TIDMC4XD
RNS Number : 3589V
C4X Discovery Holdings PLC
13 December 2021
This announcement contains inside information
C4X Discovery Holdings plc
("C4XD", "C4X Discovery" or the "Company")
Full Year Results
A strong year positions C4XD portfolio for advancement and
expansion in 2022
13 December 2021 - C4X Discovery Holdings plc (AIM: C4XD), a
pioneering Drug Discovery company, today announces its full year
audited results for the year ended 31 July 2021.
Dr Clive Dix, CEO of C4X Discovery, said: "2021 has been a
tremendous year of progress for C4XD across our entire portfolio,
culminating in the signing of our second major licensing deal with
a global pharma company. The EUR414 million agreement with Sanofi
for our IL-17A oral inhibitor programme further demonstrates the
value of our Drug Discovery expertise and business model of driving
shareholder value through early-stage revenue generating deals.
There is also significant partnering interest in NRF2.
I would like to take this opportunity to thank Craig Fox and
Harry Finch for their hard work and commitment throughout their
tenure with us, and I welcome two new Board members, Simon Harford
and Dr Mario Polywka to the Company. As we approach 2022 , the
successful GBP15 million financing in autumn 2020, along with a
roadmap of potential cash milestones over the next 24 months,
allows us to advance and broaden our portfolio as we look to build
long-term value for shareholders."
Operational Highlights (including post-period events)
-- Exclusive worldwide licensing agreement with Sanofi for
C4XD's IL-17A oral inhibitor programme worth up to EUR414 million
including:
-- EUR7 million upfront
-- EUR407 million in potential development, regulatory and
commercialisation milestones, of which EUR11 million is in
pre-clinical milestones
-- Potential for single-digit royalties
-- Indivior's Phase 1 with C4X_3256 progressing. Single
ascending dose study in healthy volunteers successfully completed
in April 2021 and preparation for multiple ascending dose study
underway in parallel with the conduct of an FDA requested
additional 28-day toxicology study due to toxicological findings
observed with a competitor molecule
-- NRF2 pre-candidate nomination and preliminary safety studies
continue, and poster presented at the virtual European Crohn's and
Colitis Organisation (ECCO) conference showing efficacy in a
disease model
-- <ALPHA>4<BETA>7 integrin inhibitor programme for
the treatment of inflammatory bowel disease ("IBD") generated
multiple chemical series showing significant selectivity vs
<ALPHA>4<BETA>1 in vitro and oral bioavailability in PK
studies. In vivo investigation of functional inhibition following
oral dosing is underway
-- C4XD has now taken on the leadership of the MALT-1 programme
from LifeArc to drive it towards the later stages of drug discovery
and deliver a commercial deal - three novel series identified, in
vivo studies initiated
-- Screening of Taxonomy3(R)-identified novel genes for
Parkinson's disease recently completed by collaboration partner
Phoremost with validation underway. Analysis of Ulcerative Colitis
genetic dataset recently completed and evaluation of identified
novel genes being formulated
-- Collaboration with GEN-COVID Consortium to investigate the
role genetics plays in the susceptibility, severity and prognosis
between different individuals with COVID-19 completed
-- Conformetrix technology patent was granted in the USA
-- Board changes with appointment of Simon Harford and Dr Mario
Polywka as Non-Executive Directors and resignation of Craig Fox as
Chief Scientific Officer and Dr Harry Finch as Non-Executive
Director
Financial Highlights
-- Revenue was GBP5.6 million (2020: GBPnil)
-- Total loss after tax of GBP3.8 million or 1.96 pence per
share (2020: GBP7.8m or 8.10 pence per share)
-- R&D expenses increased by 20% to GBP8.3 million (2020:
GBP6.9m), reflecting focused investment in key Drug Discovery
programmes
-- Net assets of GBP19.3 million (2020: GBP8.1m)
-- Successful GBP15.0 million fundraise (before expenses) with a
total of 107,142,858 Placing Shares and 99,169,286 Warrants issued
to new and existing shareholders
-- Net cash as at 31 July 2021: GBP17.1 million (31 July 2020: GBP5.6m)
Analyst conference call today
Dr Clive Dix, Chief Executive Officer, and members of the
management team will host a webcast for analysts at 10am GMT today.
A copy of the final results presentation will be released later
this morning on the Company website at www.c4xdiscovery.com .
Please contact Consilium Strategic Communications for details on
C4XDiscovery@consilium-comms.com / +44 203 709 5700.
The Annual Report will be sent to shareholders prior to the
Annual General Meeting on 18 January 2022 and will be made
available on the Company's website at that time.
- Ends -
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,
neurodegeneration, oncology 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 two 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 more information visit
us at www.c4xdiscovery.com or follow us on twitter
@C4XDiscovery.
Chairman's Statement
Expanding our portfolio and collaborator network
"Entering into our small molecule IL-17A collaboration is a
major milestone for C4X Discovery and we are delighted to be
working with Sanofi to create an oral, convenient therapy."
We generated considerable momentum during the financial year
ended 31 July 2021, expanding and advancing our proprietary
portfolio of pre-clinical programmes and entering into our second
significant collaboration. Our new collaboration with Sanofi around
our oral IL-17A programme, not only validates the strength of our
portfolio but also our strategy to drive shareholder value through
early-stage revenue generating deals. The deal marks a major
milestone for C4X Discovery.
It is our belief that our IL-17A small molecule programme has
the potential to create a high value, efficacious and convenient,
oral IL-17A therapeutic and when combined with Sanofi's development
capabilities, our programme can address additional indications
beyond psoriasis. We are delighted to be working with Sanofi and
look forward to seeing this programme advancing towards the
clinic.
We continue to advance a solid portfolio of novel, pre-clinical,
small molecule programmes applying our cutting-edge Drug Discovery
technologies which are able to deliver high quality, differentiated
drug candidates for development by pharma and biotech. While our
proprietary portfolio is predominantly focused in the area of
inflammation, we are actively pursuing other therapeutic areas
including oncology and neurology. Potential partner discussions are
ongoing across our portfolio so that we can identify the right
opportunities for out-licensing our other lead programmes.
In October 2020, we completed a GBP15 million financing which
was supported by our key existing shareholders as well as new
shareholders. Importantly, this has enabled the Company to
accelerate and broaden our proprietary portfolio of unique assets
to near term inflection points and to strengthen the balance sheet
as partnering discussions and strategic collaborations
progress.
We continue to bring new skills and capabilities to our already
diverse Board. In April, we welcomed Simon Harford as a
Non-Executive Director and Chair of the Audit Committee. Simon has
more than 30 years of financial and investor relations expertise in
global pharmaceutical companies, including GSK and Lilly, and is
currently the CFO at NASDAQ-listed Albireo Pharma. In November, we
welcomed Dr Mario Polywka as Non-Executive Director and successor
to Dr Harry Finch who has announced his retirement from the Board.
Mario brings industry expertise from key leadership and board roles
within the sector including 12 years as COO of Evotec SE. Together,
Simon and Mario's understanding of the global healthcare industry
will be invaluable as we continue to grow C4XD.
We also announced the resignation of Craig Fox, our Chief
Scientific Officer, in November. Craig will remain with C4XD until
the end of March. He has provided excellent guidance and leadership
to the scientific team for six years, and both he and Harry will be
sorely missed. A search is underway for Craig's successor and we
will announce the new appointment in due course.
I would like to thank all of C4XD's employees and our partners
for their dedication, hard work and contributions during the year
and our shareholders for their continued support and belief in our
vision.
Eva-Lotta Allan
Non-Executive Chairman
10 December 2021
CEO Statement
EUR414m agreement with Sanofi demonstrates value and quality of
C4XD portfolio
"This has been a tremendous year of progress across our entire
portfolio, culminating in our second high-value deal with Sanofi.
The GBP15 million raised allows us to advance and broaden our
portfolio as we look to build value for shareholders."
We have made incredibly strong progress this year. In autumn
2020, we raised GBP15 million, and advanced each of our key
programmes, resulting in a EUR414 million licensing agreement with
Sanofi for our IL-17A oral inhibitor programme, demonstrating the
value of C4XD's Drug Discovery expertise and our business model.
The psoriasis market alone is estimated to be worth c.$24 billion
per annum by 2027 (1) , and when combined with Sanofi's development
capabilities, our programme has the potential to address additional
indications beyond psoriasis. With Sanofi now leading this
programme, our team continues to work with them on the earlier Drug
Discovery work and we are excited to see how this programme
develops.
Indivior has also continued to make excellent progress on C4XD's
oral Orexin-1 receptor antagonist C4X_3256, also known as
INDV-2000, for the treatment of addiction, which we out-licensed to
them in 2018 for $294 million. With the Phase 1 single ascending
dose clinical trial completed, preparation for the multiple
ascending dose study is now underway.
Additional important milestones were met during the year and
C4XD is now working to progress the rest of the portfolio including
our NRF2 programme for inflammatory diseases, the
<ALPHA>4<BETA> 7 integrin inhibitor programme for
Inflammatory Bowel Disease ( "IBD" ) and our MALT-1 inhibitor
programme for oncology and inflammation indications, where we have
recently taken the lead in the development programme from LifeArc.
Whilst there is much Drug Discovery work still to be done, we are
reaching a stage where industry players are closely monitoring the
status of each programme.
It will be important over the coming year to assess and augment
our portfolio with the appropriate new target candidates, either
through our own Drug Discovery techniques or potentially through
work with partners. With two programmes now successfully partnered,
a robust but carefully managed financial base and a roadmap of
potential cash milestones over the next 24 months, the Board
believes that C4XD has shown how we can deliver significant value
for shareholders and we anticipate the coming year to continue
apace.
In September we rebranded our website and corporate materials,
resulting in a more contemporary look which we feel reflects the
real us - where we are today, the pioneering scientific work that
we do and the quality of companies that we partner with - a new
image to take us forward in line with our vision.
Post-period, we announced the departure of our CSO, Craig Fox
and retirement of Harry Finch, Non-Executive Director. We thank
them for their hard work, commitment and inspiration, and we wish
them well in their future endeavors. We also welcomed our two new
Non-Executive Directors, Simon Harford and Mario Polywka, who bring
valuable expertise which will be critical as we look to expand our
portfolio and expedite new deals.
On behalf of the Board, I would like to thank our incredibly
hard-working employees. They have advanced key programmes across
our portfolio and without their commitment, we would not be where
we are today. I am proud to be working with such talented
people.
Portfolio Review
Two partnered products with strong pipeline of Drug Discovery
programmes
C4XD saw progress across its drug discovery portfolio, with a
number of programmes making significant advances, particularly in
inflammation with the announcement post period of a EUR414 million
exclusive, worldwide out-licensing agreement with Sanofi for our
IL-17A inhibitor programme. Together with advancements in early
innovation projects and partnered collaborations, C4XD continues to
focus on building a sustainable pipeline of potential future
out-licensing opportunities.
Addictive disorders (Orexin-1 Antagonist)
Phase 1 clinical trial progressing
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 has recently completed a Phase I first in human single
ascending dose clinical trial showing encouraging safety and
pharmacokinetics in healthy volunteers. Indivior has been requested
to perform an additional 28-day repeat-dose toxicology study by the
FDA following non-clinical findings from a competitor molecule.
Preparation for the initiation of a multiple ascending dose study
to be conducted by Indivior is underway in parallel. To find out
more information, please follow this link .
Inflammation (NRF2 Activator)
Multiple therapeutic opportunities
The Company 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 anti-oxidant 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.
There is significant partnering interest in this programme based
on a limited number of potent NRF2 activators with described oral
bioavailability. Interest in this therapeutic approach covers
multiple therapeutic areas including Chronic Obstructive Pulmonary
Disease ("COPD"), IBD, Pulmonary Arterial Hypertension ("PAH") and
Sickle Cell Disease ("SCD"). Material Transfer Agreement (MTA)
studies are underway where C4X molecules are examined by potential
partners in their in-house biological assays and models linked to
their preferred disease indication.
The Company recently presented a poster at the virtual ECCO
conference demonstrating efficacy and antioxidant activity in an
IBD model
(https://academic.oup.com/ecco-jcc/article/15/Supplement_1/S174/6286040).
Pre-candidate nomination studies and preliminary safety studies
continue including significant drug substance scale-up to support
longer-term studies.
Inflammation (IL-17A Inhibitor)
Partnered with Sanofi for EUR414 million
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 EUR414 million. The Company has
received an upfront payment of EUR7 million and could receive up to
a further EUR407 million in potential development, regulatory and
commercialisation milestones, of which EUR11 million is in
pre-clinical milestones, in addition to single digit royalties.
Sanofi will take control of the programme but will continue 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)
C4XD has now taken the leadership role in the LifeArc
collaboration
In November 2018, C4XD entered into a risk-share discovery
collaboration with LifeArc(R) , 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. Three
novel series have been identified by harnessing C4XD's Conformetrix
technology and data obtained in 2020 has 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 recently molecules
with good oral PK profiles have been synthesised. These will
shortly be tested in vivo to show equivalent inhibition to that
achieved with JNJ-67856633. C4XD is now taking on leadership of the
MALT-1 programme from LifeArc to drive it towards the later stages
of drug discovery and deliver a commercial deal.
Inflammation (<ALPHA>4<BETA>7 Integrin
Inhibitor)
Significant progress
C4XD' s oral <ALPHA>4<BETA> 7 integrin inhibitor
programme has identified novel, potent and selective
<ALPHA>4<BETA> 7 integrin inhibitors for the treatment
of IBD . In August 2020, the Company announced that significant
progress has been made on C4XD's early oral inhibitor programme
targeting <ALPHA>4<BETA>7 integrin 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. C4XD has identified a second
series of novel, potent and selective inhibitors providing a
further competitive edge for this programme. 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 <ALPHA>4<BETA>7 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. Both
series have demonstrated oral bioavailability in PK studies and
there is particular focus on improving PK properties to achieve a
good oral half-life. A prototype molecule has recently shown a
signal in functionally inhibiting <ALPHA>4<BETA>7
integrin in vivo following oral dosing and this is currently being
repeated to confirm activity. 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 Evaluation Stage Programmes
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.
Updates on these evaluations will be provided in the future once
robust data has been generated exemplifying novel chemical
matter.
Taxonomy3(R)
C4XD continues to progress the validation of its proprietary
Taxonomy3 (R)-derived novel targets for Parkinson's disease (PD),
utilising a diversified strategic approach with internal efforts in
addition to a key collaborative partner, Phoremost. Almost all
genetic variation between patients with and without Parkinson's is
in the non-coding region of DNA where these variants can affect
expression of specific genes in a cell specific manner. 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 in PD, with
studies continuing.
Very recently, screening of 338 PD genes identified by
Taxonomy3(R) using Phoremost's Siteseeker technology has been
completed in a neuroinflammation microglial assay where peptides
targeting a specific subset of these genes have been found to
inhibit the inflammatory signal. Follow-up studies are underway to
provide existing validation to these potential exciting novel
targets.
A new analysis of an ulcerative colitis patient genetic dataset
has recently been completed using Taxonomy3(R) and novel genetic
variants have been identified with investigation into these novel
genes initiated. A subset of these novel genes will be examined in
key phenotypic cells assays relating to IBD.
In August 2020, C4XD announced that it had entered a new
collaboration with the GEN-COVID consortium, a network of more than
20 hospitals in Italy led by Professor Alessandra Renieri of the
University of Siena. The collaboration used the unique mathematical
genetic analysis methodology of Taxonomy3(R) to investigate the
role genetics plays in the widely varied disease susceptibility,
severity and prognosis observed between individuals with COVID-19.
In contrast to other public domain genetic analysis, the GEN-COVID
study enabled the comparison of moderate to severe COVID-19
patients, removing any genetic influence on the propensity to be
infected with COVID-19. Following completion of the analysis,
whilst Taxonomy3(R) was able to separate moderate and severe
patients based on the overall genetic signature (suggesting there
is a genetic as well as environmental influence on disease
severity), none of the individual genes had a signal that was
statistically significant.
Outlook and summary
Following the EUR414 million agreement with Sanofi for our
IL-17A oral Inhibitor programme, C4XD is focused on driving forward
its portfolio towards future out-licensing opportunities, including
NRF-2 where there is significant partnering interest. Over the next
12-24 months we will look to advance and augment our portfolio to
deliver the next generation of high value, commercially attractive
candidates to secure strategic collaborations with high quality
partners and deliver value for our shareholders.
Clive Dix
Chief Executive Officer
10 December 2021
1. Plaque Psoriasis: Global Drug Forecast and Market Analysis to 2027, GlobalData, December 2018
Financial Review
Continued support from shareholders
"We thank our shareholders for their continued support. The
partnership with Sanofi demonstrates our ability to deliver
shareholder value and with a sound financial base, we are focused
on driving forward our portfolio of proprietary assets to future
out-licensing opportunities."
Revenue for the 12 months ended 31 July 2021 was GBP5.6 million
(2020: GBPnil). The revenue recognised in the current year is part
of the EUR7 million upfront payment from Sanofi on the signing of
the IL-17A licence agreement.
R&D expenses, which comprise invoiced material costs,
payroll costs and software costs, have increased by 20% to GBP8.3
million for the year ended 31 July 2021 (2020: GBP6.9m). This
reflects focused investment in key Drug Discovery programmes as
outlined in the Non-Executive Chairman's and CEO's Statements.
Administrative expenses increased during the year to GBP3.2
million (2020: GBP2.7m) as a result of the continued investment in
people and infrastructure.
This year the R&D income tax credit receivable is GBP2.1m
(2020: GBP1.8m) 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 2021 was GBP3.8
million (2020: GBP7.8m). This equates to a basic loss per share of
1.96 pence per share (2020: 8.10 pence per share) and diluted loss
per share of 1.82 pence per share (2020: 8.10 pence per share)
A successful fundraise in November 2020 saw the Group raise
GBP15.0 million (before expenses) 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 Group had net assets at 31 July 2021 of GBP19.3 million
(2020: GBP8.1m) and cash and cash equivalents of GBP17.1 million
(2020: GBP5.6m).
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 2021 of GBP5.9 million (2020: GBP9.6m), revenues of
GBP5.6 million (2020: GBPnil) and net cash used in operating
activities of GBP3.1 million (2020: GBP5.1m). The Directors
consider this to be appropriate for the following reasons:
The Board has prepared cash flow forecasts for the period to 31
July 2023, being 21 months from the date of signing the financial
statements, including consideration of severe but plausible
downside scenarios which takes into account the delayed receipt of
forecast R&D tax credits from HMRC and the impact of price
increases from its suppliers.
In the event that a cash shortfall arises in the forecast
period, the Board consider 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
10 December 2021
Consolidated statement of comprehensive income
for the year ended 31 July 2021
Notes 2021 2020
GBP000 GBP000
------------------------------------------- ------ -------- --------
Revenue 4 5,642 -
Cost of sales (90) -
------------------------------------------- ------ -------- --------
Gross profit 5,552 -
Research and development expenses (8,263) (6,858)
Administrative expenses (3,182) (2,708)
Operating loss 5 (5,893) (9,566)
------------------------------------------- ------ -------- --------
Finance income 7 1 5
Finance costs 7 (15) (18)
Loss before taxation (5,907) (9,579)
Taxation 8 2,063 1,790
------------------------------------------- ------ -------- --------
Loss for the year and total comprehensive
loss for the year (3,844) (7,789)
------------------------------------------- ------ -------- --------
Loss per share
Basic loss for the year 9 (1.96)p (8.10)p
Diluted loss for the year 9 (1.82)p (8.10)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
(2020: GBPnil) 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 2021
Share-
Issued based Capital
equity Share Warrant payment Merger contribution Revenue
capital premium Reserve reserve reserve reserve reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- -------- --------- -------- -------- -------- ------------- --------- --------
At 31 July 2019 2,602 32,256 - 736 920 195 (29,724) 6,985
------------------- -------- --------- -------- -------- -------- ------------- --------- --------
Loss for the
year and total
comprehensive
loss for the
year - - - - - - (7,789) (7,789)
------------------- -------- --------- -------- -------- -------- ------------- --------- --------
Issue of share
capital 614 8,598 - - - - - 9,212
Expenses of
placing - (547) - - - - - (547)
Share-based
payments - - - 206 - - - 206
------------------- -------- --------- -------- -------- -------- ------------- --------- --------
Transactions
with owners 614 8,051 - 206 - - - 8,871
------------------- -------- --------- -------- -------- -------- ------------- --------- --------
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
------------------- -------- --------- -------- -------- -------- ------------- --------- --------
Company statement of changes in equity
for the year ended 31 July 2021
Share-
Issued based
equity Share Warrant payment Revenue
capital premium Reserve reserve reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- -------- -------- -------- -------- ---------- ---------
At 31 July 2019 2,602 32,256 - 707 (32,987) 2,578
----------------------- -------- -------- -------- -------- ---------- ---------
Profit for the
year and total
comprehensive profit
for the year - - - - 24,752 24,752
----------------------- -------- -------- -------- -------- ---------- ---------
Issue of share
capital 614 8,598 - - - 9,211
Expenses of placing -- (547) - - - (547)
Share-based payments - - - 206 - 206
----------------------- -------- -------- -------- -------- ---------- ---------
Transactions with
owners 614 8,051 - 206 - 8,871
----------------------- -------- -------- -------- -------- ---------- ---------
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
----------------------- -------- -------- -------- -------- ---------- ---------
Statements of financial position
at 31 July 2021
31 July 31 July 31 July 31 July
2021 2021 2020 2020
Group Company Group Company
Notes GBP000 GBP000 GBP000 GBP000
------------------------------ ------ --------- -------- --------- ---------
Assets
Non-current assets
Tangible Fixed Assets 10 33 - 46 -
Right of Use Assets 10 377 - 378 -
Intangible assets 11 69 - 157 -
Goodwill 12 1,192 - 1,192 -
Investments in and loans to
subsidiaries 13 - 59,493 - 36,200
1,671 59,493 1,773 36,200
------------------------------ ------ --------- -------- --------- ---------
Current assets
Trade and other receivables 14 574 6 438 -
Income tax asset 15 2,053 - 1,780 -
Cash and cash equivalents 16 17,103 - 5,648 -
------------------------------ ------ --------- -------- --------- ---------
19,730 6 7,866 -
------------------------------ ------ --------- -------- --------- ---------
Total assets 21,401 59,499 9,639 36,200
------------------------------ ------ --------- -------- --------- ---------
Liabilities
Current liabilities
Trade and other liabilities 17 1,647 - 1,166 -
Lease liabilities 18 217 - 189 -
------------------------------ ------ --------- -------- --------- ---------
1,864 - 1,355 -
------------------------------ ------ --------- -------- --------- ---------
Non-Current liabilities
------------------------------ ------ --------- -------- --------- ---------
Trade and other liabilities 17 64 - - -
Lease liabilities 18 187 - 218 -
------------------------------ ------ --------- -------- --------- ---------
251 - 218 -
------------------------------ ------ --------- -------- --------- ---------
Total liabilities 2,115 - 1,573 -
------------------------------ ------ --------- -------- --------- ---------
Net assets 19,286 59,499 8,066 36,200
------------------------------ ------ --------- -------- --------- ---------
Capital and reserves
Issued equity capital 19 4,302 4,302 3,216 3,216
Share premium 19 53,043 53,043 40,306 40,306
Share-based payment reserve 20 1,191 1,162 942 913
Warrant reserve 21 979 979 - -
Merger reserve 22 920 - 920 -
Capital contribution reserve 23 195 - 195 -
Retained earnings 24 (41,344) 13 (37,513) (8,235)
------------------------------ ------ --------- -------- --------- ---------
Total equity 19,286 59,499 8,066 36,200
------------------------------ ------ --------- -------- --------- ---------
Cash flow statements
For the year ended 31 July 2021
31 July 31 July 31 July 31 July
2021 2021 2020 2020
Group Company Group Company
Notes GBP000 GBP000 GBP000 GBP000
---------------------------------------- ------ --------- --------- --------- ---------
(Loss)/Profit after interest
and tax (3,844) 8,235 (7,789) 24,752
Adjustments for:
Depreciation of tangible fixed
assets 10 33 - 45 -
Depreciation of right-of-use
assets 10 254 - 302 -
Amortisation of intangible assets 11 88 - 138 -
Reversal of impairment of investments
in and loans to subsidiaries - (8,235) - (24,752)
Share-based payments 19 249 - 206 -
Finance income 7 (1) - (5) -
Interest payments on leases 24 15 - 18 -
Taxation (2,063) - (1,790) -
Changes in working capital:
(Increase)/decrease in trade
and other receivables 14 (136) - 203 -
Increase/(decrease) in trade
and other payables 17 545 - (486) -
Cash outflow from operating
activities (4,860) - (9,158) -
Research and development tax
credit received 1,790 - 4,086 -
Net cash outflow from operating
activities (3,070) (5,072)
---------------------------------------- ------ --------- --------- --------- ---------
Cash flows from investing activities
Increase in investment in and
loans to subsidiaries - (14,815) - (8,664)
Purchases of tangible fixed
assets 10 (20) - (14) -
Finance income 7 1 - 5 -
Net cash outflow from investing
activities (19) (14,815) (9) (8,664)
---------------------------------------- ------ --------- --------- --------- ---------
Cash flows from financing activities
Payment of lease liabilities 24 (271) - (319) -
Proceeds from issues of ordinary
share capital 19 15,366 15,366 9,212 9,211
Expenses of share capital issue 19 (551) (551) (547) (547)
Net cash inflow from financing
activities 14,544 14,815 8,346 8,664
---------------------------------------- ------ --------- --------- --------- ---------
Decrease in cash and cash equivalents 11,455 - 3,265 -
Cash and cash equivalents at
the start of the year 5,648 - 2,383 -
---------------------------------------- ------ --------- --------- --------- ---------
Cash and cash equivalents at
the end of the year 17,103 - 5,648 -
Cash , cash equivalents and
deposits at the end of the year 16 17,103 - 5,648 -
---------------------------------------- ------ --------- --------- --------- ---------
Approved by the Board and authorised for issue on 10 December
2021
Clive Dix
Chief Executive Officer
10 December 2021
Registered number: 09134041
Notes to the financial statements
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.
These Group financial statements consolidate those of the
Company and its subsidiaries (together referred to as the "Group"
and individually as "Group entities") for the year ended 31 July
2021.
The financial statements of the Company and the Group for the
year ended 31 July 2021 were authorised for issue by the Board of
Directors on XX December 2021 and the statement of financial
position was signed on the Board's behalf by Clive Dix.
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 GBP8,235,000 for the year ended 31 July 2021 (2020: profit of
GBP24,752,000) see note 13. The profit in its entirety for the
current and prior years was as a result of the reversal of past
impairments of the Company's investment in its subsidiary.
The significant accounting policies adopted by the Group are set
out in note 3.
2. Basis of preparation
Statement of accounting compliance
The Group's and parent company's financial statements have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 "Adopted
IFRS" as they apply to the financial statements of the Group for
the period ended 31 July 2021.
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 2021 of GBP5.9 million (2020: GBP9.6m), revenues of GBP5.6
million (2020: GBPnil) and net cash used in operating activities of
GBP3.1 million (2020: GBP5.1m), 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 GBP14.5 million fundraising with new and
existing investors in November 2020. The Group also signed a
licence deal in April 2021 with Sanofi for its intellectual
property rights relating to the IL-17A inhibitor compounds, where
GBP6 million was received in an upfront payment. The Group has cash
and cash equivalents at 31 July 2021 of GBP17.1 million (2020:
GBP5.6m) and at 30 November 2021 had cash resources of GBP13.4
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 the anticipated impact of COVID-19 and inflationary
costs.
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. The base case and severe but
plausible downside cash flow forecasts, which both assume no
further fund raising and no revenue generation 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.
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.
In terms of the period beyond the going concern assessment
period, the severe but plausible downside scenario, indicates that
existing cash resources would be exhausted in approximately quarter
one 2023. However, the Board consider they are able to take
reasonable mitigating actions, 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 for a significantly
extended period.
The Board have a reasonable expectation they will be able to
raise further equity or debt financing to support their ongoing
research activities if required. The Board also have a reasonable
expectation that another licencing deal will be signed and that a
further milestone payment on the Orexin-1 contract will be achieved
within the forecast period, although there can be no guarantees
that either of these events will occur, and they are not reflected
in the Board's base case or sensitised cash flow forecasts.
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.
This includes making certain judgements when determining the
appropriate accounting treatment of key customer contract terms in
accordance with the applicable accounting standards. During the
period, C4X signed an agreement with Sanofi 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 GBP0.5 million of revenue
being spread over an 18 month period from the date of signing the
deal. The alternative judgement could be that the transfer of
intellectual property and the delivery of research services is one
performance obligation which would result in the upfront payment of
GBP6 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 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
impact of this judgement resulted in recognising revenue in full of
GBP5.5 million in the period, 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
GBP2.75 million into next 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 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 GBP0.5m 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.
-- Intangible fixed assets and goodwill
The Group tests annually whether goodwill has suffered any
impairment. The Group also tests other intangible assets for
impairment when indicators of impairment arise. The potential
recoverable amounts of intangible fixed assets and goodwill have
been determined based on a fair value less cost of disposal, this
has been calculated with reference to market capitalisation of the
Group (as explained in Note 12).
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 2021
-- Investments in and loans to subsidiaries
L oans 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 is the probability assumptions of
the future cashflows and the timing of the cashflows. The
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 has been determined to be GBP3 million. 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 the timing of signing future licence
agreements and the receipt of further milestone licence payments.
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
licenses 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
year - that generate revenue and meet the scope of IFRS 15. After
review of the contract with Sanofi, it was determined that there
were two performance obligations to be satisfied, the first 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 may include
promises to deliver other goods or services in addition to the
promised licence.
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 GBP0.5m of revenue being spread over the
length of the research work programme.
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 GBP5.6m which is the remainder of the
upfront payment received in the 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.
Royalty payments will be received by the Group when the drug is
marketed and sold by Sanofi. Revenue on royalty payments is
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.
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.
Government grants
Government grants are recognised when it is reasonable to expect
that the grants will be received and that all related conditions
are met, usually on submission of a valid claim for payment.
Government grants of a revenue nature are deducted from research
and development expenses in the consolidated statement of
comprehensive income in line with the terms of the underlying grant
agreement.
Government grants relating to capital expenditure are deducted
in arriving at the carrying amount of the asset.
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 GBP1,000 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
GBP10,462 for the year (2020: nil).
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 - straight-line over three years
and fittings
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 assets recoverable amount is the higher of an assets or
cash-generating units 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 2021 (2020: GBPnil).
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 (2020: GBPnil).
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 (2020: GBPnil).
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 2021 or ending 31
July 2022 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
----------------------------------------------- ------------------
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 1 January 2021
4 and IFRS16 : Interest Rate Benchmark Reform
- Phase 2
----------------------------------------------- ------------------
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
2021 2020
GBP000 GBP000
------------------------------------------ ------- -------
Revenue recognised at a point in time
* Right-to-use licence revenue 5,540 -
Revenue recognised over time
* Research services revenue 102 -
------------------------------------------ ------- -------
Total revenue 5,642 -
------------------------------------------ ------- -------
Revenue in the current year is generated from a contract with a
single customer which was determined to have two performance
obligations. The revenue attributable to the transfer of
intellectual property has been 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.
Contract balances
Receivable balances in respect of contracts with customers are
as follows:
2021 2020
GBP000 GBP000
------------------- ------- -------
Trade receivables - -
------------------- ------- -------
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.
2021 2020
GBP000 GBP000
------------------------------- ------- -------
Deferred revenue - short term 330 -
Deferred revenue - long term 64 -
------------------------------- ------- -------
Total deferred revenue 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 July 2021 was
GBP394,000. 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.
Greater
Less than than 1
1 year year Total
GBP000 GBP000 GBP000
----------------------------------- ------------ -------- --------
Remaining performance obligations 330 64 394
----------------------------------- ------------ -------- --------
Impairment losses recognised on receivables arising from
contracts with customers are GBPnil (2020: GBPnil).
Typical payment terms are 60 days after the occurrence of the
relevant milestone.
5. Operating loss
31 July 31 July
2021 2020
The Group GBP000 GBP000
------------------------------------------------------ -------- --------
Operating loss is stated after charging/(crediting):
Depreciation of property, plant and
equipment (see note 10) 33 45
Depreciation on right-of-use assets
(see note 10) 254 302
Amortisation of intangible assets (see
note 11) 88 138
Research and development expense* 8,263 6,858
Grant income - (34)
Auditor's remuneration
Audit services:
-Fees payable to Company auditor for
the audit of the parent and the consolidated
accounts 90 52
Fees payable in respect of the audit
of subsidiary companies:
-Auditing the accounts of subsidiaries
pursuant to legislation 30 26
-Other services 36 22
------------------------------------------------------ -------- --------
Total auditor's remuneration 156 100
------------------------------------------------------ -------- --------
*Included within research and development expense are staff
costs totalling GBP2,951,000 (2020: GBP2,335,000) also included in
note 6.
6. Staff costs and numbers
31 July 31 July
2021 2020
GBP000 GBP000
------------------------------------------------------ -------- --------
Wages and salaries 3,551 2,725
Social security costs 409 304
Pension contributions 442 428
Share-based payments 249 206
------------------------------------------------------ -------- --------
4,651 3,665
------------------------------------------------------ -------- --------
Directors' remuneration (including benefits-in-kind)
included in the aggregate remuneration
above comprised:
Emoluments for qualifying services 745 620
------------------------------------------------------ -------- --------
Directors' emoluments (excluding social security costs but
including benefits in kind) disclosed above include GBP195,000 paid
to the highest paid Director (2020: GBP162,000).
Retirement benefits are accruing to four Directors (2020: four
Directors).
The average number of employees during the year (including
Directors) was as follows:
31 July 31 July
2021 2020
The Group Number Number
---------------------- -------- --------
Directors 7 7
Technological staff 32 32
Administrative staff 7 7
46 46
---------------------- -------- --------
Additional information on the emoluments and compensation,
including cash or non-cash benefits, of the Directors, together
with information regarding the share options of the Directors, and
details of contributions paid to a pension scheme on their behalf,
is included within Tables 1 and 2 on page 36, which forms part of
these audited financial statements.
7. Finance income and costs
31 July 31 July
2021 2020
The Group GBP000 GBP000
------------------------------- -------- --------
Finance income
Bank interest receivable 1 5
------------------------------- -------- --------
1 5
------------------------------- -------- --------
Finance costs
Interest on lease liabilities 15 18
------------------------------- -------- --------
15 18
------------------------------- -------- --------
8. Income tax
The tax credit is made up as follows:
31 July 31 July
2021 2020
The Group GBP000 GBP000
---------------------------------------------------- -------- --------
Current income tax
UK corporation tax on losses in the year
Research and development income tax credit
receivable (2,053) (1,780)
Adjustment in respect of prior years (10) (10)
Total current income tax (2,063) (1,790)
---------------------------------------------------- -------- --------
The tax assessed for the year varies from 31 July 31 July
the standard rate of corporation tax as explained 2021 2020
below:
The Group GBP000 GBP000
---------------------------------------------------- -------- --------
Loss before taxation (5,907) (9,459)
---------------------------------------------------- -------- --------
Tax at standard rate of 25.00% (2020: 19.00%) (1,477) (1,797)
Effects of:
Expenses not deductible for tax purposes - 1
Movement in unprovided net deferred tax asset 86 69
Research and development tax credit receivable,
net of R&D relief surrendered (662) (760)
Share options exercised (CTA 2009 Pt 12 deduction) - -
Tax losses carried forward/(utilised) for
which no deferred tax asset is recognised - 707
Adjustment in respect of prior years (10) (10)
---------------------------------------------------- -------- --------
Tax credit in income statement (2,063) (1,790)
---------------------------------------------------- -------- --------
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% (2020: 19%), is
GBP4,331,000 (2020: GBP3,265,000), of which GBPnil (2020: GBPnil)
has been recognised. Tax losses have not been recognised as an
asset as it is not 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% (2020: 19%) is GBP9,000 (2020: GBP24,000).
The Group has a deferred tax asset for share-based payments, for
which the tax, measured at a standard rate of 25% (2020: 19%), is
GBP298,000 (2020: GBP179,000).
The net deferred tax asset of GBP289,000 (2020: GBP155,000) has
not been recognised.
9. Earnings per share
31 July 31 July
2021 2020
The Group GBP000 GBP000
---------- -------- --------
Loss for the financial year attributable to
equity shareholders (3,844) (7,790)
-------------------------------------------------- ------------ -----------
Weighted average number of shares
Ordinary shares in issue for purposes of basic
EPS 196,261,295 96,123,309
Effect of potentially dilutive ordinary shares:
Number of exercisable share options and warrants 14,531,129 -
Ordinary share in issue for purposes of diluted 210,792,424 -
EPS
-------------------------------------------------- ------------ -----------
Basic loss per share (pence) (1.96) (8.10)
-------------------------------------------------- ------------ -----------
Diluted loss per share (pence) (1.82) (8.10)
-------------------------------------------------- ------------ -----------
The exercisable share options and warrants are deemed to be
dilutive in nature where their exercise price is less than the
average share price for the period.
10. Tangible fixed assets
Office
equipment, Right-of-use
fixtures Building assets
and fittings improvements Total
The Group GBP000 GBP000 GBP000 GBP000
Cost
----------------------------- -------- -------------- -------------- --------------- ---------
At 31 July 2019 236 38 - 274
--------------------------------------- -------------- -------------- --------------- ---------
Recognition of right-of-use
assets - - 432 730
--------------------------------------- -------------- -------------- --------------- ---------
Adjusted balance at 31
July 2019 236 38 432 706
--------------------------------------- -------------- -------------- --------------- -------
Additions 13 - 248 261
Disposals - - (137) (137)
--------------------------------------- -------------- -------------- --------------- ---------
At 31 July 2020 249 38 543 830
--------------------------------------- -------------- -------------- --------------- ---------
Additions 20 - 253 273
Disposals (17) - (248) (265)
--------------------------------------- -------------- -------------- --------------- ---------
At 31 July 2021 252 38 548 838
--------------------------------------- -------------- -------------- --------------- ---------
Depreciation
----------------------------- -------- -------------- -------------- --------------- ---------
At 31 July 2019 163 33 - 196
--------------------------------------- -------------- -------------- --------------- ---------
Recognition of right-of-use -
assets - - -
Adjusted balance at 31
July 2019 163 33 - 196
--------------------------------------- -------------- -------------- --------------- ---------
Provided during the year 40 5 302 347
Eliminated on disposal - - (137) (137)
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
--------------------------------------- -------------- -------------- --------------- ---------
Net book value
At 31 July 2021 33 - 377 410
--------------------------------------- -------------- -------------- --------------- ---------
At 31 July 2020 46 - 378 424
--------------------------------------- -------------- -------------- --------------- ---------
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 GBP000 GBP000 GBP000 GBP000
Cost
-------------------------- -------- ---------- --------- -------
At 31 July 2019 138 600 50 788
Additions - - - -
-------------------------- -------- ---------- --------- -------
At 31 July 2020 138 600 50 788
-------------------------- -------- ---------- --------- -------
Additions - - - -
At 31 July 2021 138 600 50 788
-------------------------- -------- ---------- --------- -------
Amortisation
At 31 July 2019 53 410 30 493
Provided during the year 8 120 10 138
-------------------------- -------- ---------- --------- -------
At 31 July 2020 61 530 40 631
-------------------------- -------- ---------- --------- -------
Provided during the year 8 70 10 88
-------------------------- -------- ---------- --------- -------
At 31 July 2021 69 600 50 719
-------------------------- -------- ---------- --------- -------
Net book value
At 31 July 2021 69 - - 69
-------------------------- -------- ---------- --------- -------
At 31 July 2020 77 70 10 157
-------------------------- -------- ---------- --------- -------
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 GBP000 GBP000
Cost
-------------------------- ------------------- --------
At 31 July 2019, 31 July
2020 & 31 July 2021 1,192 1,192
-------------------------- ------------------- --------
Impairment
At 31 July 2019 - -
Provided during the year - -
-------------------------- ------------------- --------
At 31 July 2020 - -
Provided during the year - -
-------------------------- ------------------- --------
At 31 July 2021 - -
-------------------------- ------------------- --------
Net book value
At 31 July 2021 1,192 1,192
-------------------------- ------------------- --------
At 31 July 2020 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 the year ended 31 July 2021 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 GBP67 million.
The assessment by the Board determined that the recoverable
amount of the CGU exceeded their carrying value, and therefore no
impairment was required.
The Directors are satisfied that no reasonably possible change
in this estimate would result in the recognition of an impairment
within the next 12 months and accordingly the carrying value of
goodwill and other intangibles are not considered a significant
estimate as at 31 July 2021.
For the year ended 31 July 2020, the recoverable amount of
goodwill and intangible assets for the Group financial statements
were determined by a value in use calculation. This calculation
took into account cash flows from expected future licence
agreements at each expected contract milestone, and the costs
incurred in securing those licence agreements, discounted to
present value using a pre-tax discount rate of 25%. The cash flows
were projected until 2034 which reflected the early stage of a
number of the research programmes and the time period over which
cash inflows were expected to occur. The model included expected
licence agreements in relation to the Group's four core research
programmes, with initial payments assumed for prudent modelling
purposes by FY23 along with additional milestone payments on the
Orexin-1 licence agreement.
The key assumptions used in the net present value calculation
were the timing of signing future licence agreements, the upfront
and milestone licence payments and the discount rate used. These
assumptions were benchmarked against the Group's own experience of
such deals and external sources of information within the industry.
The model did not assume any future royalties were received.
The recoverable amount exceeded the carrying value of the
combined intangible assets and goodwill by GBP34.9 million.
The key assumptions considered most sensitive for the net
present value calculations were those regarding the timing of
signing future licence agreements and the value of up front and
milestone licence payments. The sensitivity analysis showed that
all licensing opportunities could slip by 10 years before an
impairment is triggered and all except one of the Group's licensing
opportunities could fail compared to the base case before an
impairment would be triggered.
No impairment charge was recorded during the period.
The Company has no goodwill.
13. Investment in and loans to subsidiaries
Investment Loans to
in subsidiary group undertakings Total
The Company GBP000 GBP000 GBP000
Cost
--------------------- --------------- -------------------- --------
At 31 July 2020 2,784 41,651 44,435
----------------------- --------------- -------------------- --------
Additions 249 14,809 15,058
At 31 July 2021 3,033 56,460 59,493
----------------------- --------------- -------------------- --------
Provision
--------------------- --------------- -------------------- --------
At 31 July 2020 2,784 5,451 8,235
Provided during the
year (2,784) (5,451) (8,235)
At 31 July 2021 - - -
--------------------- --------------- -------------------- --------
Net book value
At 31 July 2021 3,033 56,460 59,493
----------------------- --------------- -------------------- --------
At 31 July 2020 - 36,200 36,200
----------------------- --------------- -------------------- --------
By subsidiary
C4X Discovery Limited 59,493
C4X Drug Discovery Limited -
Adorial Limited -
At 31 July 2021 59,493
-------------------------------- ---------
Class of shares held
Subsidiary 31 July
undertakings Country of incorporation Principal activity 2020
---------------------- ------------------------------- ---------------------- --------------------------- --------
C4X Discovery Research and
Limited* England and Wales development Ordinary 100%
C4X Drug Discovery
Limited** England and Wales Dormant company Ordinary 100%
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 Ordinary 100%
*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
During the year, the impairment of the Parent's investment in
its subsidiary from the prior year has been reversed due to changes
in the assumptions in the underlying cash flows of the business
that increased the estimated recoverable amount. 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 25% discount
rate used and drug programme failure. For an impairment to arise,
the discount rate would need to increase from 25% to 27% (with no
change in the cash flows). Alternatively, one drug programme out of
the five included in the model would need fail for an impairment to
arise (with no change in the discount rate).
The amount impaired in the prior year was GBP2,784,000.
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.
For the year ended 31 July 2021, 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 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 they have considered how they expect to
recover the loan receivable and the recovery period of the loan in
calculating the expected credit loss.
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%.
This calculation takes into account the probability of expected
cash flows from future licence agreements at each contract
milestone, and the costs incurred in securing those licence
agreements. The cash flows are projected until 2034 which reflects
the early stage of a number of the research programmes and the time
period over which cash inflows are expected to occur. The model
includes expected licence agreements in relation to the Group's
four core research programmes, with initial payments assumed for
prudent modelling purposes by FY23 along with additional milestone
payments on the Orexin-1 and IL-17A licence agreements.
The key judgement made by management in the expected credit loss
calculations is the probability assumptions of the future cashflows
and the timing of the cashflows.
The model demonstrates that the future cashflows amount to
GBP65m. The ECL provision is GBPnil (2020: GBP5,451,000) as the
model shows sufficient headroom when compared with the total value
of the loan.
The calculation is sensitive to the key assumptions used in
determining the probability assumptions included in the ECL
calculation.
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%.
In order for an impairment to arise, the total implied probability
would need to fall to 15%.
For the year ended 31 July 2020, the recoverable amount of
investments in subsidiaries in the parent company financial
statements was determined by a value in use calculation. This
calculation took into account cash flows from expected future
licence agreements at each expected contract milestone, and the
costs incurred in securing those licence agreements, discounted to
present value using a pre-tax discount rate of 25%. The cash flows
were projected until 2034 which reflected the early stage of a
number of the research programmes and the time period over which
cash inflows were expected to occur. The model included expected
licence agreements in relation to the Group's four core research
programmes, with initial payments assumed for prudent modelling
purposes by FY23 along with additional milestone payments on the
Orexin-1 licence agreement.
The key assumptions used in the value in use calculation were
the timing of signing future licence agreements, the upfront and
milestone licence payments and the discount rate used. These
assumptions were benchmarked against the Company's own experience
of such deals and external sources of information within the
industry. The model did not assume any future royalties were
received.
The recoverable amount of loans to subsidiaries was determined
by using an expected credit loss model which took into account the
probability of default, the exposure at default and the loss given
default. The Directors also considered the value in use of the
Group. The model demonstrated that the combined recoverable amount
of the investments in and loans to subsidiaries was GBP36.2m which
resulted in a net impairment reversal of GBP24.8m. The carrying
amount of the investment in and loans to subsidiaries was sensitive
to assumptions about the future.
14. Trade and other receivables
31 July 31 July 31 July 31 July
2021 2021 2020 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
------------------- -------- -------- -------- --------
Trade receivables 21 - 14 -
Prepayments 307 - 329 -
Other receivables - 6 - -
VAT receivables 246 - 95 -
------------------- -------- -------- -------- --------
574 6 438 -
------------------- -------- -------- -------- --------
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
There were no revenue-related contract assets (2020:
GBPnil).
All trade receivables are denominated in Pounds Sterling.
15. Income tax asset
31 July 31 July 31 July 31 July
2021 2021 2020 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
--------------------------------- -------- -------- -------- --------
Research and development income
tax credit receivable 2,053 - 1,780 -
--------------------------------- -------- -------- -------- --------
2,053 - 1,780 -
--------------------------------- -------- -------- -------- --------
16. Cash, cash equivalents and deposits
31 July 31 July 31 July 31 July
2021 2021 2020 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
--------------------------- -------- -------- -------- --------
Cash and cash equivalents 17,103 - 5,648 -
--------------------------- -------- -------- -------- --------
17,103 - 5,648 -
--------------------------- -------- -------- -------- --------
Cash and cash equivalents at 31 July 2021 include deposits with
original maturity of three months or less of GBPnil (2020:
GBPnil).
An analysis of cash, cash equivalents and deposits by
denominated currency is given in note 27.
17. Trade and other payables
31 July 31 July 31 July 31 July
2021 2021 2020 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
--------------------- -------- -------- -------- --------
Current Liabilities
Current payables 472 - 558 -
Other payables 127 - 134 -
Deferred revenue 330 - - -
Accruals 718 - 474 -
--------------------- -------- -------- -------- --------
1,647 - 1,166 -
--------------------- -------- -------- -------- --------
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 (2020: GBPnil).
18. Lease liabilities
31 July 31 July 31 July 31 July
2021 2021 2020 2020
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
--------------------- -------- -------- -------- --------
Current Liabilities
Lease liabilities 217 - 189 -
217 - 189 -
--------------------- -------- -------- -------- --------
Non-Current Liabilities
Lease liabilities 187 - 218 -
187 - 218 -
------------------------- ---- ----
When measuring lease liabilities for leases that were classified
as operating leases, the Group discounted lease payments using its
incremental borrowing rate at 1 August 2019. The weighted average
rate applied is 4.25%.
GBP000
----------------------------------------------- -------
2021
Balance at 1 August 2020 407
Cash outflow (271)
New leases 253
Fair value movement recorded in finance costs 15
At 31 July 2021 404
----------------------------------------------- -------
GBP000
----------------------------------------------- -------
2020
Balance at 1 August 2019 460
Cash outflow (319)
New leases 248
Fair value movement recorded in finance costs 18
At 31 July 2020 407
----------------------------------------------- -------
19. Issued equity capital
Deferred Ordinary Share Deferred Warrant Share
shares shares capital shares reserve premium Total
The Company Number Number GBP000 GBP000 GBP000 GBP000 GBP000
Allotted, called
up and fully
paid ordinary
shares of 1p
At 31 July 2019 2,025,000 57,792,636 577 2,025 - 32,256 34,858
-------------------------- ------------ ------------ --------- --------- --------- --------- ---------
Issue of share
capital on placing - 57,303,367 573 - - 8,022 8,595
Issue of share
capital on open
offer - 3,907,141 39 - - 547 586
Issue of share
capital on subscription
by Directors - 200,000 2 - - 28 30
Expenses of placing,
open offer and
subscription
by Directors - - - - - (547) (547)
-------------------------- ------------ ------------ --------- --------- --------- --------- ---------
At 31 July 2020 2,025,000 119,203,144 1,191 2,025 - 40,306 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 - - 345 358
Expenses of placing,
open offer and
subscription
by Directors - - - - - (551) (551)
At 31 July 2021 2,025,000 227,812,697 2,277 2,025 992 53,042 58,336
-------------------------- ------------ ------------ --------- --------- --------- --------- ---------
Share Deferred Warrant Share
capital shares reserve premium Total
The Group GBP000 GBP000 GBP000 GBP000 GBP000
Allotted, called up
and fully paid ordinary
shares of 1p
At 31 July 2019 577 2,025 - 32,256 34,858
------------------------------- --------- --------- --------- --------- ---------
Issue of share capital
on placing 573 - - 8,022 8,595
Issue of share capital
on open offer 39 - - 547 586
Issue of share capital
on subscription by Directors 2 - - 28 30
Expenses of placing,
open offer and subscription
by Directors - - - (547) (547)
------------------------------- --------- --------- --------- --------- ---------
At 31 July 2020 1,191 2,025 - 40,306 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 - - 345 358
Expenses of placing,
open offer and subscription
by Directors - - - (551) (551)
At 31 July 2021 2,277 2,025 992 53,042 58,336
------------------------------- --------- --------- --------- --------- ---------
During November 2019, GBP7.6 million (before expenses) was
raised via a placing of 46,466,667 ordinary shares, a subscription
by Directors for 200,000 ordinary shares and an open offer for
3,907,141 ordinary shares at 15 pence each.
During November 2020 GBP15.0 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 GBP1 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 GBP1 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.
20. Share-based payment reserve
The Group GBP000
---------------------- ----------------------------
At 31 July 2019 736
Share-based payments 206
At 31 July 2020 942
Share-based payments 249
---------------------- ----------------------------
At 31 July 2021 1,191
---------------------- ----------------------------
The Company GBP000
---------------------- ----------------------------
At 31 July 2019 707
Share-based payments 206
---------------------- ----------------------------
At 31 July 2020 913
Share-based payments 249
---------------------- ----------------------------
At 31 July 2021 1,162
---------------------- ----------------------------
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 GBP249,000 has been recognised in the statement of
comprehensive income for the year (2020: GBP206,000).
This includes GBP46,342 (2020: GBP427) 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 September 2009
Share options were granted to a staff member on 29 September
2009. 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 2.05 pence
(the original exercise price of GBP22.00 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 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 GBP60.00 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 GBP60.00 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 GBP60.00 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 June 2015
Share options were granted to staff and Directors on 8 June
2015. The options granted are exercisable at any time between three
years and 10 years of them being granted. There are no performance
criteria attached to the options. The exercise price was set at
100.0 pence, being the price at which shares were placed in the IPO
in October 2014. 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. Options which had not been
cancelled or lapsed were replaced on 28 July 2020.
Grant in December 2015
Share options were granted to a Director on 8 December 2015. The
options granted are exercisable, subject to meeting certain
performance criteria, at any time between three years and 10 years
of them being granted. The exercise price was set at 77 pence,
being the average of the mid-market closing price over the three
days prior to 8 December 2015. 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. Options which
had not been cancelled or lapsed were replaced on 28 July 2020.
Grant in November 2016
Share options were granted to staff and a Director on 23
November 2016. The options granted are exercisable, at any time
between three years and 10 years of them being granted. The
exercise price was set at 105 pence, being the average of the
mid-market closing price over the three days prior to 23 November
2016. 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. Options which had not been cancelled or
lapsed were replaced on 28 July 2020.
Grant in February 2017
Share options were granted to staff and a Director on 1 February
2017. The options granted are exercisable, at any time between
three years and 10 years of them being granted. The exercise price
was set at 91 pence, being the average of the mid-market closing
price over the three days prior to 1 February 2017. 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. Options which had not been cancelled or lapsed were
replaced on 28 July 2020.
Grant in May 2017
Share options were granted to staff on 17 May 2017. The options
granted are exercisable, at any time between three years and 10
years of them being granted. The exercise price was set at 90
pence, being the average of the mid-market closing price over the
three days prior to 17 May 2017. 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. Options which
had not been cancelled or lapsed were replaced on 28 July 2020.
Grant in September 2017
Share options were granted to staff on 26 September 2017. The
options granted are exercisable, at any time between three years
and 10 years of them being granted. The exercise price was set at
77 pence, being the average of the mid-market closing price over
the three days prior to 26 September 2017. 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 October 2018
Share options were granted to staff and Directors on 16 October
2018 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 89.2 pence, being the
average 30 day closing price of the ordinary shares to 16 October
2018. 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. Options which had not been cancelled or
lapsed were replaced on 28 July 2020.
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 GBP154,571 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
GBP46,342 (2020: GBP427).
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.
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.
2021 2020
The Group and Company Number Number
--------------------------- ---------- ------------
Outstanding at 1 August 7,057,522 3,786,853
Granted during the year 4,019,000 6,387,447
Exercised during the (188,125) -
year
Lapsed/cancelled (950,650) (3,116,778)
Outstanding at 31 July 9,937,747 7,057,522
--------------------------- ---------- ------------
Exercisable at 31 July 606,950 795,075
--------------------------- ---------- ------------
During the year ended 31 July 2021, 188,125 were exercised
(2020: nil).
Weighted average exercise price of options
2021 2020
The Group and Company Pence Pence
--------------------------- ------ ------
Outstanding at 1 August 17.34 76.58
Granted during the year 20.84 18.53
Exercised during the year 4.07 -
Outstanding at 31 July 18.61 17.34
--------------------------- ------ ------
A total of 4,019,000 share options were granted during the year
(2020: 6,387,447). These included no replacement options (2020:
2,714,298). The range of exercise prices for options outstanding at
the end of the year was 5.58 pence - 100.00 pence (2019: 2.05 pence
- 100.00 pence).
For the share options outstanding as at 31 July 2021, the
weighted average remaining contractual life is 8.5 years (2020: 8.8
years).
The following table lists the inputs to the models used for the
years ended 31 July 2021 and 31 July 2020.
The Group and Company 2021 2020
Expected volatility (%) 52.5% 52.5%
Risk-free interest rate (%) 0.35%-1.00% 0.35%-1.00%
Expected life of options 3 years 3 years
(year's average)
Weighted average exercise n/a n/a
price (pence)
Weighted average share price
at date of grant (pence) 20.84 18.53
------------------------------ ------------ ------------
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 GBP000
----------------------- -------
At 31 July 2019 -
Warrant premium -
At 31 July 2020 -
Warrant premium 992
Exercise of warrants (13)
----------------------- -------
At 31 July 2021 979
----------------------- -------
During the year a total of 99,169,286 (2020: Nil) 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 (2020: Nil) per ordinary
share and are to be exercised within 5 years of being issued.
During the year a total of 1,278,570 warrants (2020: Nil) were
exercised during the year
The following tables illustrate the number and movements in,
warrants during the year.
2021 2020
The Group and Company Number Number
--------------------------- ------------ ---------
Outstanding at 1 August - -
Granted during the year 99,169,286 -
Exercised during the (1,278,570) -
year
Lapsed/cancelled - -
Outstanding at 31 July 97,890,716 -
--------------------------- ------------ ---------
Exercisable at 31 July 97,890,716 -
--------------------------- ------------ ---------
22. Merger reserve
The Group GBP000
------------------------------------------------ -------
At 31 July 2019, 31 July 2020 and 31 July 2021 920
------------------------------------------------ -------
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 GBP000
------------------------------------------------ -------
At 31 July 2019, 31 July 2020 and 31 July 2021 195
------------------------------------------------ -------
24. Retained earnings
The Group GBP000
-------------------------- ----------
At 31 July 2019 (29,724 )
-------------------------- ----------
Loss for the year (7,789)
-------------------------- ----------
At 31 July 2020 (37,513)
-------------------------- ----------
Loss for the year (3,844)
Warrant reserve movement 13
-------------------------- ----------
At 31 July 2021 (41,344)
-------------------------- ----------
The Company GBP000
-------------------------- ---------
At 31 July 2019 (32,987)
Profit for the year 24,752
At 31 July 2020 (8,235)
Loss for the year 8,235
Warrant reserve movement 13
-------------------------- ---------
At 31 July 2021 13
-------------------------- ---------
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
Buildings Total
Group Group
GBP000 GBP000
------------------------------------------ ----------- -------
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
------------------------------------------ ----------- -------
2020
Balance at 1 August 2019 432 432
Depreciation charge for the year (302) (302)
Additions to right-of-use assets 248 248
Derecognition of right-of-use assets - -
Depreciation eliminated on derecognition
of right-of-use assets - -
378 378
------------------------------------------ ------ ------
Amounts recognised in income statement
31 July 2021
Interest on lease liabilities 15 15
15 15
------------------------------- --- ---
31 July 2020
------------------------------- --- ---
Interest on lease liabilities 18 18
------------------------------- --- ---
18 18
------------------------------- --- ---
Amounts recognised in statement of cash flows
31 July 2021
Lease payments 271 271
271 271
---------------- ---- ----
31 July 2020
---------------- ---- ----
Lease payments 319 319
---------------- ---- ----
319 319
---------------- ---- ----
26. Commitments
At 31 July 2021, the Group had capital commitments amounting to
GBPnil in respect of orders placed for capital expenditure (2020:
GBPnil).
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 GBP19,286,000 at 31 July 2021 (GBP8,066,000 at 31 July
2020).
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
Financial
liabilities
Loans and at amortised Company
receivables cost Group
Financial assets/(liabilities) GBP000 GBP000 GBP000 GBP000
-------------------------------- ------------- -------------- ----------------------- ----------
31 July 2021
Trade receivables 21 - 21 -
Inter-company short-term loan - - - -
to subsidiary
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 -
-------------------------------- ------------- -------------- ----------------------- ----------
31 July 2020
Trade receivables 14 - 14 -
Inter-company short-term loan - - - -
to subsidiary
Cash, cash equivalents and
deposits 5,648 - 5,648 -
Trade and other payables* - (692) (692) -
Lease liabilities - (407) (407) -
5,662 (1,099) 4,563 -
-------------------------------- ------------- -------------- ----------------------- ----------
*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. 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 2021 or at 31
July 2020 and the Group did not enter into any such contracts
during 2021 or 2020.
The split of Group assets between Sterling and other currencies
at the year end is analysed as follows:
2021 2020
GBP USD EUR Total GBP USD EUR Total
The Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ------- ------- ------- -------- ------- ------- ------- -------
Cash, cash equivalents
and deposits 11,094 35 5,974 17,103 5,623 16 9 5,648
Trade receivables 21 - - 21 14 - - 14
Trade payables (494) (80) (25) (599) (654) (3) (35) (692)
------------------------ ------- ------- ------- -------- ------- ------- ------- -------
10,621 (45) 5,949 16,525 4,983 13 (26) 4,970
------------------------ ------- ------- ------- -------- ------- ------- ------- -------
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
GBP000 GBP000 GBP000 GBP000
------------------- -------------- ---------- -------------- ----------
31 July 2021
EUR (5% movement) 313 (283) 313 (283)
USD (5% movement) (2) 2 (2) 2
31 July 2020
EUR (5% movement) (3) 2 (3) 2
USD (5% movement) 2 (1) 2 (1)
------------------- -------------- ---------- -------------- ----------
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 2021 31 July 2020
Fixed Floating Fixed Floating
rate rate Total rate rate Total
The Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ -------- --------- ------- ------- --------- -------
Cash, cash equivalents
and deposits - 17,103 17,103 - 5,648 5,648
------------------------ -------- --------- ------- ------- --------- -------
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 2021 based on contractual undiscounted
payments including contractual interest.
One to
Less than five
one year years Total
2021 GBP000 GBP000 GBP000
--------------------------- ---------- ------- ---------
Financial liabilities
Trade and other payables
* 599 - 599
Lease liabilities 217 187 404
816 187 1,003
--------------------------- ---------- ------- ---------
2020
--------------------------- ---------- ------- -------
Financial liabilities
Trade and other payables* 692 - 692
Lease liabilities 218 189 407
881 218 1,099
--------------------------- ---------- ------- -------
*Excluding accruals and deferred revenue. Trade and other
payables are due within 3 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 (2020: 200,000 ordinary shares at 15 pence
each).
During the year, shareholder Aquarius Equity Partners Limited
charged the Group GBP11,588 (2020: GBP15,450) for monitoring fees
and was owed GBPnil at 31 July 2021 (2020: GBPnil).
During the year, The Aquarius IV Fund LLP, a fund managed by
shareholder Aquarius Equity Partners Limited, held 2,025,000
deferred shares of GBP1 each (2020: GBP2,025,000).
During the year, Director Harry Finch charged the Group GBPnil
(2020: GBPnil) for services which he provided as a technical
consultant and was owed GBPnil at 31 July 2021 (2020: GBPnil).
The Group
There were no sales to, purchases from or, at the year end,
balances with any related party.
The Company
The following table summarises inter-company balances at the
year end between C4X Discovery Holdings plc and subsidiary
entities:
31 July 31 July
Notes 2021 2020
GBP000 GBP000
--------------------------------------- ------ -------- --------
Short term loans owed to C4X Discovery
Holdings plc by:
C4X Discovery Limited 14 - -
C4X Drug Discovery Limited - -
Adorial Limited - -
- -
--------------------------------------- ------ -------- --------
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.
29. Compensation of key management personnel (including Directors)
2021 2020
GBP000 GBP000
------------------------------ ------- -------
Short-term employee benefits 1,476 1,199
Pension costs 151 164
Benefits in kind 2 2
Share-based payments 112 100
1,741 1,465
------------------------------ ------- -------
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END
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