $385.8 million in development
and commercial milestones and tiered mid-single digit royalties upon
commercialisation.
C4XD has identified a series of novel potent activators of the NRF2 pathway
for the treatment of a variety of inflammatory diseases. These KEAP-1
inhibitors in our oral NRF2 activator programme have been found to
significantly activate NRF2 following oral dosing, providing anti-inflammatory
and antioxidant activity. In C4XD studies, multiple lead compounds show
greater than 12-hour duration of action following low oral dosing on
activation of NRF2 in key tissues such as the lung, the liver and in blood.
Pre-candidate nomination including preliminary safety and efficacy studies and
significant drug substance scale-up to support longer-term studies has now
been successfully completed.
Inflammation (IL-17A Inhibitor)
First milestone achieved for Sanofi-led programme
C4XD has identified small molecules in its oral IL-17A inhibitor programme
that can selectively block IL-17 activity whilst maintaining molecular size of
the molecule in the traditional "drug-like" range. A novel, potent oral
series of IL-17A inhibitors that significantly reduce IL-17 induced
inflammation in vivo is being optimised towards candidate shortlist. In
April 2021, C4XD announced an out-licensing agreement with Sanofi for its
IL-17A inhibitor programme for up to €414 million. The Company received an
upfront payment of €7 million and could receive up to a further €407
million in potential development, regulatory and commercialisation
milestones. In July 2022, C4XD received the first milestone payment of €3
million under this agreement. Sanofi has development and commercial rights to
the programme but is continuing to work with C4XD in the next discovery phase
to utilise our Conformetrix technology and expertise as the programme
progresses towards the clinic.
Haematological Cancer (MALT-1 Inhibitor)
Transition into Lead Optimisation phase
In November 2018, C4XD entered into a risk-share discovery collaboration with
LifeArc(®), a UK medical research charity, to progress medicinal chemistry
efforts on a MALT-1 inhibitor programme with applicability across oncology and
inflammation indications, with a primary focus on haematological cancers.
During the period, C4XD licensed the MALT-1 Inhibitor programme from
LifeArc(®) and is now leading the programme. Three novel series were
identified by harnessing C4XD's Conformetrix technology which demonstrated
functional cell activity and oral bioavailability. Optimisation studies have
now delivered molecules with at least equivalent potency to J&J's clinical
candidate JNJ-67856633 and molecules with good oral PK profiles have been
synthesised. Activities in a pharmacodynamic model match that of J&J's
clinical candidate JNJ-67856633 at equivalent doses and the project has
transitioned two chemical series into Lead Optimisation.
Inflammation (α4β7 Integrin Inhibitor)
Significant progress continues
C4XD's oral α4β7 integrin inhibitor programme has identified novel, potent
and selective α4β7 integrin inhibitors for the treatment of IBD. Effective
antibody therapy against this target is already approved, removing the
clinical target risk, but an effective oral therapy remains highly sought
after. This reaffirms the capability of C4XD's Conformetrix technology to
discover novel chemical scaffolds for high value challenging drug targets.
During 2021, Morphic Therapeutic, which has the most advanced oral small
molecule α4β7 Integrin Inhibitor programme, completed the Phase 1 clinical
study of its lead molecule MORF-057. High target occupancy was demonstrated in
blood at developable doses but with a twice daily profile. This leaves the
opportunity for a once-a-day profile to be a key competitive differentiator
which C4XD is aiming for in its programme. C4XD has compounds that match or
exceed both whole blood potency and selectivity values when compared to
current clinical compounds and these have progressed into pharmacodynamic
models via the oral route of administration. Oral PK profiles have been
improved during the period, with further work ongoing. External interest in
this programme remains significant and discussions should gain significant
traction if the Company can demonstrate robust activity in vivo after oral
dosing when accompanied by a good oral half-life potentially indicating a
once-daily profile.
New Discovery Hit Identification Stage Programmes
Expansion of C4XD Pipeline
Following the completion of the transaction with Sanofi on the IL-17A
programme, several new evaluation stage programmes were initiated to establish
whether applying the Company's ligand design capabilities to a selection of
new targets could result in novel chemical series leading to additional
programmes in the pipeline. This approach has led to six additional
programmes, three in oncology and three in inflammation-immunology, being
added to the C4XD pipeline. These early-phase programmes have been resourced
to drive towards significant chemistry and biology progression milestones.
These programmes target clear unmet medical need, combined with significant
commercial potential and a unique opportunity to produce valuable chemical
equity and intellectual property through interpretation of conformational
insight via C4XD's Conformetrix and 4Sight technologies. One project has
already progressed into Hit-to-Lead with the remaining projects at the Hit
Identification stage and at least one more project expected to transition to
the next phase within the next quarter.
Taxonomy3(®)
C4XD continues to progress the validation of its proprietary
Taxonomy3®-derived novel targets for Parkinson's Disease (PD), utilising a
diversified strategic approach with internal efforts in addition to a key
collaborative partner, Phoremost. C4XD has focused on the impact of novel
genes identified from this analysis in phenotypic assays based on neuronal and
microglial cells; two key cell types identified in the pathophysiology of PD.
Investigations in microglial cell assays have now been completed and studies
in neurons, including analysis of CRISPR knockout cell lines, are continuing.
A new analysis of a Crohn's disease patient genetic dataset has recently been
completed using Taxonomy3® and novel genetic variants have been identified.
These results are being investigated, along with genes identified in the
previously completed analysis of an ulcerative colitis dataset, to identify
potential novel targets for IBD.
In addition to target identification, C4XD is exploring the opportunity to
utilise Taxonomy3® analysis to inform patient stratification strategies. Main
effects analysis of two independent Parkinson's disease datasets has revealed
three distinct subgroups that are equally represented in cases and controls.
Separation of these subgroups is driven by SNPs from one genomic locus that
contains known PD risk genes. The biological and clinical relevance of these
subgroups is being investigated in collaboration with the Garvan Institute of
Medical Research. Disease heterogeneity has been observed in datasets analysed
using Taxonomy3® across multiple disease areas and the potential application
of these sub-groups for patient segmentation and biomarker identification is
being investigated. We are developing a new platform that would use our unique
mathematical approach to stratify patients for inclusion in clinical trials as
well as offering promise in rescuing failed clinical trials or for drug
repurposing.
Outlook and summary
This third agreement across our partnered programmes with truly world-renowned
industry leader, AstraZeneca, brings the total potential value of our deals to
$1.2 billion, and our ambitious strategy and vision is now validated and
visible. With our partnered programmes making good progress, we now look to
advance the lead programmes in our portfolio to a partnerable stage and
transition our early-stage programmes into the next phase where we will be
able to provide more detail on the targets and our ambitions for the
portfolio. C4XD is in its strongest position ever, with supportive investors
and a reputation for unique expertise in Drug Discovery, attracting
world-class partners in the pharmaceutical industry.
Clive Dix
Chief Executive Officer
14 December 2022
1.
https://www.transparencymarketresearch.com/chronic-obstructive-pulmonary-disease-copd-treatment-market.html
(https://www.transparencymarketresearch.com/chronic-obstructive-pulmonary-disease-copd-treatment-market.html)
Financial Review
Delivering value to shareholders
"Our shareholders continue to show immense confidence and belief in our
vision. We thank them for their continued support as we look to drive
shareholder value through our partnered and pre-clinical Drug Discovery
portfolio."
Revenue for the 12 months ended 31 July 2022 was £2.7 million (2021: £5.6m).
The revenue recognised in the current year is the first milestone from Sanofi
of €3 million along with revenues relating to the ongoing research workplan
with them.
R&D expenses, which comprise invoiced material costs, payroll costs and
software costs, have increased by 14% to £9.4 million for the year ended 31
July 2022 (2021: £8.3m). This reflects focused investment in key Drug
Discovery programmes as outlined in the Non-Executive Chair's and CEO's
Statements.
Administrative expenses increased during the year to £3.7 million (2021:
£3.2m) as a result of the continued investment in people and infrastructure.
Cost inflation is understandably starting to have an impact on the business
too with suppliers starting to pass on increased costs.
This year the R&D income tax credit receivable is £2.4 million (2021:
£2.1m) and is reflective of the additional investment in R&D costs over
the last 12 months.
The loss after tax for the year ended 31 July 2022 was £8.2 million (2021:
£3.8m). This equates to a basic loss per share of 3.57 pence per share (2021:
1.96 pence per share) and diluted loss per share of 3.57 pence per share
(2021: 1.82 pence per share).
The Group had net assets at 31 July 2022 of £11.8 million (2021: £19.3m).
Cash and cash equivalents of £5.1 million (2021: £17.1m) were improved post
balance sheet by proceeds from the Placing of £5.7million and receipt of both
the Sanofi milestone debtor of €3million and the prior year R&D tax
credit of £2.1million.
Both cash and costs continue to be prudently and tightly managed.
These financial statements have been prepared on a going concern basis,
notwithstanding a consolidated operating loss for the year ended 31 July 2022
of £10.5 million (2021: £5.9m), revenues of £2.7 million (2021: £5.6m) and
net cash used in operating activities of £12.1 million (2021: £3.1m). The
Directors consider this to be appropriate for the following reasons:
The Board has prepared a number of cash flow forecasts for the period to 31
July 2024. Each of these show cash resource until March 2024, being 15
months from the date of signing the financial statements.
Should the company not receive any revenues from existing or new deals in the
forecast period, a cash shortfall will arise in early 2024. The Board
considers they are able to take reasonable mitigating action, which includes
but is not limited to a reduction in expenditure on certain discretionary
research programmes to focus purely on commercialising earlier stage drug
molecules, and reducing other discretionary administrative expenditure, which
would enable the Group and Company to continue to operate within its existing
cash resources during the forecast period without the need for additional
funding.
Brad Hoy
Chief Financial Officer
14 December 2022
Consolidated statement of comprehensive income
for the year ended 31 July 2022
Notes 2022 2021
£000 £000
Revenue 4 2,699 5,642
Cost of sales (130) (90)
Gross profit 2,569 5,552
Research and development expenses (9,426) (8,263)
Administrative expenses (3,665) (3,182)
Operating loss 5 (10,522) (5,893)
Finance income 7 - 1
Finance costs 7 (12) (15)
Loss before taxation (10,534) (5,907)
Taxation 8 2,374 2,063
Loss for the year and total comprehensive loss for the year (8,160) (3,844)
Loss per share
Basic loss for the year 9 (3.57)p (1.96)p
Diluted loss for the year 9 (3.57)p (1.82)p
The loss for the year arises from the Group's continuing operations and is
attributable to the equity holders of the parent.
There were no other items of comprehensive income for the year (2021: £nil)
and therefore the loss for the year is also the total comprehensive loss for
the year.
Both basic and diluted loss per share are reported due to the effect of
exercisable share options and warrants in issue.
Consolidated statement of changes in equity
for the year ended 31 July 2022
Share-
Issued Based Capital Retained
equity Share Warrant Payment Merger contribution earnings
capital premium Reserve Reserve reserve reserve reserve Total
£000 £000 £000 £000 £000 £000 £000 £000
At 31 July 2020 3,216 40,306 - 942 920 195 (37,513) 8,066
Loss for the year and total comprehensive loss for the year - - - (3,844) (3,844)
- - -
Issue of share capital 1,071 12,937 - - - - - 14,008
Expenses of placing - (551) - - - - - (551)
Issue of warrants - - 992 - - - - 992
Exercise of options 2 6 - - - - - 8
Exercise of warrants 13 345 (13) - - - 13 358
Share-based payments - - 249 - - - 249
Transactions with owners 1,086 12,737 979 249 - - 13 15,064
At 31 July 2021 4,302 53,043 979 1,191 920 195 (41,344) 19,286
Loss for the year and total comprehensive loss for the year - - - (8,160) (8,160)
- - -
Issue of share capital - - - - - - - -
Expenses of placing - - - - - - - -
Issue of warrants - - - - - - - -
Exercise of options 3 15 - - - - - 18
Exercise of warrants 11 297 (11) - - - 11 308
Share-based payments - - 352 - - - 352
Transactions with owners 14 312 (11) 352 - - 11 678
At 31 July 2022 4,316 53,355 968 1,543 920 195 (49,493) 11,804
Company statement of changes in equity
for the year ended 31 July 2022
Share-
Issued based Retained
equity Share Warrant payment earnings
capital premium Reserve reserve reserve Total
£000 £000 £000 £000 £000 £000
At 31 July 2020 3,216 40,306 - 913 (8,235) 36,200
Profit for the year and total comprehensive profit for the year - - 8,235
- - 8,235
Issue of share capital 1,071 12,937 - - - 14,008
Expenses of placing -- (551) - - - (551)
Issue of warrants - - 992 - - 992
Exercise of options 2 6 - - - 8
Exercise of warrants 13 345 (13) - 13 358
Share-based payments - - - 249 - 249
Transactions with owners 1,086 12,737 979 249 13 15,064
At 31 July 2021 4,302 53,043 979 1,162 13 59,499
Profit for the year and total comprehensive profit for the year - - -
- - -
Issue of share capital - - - - - -
Expenses of placing - - - - - -
Issue of warrants - - - - - -
Exercise of options 3 15 - - - 18
Exercise of warrants 11 297 (11) - 11 308
Share-based payments - - 352 - 352
Transactions with owners 14 312 (11) 352 11 678
At 31 July 2022 4,316 1,514 - 60,177
53,355 968 24
Statements of financial position
at 31 July 2022
31 July 31 July 31 July 31 July
2022 2022 2021 2021
Group Company Group Company
Notes £000 £000 £000 £000
Assets
Non-current assets
Tangible Fixed Assets 10 47 - 33 -
Right of Use Assets 10 707 - 377 -
Intangible assets 11 61 - 69 -
Goodwill 12 1,192 - 1,192 -
Investments in and loans to subsidiaries 13 - 60,183 - 59,493
2,007 60,183 1,671 59,493
Current assets
Trade and other receivables 14 3,069 - 574 6
Income tax asset 15 4,427 - 2,053 -
Cash and cash equivalents 16 5,079 - 17,103 -
12,575 - 19,730 6
Total assets 14,582 60,183 21,401 59,499
Liabilities
Current liabilities
Trade and other liabilities 17 2,049 6 1,647 -
Lease liabilities 18 305 - 217 -
2,354 6 1,864 -
Non-Current liabilities
Trade and other liabilities 17 - - 64 -
Lease liabilities 18 424 - 187 -
424 - 251 -
Total liabilities 2,778 6 2,115 -
Net assets 11,804 60,177 19,286 59,499
Capital and reserves
Issued equity capital 19 4,316 4,316 4,302 4,302
Share premium 19 53,355 53,355 53,043 53,043
Share-based payment reserve 20 1,543 1,514 1,191 1,162
Warrant reserve 21 968 968 979 979
Merger reserve 22 920 - 920 -
Capital contribution reserve 23 195 - 195 -
Retained earnings 24 (49,493) 24 (41,344) 13
Total equity 11,804 60,177 19,286 59,499
The Company has elected to take the exemption under Section 408 of the
Companies Act 2006 not to present the parent company's statement of
comprehensive income. The parent company had a profit of £Nil for the year
ended 31 July 2022 (2021: profit of £8,235,000) see note 13. The profit in
its entirety for the prior year was as a result of the reversal of past
impairments of the Company's investment in its subsidiary.
Approved by the Board and authorised for issue on 14 December 2022.
Clive Dix
Chief Executive Officer
14 December 2022
Registered number: 09134041
Cash flow statements
For the year ended 31 July 2022
31 July 31 July 31 July 31 July
2022 2022 2021 2021
Group Company Group Company
Notes £000 £000 £000 £000
(Loss)/Profit after interest and tax (8,160) - (3,844) 8,235
Adjustments for:
Depreciation of tangible fixed assets 10 23 - 33 -
Depreciation of right-of-use assets 10 212 - 254 -
Amortisation of intangible assets 11 8 - 88 -
Reversal of impairment of investments in and loans to subsidiaries - - - (8,235)
Share-based payments 20 352 - 249 -
Finance income 7 - - (1) -
Interest payments on leases 25 12 - 15 -
Taxation (2,374) - (2,063) -
Changes in working capital:
(Increase)/decrease in trade and other receivables 14 (2,495) 6 (136) -
Increase/(decrease) in trade and other payables 17 338 6 545 -
(12,084) 12 (4,860) -
Cash outflow from operating activities
Research and development tax credit received - - 1,790 -
Net cash outflow from operating activities (12,084) 12 (3,070)
Cash flows from investing activities
Increase in investment in and loans to subsidiaries - (338) - (14,815)
Purchases of tangible fixed assets 10 (37) - (20) -
Finance income 7 - - 1 -
Net cash outflow from investing activities (37) (338) (19) (14,815)
Cash flows from financing activities
Payment of lease liabilities 25 (229) - (271) -
Proceeds from issues of ordinary share capital 19 326 326 15,366 15,366
Expenses of share capital issue 19 - - (551) (551)
Net cash inflow from financing activities 97 326 14,544 14,815
(Decrease)/Increase in cash and cash equivalents (12,024) - 11,455 -
Cash and cash equivalents at the start of the year 17,103 - 5,648 -
Cash and cash equivalents at the end of the year 5,079 - 17,103 -
Cash, cash equivalents and deposits at the end of the year 16 5,079 - 17,103 -
Notes to the financial INFORMATION
1. Reporting entity
C4X Discovery Holdings plc (the "Company") is an AIM listed company
incorporated, registered and domiciled in England and Wales within the UK.
This financial information consolidates the Company and its subsidiaries
(together referred to as the "Group" and individually as "Group entities") for
the year ended 31 July 2022. The significant accounting policies adopted by
the Group are set out in note 3.
2. Basis of preparation
The financial information set out in this document does not constitute the
company's statutory accounts for the years ended 31 July 2022 or 31 July 2021
but is derived from those accounts. Statutory accounts for the year ended 31
July 2021 have been delivered to the registrar of companies, and those for the
year ended 31 July 2022 were approved by the Board of Directors on 14 December
2022 and will be delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include a reference
to any matters to which the auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
Statement of accounting compliance
The Group's and parent company's financial statements have been prepared in
accordance with UK adopted international accounting standards as they apply to
the financial statements of the Group for the period ended 31 July 2022.
Basis of measurement
The Company and Group financial statements have been prepared on the
historical cost basis.
The methods used to measure fair values of assets and liabilities are
discussed in the respective notes in note 3 below.
Going concern
Notwithstanding a consolidated operating loss for the year ended 31 July 2022
of £10.5 million (2021: £5.9m), revenues of £2.7 million (2021: £5.6m) and
net cash used in operating activities of £12.1 million (2021: £3.1m), the
Directors have prepared both the consolidated and Company financial statements
on a going concern basis, which the Directors believe to be appropriate for
the following reasons.
The Group completed a £5.7 million fundraising with existing investors in
August 2022 and received the outstanding R&D tax credit for the prior year
of £2.1 million in October 2022. The Group also signed a licence deal in
November 2022 with AstraZeneca for its intellectual property rights relating
to the NRF2 Activator programme , where $2 million was received in an upfront
payment. The Group has cash and cash equivalents at 31 July 2022 of £5.1
million (2021: £17.1m) and at 30 November 2022 had cash resources of £10.8
million.
The Board has prepared cash flow forecasts covering at least 12 months from
the date of signing the financial statements, including a severe but plausible
downside scenario which takes into consideration worse than anticipated
inflationary cost pressures, and a severe delay in the timing of the research
and development tax credit receipt.
The severe but plausible downside scenario considered reflects a delay of six
months in the receipt of forecast research and development tax credits from
HMRC and a 20% increase in Contract Research Organisations (CRO) costs for
continuing programmes, and worse than anticipated inflationary impacts on
other costs including scientific, operational and staff costs. The base case
and severe but plausible downside cash flow forecasts, which both assume no
further fund raising and no cash from revenues during the forecast period,
indicate that the Group and Company have sufficient cash resources to meet
their liabilities as they fall due for at least 12 months from the date of
approval of these financial statements.
In terms of the period beyond the 12 month going concern assessment period,
the severe but plausible downside scenario, indicates that existing cash
resources would be exhausted in approximately March 2024. The nature of the
Group's business model and its research intensive operations create a
requirement for additional funding until the Group is generating a higher
level of revenue from partnered programmes. However, the Board have a
reasonable expectation they will be able to raise further equity financing to
support their ongoing research activities. The Board also have a reasonable
expectation that, with three partnered programmes, further milestone payments
will be achieved within the forecast period, and another licensing deal may be
signed. There can be no guarantees that either of these events will occur,
however, and they are therefore not reflected in the Board's base case or
sensitised cash flow forecasts.
Assessment of expenditure and timing of revenue or fundraising is continually
and diligently monitored and, if potential delays were identified, the Board
consider they would be able to take additional, reasonable mitigating actions.
This includes but is not limited to a reduction in expenditure on platform
development activities to focus purely on commercialising earlier stage drug
molecules, and reducing other discretionary administrative expenditure, which
would enable the Group and Company to continue to operate within its existing
cash resources for an extended period.
Based on the above factors the Board are satisfied that the Group and Company
have adequate resources to enable the Group and Company to continue
discharging their liabilities and realising their assets for at least 12
months from the date of approval of these financial statements. Accordingly,
they continue to adopt the going concern basis in preparing the Group and
Company financial statements.
Functional and presentational currency
These financial statements are presented in Pounds Sterling, which is also the
functional currency of the Company and its subsidiaries. All financial
information presented has been rounded to the nearest thousand.
Use of judgements and estimates
The preparation of financial statements requires management to make estimates
and judgements that affect the amounts reported for assets and liabilities as
at the reporting date and the amounts reported for revenues and expenses
during the year. The nature of estimation means that actual amounts could
differ from those estimates. Estimates and judgements used in the preparation
of the financial statements are continually reviewed and revised as necessary.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to estimates are recognised prospectively.
Judgements
Judgements made in applying the Group's accounting policies that have the most
significant impact on the amounts recognised in the financial statements are:
Revenue recognition
When determining the correct amount of revenue to be recognised, the Group is
includes making certain judgements when determining the appropriate accounting
treatment of key customer contract terms in accordance with the applicable
accounting standards.
In the current year, C4XD has recognised revenue from a non-sales based
milestone received from Sanofi, along with revenue in respect of the ongoing
research work plan.
Whether the non-sales based milestones under the Sanofi contract will be met
and the associated payments become due is highly susceptible to factors
outside of the Group's influence, principally because they involve the
judgement of third parties like Regulatory Authorities. The revenue associated
with these milestones should be recognised at the date that the uncertainty
surrounding each milestone resolves and given the nature of the milestones the
Group would expect this to be on the date that each milestone is met. On that
basis, the revenue associated with the first milestone achieved has been
recognised in full in the current year.
With respect to the research work plan, the Group has recognised revenue as
follows. The cost has been established by taking the total number of days
spent on the project in the year by its employees and multiplying this by the
average FTE cost established at initiation of the project. A commercial margin
was then applied to the cost of these employees to calculate the revenue and
this was then released from deferred income and recognised as revenue. £0.14
million of deferred income has been recognised in the year in respect of the
research work plan (2021 £0.10m).
When this deal was signed with Sanofi in the prior year, for the worldwide
licensing of C4XD's IL-17A oral inhibitor programme, judgement was required in
identifying the number of performance obligations in the contract,
specifically whether the transfer of intellectual property and the delivery of
research services represented different performance obligations. The Group
applied the guidance in IFRS 15 by considering whether the licence was
distinct from the promise to provide ongoing research services through the
duration of the research work plan set out in the agreement. As such, revenue
recognised from the delivery of research services is recorded over time and
this resulted in £0.5 million of revenue being spread over an 18-month period
from the date of signing the deal. The alternative judgement could have been
that the transfer of intellectual property and the delivery of research
services is one performance obligation which would have resulted in the
upfront payment of £6 million being recognised over the length of the
research work plan estimated at 18 months. The Group concluded that these were
separate performance obligations as both the intellectual property and the
research work programme could be sold separately and the customer can benefit
from each on its own or together with readily available resources, so they are
capable of being distinct and they are set out as separate promises in the
contract.
Additional judgement was required in determining whether the transfer of
intellectual property gave the customer use at a time which the licence was
granted or a right to access. Management determined that the customer received
the right to the drug molecule on the date that the IP was transferred over
and therefore the cash payment received constituted handing over control of
the IP to Sanofi and was not dependent on any future outcomes. The impact
of this judgement resulted in recognising revenue in full of £5.5 million in
the prior year, being the residual balance of the upfront payment after
allocating revenue to the other performance obligation. Alternatively,
management could have assessed the transfer of intellectual property as a
right to access of the licence agreement date which would have resulted in
deferring £2.75 million into the current year.
Research and development
Careful judgement by the Directors is applied when deciding whether the
recognition requirements for capitalisation of research and development costs
have been met. In particular, judgement is required over whether technical
viability is proven and whether economic benefits will flow to the entity. The
Directors consider that these factors are uncertain until such time as
commercial supply agreements are considered likely to be achieved. Judgements
are based on the information available at each reporting date which includes
the progress with testing and certification and progress on, for example,
establishment of commercial arrangements with third parties. In addition, all
internal activities related to research and development of new products are
monitored by the Directors. Further information is included in note 3.
Estimates
The key sources of estimation uncertainty that have a significant risk of
causing material adjustment to the carrying amount of assets and liabilities
within the next financial year are discussed below.
· Revenue recognition
Estimation is involved in determining the correct amount of revenue to
recognise. This can be split into two components:- (i) the allocation of the
transaction price between performance obligations and (ii) the timing of
revenue recognition in respect of the delivery of services, particularly where
there is an expectation that the customer will not fully exercise their rights
to services.
Firstly, the allocation of the transaction price for the revenue relating to
the ongoing research services in the prior year was calculated on a cost-plus
margin basis. The existing salaries of five full time equivalents ("FTE")
which were available under the terms of the contract were combined and a
commercial margin was applied to the cost of these employees. In calculating
the cost, an average FTE day rate was taken and multiplied by the total number
of days expected to be worked over an 18-month period from the date of signing
the agreement which resulted in £0.5 million of revenue being spread over the
length of the research work programme.
To arrive at the commercial margin used, management reviewed the results from
comparable drug discovery services, both emerging and well-established CROs,
to understand the margins that they are achieving. The Company's platform is
unproven and unvalidated commercially as a stand-alone paid-for drug discovery
software and consequently any paid-for commercial access to the software
would, at this stage, effectively be beta-testing and therefore attract a
margin at the lower range of those achieved by other providers.
· Investments in and loans to subsidiaries
Loans to subsidiaries are tested for impairment using an expected credit loss
model. This requires estimation of the probability of default, the exposure at
default and the loss given default in order to calculate the expected credit
loss of the loans to subsidiaries. The key judgement made by management in the
expected credit loss calculations are the definition of default and the
probability assumptions of the future cashflows and the timing of the
cashflows. The definition of default and the probability sensitivities are
disclosed in Note 13.
The recoverable amount of the Parent's investment in subsidiary is tested for
impairment when indicators of impairment (or reversal of impairment) are
identified. The potential recoverable amounts have been determined based on a
value in use model. The recoverable amount is greater than the carrying
amount. These calculations require the use of estimates both in arriving at
the expected future cash flows and the application of a suitable discount rate
in order to calculate the present value of these cash flows. Cash flow
estimates include signing future licence agreements and the receipt of further
milestone licence payments, the timing of which are uncertain. These estimates
were benchmarked against the Group's own experience of such deals and external
sources of information within the industry. The assumptions and related
sensitivity analysis in these calculations are included in note 13.
3. Significant accounting policies
The accounting policies set out below are consistent with those of the
previous financial year and are applied consistently by Group entities.
Basis of consolidation
The Group financial statements consolidate the financial statements of C4X
Discovery Holdings plc and the entities it controls (its subsidiaries) drawn
up to 31 July each year.
All business combinations are accounted for by applying the acquisition method
as at the acquisition date, which is the date on which control is transferred
to the Group.
The Group measures goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus
the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets
acquired and liabilities assumed.
Transaction costs related to the acquisition, other than those associated with
the issue of debt or equity securities, that the Group incurs in connection
with a business combination are expensed as incurred.
Subsidiaries are all entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. All C4X Discovery Holdings plc's
subsidiaries are 100% owned. Subsidiaries are fully consolidated from the date
control passes.
All intra-Group transactions, balances and unrealised gains on transactions
between Group companies are eliminated on consolidation. Subsidiaries'
accounting policies are amended where necessary to ensure consistency with the
policies adopted by the Group.
Foreign currency transactions
Transactions in foreign currencies are initially recorded in the functional
currency by applying the spot rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are
retranslated at the functional currency rate of exchange ruling at the
reporting date. All differences are taken to the consolidated statement of
comprehensive income.
Segmental reporting
An operating segment is a component of an entity that engages in business
activities from which it may earn revenues and incur expenses, whose operating
results are regularly reviewed by the entity's chief operating decision maker
to make decisions about resources to be allocated to the segment and assess
its performance, and for which discrete financial information is available. As
at the reporting date the Group operated with only a single segment.
Revenue
IFRS 15 establishes principles for reporting useful information to users of
financial statements about the nature, amount, timing and uncertainty of
revenue and cash flows arising from an entity's contracts with customers. The
standard establishes a five-step principle-based approach for revenue
recognition and is based on the concept of recognising an amount that reflects
the consideration for performance obligations only when they are satisfied and
the control of goods or services is transferred.
The majority of the Group's contract revenue is generated from licences and
services.
Management reviewed the contracts where the Group received consideration in
order to determine whether or not they should be accounted for in accordance
with IFRS 15. To date, the Group has entered into two transactions - the
second which was signed in the prior year - that generate revenue and meet the
scope of IFRS 15. After review of the contract with Sanofi, it was determined,
in the prior year, that there were two performance obligations to be
satisfied, the first to being the transfer of IP and the second being the
provision of research services through the 'research work programme'. Contract
revenue is recognised at either a point-in-time or over time, depending on the
nature of the services and transfer of goods.
Revenue generated from the sale of a licence to a customer is determined to be
recognised at a point in time when a promise to provide the customer with the
right to use the entity's IP is satisfied. Management determined that the
customer receives the right to the drug molecule on the date that the IP is
transferred over and therefore the cash payment received constitutes handing
over control of the IP to Sanofi and is not dependent on any future
outcomes. The general guidance is applied on performance obligations
satisfied at a point in time to determine the point in time at which the
licence transfers to the customer. In this scenario, the point of time was
deemed to be the effective date that all of the intellectual property was
transferred over to Sanofi. The allocation of the transaction price for the
sale of licence was deemed to be £5.6 million which was the remainder of the
upfront payment received in the prior year after deducting for the revenue
allocated to the second performance obligation.
The contract with Sanofi also includes future milestone payments which are
contingent on the drug molecule passing various clinical trials testing at a
future point in time. As there can be significant variability in final
outcomes, the Group applies a constraint when measuring the variable element
within revenue, so that revenue is recognised at a suitably cautious amount.
The objective of the constraint is to ensure that it is highly probable that a
significant reversal of revenue will not occur when the uncertainties are
resolved. The constraint is applied by making suitably cautious estimates of
the inputs and assumptions used in estimating the variable consideration. The
constraints applied in recognising revenue mean that the risk of a material
downward adjustment to revenue in the next financial year is low. The company
recognised the first of these milestones in full in the current year when it
was achieved.
Royalty payments will be received by the Group when the drug is marketed and
sold by Sanofi. Revenue on royalty payments are recognised when they are
earned which for the Group will be when Sanofi have developed the drug and
sold a set number of products. At this point, the royalty rate owed to Group
is applied to the portion of the net sales made by Sanofi on royalty-bearing
products that fall within the indicated range as set out in the sales
agreement.
Revenue generated from services agreements is determined to be recognised over
time when it can be determined that the services meet one of the following:
(a) the customer simultaneously receives and consumes the benefits provided by
the entity's performance as the entity performs; (b) the entity's performance
creates or enhances an asset that the customer controls as the asset is
created or enhanced; or (c) the entity's performance does not create an asset
with an alternative use to the entity and the entity has an enforceable right
to payment for performance completed to date.
The Sanofi contract includes a separate performance obligation to deliver
research services. It was determined that the services provided to Sanofi
under the terms of the research work programme in the contract meets criteria
(a) above on the basis that the customer receives and uses the benefit as the
work on any new compounds is evolved and is therefore a separate performance
obligation and revenue should be recognised over time. The allocation of the
transaction price for the revenue relating to the ongoing research services
has been calculated on a cost-plus margin basis. The existing salaries of five
full time equivalents ("FTE") which are available under the terms of the
contract have been combined and a commercial margin has been applied to the
cost of these employees. In calculating the cost, an average FTE day rate has
been taken and multiplied by the total number of days expected to be worked
over an 18-month period from the date of signing the agreement which results
in £0.5m of revenue being spread over the length of the research work
programme.
Deferred Revenue
Deferred revenue includes amounts that are receivable or have been received
per contractual terms but have not been recognised as revenue since
performance has not yet occurred or has not yet been completed. The Company
classifies non-current deferred revenue for any transaction which is expected
to be recognised beyond one year.
Research and development
Research costs are charged in the consolidated statement of comprehensive
income as they are incurred. Development costs will be capitalised as
intangible assets when it is probable that future economic benefits will flow
to the Group. Such intangible assets will be amortised on a straight-line
basis from the point at which the assets are ready for use over the period of
the expected benefit and will be reviewed for impairment at each reporting
date based on the circumstances at the reporting date.
The criteria for recognising expenditure as an asset are:
· it is technically feasible to complete the product;
· management intends to complete the product and use or sell it;
· there is an ability to use or sell the product;
· it can be demonstrated how the product will generate probable
future economic benefits;
· adequate technical, financial and other resources are available
to complete the development, use and sale of the product; and
· expenditure attributable to the product can be reliably measured.
Development costs are currently charged against income as incurred since the
criteria for their recognition as an asset are not met.
The Group utilises the government's R&D tax credit scheme for all
qualifying UK R&D expenditure. The credits are accounted for under IAS 12
and presented in the profit and loss as a deduction from current tax expense
to the extent that the entity is entitled to claim the credit in the current
reporting period.
Leases
The Group applies the leasing standard IFRS16, to all contracts identified as
leases at their inception, unless they are considered short-term or where the
asset is of a low underlying value.
The Group has lease contracts in relation to property and office equipment. At
inception of a contract, the Group assesses whether a contract is, or
contains, a lease. 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. To assess whether a contract conveys the right to
control the use of an identified asset, the Group uses the definition of a
lease in IFRS 16.
As a lessee
At commencement or on modification of a contract that contains a lease
component, the Group allocates the consideration in the contract to each lease
component on the basis of its relative stand-alone prices. However, for leases
of property the Group has elected not to separate non-lease components and
account for the lease and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date, at which point the Group assesses the term for which it is
reasonably certain to hold that lease. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, plus
any initial direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on
which it is located, less any lease
incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the lease term, unless the
lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the right-of-use asset reflects that the Group
will exercise a purchase option. In that case, the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate. Generally, the Group uses
its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest
rates from various external financing sources and makes certain adjustments to
reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the
following:
• Fixed payments, including in-substance fixed payments;
• Variable lease payments that depend on an index or a rate, initially
measured using the index or rate as at the commencement date;
• amounts expected to be payable under a residual value guarantee; and
• the exercise price under a purchase option that the Group is
reasonably certain to exercise, lease payments in an optional renewal period
if the Group is reasonably certain to exercise an extension option, and
penalties for early termination of a lease unless the Group is reasonably
certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest
method. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, if there is a change in the Group's
estimate of the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset or is recorded in
profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
The Group presents right-of-use assets that do not meet the definition of
investment property in 'property, plant and equipment' and lease liabilities
in 'loans and borrowings' in the statement of financial position. On a
significant event, such as the lease reaching its expiry date or the likely
exercise of a previously unrecognised break clause, the lease term is
re-assessed by management as to how long we can be reasonably certain to stay
in that property, and a new lease agreement or modification (if the change is
made before the expiry date) is recognised for the re-assessed term.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for leases of low-value assets and short-term leases. Assets which
fall into this category include office equipment. The Group recognises the
lease payments associated with these leases as an expense on a straight-line
basis over the lease term. The value of these leases is less than £1,000 per
annum.
COVID-19-related rent concessions
The Group has applied COVID-19-Related Rent Concessions - Amendment to IFRS
16. The Group applies the practical expedient allowing it not to assess
whether eligible rent concessions that are a direct consequence of the
COVID-19 pandemic are lease modifications. The Group applies the practical
expedient consistently to contracts with similar characteristics and in
similar circumstances. For rent concessions in leases to which the Group
chooses not to apply the practical expedient, or that do not qualify for the
practical expedient, the Group assesses whether there is a lease modification.
The total value of this was £Nil for the year (2021: £10,462).
Finance income and costs
Finance income comprises interest income on funds invested. Interest income is
recognised as interest accrues using the effective interest rate method.
Finance costs comprise interest payments on right-of-use leases.
Income tax
Income tax expense comprises current and deferred tax. Income tax expense is
recognised in the consolidated statement of comprehensive income except to the
extent that it relates to items recognised directly in equity or in other
comprehensive income.
Current income tax assets and liabilities for the current and prior periods
are measured at the amount expected to be recovered from, or paid to, the tax
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the reporting date.
Deferred income tax is recognised on all temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the
financial statements with the following exceptions:
· where the temporary difference arises from the initial recognition
of goodwill or of an asset or liability in a transaction that is not a
business combination, that at the time of the transaction affects neither
accounting nor taxable profit nor loss; and
· in respect of taxable temporary differences associated with
investments in subsidiaries where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are measured on an undiscounted
basis using the tax rates and tax laws that have been enacted or substantially
enacted by the reporting date and which are expected to apply when the related
deferred tax asset is realised or the deferred tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable
that future taxable profits will be available against which differences can be
utilised. An asset is not recognised to the extent that the transfer or
economic benefits in the future are uncertain.
Tangible fixed assets
Owned assets
Property, plant and equipment assets are recognised initially at cost. After
initial recognition, these assets are carried at cost less any accumulated
depreciation and any accumulated impairment losses. Cost comprises the
aggregate amount paid and the fair value of any other consideration given to
acquire the asset and includes costs directly attributable to making the asset
capable of operating as intended.
Leased assets
Assets funded through finance leases and similar hire purchase contracts and
those previously classified as operating leases are now recognised in the
consolidated statement of financial position under IFRS 16 Leases as a right
of use asset. The lease note illustrates the recognition and subsequent
measurement of leased assets under IFRS 16.
Depreciation is computed by allocating the depreciable amount of an asset on a
systematic basis over its useful life and is applied separately to each
identifiable component.
The following bases and rates are used to depreciate classes of assets:
Building improvements - straight-line over remainder of lease period
Office equipment, fixtures and fittings - straight-line over three years
Right-of-use assets - straight-line from the commencement date to the end of the lease term
The carrying values of property, plant and equipment are reviewed for
impairment if events or changes in circumstances indicate that the carrying
value may not be recoverable, and are written down immediately to their
recoverable amount. Useful lives and residual values are reviewed annually and
where adjustments are required these are made prospectively.
A property, plant and equipment item is derecognised on disposal or when no
future economic benefits are expected to arise from the continued use of the
asset. Any gain or loss arising on the derecognition of the asset is included
in the consolidated statement of comprehensive income in the period of
derecognition.
Intangible assets
Intangible assets acquired either as part of a business combination or from
contractual or other legal rights are recognised separately from goodwill
provided they are separable and their fair value can be measured reliably.
This includes the costs associated with acquiring and registering patents in
respect of intellectual property rights.
Where intangible assets recognised have finite lives, after initial
recognition their carrying value is amortised on a straight-line basis over
those lives. The nature of those intangibles recognised and their estimated
useful lives are as follows:
Patents - straight line over 20 years
IP assets - straight line over five years
Software - straight line over five years
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is not amortised but is tested annually
for impairment.
Impairment of assets
At each reporting date the Group reviews the carrying value of its plant,
equipment, intangible assets and goodwill to determine whether there is an
indication that these assets have suffered an impairment loss. If any such
indication exists, or when annual impairment testing for an asset is required,
the Group makes an assessment of the asset's recoverable amount.
An asset's recoverable amount is the higher of an assets or cash-generating
unit's fair value less costs to sell and its value in use and is determined
for an individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets. Where
the carrying value of an asset exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount. In
determining fair value less costs of disposal, an appropriate valuation model
is used, these calculations are corroborated by valuation multiples, or other
available fair value indicators. Impairment losses on continuing operations
are recognised in the consolidated statement of comprehensive income in those
expense categories consistent with the function of the impaired asset.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there
has been a change in the assumptions used to determine the asset's recoverable
amount since the last impairment loss was recognised. If that is the case the
carrying amount of the asset is increased to its recoverable amount. That
increased amount cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for
the asset in prior years. Such reversal is recognised in the consolidated
statement of comprehensive income unless the asset is carried at revalued
amount, in which case the reversal is treated as a valuation increase. After
such a reversal the depreciation charge is adjusted in future periods to
allocate the asset's revised carrying amount, less any residual value, on a
systematic basis over its remaining useful life.
The carrying values of plant, equipment, intangible assets and goodwill as at
the reporting date have not been subjected to impairment charges.
Investments in subsidiaries
Investments in subsidiaries are stated in the Company's statement of financial
position at cost less provision for any impairment.
Trade and other receivables
Trade receivables, which generally have 30-to-60-day terms, are measured at
amortised cost. Loss allowances for trade receivables are measured at an
amount equal to a lifetime expected credit loss ("ECL"). Lifetime ECLs are the
ECLs that result from all possible default events over the expected life of
the receivables. ECLs are a probability weighted estimate of credit losses.
Credit losses are measured as the present value of all cash shortfalls. The
gross carrying amount of trade receivables are written off to the extent that
there is no realistic prospect of recovery
Cash, cash equivalents and short-term investments and cash on deposit
Cash and cash equivalents comprise cash at hand and deposits with maturities
of three months or less. Short-term investments and cash on deposit comprise
deposits with maturities of more than three months, but no greater than 12
months.
Trade and other payables
Trade and other payables are non-interest bearing and are initially recognised
at fair value. They are subsequently measured at amortised cost using the
effective interest rate method.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event and it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
The expense relating to any provision is presented in the consolidated
statement of comprehensive income, net of any expected reimbursement, but only
where recoverability of such reimbursement is virtually certain.
Provisions are discounted using a current pre-tax rate that reflects, where
appropriate, the risk specific to the liability. Where discounting is used,
the increase in the provision due to the passage of time is recognised as a
finance cost.
There were no provisions at 31 July 2022 (2021: £nil).
Financial instruments
i) Recognition and initial measurement
At the year end, the Group had no financial assets or liabilities designated
at fair value through the consolidated statement of comprehensive income
(2021: £nil).
Trade receivables and debt securities are initially recognised when they are
originated. All other financial assets and liabilities are initially
recognised when the Group becomes a party to the contractual provisions in the
instrument.
A financial asset (unless it is a trade receivable without a significant
financing component) or a financial liability is initially measured at fair
value plus, for items not measured at fair value through profit and loss
("FVTPL"), transaction costs that are directly attributable to its acquisition
or issue. A trade receivable without a significant financing component is
measured at the transaction price.
ii) Classification and subsequent measurement
Financial assets
On initial recognition a financial instrument is classified as measured at:
amortised cost, fair value through other comprehensive income ("FVOCI") or
FVTPL. Financial assets are not reclassified subsequent to their initial
recognition unless the Group changes its business model for managing financial
assets.
A financial asset is measured at amortised cost if it meets both the following
conditions and is not designated as FVTPL:
- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
- its contractual terms give rise on a specified date to cash
flows that are solely the payment of principal and interest on the principal
outstanding.
On initial recognition of an equity investment that is not held for trading
the Group may irrevocably elect to present subsequent changes in the
investment's fair value in OCI. This election is made on an
investment-by-investment basis.
Financial assets at amortised cost are subsequently measured at amortised cost
using the effective interest method. The amortised cost is reduced by
impairment losses.
Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL. A
financial liability is classified as FVTPL if it is held-for-trading, it is a
derivative or it is designated as such on initial recognition. Other financial
liabilities are subsequently measured at amortised cost using the effective
interest method. Interest expense is recognised in profit or loss.
At the year end, the Group had no financial assets or liabilities designated
at FVOCI (2021: £nil).
Share capital
Proceeds on issue of shares are included in shareholders' equity, net of
transaction costs. The carrying amount is not remeasured in subsequent years.
Share-based payments
Equity-settled share-based payment transactions are measured with reference to
the fair value at the date of grant, recognised on a straight-line basis over
the vesting period, based on the Group's estimate of shares that will
eventually vest. Fair value is measured using a suitable option pricing model.
At each reporting date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and
management's best estimate of the achievement or otherwise of non-market
conditions and the number of equity instruments that will ultimately vest. The
movement in cumulative expense since the previous reporting date is recognised
in the consolidated statement of comprehensive income, with a corresponding
entry in equity.
Where the terms of an equity-settled award are modified or a new award is
designated as replacing a cancelled or settled award, the cost based on the
original award terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new
vesting period for the incremental fair value of any modification, based on
the difference between the fair value of the original award and the fair value
of the modified award, both as measured on the date of the modification. No
reduction is recognised if this difference is negative.
Where awards are granted to the employees of a subsidiary company, the fair
value of the awards at grant date is recorded in the Company's financial
statements as an increase in the value of the investment with a corresponding
increase in equity via the share-based payment reserve.
Warrant reserve
Proceeds from issuance of warrants, net of issue costs are included in the
warrant reserve. The warrant reserve is distributable and will be transferred
to retained reserves upon exercise or lapse of warrants.
Defined contribution pension scheme
The Group operates a defined contribution pension scheme. The assets of the
scheme are held separately from those of the Group in an independently
administered fund. The amounts charged against profits represent the
contributions payable to the scheme in respect of the accounting period.
New accounting standards and interpretations
A number of new standards, amendments to standards and interpretations have
been endorsed by the EU and are effective for annual periods commencing on or
after 1 January 2022 or ending 31 July 2023 or thereafter and have not been
applied in preparing these consolidated financial statements and those are
summarised below. None of these are expected to have a significant effect on
the consolidated financial statements of the Group in the period of initial
application.
The following standards and interpretations have an effective date after the
date of these financial statements.
UK effective date
IFRS 17 Insurance Contracts 1 January 2023
Research partnerships
The costs and revenues related to research partnerships are shared between the
parties in accordance with the terms of the agreement.
4. Segmental information
The Group operated as one single operating segment for the current and prior
financial years. This is the level at which operating results are reviewed by
the Chief Operating Decision Market (considered to be the Board of Directors)
to assess performance and make strategic decisions about the allocation of
resources.
Revenue from contracts with customers
2022 2021
£000 £000
Revenue recognised at a point in time
- Right-to-use licence revenue - 5,540
- Milestone revenue 2,555 -
Revenue recognised over time
- Research services revenue 144 102
Total revenue 2,699 5,642
Revenue in the current and prior year is generated from a contract with a
single customer. In the current year, the milestone revenue was determined to
have one performance obligation and has been recognised at a point in time.
The revenue in the prior year was determined to have two performance
obligations. The revenue attributable to the transfer of intellectual property
was recognised at a single point in time. The revenue attributed to the
delivery of research services is recognised over time and progress is measured
based on costs incurred to date as compared with the total projected costs for
both the current and prior year.
Contract balances
Receivable balances in respect of contracts with customers are as follows:
2022 2021
£000 £000
Trade receivables 2,555 -
Contract liabilities represent the Group's obligation to provide services to a
customer for which consideration has been received. Contract liabilities are
included within deferred revenue on the Consolidated Statement of Financial
Position
2022 2021
£000 £000
Deferred revenue - short term 250 330
Deferred revenue - long term - 64
Total deferred revenue 250 394
Remaining performance obligations represent the value of partially satisfied
performance obligations within contracts with an original expected contract
term that is greater than one year and for which fulfilment of the contract
has started as of the end of the reporting period. The total remaining
consideration allocated to remaining performance obligations at 31(st) July
2022 was £250,000 (2021: £394,000). The Group expects to recognise the
remaining performance obligations as revenue and will do so based upon costs
incurred to date as compared with the total projected costs.
Less than 1 year Greater than 1 year Total
£000 £000 £000
Remaining performance obligations 250 - 250
Impairment losses recognised on receivables arising from contracts with
customers are £nil (2021: £nil).
Typical payment terms are 60 days after the occurrence of the relevant
milestone.
5. Operating loss
31 July 31 July
2022 2021
The Group £000 £000
Operating loss is stated after charging/(crediting):
Depreciation of property, plant and equipment (see note 10) 23 33
Depreciation on right-of-use assets (see note 10) 212 254
Amortisation of intangible assets (see note 11) 8 88
Foreign exchange (gains)/losses 149 71
Research and development expense* 9,426 8,263
Auditor's remuneration
Audit services:
-Fees payable to Company auditor for the audit of the parent and the 200 90
consolidated accounts
Fees payable in respect of the audit of subsidiary companies:
-Auditing the accounts of subsidiaries pursuant to legislation 50 30
-Other services 9 36
Total auditor's remuneration 259 156
*Included within research and development expense are staff costs totalling
£2,734,000 (2021: £2,951,000) also included in note 6.
6. Staff costs and numbers
31 July 31 July
2022 2021
£000 £000
Wages and salaries 3,445 3,551
Social security costs 430 409
Pension contributions 524 442
Share-based payments 309 249
4,708 4,651
Directors' remuneration (including benefits-in-kind) included in the aggregate
remuneration above comprised:
Emoluments for qualifying services 807 745
Directors' emoluments (excluding social security costs but including benefits
in kind) disclosed above include £204,000 paid to the highest paid Director
(2021: £196,000).
Retirement benefits are accruing to seven Directors (2021: four Directors).
The average number of employees during the year (including Directors) was as
follows:
31 July 31 July
2022 2021
The Group Number Number
Directors 8 7
Technological staff 32 32
Administrative staff 8 7
48 46
7. Finance income and costs
31 July 31 July
2022 2021
The Group £000 £000
Finance income
Bank interest receivable - 1
- 1
Finance costs
Interest on lease liabilities 12 15
12 15
8. Income tax
The tax credit is made up as follows:
31 July 31 July
2022 2021
The Group £000 £000
Current income tax
Research and development income tax credit receivable (2,365) (2,053)
Adjustment in respect of prior years (9) (10)
(2,374) (2,063)
Deferred tax
Charge for the year - -
Total income tax credit (2,374) (2,063)
The tax assessed for the year varies from the standard rate of corporation tax 31 July 31 July
as explained below:
2022 2021
The Group £000 £000
Loss before taxation (10,534) (5,907)
Tax at standard rate of 19.00% (2021: 19.00%) (2,001) (1,122)
Effects of:
Additional deduction for research and development expenditure under SME scheme (1,752) (1,633)
Surrender of research and development relief for receivable tax credit under 3,099 2,690
SME scheme
Research and development tax credit receivable under SME scheme (2,365) (2,053)
Tax losses carried forward for which no deferred tax asset is recognised 590 -
Capital allowances in excess of deprecation and share based payment charges 64 65
carried forward for which no deferred tax asset is recognised
Adjustment in respect of prior years (9) (10)
Tax credit in income statement (2,374) (2,063)
The Group qualifies for HMRC's SME R&D tax relief scheme which for the
current and prior year allows it to deduct an extra 130% of its qualifying
costs against its tax position. As the group is loss making it has elected to
claim a receivable tax credit under the scheme of £2,365,000, being 14.5% of
the surrenderable loss, instead of carrying forward the research and
development relief as additional tax losses. These adjustments are included in
the tax reconciliation.
The Group has accumulated losses available to carry forward against future
trading profits. The estimated value of the deferred tax asset, measured at a
standard rate of 25% (2021: 25%), is £5,107,000 (2021: £4,331,000), of which
£nil (2021: £nil) has been recognised. Tax losses have not been recognised
as an asset as it is not yet probable that future taxable profits will be
available against which the unused tax losses can be utilised.
The Group also has a deferred tax liability being accelerated capital
allowances, for which the tax, measured at a standard rate of 25% (2021: 25%)
is £12,000 (2021: £9,000).
The Group has a deferred tax asset for share-based payments, for which the
tax, measured at a standard rate of 25% (2021: 25%), is £386,000 (2021:
£298,000).
The net deferred tax asset of £374,000 (2021: £289,000) has not been
recognised as it is not yet probable that future taxable profits will be
available against which the unused tax losses can be utilised.
In the March 2021 budget it was announced that the UK corporation tax rate
would remain at the current 19% and increase to 25% from 1 April 2023.
Accordingly, the UK deferred tax asset/(liability) as at 31 July 2022 and 31
July 2021 have been calculated based on the enacted rate as at the balance
sheet date of 25%. It was confirmed by the government in October 2022 that the
corporation tax rate will increase to 25% as planned from 1 April 2023.
9. Earnings per share
31 July 31 July
2022 2021
The Group £000 £000
Loss for the financial year attributable to equity shareholders (8,160) (3,844)
Weighted average number of shares
Ordinary shares in issue for purposes of basic EPS 228,675,845 196,261,295
Effect of potentially dilutive ordinary shares:
Number of exercisable share options and warrants 12,231,972 14,531,129
Ordinary share in issue for purposes of diluted EPS 240,907,817 210,792,424
Basic loss per share (pence) (3.57) (1.96)
Diluted loss per share (pence) (3.57) (1.82)
The number of exercisable share options and warrants above are those deemed to
be potentially dilutive in nature as their exercise price is less than the
average share price for the period. As the group made a loss in the current
and comparative period the effects of these potential ordinary shares are not
dilutive. The prior year comparative has not been restated as the impact was
not considered material.
10. Tangible fixed assets
Office equipment, fixtures and fittings Building improvements Total
Right-of-use assets
The Group £000 £000 £000 £000
Cost
At 31 July 2020 249 38 543 830
Additions 20 - 253 273
Disposals (17) - (248) (265)
At 31 July 2021 252 38 548 838
Additions 37 - 542 579
Disposals (11) - - (11)
At 31 July 2022 278 38 1,090 1,406
Depreciation
At 31 July 2020 203 38 165 406
Provided during the year 33 - 254 287
Eliminated on disposal (17) - (248) (265)
At 31 July 2021 219 38 171 428
Provided during the year 23 - 212 235
Eliminated on disposal (11) - - (11)
At 31 July 2022 231 38 383 652
Net book value
At 31 July 2022 47 - 707 754
At 31 July 2021 33 - 377 410
The Company has no tangible fixed assets.
The Group recognises right-of-use assets with respect to its property leases.
11. Intangible assets
Patents IP assets Software Total
The Group £000 £000 £000 £000
Cost
At 31 July 2020 138 600 50 788
Additions - - - -
At 31 July 2021 138 600 50 788
Additions - - - -
At 31 July 2022 138 600 50 788
Amortisation
At 31 July 2020 61 530 40 631
Provided during the year 8 70 10 88
At 31 July 2021 69 600 50 719
Provided during the year 8 - - 8
At 31 July 2022 77 600 50 727
Net book value
At 31 July 2022 61 - - 61
At 31 July 2021 69 - - 69
Patents are amortised on a straight-line basis over 20 years. Amortisation
provided during the period is recognised in administrative expenses. The Group
does not believe that any of its patents in isolation are material to the
business.
IP assets and software are amortised on a straight-line basis over five years.
Amortisation provided during the period is recognised in administrative
expenses.
For impairment reviews see note 12.
The Company has no intangible assets.
12. Goodwill
Purchased goodwill Total
The Group £000 £000
Cost
At 31 July 2020, 31 July 2021 & 31 July 2022 1,192
1,192
Impairment
At 31 July 2020 - -
Provided during the year - -
At 31 July 2021 - -
Provided during the year - -
At 31 July 2022 - -
Net book value
At 31 July 2022 1,192 1,192
At 31 July 2021 1,192 1,192
The Group has determined that for the purposes of goodwill and other
intangibles (see note 11) impairment testing, the UK Operations represents the
lowest level within the entity that goodwill and other intangibles are
monitored for internal management purposes. This is consistent with the one
operating segment analysis within Note 4. Therefore, the Group only has one
cash-generating unit ("CGU").
Management assesses goodwill and other intangibles for impairment annually at
the year-end date.
For both the current and prior year, impairment reviews were performed by
comparing the carrying value of the cash-generating unit with their
recoverable amount.
The recoverable amount of the cash-generating units has been determined based
on their fair value less costs to disposal. As there is only one CGU, the
Group has determined its market capitalisation at the year-end date to be a
good basis in determining the value of the underlying CGU. The market
capitalisation at the year-end date was £61 million (2021: £67m).
The assessment by the Board determined that the recoverable amount of the CGU
exceeded their carrying value, and therefore no impairment was required.
(2021: no impairment)
The Directors are satisfied that no reasonably possible change in this
estimate would result in the recognition of an impairment within the next
twelve months and accordingly the carrying value of goodwill and other
intangibles are not considered a significant estimate as at 31 July 2022.
The Company has no goodwill.
13. Investment in and loans to subsidiaries
Investment in subsidiary Loans to group undertakings Total
The Company £000 £000 £000
Cost
At 31 July 2021 3,033 56,460 59,493
Additions 309 338 647
At 31 July 2022 3,342 56,798 60,140
Provision
At 31 July 2021 - - -
Provided during the year - - -
At 31 July 2022 - - -
Net book value
At 31 July 2022 3,342 56,798 60,140
At 31 July 2021 3,033 56,460 59,493
By subsidiary
C4X Discovery Limited
60,140
C4X Drug Discovery Limited -
Adorial Limited -
At 31 July 2022 60,140
Country of incorporation Principal activity 31 July
Subsidiary undertakings 2022
Class of
shares held
C4X Discovery Limited* England and Wales Research and development 100%
Ordinary
C4X Drug Discovery Limited** England and Wales Dormant company 100%
Ordinary
Adorial Limited* England and Wales Dormant company Ordinary 100%
Adorial Technologies Limited* England and Wales Dormant company Ordinary 100%
Adorial Pharma Limited* England and Wales Dormant company 100%
Ordinary
*The registered office address is Manchester One, 53 Portland Street,
Manchester M1 3LD.
**The registered office address is C/O Schofield Sweeney Springfield House, 76
Wellington Street, Leeds, West Yorkshire LS1 2AY.
Investment in subsidiary
The recoverable amount has been determined based on a value in use cashflow
model. We note that there is high estimation uncertainty and judgement
involved in the preparation of the cash flow forecast and it is sensitive to
changes in key assumptions - particularly around the simplified 25% discount
rate used and drug programme failure.
For an impairment to arise, the simplified discount rate would need to
increase from 25% to 41% (with no change in the cash flows). Alternatively,
two drug programmes out of the five included in the model would need fail for
an impairment to arise (with no change in the discount rate). The model
excludes later stage sales threshold milestones and royalties and only takes
into the model partnered programmes and the two more advanced unpartnered
programmes. The model demonstrates that the discounted future cashflows amount
to £111 million (2021: £65m).
During the prior year, the impairment of the Parent's investment in its
subsidiary from previous years was reversed due to changes in the assumptions
in the underlying cash flows of the business that increased the estimated
recoverable amount. The value of the reversed impairment the prior year was
(£2,784,000).
Loans to group undertakings
There are no formal terms for the repayment of inter-company loans, none of
which bear interest and all of which are repayable on demand however the
Directors do not expect this amount to be settled within the next 12 months
therefore have classified this as a non-current receivable.
The recoverable amount of loans to subsidiaries is determined by using an
expected credit loss model which takes into account the probability of
default, the exposure at default and the loss given default at the year end.
The company defines default in this context as the performance of the
subsidiary against its business plan and forecasts and progress of pipeline
programmes towards commercialisation.
The Company does not expect this amount to be recalled within the next 12
months and nor would the subsidiary be able to repay on demand and therefore
the Company has considered how it expects to recover the loan receivable and
the recovery period of the loan in calculating the expected credit loss.
The Company considers the probability of default to be low when considering
the performance of the subsidiary. The Company has assessed the expected
credit loss by looking at the future cashflows of the subsidiary. As the loan
is held at 0% interest, the effective rate of return (ERR) is deemed to be 0%.
The potential recoverable amount has been determined based on probability
weighted cashflow model. These calculations require the use of estimates in
arriving at the expected future cash flows. Cash flow estimates include
signing future licence agreements and the receipt of further milestone licence
payments, the timing of which are uncertain. These estimates were benchmarked
against the Group's own experience of such deals and external sources of
information within the industry.
The key judgement made by management in the expected credit loss calculations
is the definition of default, and the probability assumptions of the future
cashflows and the timing of the cashflows.
The ECL provision is £immaterial (2021: £immaterial) as the probability of
default is low and the probability weighted cashflows show sufficient headroom
when compared with the total value of the loan.
The carrying amount of the loan receivable is sensitive to assumptions about
the future. A probability weighted future cash flow model has been used with a
total implied probability of 18% (2021: 18%). In order for an impairment to
arise, the total implied probability would need to fall to 14% (2021: 15%).
14. Trade and other receivables
31 July 2022 31 July 2022 31 July 2021 31 July 2021
Group Company Group Company
£000 £000 £000 £000
Trade receivables 2,524 - 21 -
Prepayments 398 - 307 -
Other receivables - - - 6
VAT receivables 147 - 246 -
3,069 - 574 6
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value. There is £immaterial (2021: £immaterial)
expected credit loss against other receivables.
There were no revenue-related contract assets (2021: £nil).
Trade receivables are denominated in the following currency:
31 July 2022 31 July 2022 31 July 2021 31 July 2021
Group Company Group Company
£000 £000 £000 £000
Euros 2,519 - - -
Sterling 5 - 21 -
2,524 - 21 -
The ageing analysis of trade receivables was as follows:
Not Yet Due Due <30 days overdue >30 days overdue Total
£000 £000 £000 £000
As at 31 July 2022 - 2,524 - - 2,524
As at 31 July 2021 - - 21 - 21
15. Income tax asset
31 July 2022 31 July 2022 31 July 2021 31 July 2021
Group Company Group Company
£000 £000 £000 £000
Research and development income tax credit receivable 4,427 - 2,053 -
4,427 - 2,053 -
16. Cash, cash equivalents and deposits
31 July 31 July 2022 31 July 31 July 2021
2022 2021
Group Company Group Company
£000 £000 £000 £000
Cash and cash equivalents 5,079 - 17,103 -
5,079 - 17,103 -
Cash and cash equivalents at 31 July 2022 include deposits with original
maturity of three months or less of £nil (2021: £nil).
An analysis of cash, cash equivalents and deposits by denominated currency is
given in note 27.
17. Trade and other payables
31 July 2022 31 July 2022 31 July 2021 31 July
2021
Group Company Group Company
£000 £000 £000 £000
Current Liabilities
Current payables 949 - 472 -
Other payables 179 6 127 -
Deferred revenue 250 - 330 -
Accruals 671 - 718 -
2,049 6 1,647 -
Non-Current Liabilities
Deferred revenue - - 64 -
- - 64 -
Revenue-related contract liabilities are recognised as deferred revenue and
allocated to the time period in which they are estimated to be recognised as
revenue (2021: £nil).
18. Lease liabilities
31 July 2022 31 July 2022 31 July 2021 31 July
2021
Group Company Group Company
£000 £000 £000 £000
Current Liabilities
Lease liabilities 305 - 217 -
305 - 217 -
Non-Current Liabilities
Lease liabilities 424 - 187 -
424 - 187 -
When measuring lease liabilities for leases that were classified as operating
leases, the Group discounted lease payments using its incremental borrowing
rate at the time the lease is initially recognised. The weighted average rate
applied is 4.99% (2021: 4.25%).
Lease liabilities are deemed to be secured against the right-of-use assets to
which they relate.
£000
2022
Balance at 1 August 2021 404
Cash outflow (229)
New leases 542
Interest on lease liabilities 12
At 31 July 729
2022
£000
2021
Balance at 1 August 2020 407
Cash outflow (271)
New leases 253
Interest on lease liabilities 15
At 31 July 404
2021
19. Issued equity capital
Ordinary shares Share capital Deferred shares Warrant reserve Share premium Total
Deferred shares
The Company Number Number £000 £000 £000 £000 £000
Allotted, called up and fully paid ordinary shares of 1p
119,203,144 1,191 40,306
At 31 July 2020 2,025,000 2,025 - 43,522
Issue of share capital on placing - 99,169,286 992 - - 11,899 12,891
Issue of share capital on open offer - 7,973,572 80 - - 1,037 1,117
Issue of warrants on placing - - - - 992 - 992
Issue of share capital on exercise of share options - 188,125 2 - - 6 8
Issue of share capital on exercise of warrants - 1,278,570 13 - (13) 345 345
Expenses of placing, open offer and subscription by Directors - - - - - (551) (551)
227,812,697 2,277 53,042
At 31 July 2021 2,025,000 2,025 979 58,324
Issue of share capital on exercise of share options - 319,275 3 - - 15 18
Issue of share capital on exercise of warrants - 1,100,000 11 - (11) 297 297
229,231,972 2,291 53,355
At 31 July 2022 2,025,000 2,025 968 58,639
Share capital Deferred shares Warrant reserve Share premium Total
The Group £000 £000 £000 £000 £000
Allotted, called up and fully paid ordinary shares of 1p
1,191 40,306
At 31 July 2020 2,025 - 43,522
Issue of share capital on placing 992 - - 11,899 12,891
Issue of share capital on open offer 80 - - 1,037 1,117
Issue of warrants on placing - - 992 - 992
Issue of share capital on exercise of share options 2 - - 6 8
Issue of share capital on exercise of warrants 13 - (13) 345 345
Expenses of placing, open offer and subscription by Directors - - - (551) (551)
At 31 July 2021 2,277 2,025 979 53,042 58,324
Issue of share capital on exercise of share options 3 - - 15 18
Issue of share capital on exercise of warrants 11 - (11) 297 297
2,291 53,355
At 31 July 2022 2,025 968 58,639
During November 2020 £15.0 million (before expenses) was raised via a placing
of 99,169,286 ordinary shares and an open offer for 7,973,572 ordinary shares
at 14 pence each. In addition, 99,169,286 warrants were issued over ordinary
shares, exercisable at 28p per share with an exercise period of 5 years.
The deferred shares of £1 carry no right to participate in dividends in
respect of any financial year, until there shall have been paid to the holders
of the ordinary shares £1 per ordinary share in respect of the relevant
financial year; subject thereto, the deferred shares and the ordinary shares
shall rank equally in respect of any further dividends in respect of the
relevant financial year as if they constituted one class of share.
During August 2022 £5.7 million (before expenses) was raised via a placing of
22,781,200 ordinary shares at 25 pence each.
20. Share-based payment reserve
The Group £000
At 31 July 942
2020
Share-based 249
payments
At 31 July 1,191
2021
Share-based 352
payments
At 31 July 1,543
2022
£000
The Company
At 31 July 913
2020
Share-based 249
payments
At 31 July 1,162
2021
Share-based 352
payments
At 31 July 1,514
2022
The share-based payment reserve accumulates the corresponding credit entry in
respect of share-based payment charges. Movements in the reserve are disclosed
in the consolidated statement of changes in equity.
A charge of £352,000 has been recognised in the statement of comprehensive
income for the year (2021: £249,000).
This includes £46,416 (2021: £46,342) of incremental fair value on
replacement of options.
Share option schemes
The Group operates the following share option schemes all of which are
operated as Enterprise Management Incentive ("EMI") schemes insofar as the
share options being issued meet the EMI criteria as defined by HM Revenue
& Customs. Share options issued that do not meet EMI criteria are issued
as unapproved share options but are subject to the same exercise performance
conditions.
C4X Discovery Holdings plc Long Term Incentive Plan ("LTIP")
Grant in August 2012
Share options were granted to staff on 28 August 2012. The options granted are
exercisable in the event of the listing of the Company, its acquisition or at
the absolute discretion of the Board. The exercise price was set at 5.58 pence
(the original exercise price of £60.00 was adjusted for a subdivision of
1,075 share options in C4X Discovery Holdings plc for each share option
originally held in C4X Discovery Limited), being the estimated fair value of
the shares on the day preceding the issue of the share options. The fair value
benefit is measured using a Black Scholes model, taking into account the terms
and conditions upon which the share options were issued.
Grant in July 2013
Share options were granted to staff on 4 July 2013. The options granted are
exercisable in the event of the listing of the Company, its acquisition or at
the absolute discretion of the Board. The exercise price was set at 5.58 pence
(the original exercise price of £60.00 was adjusted for a subdivision of
1,075 share options in C4X Discovery Holdings plc for each share option
originally held in C4X Discovery Limited), being the estimated fair value of
the shares on the day preceding the issue of the share options. The fair value
benefit is measured using a Black Scholes model, taking into account the terms
and conditions upon which the share options were issued.
Grant in May 2014
Share options were granted to staff on 27 May 2014. The options granted are
exercisable in the event of the listing of the Company, its acquisition or at
the absolute discretion of the Board. The exercise price was set at 5.58 pence
(the original exercise price of £60.00 was adjusted for a subdivision of
1,075 share options in C4X Discovery Holdings plc for each share option
originally held in C4X Discovery Limited), being the estimated fair value of
the shares on the day preceding the issue of the share options. The fair value
benefit is measured using a Black Scholes model, taking into account the terms
and conditions upon which the share options were issued.
Grant in November 2019
Share options were granted to staff and Directors on 29 November 2019 pursuant
to the EMI 2014 Plan. The options granted are exercisable, at any time between
three years and 10 years of them being granted. The exercise price was set at
16.2 pence, being the average five-day volume weighted average price of the
ordinary shares to 29 November 2019. The fair value benefit is measured using
a Black Scholes model, taking into account the terms and conditions upon which
the share options were issued.
Grant in December 2019
Share options were granted to staff on 1 December 2019 pursuant to the EMI
2014 Plan. The options granted are exercisable, at any time between three
years and 10 years of them being granted. The exercise price was set at 42.0
pence, based on the last 200-day moving average prior to 1 December 2019. The
fair value benefit is measured using a Black Scholes model, taking into
account the terms and conditions upon which the share options were issued.
Grant in February 2020
Share options were granted to staff on 10 February 2020 pursuant to the EMI
2014 Plan. The options granted are exercisable, at any time between three
years and 10 years of them being granted. The exercise price was set at 27.8
pence, based on the last 200 day moving average prior to 10 February 2020. The
fair value benefit is measured using a Black Scholes model, taking into
account the terms and conditions upon which the share options were issued.
Grant in June 2020
Share options were granted to staff on 2 June 2020 pursuant to the EMI 2014
Plan. The options granted are exercisable, at any time between three years and
10 years of them being granted. The exercise price was set at 15.5 pence,
based on the last 200 day moving average prior to 2 June 2020. The fair value
benefit is measured using a Black Scholes model, taking into account the terms
and conditions upon which the share options were issued.
Cancellation and regrant of existing options in July 2020
A number of unvested share options were cancelled and reissued to staff and
Directors on 28 July 2020. The regrant brings the strike price of the share
options into line with the current market price of the Company's shares and
should now deliver a viable incentive and reward package to the employees and
Directors of the Company. The regrant options have an exercise price of 16
pence, being the closing price of the Ordinary Shares on 28 July 2020. The
options can be exercised at any time between three years and 10 years of them
being granted. The fair value benefit is measured using a Black Scholes model,
taking into account the terms and conditions upon which the share options were
issued.
The Group designated the new equity instruments as replacements for the
cancelled equity instruments and as such, modification accounting has been
applied. As the new options have an increased fair value compared to the
previous awards, the incremental fair value of £154,571 is recognised over
the modified three-year vesting period, in addition to the amount recognised
based on the grant date fair value of the original instruments, which
continues to be recognised over the remainder of the original vesting period.
The charge in the current year on the new options amounted to £46,416 (2021:
£46,342).
Grant in December 2020
Share options were granted to staff and Directors on 14 December 2020 pursuant
to the EMI 2014 Plan. The options granted are exercisable, at any time between
three years and 10 years of them being granted. The exercise price was set at
20.0 pence, being the average five-day volume weighted average price of the
ordinary shares to 11 December 2020. The fair value benefit is measured using
a Black Scholes model, taking into account the terms and conditions upon which
the share options were issued.
Grant in May 2021
Share options were granted to staff on 05 May 2021 pursuant to the EMI 2014
Plan. The options granted are exercisable, at any time between three years and
10 years of them being granted. The exercise price was set at 41.34 pence,
being the average five-day volume weighted average price of the ordinary
shares to 05 May 2021. The fair value benefit is measured using a Black
Scholes model, taking into account the terms and conditions upon which the
share options were issued.
Grant in September 2021
Share options were granted to staff on 16 September 2021 pursuant to the EMI
2014 Plan. The options granted are exercisable, at any time between three
years and 10 years of them being granted. The exercise price was set at 32
pence, being the average five-day volume weighted average price of the
ordinary shares to 16 September 2021. The fair value benefit is measured using
a Black Scholes model, taking into account the terms and conditions upon which
the share options were issued.
Grant in February 2022
Share options were granted to staff and directors on 01 February 2022 pursuant
to the EMI 2014 Plan. The options granted are exercisable, at any time between
three years and 10 years of them being granted. The exercise price was set at
36 pence, being the average five-day volume weighted average price of the
ordinary shares to 1 February 2022. The fair value benefit is measured using a
Black Scholes model, taking into account the terms and conditions upon which
the share options were issued.
Grant in May 2022
Share options were granted to staff on 03 May 2022 pursuant to the EMI 2014
Plan. The options granted are exercisable, at any time between three years and
10 years of them being granted. The exercise price was set at 32.8 pence,
being the average five-day volume weighted average price of the ordinary
shares to 03 May 2022. The fair value benefit is measured using a Black
Scholes model, taking into account the terms and conditions upon which the
share options were issued.
Share options are awarded to management and key staff as a mechanism for
attracting and retaining key members of staff. The options are granted at no
lower than either: (i) market price on the day preceding grant; or (ii) in the
event of abnormal price movements at an average market price for the week
preceding grant date. Options may be granted at prices higher than the market
price on the day preceding grant where the Board believes it is appropriate to
do so. These options vest over a three-year period from the date of grant and
are exercisable until the tenth anniversary of the award. Exercise of the
award is subject to the employee remaining a full-time member of staff at the
point of exercise. The fair value benefit is measured using a Black Scholes
valuation model, taking into account the terms and conditions upon which the
share options were issued.
The following tables illustrate the number and weighted average exercise
prices of, and movements in, share options during the year.
2022 2021
The Group and Company Number Number
Outstanding at 1 August 9,937,747 7,057,522
Granted during the year 3,824,000 4,019,000
Exercised during the year (425,700) (188,125)
Forfeited during the year (460,149) (950,650)
Lapsed/cancelled - -
Outstanding at 31 July 12,875,898 9,937,747
Exercisable at 31 July 161,250 606,950
During the year ended 31 July 2022, 425,700 were exercised (2021: 188,125
exercised).
Weighted average exercise price of options
2022 2021
The Group and Company Pence Pence
Outstanding at 1 August 18.61 17.34
Granted during the year 35.86 20.84
Exercised during the year 5.58 4.07
Forfeited during the year 25.13 21.53
Lapsed/cancelled during the year - -
Outstanding at 31 July 25.55 18.61
A total of 3,824,000 share options were granted during the year (2021:
4,019,000). The range of exercise prices for options outstanding at the end of
the year was 5.58 pence - 42.00 pence (2021: 5.58 pence - 100.00 pence).
For the share options outstanding as at 31 July 2022, the weighted average
remaining contractual life is 8.3 years (2021: 8.5 years).
The following table lists the inputs to the models used for the years ended 31
July 2022 and 31 July 2021.
The Group and Company 2022 2021
Expected volatility (%) 52.5% - 71.5% 52.5%
Risk-free interest rate (%) 0.35%-1.78% 0.35%-1.00%
Expected life of options (year's average) 3 years - 6.5 years 3 years
Weighted average exercise price (pence) n/a n/a
Weighted average share price at date of grant (pence) 35.86 20.84
The expected life of the options is based on historical data and is not
necessarily indicative of exercise patterns that may occur. The expected
volatility reflects the assumption that the historical volatility is
indicative of future trends, which may also not necessarily be the actual
outcome.
No other features of options granted were incorporated into the measurement of
fair value.
21. Warrant reserve
The Group and Company £000
At 31 July -
2020
Warrant 992
premium
Exercise of warrants (13)
At 31 July 979
2021
Warrant -
premium
Exercise of warrants (11)
At 31 July 968
2022
During the year no warrants were issued (2021: 99,169,286). During the prior
year warrants associated with the fundraising were issued to all places, being
one warrant for every share, excluding those investors seeking to claim EIS
relief in relation to their investment. The value attributed to these warrants
is 1p per share from the 14p per share price of the raise.
The warrants are exercisable at 28p (2021: 28p) per ordinary share and are to
be exercised within 5 years of being issued.
During the year a total of 1,100,000 warrants (2021: 1,278,570) were exercised
during the year.
The following tables illustrate the number and movements in, warrants during
the year.
2022 2021
The Group and Company Number Number
Outstanding at 1 August 97,890,716 -
Granted during the year - 99,169,286
Exercised during the year (1,100,000) (1,278,570)
Lapsed/cancelled - -
Outstanding at 31 July 96,790,716 97,890,716
Exercisable at 31 July 96,790,716 97,890,716
22. Merger reserve
The Group £000
At 31 July 2020, 31 July 2021 and 31 July 920
2022
The merger reserve arises as a result of the reverse acquisition requirements
of IFRS 3 meaning the consolidated accounts are presented as a continuation of
the C4X Discovery Limited accounts along with the share capital structure of
the legal parent company (C4X Discovery Holdings plc).
23. Capital contribution reserve
The Group £000
At 31 July 2020, 31 July 2021 and 31 July 195
2022
24. Retained earnings
The Group £000
At 31 July 2020 (37,513)
Loss for the year (3,844)
Warrant reserve movement 13
At 31 July (41,344)
2021
Loss for the year (8,160)
Warrant reserve movement 11
At 31 July (49,493)
2022
The Company £000
At 31 July (8,235)
2020
Loss for the year 8,235
Warrant reserve movement 13
At 31 July 13
2021
Loss for the year -
Warrant reserve movement 11
At 31 July 24
2022
25. Leases
Leases as lessee (IFRS16)
The Group leases premises under non-cancellable operating lease agreements.
Right‑of‑use assets related to leased properties that do not meet the
definition of investment property are presented as property, plant and
equipment (note 10).
Land and Total
Buildings
Group Group
£000 £000
2022
Balance at 1 August 2021 377 377
Depreciation charge for the year (212) (212)
Additions to right-of-use assets 542 542
Derecognition of right-of-use assets - -
Depreciation eliminated on derecognition of right-of-use assets - -
707 707
2021
Balance at 1 August 2020 378 378
Depreciation charge for the year (254) (254)
Additions to right-of-use assets 253 253
Derecognition of right-of-use assets (248) (248)
Depreciation eliminated on derecognition of right-of-use assets 248 248
377 377
Amounts recognised in income statement
31 July 2022
Interest on lease liabilities 12 12
12 12
31 July 2021
Interest on lease liabilities 15 15
15 15
Amounts recognised in statement of cash flows
31 July 2022
Lease payments 229 229
229 229
31 July 2021
Lease payments 271 271
271 271
26. Commitments
At 31 July 2022, the Group had capital commitments amounting to £nil in
respect of orders placed for capital expenditure (2021: £nil).
27. Financial risk management
Overview
This note presents information about the Group's exposure to various kinds of
financial risks, the Group's objectives, policies and processes for measuring
and managing risk, and the Group's management of capital.
The Board has overall responsibility for the establishment and oversight of
the Group's risk management framework. The Executive Directors report
regularly to the Board on Group risk management.
Capital risk management
The Group reviews its forecast capital requirements on a half-yearly basis to
ensure that entities in the Group will be able to continue as a going concern
while maximising the return to stakeholders.
The capital structure of the Group consists of equity attributable to equity
holders of the parent, comprising issued share capital, reserves and retained
earnings as disclosed in notes 19 to 24 and in the Group statement of changes
in equity.
Total equity was £11,804,000 at 31 July 2022 (£19,286,000 at 31 July 2021).
The Group is not subject to externally imposed capital requirements.
Liquidity risk
The Group's approach to managing liquidity is to ensure that, as far as
possible, it will always have sufficient liquidity to meet its liabilities
when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group's reputation.
The Group manages all of its external bank relationships centrally in
accordance with defined treasury policies. The policies include the minimum
acceptable credit rating of relationship banks and financial transaction
authority limits. Any material change to the Group's principal banking
facility requires Board approval. The Group seeks to mitigate the risk of bank
failure by ensuring that it maintains relationships with a number of
investment grade banks.
At the reporting date the Group was cash positive with no outstanding
borrowings.
Categorisation of financial instruments
Loans and receivables Financial liabilities at amortised cost
Group
Company
Financial assets/(liabilities) £000 £000 £000 £000
31 July 2022
Trade receivables 2,524 - 2,524 -
Inter-company loan to subsidiary - - - 56,798
Cash, cash equivalents and deposits 5,079 - 5,079 -
Trade and other payables* - (1,128) (1,128) -
Lease liabilities - (729) (729) -
7,603 (1,857) 5,746 56,798
31 July 2021
Trade receivables 21 - 21 -
Inter-company loan to subsidiary - - - 56,460
Cash, cash equivalents and deposits 17,103 - 17,103 -
Trade and other payables* - (599) (599) -
Lease liabilities - (404) (404) -
17,124 (1,003) 16,121 56,460
*Excluding accruals and deferred revenue.
The values disclosed in the above table are carrying values. The Board
considers that the carrying amount of financial assets and liabilities
approximates to their fair value.
The main risks arising from the Group's financial instruments are credit risk
and foreign currency risk. The Board of Directors reviews and agrees policies
for managing each of these risks which are summarised below.
Credit risk
The Group's principal financial assets are cash, cash equivalents and
deposits. The Group seeks to limit the level of credit risk on the cash
balances by only depositing surplus liquid funds with multiple counterparty
banks that have investment grade credit ratings.
The Group trades only with recognised, creditworthy third parties. Receivable
balances are monitored on an ongoing basis with the result that the Group's
exposure to bad debts is not significant. The Group's maximum exposure is the
carrying amount of trade receivables as disclosed in note 14, which was
neither past due nor impaired. All trade receivables are ultimately overseen
by the Chief Executive Officer and are managed on a day-to-day basis by the
finance team. Credit limits are set as deemed appropriate for the customer.
The maximum exposure to credit risk in relation to cash, cash equivalents and
deposits is the carrying value at the balance sheet date.
Foreign currency risk
The Group is exposed to currency risk on sales and purchases that are
denominated in a currency other than the respective functional currency of the
Company and its subsidiaries. Other than Pounds Sterling (GBP), the currencies
that sales and purchases most often arise in are US Dollars (USD) and Euros
(EUR). Transactions in other foreign currencies are limited.
The Group may use forward exchange contracts as an economic hedge against
currency risk, where cash flow can be judged with reasonable certainty.
Foreign exchange swaps and options may be used to hedge foreign currency
receipts in the event that the timing of the receipt is less certain.
There were no open forward contracts as at 31 July 2022 or at 31 July 2021 and
the Group did not enter into any such contracts during 2022 or 2021.
The split of Group assets between Sterling and other currencies at the
year-end is analysed as follows:
GBP USD EUR 2022 Total GBP USD EUR 2021 Total
The Group £000 £000 £000 £000 £000 £000 £000 £000
Cash, cash equivalents and deposits 764 75 4,240 5,079 11,094 35 5,974 17,103
Trade receivables 5 - 2,519 2,524 21 - - 21
Trade payables (905) (162) (61) (1,128) (494) (80) (25) (599)
(136) (87) 6,697 6,474 10,621 (45) 5,949 16,525
Sensitivity analysis to movement in exchange rates
A reasonably possible strengthening (weakening) of the Euro or US Dollar
against Sterling at 31 July would have affected the measurement of financial
instruments denominated in a foreign currency and affected equity and profit
or loss by the amounts shown below. This analysis assumes that all other
variables, in particular interest rates, remain constant and ignores any
impact of forecast sales and purchases.
Profit or loss Equity
Strengthening Weakening Strengthening Weakening
£000 £000 £000 £000
31 July 2022
EUR (10% movement) 744 (601) 744 (601)
USD (10% movement) (10) 8 (10) 8
31 July 2021
EUR (5% movement) 313 (283) 313 (283)
USD (5% movement) (2) 2 (2) 2
Interest rate risk
As the Group has no borrowings the risk is limited to the reduction of
interest received on cash surpluses held at bank which receive a floating rate
of interest. The principal impact to the Group is the result of
interest-bearing cash and cash equivalent balances held as set out below:
31 July 2022 31 July 2021
Fixed rate Floating rate Total Fixed rate Floating rate Total
The Group £000 £000 £000 £000 £000 £000
Cash, cash equivalents and deposits - 5,079 5,079 - 17,103 17,103
The Company
Cash, cash equivalents and deposits - - - - - -
As the majority of cash and cash equivalents are held on floating deposit and
the overall level of interest rates is low, the exposure to interest rate
movements is immaterial.
Maturity profile
Set out below is the maturity profile of the Group's financial liabilities at
31 July 2022 based on contractual undiscounted payments including contractual
interest.
Less than One to five Total
one year years
2022 £000 £000 £000
Financial liabilities
Trade and other payables * 1,128 - 1,128
Lease liabilities 305 424 729
1,433 424 1,857
2021
Financial liabilities
Trade and other payables* 599 - 599
Lease liabilities 217 187 404
816 187 1,003
*Excluding accruals and deferred revenue. Trade and other payables are due
within three months.
The Directors consider that the carrying amount of the financial liabilities
approximates to their fair value.
As all financial assets are expected to mature within the next 12 months an
aged analysis of financial assets has not been presented.
28. Related party transactions
During the year there were no subscriptions by Directors for ordinary shares
(2021: no subscriptions).
During the year, shareholder Aquarius Equity Partners Limited charged the
Group £nil (2021: £11,588) for monitoring fees and was owed £nil at 31 July
2022 (2021: £nil).
During the year, The Aquarius IV Fund LLP, a fund managed by shareholder
Aquarius Equity Partners Limited, held 2,025,000 deferred shares of £1 each
(2021: £2,025,000).
The Group
There were no sales to, purchases from or, at the year end, balances with any
related party.
The Company
C4X Discovery Holdings plc holds loans due > 1 year from its subsidiary
undertaking C4X Discovery Limited of £56.8 million (2021: £56.5m). No
repayments have been made in the year (2021: none).
There are no formal terms of repayment in place for these loans and it has
been confirmed by the Directors that the long-term loans will not be recalled
within the next 12 months.
None of the loans are interest bearing.
There are no short term loans owed to C4X Discovery Holdings plc (2021: none).
29. Compensation of key management personnel (including Directors)
2022 2021
£000 £000
Short-term employee benefits 1,331 1,476
Pension costs 165 151
Benefits in kind 3 2
Share-based payments 128 112
1,627 1,741
30. Post Balance Sheet Events
On 16(th) August 2022, the Company raised £5.7m before expenses via a placing
of 22,781,200 ordinary shares at 25 pence each.
Following the issue of these shares, the Company's ordinary share capital
increased to 252,013,172 ordinary shares.
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. END FR TIBTTMTMBTMTRecent news on C4X Discovery Holdings
See all newsREG - AIM C4X Discovery - Cancellation - C4X Discovery Holdings plc
AnnouncementREG - C4X Discovery - Last day of dealings and update on cancellation
AnnouncementREG - C4X Discovery - Holding(s) in Company
AnnouncementREG - FTSE Russell C4X Discovery - C4X Discovery Holdings
AnnouncementREG - C4X Discovery - Result of General Meeting
Announcement