TIDMC4XD
RNS Number : 7157W
C4X Discovery Holdings PLC
14 December 2023
This announcement contains inside information
C4X Discovery Holdings plc
("C4XD", "C4X Discovery" or the "Company")
Full Year Results
Evolution of strategy as immuno-inflammation company to deliver
greater value to shareholders
14 December 2023 - C4X Discovery Holdings plc (AIM: C4XD), a
pioneering Drug Discovery company, today announces its full year
audited results for the year ended 31 July 2023.
Dr Clive Dix, CEO of C4X Discovery, said: "This year has seen
C4XD evolve significantly to build on its proven strengths and
expertise and focus on immuno-inflammation. The licensing of our
NRF-2 programme to AstraZeneca reinforced our confidence in our
ability to discover high value new small molecule drugs in the
space and the strategic divestment of our Orexin-1 programme
further streamlined our portfolio and provided further resources to
pursue this more defined path to value. The market potential in
immuno-inflammation is large and growing, reflecting the need for
better treatments. With a robust balance sheet, focused strategy
and streamlined portfolio, we believe we are strongly positioned in
immuno-inflammation and excited about the future ."
Operational highlights (including post-period events)
-- New strategic focus as an immuno-inflammation company.
-- C4XD signed an exclusive worldwide licensing agreement with
AstraZeneca in November 2022, worth up to $402 million, for its
NRF2 Activator programme.
-- <ALPHA>4<BETA>7 integrin inhibitor programme for
inflammatory bowel disease ("IBD") delivered compounds showing
improved activity at a lower dose compared to example competitor
compounds in a pharmacodynamic model after oral dosing.
-- C4XD internal portfolio expanded in inflammatory diseases and
new programmes identified progressing towards Lead Optimisation and
beyond.
-- Launch of PatientSeek, C4XD's precision medicine platform for optimised patient selection.
-- Indivior acquired C4XD's oral Orexin-1 receptor antagonist,
C4X_3256 (INDV-2000), for substance use disorder under an asset
purchase agreement for GBP15.95 million (recognised post
period).
-- Sanofi is progressing C4XD's IL-17A inhibitor programme for
inflammatory diseases towards the next milestone.
-- MALT-1 inhibitor programme moving forward to identification
of candidate shortlist molecules as partnering process
initiated.
-- Executive changes: Clive Dix's appointed at interim Executive
Chairman & CEO as Eva-Lotta Allan steps down as Chair and Dr
Nick Ray appointed as Chief Scientific Officer.
Financial highlights
-- Revenue of GBP1.7 million (2022: GBP2.7m).
-- Total loss after tax of GBP11.1 million or 4.42 pence per
share (2022: GBP8.2m or 3.57 pence per share).
-- R&D expenses increased by 16% to GBP10.9 million (2022:
GBP9.4m), reflecting focused investment in key Drug Discovery
programmes.
-- Net assets of GBP6.5 million (2022: GBP11.8m).
-- Net cash as at 31 July 2023: GBP4.2 million (31 July 2022: GBP5.1m).
-- Post-period, payment of GBP15.95 million received from
Indivior for the outright acquisition of Orexin-1 Receptor
Antagonist Programme.
Analyst Webcast Today
Dr Clive Dix, Chief Executive Officer, and members of the
management team will host a live webcast for analysts at 9:30am GMT
today to discuss the results. The webcast can be accessed online
at:
https://www.lsegissuerservices.com/spark/C4xDiscoveryHolding/events/add39e84-79c5-41b8-a497-f14f787e5d1d
A copy of the final results presentation will be released later
this morning on the Company website at www.c4xdiscovery.com .
Contacts
C4X Discovery Holdings
Mo Noonan, Communications +44 (0)787 6444977
Panmure Gordon (UK) Limited (NOMAD and
Broker)
Freddy Crossley, Emma Earl (Corporate
Finance) +44 (0)20 7886 2500
Rupert Dearden (Corporate Broking)
C4X Discovery Media - ICR Consilium
Mary-Jane Elliott, Chris Gardner, Matthew
Neal +44 (0)203 709 5700
Notes to Editors:
About C4X Discovery
C4X Discovery ("C4XD") is a pioneering Drug Discovery company
combining scientific expertise with cutting-edge Drug Discovery
technologies to efficiently deliver world leading medicines, which
are developed by our partners for the benefit of patients. We have
a highly valuable and differentiated approach to Drug Discovery
through our enhanced DNA-based target identification and candidate
molecule design capabilities, generating small molecule drug
candidates across multiple disease areas including inflammation,
oncology, neurodegeneration and addictive disorders. Our
commercially attractive portfolio ranges from early-stage novel
target opportunities to late-stage Drug Discovery programmes ready
for out-licensing to partners and we have three commercially
partnered programmes with one candidate in clinical
development.
We collaborate with leading pharmaceutical and life sciences
companies to enrich our expertise and take our assets through
pre-clinical and clinical development. Through early-stage
revenue-generating licensing deals, we realise returns from our
high value pre-clinical assets which are reinvested to maximise the
value of our Drug Discovery portfolio. For further information see
www.c4xdiscovery.com
Executive Chairman & CEO Statement
Growth, focused approach and evolution
"Our focused immuno-inflammation strategy will allow us to
garner greater value for our programmes as we extend the
development pathway and create new innovative therapies for
patients."
The last twelve months have been a period of evolution for the
business. To ensure we continue to deliver a strong performance,
the Board and senior management continually assess whether the
Company's strategy is in line with its expertise and market
opportunities. With a successful track record of three programmes
out-licensed to world-leading pharmaceutical companies, and the
majority of our portfolio already focused on immuno-inflammatory
diseases, we announced in our half year results in April 2023 our
strategic decision to focus on immuno-inflammation as a company.
This is an area where we already have proven drug discovery and
development expertise as well as an expert team of scientists who
understand this disease area. This evolution of our approach
enables us to harness our skillset more fully and take the
development of our programmes further towards and into the clinic,
providing greater value for shareholders.
Millions of people's lives are impacted by immuno-inflammatory
diseases every year. For some, even the simplest of normal every
day activities become impossible, restricting what they can do and
how they can live their lives without excruciating pain, or being
dismissed as minor afflictions, impacting both their physical and
psychological health. These poorly understood diseases are a
growing burden on healthcare systems, with an increasing prevalence
combined with an ageing population. We believe that through our
unique approach to small molecule drug discovery and our track
record in developing viable immuno-inflammation candidates, we will
be able to offer new innovative and safe therapies for these
patients in the future.
In line with our new strategy to become an immuno-inflammatory
therapeutics company, we were proud to announce in July 2023
Indivior PLC's ("Indivior") outright GBP15.95 million asset
acquisition of C4XD's oral Orexin-1 receptor antagonist programme
for the treatment of substance abuse disorder. This divestment
enables us to further streamline our portfolio whilst crystallising
value early for the programme. Indivior's decision validates our
expertise to produce valuable, commercially relevant,
small-molecule drug candidates as well as the high value of our
molecules. This non-dilutive funding in combination with potential
preclinical milestone payments from our licensing deals with Sanofi
and AstraZeneca provide the runway to advance our newly focused
portfolio towards, and potentially into, the clinic.
In June 2023, with the new strategy in place, Eva-Lotta Allan
took the decision to step down as Chair after five years of
service. This change at the Board level has opened the door to
bringing in a new CEO, with strong leadership skills and a track
record of building a company with products that have entered
clinical development. The Nomination Committee has been tasked with
running the process for the new CEO search. In the meantime, I have
taken on the role of both interim Executive Chairman and CEO to
ensure a smooth transition. Thereafter, I expect to take a
Non-Executive Board role to ensure continuity and to support the
delivery of our vision and strategy to develop new therapies that
will improve the lives of patients living with immuno-inflammatory
diseases. Once the CEO is in place, we will assess and commence the
appointment of Chairman for the Company.
Another key appointment to ensure delivery of our new strategy
was the appointment of Nick Ray as our Chief Scientific Officer in
January 2023. Having been at C4XD for seven years, and with
expertise in medicinal chemistry, structural analysis and
computational chemistry/cheminformatics, Nick has already shown
strong leadership across the scientific teams as we take these
programmes further into development.
Internal portfolio
Our internal portfolio will now focus on the discovery and
development of novel oral small molecule medicines to treat
patients across a range of immuno-inflammatory diseases.
Our lead internal programme, focused on oral small molecule
inhibitors of <ALPHA>4<BETA>7, has the potential to
expand patient access to <ALPHA>4<BETA>7 inhibitor
therapy for the treatment of inflammatory bowel disease ("IBD").
This programme is making significant headway through late-stage
discovery and progressing towards preclinical studies, with the aim
of delivering a low dose Best-In-Class therapy.
We have a portfolio of early-stage discovery immuno-inflammatory
projects which are progressing through the required studies to
assess scientific potential. Our rigorous project initiation
process assesses the contributions that our proprietary platforms,
Conformetrix and PatientSeek, can provide, together with a thorough
analysis of the commercial viability of a small molecule approach
for any target under consideration. Once through this phase
successfully and heading towards or into Lead Optimisation, we will
provide greater detail. This way, we ensure that only the best
projects with strong scientific and commercial attributes will
become C4XD portfolio programmes. We still anticipate moving two of
these early evaluation projects into Lead Optimisation by the end
of 2024.
Partnered portfolio
In November 2022, we out-licensed our NRF2 Activator programme
to AstraZeneca for up to $402 million. C4XD has received an upfront
payment of $2 million and the deal terms highlight the potential
for C4XD to receive up to $400 million in development and
commercial milestones, including potential preclinical milestone
payments ahead of the first clinical trial. If successful, we will
also receive mid-single digit royalties upon commercialisation.
AstraZeneca is developing the programme further with the aim to
commercialise an oral therapy for the treatment of inflammatory and
respiratory diseases with a lead focus on chronic obstructive
pulmonary disease (COPD), a market worth close to $20 billion and
rising.(1)
Having received the first milestone payment of EUR3 million in
July 2022 from our out-licensing agreement worth up to EUR414
million with Sanofi for our IL-17A oral inhibitor programme, the
programme continues to make strong progress. Under the license,
Sanofi is developing the programme with the aim to commercialise an
oral therapy for the treatment of inflammatory diseases, a
multi-billion dollar market, with the IL-17 pathway implicated in
psoriasis, psoriatic arthritis and ankylosing spondylitis.
In February 2023, we added to our pioneering technology,
Conformetrix, with the launch of our patient stratification
platform, PatientSeek. We have always believed in a science first
approach but by having access to the right tools available to our
scientists, we can advance our programmes smarter and with more
accuracy. PatientSeek has the ability to optimise patient selection
with the potential to match the most effective treatments with
groups of patients who are most likely to benefit thereby ensuring
the right drug is given to the right patient, based on their
genetics. We are working with organisations such as Sano Genetics,
to access comprehensive data from immuno-inflammatory patients and
bring precision medicine approaches to our drug development
programmes.
With the evolution of our strategy to take our internal
portfolio further along the development pathway, it is incredibly
important to appreciate the continued support of our shareholders.
In August 2022, through an investor-led fund raise, we raised
GBP5.7 million which has allowed us to make these important changes
that we believe will deliver greater long-term value for C4XD's
highly prized portfolio of small molecule programmes in
immuno-inflammation.
Finally, none of this progress can happen without the C4XD team.
Often changes such as these have a more immediate impact internally
for those working on the programmes and I am grateful for their
continued belief and commitment to C4XD's vision. We truly have a
great and highly skilled team that will make this vision a
success.
Outlook and summary
We have made excellent progress this year, including partnering
our NRF2 programme with AstraZeneca, and continuing key studies to
advance our internal portfolio. The decision to focus on
immuno-inflammatory diseases sets a defined path forward, allowing
us to take our portfolio further into the development pathway.
This, we believe, will allow us to garner greater value for our
programmes as we extend the partnering timeline with the potential
of including clinical data where suitable. With a newly focused
immuno-inflammation strategy, a robust balance sheet and
streamlined portfolio, C4XD is in a strong position, and we are
excited for our future.
Clive Dix
Executive Chairman & CEO
13 December 2023
1.
https://www.transparencymarketresearch.com/chronic-obstructive-pulmonary-disease-copd-treatment-market.html
Financial Review
Strong investor support for new immuno-inflammation strategy
"C4XD has a robust balance sheet following the divestment of our
Orexin-1 programme to Indivior and when combined with potential
milestones from our partnered programmes provides a clear runway
for the development of our portfolio of immuno-inflammation
programmes."
Revenue for the 12 months ended 31 July 2023 was GBP1.7 million
(2022: GBP2.7m). The revenue recognised in the current year
includes deferred revenues relating to the ongoing research
workplan with Sanofi and upfront payment of $2 million by
AstraZeneca for C4XD's NRF2 Activator programme. Revenue of
GBP15.95 million from the agreement with Indivior for the outright
acquisition of Orexin-1 Receptor Antagonist Programme executed on
31 July 2023 was subject to certain performance obligations which
were met on 4 August 2023 resulting in this revenue being
recognised shortly after the year end.
R&D expenses, which comprise invoiced material costs,
payroll costs and software costs, have increased by 16% to GBP10.9
million for the year ended 31 July 2023 (2022: GBP9.4m). This
reflects focused investment in key Drug Discovery programmes as
outlined in the Executive Chairman & CEO Statement.
Administrative expenses increased during the year to GBP4.2
million (2022: GBP3.7m) as a result of the continued investment in
people and infrastructure. Cost inflation is understandably
starting to have an impact on the business too with suppliers
starting to pass on increased costs.
This year the R&D income tax credit receivable is GBP2.3
million (2022: GBP2.4m) and is reflective of the continuing
investment in R&D costs over the last 12 months.
The loss after tax for the year ended 31 July 2023 was GBP11.1
million (2022: GBP8.2m). This equates to a basic and diluted loss
per share of 4.42 pence per share (2022: 3.57 pence per share).
The Company had net assets at 31 July 2023 of GBP6.5 million
(2022: GBP11.8m). Cash and cash equivalents of GBP4.2 million
(2022: GBP5.1m) were improved post balance sheet by the receipt of
GBP15.95 million from Indivior for the outright acquisition of
C4XD's Orexin 1 programme.
Both cash and costs continue to be prudently and tightly
managed.
Notwithstanding a consolidated operating loss for the year ended
31 July 2023 of GBP13.4 million (2022: loss of GBP10.5m) and net
cash used in operating activities of GBP5.9 million (2022:
GBP12.1m), these financial statements have been prepared on a going
concern basis. The Directors consider this to be appropriate for
the following reasons:
The Board has prepared a number of cash flow forecasts for the
period to 31 July 2025. Base case scenario shows that cash
resources are maintained throughout the period to July 2025 whilst
severe but plausible downside scenario shows cash resource to April
2025, both being more than 12 months from the date of signing the
financial statements.
Should the company not receive any revenues from existing or new
deals in the forecast period, a cash shortfall will arise in early
2025. The Board considers they are able to take reasonable
mitigating action, which includes but is not limited to a reduction
in expenditure on certain discretionary research programmes to
focus purely on commercialising earlier stage drug molecules, and
reducing other discretionary administrative expenditure. This 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
13 December 2023
Portfolio Review
Streamlined portfolio focused on immuno-inflammatory
diseases
Small molecule focus
We are focused on the discovery and development of small
molecule therapeutics for the treatment of a range of
immuno-inflammatory diseases. Our Conformetrix technology for the
elucidation of ligand shape in the physiologically-relevant
solution state plays a key role in guiding our team of
industry-experienced medicinal chemists to identify novel chemical
space, whilst our biologists have decades of experience in
designing effective assay cascades to support the prosecution of
time- and cost-effective drug discovery campaigns. All wet
laboratory science is conducted through a worldwide network of
tested and trusted CROs, employing the right CRO at the right time
for the right activity whilst maintaining flexibility and
cost-effectiveness.
Internal portfolio
Inflammation (<ALPHA>4<BETA>7 Integrin
Inhibitor)
Programme transitioned into Lead Optimisation
C4XD's oral <ALPHA>4<BETA>7 integrin inhibitor
programme has identified multiple series of novel, potent and
selective <ALPHA>4<BETA>7 integrin inhibitors for the
treatment of IBD. Effective antibody therapy (Vedolizumab,
'Entyvio') against this target is already approved, removing the
clinical target risk, but an effective oral therapy remains highly
sought after. During 2023, Morphic Therapeutics reported positive
topline data from a Phase 2a clinical study in adults with moderate
to severe ulcerative colitis (UC) at a dose of 100 mg twice daily
(BID). C4XDs programme is targeting a more optimal dosing
regimen.
Oral bioavailability has been demonstrated and there is
particular focus on improving PK properties to achieve a good oral
half-life. C4XD has compounds that match or exceed both whole blood
potency and selectivity over the related integrin a 4 b 1 when
compared to examples from current clinical patent estates, with
correspondingly improved activity at a lower dose when profiled in
a T-cell gut-homing pharmacodynamic model. In parallel, we are
using the PatientSeek platform to identify stratification signals
in IBD patients that could inform the clinical development path for
the <ALPHA>4<BETA>7 programme.
Haematological cancer (MALT-1 Inhibitor)
In partnering process
MALT1 is one of the key regulators of B-cell receptor (BCR) and
T-cell receptor (TCR) signalling. Mutations that lead to
constitutive activation of MALT1 are associated with aggressive
forms of non-Hodgkin B-cell lymphoma and inhibition of MALT1 has
potential therapeutic applicability as a mono therapy for
MALT1-driven cancers such as activated B-cell diffuse large B-cell
lymphoma (ABC-DLBCL) and in combination with BTK and Bcl inhibitors
across multiple haematological indications, as well as broader
potential in solid tumours and inflammation.
Our Conformetrix technology has yielded multiple structurally
distinct series. Profiling of a Lead compound in a mouse xenograft
study has shown equivalent efficacy at equivalent dose to the
Johnson & Johnson clinical compound JnJ-67856633 (in Phase 1)
and the programme is progressing to complete the datapack on a set
of preclinical candidate molecules.
New discovery early-stage programmes
Expansion of Pipeline
As we look to scale our portfolio, investigation of a number of
targets across a range of immuno-inflammatory diseases are being
resourced to identify those with the highest potential to warrant
increased commitment of resources to progress novel series into
Lead Optimisation and beyond. These programmes target clear unmet
medical need, combined with significant commercial potential and a
unique opportunity to produce valuable chemical equity through
interpretation of conformational insight via C4XD's Conformetrix
technology. Additionally, we are using our PatientSeek platform to
inform our target selection choices, based on identification of
patient stratification opportunities. Details of each programme
will be provided once they have matured to Lead Optimisation
stage.
Partnered portfolio
Inflammation (NRF2 Activator)
Programme continues to move forward under a license agreement
with AstraZeneca
C4XD signed an exclusive worldwide licensing agreement with
AstraZeneca in November 2022, worth up to $402 million, for C4XD's
NRF2 Activator programme. AstraZeneca will develop and
commercialise an oral therapy for the treatment of inflammatory and
respiratory diseases with a lead focus on chronic obstructive
pulmonary disease (COPD). Under the terms of the agreement, C4XD
has received an upfront payment of $2 million, with the potential
to receive a further $400 million in preclinical development,
clinical development and commercial milestones, as well as tiered
mid-single digit royalties upon commercialisation.
Inflammation is a key driver in many pathological conditions.
NRF2 plays a pivotal role in controlling the expression of
antioxidant genes that ultimately exert anti-inflammatory
functions. Targeting the NRF2 pathway to reduce inflammatory damage
offers the potential for a new approach to treat a variety of
inflammatory diseases. Interest in this therapeutic approach across
the industry covers multiple therapeutic areas including chronic
obstructive pulmonary disease, atopic dermatitis, IBD, pulmonary
arterial hypertension and sickle cell disease.
Inflammation (IL-17A Inhibitor)
Sanofi-led programme making significant progress
Under the exclusive worldwide licensing agreement worth up to
EUR414 million, Sanofi continues to make strong preclinical
progress towards the second milestone; C4XD received the first
milestone payment of EUR3 million in July 2022. The small molecules
in C4XD's oral IL-17A inhibitor programme can selectively block
IL-17 activity whilst maintaining molecular size of the molecule in
the traditional "drug-like" range. Sanofi has development and
commercial rights to the programme and is continuing to work with
C4XD in the next discovery phase, utilising our Conformetrix
technology, interpretation and application to compound design as
the programme progresses towards the clinic.
Consolidated statement of comprehensive income
for the year ended 31 July 2023
Notes 2023 2022
GBP000 GBP000
------------------------------------------- ------ --------- ---------
Revenue 4 1,710 2,699
Cost of sales (38) (130)
------------------------------------------- ------ --------- ---------
Gross profit 1,672 2,569
Research and development expenses (10,894) (9,426)
Administrative expenses (4,192) (3,665)
Operating loss 5 (13,414) (10,522)
------------------------------------------- ------ --------- ---------
Finance income 7 22 -
Finance costs 7 (24) (12)
Loss before taxation (13,416) (10,534)
Taxation 8 2,305 2,374
------------------------------------------- ------ --------- ---------
Loss for the year and total comprehensive
loss for the year (11,111) (8,160)
------------------------------------------- ------ --------- ---------
Loss per share
Basic loss for the year 9 (4.42)p (3.57)p
Diluted loss for the year 9 (4.42)p (3.57)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
(2022: 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 2023
Issued Share-Based Capital Retained
equity Share Warrant Payment Merger contribution earnings
capital premium Reserve Reserve reserve reserve reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- --------- --------- --------- ------------ --------- -------------- ---------- ---------
At 31 July 2021 4,302 53,043 979 1,191 920 195 (41,344) 19,286
--------------------- --------- --------- --------- ------------ --------- -------------- ---------- ---------
Loss for the year
and total
comprehensive
loss for the year - - - - - - (8,160) (8,160)
--------------------- --------- --------- --------- ------------ --------- -------------- ---------- ---------
Exercise of options 3 15 - - - - - 18
Exercise of warrants 11 297 (11) - - - 11 308
Share-based payments - - 352 - - - 352
--------------------- --------- --------- --------- ------------ --------- -------------- ---------- ---------
Transactions with
owners 14 312 (11) 352 - - 11 678
--------------------- --------- --------- --------- ------------ --------- -------------- ---------- ---------
At 31 July 2022 4,316 53,355 968 1,543 920 195 (49,493) 11,804
--------------------- --------- --------- --------- ------------ --------- -------------- ---------- ---------
Loss for the year
and total
comprehensive
loss for the year - - - - - - (11,111) (11,111)
--------------------- --------- --------- --------- ------------ --------- -------------- ---------- ---------
Issue of share
capital 228 5,467 - - - - - 5,695
Expenses of placing - (287) - - - - - (287)
Exercise of options 1 5 - - - - - 6
Share-based payments - - - 425 - - - 425
--------------------- --------- --------- --------- ------------ --------- -------------- ---------- ---------
Transactions with
owners 229 5,185 - 425 - - - 5,839
--------------------- --------- --------- --------- ------------ --------- -------------- ---------- ---------
As at 31 July 2023 4,545 58,540 968 1,968 920 195 (60,604) 6,532
--------------------- --------- --------- --------- ------------ --------- -------------- ---------- ---------
Company statement of changes in equity
for the year ended 31 July 2023
Issued Share-Based Retained
equity Share Warrant Payment earnings
capital premium Reserve Reserve reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- --------- --------- --------- ------------ ---------- --------
At 31 July 2021 4,302 53,043 979 1,162 13 59,499
----------------------------- --------- --------- --------- ------------ ---------- --------
Loss for the year and total - - - - - -
comprehensive loss for the
year
----------------------------- --------- --------- --------- ------------ ---------- --------
Exercise of options 3 15 - - - 18
Exercise of warrants 11 297 (11) - 11 308
Share-based payments - - 352 - 352
----------------------------- --------- --------- --------- ------------ ---------- --------
Transactions with owners 14 312 (11) 352 11 678
----------------------------- --------- --------- --------- ------------ ---------- --------
At 31 July 2022 4,316 53,355 968 1,514 24 60,177
----------------------------- --------- --------- --------- ------------ ---------- --------
Loss for the year and total
comprehensive loss for the
year - - - - (3,810) (3,810)
----------------------------- --------- --------- --------- ------------ ---------- --------
Issue of share capital 228 5,467 - - - 5,695
Expenses of placing - (287) - - - (287)
Exercise of options 1 5 - - - 6
Share-based payments - - - 425 - 425
----------------------------- --------- --------- --------- ------------ ---------- --------
Transactions with owners 229 5,185 - 425 - 5,839
----------------------------- --------- --------- --------- ------------ ---------- --------
As at 31 July 2023 4,545 58,540 968 1,939 (3,786) 62,206
----------------------------- --------- --------- --------- ------------ ---------- --------
Statements of financial position
at 31 July 2023
31 July 31 July 31 July 31 July
2023 2023 2022 2022
Group Company Group Company
Notes GBP000 GBP000 GBP000 GBP000
------------------------------ ------ --------- -------- --------- --------
Assets
Non-current assets
Tangible Fixed Assets 10 39 - 47 -
Right of Use Assets 10 402 - 707 -
Intangible assets 11 54 - 61 -
Goodwill 12 1,192 - 1,192 -
Investments in and loans
to subsidiaries 13 - 62,206 - 60,183
1,687 62,206 2,007 60,183
------------------------------ ------ --------- -------- --------- --------
Current assets
Trade and other receivables 14 572 - 3,069 -
Income tax asset 15 2,305 - 4,427 -
Cash and cash equivalents 16 4,220 - 5,079 -
------------------------------ ------ --------- -------- --------- --------
7,097 - 12,575 -
------------------------------ ------ --------- -------- --------- --------
Total assets 8,784 62,206 14,582 60,183
------------------------------ ------ --------- -------- --------- --------
Liabilities
Current liabilities
Trade and other liabilities 17 1,828 - 2,049 6
Lease liabilities 18 337 - 305 -
------------------------------ ------ --------- -------- --------- --------
2,165 - 2,354 6
------------------------------ ------ --------- -------- --------- --------
Non-Current liabilities
------------------------------ ------ --------- -------- --------- --------
Lease liabilities 18 87 - 424 -
------------------------------ ------ --------- -------- --------- --------
87 - 424 -
------------------------------ ------ --------- -------- --------- --------
Total liabilities 2,252 - 2,778 6
------------------------------ ------ --------- -------- --------- --------
Net assets 6,532 62,206 11,804 60,177
------------------------------ ------ --------- -------- --------- --------
Capital and reserves
Issued equity capital 19 4,545 4,545 4,316 4,316
Share premium 19 58,540 58,540 53,355 53,355
Share-based payment reserve 20 1,968 1,939 1,543 1,514
Warrant reserve 21 968 968 968 968
Merger reserve 22 920 - 920 -
Capital contribution reserve 23 195 - 195 -
Retained earnings 24 (60,604) (3,786) (49,493) 24
------------------------------ ------ --------- -------- --------- --------
Total equity 6,532 62,206 11,804 60,177
------------------------------ ------ --------- -------- --------- --------
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 loss of
GBP3,810,000 for the year ended 31 July 2023 (2022: loss of
GBPnil). Current year's loss in its entirety was as a result of the
provision for impairment of the Company's investment in its
subsidiary as described in the note 13.
Approved by the Board and authorised for issue on 13 December
2023.
Clive Dix
Chief Executive Officer
13 December 2023
Registered number: 09134041
Cash flow statements
For the year ended 31 July 2023
31 July 31 July 31 July 31 July
2023 2023 2022 2022
Group Company Group Company
Notes GBP000 GBP000 GBP000 GBP000
------------------------------------ ------ --------- ------------ --------- ----------
Profit / (loss) after interest
and tax (11,111) (3,810) (8,160) -
Adjustments for:
Depreciation of tangible fixed
assets 10 26 - 23 -
Depreciation of right-of-use
assets 10 305 - 212 -
Amortisation of intangible
assets 11 7 - 8 -
Net foreign exchange differences (89) - - -
Provision for impairment of
investments in subsidiaries 13 - 3,810 - -
Share-based payments 20 425 - 352 -
Finance income 7 (22) - - -
Interest payments on leases 25 24 - 12 -
Taxation 8 (2,305) - (2,374) -
Changes in working capital:
(Increase)/decrease in trade
and other receivables 14 2,497 - (2,495) 6
Increase/(decrease) in trade
and other payables 17 (211) (6) 338 6
Cash (used in) / generated
from operating activities (10,454) (6) (12,084) 12
------------------------------------ ------ --------- ------------ --------- ----------
Research and development tax 4,427 - - -
credit received
Net cash (used in) / from
operating activities (6,027) (6) (12,084) 12
------------------------------------ ------ --------- ------------ --------- ----------
Cash flows from investing
activities
Increase in investment in and
loans to subsidiaries - (5,408) - (338)
Purchases of tangible fixed
assets 10 (18) - (37) -
Finance income 7 22 - - -
Net cash from / (used in)
investing activities 4 (5,408) (37) (338)
------------------------------------ ------ --------- ------------ --------- ----------
Cash flows from financing
activities
Payment of lease liabilities 25 (329) - (229) -
Proceeds from issues of ordinary
share capital 19 5,701 5,701 326 326
Expenses of share capital issue 19 (287) (287) - -
Net cash from financing activities 5,085 5,414 97 326
------------------------------------ ------ --------- ------------ --------- ----------
Net decrease in cash and cash
equivalents (938) - (12,024) -
Net foreign exchange differences 79 - - -
Cash and cash equivalents at
the start of the year 5,079 - 17,103 -
------------------------------------ ------ --------- ------------ --------- ----------
Cash and cash equivalents
at the end of the year 4,220 - 5,079 -
Cash , cash equivalents and
deposits at the end of the
year 16 4,220 - 5,079 -
------------------------------------ ------ --------- ------------ --------- ----------
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
2023.
The financial statements of the Company and the Group for the
year ended 31 July 2023 were authorised for issue by the Board of
Directors on 13 December 2023 and the statement of financial
position was signed on the Board's behalf by Clive Dix.
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 UK adopted international accounting
standards as they apply to the financial statements of the Group
for the period ended 31 July 2023.
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
Group has reported consolidated operating loss for the year
ended 31 July 2023 of GBP13.4 million (2022: GBP10.5m), revenues of
GBP1.7 million (2022: GBP2.7m) and net cash used in operating
activities of GBP6.0 million (2022: GBP12.1m). 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 has executed an asset purchase agreement for Indivior
PLC to acquire the proprietary rights to C4XD's oral Orexin-1
receptor antagonist for substance use disorder on 31 July 2023 with
payment of GBP15.95 million being settled in full in August 2023.
The Group had cash and cash equivalents at 31 July 2023 of GBP4.2
million (2022: GBP5.1m) and at 31 October 2023 had cash resources
of GBP16.0 million.
The Board has prepared cash flow forecasts covering at least 12
months from the date of signing the financial statements, including
base case forecast with further milestone payments received from
the partnered programs and severe but plausible downside
scenario.
The base case cash flow forecast, which assumes partnered
programmes progress to deliver next milestone payments, show that
no additional funding will be required in the forecasted period.
The severe but plausible downside scenario reflects a case with no
income modelled, receipt of research and development tax credits
from HMRC 11 months after the year end, a 10% increase in Contract
Research Organisations (CRO) costs for continuing programmes, and
worse than anticipated inflationary impacts on other costs
including scientific, operational and staff costs. The base case
and severe but plausible downside cash flow forecasts, which both
assume no further fund raising, indicate that the Group and Company
have sufficient cash resources to meet their liabilities as they
fall due for at least 12 months from the date of approval of these
financial statements.
In terms of the period beyond the 12 month going concern
assessment period, the severe but plausible downside scenario,
indicates that existing cash resources would be exhausted in
approximately April 2025. The nature of the Group's business model
and its research intensive operations create a requirement for
additional funding until the Group is generating a higher level of
revenue from partnered programmes. However, the Board have a
reasonable expectation they will be able to raise further equity
financing to support their ongoing research activities. The Board
also have a reasonable expectation that further milestone payments
will be achieved within the forecast period. There can be no
guarantees that either of these events will occur and they are
therefore not reflected in the Board's severe but plausible
downside cash flow forecast.
Assessment of expenditure and timing of revenue or fundraising
is continually and diligently monitored and, if potential delays
were identified, the Board consider they would be able to take
additional, reasonable mitigating actions. This includes but is not
limited to a reduction in expenditure on platform development
activities to focus purely on commercialising earlier stage drug
molecules, and reducing other discretionary administrative
expenditure, which would enable the Group and Company to continue
to operate within its existing cash resources for an extended
period.
Based on the above factors the Board are satisfied that the
Group and Company have adequate resources to enable the Group and
Company to continue discharging their liabilities and realising
their assets for at least 12 months from the date of approval of
these financial statements. Accordingly, they continue to adopt the
going concern basis in preparing the Group and Company financial
statements.
Functional and presentational currency
These financial statements are presented in Pounds Sterling,
which is also the functional currency of the Company and its
subsidiaries. All financial information presented has been rounded
to the nearest thousand.
Use of judgements and estimates
The preparation of financial statements requires management to
make estimates and judgements that affect the amounts reported for
assets and liabilities as at the reporting date and the amounts
reported for revenues and expenses during the year. The nature of
estimation means that actual amounts could differ from those
estimates. Estimates and judgements used in the preparation of the
financial statements are continually reviewed and revised as
necessary.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to estimates are recognised prospectively.
Judgements
Judgements made in applying the Group's accounting policies that
have the most significant impact on the amounts recognised in the
financial statements are:
Revenue recognition
When determining the correct amount of revenue to be recognised,
the Group includes making certain judgements when determining the
appropriate accounting treatment of key customer contract terms in
accordance with the applicable accounting standards.
In the prior year, C4XD has recognised revenue from a non-sales
based milestone received from Sanofi, along with revenue in respect
of the ongoing research work plan. In the current year, further
revenue from the ongoing research work plan has been
recognised.
Whether the non-sales based milestones under the Sanofi contract
will be met and the associated payments become due is highly
susceptible to factors outside of the Group's influence,
principally because they involve the judgement of third parties
like Regulatory Authorities. The revenue associated with these
milestones should be recognised at the date that the uncertainty
surrounding each milestone resolves and given the nature of the
milestones the Group would expect this to be on the date that each
milestone is met. On that basis, the revenue associated with the
first milestone achieved has been recognised in full in the prior
year.
With respect to the research work plan, the Group has recognised
revenue as follows. The cost has been established by taking the
total number of days spent on the project in the year by its
employees and multiplying this by the average FTE cost established
at initiation of the project. A commercial margin was then applied
to the cost of these employees to calculate the revenue and this
was then released from deferred income and recognised as revenue.
GBP42,000 has been released from deferred income and recognised as
revenue in the year in respect of the research work plan (2022:
GBP144,000).
When this deal was signed with Sanofi in the year ending 31 July
2021, 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 deferred. The alternative judgement could
have been that the transfer of intellectual property and the
delivery of research services is one performance obligation which
would have resulted in the upfront payment of GBP6 million being
recognised over the length of the research work plan estimated at
18 months at the time. The Group concluded that these were separate
performance obligations as both the intellectual property and the
research work programme could be sold separately and the customer
can benefit from each on its own or together with readily available
resources, so they are capable of being distinct and they are set
out as separate promises in the contract.
Additional judgement was required in determining whether the
transfer of intellectual property gave the customer use at a time
which the licence was granted or a right to access. Management
determined that the customer received the right to the drug
molecule on the date that the IP was transferred over and therefore
the cash payment received constituted handing over control of the
IP to Sanofi and was not dependent on any future outcomes. The
impact of this judgement resulted in recognising revenue in full of
GBP5.5 million in the year ending 31 July 2021, 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 from the year ending 31 July 2021 into
the year ending 31 July 2022.
On 25 November 2022, C4XD entered a worldwide license agreement
with AstraZeneca for C4XD's NRF2 Activator programme. Judgement was
required in identifying the number of performance obligations in
the contract, specifically whether the transfer of intellectual
property, provision of ad-hoc consulting and technical scientific
support and facilitation of the completion of on-going research
represented different performance obligations.
The Group applied the guidance in IFRS 15 by considering whether
these three performance obligations were distinct from each other.
It was determined that the revenue from provision of consulting and
technical support is to be recorded over time and consideration
allocated to it was calculated on a cost-plus margin basis using
the FTE rate that was defined in the agreement. Total consideration
of GBP15,500 was initially deferred and then recognised in the
second half of the current period. The alternative judgement could
be that the transfer of intellectual property and the delivery of
consulting and support services is one performance obligation which
would result in the upfront payment of GBP1.7 million being
recognised over the time together with provision of consulting and
technical support, however, this would still result in GBP1.7
million being recognised in the current period given the delivery
of the consulting and support services was also completed within
the financial year. In respect of facilitation of the completion of
on-going research, C4XD was deemed to be an agent in this
transaction on the basis that C4XD performance obligation is to
arrange for the services to be provided and not to provide services
itself and therefore C4XD should recognise revenue on the net
basis. In the current period no revenues were recorded in respect
of this performance obligation.
On 31 July 2023, C4XD entered into an asset purchase agreement
for Indivior to acquire the proprietary rights to C4XD's oral
Orexin-1 receptor antagonist. Judgement was required in identifying
the number of performance obligations in the contract as well as
the appropriate date for revenue to be recognised. It was
determined that the contract only had one performance obligation to
sell the asset. After applying the guidance of IFRS 15, it was
determined that the revenue should be recognised at a point in time
as none of the criteria for recognising revenue over time were
satisfied. The revenue will therefore be recognised on the closing
date, 4 August 2023, when in line with the agreement the control
over the asset passes to Indivior.
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.
The following describes estimations made in connection with the
revenue deferred from the contract with Sanofi signed in the year
ending 31 July 2021 which has impact on the current year where part
of the deferred revenue was recognised. Firstly, the allocation of
the transaction price for the revenue relating to the ongoing
research services for Sanofi was calculated on a cost-plus margin
basis. The existing salaries of five full time equivalents ("FTE")
which were available under the terms of the contract were combined
and a commercial margin was applied to the cost of these employees.
In calculating the cost, an average FTE day rate was taken and
multiplied by the total number of days expected to be worked over
an 18-month period from the date of signing the agreement which
resulted in GBP0.5 million of revenue being spread over the length
of the research work programme.
To arrive at the commercial margin used, management reviewed the
results from comparable drug discovery services, both emerging and
well-established CROs, to understand the margins that they are
achieving. The Company's platform is unproven and unvalidated
commercially as a stand-alone paid-for drug discovery software and
consequently any paid-for commercial access to the software would,
at this stage, effectively be beta-testing and therefore attract a
margin at the lower range of those achieved by other providers.
The allocation of the transaction price for the revenue relating
to the consulting and support activities for AstraZeneca was also
calculated on a cost-plus margin basis. In this case the FTE rate
was already defined in the agreement for the work in excess of the
fixed number of hours allowed under the agreement.
-- Investments in and loans to subsidiaries
Loans to subsidiaries are tested for impairment using an
expected credit loss model. This requires estimation of the
probability of default, the exposure at default and the loss given
default in order to calculate the expected credit loss of the loans
to subsidiaries. The key judgement made by management in the
expected credit loss calculations are the definition of default and
the probability assumptions of the future cashflows and the timing
of the cashflows. The definition of default and the probability
sensitivities are disclosed in Note 13.
The recoverable amount of the Parent's investment in subsidiary
is tested for impairment when indicators of impairment (or reversal
of impairment) are identified. The potential recoverable amounts
have been determined based on a value in use model. As the
recoverable amount is less than the carrying amount, the provision
of GBP3,810,000 was recorded in the current year (2022: GBPnil).
These calculations require the use of estimates both in arriving at
the expected future cash flows and the application of a suitable
discount rate in order to calculate the present value of these cash
flows. Cash flow estimates include signing future licence
agreements and the receipt of further milestone licence payments,
the timing of which are uncertain. These estimates were benchmarked
against the Group's own experience of such deals and external
sources of information within the industry. The assumptions and
related sensitivity analysis in these calculations are included in
note 13.
3. Significant accounting policies
The accounting policies set out below are consistent with those
of the previous financial year and are applied consistently by
Group entities.
Basis of consolidation
The Group financial statements consolidate the financial
statements of C4X Discovery Holdings plc and the entities it
controls (its subsidiaries) drawn up to 31 July each year.
All business combinations are accounted for by applying the
acquisition method as at the acquisition date, which is the date on
which control is transferred to the Group.
The Group measures goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the
acquiree; plus
the fair value of the existing equity interest in the acquiree;
less
the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
Transaction costs related to the acquisition, other than those
associated with the issue of debt or equity securities, that the
Group incurs in connection with a business combination are expensed
as incurred.
Subsidiaries are all entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
All C4X Discovery Holdings plc's subsidiaries are 100% owned.
Subsidiaries are fully consolidated from the date control
passes.
All intra-Group transactions, balances and unrealised gains on
transactions between Group companies are eliminated on
consolidation. Subsidiaries' accounting policies are amended where
necessary to ensure consistency with the policies adopted by the
Group.
Foreign currency transactions
Transactions in foreign currencies are initially recorded in the
functional currency by applying the spot rate ruling at the date of
the transaction. Monetary assets and liabilities denominated in
foreign currencies are retranslated at the functional currency rate
of exchange ruling at the reporting date. All differences are taken
to the consolidated statement of comprehensive income.
Segmental reporting
An operating segment is a component of an entity that engages in
business activities from which it may earn revenues and incur
expenses, whose operating results are regularly reviewed by the
entity's chief operating decision maker to make decisions about
resources to be allocated to the segment and assess its
performance, and for which discrete financial information is
available. As at the reporting date the Group operated with only a
single segment.
Revenue
IFRS 15 establishes principles for reporting useful information
to users of financial statements about the nature, amount, timing
and uncertainty of revenue and cash flows arising from an entity's
contracts with customers. The standard establishes a five-step
principle-based approach for revenue recognition and is based on
the concept of recognising an amount that reflects the
consideration for performance obligations only when they are
satisfied and the control of goods or services is transferred.
All of the Group's contract revenue is generated from licences
and services.
Management reviewed the contracts where the Group received
consideration in order to determine whether or not they should be
accounted for in accordance with IFRS 15. To date, the Group has
entered into four contracts - the two of which were signed in the
current year - that generate revenue and fall within the scope of
IFRS 15.
As set out in more detail within note 2, it was determined that
there were two performance obligations within the Sanofi contract,
the first to being the transfer of IP and the second being the
provision of research services through the 'research work
programme'. The contract with AstraZeneca had three performance
obligations - the transfer of IP, provision of consulting and
technical scientific support and facilitation of the completion of
on-going research. The contract with Indivior was determined to
have single performance obligation, being sale of the asset.
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 right-to-use 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 customer 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 customer. The allocation of the transaction
price to the sale of right-to-use licences was the remainder of the
payments received less consideration allocated to other performance
obligations.
The contracts with Sanofi and AstraZeneca also include future
milestone payments which are contingent on the various future
events such as passing clinical trials testing at a future point in
time. As there can be significant variability in final outcomes,
the Group applies a constraint when measuring the variable element
within revenue, so that revenue is recognised at a suitably
cautious amount. The objective of the constraint is to ensure that
it is highly probable that a significant reversal of revenue will
not occur when the uncertainties are resolved. The constraint is
applied by making suitably cautious estimates of the inputs and
assumptions used in estimating the variable consideration. The
constraints applied in recognising revenue mean that the risk of a
material downward adjustment to revenue in the next financial year
is low. The company recognised the first of these milestones from
the contract with Sanofi in the prior year when it was achieved and
no further milestones were achieved in the current year.
Royalty payments will be received by the Group if the drugs are
marketed and sold by Sanofi or AstraZeneca respectively. Revenue on
royalty payments are recognised when they are earned which for the
Group will be when the drugs have been developed and a set number
of products sold. At this point, the royalty rate owed to Group
will be applied to the portion of the net sales of royalty-bearing
products that fall within the indicated range as set out in the
sales agreement.
Revenue generated from services agreements is determined to be
recognised over time when it can be determined that the services
meet one of the following: (a) the customer simultaneously receives
and consumes the benefits provided by the entity's performance as
the entity performs; (b) the entity's performance creates or
enhances an asset that the customer controls as the asset is
created or enhanced; or (c) the entity's performance does not
create an asset with an alternative use to the entity and the
entity has an enforceable right to payment for performance
completed to date.
The Sanofi and AstraZeneca contracts both include a separate
performance obligation to deliver services. It was determined that
the services provided under the terms of these contracts meet
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 services has been calculated on a
cost-plus margin basis. Contract with Indivior did not meet
criteria for recognition over time and thus the revenue will be
recognised at the point in time when control over the asset is
transferred.
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 obligations have not yet occurred or have
not yet been completed. The Company classifies non-current deferred
revenue for any transaction which is expected to be recognised
beyond one year.
Research and development
Research costs are charged in the consolidated statement of
comprehensive income as they are incurred. Development costs will
be capitalised as intangible assets when it is probable that future
economic benefits will flow to the Group. Such intangible assets
will be amortised on a straight-line basis from the point at which
the assets are ready for use over the period of the expected
benefit and will be reviewed for impairment at each reporting date
based on the circumstances at the reporting date.
The criteria for recognising expenditure as an asset are:
-- it is technically feasible to complete the product;
-- management intends to complete the product and use or sell it;
-- there is an ability to use or sell the product;
-- it can be demonstrated how the product will generate probable future economic benefits;
-- adequate technical, financial and other resources are
available to complete the development, use and sale of the product;
and
-- expenditure attributable to the product can be reliably measured.
Development costs are currently charged against income as
incurred since the criteria for their recognition as an asset are
not met.
The Group utilises the government's R&D tax credit scheme
for all qualifying UK R&D expenditure. The credits are
accounted for under IAS 12 and presented in the profit and loss as
a deduction from current tax expense to the extent that the entity
is entitled to claim the credit in the current reporting
period.
Leases
The Group applies the leasing standard IFRS16, to all contracts
identified as leases at their inception, unless they are considered
short-term or where the asset is of a low underlying value.
The Group has lease contracts in relation to property and office
equipment. At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to
control the use of an identified asset, the Group uses the
definition of a lease in IFRS 16.
As a lessee
At commencement or on modification of a contract that contains a
lease component, the Group allocates the consideration in the
contract to each lease component on the basis of its relative
stand-alone prices. However, for leases of property the Group has
elected not to separate non-lease components and account for the
lease and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date, at which point the Group assesses
the term for which it is reasonably certain to hold that lease. The
right-of-use asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or
the site on which it is located, less any lease incentives
received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the end of the
lease term, unless the lease transfers ownership of the underlying
asset to the Group by the end of the lease term or the cost of the
right-of-use asset reflects that the Group will exercise a purchase
option. In that case, the right-of-use asset will be depreciated
over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition,
the right-of-use asset is periodically reduced by impairment
losses, if any, and adjusted for certain remeasurements of the
lease liability
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the Group's incremental
borrowing rate. Generally, the Group uses its incremental borrowing
rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining
interest rates from various external financing sources and makes
certain adjustments to reflect the terms of the lease and type of
the asset leased.
Lease payments included in the measurement of the lease
liability comprise the following:
-- Fixed payments, including in-substance fixed payments;
-- Variable lease payments that depend on an index or a rate,
initially measured using the index or rate as at the commencement
date;
-- amounts expected to be payable under a residual value guarantee; and
-- the exercise price under a purchase option that the Group is
reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise an
extension option, and penalties for early termination of a lease
unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate,
if there is a change in the Group's estimate of the amount expected
to be payable under a residual value guarantee, if the Group
changes its assessment of whether it will exercise a purchase,
extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the
right-of-use asset or is recorded in profit or loss if the carrying
amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets that do not meet the
definition of investment property in 'property, plant and
equipment' and lease liabilities in 'loans and borrowings' in the
statement of financial position. On a significant event, such as
the lease reaching its expiry date or the likely exercise of a
previously unrecognised break clause, the lease term is re-assessed
by management as to how long we can be reasonably certain to stay
in that property, and a new lease agreement or modification (if the
change is made before the expiry date) is recognised for the
re-assessed term.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and
lease liabilities for leases of low-value assets and short-term
leases. Assets which fall into this category include office
equipment. The Group recognises the lease payments associated with
these leases as an expense on a straight-line basis over the lease
term. The value of these leases is less than GBP1,000 per
annum.
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 asset's recoverable amount is the higher of an assets or
cash-generating unit's fair value less costs to sell and its value
in use and is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of
those from other assets or groups of assets. Where the carrying
value of an asset exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount.
In determining fair value less costs of disposal, an appropriate
valuation model is used, these calculations are corroborated by
valuation multiples, or other available fair value indicators.
Impairment losses on continuing operations are recognised in the
consolidated statement of comprehensive income in those expense
categories consistent with the function of the impaired asset.
An assessment is made at each reporting date as to whether there
is any indication that previously recognised impairment losses may
no longer exist or may have decreased. If such indication exists,
the recoverable amount is estimated. A previously recognised
impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset's recoverable amount since
the last impairment loss was recognised. If that is the case the
carrying amount of the asset is increased to its recoverable
amount. That increased amount cannot exceed the carrying amount
that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years. Such
reversal is recognised in the consolidated statement of
comprehensive income unless the asset is carried at revalued
amount, in which case the reversal is treated as a valuation
increase. After such a reversal the depreciation charge is adjusted
in future periods to allocate the asset's revised carrying amount,
less any residual value, on a systematic basis over its remaining
useful life.
The carrying values of plant, equipment, intangible assets and
goodwill as at the reporting date have not been subjected to
impairment charges.
Investments in subsidiaries
Investments in subsidiaries are stated in the Company's
statement of financial position at cost less provision for any
impairment.
Trade and other receivables
Trade receivables, which generally have 30-to-60-day terms, are
measured at amortised cost. Loss allowances for trade receivables
are measured at an amount equal to a lifetime expected credit loss
("ECL"). Lifetime ECLs are the ECLs that result from all possible
default events over the expected life of the receivables. ECLs are
a probability weighted estimate of credit losses. Credit losses are
measured as the present value of all cash shortfalls. The gross
carrying amount of trade receivables are written off to the extent
that there is no realistic prospect of recovery.
Cash, cash equivalents and short-term investments and cash on
deposit
Cash and cash equivalents comprise cash at hand and deposits
with maturities of three months or less. Short-term investments and
cash on deposit comprise deposits with maturities of more than
three months, but no greater than 12 months.
Trade and other payables
Trade and other payables are non-interest bearing and are
initially recognised at fair value. They are subsequently measured
at amortised cost using the effective interest rate method.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event and
it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
The expense relating to any provision is presented in the
consolidated statement of comprehensive income, net of any expected
reimbursement, but only where recoverability of such reimbursement
is virtually certain.
Provisions are discounted using a current pre-tax rate that
reflects, where appropriate, the risk specific to the liability.
Where discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
There were no provisions at 31 July 2023 (2022: 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 (2022: 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 (2022: 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
It was determined that the warrants constitute equity on a basis
that these must be settled exchanging a fixed amount of cash for a
fixed number of equity instruments. 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 UK and are effective for
annual periods commencing on or after 1 January 2023 or ending 31
July 2024 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
------------------------------------------------------------ ---------------
Deferred Tax related to Assets and Liabilities arising 1 January 2023
from a Single Transaction (Amendments to IAS 12)
------------------------------------------------------------ ---------------
Definition of Accounting Estimates (Amendments to IAS 1 January 2023
8)
------------------------------------------------------------ ---------------
Disclosure of Accounting policies (Amendments to IAS 1 January 2023
1 and IFRS Practice Statement 2)
------------------------------------------------------------ ---------------
IFRS 17 Insurance Contracts 1 January 2023
------------------------------------------------------------ ---------------
Amendments to IAS 1 Presentation of Financial Statements 1 January 2024
------------------------------------------------------------ ---------------
International Tax Reform-Pillar Two Model Rules (Amendments 1 January 2023
to IAS 12)
------------------------------------------------------------ ---------------
Lease Liability in a Sale and Leaseback (Amendments 1 January 2024
to IFRS 16)
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
2023 2022
--------------------------------------------
GBP000 GBP000
-------------------------------------------- ------- -------
Revenue recognised at a point in time
- Right-to-use licence revenue 1,652 -
- Milestone revenue - 2,555
Revenue recognised over time
- Research services revenue 42 144
- Consultancy services 16 -
-------------------------------------------- ------- -------
Total revenue 1,710 2,699
-------------------------------------------- ------- -------
Revenue in the current period is generated from the contracts
with Sanofi and AstraZeneca.
The revenue from the right-to-use licence agreement with
AstraZeneca was recognised at a single point in time when transfer
of intellectual property was completed. T he revenue from provision
of consulting and technical support services under the same
agreement was recognised over time when the services were
provided.
The revenue attributed to the delivery of research services was
generated from the contract with Sanofi and is recognised over
time. The progress is measured based on costs incurred to date as
compared with the total projected costs for both the current and
prior periods.
In the prior period, the milestone revenue from the contract
with Sanofi was determined to have one performance obligation and
was recognised at a point in time. The revenue attributed to the
delivery of research services was recognised on the same basis as
in the current period.
Contract balances
Receivable balances in respect of contracts with customers are
as follows:
2023 2022
-------------------
GBP000 GBP000
------------------- ------- -------
Trade receivables - 2,555
------------------- ------- -------
Contract liabilities represent the Group's obligation to provide
services to a customer for which consideration has been invoiced.
Contract liabilities are included within deferred revenue on the
Consolidated Statement of Financial Position:
2023 2022
-------------------------------
GBP000 GBP000
------------------------------- ------- -------
Deferred revenue - short term 207 250
Deferred revenue - long term - -
------------------------------- ------- -------
Total deferred revenue 207 250
------------------------------- ------- -------
Remaining performance obligations under the contract with Sanofi
represent the value of partially satisfied performance obligations
within contracts with an original expected contract term that is
greater than one year and for which fulfilment of the contract has
started as of the end of the reporting period. The total remaining
consideration allocated to remaining performance obligations at 31
July 2023 was GBP207,000 (2022: GBP250,000). The Group expects to
recognise the remaining performance obligations as revenue and will
do so based upon costs incurred to date as compared with the total
projected costs.
Less than Greater Total
1 year than 1
year
GBP000 GBP000 GBP000
----------------------------------- ---------- -------- -------
Remaining performance obligations 207 - 207
----------------------------------- ---------- -------- -------
Impairment losses recognised on receivables arising from
contracts with customers are GBPnil (2022: GBPnil).
Typical payment terms are 60 days after the occurrence of the
relevant milestone.
5. Operating loss
31 July 31 July
2023 2022
The Group GBP000 GBP000
------------------------------------------------------ -------- --------
Operating loss is stated after charging/(crediting):
Depreciation of property, plant and equipment (see
note 10) 26 23
Depreciation on right-of-use assets (see note 10) 305 212
Amortisation of intangible assets (see note 11) 7 8
Foreign exchange (gains)/losses 154 149
Research and development expense* 10,894 9,426
Auditor's remuneration
Audit services:
-Fees payable to Company auditor for the audit
of the parent and the consolidated accounts 220 200
Fees payable in respect of the audit of subsidiary
companies:
-Auditing the accounts of subsidiaries pursuant
to legislation 60 50
-Other services 23 9
------------------------------------------------------ -------- --------
Total auditor's remuneration 303 259
*Included within research and development expense are staff
costs totalling GBP3,480,085 (2022: GBP2,734,000) also included in
note 6.
6. Staff costs and numbers
31 July 31 July
2023 2022
GBP000 GBP000
------------------------------------------------------ -------- --------
Wages and salaries 4,262 3,445
Social security costs 542 430
Pension contributions 614 524
Share-based payments 425 309
------------------------------------------------------ -------- --------
5,843 4,708
------------------------------------------------------ -------- --------
Directors' remuneration (including benefits-in-kind)
included in the aggregate remuneration above
comprised:
Emoluments for qualifying services 904 807
------------------------------------------------------ -------- --------
Directors' emoluments (excluding social security costs but
including benefits in kind) disclosed above include GBP242,000 paid
to the highest paid Director (2022: GBP204,000).
Retirement benefits are accruing to six Directors (2022: seven
Directors).
The average number of employees during the year (including
Directors) was as follows:
31 July 31 July
2023 2022
The Group Number Number
---------------------- -------- --------
Directors 8 8
Technological staff 34 32
Administrative staff 7 8
49 48
---------------------- -------- --------
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 41, which forms part of
these audited financial statements.
7. Finance income and costs
31 July 31 July
2023 2022
The Group GBP000 GBP000
------------------------------- -------- --------
Finance income
Bank interest receivable 22 -
------------------------------- -------- --------
22 -
------------------------------- -------- --------
Finance costs
Interest on lease liabilities 24 12
------------------------------- -------- --------
24 12
------------------------------- -------- --------
8. Income tax
The tax credit is made up as follows:
31 July 31 July
2023 2022
The Group GBP000 GBP000
-------------------------------------------- --------- --------
Current income tax
Research and development income tax credit
receivable (2,305) (2,365)
Adjustment in respect of prior years - (9)
-------------------------------------------- --------- --------
(2,3205) (2,374)
-------------------------------------------- --------- --------
Deferred tax
Charge for the year - -
-------------------------------------------- ---------
Total income tax credit (2,305) (2,374)
-------------------------------------------- --------- --------
The tax assessed for the year varies from the standard rate of
corporation tax as explained below:
31 July 31 July
2023 2022
The Group GBP000 GBP000
--------------------------------------------------- --------- ---------
Loss before taxation (13,416) (10,534)
--------------------------------------------------- --------- ---------
Tax at average effective rate of 21.00% (2022:
19.00%) (2,817) (2,001)
Effects of:
Additional deduction for research and development
expenditure under SME scheme (1,984) (1,752)
Surrender of research and development relief
for receivable tax credit under SME scheme 3,752 3,099
Research and development tax credit receivable
under SME scheme (2,305) (2,365)
Tax losses carried forward for which no deferred
tax asset is recognised 955 590
Non-deductible expenses 1 -
Capital allowances in excess of deprecation
and share based payment charges carried forward
for which no deferred tax asset is recognised 93 64
Adjustment in respect of prior years - (9)
--------------------------------------------------- --------- ---------
Tax credit in income statement (2,305) (2,374)
--------------------------------------------------- --------- ---------
The government enacted a change in the main corporation tax rate
from 19% to 25% from 1 April 2023. The tax rate of 21% used above
is therefore the average corporation tax rate applicable in the
United Kingdom.
The Group qualifies for HMRC's SME R&D tax relief scheme
which for the current and prior year allows it to deduct an extra
130% (to 31 March 2023) / 86% (from 1 April 2023) of its qualifying
costs against its tax position. As the group is loss making it has
elected to claim a receivable tax credit under the scheme of
GBP2,305,000 instead of carrying forward the research and
development relief as additional tax losses. These adjustments are
included in the tax reconciliation.
The Group has accumulated losses available to carry forward
against future trading profits. The estimated value of the deferred
tax asset, measured at a standard rate of 25% (2022: 25%), is
GBP6,270,000 (2022: GBP5,107,000), of which GBPnil (2022: GBPnil)
has been recognised. Tax losses have not been recognised as an
asset as it is not yet probable that future taxable profits will be
available against which the unused tax losses can be utilised.
The Group also has a deferred tax liability being accelerated
capital allowances, for which the tax, measured at a standard rate
of 25% (2022: 25%) is GBP9,000 (2022: GBP12,000).
The Group has a deferred tax asset for share-based payments, for
which the tax, measured at a standard rate of 25% (2022: 25%), is
GBP492,000 (2022: GBP386,000).
The net deferred tax asset of GBP483,000 (2022: GBP374,000) has
not been recognised as it is not yet probable that future taxable
profits will be available against which the unused tax losses can
be utilised.
9. Earnings per share
31 July 31 July
2023 2022
The Group GBP000 GBP000
------------------------------------------------- ------------ ------------
Loss for the financial year attributable to
equity shareholders (11,111) (8,160)
------------------------------------------------- ------------ ------------
Weighted average number of shares
Ordinary shares in issue for purposes of basic
EPS 251,102,072 228,675,845
Effect of potentially dilutive ordinary shares:
Number of share options and warrants 855,664 12,231,972
Ordinary share in issue for purposes of diluted
EPS 251,957,736 240,907,817
------------------------------------------------- ------------ ------------
Basic loss per share (pence) (4.42) (3.57)
------------------------------------------------- ------------ ------------
Diluted loss per share (pence) (4.42) (3.57)
------------------------------------------------- ------------ ------------
The number of exercisable share options and warrants above are
those deemed to be potentially dilutive in nature as their exercise
price is less than the average share price for the period. As the
group made a loss in the current and comparative period the effects
of these potential ordinary shares are not dilutive.
10. Tangible fixed assets
Office equipment, Building Right-of-use Total
fixtures and improvements assets
fittings
The Group GBP000 GBP000 GBP000 GBP000
Cost
-------------------------- ------------------ -------------- ------------- -------
At 31 July 2021 252 38 548 838
-------------------------- ------------------ -------------- ------------- -------
Additions 37 - 542 579
Disposals (11) - - (11)
-------------------------- ------------------ -------------- ------------- -------
At 31 July 2022 278 38 1,090 1,406
-------------------------- ------------------ -------------- ------------- -------
Additions 18 - - 18
Disposals (14) - (253) (267)
-------------------------- ------------------ -------------- ------------- -------
As at 31 July 2023 282 38 837 1,157
-------------------------- ------------------ -------------- ------------- -------
Depreciation
-------------------------- ------------------ -------------- ------------- -------
At 31 July 2021 219 38 171 428
--------------
Provided during the year 23 - 212 235
Eliminated on disposal (11) - - (11)
-------------- -------------
At 31 July 2022 231 38 383 652
-------------------------- ------------------ -------------- ------------- -------
Provided during the year 26 - 305 331
Eliminated on disposal (14) - (253) (267)
------------------ -------------- -------------
As at 31 July 2023 243 38 435 716
-------------------------- ------------------ -------------- ------------- -------
Net book value
As at 31 July 2023 39 - 402 441
-------------------------- ------------------ -------------- ------------- -------
At 31 July 2022 47 - 707 754
-------------------------- ------------------ -------------- ------------- -------
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 2021 138 600 50 788
-------------------------- -------- ---------- --------- -------
Additions - - - -
At 31 July 2022 138 600 50 788
-------------------------- -------- ---------- --------- -------
Additions - - - -
---------
As at 31 July 2023 138 600 50 788
-------------------------- -------- ---------- --------- -------
Amortisation
-------------------------- -------- ---------- --------- -------
At 31 July 2021 69 600 50 719
-------------------------- -------- ---------- --------- -------
Provided during the year 8 - - 8
-------------------------- -------- ---------- --------- -------
At 31 July 2022 77 600 50 727
-------------------------- -------- ---------- --------- -------
Provided during the year 7 - - 7
-------------------------- -------- ---------- --------- -------
As at 31 July 2023 84 600 50 734
-------------------------- -------- ---------- --------- -------
Net book value
As at 31 July 2023 54 - - 54
-------------------------- -------- ---------- --------- -------
At 31 July 2022 61 - - 61
-------------------------- -------- ---------- --------- -------
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 2021, 31 July 2022 & 31
July 2023 1,192 1,192
Impairment
---------- -------
At 31 July 2021 - -
Provided during the year - -
------------------------------------ ---------- -------
At 31 July 2022 - -
Provided during the year - -
------------------------------------ ---------- -------
As at 31 July 2023 - -
------------------------------------ ---------- -------
Net book value
As at 31 July 2023 1,192 1,192
------------------------------------- ---------- -------
At 31 July 2022 1,192 1,192
------------------------------------- ---------- -------
The Group has determined that for the purposes of goodwill and
other intangibles (see note 11) impairment testing, the UK
Operations represents the lowest level within the entity that
goodwill and other intangibles are monitored for internal
management purposes. This is consistent with the one operating
segment analysis within Note 4. Therefore, the Group only has one
cash-generating unit ("CGU").
Management assesses goodwill and other intangibles for
impairment annually at the year-end date.
For both the current and prior year, impairment reviews were
performed by comparing the carrying value of the cash-generating
unit with their recoverable amount.
The recoverable amount of the cash-generating units has been
determined based on their fair value less costs to disposal. As
there is only one CGU, the Group has determined its market
capitalisation at the year-end date to be a good basis in
determining the value of the underlying CGU. The market
capitalisation at the year-end date was GBP51 million (2022:
GBP61m).
The assessment by the Board determined that the recoverable
amount of the CGU exceeded their carrying value, and therefore no
impairment was required. (2022: no impairment)
The Directors are satisfied that no reasonably possible change
in this estimate would result in the recognition of an impairment
within the next twelve months and accordingly the carrying value of
goodwill and other intangibles are not considered a significant
estimate as at 31 July 2023.
The Company has no goodwill.
13. Investment in and loans to subsidiaries
Loans
Investment to group
in subsidiary undertakings Total
The Company GBP000 GBP000 GBP000
Cost
-------------------------- --------------- -------------- -------
At 31 July 2022 3,385 56,798 60,183
-------------------------- --------------- -------------- -------
Additions 425 5,408 5,833
As at 31 July 2023 3,810 62,206 66,016
-------------------------- --------------- -------------- -------
Provision
-------------------------- --------------- -------------- -------
At 31 July 2022 - - -
-------------------------- --------------- -------------- -------
Provided during the year 3,810 - 3,810
As at 31 July 2023 3,810 - 3,810
-------------------------- --------------- -------------- -------
Net book value
As at 31 July 2023 - 62,206 62,206
-------------------------- --------------- -------------- -------
At 31 July 2022 3,385 56,798 60,183
-------------------------- --------------- -------------- -------
By subsidiary
C4X Discovery Limited 62,206
C4X Drug Discovery Limited -
Adorial Limited -
As at 31 July 2023 62,206
------------------------------ -------
Class
of
Country of shares 31 July
Subsidiary undertakings incorporation Principal activity held 2022
------------------------- ---------------- -------------------------- ------------ --------
England and
C4X Discovery Limited* Wales Research and development Ordinary 100%
C4X Drug Discovery England and
Limited** Wales Dormant company Ordinary 100%
England and
Adorial Limited* Wales Dormant company Ordinary 100%
Adorial Technologies England and
Limited* Wales Dormant company Ordinary 100%
England and
Adorial Pharma Limited* 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
The recoverable amount has been determined based on a
probability adjusted value in use cashflow model. An impairment has
been recorded of GBP3,810,000 (2022: GBPnil) as the recoverable
amount has been determined to be below the carrying value of the
investment in the subsidiary. 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.
The key assumptions of the value in use model include:
-- The discount rate of 17.3% used in the risk-adjusted model is
estimated using pre tax rates that reflect current market
assessment of the time value of money and the risks specific to the
CGU. To determine the appropriate discount rate the CGU's post tax
weighted average cost of capital is adjusted to reflect the risk
already factored into the probabilities but reflecting other
inherent risks in the cash flows for example in relation to
uncertainty in the timing of projected cashflows. The recoverable
amount of the investment was determined based on a probability
adjusted value in use cashflow model. For the year ending 31 July
2022, the recoverable amount was determined based on a value in use
model using a single set of cash flows. As such the discount rate
used in the prior year is not directly comparable.
-- The probabilities of success at each stage of the drug
discovery programme, which are derived from industry standards with
reference to life science valuation consultancy publications and
proprietary intelligence data providers' analysis. These do not
account for variations in target, modality, disease area or
partners expertise
-- Only the potential progression of partnered programmes, one
of the two most advanced programmes and a minimal early portfolio
are modelled.
-- Later stage milestones, including sales and royalties, are excluded from the model.
-- The timing and quantum of the cash inflows relating to
partnering agreements and milestone payments are modelled on basis
of existing licenses.
Loans to group undertakings
There are no formal terms for the repayment of inter-company
loans, none of which bear interest and all of which are repayable
on demand however the Directors do not expect this amount to be
settled within the next 12 months therefore have classified this as
a non-current receivable.
The recoverable amount of loans to subsidiaries is determined by
using an expected credit loss model which takes into account the
probability of default, the exposure at default and the loss given
default at the year end. The company defines default in this
context as the performance of the subsidiary against its business
plan and forecasts and progress of pipeline programmes towards
commercialisation.
The Company does not expect this amount to be recalled within
the next 12 months. The Company has considered how it expects to
recover the loan receivable and the recovery period of the loan in
calculating the expected credit loss.
The Company has assessed the expected credit loss by looking at
the future cashflows of the subsidiary in order to determine the
loss given default. As the loan is held at 0% interest, the
effective rate of return (ERR) is deemed to be 0%.
The potential recoverable amount has been determined based on
probability weighted cashflow model. These calculations require the
use of estimates in arriving at the expected future cash flows.
Cash flow estimates include signing future licence agreements and
the receipt of further milestone licence payments, the timing of
which are uncertain. These estimates were benchmarked against the
Group's own experience of such deals and external sources of
information within the industry.
The key judgement made by management in the expected credit loss
calculations is the definition of default, and the probability
assumptions of the future cashflows and the timing of the cashflows
in determining the loss given default. The ECL provision is
GBPimmaterial (2022: GBPimmaterial) as the loss given default is
low given the probability weighted cashflows show sufficient
headroom when compared with the total value of the loan. Failure of
3 of the 7 forecast programmes in FY24 would lead to an increase in
the ECL provision of GBP1.8m.
14. Trade and other receivables
31 July 31 July 31 July 31 July
2023 2023 2022 2022
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
------------------- -------- -------- -------- --------
Trade receivables 31 - 2,524 -
Prepayments 401 - 398 -
Other receivables 7 - - -
VAT receivables 133 - 147 -
------------------- -------- -------- -------- --------
572 - 3,069 -
------------------- -------- -------- -------- --------
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value. There is
GBPimmaterial (2022: GBPimmaterial) expected credit loss against
other receivables.
There were no revenue-related contract assets (2022:
GBPnil).
Trade receivables are denominated in the following currency:
31 July 31 July 31 July 31 July
2023 2023 2022 2022
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
---------- -------- -------- -------- --------
Sterling 31 - 5 -
Euros - - 2,519 -
31 - 2,524 -
---------- -------- -------- -------- --------
The ageing analysis of trade receivables was as follows:
Not Yet Due <30 days >30 Total
Due overdue days
overdue
--------------------
GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- -------- ------- --------- --------- -------
As at 31 July 2023 28 3 - - 31
-------------------- -------- ------- --------- --------- -------
At 31 July 2022 - 2,524 - - 2,524
-------------------- -------- ------- --------- --------- -------
15. Income tax asset
31 July 31 July 31 July 31 July
2023 2023 2022 2022
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
--------------------------------- -------- -------- -------- --------
Research and development income
tax credit receivable 2,305 - 4,427 -
--------------------------------- -------- -------- -------- --------
2,305 - 4,427 -
--------------------------------- -------- -------- -------- --------
16. Cash, cash equivalents and deposits
31 July 31 July 31 July 31 July
2023 2023 2022 2022
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
--------------------------- -------- -------- -------- --------
Cash and cash equivalents 4,220 - 5,079 -
--------------------------- -------- -------- -------- --------
4,220 - 5,079 -
--------------------------- -------- -------- -------- --------
Cash and cash equivalents at 31 July 2023 include deposits with
original maturity of three months or less of GBPnil (2022:
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
2023 2023 2022 2022
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
--------------------- -------- -------- -------- --------
Current Liabilities
Current payables 785 - 949 -
Other payables 185 - 179 6
Deferred revenue 207 - 250 -
Accruals 651 - 671 -
1,828 - 2,049 6
--------------------- -------- -------- -------- --------
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. Deferred revenue recognised
in the year ending 31 July 2023 was GBP207,000 (2022:
GBP250,000).
18. Lease liabilities
31 July 31 July 31 July 31 July
2023 2023 2022 2022
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
------------------------- -------- -------- -------- --------
Current Liabilities
Lease liabilities 337 - 305 -
337 - 305 -
------------------------- -------- -------- -------- --------
Non-Current Liabilities
Lease liabilities 87 - 424 -
87 - 424 -
------------------------- -------- -------- -------- --------
When measuring lease liabilities for leases that were classified
as operating leases, the Group discounted lease payments using its
incremental borrowing rate at the time the lease is initially
recognised. The discount rates used for calculating the present
value of lease liabilities range from 4.25% to 5.25%.
Lease liabilities are deemed to be secured against the
right-of-use assets to which they relate.
GBP000
------------------------------ -------
2023
Balance at 1 August 2022 729
Cash outflow (329)
New leases -
Interest on lease liabilities 24
As at 31 July 2023 424
------------------------------ -------
GBP000
------------------------------ -------
2022
Balance at 1 August 2021 404
Cash outflow (229)
New leases 542
Interest on lease liabilities 12
At 31 July 2022 729
------------------------------ -------
19. Issued equity capital
Deferred Ordinary Share Deferred Warrant Share Total
shares shares capital shares reserve premium
The Company Number Number GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- --------- --------- --------- --------- -------
Allotted, called up and fully paid
ordinary shares of 1p
-----------------------------------------------------------------
At 31 July 2021 2,025,000 227,812,697 2,277 2,025 979 53,042 58,324
------------------------ ---------------- --------------------- --------- --------- --------- --------- -------
Issue of share capital
on exercise of share
options - 319,275 3 - - 15 18
Issue of share capital
on exercise of
warrants - 1,100,000 11 - (11) 297 297
------------------------ ---------------- --------------------- --------- --------- --------- --------- -------
At 31 July 2022 2,025,000 229,231,972 2,291 2,025 968 53,355 58,639
------------------------ ---------------- --------------------- --------- --------- --------- --------- -------
Issue of share capital
on placing - 19,781,200 198 - - 4,460 4,658
Issue of share capital
on open offer - 3,000,000 30 - - 720 750
Issue of share capital
on exercise of share
options - 106,425 1 - - 5 6
As at 31 July 2023 2,025,000 252,119,597 2,520 2,025 968 58,540 64,053
------------------------ ---------------- --------------------- --------- --------- --------- --------- -------
The Group GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- --------- --------- --------- --------- -------
Allotted, called up and fully paid
ordinary shares of 1p
-----------------------------------------------------------------
At 31 July 2021 2,277 2,025 979 53,042 58,324
------------------------ ---------------- --------------------- --------- --------- --------- --------- -------
Issue of share capital
on exercise of share
options 3 - - 15 18
Issue of share capital
on exercise of
warrants 11 - (11) 297 297
------------------------ ---------------- --------------------- --------- --------- --------- --------- -------
At 31 July 2022 2,291 2,025 968 53,355 58,639
------------------------ ---------------- --------------------- --------- --------- --------- --------- -------
Issue of share capital
on placing 198 - - 4,460 4,658
Issue of share capital
on open offer 30 - - 720 750
Issue of share capital
on exercise of share
options 1 - - 5 6
As at 31 July 2023 2,520 2,025 968 58,540 64,053
------------------------ ---------------- --------------------- --------- --------- --------- --------- -------
The amounts related to issue of share capital on open offer
included in the table above are stated after deduction of expenses
related to placing.
During August 2022 GBP5.7 million (before expenses) was raised
via a placing of 22,781,200 ordinary shares at 25 pence each.
The deferred shares of GBP1 carry no right to participate in
dividends in respect of any financial year, until these 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 2021 1,191
Share-based payments 352
---------------------- -------
At 31 July 2022 1,543
---------------------- -------
Share-based payments 425
---------------------- -------
As at 31 July 2023 1,968
---------------------- -------
The Company GBP000
---------------------- -------
At 31 July 2021 1,162
Share-based payments 352
---------------------- -------
At 31 July 2022 1,514
---------------------- -------
Share-based payments 425
---------------------- -------
As at 31 July 2023 1,939
---------------------- -------
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 GBP425,000 has been recognised in the statement of
comprehensive income for the year (2022: GBP352,000).
This includes GBP45,563 (2022: GBP46,416) of incremental fair
value on replacement of options.
Share option schemes
The Group operates the following share option schemes all of
which are operated as Enterprise Management Incentive ("EMI")
schemes insofar as the share options being issued meet the EMI
criteria as defined by HM Revenue & Customs. Share options
issued that do not meet EMI criteria are issued as unapproved share
options but are subject to the same exercise performance
conditions.
C4X Discovery Holdings plc Long Term Incentive Plan ("LTIP")
Grant in August 2012
Share options were granted to staff on 28 August 2012. The
options granted are exercisable in the event of the listing of the
Company, its acquisition or at the absolute discretion of the
Board. The exercise price was set at 5.58 pence (the original
exercise price of 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 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
GBP46,416 (2022: GBP46,342).
Grant in December 2020
Share options were granted to staff and Directors on 14 December
2020 pursuant to the EMI 2014 Plan. The options granted are
exercisable, at any time between three years and 10 years of them
being granted. The exercise price was set at 20.0 pence, being the
average five-day volume weighted average price of the ordinary
shares to 11 December 2020. The fair value benefit is measured
using a Black Scholes model, taking into account the terms and
conditions upon which the share options were issued.
Grant in May 2021
Share options were granted to staff on 05 May 2021 pursuant to
the EMI 2014 Plan. The options granted are exercisable, at any time
between three years and 10 years of them being granted. The
exercise price was set at 41.34 pence, being the average five-day
volume weighted average price of the ordinary shares to 05 May
2021. The fair value benefit is measured using a Black Scholes
model, taking into account the terms and conditions upon which the
share options were issued.
Grant in September 2021
Share options were granted to staff on 16 September 2021
pursuant to the EMI 2014 Plan. The options granted are exercisable,
at any time between three years and 10 years of them being granted.
The exercise price was set at 32 pence, being the average five-day
volume weighted average price of the ordinary shares to 16
September 2021. The fair value benefit is measured using a Black
Scholes model, taking into account the terms and conditions upon
which the share options were issued.
Grant in February 2022
Share options were granted to staff and directors on 01 February
2022 pursuant to the EMI 2014 Plan. The options granted are
exercisable, at any time between three years and 10 years of them
being granted. The exercise price was set at 36 pence, being the
average five-day volume weighted average price of the ordinary
shares to 1 February 2022. The fair value benefit is measured using
a Black Scholes model, taking into account the terms and conditions
upon which the share options were issued.
Grant in May 2022
Share options were granted to staff on 03 May 2022 pursuant to
the EMI 2014 Plan. The options granted are exercisable, at any time
between three years and 10 years of them being granted. The
exercise price was set at 32.8 pence, being the average five-day
volume weighted average price of the ordinary shares to 03 May
2022. The fair value benefit is measured using a Black Scholes
model, taking into account the terms and conditions upon which the
share options were issued.
Grant in December 2022
Share options were granted to staff on 15 December 2022 pursuant
to the EMI 2014 Plan. The options granted are exercisable, at any
time between three years and 10 years of them being granted. The
exercise price was set at 21.122 pence, being the average five-day
volume weighted average price of the ordinary shares to 15 December
2022. The fair value benefit is measured using a Black Scholes
model, taking into account the terms and conditions upon which the
share options were issued.
Grant in January 2023
Share options were granted to staff on 9 January 2023 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 17.58 pence, being the average five-day
volume weighted average price of the ordinary shares to 9 January
2023. 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.
2023 2022
The Group and Company Number Number
--------------------------- ----------- -----------
Outstanding at 1 August 12,875,898 9,937,747
Granted during the year 156,750 3,824,000
Exercised during the year - (425,700)
Forfeited during the year (105,000) (460,149)
Lapsed/cancelled - -
Outstanding at 31 July 12,927,648 12,875,898
--------------------------- ----------- -----------
Exercisable at 31 July 5,455,676 161,250
--------------------------- ----------- -----------
During the year ended 31 July 2023, no options were exercised
(2022: 425,700 exercised).
Weighted average exercise price of options
2023 2022
The Group and Company Pence Pence
---------------------------------- ------------------------- ------
Outstanding at 1 August 25.55 18.61
Granted during the year 20.41 35.86
Exercised during the year - 5.58
Forfeited during the year 25.14 25.13
Lapsed/cancelled during the year - -
Outstanding at 31 July 23.87 25.55
---------------------------------- ------------------------- ------
A total of 156,750 share options were granted during the year
(2022: 3,824,000 ). The range of exercise prices for options
outstanding at the end of the year was 5.58 pence - 42.00 pence
(2022: 5.58 pence - 42.00 pence).
For the share options outstanding as at 31 July 2023, the
weighted average remaining contractual life is 7.3 years (2022: 8.3
years).
The following table lists the inputs to the models used for the
years ended 31 July 2023 and 31 July 2022.
The Group and Company 2023 2022
Expected volatility (%) 52.5% - 52.5% -
72.86% 71.5%
Risk-free interest rate (%) 0.35%-3.46% 0.35%-1.78%
Expected life of options (year's average) 3 years 3 years
- 6.5 years - 6.5 years
Weighted average exercise price (pence) n/a n/a
Weighted average share price at date of grant
(pence) 20.41 35.86
----------------------------------------------- ---------------------- -------------
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 2021 979
Warrant premium -
Exercise of warrants (11)
----------------------- -------
At 31 July 2022 968
----------------------- -------
Warrant premium -
Exercise of warrants -
----------------------- -------
As at 31 July 2023 968
----------------------- -------
The warrants are exercisable at 28p (2022: 28p) per ordinary
share and are to be exercised within 5 years of being issued.
During the year no warrants were exercised (2022:
1,100,000).
The following tables illustrate the number and movements in,
warrants during the year.
2023 2022
The Group and Company Number Number
--------------------------- ----------- ------------
Outstanding at 1 August 96,790,716 97,890,716
Granted during the year - -
Exercised during the year - (1,100,000)
Lapsed/cancelled - -
Outstanding at 31 July 96,790,716 96,790,716
--------------------------- ----------- ------------
Exercisable at 31 July 96,790,716 96,790,716
--------------------------- ----------- ------------
22. Merger reserve
The Group GBP000
---------------------------------------------- -------
At 31 July 2021, 31 July 2022 & 31 July 2023 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 2021, 31 July 2022 & 31 July 2023 195
---------------------------------------------- -------
24. Retained earnings
The Group GBP000
-------------------------- ---------
At 31 July 2021 (41,344)
-------------------------- ---------
Loss for the year (8,160)
Warrant reserve movement 11
-------------------------- ---------
At 31 July 2022 (49,493)
-------------------------- ---------
Loss for the year (11,111)
Warrant reserve movement -
-------------------------- ---------
As at 31 July 2023 (60,604)
-------------------------- ---------
The Company GBP000
-------------------------- ---------
At 31 July 2021 13
Loss for the year -
Warrant reserve movement 11
-------------------------- ---------
At 31 July 2022 24
-------------------------- ---------
Loss for the year (3,810)
Warrant reserve movement -
-------------------------- ---------
As at 31 July 2023 (3,786)
-------------------------- ---------
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
-------------------------------------------- ---------- -------
2023
Balance at 1 August 2022 707 707
Depreciation charge for the year (305) (305)
Additions to right-of-use assets - -
Derecognition of right-of-use assets (253) (253)
Depreciation eliminated on derecognition of
right-of-use assets 253 253
--------------------------------------------
402 402
-------------------------------------------- ---------- -------
2022
Balance at 1 August 2021 377 377
Depreciation charge for the year (212) (212)
Additions to right-of-use assets 542 542
Derecognition of right-of-use assets - -
Depreciation eliminated on derecognition of - -
right-of-use assets
--------------------------------------------
707 707
-------------------------------------------- ---------- -------
Amounts recognised in income statement
31 July 2023
Interest on lease liabilities 24 24
24 24
31 July 2022
Interest on lease liabilities 12 12
12 12
------------------------------- --- ---
Amounts recognised in statement of cash flows
31 July 2023
Lease payments 329 329
329 329
31 July 2022
Lease payments 229 229
---------------- ---- ----
229 229
---------------- ---- ----
26. Commitments
At 31 July 2023, the Group had capital commitments amounting to
GBPnil in respect of orders placed for capital expenditure (2022:
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 GBP6,532,000 at 31 July 2023 (GBP11,804,000 at
31 July 2022).
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
receivables cost Group Company
Financial assets/(liabilities) GBP000 GBP000 GBP000 GBP000
---------------------------------- ------------- -------------- --------------------- --------
31 July 2023
Trade receivables 31 - 31 -
Inter-company loan to subsidiary - - - 62,206
Cash, cash equivalents and
deposits 4,220 - 4,220 -
Trade and other payables* - (970) (970) -
Lease liabilities - (424) (424) -
4,251 (1,394) 2,857 62,206
---------------------------------- ------------- -------------- --------------------- --------
31 July 2022
Trade receivables 2,524 - 2,524 -
Inter-company loan to subsidiary - - - 56,798
Cash, cash equivalents and
deposits 5,079 - 5,079 -
Trade and other payables* - (1,128) (1,128) -
Lease liabilities - (729) (729) -
7,603 (1,857) 5,746 56,798
---------------------------------- ------------- -------------- --------------------- --------
*Excluding accruals and deferred revenue.
The values disclosed in the above table are carrying values. The
Board considers that the carrying amount of financial assets and
liabilities approximates to their fair value.
The main risks arising from the Group's financial instruments
are credit risk and foreign currency risk. The Board of Directors
reviews and agrees policies for managing each of these risks which
are summarised below.
Credit risk
The Group's principal financial assets are cash, cash
equivalents and deposits. The Group seeks to limit the level of
credit risk on the cash balances by only depositing surplus liquid
funds with multiple counterparty banks that have investment grade
credit ratings.
The Group trades only with recognised, creditworthy third
parties. Receivable balances are monitored on an ongoing basis with
the result that the Group's exposure to bad debts is not
significant. The Group's maximum exposure is the carrying amount of
trade receivables as disclosed in note 14, which was neither past
due nor impaired. All trade receivables are ultimately overseen by
the Chief Executive Officer and are managed on a day-to-day basis
by the finance team. Credit limits are set as deemed appropriate
for the customer.
The maximum exposure to credit risk in relation to cash, cash
equivalents and deposits is the carrying value at the balance sheet
date.
Foreign currency risk
The Group is exposed to currency risk on sales and purchases
that are denominated in a currency other than the respective
functional currency of the Company and its subsidiaries. Other than
Pounds Sterling (GBP), the currencies that sales and purchases most
often arise in are US Dollars (USD) and Euros (EUR). Transactions
in other foreign currencies are limited.
The Group may use forward exchange contracts as an economic
hedge against currency risk, where cash flow can be judged with
reasonable certainty. Foreign exchange swaps and options may be
used to hedge foreign currency receipts in the event that the
timing of the receipt is less certain.
There were no open forward contracts as at 31 July 2023 or at 31
July 2022 and the Group did not enter into any such contracts
during 2023 or 2022.
The split of Group assets between Sterling and other currencies
at the year-end is analysed as follows:
GBP USD EUR 2023 Total GBP USD EUR 2022
Total
The Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ------- ------- ------- ----------- ------- ------- ------- --------
Cash, cash equivalents
and deposits 2,689 92 1,439 4,220 764 75 4,240 5,079
Trade receivables 31 - - 31 5 - 2,519 2,524
Trade and other
payables (785) (155) (30) (970) (905) (162) (61) (1,128)
------------------------ ------- ------- ------- ----------- ------- ------- ------- --------
1,935 (63) 1,409 3,281 (136) (87) 6,698 6,475
------------------------ ------- ------- ------- ----------- ------- ------- ------- --------
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 Equity
or loss
Strengthening Weakening Strengthening Weakening
GBP000 GBP000 GBP000 GBP000
-------------------- -------------- ---------- -------------- ----------
31 July 2023
EUR (10% movement) 157 (128) 157 (128)
USD (10% movement) (7) 6 (7) 6
31 July 2022
EUR (10% movement) 744 (601) 744 (601)
USD (10% movement) (10) 8 (10) 8
-------------------- -------------- ---------- -------------- ----------
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-Jul-23 31-Jul-22
Fixed rate Floating Total Fixed Floating Total
rate rate rate
The Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ------------ --------- ------- ------- --------- -------
Cash, cash equivalents
and deposits - 4,220 4,220 - 5,079 5,079
------------------------ ------------ --------- ------- ------- --------- -------
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 2023 based on contractual undiscounted
payments including contractual interest.
Less than One to Total
five
one year years
2023 GBP000 GBP000 GBP000
--------------------------- ---------- ------- -------
Financial liabilities
Trade and other payables * 970 - 970
Lease liabilities 337 87 424
1,307 87 1,394
--------------------------- ---------- ------- -------
2022
--------------------------- ---------- ------- -------
Financial liabilities
Trade and other payables * 1,128 - 1,128
Lease liabilities 305 424 729
1,433 424 1,857
--------------------------- ---------- ------- -------
*Excluding accruals and deferred revenue. Trade and other
payables are due within three months.
The Directors consider that the carrying amount of the financial
liabilities approximates to their fair value.
As all financial assets are expected to mature within the next
12 months an aged analysis of financial assets has not been
presented.
28. Related party transactions
During the year there were no subscriptions by Directors for
ordinary shares (2022: no subscriptions).
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 (2022: GBP2,025,000).
The Group
There were no sales to, purchases from or, at the year end,
balances with any related party.
The Company
C4X Discovery Holdings plc holds loans due > 1 year from its
subsidiary undertaking C4X Discovery Limited of GBP62.2 million
(2022: GBP56.8m). No repayments have been made in the year (2022:
none).
There are no formal terms of repayment in place for these loans
and it has been confirmed by the Directors that the long-term loans
will not be recalled within the next 12 months.
None of the loans are interest bearing.
There are no short term loans owed to C4X Discovery Holdings plc
(2022: none).
29. Compensation of key management personnel (including Directors)
2023 2022
GBP000 GBP000
------------------------------ ------- -------
Short-term employee benefits 1,667 1,331
Pension costs 222 165
Benefits in kind 12 3
Share-based payments 171 128
2,072 1,627
------------------------------ ------- -------
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END
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(END) Dow Jones Newswires
December 14, 2023 02:00 ET (07:00 GMT)
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