EDX Medical Group - Annual Report/Financial Statement to 31 March 2023
Announcement provided by
EDX Medical Group Plc · EDX02/10/2023 07:00
This announcement contains inside information as stipulated under the
Annual Report and Financial Statements for the year ended March 31, 2023
2 October 2023
EDX Medical Group, plc ("EDX Medical", the "Company" or the "Group"), which develops innovative digital diagnostic products and services for the personalised treatment for cancer, heart disease and infectious diseases, today announces publication of its Annual Report and Financial Statements for the year ended March 31, 2023.
CHAIRMAN'S STATEMENT
Jason Holt, Chairman of the Group:
"From a standing start to the end of the financial year in March 2023, the Group has been preparing the ground for significant business growth over the next three years. This period saw the reverse take-over of TECC Capital plc and the registration of EDX Medical Group plc on the London AQSE exchange on 14 November 2022".
"EDX Medical has embarked on a collaborative path with partners to lead in diagnostic research and development to improve the lives of many. By utilising better diagnostics, healthcare providers in the public and private sectors can deploy improved treatments for many common diseases that remain stubbornly difficult to treat successfully".
"The imperative for the Group during the financial period up to 31 March 2023 was rightfully preparing for this rapid business growth as diagnostic opportunities emerge. This preparation has involved much due diligence of potential opportunities; assembling the right leadership, commercial and scientific teams; as well as raising capital to undertake the necessary steps to grow our business".
"I am pleased to report these foundational steps are now all in place. With the financial year ending March 2023 focused on exploring numerous innovations to gain access to the necessary licences and intellectual property for delivering a range of novel diagnostic products, we are grateful for the excellent support received from our shareholders. We have invested sensibly into a number of very attractive new product areas that all have attractive future markets. As the Company focuses on crystalising the many commercial opportunities into forthcoming revenues, this should trigger investor and shareholder responsiveness that matches the series of announcements that we are currently finalising."
The directors of EDX Medical accept responsibility for the contents of this announcement.
Contacts:
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EDX Medical PLC |
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Dr Mike Hudson (Chief Executive Officer) |
+44 (0)7812 345 301
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Oberon Capital |
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Nick Lovering (Corporate Adviser) Adam Pollock (Corporate Broking) Mike Seabrook (Corporate Broking) |
+44 (0)20 3179 5300 |
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Media House International |
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Ramsay Smith
Gary McQueen |
+44 (0)7788 414856 + 44 (0)7834 694609 |
About EDX Medical Group PLC (www.edxmedical.co.uk)
EDX Medical Group plc develops innovative digital diagnostic products and services, enabling cost effective and timely delivery of personalised treatment for cancer, heart disease, and infectious diseases. The company is listed on the AQSE Growth Market (TIDM: EDX).
EDX Medical was founded by Professor Sir Christopher Evans, OBE, a medical and life sciences entrepreneur with more than 30 years of experience, together with CEO, Dr Mike Hudson.
By translating clinical insights into pragmatic solutions combining advanced biological and digital technologies, EDX Medical seeks to cost-effectively improve the detection and characterisation of disease in order to personalise treatment in a timely fashion. Early disease detection and biologically-based personal treatment optimisation is considered to be the most impactful way of reducing deaths and lowering the cost of healthcare globally.
EDX Medical Group operates a molecular biology and diagnostics laboratory in
EDX Medical, provides testing and genomic sequencing services, undertakes quality assurance, conducts research & development (R&D) and has established expertise in the design, development, validation and sourcing of diagnostic testing solutions to ISO 13485. Key laboratory tests performed by the Company have been accredited to ISO 15189 by the United Kingdom Accreditation Service (UKAS).
EDX Medical Group Plc
Annual Report and Financial Statements
For the period ended 31 March 2023
Company registration number: 13277385 (
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Company Information |
1 |
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Chief Executive Officer's Report |
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Chairman's Statement |
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Strategic Report |
5 |
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Risk Management Report |
13 |
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Corporate Governance Report |
18 |
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Audit Committee Report |
23 |
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Director's Report |
25 |
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Remuneration Report |
29 |
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Statement of Directors' Responsibilities |
32 |
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Independent Auditor's Report |
33 |
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Consolidated Statement of Comprehensive Income |
39 |
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Consolidated Statement of Financial Position |
40 |
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Company Statement of Financial Position |
41 |
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Consolidated Statement of Changes in Equity |
42 |
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Company Statement of Changes in Equity |
43 |
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Consolidated Statement of Cash Flows |
44 |
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Company Statement of Cash Flows |
46 |
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Notes to the Consolidated and Company Financial Statements |
47 |
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DIRECTORS |
C Evans J Holt M Hudson T Jones |
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COMPANY SECRETARY |
ONE Advisory Limited 201 Temple Avenue EC4Y 0DT |
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REGISTERED NUMBER |
13277385 ( |
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REGISTERED OFFICE |
210 Cambridge Science Park Milton Road CB4 0WA |
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CORPORATE ADVISER AND BROKER |
Oberon Investment Group Nightingale House, 64 Curzon St W1J 8PE |
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INDEPENDENT AUDITORS |
PKF Littlejohn LLP Statutory Auditor 15 Westferry Circus, Canary Wharf E14 4HD |
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COMPANY WEBSITE |
https://edxmedical.co.uk/ |
Introduction
Within the global diagnostics industry the 'clinical' sector offers the biggest potential economic and health impact for successful products and is an increasingly regulated marketplace. Furthermore, the rapid, digital data available from clinical diagnostics holds the potential to unlock the large-scale benefits of personalised medicine. EDX Medical is building the bioscience capabilities and digital infrastructure to deliver a portfolio of clinical diagnostic products and services via a 'buy & build' strategy, involving our own developments and in-licensed or acquired products in collaboration with key partners. We focus on major areas of need - cancer, heart disease, neurology and infectious diseases.
The Group operates its main ISO 15189 accredited laboratory facility in
The last 12 months have provided a valuable opportunity for EDX Medical to establish and validate its strategy and to lay the foundations for rapid growth in the coming period. The Group strategy remains to focus on the clinical marketplace and to provide health professionals with access to a range of innovative, class-leading tests and digital reports to enable fast and effective personalised treatment and improved patient outcomes.
Significant expertise and resources have been added to the senior team in R&D, regulatory, quality, commercial and data management in order to prepare for and support the future commercialisation of innovative new products.
The Group is concluding a number of strategic partnerships to ensure efficient and scalable operations including; laboratory instrumentation, patient sample collection, and medical logistics. Each of these relationships are expected to provide the Company with competitive advantages in terms of scalable delivery.
We have also identified and are progressing a pipeline of potential product acquisitions, partnerships and licensing deals to create a powerful portfolio of both laboratory-based tests and point-of-care tests for the clinical marketplace.
Trading Results
The Group's loss for the period was
Outlook
Positioned in a new, high growth sector - moving into revenues
EDX Medical is positioned to participate in and benefit from two dominant trends in healthcare:
Ø Digitalisation of molecular biology and medicine
Ø Move of testing closer to the patient (point-of-care)
The Group has access to an active pipeline of advanced, genomic-based laboratory tests for which there is robust data supporting clinical utility, and as part of its growth strategy, continues to pursue the acquisition, licensing or distribution partnerships with the companies who have developed these assets. We expect to be announcing details of these deals and partnerships during the coming period.
In the coming period, EDX Medical will continue to develop its' commercial operations. Initially launching in the
Building on the Torax Biosciences acquisition, coupled with further investment, we plan to establish a specialist point-of-care innovation team to accelerate the development and validation of new tests addressing global needs based on an additional proprietary technology platform to be acquired during the next year. This will provide customers with access to reliable and sensitive tests for direct use with the patient where previously only laboratory tests could provide the required level of technical precision. These innovative new products will create new markets for EDX Medical.
Personalised Medicine remains an enormous opportunity
EDX clients are leading the adoption of personalised medicine and healthcare. Personalised medicine provides customised healthcare for patients based on their genetics, lifestyle, and environmental factors. Digitalisation in the healthcare industry, along with advances in molecular biology, medical & diagnostics devices and wearable sensors, enables clinicians to combine and analyse information to detect illness earlier and determine the most cost- and clinically-effective interventions - leading to improved outcomes. Many argue that in a world of escalating costs and limited trained medical staff, the use of digital diagnostic tools to enable personalised medicine is the only sustainable, economically viable way forward.
According to Global Data, key trends impacting personalised medicine include electronic medical records and genetic testing, as well as remote patient monitoring and wearable technologies. They value the global personalized medicine market size at
Conclusions
The digital healthcare sector overall remains active and is performing better than many other sub-sectors of the tech market. According to CB Insights, global digital health investment funding was
On balance, the directors believe that the
Dr Michael Hudson
Chief Executive Officer
1 October 2023
Embracing the future
From a standing start to the end of the financial year in March 2023, the Group has been preparing the ground for significant business growth over the next three years. This last year saw the reverse take-over of TECC Capital plc and the registration of EDX Medical Group plc on the London AQSE exchange on 14 November 2022.
With the advancement in clinical diagnostics incorporating exciting new technology - as well as the ever-onward march of artificial intelligence boosting digital health capabilities - EDX Medical has embarked on a collaborative path with partners to lead in diagnostic research and development to improve the lives of many.
By utilising better diagnostics, healthcare providers in the public and private sectors can deploy improved treatments for many common diseases that remain stubbornly difficult to treat successfully. Cancer alone accounts for one in six deaths globally but with the onset of artificial intelligence and genetic sequencing scanning for types of DNA found in blood caused by changes in cancer cells, we now have the opportunity to drive forward with better, more accurate testing.
The imperative for the Group during the financial period up to 31 March 2023 was rightfully preparing for this rapid business growth as diagnostic opportunities emerge. This preparation has involved much due diligence of potential opportunities; assembling the right leadership, commercial and scientific teams; as well as raising capital to undertake the necessary steps to grow our business. I am pleased to report these foundational steps are now all in place.
With the financial year ending March 2023 focused on exploring numerous innovations to gain access to the necessary licences and intellectual property for delivering a range of novel diagnostic products, we are grateful for the excellent support received from our shareholders. We have invested sensibly into a number of very attractive new product areas that all have attractive future markets.
As the Company focuses on crystalising the many commercial opportunities into forthcoming revenues this should trigger investor and shareholder responsiveness that matches the series of announcements that we are currently finalising
Finally, I would like to pay tribute to our Senior Independent Director, Professor Trevor Jones CBE, for his wisdom and counsel over the period as I do too to my other Board directors, Dr Michael Hudson and Professor Sir Christoper Evans OBE. Combined, they represent an unrivalled 150 years of scientific and healthcare commercial leadership that offers assurance to our shareholders and partners as the EDX Medical board continues to guide the innovative development of the opportunities ahead. I look forward to working with you all to move EDX Medical forward together.
Jason Holt
Chairman
1 October 2023
The Directors present their strategic report for the period ended 31 March 2023.
Principal Activities
During the period under review, the principal activities of the Group consisted of building the foundations for a digital diagnostics business with global ambitions and access to a portfolio of class-leading products and services for customers in the clinical healthcare sector.
POST BALANCE SHEET EVENTS
Post Balance Sheet events are included in Note 32.
PRINCIPAL RISKS AND UNCERTAINTIES
Principal Risks & Uncertainties are discussed in the Risk Management Report.
The Group ISO 15189 accreditation was maintained. Product development and validation, supply chain audits and M&A efforts were all active and generating results.
Business Review AND STRATEGY
EDX Medical Group Plc operates in the emerging 'digital diagnostics' sector at the convergence of two high growth industries - molecular biology and digital health. Providing biological assays, interpretative analysis and digital data, enabling healthcare professionals to deliver timely and cost-effective personalised patient treatments, leading to improved patient outcomes.
The period to 31 March 2023 saw a significant set up phase including the Reverse Take Over into the AQSE market. The period also saw the acquisition of Torax Bioscience Ltd. The loss for the period was
Our vision for digital diagnostics is to combine advanced biology, software and digital tools (AI) to obtain, analyse and report actionable data in real time, unlocking the clinical potential (impact) of Personalised Medicine whilst enhancing accuracy, traceability & regulatory compliance and environmental impact of our products.
As the EDX Medical business enters it's commercial; growth phase, our strategic value will be based on the quality of our solutions, the global potential of our innovative, proprietary assets, infrastructure to deliver secure digital services and the associated future profits and revenues.
The Group is an exceptionally strong digital diagnostics partner for clinical healthcare providers, payers and technology innovators, with the global ambition to deliver an integrated clinical diagnostics service on the world stage:
ü Exclusive focus on 'data-rich' molecular diagnostics for clinical use
ü Deploying biological testing in both laboratory and 'point of care' as needed
ü Validating tests and technologies against clinical needs and future regulatory requirements including accredited tests with digital traceability
ü Fully secure, digital data acquisition, analysis and reporting
Personal biology drives our Product Strategy, addressing three priority clinical needs:
ü Safety: (avoidance of adverse drug reactions)
ü Selection: (identification of the most effective treatments)
ü Surveillance: (drug resistance, recurrence and family screening) and priority diseases with major health and economic impact:
ü Cancer: (variable survival rates & high treatment costs, require biological tests to diagnose early and select effective treatments fast).
ü Cardiology: (many patients are dying from identifiable / modifiable risks)
ü Neurology: (high care costs drive need for early diagnosis / personal treatment selection)
Business Model and Strategy
EDX Medical is an ambitious pioneer in digital diagnostics intending to grow by organic innovations, acquisition/licensing and strategic collaborations in order to provide a portfolio of digitally enabled clinical diagnostics for the public and private healthcare sector.
The Group is investing to secure a significant early 'bridgehead' in the UK and Europe based on providing innovative products and services for clinical healthcare providers & payers; whilst developing and validating a range of digital next generation 'Point-of-care' digital diagnostics for commercialisation in global markets.
The Group business model is based on the acquisition or licensing of proprietary and high performing test products with robust legacy clinical data and developing such assets into IVDR-compliant market-ready test solutions.
Strategic partnerships with technology providers will help translate classic laboratory tests into IVDR compliant 'kits' de-risking scale-up and enabling rapid, low-cost expansion to other laboratory sites globally.
The in-house development efforts to create the next generation of point-of-care tests combined with mobile phone digital reader will provide further opportunity to scale the business globally. EDX Medical provides both 'laboratory tests' and 'point -of-care' tests' the two largest sectors of the diagnostics industry:
Laboratory Tests Market
Modern molecular testing is a highly specialised field providing detailed patient information from blood or tissue samples. Laboratory tests are widely used to assist drug development and select patients for clinical trials, for neonatal screening and in cancer care due to the massive gains and cost savings of early diagnosis in both cases.
The current diagnostic spend in this sector is estimated to be around
The Point-of Care Test Market
Lateral flow testing is the dominant 'point-of-care' testing technology and has grown globally but modestly over the years prior to the Covid pandemic. Patient testing outside the hospital accounted for approximately 90% of the pre-covid market, with use in infectious diseases and fertility accounting for over
Despite improvements in components, innovation and performance has been modest due to the historic self-certification of tests by manufacturers, leading to a variable quality and a fragmented marketplace. New regulations requiring improved product quality and digital reporting provide an opportunity for consolidation and rationalisation in the sector as barriers to entry increase. The main areas of use for lateral flow tests currently include testing for: Pregnancy & Fertility, Infectious Diseases, Cardiovascular & Cholesterol, Drugs-of-Abuse, Food Safety & Environmental Testing.
The prominent players in the global lateral flow testing market are either US-domiciled (Abbott Laboratories, Hoffman-La Roche Ltd. (Switzerland), Danaher Corporation, Becton, Dickinson, Thermo Fisher Scientific) or more recent post-covid entrants from China, Orient Gene, AN Biotech, Xiamen Boson and Getein Biotech, though these have not yet demonstrated their plans for ongoing market participation.
Competition and Market
Whilst most players only provide laboratory OR 'point-of-care' tests, EDX competes in both sectors of the global in-vitro diagnostics business, with the ambition to secure a significant market position in Europe over the next five years. EDX is building capabilities to compete strongly with different players in each sector.
The market is seen as attractive but facing a period of change driven by three main factors:
a. increased regulatory requirements leading to rationalisation of the range of available (approved) tests in the UK and Europe within 2-3 years;
b. increased familiarity with testing and its benefits/cost effectiveness at both individual and population levels is encouraging broad uptake and confidence amongst governments, private healthcare providers and individuals.
c. significant technical improvements, reliability and ESG credentials of lateral flow/point-of-care tests combined with personal digital device interface for reading and reporting data;
It is inevitable that others will also seek to consolidate in the diagnostics sector and there will be competition for good assets going forward.
Innovation & New Product Development - Key Driver of Business Growth
EDX Medical is committed to providing its clients with innovative products enabling them to deliver high quality, cost-effective personalised patient care by investing in the following areas:
Laboratory Testing Innovation
· Improved sampling and extraction / processing for laboratory tests
The ability to optimise and standardise the extraction of biological and genomic material from human samples such as blood will provide savings in time (flexibility) and costs by standardising laboratory procedures that will also meet future regulatory requirements.
· Translation of assays into IVDR-compliant 'kits' with strategic technology partner
EDX Medical and a strategic laboratory partner are working to reduce several of the assays that EDX Medical intends to acquire, into simplified 'kits' meeting the pending EU and UK regulations, enabling rapid, cost-effective transfer and scale-up at 3rd party or Group's own laboratories.
Point of Care Testing Innovation
· Improving the Performance, Accuracy and Reliability of Tests
The acquisition of Torax Biosciences was the first step in our journey to radically improve the performance and utility of 'point of care' tests. The Group directors believe that the acquisition of further proprietary technologies currently under negotiation will enable EDX Medical to deliver the performance of laboratory testing via a new proprietary 'point-of-care' product platform, supporting strong brand positioning amongst health professionals and ultimately providing robust devices suitable for consumer self-testing in due course.
· Digitalisation - The Growing Importance of Timely and Accurate Data - Mobile solution
Over the next 3 or so years, the 'digital reader' segment is forecast to grow at the highest rate in the lateral flow assays market. Lateral flow digital readers are sufficiently sensitive to enable better accuracy than the human eye and also to provide a quantitative readout. The EDX Medical team developed and holds the first CE- registration for use of a covid self-test in combination with a mobile phone reader and algorithm. This knowledge and experience is now enabling EDX Medical to rapidly design and develop an internationally scalable mobile phone based digital reader solution for a number of next generation 'point-of-care' tests.
Reducing the Environmental Impact of Lateral Flow Testing
The expansion in use of LFTs demands greater consideration of the environmental liability and disposal of such devices. In October 2020, the NHS set itself the challenge of becoming the world's first 'net zero' national health service to reduce use of plastics, reduce carbon impact and to increase re-useable and biodegradable materials. Used tests cannot be recycled, focussing attention on the use of alternative primary materials with improved ESG credentials. The next generation 'point-of-care' tests from EDX Medical will combine environmentally acceptable components with the above performance and digital improvements.
Meeting and Exceeding Regulatory Requirements
Covid-testing 'emergency use' legislation led to delays in the adoption of planned new regulatory standards for in-vitro diagnostics in UK and Europe, but we are now entering a new era. In Europe, the former 'In-Vitro Diagnostics Device Directive' ("IVDD") under which manufacturers primarily provided self-declaration of conformity and registered tests by notification to national health agencies, will be replaced by new 'In-Vitro Diagnostics Regulations' ("IVDR"), which requires manufacturers or distributors to apply for approval based on the submission of data on the clinical performance of tests under controlled conditions and to provide appropriate post-marketing surveillance measures. The final implementation of the IVDR in Europe is now delayed until 2028, allowing legacy CE-marked tests to continue to be sold during a transitional period. EDX Medical is selectively and systematically moving product validation and development efforts to satisfy the future IVDR standards, which involves digital integration.
Key Strengths of the Business
The Directors believe that the strengths of the EDX Medical business are based on:
· its focus on clinical testing
· risk-mitigation strategy based on both 'laboratory tests' and 'point of care' testing
· integration of advanced biology with digital tools to meet future performance and regulatory requirements;
· prior experience of scale-up of laboratory and point-of-care tests supply lines and capabilities;
· prior experience of digital integration with mobile device technology and CE-mark approval, and privileged access to an experienced industry player in software as a service design and deployment;
· early/first-mover advantage in the consolidating the European diagnostics sector
· ability to leverage its recent Covid experience across a range of technologies including genomic sequencing by its in-house team; and
· experienced management and industry access / knowledge to secure products and partnerships as well as finance and company development.
Key Performance Indicators ("KPI")
The Directors consider that there were no specific key performance indicators during the period. Loss for the period to 31 March 2023 was
The future goals/ KPIs are expected to be:
· Establishing UK revenues in Q1, 2024, with a number of private and public sector clients.
· Completing the acquisition of a company with proprietary expertise in point of care testing with potential to form an PoC Innovation team and accelerate additional products for PoC deployment by the Spring of 2024.
· Securing exclusive licenses for performing and reporting genomics tests in cancer by Q1 2024.
· Establishing core IT and logistics partnerships to be operational in the UK by the end of 2023.
· Establishing patient sample collection partnership for UK and Nordics, Q1 2024.
· Completing Nordics business plan and establishing commercial revenues by end Q1, 2024.
Section 172 Statement
The Directors understand the importance for the business and its stakeholders to act in good faith in a way that best promotes the success of EDX Medical and the benefit of shareholders as a whole, in line with its responsibilities under Section 172 of the Companies Act 2006. In applying this, they have had regard for the interest of EDX stakeholders, whilst preserving EDX's reputation and ensuring long-term sustainability of the Company.
The Board believes that considering our stakeholders in key business decisions is fundamental to our ability to drive value creation over the longer term. The Board considers its major stakeholders to be its employees, its suppliers, customers, and shareholders. The Directors continue to have regard to the interests of the Company's employees and other stakeholders, including the impact of its activities on the community, the environment and the Company's reputation, when making decisions.
Acting in good faith and fairly between members, the Directors consider what is most likely to promote the success of the Company for its members in the long term. In today's challenging economic environment, balancing the needs and expectations of our stakeholders has never been a more important task.
The Board regularly reviews our principal stakeholders and how we engage with them. The stakeholder voice is brought into the boardroom throughout the annual cycle through information provided by management and also by direct engagement with stakeholders themselves. The relevance of each stakeholder group may increase or decrease depending on the matter or issue in question, so the Board seeks to consider the needs and priorities of each stakeholder group during its discussions and as part of its decision making.
Our directors are bound by their duties under the Companies Act 2006 (the Act) to promote the success of the company for the benefit of our members as a whole taking into account the factors listed in Section 172 of the Act as follows:
· the likely consequences of any decision in the long term;
· the interests of the Company's employees;
· the need to foster the Company's business relationships with suppliers, customers and others;
· the impact of the Company's operations on the community and the environment;
· the desirability of the Company maintaining a reputation for high standards of business conduct; and
· the need to act fairly as between members of the Company.
Key decisions taken during the year under review, following consultations with key stakeholders, include:
· Collaboration with Tianjin Bioscience from November 2022 - with this partnership, EDX has received two automated digital chemiluminescence immunoassay instruments at the Company's laboratory in Cambridge, enabling our clients to have access to a range of cancer biomarker tests.
· The acquisition of Torax Biosciences in February 2023 - the Board considered the best interests of its shareholders, including achieving value for money. We also considered our internal stakeholders, such as employees, in terms of how such an acquisition would affect the culture and skillsets of the Company.
The table below acts as our s172(1) statement by setting out the key stakeholder groups, their interests and how EDX Medical has engaged with them over the reporting period. However, given the importance of stakeholder focus, long-term strategy and reputation, these themes are also discussed throughout this Annual Report.
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Their interests |
How we engage |
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Our suppliers |
· Workers' rights · Supplier engagement and management to prevent modern slavery · Fair trading and payment terms · Sustainability and environmental impact · Collaboration · Long-term partnerships · Supplier payment
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· Initial meetings and negotiations · Seek preferred partnerships and collaborative development of new materials / assays · Enter into equitable, mutual non-disclosure undertakings · Feedback from suppliers · Board approval on significant changes to suppliers · Direct engagement between suppliers and specified company contact · Prompt payment of suppliers in line with supplier payment policy
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Our Investors |
· Comprehensive review of financial performance of the business · Business sustainability · High standard of governance · Success of the business · Ethical behaviour · Awareness of long-term strategy and direction
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· Regular reports and analysis on investors and shareholders · Investor roadshows · Annual Report · Company website · Shareholder circulars · AGM · Stock exchange announcements · Press releases · Investor relations strategy for shareholder liaison
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Our clients |
· Timely and informative end to end service · Ease of access to information · Legal expertise · Timeliness · Safety · Data security
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· Customer support service · Company reports · Press engagement · Marketing and communications · Customer surveys · Annual Report · AGM · Company Website
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Regulatory bodies |
· Compliance with regulations · Worker pay and conditions · Gender Pay · Health and Safety · Treatment of Suppliers · Brand reputation · Waste and environment · Insurance
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· Audits and inspections · Company website · Stock exchange announcements · Annual Report · Direct contact with regulators · Compliance updates at Board Meetings · Consistent risk review |
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Community and Environment |
· Sustainability · Human Rights · Energy usage · Recycling · Waste Management · Community outreach and CSR
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· Oversight of corporate responsibility plans · Introduction of CSR initiatives · Workplace recycling policies and processes
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The Strategic Report was approved by the Board of Directors on 1 October 2023.
Dr Michael Hudson - Chief Executive Officer
1 October 2023
PRINCIPAL RISKS AND UNCERTAINTIES
1. Early-stage business
EDX Medical is at a pivotal but early stage of its development and still faces a number of operational, strategic and financial risks frequently encountered by pioneering companies creating new markets or bringing new products to market. There is no certainty that anticipated outcomes and sustainable revenue streams will be achieved. Any one or more of these risks could have a material adverse effect on the Enlarged Group's business, financial condition and results of operations.
The Group's strategy is to generate value through the application of digital technology in combination with diagnostics, in most cases based on the accelerated development and validation of novel products being developed with third parties. The Group's future growth and prospects thus depends on its ability to develop, source or acquire products which have commercial appeal; to secure arrangements with suppliers and manufacturing partners on appropriate terms; to secure arrangements with contract sales organisations; to manage the growth of the business; and to continue to expand and improve operational, financial and management information, quality control systems and its commercialisation function on a timely basis whilst at the same time maintaining effective cost controls.
In addition, if the Enlarged Group is unable to convince key opinion leaders or customers within its target market of the efficacy and economic benefits of its products, it may not achieve widespread adoption, which might have a material adverse effect on the Group, its business, financial situation, growth and prospects, including delays to anticipated revenues and profits.
While the Directors believe that there is a significant potential market for the Group's products and solutions, there can be no guarantee of commercial success which will be affected by various factors, some of which are beyond the Group's control, including: (i) the emergence of newer, more advanced products or technologies; (ii) the cost of the products (as well as competitors' products); (iii) regulatory requirements; (iv) clinician and patient perceptions of the validity and utility of the products; and (v) reluctance to adopt a new clinical approach. If the market fails to develop or develops more slowly than anticipated, the Group's commercial operations may not become successful and profitable.
2. High reliance on founders and other key individuals
The Group will continue to be dependent upon the contribution of founders, Professor Sir Christopher Evans and Dr Michael Hudson, who have recently been joined by an enlarged group of highly experienced managers with required skills. In order to be able to achieve its plans the Group must recruit and retain suitably qualified personnel. Failure to retain key staff and/or to recruit suitability experienced staff when needed may have a material adverse effect on the Group's business, financial condition and results of operations.
3. Reliance upon Intellectual Property and know-how
The Group's future success may in part depend on its ability to monetise protected intellectual property rights, particularly patents relating to proprietary products. Obtaining and exploiting patents in the life sciences industry is legally and technically complex. EDX Medical has engaged an external law firm with intellectual property expertise to review its patent strategy and to review such rights of 3rd party product development partners prior to commercial engagement.
The Directors are not aware of any infringement by the Group's existing or planned products of the intellectual property rights of any third parties. However, it is not economically viable to establish the existence all third-party intellectual property rights and no formal freedom to operate search has been conducted on behalf of EDX Medical.
Adverse judgments against the Group may give rise to significant liabilities in monetary damages, legal fees and/or an inability to develop, market or sell products, either in all or in particular territories using the affected Intellectual Property. All commercial agreements with product partners include clear limitation to such liability exposure for EDX Medical.
Some of the Group's intellectual property rights are not capable of registration, such cases being embodied in 'know-how', trade secrets or software copyright. Therefore, the Group is reliant on internal processes and systems to protect such rights as far as possible. Whilst the Directors believe that our systems and processes afford adequate protection, there is a risk that they may not prevent misappropriation of the Group's intellectual property. No assurance is given that the Group will be able to acquire or develop products which are capable of being protected, or that any protection gained will be sufficiently broad in scope to exclude competitors from producing similar competing technology.
There can be no guarantee that third parties will not manage to independently develop products with similar functionality as the Group's products without infringing the Group's intellectual property rights, and there can be no guarantee that any such competing products would not have a material adverse effect on prospects of the Group.
4. Product Development
The Group will primarily engage in product development and validation in order to meet the needs of customers and regulators and will itself conduct limited research. The Group will be involved in complex scientific areas in which the founders and senior team have significant experience delays or failure to produce results are commonplace in this industry.
The majority of the Group's products may require regulatory approvals. If approval is required and is not successful or takes longer than anticipated, there may be an adverse impact on the Group's business, financial condition and results of operations. Clinical validation trials are costly and cannot be guaranteed to be successful.
5. Business Development and Growth
EDX Medical intends to grow its business through the development and acquisition of new products, Intellectual Property or technologies. However, the Group may be unable to find suitable opportunities on attractive terms, or it may be unable to consummate such opportunities as a result of competition from other prospective acquirers, or due to its inability to finance such acquisitions.
Failure to complete any such acquisitions may have an adverse effect on the Group's business, results of operations, financial condition and future prospects.
Should such acquisitions proceed, there can be no assurance that the benefits from such acquisitions or licensing opportunities will be realised to the extent, or within the time frame, that the Directors may have anticipated.
In addition, these opportunities may involve a number of risks, including the diversion of management's attention to unforeseen difficulties in relation to an acquired product, unanticipated costs and liabilities, the implementation of new operating procedures and disruption of the Group's ongoing business at that point in time.
Any delays or unexpected costs incurred in connection with product acquisitions including significant one-time capital expenditures, may result in dilutive issues of equity securities, increased debt or other contingent liabilities, adverse tax consequences, deferred consideration charges and the recording and later amortisation of amounts related to deferred consideration and certain purchased intangible assets. Any of which items could have an adverse effect on the Group's business, results of operations, financial condition and future prospects.
The Group is negotiating a number of agreements or collaborations with third parties and may also in the future enter into further ventures, partnerships or other collaborative arrangements with third parties. There is a risk that such arrangements may not be commercially successful, and it is possible that the working relationship between the parties may break down, that substantial costs and/or liabilities may be incurred in attempting to deliver the product or service in question, and/or that the arrangement may not yield the returns expected.
There is a risk that parties with which the Group has business relationships, including its partners and those with which it collaborates, may become insolvent or may otherwise become unable or unwilling to fulfil their obligations as part of the arrangement. This could detrimentally affect projects upon which the parties are collaborating and could adversely affect the Group's ability to deliver the products or services in question, which may in turn have a negative impact upon its business, financial position and prospects. It may also result in the Group having to input further capital into the project in order to ensure that delivery of the project remains unaffected. This extra cost could in turn adversely affect the business, revenues and profitability of the Group.
6. Potential Liabilities
EDX Medical's activities expose it to potential product liability and professional indemnity risks that are inherent in the development and manufacture of medical products and devices. EDX Medical operates under a rigorous quality management system in accordance with its UKAS accreditation under ISO-15189, which is partly designed to mitigate such risks. Under such accreditation, the Group has a validated Business Continuity Plan' in place, the objectives of which are to re-establish a normal business activity level or a sustainable on-going business level in as short a period as possible following any business interruption. In order to achieve this, EDX maintains an accurate and current record of:
Ø the critical equipment, functions and activities of the organisation
Ø required responses to anticipated risks to the operations of the organisation
Ø detailed, prioritised and timetabled response to an emergency situation
Ø the key roles, responsibilities and contacts to respond to an emergency
If the Group produces any products which are defective, or which are alleged to be defective, it may face a product liability claim in respect of those products. In the UK and in member states of the European Union, consumers who suffer property damage or personal injury because of a defective product may be able to recover compensation (up to certain prescribed limits) from the producer of that product, without needing to prove the producer was at fault for the defect.
Any serious quality or safety incident may result in adverse reporting in the media, which in turn may damage the Group's public relations and could potentially interrupt its business. This in turn could affect the Group's financial condition, operational results and prospects, including damage to the Group's reputation and/or its brands.
The Group could incur costs in connection with any such proceedings. The Group's existing and future relationships and reputation could also be adversely affected with consequential adverse effects on its business development, growth and revenue prospects.
In addition, any product liability claim brought against the Group, with or without merit, could result in the increase of the Group's product liability insurance rates or the inability to secure cover in the future. There can be no assurance that future necessary insurance cover will be available to the Group at an acceptable cost, if at all, or that, in the event of any claim, the level of insurance carried by the Group or in the future will be adequate or that a product liability or other claim would not have an adverse impact on the Group's business, prospects, results of operations and financial condition.
7. Regulatory Risks
EDX Medical customers generally provide regulated healthcare services, and the Group will therefore be subject to relevant industry regulation in the countries in which it operates. When expanding beyond the UK, its activities in its new locales will be subject to any relevant regulations of those countries. Should the requirements of any country in which the Group is looking to market its products not be satisfied, the Group may be restricted from expanding its business in that country. The regulations governing the Group's activities in the countries in which it operates may also be subject to change without prior notice. Any such changes or amendments may significantly impact the business of the Group.
Where regulatory approval is required, the timescales for regulatory approval being given can be affected by various factors, some of which are outside the Group's control, such as: changes to regulatory requirements, trial recruitment rates, and the results of clinical tests. Delays in regulatory approval could impact upon the timeline for delivery of the product and ultimately have a financial impact upon the Group and its prospects.
If any of the Group's partners or customers, or the Group itself, were to breach applicable regulations, the Group may incur substantial additional costs to remedy the breach and ensure future compliance with the regulatory requirements in order to avoid breaching the agreement with that partner or customer. The failure of a third party properly to comply with their contractual duties or regulatory obligations could have an adverse effect on the Group's ability to generate profits as well as its ability to source premium products. Further, any action taken by a third party that is detrimental to the Group's reputation could have a negative impact on the Group's ability to register its trademarks and other forms of Intellectual Property protection, and/or market and sell its products.
8. Reputational Risk
EDX's reputation is central to its future success in terms of the products and services it provides, the relationships it currently has and intends to develop in the future with distributors, partners and customers, the way in which it conducts its business and the financial results which it achieves. The Group may face reputational risk arising from a number of factors, including failure to deal appropriately with legal and regulatory requirements, ethical practices, fraud, privacy, record-keeping and other trading practices, as well as market risks inherent in the Group's business.
The failure, or allegations or perceptions of failure, of the Group to deal appropriately with legal and regulatory requirements, privacy, record-keeping, sales and trading practices or its failure to meet the expectations of the press and the general public, as well as its customers, suppliers, employees, shareholders and other business partners may have a material adverse effect on the Enlarged Group's reputation, business, results of operations, financial condition and future prospects.
9. Additional Financing
The Group expects to incur significant costs in connection with development, commercialisation and Intellectual Property protection of its products and technology. The Group's financing requirements depend on numerous factors, including the rate of market acceptance of its products, its ability to attract distributors and customers and other factors that may be outside of the Group's control. The Group may require additional financing in the medium to long term, whether from equity or debt sources, to finance working capital requirements or to finance its growth through future stages of development.
Any additional share issue may have a dilutive effect on Shareholders, particularly if they are unable to, or choose not to, subscribe by taking advantage of rights of pre-emption that may be available. Debt funding may require the lender to take security over the assets of the Group, which may be exercised if the Group were to be unable to comply with the terms of the relevant debt facility agreement. Failure to obtain adequate future financing on acceptable terms, if at all, could cause the Group to delay, reduce or abandon its development programmes or hinder commercialisation of its product portfolio and could have a material adverse effect on the Group's business.
10. Counterparty risk
There is a risk that parties with whom the Enlarged Group trades or has business relationships may become insolvent, in which case this could have an adverse impact on the Group's business, revenue, financial condition, profitability, results, prospects and/or future operations. This risk may be higher where the counterparty is located or registered outside the United Kingdom, as the costs of enforcing the Group's rights to payment or performance may be higher than would be the case in the United Kingdom.
11. Competition
The life sciences market has become more competitive. Established categories are becoming crowded as they mature and there has been a significant increase in smaller companies who are entering the industry. Even though the Existing Directors and Proposed Directors believe that the Enlarged Group has a competitive advantage in this space, the Enlarged Group may face competition from organisations which have greater capital resources. This could hinder the Enlarged Group's ability to compete successfully in the market. In addition, the Directors anticipate that the Enlarged Group will face increased competition in the future as new companies enter the market and alternative products, strategies and technologies become available. Increased competition from new and existing companies, including as a result of their aggressive pricing, may have a material adverse effect on the Enlarged Group's financial results. If the Enlarged Group's business model is successful it may be replicated by other organisations, some of which may have greater resources than the Enlarged Group.
12. Reliance on information technology systems
EDX Medical is highly reliant on its information technology systems for the processing, transmission and storage of electronic data relating to its research, operations and financial reporting. A significant portion of communications among the Group's personnel, partners, customers and suppliers relies on the efficient performance of information technology systems. The success of the Group is dependent on its technical capabilities, and it relies to a significant extent on the efficient and uninterrupted operation of its own and the systems of its suppliers and partners. Despite the Group's security measures and back-up systems, its information technology and infrastructure may be vulnerable to attacks by hackers, computer viruses or malicious code or may be breached due to employee error, malfeasance or affected by other disruptions, including as a result of natural disasters or telecommunications breakdown or other reasons beyond the Group's control. If one or more such events occur, it could cause material disruptions or delays to the Group's operations and result in the loss of revenues as well as confidential information and know-how, which could expose the Group to liability and cause its business and reputation to suffer. The Group may also be required to expend significant capital and other resources to alleviate problems caused by such breaches or failures. Any of the foregoing could have a material adverse effect on the Group's prospects, results of operations and financial condition.
The Group mitigates this risk by having robust systems including firewalls, multi factor authentication and other internal controls.
Governance
Overview
As Chairman of the Board of Directors, it is my responsibility to ensure that EDX has both sound corporate governance and an effective Board. As Chairman, my responsibilities include effectively leading the Board, supervising the Group's corporate governance approach, engaging with shareholders, and ensuring that excellent information flows freely and in a timely way between the Executive and Non-Executive Directors. EDX has agreed to follow the Corporate Governance Principles of the Quoted Companies Alliance (QCA Code), which requires companies to adopt a 'comply or explain' explain approach in respect of the application of guidance contained within. This report refers to the framework of these recommendations and describes how we used them. The Board elievees that the Company conforms with the QCA Code in every way.
The Board elievees that corporate governance is more than just a set of guidelines; rather it is a framework which underpins the core values for running the business in which we all believe, including a commitment to open and transparent communications with stakeholders. We believe that good corporate governance improves long-term success and performance. We will provide annual updates on our compliance with the QCA Code.
QCA COMPLIANCE PRINCIPLES
1 - ESTABLISH A STRATEGY AND BUSINESS MODEL WHICH PROMOTE LONG-TERM VALUE FOR SHAREHOLDERS
The Board of Directors has determined that the Company's growth strategy will deliver the greatest medium and long-term value to its shareholders.
EDX Medical provides individuals and organisations with reliable, high-performance tools and services for predicting and managing disease. The Company creates, develops and validates digitally enabled diagnostic products and services to help predict disease risk, inform clinical decision-making and accelerate the development of new medicines in the areas of cancer, heart disease, neurology and infectious diseases.
The Company's plan for growth is centred on extending and improving the quality of life through smart testing. In addition, EDX is actively introducing a range of innovative new diagnostic tests to address a range of illnesses. These digitally enabled products and services will set new standards in risk assessment enable better clinical decision-making and accelerate the development of new medicines in the areas of cancer, heart disease, and infectious disease.
EDX will also continue to create value through acquisition, partnerships and strategic investments. In November 2022, we announced a collaboration with Tianjin Bioscience Diagnostic Technology Co. Ltd to improve access to cost-effective and reliable tests for a range of cancers in the UK and Europe. In February 2023, we were pleased to acquire Torax Biosciences Limited to improve our innovation and product development capabilities in the growing field of 'point of care' testing outside of the laboratory. We have announced additional strategic investments post the period under review and will continue to seek additional strategic opportunities to add value and scale.
2 - SEEK TO UNDERSTAND AND MEET SHAREHOLDER NEEDS AND EXPECTATIONS
We believe that a mutually trusting relationship between shareholders and the Board is vital for a well-governed organisation to fulfil its commercial goals. As a result, the Board provide clear and transparent information to shareholders about our financial position and strategy.
EDX seeks to provide effective shareholder communications through periodic financial reports, along with Regulatory News Service announcements and trading updates published on our website: https://edxmedical.co.uk/news-media/.
The Board prioritises reviewing the efficacy of shareholder interactions on a regular basis and ensuring that efforts are taken to increase engagement based on shareholder feedback. The Board also interacts with shareholders through official meetings such as the Annual General Meeting (AGM), which allow the Board to meet, listen to, present and provide information to shareholders. We are looking forward to welcoming shareholders to our inaugural AGM as a listed business and encourage shareholders to attend and ask questions of the Board.
3 - TAKE INTO ACCOUNT WIDER STAKEHOLDER AND SOCIAL RESPONSIBILITIES AND THEIR IMPLICATIONS FOR LONG-TERM SUCCESS
We recognise that the Board is responsible not only to its shareholders, but to a wider group of internal (members of staff) and external (customers, suppliers, regulators and others) stakeholders. EDX acts with integrity and values its people, from its members of staff to those who form the communities with which it engages. The Board has put in place a range of processes and systems to ensure there is close oversight and contact with its key resources and relationships.
The Board is kept up to date on wider stakeholder engagement feedback in order to be informed about stakeholder viewpoints on crucial issues for them and our business. Due to the current size and stage of development of the Company, we consider our impact on our stakeholder network and wider society to be minimal.
At Board meetings, the Directors consider their responsibilities under s.172 of the Companies Act 2006 in all decisions taken, as set out in the s. 172 statement in the Strategic Report.
4 - EMBED EFFECTIVE RISK MANAGEMENT, CONSIDERING BOTH OPPORTUNITIES AND THREATS, THROUGHOUT THE ORGANISATION
The Board is responsible for determining the nature and extent of significant risks that may have an impact on our operations, and for maintaining a risk management framework.
The Board has carried out a robust assessment of the principal risks and uncertainties affecting our business, considered how these could affect operations, performance and solvency and what mitigating actions, if any, can be taken. The Risk Management Report in this Annual Report outlines the principal risks to the business.
The Audit Committee has been delegated responsibility for monitoring risk management systems, to ensure an effective system of financial controls is maintained to support timely and accurate reporting of financial information for review by the Board and the Group's external auditors
5 - MAINTAIN THE BOARD AS A WELL-FUNCTIONING, BALANCED TEAM LED BY THE CHAIR
The Board is currently comprised of a non-executive Chairman, Jason Holt, two Executive Directors, Michael Hudson and Christoper Evans, and a Senior Independent Director, Trevor Jones, who has no business dealings or material relationship with the Group apart from this appointment and is therefore deemed independent by the Board. Biographies of the Board can be found on the company website at https://edxmedical.co.uk/wp-content/uploads/2022/11/Company-Directors-2022-11-14.pdf.
We note that the QCA Code advises that there be two independent non-executive directors, however we feel that the current composition of the Board is appropriate and suitable given the size and stage of development of the Company. As EDX grows, we will consider the merits of an additional independent non-executive director.
The Board of Directors has a duty and legal obligation to further the Company's interests while also establishing corporate governance frameworks. The Chairman is ultimately responsible for the strategy and quality of corporate governance.
Directors are required to commit as much time as deemed reasonably appropriate to conduct their duties. Both Executive Directors are full-time employees of the Company. For the year to 31 March 2023, the Directors' attendances at Board and Committee meetings are as follows:
|
|
Board |
Audit Committee |
Remuneration Committee |
|
Prof Sir Christoper Evans OBE1 |
2/2 |
- |
0/0 |
|
Jason Holt1 |
2/2 |
0/0 |
2/2 |
|
Michael Hudson1 |
2/2 |
- |
- |
|
Prof Trevor Jones CBE1 |
2/2 |
0/0 |
2/2 |
|
Donald Stewart2 |
0/1 |
0/0 |
0/0 |
|
Alexander Barblett2 |
1/1 |
0/0 |
0/0 |
|
John Taylor2 |
1/1 |
- |
- |
1 Appointed 14 November 2022
2 Resigned 14 November 2022
The audit committee did not meet formally in the year as it was re-formed at the time of the RTO and the first formal meeting was post year end. Conflicts of interest are monitored and dealt with effectively. The Board is aware of its Directors' other responsibilities and interests, and any changes are communicated to and, where appropriate, agreed upon by the rest of the Board.
6 - ENSURE THAT BETWEEN THEM THE DIRECTORS HAVE THE NECESSARY UP-TO-DATE EXPERIENCE, SKILLS AND CAPABILITIES
The Company believes that the Directors have wide-ranging experience in relevant sectors, providing the ability to deliver the Company's strategy for the benefit of shareholders over the medium and long term. They also have an extensive network of relationships to reach key decision-makers to help achieve their strategy.
EDX's Company Secretary, ONE Advisory Limited, assist with ensuring that Board procedures are followed and that the Company complies with all applicable rules, regulations and obligations governing its operation, as well as helping the Chairman maintain excellent standards of corporate governance. ONE Advisory also provides support and assistance with MAR compliance and shareholder meetings.
There is no formal process to keep Directors' skill sets up to date, however Directors are encouraged to undertake additional training where required. The Company's lawyers, auditors, company secretary and corporate advisor provide regular updates on governance, financial reporting and the AQSE Growth Market Access Rulebook and the Board is able to obtain advice from other external bodies when necessary.
The Executive Directors will be evaluated against predefined targets and their personal and professional development requirements will be addressed as part of our performance and development assessment process. The Chairman will be encouraged to discuss any personal growth or training requirements with the Board of Directors
7 - EVALUATE BOARD PERFORMANCE BASED ON CLEAR AND RELEVANT OBJECTIVES, SEEKING CONTINUOUS IMPROVEMENT
The Remuneration Committee is responsible for reviewing the performance of the Board. Internal evaluation of the Board, the Committees and individual Directors will be undertaken on a regular basis in the form of peer appraisal and discussions to determine the effectiveness and performance against targets and objectives. As a part of the appraisal, the appropriateness and opportunity for continuing professional development, whether formal or informal, are discussed and assessed.
8 - PROMOTE A CORPORATE CULTURE THAT IS BASED ON ETHICAL VALUES AND BEHAVIOURS
The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Company as a whole, which in turn will impact the Company's performance. The Directors are aware that the tone and culture set by the Board will impact all aspects of the Company and the way that advisers or other representatives behave. The corporate governance arrangements that the Board has adopted are designed to instil a firm ethical code to be followed by Directors, advisers, and representatives alike throughout the organisation.
The Company strives to achieve and maintain an open and respectful dialogue with its professional advisers, regulators, suppliers, and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate strategy. The Directors consider that, at present, the Company has an open culture facilitating comprehensive dialogue and feedback and enabling positive and constructive challenge. The Company has adopted a code for Directors' dealings in securities which is appropriate for a company whose securities are traded on the AQSE Growth Market and is in accordance with the requirements of the UK Market Abuse Regulation.
9 - MAINTAIN GOVERNANCE STRUCTURES AND PROCESSES THAT ARE FIT FOR PURPOSE AND SUPPORT GOOD DECISION- MAKING BY THE BOARD
The Company's governance structures are appropriate for a company of its size. The Board also meets regularly, and the Directors continuously maintain an informal dialogue between themselves. The Chairman is responsible for the effectiveness of the Board as well as primary contact with shareholders, while the execution of the Company's investment strategy is a matter for all Board members. The Board delegates authority to two Committees to assist it with accomplishing its business objectives and maintain a strong system of internal control and risk management. The Committees meet separately from the Board. The current Governance structure is outlined below:
Audit Committee
The Audit Committee comprises of Jason Holt as chairperson and Sir Christopher Evans as a member. The Committee has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the Group is properly measured and reported on.
Remuneration Committee
The Remuneration Committee is chaired by Professor Trevor Jones, with Jason Holt as a member. The Committee reviews the performance of the Board and make recommendations to the Directors on matters relating to their remuneration and terms of employment.
The remuneration committee is also responsible for making recommendations to the Directors on proposals for the granting of share awards and other equity incentives pursuant to any share award scheme, LTIP or equity incentive scheme in operation from time to time.
Considering the size of the board of directors of the Company, the Directors do not consider it necessary to establish a Nomination Committee, however the Directors will keep this under review.
10 - COMMUNICATE HOW THE COMPANY IS GOVERNED AND IS PERFORMING BY MAINTAINING A DIALOGUE WITH SHAREHOLDERS AND OTHER RELEVANT STAKEHOLDERS.
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders in compliance with regulations applicable to companies quoted on AQUIS Stock Exchange which operates the AQSE Growth Market. Shareholders are encouraged to attend the Company's Annual General Meeting, where they will be given the opportunity to interact with the Directors.
Investors also have access to current information on the Company through its website, https://edxmedical.co.uk and via any of the Directors, who are available to answer investor relations enquiries.
The Board maintains that if a resolution is passed by a general meeting with 20% or more votes against it, the Board will investigate the reason for the result and take appropriate action if necessary.
Jason Holt
Chairman
1 October 2023
The Audit Committee comprises Jason Holt as chairman and Professor Sir Christopher Evans as the other member. The Committee has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the Group is properly measured and reported on. The Committee is expected to meet at least twice a year to review annual reporting and interim reporting and at any other times as deemed necessary.
Role and Responsibilities
Pursuant to its terms of references, the Committee is responsible for, inter alia, the following:
· Ensuring the Company has followed appropriate accounting standards and made appropriate estimates and judgments.
· Reviewing the adequacy and effectiveness of internal controls.
· Reviewing the effectiveness of the external auditor, including their appointment or removal.
· Determining the remuneration of the external auditor.
· Monitoring any significant changes to accounting policies.
Significant issues considered by the Audit Committee
Significant issues considered by the Audit Committee included the RTO of EDX Medical Ltd into EDX Medical Group plc which included overseeing the process, including the creation of documents and supply of information to the legal teams and the RTO accountants.
Also considered along with the CEO, was the acquisition and integration of Torax Bioscience Ltd which included but not limited to review of Due Diligence work, review of Shareholder docs and implications on financial aspects of the business.
The Committee continually reviews any risks financial or macro-economic or otherwise to the organisation.
Risk Management and Internal Controls
The Committee reviews the effectiveness of the Company's internal financial controls and risk management systems. On at least an annual basis, it will review the practical implementation of such controls. As the Company laboratory activities are regulated under ISO accreditation, the Head of Quality, Regulatory Affairs and Compliance provides ongoing internal supervision of operational risks and mitigation, and reports are submitted to the Audit Committee on a routine basis.
Whilst there is currently not considered a need for an internal audit function due to the size and stage of development of the Company and the adequacy of present controls, the Committee will keep under continual review the necessity of such a role.
External Audit
The Committee meets periodically with the Company's external auditor, without the presence of management, to discuss key audit matters and review audit findings reports. Any recommendations made by the external auditor are considered and, if appropriate, acted upon.
PKF Littlejohn LLP were appointed as auditor in 2022. In line with guidance, EDX will rotate auditor through an audit tender process no later than 2031 and rotate audit partner by 2027.
Auditor Independence
The Committee maintains responsibility for reviewing and monitoring the external auditor's independence and objectivity as well as their qualifications, expertise and the effectiveness of the audit process, taking into consideration relevant UK and other relevant professional and regulatory requirements. The Committee have considered the auditor's independence and continues to believe that PKF Littlejohn LLP is independent within the meaning of all UK regulatory and professional requirements and the objectivity of the audit engagement partner and audit staff are not impaired.
Jason Holt
Chairman of the Audit Committee
1 October 2023
The Directors present their report with the financial statements of the company for the period ended 31 March 2023.
Principal Activities and Business Review
The principal activities of the Company during the period under review were the development of innovative digital diagnostic products and services, enabling cost effective and timely delivery of personalised treatment for cancer, heart disease, neurology and infectious diseases.
The requirements of the business review have been considered within the Strategic Report.
Results and dividends
An analysis of the Company's performance is contained within the Strategic Report. The Company's income statement is set out in the Consolidated Statement of Comprehensive Income and shows the result for the year.
The Directors have not recommended the payment of a dividend in respect of the financial period to 31 March 2023 (2022:
Directors
The Directors and brief biographies are detailed on the company website at https://edxmedical.co.uk/wp-content/uploads/2022/11/Company-Directors-2022-11-14.pdf.
The Directors of the Company during the period were:
Prof Sir Christoper Evans OBE Appointed on 14 November 2022
Jason Holt Appointed on 14 November 2022
Michael Hudson Appointed on 14 November 2022
Prof Trevor Jones CBE Appointed on 14 November 2022
Donald Stewart Resigned on 14 November 2022
Alexander Barblett Resigned on 14 November 2022
John Taylor Resigned on 14 November 2022
In accordance with the Articles of Association, all current directors, having been appointed during the year under review, retire by rotation and being eligible offer themselves for re-election at the Company's forthcoming AGM.
Director's emoluments
Directors' emoluments during the year under review are set out in the Remuneration Committee Report.
Directors' Interests
The beneficial interests of the Directors in the Ordinary Shares of the Company on 31 March 2023 are set out below:
|
|
Ordinary Shares |
||
|
Prof Sir Christoper Evans OBE |
124,000,000 |
42.48% |
|
|
Michael Hudson |
20,000,000 |
6.85% |
|
|
Jason Holt |
4,400,000 |
1.37% |
|
As at 31 March 2022:
|
|
Warrants |
Ordinary Shares |
|
|
Michael Hudson |
- |
- |
- |
|
Prof Sir Christoper Evans OBE |
- |
- |
- |
|
Jason Holt |
- |
- |
- |
|
Alexander Barblett |
1,050,000 |
1,050,000 |
3.8% |
|
John Taylor |
1,050,000 |
1,150,000 |
3.8% |
|
Donald Stewart |
1,050,000 |
1,250,000 |
4.2% |
Substantial shareholders
In addition to the Directors' shareholdings, the Company had been notified of the following shareholding of 3% or more in the ordinary share capital of the Company at 29 September 2023:
|
|
Number of shares |
Percentage of issued share capital |
|
Bridgemere Securities Limited |
32,720,000 |
11.2% |
|
Countywide Developments Ltd |
20,000,000 |
6.9% |
|
West Coast Capital Holdings Ltd |
16,000,000 |
5.5% |
|
Intrinsic Capital |
14,802,647 |
5.1% |
As at the period end, 31 March 2023:
|
|
Number of shares |
Percentage of issued share capital |
|
Bridgemere Securities Limited |
7,720,000 |
3.08% |
|
Countywide Developments Ltd |
20,000 |
7.97% |
|
West Coast Capital Holdings Ltd |
16,000,000 |
6.38% |
|
Intrinsic Capital |
15,966,897 |
6.37% |
Share Capital
Details of the changes in the share capital of the Company during the period are set out in Note 25.
Employees
Given the limited number of employees, the Company undertakes a tailored approach to employee engagement based on the needs and skills of each employee and having regard to employees' interests in decisions taken by the Board. As the Company grows, EDX will look to introduce more formal employee engagement mechanisms.
Engagement with suppliers, customers and others in a business relationship with the company
Details of the Company's engagement with its stakeholders during the year are set out in the Section 172 statement in the Strategic Report.
Energy and Carbon Reporting
The Company is aware that it needs to measure its operational carbon footprint in order to limit and control its environmental impact. However, given the very limited nature of its operations during the year under review, it has not been practical to measure its carbon footprint and intends to do so in time for its next annual report.
Statement of corporate governance arrangements
The Company has adopted the QCA Corporate Governance Code. See the Corporate Governance Report for more details.
Political and charitable donations
The Company made
The Company made no political donations during the year ended 31 March 2023 (2022:
Post-Balance Sheet Events
See Note 32.
Share Buy Backs
The Company did not acquire any of its own shares during the year under review.
Financial Instruments
Disclosures in respect of the Company policy regarding financial instruments and risk management are contained in Note 28 to the financial statements.
Directors' third-party indemnity provisions
The Company has taken the opportunity to purchase Director's & Officers Liability Insurance.
Statement of disclosure to auditors
So far as each Director is aware, there is no relevant audit information of which the Company's auditors are unaware.
Each Director has taken all the steps that they ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
PKF Littlejohn LLP has expressed their willingness to continue in office and a resolution to re-appoint them will be proposed at the annual general meeting.
Going Concern Basis
The Board continues to adopt the going concern basis to the preparation of the financial statements as it is confident of the Group continuing operations into the foreseeable future.
The Board's forecasts for the Group include due consideration for contracted minimum revenues, potential future capital in-flows, continued operating losses, projected increase in cash-burn of the Group for a minimum period of at least twelve months from the date of approval of these financial statements.
However, the Group forecasts assume that further equity fundraising will be required in the next twelve months in order to implement its growth strategy and operate as a going concern. Although the entity has had past success in fundraising and continues to attract interest from investors, making the Board confident that such fundraising will be available to provide the required capital, there can be no guarantee that such fundraising will be available and, accordingly, this constitutes a material uncertainty over going concern, which the auditors have made reference to in their audit report.
Notwithstanding the above, the Board has considered various alternative operating strategies should these be necessary in the light of fundraising not being available and actual trading performance not matching the Group's forecasts given current macro-economic conditions and is satisfied that such revised operating strategies could be adopted, if and when necessary. This includes the ability to call upon Sir Christopher Evans, a director of the Company, to extend sufficient loans. Therefore, the Directors consider the going concern basis of preparation is appropriate.
The financial statements have been prepared on a going concern basis and do not include the adjustments that would be required should the going concern basis of preparation no longer be appropriate.
This report was approved by the Board on 1 October 2023 and signed on its behalf.
Jason Holt
Chairman
1 October 2023
Chairman's Introduction
I am pleased to present our Remuneration Committee report for the period ended 31 March 2023.
The Remuneration Committee comprises of myself, Prof Trevor Jones CBE, as Chairman and Jason Holt as the other member. Other Directors may attend by invitation of the Committee, but it is a fundamental principle that no individual should be able to participate in discussions about their own remuneration. The Committee's main responsibilities are to make recommendations to the Board as to the remuneration of the Directors and the terms of their services. The Committee also makes recommendations to the Board relating to incentive schemes for all employees pursuant to share options schemes or otherwise.
Role and Responsibilities
The Committee aims to meet at least twice a year and at any other times as required. Pursuant to its terms of reference, its responsibilities include:
· Determining the broad framework for the remuneration of the Directors.
· Determining the policy for and scope of pension arrangements of the Directors.
· Approving the implementation of share options schemes, subject to the approval of the Board, granting new share options and overseeing other incentive arrangements for the Directors.
· Determining the base salary and bonus arrangements of the Directors.
Share options
As outlined on admission on 14 November 2022, EDX intends to establish a Long-Term Incentive Plan (LTIP) in order to attract, retain and incentivise individuals who can deliver long-term value for the Company. As set out in the admission document, the Chief Executive is due to be granted 2,046,666 options at an exercise price of
The Company intends for the LTIP not to exceed 10% of the Company's issued Ordinary Shares from time to time without the prior approval of the shareholders.
Directors' remuneration
For the year to 31 March 2023.
|
Director |
Salary £ |
Pension contributions £ |
Other benefits £ |
Bonus £ |
Share-based payments £ |
Total £ |
|
Prof Sir Christoper Evans OBE |
361,253 |
NIL |
NIL |
NIL |
NIL |
361,253 |
|
Jason Holt |
46,734 |
NIL |
NIL |
NIL |
NIL |
46,734 |
|
Michael Hudson |
222,471 |
NIL |
NIL |
NIL |
NIL |
222,471 |
|
Prof Trevor Jones CBE |
13,931 |
NIL |
NIL |
NIL |
NIL |
13,931 |
|
Donald Stewart |
17,896 |
NIL |
NIL |
NIL |
NIL |
18,636 |
|
Alexander Barblett |
18,636 |
NIL |
NIL |
NIL |
NIL |
18,636 |
|
John Taylor |
18,636 |
NIL |
NIL |
NIL |
NIL |
18,636 |
For the year to 31 March 2022.
|
Director |
Salary £ |
Pension contributions £ |
Other benefits £ |
Bonus £ |
Share-based payments £ |
Total £ |
|
Donald Stewart |
30,000 |
NIL |
NIL |
NIL |
NIL |
30,000 |
|
Alexander Barblett |
30,000 |
NIL |
NIL |
NIL |
NIL |
30,000 |
|
John Taylor |
30,000 |
NIL |
NIL |
NIL |
NIL |
30,000 |
Remuneration Policy
EDX's remuneration policy is designed to promote the long-term strategy and sustainable success of the business. We are committed to applying the recommendations of the QCA Corporate Governance Code, QCA Remuneration Committee Guide and the Investment Association's Principles of Remuneration. Clawback provisions are in place in the event of financial misstatement or misconduct.
The policy of the Remuneration Committee is to ensure that the Executive Director, Michael Hudson is fairly rewarded for his individual contribution to the Company's overall performance and to provide a competitive remuneration package to employees including Long-Term option awards incentive plans (LTIP) to attract and retain and motivate individuals of the experience and competence required to ensure that the Company is managed successfully in the interest of shareholders.
Directors' remuneration is made up of basic salary, benefits, a discretionary cash bonus, LTIPs and pension arrangements.
We consider feedback from investors and encourage engagement from our shareholders on remuneration matters.
Non-Executive Director's fee policy
The policy for the remuneration of the Non-Executive Directors (NED) is to attract NED with a broad range of relevant experience and skills to oversee the implementation of the Company's strategy and are paid in 12 equal monthly instalments during the year. Notice periods are 1 month, and notice can be given by the Company or the NEDs pursuant to their service contracts.
Executive Directors' service contracts
The executive directors have entered into service contracts with the Company which contain notice periods of 1 month. The service contracts are available to inspect at the Company's registered office.
Conclusion
This report is intended to provide shareholders with sufficient information to judge the impact of decisions taken by the Remuneration Committee and to assess whether remuneration packages for Directors are fair in the context of the performance of the Company.
The Remuneration Committee is mindful of shareholder views, and we believe that our Directors' remuneration Policy is aligned with the achievement of the Company's business objective and the interest of shareholders
The Directors' Remuneration Policy and Statement of Remuneration were approved by the Remuneration Committee and by the Board on 27 July 2022 and this Remuneration Committee Report approved on 1 October 2023.
Professor Trevor Jones CBE
Chairman of the Remuneration Committee
The Directors are responsible for preparing the directors' report, strategic report, annual report and the financial statements in accordance with applicable laws and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare Company financial statements in accordance with UK adopted international accounting standards ("IFRSs") and in accordance with the requirements of the Companies Act. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that year.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether applicable UK adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose, with reasonable accuracy, at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the EDX Medical Group Plc website. The Company is compliant with the Aquis Growth Market Rulebook regarding the Company's website.
Professor Sir Christopher Evans
Director
1 October 2023
Opinion
We have audited the financial statements of EDX Medical Group Plc (the 'parent company') and its subsidiaries (the 'group') for the period ended 31 March 2023 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the Consolidated and Parent Company Statements of Changes in Equity, the Consolidated and Parent Company Statements of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards and as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
· the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 March 2023 and of the group's loss for the period then ended;
· the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
· the parent company financial statements have been properly prepared in accordance with UK-adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and
· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 2 in the financial statements, which indicates that conditions exist that may cast doubt on the group's ability to continue as a going concern. The group incurred a net loss of £3,709,000, incurred operating cash outflows of £1,163,000 and is not expected to generate positive cash outflows in the 12 months from the date at which these financial statements were signed. As stated in note 2 these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the parent company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the group's and parent company's ability to continue to adopt the going concern basis of accounting included:
· Reviewing the cashflow forecast and budgets for the period to 30 November 2025 and the corresponding key assumptions used. This included but was not limited to consideration of the following: funding arrangements and related cashflows, planned acquisitions/ expansions and capital expenditures;
· Evaluating the group's procedures and controls for preparing and reviewing the budgets and cash flow forecasts covering at least the going concern period;
· Assessing and challenging the key assumptions in the underlying cashflow forecasts, including performing a sensitivity analysis on plausible changes to the cashflow forecasts;
· Discussions with management regarding future plans and funding to support the operations of the group and parent company; and
· Reviewing management's going concern paper and ensuring the underlying key assumptions are congruent to the cashflow forecast provided, including testing the mathematical accuracy and appropriateness of the model used to prepare the cashflows and agreeing the cashflows to supporting documentation or reasonableness in comparison to historic cashflows.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures.
The materiality applied to the group financial statements as a whole was £100,000. This was calculated based upon 2.5% of group expenditure, which was considered to be the most appropriate benchmark as the majority of the activity in the period was research which is expensed. There was no group materiality in the prior year, as the acquisitions of the subsidiaries occurred during the period.
We use performance materiality to reduce to an appropriately low level, the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Performance materiality of £70,000 was set at 70% of materiality due to the assessed risk and our accumulated knowledge of the group.
Materiality for the parent company financial statements as a whole was set at £70,000 (2022: £11,500). This was calculated based upon 2.5% of the parent company's gross assets but capped below group materiality (2022: 5% of loss before tax). The reason for the change is due to the acquisitions during the year, which mean the investments in the subsidiaries are the most significant balances within the parent company financial statements. Performance materiality was set at £49,000 (2022: £8,000) based on 70% of materiality (2022: 70%) for the same reasons as for the group.
Whilst materiality for the financial statements as a whole was set at £100,000, each significant component of the group was audited to an overall materiality of £70,000, with performance materiality set at 70%.
We agreed to report to the audit committee any corrected or uncorrected identified misstatements exceeding £5,000 for the group and £3,500 (2022: £575) for the parent company, in addition to other identified misstatements that warranted reporting on qualitative controls.
We applied the concept of materiality both in planning and performing the audit, and in evaluating the effect of misstatement. No significant changes have come to light during the audit which required a revision of our materiality for the financial statements as a whole.
Our approach to the audit
Our audit is risk based and is designed to focus our efforts on the areas at greatest risk of material misstatement, aspects subject to significant management judgement as well as greatest complexity, risk and size.
As part of designing our audit, we determined materiality, as above, and assessed the risk of material misstatement in the financial statements. In particular, we looked at areas involving significant accounting estimates and judgement by the directors and considered future events that are inherently uncertain. These areas of estimate and judgement included:
· the recoverability of internally generated intangible assets and investments in subsidiary undertakings, as the future research and development results are inherently uncertain;
· the accounting for the reverse takeover and acquisition in the year and key judgements used in this regard;
· the accounting for equity instruments including the convertible loan notes and share based payments which were assessed as an area which involved significant judgements by management.
We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
We have performed an audit on the financial information of two financially significant components and tested certain account balances for one component identified to be a risk significant.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern section we have determined the matters described below to be key audit matters to be communicated in our report.
|
Key Audit Matter |
How our scope addressed this matter |
|
Reverse Takeover Accounting and Disclosure (Note 4) |
|
|
On 21 November 2022, the parent company agreed to acquire the issued and to be issued share capital of EDX Medical Limited for a consideration of ₤12,000,000 to be satisfied by the issue of 200,000,000 Consideration Shares at the placing price. Although the transaction resulted in EDX Medical Limited becoming a wholly owned subsidiary of the parent company, the transaction was considered to constitute a reverse takeover ("RTO") as the previous shareholders of EDX Medical Limited now own a substantial majority of the ordinary shares of the Company and the Board of Directors of the Company are principally comprised of the Directors of EDX Medical Limited. Accounting for an RTO is a complex process and requires management to make key judgements. As a result, the accounting for the RTO is considered a key audit matter.
|
Our work in this area included:
· Obtaining the share purchase agreement in respect of the transaction to identify key terms and to confirm ownership; · Obtaining management's accounting paper and reviewing and challenging key assumptions, inputs, data and method applied in the determination of the fair value; · Reviewing the accounting treatment and accounting entries in relation to the transaction against the requirements of UK adopted IAS; · Reperforming the RTO accounting and testing the accuracy of the parent company and EDX Medical Limited trial balance as at the date of acquisition; and
· Ensuring that disclosures in the financial statements are in accordance with the financial reporting framework. |
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the group and parent company financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and the directors' report for the financial period for which the financial statements are prepared is consistent with the financial statements; and
· the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
· the parent company financial statements are not in agreement with the accounting records and returns; or
· certain disclosures of directors' remuneration specified by law are not made; or
· we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation of the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing the group and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
· We obtained an understanding of the group and parent company and the sector in which they operate to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management and industry research;
· We obtained an understanding and evaluated the design and implementation of controls that address fraud risks of the group and parent company;
· We determined the principal laws and regulations relevant to the group and parent company in this regard to be those arising from:
o the Companies Act 2006;
o UK tax legislation;
o Employment Law;
o Anti-Bribery and Money Laundering Regulations;
o Compliance with certain ISO certifications held; and
o General Data Protection Regulation.
· We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the group and parent company with those laws and regulations. These procedures included, but were not limited to:
o Enquiring of management regarding potential non-compliance;
o Reviewing legal and professional fees to understand the nature of the costs and the existence of any non-compliance with laws and regulations;
o Reviewing minutes of meetings of those charged with governance and Regulatory News Service announcements; and
o Reviewing accounting ledgers for any unusual journal entries which may indicate non-compliance.
· We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, that the potential for management bias was identified in relation to the areas of judgement outlined in the 'Our approach to the audit section,' and also in revenue recognition. Audit testing was designed to address each of these areas.
· As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of bias; evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business; and reviewing bank statements during the period to identify any large and unusual transactions where the business rationale is not clear.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Adam Humphreys (Senior Statutory Auditor) 15 Westferry Circus
For and on behalf of PKF Littlejohn LLP Canary Wharf
Statutory Auditor London E14 4HD
1 October 2023
|
|
Note |
Period ended |
|
|
|
31 March 2023 |
|
|
|
£ |
|
Continuing operations |
|
|
|
Revenue |
5 |
3,864 |
|
Cost of sales |
|
(3,894) |
|
Gross loss |
|
(30) |
|
|
|
|
|
Other income |
|
50 |
|
Administrative expenses |
7 |
(3,582,633) |
|
Operating loss |
7 |
(3,582,613) |
|
|
|
|
|
Finance expense |
6 |
(126,750) |
|
Loss before taxation |
|
(3,709,363) |
|
Taxation |
11 |
- |
|
Loss for the period |
|
(3,709,363) |
|
|
|
|
|
Other comprehensive income |
|
|
|
Other comprehensive income for the period |
|
- |
|
|
|
|
|
Total comprehensive loss for the period attributable to owners of the parent |
|
(3,709,363) |
|
|
|
|
|
Earnings per share from continuing operations attributable to owners of the parent: |
|
|
|
Basic and diluted loss per share (pence) |
13 |
(3.25) |
The notes on pages 47 to 83 form part of these financial statements.
|
|
Note |
31 March 2023 |
|
ASSETS |
|
£ |
|
Non-current assets |
|
|
|
Intangible assets |
15 |
91,322 |
|
Property, plant and equipment |
16 |
422,126 |
|
Right-of-use asset |
20 |
422,943 |
|
Total non-current assets |
|
936,391 |
|
|
|
|
|
Current assets |
|
|
|
Trade and other receivables |
18 |
382,445 |
|
Other current assets |
20 |
270,710 |
|
Cash and cash equivalents |
21 |
116,176 |
|
Total current assets |
|
769,331 |
|
|
|
|
|
Total assets |
|
1,705,722 |
|
|
|
|
|
EQUITY AND LIABILITIES |
|
|
|
Equity |
|
|
|
Share capital |
25 |
2,525,000 |
|
Share premium |
25 |
1,929,781 |
|
Shares to be issued |
26 |
200,000 |
|
Warrant reserve |
26 |
17,567 |
|
Merger relief reserve |
26 |
6,545,833 |
|
Reverse acquisition reserve |
26 |
(8,461,500) |
|
Retained losses |
26 |
(3,709,363) |
|
Total equity |
|
(952,682) |
|
|
|
|
|
Non-current liabilities |
|
|
|
Lease liability |
23 |
262,775 |
|
Deferred tax |
12 |
9,804 |
|
Borrowings |
29 |
11,354 |
|
Total non-current liabilities |
|
283,933 |
|
|
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
22 |
718,869 |
|
Convertible loan - debt |
24 |
1,389,268 |
|
Convertible loan - derivative |
24 |
93,887 |
|
Borrowings |
29 |
27,165 |
|
Lease liability |
23 |
145,282 |
|
Total current liabilities |
|
2,374,471 |
|
|
|
|
|
Total liabilities |
|
2,658,405 |
|
|
|
|
|
Total equity and liabilities |
|
1,705,722 |
The consolidated financial statements on pages 40 to 46 were approved by the board of Directors on 1 October and signed by Professor Sir Christopher Evans as Director. The notes on pages 47 to 83 form part of these financial statements.
Company number 13277385
|
|
Note |
31 March 2023 |
31 March 2022 |
|
ASSETS |
|
£ |
£ |
|
Non-current assets |
|
|
|
|
Investments |
17 |
8,562,500 |
|
|
Property, plant and equipment |
16 |
- |
832 |
|
Total non-current assets |
|
8,562,500 |
832 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Trade and other receivables |
18 |
1,337,236 |
8,068 |
|
Financial assets at fair value through profit or loss |
19 |
600,000 |
- |
|
Cash and cash equivalents |
21 |
14,518 |
1,027,114 |
|
Total current assets |
|
1,951,754 |
1,035,182 |
|
|
|
|
|
|
Total assets |
|
10,514,254 |
1,036,014 |
|
|
|
|
|
|
EQUITY AND LIABILITIES |
|
|
|
|
Equity |
|
|
|
|
Share capital |
25 |
2,525,000 |
300,000 |
|
Share premium |
25 |
1,929,781 |
918,933 |
|
Shares to be issued |
26 |
200,000 |
- |
|
Merger relief reserve |
26 |
6,545,833 |
- |
|
Warrant reserve |
26 |
17,567 |
17,567 |
|
Retained losses |
26 |
(824,925) |
(253,408) |
|
Total equity |
|
10,393,256 |
983,092 |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
22 |
120,998 |
52,922 |
|
Total current liabilities |
|
120,998 |
52,922 |
|
|
|
|
|
|
Total liabilities |
|
120,998 |
52,922 |
|
|
|
|
|
|
Total equity and liabilities |
|
10,514,254 |
1,036,014 |
As permitted by Section 408 of the Companies Act 2006 the Company is exempt from the requirements to present its own statement of comprehensive income. The Company's loss for the financial year was £571,517 (2022: £253,408).
The financial statements on pages 40 to 46 were approved by the board of Directors on 1 October 2023 and signed on its behalf by Professor Sir Chrisopher Evans.
Professor Sir Christopher Evans - Director
The notes on pages 47 to 83 form part of these financial statements.
|
|
Share capital |
Share premium |
Shares to be issued |
Merger relief reserve |
Warrant reserve |
Reverse acquisition reserve |
Retained losses |
Total equity |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
Balance at incorporation of EDX Medical Ltd |
50,000 |
- |
- |
- |
- |
- |
- |
50,000 |
|
Loss for the period |
- |
- |
- |
- |
- |
- |
(3,709,363) |
(3,709,363) |
|
Total comprehensive loss for the period |
- |
- |
- |
- |
- |
- |
(3,709,363) |
(3,709,363) |
|
|
|
|
|
|
|
|
|
|
|
Recognition of plc equity at acquisition date |
300,000 |
918,933 |
- |
- |
17,567 |
- |
- |
1,236,500 |
|
Equity of EDX Ltd recycled to reverse acquisition reserve |
(50,000) |
- |
- |
- |
- |
50,000 |
- |
- |
|
Reverse acquisition |
2,000,000 |
- |
- |
6,500,000 |
- |
(8,511,500) |
- |
(11,500) |
|
Issue of placing shares |
200,000 |
1,000,000 |
- |
- |
- |
- |
- |
1,200,000 |
|
Issue of adviser shares |
8,333 |
41,667 |
- |
- |
- |
- |
- |
50,000 |
|
Cost of issue of shares |
- |
(30,819) |
- |
- |
- |
- |
- |
(30,819) |
|
Issue of shares for consideration of subsidiary |
16,667 |
- |
- |
45,833 |
- |
- |
- |
62,500 |
|
Proceeds received in advance of share issuance |
- |
- |
200,000 |
- |
- |
- |
- |
200,000 |
|
Total transactions with owners |
2,525,000 |
1,929,781 |
200,000 |
6,545,833 |
17,567 |
(8,461,500) |
- |
2,756,681 |
|
|
|
|
|
|
|
|
|
|
|
As at 31 March 2023 |
2,525,000 |
1,929,781 |
200,000 |
6,545,833 |
17,567 |
(8,461,500) |
(3,709,363) |
(952,682) |
The notes on pages 47 to 83 form part of these financial statements.
|
|
Share capital |
Share premium |
Shares to be issued |
Merger relief reserve |
Warrant reserve |
Retained losses |
Total equity |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
|
|
|
Balance at incorporation |
2 |
- |
- |
- |
- |
- |
2 |
|
|
|
|
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
- |
- |
(253,408) |
(253,408) |
|
Total comprehensive loss for the period |
- |
- |
- |
- |
- |
(253,408) |
(253,408) |
|
|
|
|
|
|
|
, |
|
|
Issue of shares |
299,998 |
1,000,000 |
- |
- |
- |
- |
1,299,998 |
|
Costs of issue of shares |
- |
(81,067) |
- |
- |
- |
- |
(81,067) |
|
Share-based payment expense |
- |
- |
- |
- |
17,567 |
- |
17,567 |
|
Total transactions with owners |
299,998 |
918,933 |
- |
- |
17,567 |
- |
1,236,498 |
|
|
|
|
|
|
|
|
|
|
As at 31 March 2022 |
300,000 |
918,933 |
- |
- |
17,567 |
(253,408) |
983,092 |
|
|
|
|
|
|
|
|
|
|
Loss for the year |
- |
- |
- |
- |
- |
(571,517) |
(571,517) |
|
Total comprehensive loss for the year |
- |
- |
- |
- |
- |
(571,517) |
(571,517) |
|
|
|
|
|
|
|
|
|
|
Issue of shares |
2,000,000 |
- |
- |
6,500,000 |
- |
- |
8,500,000 |
|
Acquisition of subsidiary |
16,667 |
- |
- |
45,833 |
- |
- |
62,500 |
|
Issue of placing shares |
200,000 |
1,000,000 |
- |
- |
- |
- |
1,200,000 |
|
Costs of issue of shares |
- |
(30,819) |
- |
- |
- |
- |
(30,819) |
|
Issue of adviser shares |
8,333 |
41,667 |
- |
- |
- |
- |
50,000 |
|
Proceeds received in advance of share issues |
- |
- |
200,000 |
- |
- |
|
200,000 |
|
Total transactions with owners |
2,225,000 |
1,010,848 |
200.000 |
6,545,833 |
- |
- |
9,981,681 |
|
|
|
|
|
|
|
|
|
|
As at 31 March 2023 |
2,525,000 |
1,929,781 |
200,000 |
6,545,833 |
17,567 |
(824,925) |
10,393,256 |
The notes on pages 47 to 83 form part of these financial statements.
|
|
|
31 March 2023 |
|
|
Note |
£ |
|
Cash flows from operating activities |
|
|
|
Loss before taxation |
|
(3,709,363) |
|
Adjustments for: |
|
|
|
Amortisation - Right of use asset |
20 |
154,533 |
|
Amortisation - Intangibles |
14 |
1,266 |
|
Depreciation |
15 |
124,995 |
|
Impairment of related party receivable |
9 |
103,684 |
|
Loss on disposal of property, plant & equipment |
15 |
633 |
|
Deemed cost of listing in reverse acquisition |
4 |
721,245 |
|
Fair value loss on convertible loan |
6 |
93,887 |
|
Finance expense |
6 |
32,863 |
|
Share-based payment - settled expenses |
25 |
50,000 |
|
Net cash used in operating activities before changes in working capital |
|
(2,426,256) |
|
|
|
|
|
Changes in working capital |
|
|
|
Decrease in trade and other receivables |
|
391,505 |
|
Increase in trade and other payables |
|
399,262 |
|
Increase in supplies and materials |
20 |
472,101 |
|
Net cash used in operating activities |
|
(1,163,388) |
|
|
|
|
|
Cash flow from investing activities |
|
|
|
Cash acquired with subsidiary |
13 |
776 |
|
Cash acquired on reverse acquisition |
|
95,756 |
|
Net cash flow used in investing activities |
|
96,532 |
|
|
|
|
|
Cash flow from financing activities |
|
|
|
Proceeds from issue of share capital |
22 |
1,200,000 |
|
Cost of issue of share capital |
22 |
(30,819) |
|
Cost of convertible loan note |
|
(15,786) |
|
Proceeds received in advance of share issue |
25 |
200,000 |
|
Receipts from related parties |
31 |
145,000 |
|
Repayment of borrowings |
|
(118,027) |
|
Other interest paid |
|
(1,166) |
|
Lease interest paid |
23 |
(26,643) |
|
Principal paid on leases |
23 |
(169,527) |
|
Net cash generated from financing activities |
|
1,183,032 |
|
|
|
|
|
Increase in cash and cash equivalents in the period |
|
116,176 |
|
|
|
|
|
Cash and cash equivalents at the end of the period |
|
116,176 |
Major non-cash transactions
On 14 November 2022, the Company issued 200,000,000 shares of 0.1p each at a price of 0.425p per share to the shareholders of EDX Medical Limited. as part of the RTO acquisition for a total of £8,500,000. See note 4.
On 27 February 2023, the Company also issued 1,666,667 shares of 0.1p each at a price of 0.375p per share for a total value of £62,500 for the acquisition of the 100% issues share capital of Torax Biosciences Limited. See note 13
The Company also issued 833,333 shares of 0.1p each at a price of 0.6p per share for a total value of £50,000 for the settlement of services rendered by advisors to the Company.
In July 2022 the Group issued 1,400,000 convertible redeemable loan notes ("CLNs") of £1.00 totalling £1,400,000 to replace an outstanding liability due to Christopher Evans. The original liability was in relation to the Company's acquisition of assets from Christopher Evans that totalled £1,404,923. Only £200,000 of cash was received from the convertible loan note. See note 21.
The notes on pages 47 to 83 form part of these financial statements.
|
|
|
31 March 2023 |
31 March 2022 |
|
|
Note |
£ |
£ |
|
Cash flows from operating activities |
|
|
|
|
Loss before taxation |
|
(571,517) |
(253,408) |
|
Adjustments for: |
|
|
|
|
Depreciation |
15 |
200 |
366 |
|
Loss on disposal of property, plant & equipment |
15 |
632 |
- |
|
Share-based payment |
|
50,000 |
- |
|
Net cash used in operating activities before changes in working capital |
|
(520,685) |
(253,042) |
|
Changes in working capital |
|
|
|
|
Decrease/(increase) in trade and other receivables |
17 |
301 |
(8,068) |
|
Increase in trade and other payables |
19 |
68,077 |
52,922 |
|
Net cash generated used in operating activities |
|
(452,307) |
(208,188) |
|
|
|
|
|
|
Cash flow from investing activities |
|
|
|
|
Investment in property, plant and equipment |
|
- |
(1,198) |
|
Investment in subsidiaries |
17 |
(1,329,470) |
- |
|
Payments for financial assets at fair value through profit or loss |
|
(600,000) |
- |
|
Net cash flow used in investing activities |
|
(1,929,470) |
(1,198) |
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
Proceeds from issue of share capital |
22 |
1,200,000 |
1,300,000 |
|
Cost of issue of share capital |
22 |
(30,819) |
(63,500) |
|
Proceeds received in advance of share issue |
22 |
200,000 |
- |
|
Net cash generated from financing activities |
|
1,369,181 |
1,236,500 |
|
|
|
|
|
|
(Decreases)/increase in cash and cash equivalents in the year |
|
(1,012,596) |
1,027,114 |
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
1,027,114 |
- |
|
|
|
|
|
|
Cash and cash equivalents at the end of the year |
|
14,518 |
1,027,114 |
Non-cash transaction
Non-cash transactions are as disclosed in the Group Statement of Cash Flow, with the exception of the £1.4m CLN which was issued by the subsidiary.
The notes on pages 47 to 83 form part of these financial statements.
1 General information
EDX Medical Group Plc (the "Company") is a public limited company, limited by shares (not guarantee) and is incorporated and domiciled in the UK. The address of the registered office is 210-211 Milton Road, Cambridge, England, CB4 0WA The registered number of the Company is 13277385. The Company changed its name from TECC Capital Plc to EDX Medical Group Plc on 11 November 2022. The consolidated financial statements consolidate those of the Company and its subsidiaries (together the "Group"). The principal activity of the Group is that of creating innovative health testing solutions and developing biological and digital technologies to improve the detection of diseases and disorders.
2 Summary of significant accounting policies
Basis of preparation
The consolidated and company financial statements have been prepared in accordance with UK-adopted International Accounting Standards ("IFRS") and in conformity with the requirements of the Companies Act 2006.
The consolidated and Company financial statements are presented in GBP ("£"), which is the subsidiaries' and Company's functional and presentational currency.
The Company has guaranteed the liabilities of the following subsidiaries in order that they qualify from audit under Section 479A of the Companies Act 2006, in respect of the year ended 31 March 2023:
· EDX Medical Limited
· Torax Biosciences Limited
Basis of consolidation
The consolidated financial statements consolidate the financial statements of the Company and the results of its subsidiary undertakings EDX Medical Limited and Torax Biosciences Limited, made up to 31 March 2023.
Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group 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. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
On 14th November 2022, the Company completed a reverse acquisition of EDX Medical Limited, a company registered in England and Wales. Further information about the transaction is disclosed in note 4.
Although the consolidated financial information has been issued in the name of EDX Medical Group Plc, the legal parent, it represents in substance continuation of the financial information of the legal subsidiary, EDX Medical Limited. EDX Medical Limited was incorporated on 28th February 2022, and the financial information represents a long period from incorporation to 31 March 2023 and there is no comparative period. As a result, no comparative information has been shown for any of the consolidated financial statements.
On 17 February 2023, the Company acquired 100% of the share capital of Torax Bioscience Limited in exchange for shares in the Company. This acquisition was accounted for using the acquisition method of accounting in accordance with IFRS 3 Business Combinations.
2 Summary of significant accounting policies (continued)
Principles of consolidation and equity accounting
Subsidiaries
Subsidiaries are entities over which the group has control. The group controls an entity where the group exposed to, or has rights to, variable returns from its involvement when the entity has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control creases.
The acquisition method of accounting is used to account for business combinations by the group (see note 13).
Inter-company transactions, balances and unrealised gains on transaction between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with policies adopted by the group.
New accounting standards, interpretations or amendments adopted by the Group
The adoption of the following mentioned amendments, which were all effective for years beginning on or after 1 January 2022, have not had a material impact on the Group's and Company's financial statements:
· Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use;
· Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41);
· Amendments to IFRS 3 References to Conceptual Framework);
· Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets
· Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Amendments to IAS 1: Classification of Liabilities as Current or Non-current - Deferral of Effective Date
· Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies
· Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors -Definition of Accounting Estimates
· Amendments to IAS 12 Income Taxes - Deferred Tax Related to Assets and Liabilities arising from a Single Transaction
New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.
The following amendments are effective for the period beginning on or after 1 January 2023:
· IFRS 17 Insurance Contracts
· IFRS 9 Financial Instruments
· IAS 1 Presentation of Financial Statements (Amendment - Disclosure of Accounting Policies)
· IAS 8 Accounting Policies, Changing in Accounting Estimates and Errors (Amendment - Definition of Accounting Estimate)
· IAS 1 Presentation of Financial Statements (Amendment - Non-current Liabilities with Covenants.
2 Summary of significant accounting policies (continued)
The following amendments are effective for the period beginning on or after 1 January 2024:
· IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback)
· IFRS 7 Financial Instruments (Amendment - Supplier Finance Arrangements)
· IAS 1 Presentation of Financial Statements (Amendment - Classification of Liabilities as Current or Non-current)
· IAS 1 Presentation of Financial Statements (Amendment - Non-current Liabilities with Covenants)
· IFRS 10 Consolidated Financial Statements (Amendment - Sale or Contribution of Assets between an investor and its Associate or Joint Venture)
The Group is currently assessing the impact of these new accounting standards and amendments.
Going concern
The Board continues to adopt the going concern basis to the preparation of the financial statements as it is confident of the Group continuing operations into the foreseeable future.
The Board's forecasts for the Group include due consideration for contracted minimum revenues, potential future capital in-flows, continued operating losses, projected increase in cash-burn of the Group for a minimum period of at least twelve months from the date of approval of these financial statements.
However, the Group forecasts assume that further equity fundraising will be required in the next twelve months in order to implement its growth strategy and operate as a going concern. Although the entity has had past success in fundraising and continues to attract interest from investors, making the Board confident that such fundraising will be available to provide the required capital, there can be no guarantee that such fundraising will be available and, accordingly, this constitutes a material uncertainty over going concern, which the auditors have made reference to in their audit report.
Notwithstanding the above, the Board has considered various alternative operating strategies should these be necessary in the light of fundraising not being available and actual trading performance not matching the Group's forecasts given current macro-economic conditions and is satisfied that such revised operating strategies could be adopted, if and when necessary. This includes the ability to call upon Sir Christopher Evans, a director of the Company, to extend sufficient loans. Therefore, the Directors consider the going concern basis of preparation is appropriate.
The financial statements have been prepared on a going concern basis and do not include the adjustments that would be required should the going concern basis of preparation no longer be appropriate.
Investment in subsidiaries
In the Company financial statements, equity investments in the Company's subsidiaries are stated at cost, which is the fair value of the consideration paid, less any impairment provision.
Revenue recognition
IFRS 15 Revenue from Contracts with Customers is a principle-based model of recognising revenue from contracts with customers. It has a five-step model that requires revenue to be recognised when the control over goods and services is transferred to the customer The underlying principle is a five-step approach to identify a contract, determine performance obligations, the consideration and the allocation thereof, and timing of revenue recognition. IFRS 15 also includes guidance on the presentation of assets and liabilities arising from contracts with customers, which depends on the relationship between Group's performance and the customers' payment.
2 Summary of significant accounting policies (continued)
Revenue recognition (continued)
The Group sells various medical items including IVDs, antigen tests, blood glucose tests and visible latex to customers both in the U.K and internationally. Revenue is recognised at a point in time when the relevant performance obligation is satisfied. The Group considers the control over goods is transferred to the customer at the point of shipment. The performance obligation is considered to be satisfied when the Group dispatches a product to a customer. As the Group considers the significant risks and rewards of ownership of the goods to be transferred at this point, revenue is measured at this point and does not give rise to any contract assets or liabilities.
Revenue is measured at fair value of the consideration received, excluding discounts, rebates and sales taxes or duty. Production-based taxes are not included in revenue, they are paid on production and recorded within cost of sales.
Net finance expense
The Group's finance income and finance costs include interest income, interest expense on lease liabilities and interest expenses on borrowings and gains/losses on revaluation of derivative in respect of convertible note. Interest income on cash deposits is recognised in the Statement of Comprehensive Income as it is earned.
Current and deferred taxation
Income tax credit or expense represents the sum of the current tax and deferred tax. Tax is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is recognised as the amount of corporation tax payable in respect of taxable profit for the current or past reporting periods using tax rates and laws that have been enacted or substantively enacted by the reporting date.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes except for when they arise on the initial recognition of goodwill. Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
Intangible assets
Goodwill
Goodwill represents the excess of the cost of acquisition of businesses over the fair value of new assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated impairment losses. Goodwill is considered to have an indefinite useful life.
Other intangible assets
An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured reliably, the asset is deemed to be identifiable when it is separable or when it arises from contractual or other legal rights.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses.
2 Summary of significant accounting policies (continued)
Intangible assets (continued)
Amortisation is charged on a straight-line basis and is included in administrative expenses in the statement of comprehensive income. Intangible assets with an indefinite life and goodwill are systematically tested for impairment at each balance sheet date. The Group has no assets with indefinite lives, other than goodwill, throughout the reporting period. Other intangibles are amortised from the date they are available for use.
The rates applicable, which represent the Directors' best estimate of the useful economic life, are:
- Technology - 10 years straight line
- Trademarks - 10 years straight line
Useful lives are reconsidered if circumstances relating to the asset change or if there is an indication that the initial estimate requires revision. Gains and losses of disposals are determined by comparing the proceeds with the carrying amount and are recognised in the consolidated statement of comprehensive income.
Impairment of tangible and intangible assets and right-of-use assets
Assets that are subject to depreciation and amortisation are assessed at each reporting date to determine whether there is any indication that the assets are impaired. Where there is any indication that an asset may be impaired, the carrying value of the asset is tested for impairment. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
Goodwill is tested annually for impairment, or more frequently is events or changes in circumstances indicate that they might be impaired. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit (CGU). For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs).
Supplies and materials
Supplies and materials acquired or generated for the use of research and development for use in the production process or for general operational purposes that do not meet the definition on inventory are recognised as assets on the balance sheet when the Group has control over the assets, meaning that the Group has the ability to use them in its production process or operational activities, it is probable that future economic benefits will flow to the entity as a result of these assets and the cost of the assets can be reliably measured. Supplies and materials are initially measured at cost less any attributable costs incurred to bring the assets to a condition for use.
Leases
At inception of a contract, the Group assess 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 assesses whether: a physically distinct asset can be identified; and the Group has the right to obtain substantially all of the economic benefits from the asset throughout the period of use and has the ability to direct the use of the asset over the lease term, being able to restrict the usage of third parties as applicable.
2. Summary of significant accounting policies (continued)
Leases (continued)
The Group applies the short-term lease recognition exemption to those leases that have a lease term of twelve months or less from the commencement date and do not contain a purchase option. It also applies the low-value asset recognition exemption to leases of assets below £5,000. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.
Lease liabilities are initially measured at the present value of the lease payments that are due over the lease term, discounted using the Group's incremental borrowing rate. The Group's incremental borrowing rate is the rate that would have to be paid for a loan of a similar term, and with similar security, to obtain an asset of similar value. The Group's borrowing rate is appropriate as all Group companies are able to borrow from the Group company.
On initial recognition, the carrying value of the lease liability also includes:
· amounts expected to be payable under any residual value guarantee;
· the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to take that option; and
· any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of the termination option being exercised.
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
· lease payments made at or before commencement of the lease;
· initial direct costs incurred; and
· the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset.
Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. When the Group revises its estimate of the term of any lease (because, for example, it reassesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. An equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
2. Summary of significant accounting policies (continued)
Borrowings
All borrowings are initially recorded at the amount of proceeds received, net of transaction costs. Borrowings are subsequently carried at amortised cost with the difference between the proceeds, net of transaction costs and the amount due on redemption, being recognised as a charge to the income statement over the period of the relevant borrowing.
Interest expense is recognised on the basis of the effective interest method and is included in finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
Financial instruments
Financial assets
The Group classifies its financial assets in the following measurement categories:
· Those to be measured at amortised cost
· Those to be measured subsequently at fair value through profit or loss
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit of loss ("FVPL"), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the statement of comprehensive income.
Subsequent measurement of debt instruments depends on the Group's business model for managing the asset and the cash flow characteristics for the asset. There are two measurement categories into which the Group classifies its debt instruments:
Amortised cost
Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in the statement of comprehensive income.
Financial assets held at amortised costs comprise of all loans and other receivables. Financial assets do not comprise prepayments.
FVPL
Assets that do not meet the criteria for amortised cost are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in the statement of comprehensive income presented net within other gains/(losses) in the period in which it arises.
Financial assets held at FVPL comprise convertible loan notes
Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in the statement of comprehensive income.
2. Summary of significant accounting policies (continued)
Financial instruments (continued)
Financial liabilities
The Group classifies its financial liabilities in the following measurement categories:
· Those to be measured at amortised cost
· Those to be measured subsequently at fair value through profit or loss
Management determines the classification of its financial liabilities at initial recognition. At initial recognition, the Group measures a financial liability at its fair value plus, in the case of a financial liability not at FVPL, transaction costs that are directly attributable to the acquisition of the financial liability. Transaction costs of financial liabilities carried at FVPL are expensed to the statement of comprehensive income.
Financial liabilities are classified as measured at amortised cost or FVPL. A financial liability is classified as at FVPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains and losses, including any interest expense, are recognised in the statement of comprehensive income. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss.
The Group's financial liabilities held at amortised costs comprise trade payables and other short-dated monetary liabilities in the consolidated statement of financial position. Trade payables and other short-dated monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method. For the purpose of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding. Unless otherwise indicated, the carrying values of the Group's financial liabilities measured at amortised cost represents a reasonable approximation of their fair values.
The Group's financial liabilities held at FVPL comprise the embedded derivative in conjunction with the ordinary host liability of the convertible loan note. The derivative element has been measured at fair value using the Black
Scholes option pricing model. All instruments for which fair value is recognised or disclosures are categorised within the fair value hierarchy, which costs of the following 3 levels:
- Quoted prices (unadjusted), in active markets for identical assets or liabilities (level 1)
- Inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly (level 2);
- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
The financial liabilities held at FVPL falls under level 3 of the hierarchy.
2. Summary of significant accounting policies (continued)
Fair value measurement
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.
Research and Development expenditure
Research and development expenditure that does not meet the criteria of an intangible asset is recognised as an expense as incurred. Development costs are only capitalised after technical and commercial feasibility of the asset for sale or use have been established. The Group must intend to complete the asset and either use it or sell it and be able to demonstrate how the asset will generate future economic benefit. To date, all activities have been research in nature and as such costs expenses as incurred.
Share-based payments
Where share options are awarded to directors or employees, the fair value of the options at the date of grant is charged to the statement of comprehensive income the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted.
As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the income statement over the remaining vesting period. Where equity instruments are granted to persons other than employees, the income statement is charged with fair value of goods and services received.
Convertible loans
The proceeds received on the issue of the Company's convertible notes are allocated into their liability and equity components where the fixed-for-fixed criterion is met. Where this is not met, the conversion feature is accounted for as a derivative liability and accounted for separately from the host instrument with the fair value of the embedded derivative liability being calculated first and residual value being assigned to the host instrument, which is accounted for at amortised cost.
On initial recognition, convertible loan notes were recorded at fair value net of issue costs. The initial fair value of the debt host was determined using the market interest rate applied by a market participant for an equivalent non-convertible debt instrument. Subsequent to initial recognition, the debt host was recorded using the effective interest method until extinguished on conversion or maturity of the notes.
2. Summary of significant accounting policies (continued)
Convertible loans (continued)
The amortisation of the debt host and the interest payable in each accounting period is expensed as a finance cost.
Equity derivatives embedded in the convertible instruments which were required to be recorded as financial liabilities are initially recognised at fair value. At each reporting date, or immediately prior to them being exercised, the fair values of the derivative were reassessed by management. Where there is no market for such derivatives, the Company used option pricing models to measure the fair value.
Derivatives
Derivatives are initially recognised at fair value at the date a derivative contract in entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in the statement of comprehensive income immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset or liability if the remaining maturity of the instrument is more than 12 months, and it is not expected to be realised or settled within 12 months. Other derivatives are classified as current.
An embedded derivative is a component of a hybrid contract that also included a non-derivative host - with the effect that some of the cash flows of the combined instrument vary in a way similar to a standalone derivative. Derivatives embedded in a hybrid contract with financial liability hosts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value through profit or loss.
Derivative assets embedded within financial liability hosts are combined with the corresponding financial liability host and are shown net in the statement of financial position.
Equity
An equity instrument is any contract that evidences a residual interest in the assets of a company after deducting all of its liabilities. Equity liabilities issued are recorded at the proceeds received net of direct issue cost.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued, or liabilities incurred by the acquirer to former owners of the
acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or as the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to the statement of comprehensive income.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity's operating or accounting policies and other pertinent conditions in existence at the acquisition date.
2. Summary of significant accounting policies (continued)
Business combinations (continued)
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer.
Impairment of fixed asset investments
Fixed asset investments are assessed for the presence of impairment indicators, if any indicators are present then an impairment review is conducted. An impairment review of Goodwill is conducted annually, any resulting impairment loss is measured and recognised on a consistent basis.
3 Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated on historical experience and other factors, including expectations of future events that are believed to be reasonable. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.
Key accounting judgements
Reverse acquisition accounting - identifying the accounting acquirer
As disclosed in the basis of preparation, management has used judgement to determine an appropriate accounting policy to account for the business combination in the period. The most significant judgement is in determining the accounting acquiror as the conclusion of this has a fundamental impact on the presentation of the financial statements. In arriving at the judgement management had reverted to the guidance in IFRS 3 to identify the accounting acquirer and on the basis determined that EDX Medical Limited was the accounting acquirer and there presented the financial statements as disclosed in note 4.
Reverse acquisition accounting - deemed acquisition cost
The deemed acquisition cost represents the value attributed to the assets and liabilities of the legal acquiree (the legal entity that is the acquirer for legal purposes) as if it were the acquirer for accounting purposes. In determining the deemed acquisition cost judgement is required is determining the fair values of the individual assets and liabilities of the legal acquiree at the acquisition date. In determining that the assets and liabilities were held at fair value at the date of acquisition management confirmed that all financial instruments were held at amortised cost and that any effective interest was accounted for, that all bookkeeping had been completed to the date of acquisition and enquired with management that there were no indicators of impairment on any classes of assets and that the carrying values were the same as their fair values.
In calculating the deemed acquisition costs, the fair value of the shares acquired is required to be determined. The placing price per share was £0.06 on the date of the reverse acquisition, however, share price upon completion of the reverse acquisition was £0.0425. The fair value should reflect the price that a willing buyer would pay, and a willing seller would accept in an arm's length transaction in the open market so it has been determined that the share price on the acquisition date should be used.
3 Critical accounting estimates and judgements (continued)
Key accounting estimates and assumptions
Convertible loan notes - valuation of embedded derivatives
Derivative financial liabilities are recognised at fair value at the date of grant of the convertible debt instrument with which they are associated. The inputs used in establishing the fair value of the derivative component and the convertible debt instrument used are not market observable and are based on estimates derived from available data and professional judgement surrounding future events. A significant change in these estimates could have a material impact on the value of the derivative liabilities and corresponding fair value gain or loss recognised in the profit and loss. See note 21 for the carrying value of the derivative.
IFRS 16 - Discount rates
IFRS 16 states that the lease payments shall be discounted using the lessee's incremental borrowing rate where the rate implicit in the lease cannot be readily determined. Accordingly, all lease payments have been discounted using the incremental borrowing rate ("IBR"). The IBR has been determined by management using a range of data including current economic and market conditions, review of current debt and capital within the Group, lease length and comparisons against seasoned corporate bond rates and other relevant data points. A range between 4.20% - 5% has been adopted based on existing loans that the Group have. See note 20 for the carrying value of the leases.
Fair value and ongoing impairment of acquired intangible assets
The fair value of technology intangible assets and trade names separately acquired through business combinations involves the use of valuation techniques and the estimation of future cash flows to be generated over several years. The estimation of the future cash flows requires a combination of assumptions including assumptions for growth rate, EBITDA and discount rates. The relief from royalty rate is estimated based on historic benchmarking numbers.
The following assumptions were built into the valuation model that valued the intangible assets:
- A discount rate of 4.39% based on the weighted cost of capital of the acquired business
- A growth rate of 10.4% which was based on the consumer price inflation 12-month rate on acquisition
- A royalty rate which was based on the lower quartile from an external benchmarking guide
See note 13 for the carrying value of the assets.
Useful economic lives of intangible and tangible assets
Annual amortisation and depreciation charge for intangible and tangible assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on cash generating unit performance, technological advances, future investments, economic utilisation and the physical condition of the assets. See notes 14 and 15 for the carrying value of the tangible and intangible assets.
Impairment of investment in subsidiary undertakings of the Company
At the end of the period, the Company considers whether there are any indications that the investments in its subsidiary undertakings are impaired. Some indications of impairment are both external such as changes in technology and interest rates on the subsidiary undertaking and internal such as losses incurred in the year. In the event indicators of impairment are identified, the Group performs stress-tested net cash flow assessments on the forecasted cash flow projections on the subsidiary undertaking and provide for any shortfall in the carry value of the subsidiary undertaking against future cashflow projections
3 Critical accounting estimates and judgements (continued)
Research and development expenditure
The Group makes certain estimates and assumptions in order to establish whether costs relate to the research phase or the development phase. If the Group cannot distinguish between research and development phase, then all costs are expensed as research costs.
4 Reverse acquisition
On 14 November 2022, the Company acquired through a share for share exchange the entire shares of EDX Medical Ltd, a privately-owned business who principal activity was that of creating innovative health testing solutions and developing biological and digital technologies.
Although the transaction resulted in EDX Medical Ltd becoming a wholly owned subsidiary of the Company, the transaction constitutes a reverse acquisition as the previous shareholders of EDX Medical Ltd own a substantial majority of the Ordinary Shares of the Company and the executive management of EDX Medical Ltd became the executive management of EDX Medical Group Plc, previously TECC Capital Plc.
In substance, the shareholders of EDX Medical Ltd acquired a controlling interest in the Company and the transaction has therefore been accounted for as a reverse acquisition. The Company held no material assets or liabilities within its balance sheet other than cash. Additionally, the Company had no income stream and the only relevant costs incurred were listing fees and general administrative fees each period. Therefore, the Company did not meet the definition of a business in accordance with IFRS 3 for the purpose of these consolidated financial statements of the Group.
Accordingly, in these consolidated financial statements, the reverse acquisition did not constitute a business combination and was accounted for in accordance with IFRS 2 "Share-based Payments" and the associated IFRIC guidance. Although, the reverse acquisition is not a business combination, the Company has become a legal parent and is required to apply IFRS 10 and prepare consolidated financial statements using the reverse acquisition methodology, but rather than recognising goodwill, the difference between the equity value given up by the EDX Medical Ltd shareholders and the share of the fair value of net assets gained by the EDX Medical Ltd shareholders is charged to the statement of comprehensive income as a share-based payment on reverse acquisition and represents in substance the cost of acquiring an admission to the AQSE Growth Market.
In accordance with reverse acquisition accounting principles, these consolidated financial statements represent a continuation of the statements of EDX Medical Ltd and include:
· The assets and liabilities of EDX Medical Ltd at their carrying value amounts and the results for the period from incorporation; and
· The assets and liabilities of the Company as at 14 November 2022 and its results from the date of the reverse acquisition (14 November 2022) to 31 March 2023.
On 14 November 2022, the Company issued 200,000,000 ordinary shares to acquire the whole of the share capital of EDX Medical Ltd. The prospectus dated 14 November 2022 had an issue price of £0.0425 per share of the Company's share capital to be issued and therefore valued the investment in EDX Medical Ltd at £8,500,000.
Because the legal subsidiary, EDX Medical Ltd, was treated on consolidation as the accounting acquirer and the then legal Parent Company, EDX Medical Group Plc, was treated as the accounting subsidiary, the fair value of the shares deemed to have been issued by EDX Medical Ltd was determined to be £1,275,000, being the number of shares in issue of EDX Medical Group Plc of 30,000,000 valued at £0.0425 share price.
4 Reverse acquisition (continued)
The fair value of the net assets of EDX Medical Group PLC at acquisition was as follows:
|
|
£ |
|
Computer equipment |
632 |
|
Cash and cash equivalents |
95,756 |
|
Receivables |
781,883 |
|
Payables |
(324,695) |
|
Total net assets |
553,576 |
The difference between the deemed cost (£1,275,000) and the fair value of the net liabilities assumed per above of £553,576 resulted in £721,425 being expensed within "reverse acquisition expenses" in accordance with IFRS 2, Share-Based Payments, reflecting the economic cost to EDX Medical shareholders of acquiring a quoted entity.
The reverse acquisition reserve which arose from the reverse takeover is made up as follows:
|
|
£ |
|
Pre-acquisition equity (1) |
(732,925) |
|
EDX Medical Ltd equity at acquisition (2) |
50,000 |
|
Investment in EDX Group Plc (3) |
(8,500,000) |
|
Reverse acquisition expense (4) |
721,425 |
|
Total acquisition reserve |
(8,461,500) |
Notes:
1. Recognition of pre-acquisition equity of EDX Medical Group Plc as at 14 November 2023.
2. EDX Medical Ltd had issued equity of £50,000. As these consolidated financial statements present the capital structure of the legal parent entity, the equity of EDX Medical Ltd is eliminated.
3.The value of the shares issued by the Company in exchange for the entire share capital of EDX Medical Limited. The above entry is required to eliminate the statement of financial position impact of this transaction.
4. The reverse acquisition expense represents the difference between the value of the equity issued by the Company, and the deemed consideration given by EDX Medical Ltd to acquire the Company.
5 Revenue and operating segments
The Chief Operating Decision Maker ("CODM") has been identified as the board of directors. The CODM reviews the Group's internal reporting in order to assess performance and allocate resources.
The CODM has determined that there was one single operating segment during the period being the provision of medical goods in the UK. This assessment will be reviewed periodically as the business grows.
All revenue was derived from the UK.
|
|
Period ended 31 March 2023 |
|
|
£ |
|
|
|
|
Medical goods |
3,864 |
|
Total revenue |
3,864 |
|
|
|
There were no contract liabilities with customers or no contract assets as at 31 March 2023:
6 Net finance expense
|
|
Period ended 31 March 2023 |
|
|
£ |
|
Convertible loan - revaluation of derivative |
93,887 |
|
Convertible loan - interest |
5,054 |
|
Interest on lease liabilities |
26,643 |
|
Other finance expense |
1,166 |
|
|
126,750 |
7 Operating loss
Operating loss for the period has been arrived at after changing the following items:
|
|
Period ended 31 March 2023 |
|
|
£ |
|
|
|
|
|
|
|
Employee benefit expenses (note 10) |
1,280,309 |
|
Listing costs - deemed cost of listing (note 9) |
721,425 |
|
Related party loan write off - Excalibur Healthcare Limited |
103,684 |
|
Depreciation |
124,995 |
|
Amortisation - intangibles |
1,266 |
|
Amortisation - right of use |
154,533 |
|
Laboratory consumables |
475,355 |
|
Accountancy fees |
36,086 |
|
Auditors' remuneration (note 8) |
47,500 |
8 Auditors' remuneration
|
|
Company Period ended 31 March 2023 |
Company Period ended 31 March 2022 |
|
|
£ |
£ |
|
The audit of the Parent Company and consolidated financial statements |
45,000 |
22,000 |
|
Other services - agreed upon procedures for the interim accounts |
2,500 |
15,000 |
|
|
47,500 |
37,000 |
9 One off IPO costs - included in administrative expenses
|
|
Period ended 31 March 2023 |
|
|
£ |
|
Listing costs - deemed cost of listing |
721,425 |
|
Related party loan write off - Excalibur Healthcare Limited |
103,684 |
|
|
825,109 |
Included within administrative expenses are one-off costs incurred by the Group in connection with the admission to the AQSE Growth Market on 14 November 2022. The amount of £721,425 represents the deemed cost of listing in the period, being the excess fair value of the shares deemed to have been issued to acquire TECC Capital Plc over its net assets acquired. See note 4 for further information.
During the period to 31 March 2023, the Company wrote off a related party loan receivable from Excalibur Healthcare Limited, a company in which Christopher Evans was a Director until his resignation on 28 February 2022. On 17 July 2023, Excalibur Healthcare Limited appointed a voluntary liquidator.
10 Employee benefits and expenses
|
|
Group 31 March 2023 |
Company 31 March 2023 |
Company 31 March 2022 |
|
|
£ |
£ |
£ |
|
|
|
|
|
|
Wages and salaries |
1,210,648 |
55,909 |
90,000 |
|
Social security costs |
69,661 |
1,577 |
8,960 |
|
|
1,280,309 |
57,486 |
98,960 |
The average number of people employed by the Group (including directors) amount to 15 Employees
10 Employee benefits and expenses (continued)
Key management compensation
The Directors consider that the key management comprises the Directors of the Group; their emoluments are set out below:
|
|
Group 31 March 2023 |
Company 31 March 2023 |
Company 31 March 2022 |
|
|
£ |
£ |
£ |
|
|
|
|
|
|
Wages and salaries |
690,672 |
55,909 |
90,000 |
|
Social security costs |
69,661 |
1,577 |
8,960 |
|
Total |
760,333 |
57,486 |
98,960 |
Disclosure of individual Directors' remuneration, share interests, share options, long-term incentive schemes, pension contributions and pension entitlements required by the Companies Act 2006 are shown in the tables in the Remuneration Committee report on pages 29 to 31 and form part of these financial statements.
Highest paid director
|
|
Group 31 March 2023 |
Company 31 March 2023 |
Company 31 March 2022 |
|
|
£ |
£ |
£ |
|
|
|
|
|
|
Salaries and fees |
361,253 |
- |
30,000 |
|
Social security costs |
- |
- |
2,987 |
|
Total |
361,253 |
- |
32,987 |
11 Taxation
The current tax charge is reconciled to the result for the period as follows:
|
|
31 March 2023 |
|
|
£ |
|
Current tax expense |
|
|
Current year |
- |
|
|
- |
|
|
|
|
Deferred tax expense |
- |
|
|
|
|
Tax expense for the period |
- |
11 Taxation (continued)
Reconciliation of effective tax rate
Tax assessed for the period is £Nil. The standard rate corporation tax of 19%. The differences are explained below:
|
|
Group 31 March 2023 |
|
|
£ |
|
Loss before tax |
(3,709,363) |
|
|
|
|
Tax using the UK corporation rate of 19% |
(704,779) |
|
Fixed asset differences |
(66,305) |
|
Deferred tax not recognised |
771,084 |
|
|
|
|
Total tax charge |
- |
The Group has estimated tax losses of £3,074,201 to carry forward against future taxable profits.
No deferred tax asset has been recognised in relation to the trading losses available for offset against future taxable profits. The Group has not recognised deferred tax asset due to there being insufficient evidence of short-term recoverability.
Deferred tax liabilities are presented within provisions for liabilities and deferred tax assets within debtors. Deferred tax assets and deferred tax liabilities are offset only if:
- the Group has a legally enforceable right to set off current tax assets against current tax liabilities, and
- the deferred tax assets and deferred tax liabilities relate to corporation tax levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously.
- Research and Development Tax Credits are recognised as receivables when an inflow of economic benefit is certain, until then a contingent asset in respect of probable Corporation Tax is disclosed.
12 Deferred tax
|
|
Acquisitions - business combinations £ |
Recognised in profit or loss £ |
Net
£ |
Deferred tax liability £ |
|
Intangible assets |
(9,804) |
- |
(9,804) |
(9,804) |
|
|
(9,804) |
- |
(9,804) |
(9,804) |
|
|
|
|
|
|
13 Loss per share
Basic and diluted loss per share
The calculation of basic and diluted loss per share is based on the loss attributable to equity holders divided by the weighted average number of shares in issue during the period.
The loss incurred by the Group means that the effect of any outstanding warrants and options would be considered anti-dilutive and is ignored for the purposes of the loss per share calculation.
|
|
Period ended |
|
Loss for the period from continuing activities |
(3,709,363) |
|
|
|
|
|
Period ended |
|
Weighted average number of ordinary shares |
114,001,831 |
|
|
|
|
|
Period ended |
|
Basic and diluted loss per share |
(3.25) |
14 Business Combinations
Summary of acquisition
The entire issued share capital of Torax Biosciences Limited was acquired by EDX Medical Group Plc on 17 February 2023, (the "Acquisition Date") making EDX Medical Group Plc the legal acquirer by the way of issuing 1,666,667 new ordinary shares in the capital of the Company at a deemed price of £0.06 per share. On the Acquisition Date, one ordinary share of the Company was worth £0.0375 in the market, establishing a fair value of the acquisition shares at £62,500.
|
Purchase consideration |
£ |
|
|
|
|
Ordinary consideration shares issued at fair value 1,666,667 @ £0.0375 pence |
62,500 |
Acquisition costs of £9,233 have been expensed to the Statement of Comprehensive Income and are within administrative expenses.
14 Business Combinations (continued)
The assets and liabilities recognised as a result of the acquisition are as follows:
|
|
Carrying value £ |
Fair value adjustments £ |
Fair value
£ |
|
Intangible Asset - Technology (material contracts) |
- |
36,722 |
36,722 |
|
Intangible Asset - Trade names |
- |
39,217 |
39,217 |
|
Property, plant and equipment |
21,171 |
- |
21,171 |
|
Right of use assets |
8,802 |
- |
8,802 |
|
Inventories |
12,500 |
- |
12,500 |
|
Trade and other receivables |
28,340 |
- |
28,340 |
|
Cash |
776 |
- |
776 |
|
Trade and other payables |
(41,418) |
- |
(41,418) |
|
Overdraft and other borrowings |
(41,546) |
- |
(41,546) |
|
Lease liabilities |
(8,909) |
- |
(8,909) |
|
Deferred tax liability |
- |
(9,804) |
(9,804) |
|
Net identifiable assets acquired |
(20,284) |
66,135 |
45,851 |
|
|
|
|
|
|
Fair value of consideration paid |
|
|
62,500 |
|
|
|
|
|
|
Goodwill |
|
|
16,649 |
The fair values include recognition of intangible assets trade names and the technology, which will be amortised over a 10-year period on a straight-line basis.
Goodwill of £16,649 was recognised on acquisition of the business. Goodwill represents the know-how of how the material contracts can be utilised to promote future revenue generating opportunities.
Since the acquisition date, Torax Biosciences ("Torax") has contributed £3,864 to Group revenues and a loss of £12,382 to the Group's comprehensive income. If the acquisition had occurred on 1 April 2022, Group revenue would have increased by £72,581, however, the Group loss would have also increased by £43,522.
The net cash sum expended on acquisition is as follows:
|
|
£ |
|
Cash paid on consideration on acquisition |
- |
|
Less cash acquired at acquisition |
776 |
|
Net cash movement |
(776) |
15 Intangible assets
|
|
Goodwill |
Trade names |
Technology |
Total |
|
|
£ |
£ |
£ |
£ |
|
Cost |
|
|
|
|
|
Acquired in business combinations |
16,649 |
39,217 |
36,722 |
92,588 |
|
At 31 March 2023 |
16,649 |
39,217 |
36,722 |
92,588 |
|
|
|
|
|
|
|
Amortisation |
|
|
|
|
|
Charge |
- |
654 |
612 |
1,266 |
|
At 31 March 2023 |
- |
654 |
612 |
1,266 |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
At 31 March 2023 |
16,649 |
38,563 |
36,110 |
91,322 |
15 Intangible assets (continued)
Amortisation has been charged to the Statement of Comprehensive Income.
During the period, the Group acquired Torax resulting in additions to goodwill of £16,649.
Impairment tests for goodwill
In accordance with the Group's accounting policy, goodwill is tested at least annual for impairment and when events or circumstances indicate that the carrying amount may not be recoverable. An impairment test was performed for all CGU groups during the period ended 31 March 2023.
The recoverable amounts of all CGU groups were determined based on the higher of the fair value less costs to sell and value in use calculations. The recoverable amount is determined firstly through value in use calculations. Where this is insufficient to cover the carrying value of the relevant asset being tested, fair value less costs to sell is also determined.
If the carrying amount of a CGU or CGU group exceeds its recoverable amount, an impairment loss is recognised in the following order: first, to reduce the carrying amount of any goodwill allocated to the CGU, and then, to the other assets of the CGU pro rata on the basis of the carrying amount of each asset in the CGU unless assessing individual assets.
The value in use calculations use cash flow projections based on four-year financial forecasts prepared by management. The key assumptions for these forecasts relate to revenue, gross margins, overheads, the level of working capital required to support trading and capital expenditure, and the discount rate used. A terminal value calculation is used to estimate the cash flows after year 4 using a growth rate.
Based on the key assumptions, management do not believe that the goodwill balance is impaired.
16 Property, plant and equipment - Group
|
|
Furniture and fittings |
Computer equipment |
Plant and machinery |
Total |
|
|
£ |
£ |
£ |
£ |
|
Cost |
|
|
|
|
|
Additions |
26,317 |
57,527 |
442,738 |
526,582 |
|
Acquired in business combinations |
21,171 |
- |
- |
21,171 |
|
Disposals |
- |
(1,198) |
- |
(1,198) |
|
At 31 March 2023 |
47,488 |
56,329 |
442,738 |
546,555 |
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
Charge |
10,181 |
20,554 |
94,260 |
124,995 |
|
Disposals |
- |
(566) |
- |
(566) |
|
At 31 March 2023 |
10,181 |
19,988 |
94,260 |
124,429 |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
At 31 March 2023 |
37,307 |
36,341 |
348,478 |
422,126 |
Depreciation has been charged to the Statement of Comprehensive Income.
Of the total additions of £526,582 during the period, £470,000 were sold to the Company by Christopher Evans as part of the £1,400,000 convertible loan subscribed to by Christopher Evans and £632 were acquired as part of the RTO.
17 Investments - Company
|
|
Investments in subsidiaries |
|
|
£ |
|
Cost |
|
|
At 1 April 2022 |
- |
|
Additions |
8,562,500 |
|
At 31 March 2023 |
8,562,500 |
|
|
|
|
Impairment |
|
|
At 1 April 2022 |
- |
|
Charge |
- |
|
At 31 March 2023 |
- |
|
|
|
|
Net book value |
|
|
At 31 March 2023 |
8,562,500 |
Principal subsidiary undertakings of the Company
On 14 November 2022, the Company issued 200,000,000 ordinary shares to acquire the whole of the share capital of EDX Medical Ltd. The prospectus dated 14 November 2022 had an issue price of £0.0425 per share of the Company's share capital to be issued and therefore valued the investment in EDX Medical Ltd at £8,500,000. Further details can be found in note 4.
On 17 February 2023, the Company acquired the entire issued share capital of Torax Biosciences Limited by the issue of 1,666,667 shares in the capital of the Company at a deemed price of £0.06 per share. The share price at the date of acquisition was £0.0375. Therefore, the fair value of the consideration has been determined to be £62,500. Further details can be found in note 13.
The Company has applied the statutory relief as prescribed by Companies Act 2006 in respect of both acquisitions as the issuing company has secured more than 90% equity in the other entity. The carrying value of the investment is carried at the nominal value of the shares issued.
The subsidiary undertaking of the Company is presented below:
|
Subsidiaries |
Country of incorporation |
Registered address |
Proportion of ordinary shares held at period end |
|
Torax Biosciences Limited |
United Kingdom |
Unit 1 212-218 Upper Newtonwnards Road, Belfast, United Kingdom, BT4 3ET |
100% |
|
EDX Medical Ltd |
United Kingdom |
Unit 210-211 Cambridge Science Park, Milton Road, Cambridge, United Kingdom, CB4 0WA |
100% |
The principal activity of EDX Medical Ltd is the development of a digital diagnostics business.
The principal activity of Torax Biosciences Limited is the design, development and manufacture of IVD reagents.
18 Trade and other receivables
|
|
Group |
Company |
|
|
|
31 March 2023 |
31 March 2023 |
31 March 2022 |
|
|
£ |
£ |
£ |
|
Trade receivables |
3,864 |
- |
- |
|
Prepayments |
51,795 |
252 |
4,990 |
|
Amounts receivable from Group undertakings |
- |
1,329,470 |
- |
|
Loan from Christopher Evans |
224,396 |
- |
- |
|
Other receivables |
102,390 |
7,514 |
3,078 |
|
|
382,445 |
1,337,236 |
8,068 |
The fair values of trade receivables are the same as their book values.
No provision against trade receivables has been made, the overdue receivables relate to a customer for whom there is no recent history of default and no other indication that settlement will not be forthcoming.
As at 31 March 2023, £224,396 was due from Christopher Evans, a director of the Company. The amount has no interest and is repayable on demand.
19 Financial assets at fair value through profit or loss
|
|
Group |
Company |
|
|
|
31 March 2023 |
31 March 2023 |
31 March 2022 |
|
|
£ |
£ |
£ |
|
Convertible loan note |
- |
600,000 |
- |
|
|
- |
600,000 |
- |
Prior to the reverse acquisition, the Company subscribed to £600,000 convertible loan notes in EDX Medical Limited. There was no interest to accrue on the notes and redemption was 12 months from the date of issue but could be repaid early. The CLNs were convertible at any point after the earlier of completion of the reverse acquisition and 31 October 2022. The conversion rate was fixed at £1.50 per share. The CLN is a financial asset at fair value through profit or loss. At initial recognition as at 31 March 2023, the fair value of the CLN approximated to its principal amount. Following the reverse acquisition, the CLN forms part of the intercompany balance between the two entities.
20 Other current assets
|
|
Group |
Company |
|
|
|
31 March 2023 |
31 March 2023 |
31 March 2022 |
|
|
£ |
£ |
£ |
|
Supplies and materials |
270,710 |
- |
- |
|
|
270,710 |
- |
- |
Supplies and materials relate to supplies and materials used in research and development but do not meet the definition of inventory. Supplies and materials are initially measured at cost less any attributable costs incurred to bring the assets to a condition for us.
In July 2022 the Group issued 1,400,000 CLNs of £1.00 totalling £1,400,000 to replace an outstanding liability due to Christopher Evans. The original liability was in relation to the sale of assets to the Company by Christopher Evans of which £730,000 related to supplies and materials sold to the company.
£12,500 supplies and materials was acquired on the acquisition of Torax Biosciences Ltd.
21 Cash and cash equivalents
|
|
Group |
Company |
|
|
|
31 March 2023 |
31 March 2023 |
31 March 2022 |
|
|
£ |
£ |
£ |
|
Cash and cash equivalents |
116,176 |
14,518 |
1,027,114 |
|
|
116,176 |
14,518 |
1,027,114 |
Cash and cash equivalents comprise current accounts held by the Group with immediate access. The credit risk on such funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
22 Trade and other payables
|
|
Group |
Company |
|
|
|
31 March 2023 |
31 March 2023 |
31 March 2022 |
|
|
£ |
£ |
£ |
|
Trade payables |
288,939 |
39,512 |
6,855 |
|
Taxation and social security |
44,528 |
- |
12,825 |
|
Other payables |
119,665 |
- |
242 |
|
Accruals |
265,737 |
81,486 |
33,000 |
|
|
718,869 |
120,998 |
52,922 |
The fair values of trade payables are the same as their book values.
Included in other payables is an amount of £85,257 due from Merlin Scientific Consulting Ltd, a company in which Christoper Evans is a director.
Included in other payables is an amount of £28,115 due from Lawrence McGrath, a director of Torax Biosciences Limited.
As disclosed in Note 2, the Company's subsidiaries have taken advantage of the exemption available under Section 479A of the Companies Act 2006 in respect of the requirement for audit. As a condition of the exemption, the Company has guaranteed the year-end liabilities of the relevant subsidiaries until they are settled in full. The liabilities of the subsidiaries for the year-end was £597,872.
23 Leases
The Group leases two properties for office and laboratory use. Information about the leases for which the Group is a lessee is presented below.
Right-of-use assets
|
|
Leasehold property £ |
Total £ |
|
Cost |
|
|
|
Additions |
568,676 |
568,676 |
|
Acquired through business combinations |
8,802 |
8,802 |
|
At 31 March 2023 |
577,478 |
577,478 |
|
|
|
|
|
Amortisation |
|
|
|
Charge |
154,533 |
154,533 |
|
At 31 March 2023 |
154,533 |
154,533 |
|
|
|
|
|
Net book value |
|
|
|
At 31 March 2023 |
422,943 |
422,943 |
Reconciliation of change in lease liability
|
|
Leasehold property £ |
Total
£ |
|
Additions |
568,676 |
568,676 |
|
Acquired through business combinations |
8,908 |
8,908 |
|
Interest expense |
26,643 |
26,643 |
|
Lease payments |
(196,170) |
(196,170) |
|
At 31 March 2023 |
408,057 |
408,057 |
|
|
31 March 2023 £ |
|
Non-current |
|
|
Lease liability |
262,775 |
|
|
262,775 |
|
Current |
|
|
Lease liability |
145,282 |
|
|
145,282 |
|
|
|
|
Total lease liability |
408,057 |
23 Leases (continued)
Reconciliation of minimum lease payments and present value
|
|
31 March 2023 £ |
|
Within one year |
162,992 |
|
Later than one year and less than five years |
276,043 |
|
Total including interest cash flows |
439,035 |
|
Less interest cash flows |
(30,978) |
|
Total principal cash flows |
408,057 |
24 Convertible loan
Convertible Loan Note 2022
In July 2022 the Group issued 1,400,000 convertible redeemable loan notes ("CLNs") of £1.00 totalling £1,400,000 to replace an outstanding liability due to Christopher Evans. The original liability was in relation to the sale of assets to the Company by Christopher Evans that totalled £1,404,923.
The CLNs were issued at par value and no interest is accrued on the CLNs, unless an administration order is made in relation to the Company, or the Company becomes insolvent.
The CLNs contain various conversion and redemption features. The noteholder is able to convert the CLNs on any business date on or after the 31 October 2022. The condition to be satisfied to enable the noteholder to convert was for the Company to successfully be admitted on the AQSE Growth Market, which occurred on 14 November 2022 ("Proposed Transaction").
The noteholder is able to convert at a rate of one Company share per £0.06 nominal of CLN or, if higher, reflecting a price per Company share equal to a 20% discount to the volume weighted average price ("VWAP") of Company shares over the period of 3 months prior to the conversion date.
The CLN agreement contains an embedded derivative in conjunction with the host debt liability. As a result, the convertible loan notes are shown in the Consolidated Statement of Financial Position in two separate components, being the 'Convertible loan - debt' and 'Convertible loan - derivative'.
Additionally, the noteholder has the option to partially convert the CLNs at their discretion, though did not do so during the period.
At issuance, the total inception value was £1,400,000. The fair value at inception of the derivative element was deemed to be nil as at the date of issuance there was an uncertainty, out of the company's control, as to whether the Proposed Transaction would go ahead. Therefore, the initial carrying value of £1,400,000 was held as the debt liability element at amortised cost. Transaction costs of £15,786 have been fully allocated to the debt liability component at inception as the derivative liability was considered to have a value of nil. This adjusted the carrying value of the debt liability at inception.
24 Convertible loan (continued)
As at 31 March 2023, the Company measured the derivative element at fair value using the Black-Scholes option pricing model based on the exercise price of £0.06. The fair value at the period-end date was £93,887 resulting in a loss on revaluation of the derivative being recognised of £93,887. Significant assumptions used in the fair value analysis include the volatility rate and the estimated date of conversion. A volatility of 74.23% was used in the determination of the fair value at 31 March 2023. A reduction of 10% would have resulted in a reduction in the fair value at 31 March 2023 by £28,653 with an increase of 10% resulting in an increase in the fair value at 31 March 2023 of £30,498.
Given the option of the noteholder to convert the CLNs at their discretion, the debt and derivative liability elements have been classified as current liabilities.
|
|
Convertible loan - derivative £ |
Convertible loan - debt
£ |
|
At inception |
- |
1,384,214 |
|
Interest expense |
- |
5,054 |
|
Revaluation of derivative |
93,887 |
- |
|
At 31 March 2023 |
93,887 |
1,389,268 |
|
|
|
|
25 Share capital and reserves
|
Allotted, called up and fully paid |
Ordinary 0.01p shares |
Share capital |
Share Premium |
|
|
No. |
£ |
£ |
|
|
|
|
|
|
Parent company reflected on reserve acquisition |
30,000,000 |
300,000 |
918,933 |
|
Share issue |
22,500,000 |
225,000 |
1,041,667 |
|
Cost of share issue |
- |
- |
(30,819) |
|
Reverse acquisition of EDX Medical Ltd |
200,000,000 |
2,000,000 |
- |
|
|
|
|
|
|
As at 31 March 2023 |
252,500,000 |
2,525,000 |
1,929,781 |
On 14 November 2022, the Group completed a reverse acquisition transaction with EDX Medical Ltd. It was considered that EDX Medical Ltd was the accounting acquirer in the transaction. The share capital set out above is that of EDX Medical Group Plc which is the legal acquirer.
New shares allotted
During the period, 200,000,000 ordinary shares were issued as consideration for the acquisition of EDX Medical Ltd on 14 November 2022 of £0.0425 per share.
On 14 November 2022, 20,000,000 ordinary shares were issued for cash at the placing price of £0.06 per share.
On 14 November 2022, 833,333 ordinary shares were issued to Sports Resource Group Limited who provided services in connection with the reverse takeover at the placing price of £0.06. Sports Resource Group Limited in controlled by Christoper Akers, a person with significant control.
On 17 February 2023, 1,666,667 ordinary shares were issued as consideration for the acquisition of Torax Biosciences Limited at £0.375 each.
25 Share capital and reserves (continued)
Shares to be allotted
On 26 April 2023, 28,750,000 ordinary shares were issued in the Company at a placing price of £0.06. On 20 January 2023. £200,000 was received in advance from a shareholder to subscribe in the placing.
Rights, preferences and restrictions
All ordinary shares are equally eligible to receive dividends and the repayment of capital and represent equal votes at meetings of Shareholders. There are no rights of redemption attaching to the ordinary shares.
26 Capital reserves
The following describes the nature and purpose of each reserve within owner's equity:
Share capital: Amount subscribed for shares at nominal value.
Share premium: Amount subscribed for share capital in excess of nominal value, less costs of share issue. This reserve is not distributable.
Merger relief reserve: Represents the excess of the value of the consideration shares issued to the shareholders of EDX Medical Group Plc upon the reverse takeover over the fair value of the assets acquired and the fair value of the consideration given in excess of the nominal value of the ordinary shares issued in the acquisition of Torax Biosciences Limited.
Reverse acquisition reserve: The reverse acquisition reserve arose from the application of reverse acquisition accounting principles to the financial statements at the time of the reverse takeover of TECC Capital Plc by EDX Medical Ltd. This reserve is not distributable.
Warrant reserve: The warrant reserve comprises the cumulative expense representing the extent to which the vesting period of warrants has passed and management's best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will ultimately vest.
Shares to be issued: Represents monies received for the issue of new ordinary shares in the Company not yet issued.
Retained losses: Cumulative realised losses of the Group. As a result of the reverse takeover and the acquisition of Torax Biosciences Limited, the consolidated figures include the retained losses of the Group only from the date of the reverse takeover together with the brought forward losses of EDX Medical Ltd.
27 Share options and warrants
LTIPs
Included within the admission document the Group intended to set up a Long-Term Incentive Plan ("LTIP") and grant 2,046,666 LTIP awards to Michael Hudson. The LTIP options would have been exercisable by the option holder at the placing price of £0.06 for a period between three and ten years from the date of admission, vesting over a period of 18 months.
As at 31 March 2023 the LTIP scheme has yet to be formally agreed. The intention is to set up the LTIP scheme and grant Michael Hudson 2,046,666 LTIP awards, however management are considering changing the vesting conditions and as such no options have been issued.
The Group have accrued an estimated share-based payment charge of £8,986 in relation to the proposed LTIPs to be grated. Once the scheme has been formalised and the vesting conditions confirmed, the options will be valued using a valuation model with the any difference between the estimated share-based payment charge and actual share-based payment charge being charged to the statement of comprehensive income immediately, and the accrued amount reallocated to a share-based payment reserve.
Warrants
Prior to the reverse acquisition on 11 November 2022, the Company issued the follow warrants:
On 30 March 2021, the Company issued 5,000,000 warrants to the founders of the Company. Of this issue, 1,050,000 were issued to Arwon Capital (UK) Limited, a company in which former director Sandy Barblett is a director, 1,050,000 warrants were issued to John Taylor and 1,050,000 were issued to Ruscombe Management Services Limited, a Company in which former director Donald Stewart is a director. The warrants have an exercise price of 5p, vested immediately and expire on the 5th anniversary of the grant date. Exercise of such right is not subject to the satisfaction of any performance or other conditions.
On 30 April 2021, the Company issued 370,000 warrants to Peterhouse Capital Limited. The warrants have an exercise price of 5p, vested immediately and expire on the 5th anniversary of the grant date.
On 30 April 2021, the Company issued warrants to investors to subscribe for 12,500,000 new Ordinary shares of £0.01 at 10p per share and for 12,500,000 new Ordinary shares of £0.01 at 20p per share. Exercise of such rights are not subject to the satisfaction of any performance or other conditions and expire on the 5th anniversary of the grant date.
Details of the number of share options and warrants granted, exercised, lapsed and outstanding at the end of the period, as well as the weighted average exercise prices in £ ("WAEP") as follow:
|
|
31 March 2023 |
|
|
|
Number |
Weighted Average Exercise Price |
|
|
|
£ |
|
Outstanding on date of reverse acquisition |
30,370,000 |
0.13 |
|
Granted during the period |
- |
- |
|
Forfeited during the period |
- |
- |
|
At 31 March 2023 |
30,370,000 |
0.13 |
|
Total exercisable at 31 March 2023 |
30,370,000 |
0.13 |
|
|
|
|
The weighted average remaining contractual life of the options is 3 years and 54 days
28 Financial Instruments and risk management
The Group and Company's financial instruments comprise cash and cash equivalents, loans, trade and other receivables, trade and other payables, and lease liabilities. An analysis of the financial assets and liabilities recognised on the balance sheet, each of which is at amortised costs unless stated, is set out below.
The Group and Company hold the following financial instruments:
|
|
|
Group |
|
Company |
||
|
|
|
31 March 2023 |
|
31 March 2023 |
|
31 March 2022 |
|
|
|
£ |
|
£ |
|
£ |
|
Financial assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
116,176 |
|
14,518 |
|
1,027,114 |
|
Trade receivables |
|
3,864 |
|
- |
|
- |
|
Loan from Christoper Evans |
|
224,396 |
|
- |
|
- |
|
Amount receivable from Group undertakings |
|
- |
|
1,329,470 |
|
- |
|
Convertible loan - held at FVPL |
|
|
|
600,000 |
|
|
|
|
|
344,436 |
|
1,943,988 |
|
1,027,114 |
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
Company |
||
|
|
|
31 March 2023 |
|
31 March 2023 |
|
31 March 2022 |
|
|
|
£ |
|
£ |
|
£ |
Financial liabilities |
|
|
|
|
|
|
|
Trade payables |
|
288,938 |
|
39,512 |
|
6,855 |
|
Accruals |
|
265,738 |
|
81,486 |
|
33,000 |
|
Amounts due from related party |
|
85,257 |
|
- |
|
- |
|
Directors loan account |
|
28,115 |
|
- |
|
242 |
|
Bank loans and overdrafts |
|
27,165 |
|
- |
|
- |
|
Lease liability |
|
408,057 |
|
- |
|
- |
|
Convertible loan - debt component |
|
1,389,268 |
|
- |
|
- |
|
Convertible loan - derivative component (measured at fair value) |
|
93,887 |
|
- |
|
- |
|
|
|
2,586,425 |
|
120,998 |
|
40,097 |
The significant accounting policies regarding financial instruments are disclosed in note 2.
Financial risk management
The fair value hierarchy of financial instruments measure at fair value is provided below. The different levels have been defined as follows:
- Quoted prices (unadjusted), in active markets for identical assets or liabilities (level 1);
- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2);
- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs), (level 3).
28 Financial Instruments and risk management (continue)
Financial risk management (continued)
There have been no transfers between levels during the period.
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
£ |
£ |
£ |
£ |
|
Derivative financial liabilities held at fair value through profit or loss (see note 24) |
- |
- |
(93,887) |
(93,887) |
|
Financial assets held at fair value through profit or loss (see note 19) |
- |
- |
600,000 |
600,000 |
|
|
- |
- |
506,113 |
506,113 |
Capital management
The Group's main objective when managing capital is to protect returns to shareholders by ensuring the Group develops such that it trades profitably in the foreseeable future. The Group recognises that because it is an early-stage development Group with limited current revenues, and significant continued investment that does not support debt within its capital structure, its capital structure is largely limited to equity-based capital which the Group uses to finance most of its strategy.
The Group manages its capital with regard to the risks inherent in the business and the sector within which it operates.
The Group is exposed through its operations to the following risks:
- Credit risk
- Liquidity risk
- Interest rate risk
In common with all other businesses, the Group is exposed to risks that arise from is use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
- Trade and other receivables
- Cash and cash equivalents
- Trade and other payables
- Convertible loans
28 Financial Instruments and risk management
The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. The Board receives regular updates from the CFO through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set policies that seek to reduce as far as possible without unduly affective the Group's competitiveness and flexibility. Further details regarding these policies are set out below.
Credit risk
The Group's principal financial assets are the cash and cash equivalents and loans and receivables, as recognised in the statement of financial position, and which represent the Group's maximum exposure to credit risk in relation to financial assets. The Group and Company policy for managing its exposure to credit risk with cash and cash equivalents is to restrict the maximum value of cash held with any one financial institution. The Group does not require collateral in respect of financial assets.
The Company has made unsecured interest-free loans to its subsidiaries. Although they are repayable on demand, they are unlikely to be repaid until the projects becomes successful and the subsidiaries start to generate revenues.
Liquidity risk
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. However, the Group continues to absorb cash in its operations for the time being and management recognises the risk of insufficient cash and capital to carry on its activities and safeguard the Group's ability to continue as a going concern.
The Board receives cash flow projections on a regular basis, which are monitored regularly. The Board will not commit to material expenditure in respect of its ongoing development programme prior to being satisfied that sufficient funding is available to the Group to finance the planned programmes. Regular reviews will ensure that further steps will be taken if necessary.
The Group has an overdraft balance on a bank account at period end. Shortly after the period-end, the Group cleared the overdraft balance. The Group does not have any long-term gearing targets.
Interest rate risk
Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest rates. The Group manages its cash position in a manner designed to maximise interest income, while at the same time minimising any risks to these funds. The convertible loan does not have a fixed interest coupon rate attached to it. The Group has an outstanding loan that attracts interest of 4.20% per 30 days on any credit balances between £0 and £15,000. At period end, the outstanding balance was £5,724. The Group do not intend to extend any further credit from the creditor.
Sensitivity analysis
The Group is not materially exposed to change in interest or exchange rates at 31 March 2023.
29 Borrowings
|
|
|
Group |
|
Company |
||
|
|
|
31 March 2023 |
|
31 March 2023 |
|
31 March 2022 |
|
|
|
£ |
|
£ |
|
£ |
|
Non-current |
|
|
|
|
|
|
|
Bank borrowings |
|
11,354 |
|
- |
|
|
|
|
|
11,354 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
Company |
||
|
|
|
31 March 2023 |
|
31 March 2023 |
|
31 March 2022 |
|
|
|
£ |
|
£ |
|
£ |
Current |
|
|
|
|
|
|
|
Other loans |
|
27,165 |
|
- |
|
- |
|
|
|
27,165 |
|
- |
|
- |
The directors consider the value of all financial liabilities to be equivalent to their fair value. The Group's exposure to liquidity and cash flow risk in respect is disclosed in the financial risk management note, see note 28.
30 Changes in liabilities arising from financing activities
|
|
Financing cash flows |
Repayment |
Other-non cash changes |
Interest |
New leases |
At 31 March 2023 |
|
|
£ |
£
|
£ |
£ |
£ |
£ |
|
Lease liabilities |
(196,170) |
- |
- |
26,643 |
577,584 |
408,057 |
|
Short-term borrowings |
(2,663) |
- |
29,828 |
|
- |
27,165 |
|
Long-term borrowings |
(364) |
- |
11,718 |
- |
- |
11,354 |
|
Directors loan - C Evans |
145,000 |
(115,000) |
(254,396) |
|
|
(224,396) |
|
Directors loan - L McGrath |
- |
- |
28,115 |
- |
- |
28,115 |
|
CLN |
- |
- |
1,483,155 |
- |
- |
1,483,155 |
|
Total liabilities from financing |
(54,197) |
(115,000) |
1,298,420 |
26,643 |
577,584 |
1,733,450 |
31 Related party transactions
Transactions with subsidiaries
During the period, cash advances of £11,000 (2022: £nil) were made to Torax Biosciences Limited. The advances are held on an interest free inter-group loan which has no terms for repayment. As at the period end, Torax Biosciences Limited owed £11,000 to EDX Medical Ltd.
During the period, cash advances of £1,329,470 (2022: £nil) were made to EDX Medical Ltd. The advances are held on an interest free inter-group loan which has no terms for repayment. As at the period end, EDX Medical Ltd owed £1,329,470 to EDX Medical Group Plc in addition to the convertible loan amount described below.
During the period, prior to the reverse acquisition the Company subscribed to £600,000 convertible loan notes in EDX Medical Ltd. As at 31 March 2023, following the reverse acquisition, the convertible loan forms part of the intercompany balance between the two entities.
During the period, the Group made payments totalling £216,667 (2022: £nil) to Health Ventures Limited, a company in which Dr Michael Hudson is a director. The payments were for services undertaken by Dr Michael Hudson in the Group.
During the period, the Group made payments totalling £260,000 (2022: £nil) to Merlin Scientific Consulting Limited, a company in which Professor Christopher Evans is director. The payments were for services undertaken by Professor Christopher Evans in the Group.
Transactions with other related parties
On 5 March 2022, the Company and Christopher Evans, a director of the Company, entered into a sale and purchase of assets agreement for Christopher to sell assets to the Company for the sum of £1,404,923. The sum was recorded as a debtor loan to Christopher Evans. On 22 July 2022, the Company entered into an agreement in which the outstanding debt was replaced by issuing £1,400,000 CLNs. Further details of the CLN can be found in note 21. The remaining balance of £4,923 is still outstanding as at the period end.
During the period, an amount due from Excalibur Healthcare Limited of £103,684 (2022: £nil), a company in which Christopher Evans was a director of until his resignation on 28 February 2022, was written off due to the company going into liquidation. The cost has been included within administrative costs and was in relation to costs incurred on behalf of the Company.
During the period, an amount was due to Merlin Scientific Consulting Limited, a company in which Christopher Evans is a director, of £85,257 (2022: £nil) in relation to a working capital loan and expenses incurred. The amount was outstanding at the period end.
As at 31 March 2023, an amount of £28,115 due from Lawrence McGrath, a director of Torax Biosciences Limited was outstanding.
As at 31 March 2023, an amount of £224,396 (2022: £nil) was due from Christopher Evans, a director of the Company. The outstanding balance due included the following transactions:
- Cash advances of £145,000 were made to the Group as part of a working capital loan. The balance was interest free and had no terms for repayment. At the period end, the amount owed by Christopher Evans in relation to this working capital loan is £24,396.
- During the period the Company and Christopher Evans entered into a sale and purchase of assets agreement for a sum of £1,404,923. Included within the sale and purchase of assets agreement was a loan from the Company to Christopher Evans of £200,000. As at the period end, the outstanding loan owed by Christoper Evans was still outstanding.
31 Related party transactions (continued)
During the period to 31 March 2023, £16,250 (2022: £nil) was donated to Cancer Awareness Trust, a charity in which Christopher Evans is a director.
32 Ultimate controlling party
At 31 March 2023 there was no individual controlling party.
33 Events after the reporting period
Bridgemere Securities Ltd ("Bridgemere Securities")
On 26 April 2023 the Company raised a total of £1,725,000 via the issue of 28,750,000 new ordinary shares in the Company at £0.06 per share. Bridgemere Securities Ltd invested £1,500,000 in the placing and bought a further 7,720,000 ordinary shares in the market between 20 and 21 April 2023 making Bridgemere Securities Ltd the second largest shareholder in the Company.
Seerave Enterprises Ltd ("Seerave Enterprises").
The Company received a strategic investment of £350,000 from Seerave Enterprises via a subscription of 4,375,000 ordinary shares of £0.01 in the Company at a price of £0.08 per share.
Seerave Enterprises is a wholly owned subsidiary of the Seerave Foundation, a philanthropic non-profit organisation which has a global commitment to improving patient access to personalised cancer treatment. The Seerave Foundation awards traditional grants to academic researchers and makes selective equity investments into developing companies via its investment arm, Seerave Enterprises.
Hutano Diagnostics Limited ("Hutano")
On 27 September 2023 ("Acquisition Date") the Group acquired the entire issued share capital of Hutano.
The initial consideration was 9,090,909 new ordinary shares of £0.01 each in the Company at a price of £0.11 per share. Up to 1,818,182 additional consideration shares will be issued to the sellers on achievement of certain commercial milestones. The initial consideration shares will rank pari passu in all respects with the existing share capital of the Company.
32 Events after the reporting period (continued)
A summary balance sheet of Hutano at 31 August 2023 is included below.
|
|
31 August 2023 |
|
ASSETS |
£ |
|
Non-current assets |
|
|
Intangible assets |
4,740 |
|
Property, plant and equipment |
22,598 |
|
Total non-current assets |
27,338 |
|
|
|
|
Current assets |
|
|
Cash and cash equivalents |
316,021 |
|
Total current assets |
316,021 |
|
|
|
|
Total assets |
343,359 |
|
|
|
|
EQUITY AND LIABILITIES |
|
|
Equity |
|
|
Share capital |
2,121 |
|
Share premium |
886,950 |
|
Retained losses |
(554,612) |
|
Total equity |
334,459 |
|
|
|
|
|
|
|
Current liabilities |
|
|
Trade and other payables |
8,900 |
|
Total current liabilities |
8,900 |
|
|
|
|
Total liabilities |
8,900 |
|
|
|
|
Total equity and liabilities |
343,359 |
At the Acquisition Date the cash and cash equivalents balance of Hutano was £217,068. Between 1 September 2023 and the Acquisition Date no significant transactions have been entered in to and the balance sheet of Hutano at 31 August 2023 is representative of the fair values acquired at the Acquisition Date.
On the Acquisition Date, one ordinary share of the Company was worth £0.028 per share in the market. The fair value of the initial consideration of the 9,090,909 ordinary shares was £245,545.
The contingent consideration in shares to the sellers of up to 1,818,182 ordinary shares is contingent on the achievement of certain commercial milestones. Management's expectation at the Acquisition Date was that the performance criteria would be met in full and have forecasted as such and therefore the contingent consideration has been included in the total consideration payable with no discount for the probability of the performance criteria not being delivered.
The fair value of the contingent consideration of up to 1,818,182 ordinary shares was £50,909.
32 Events after the reporting period (continued)
Details of the approximate net assets acquired, and purchase price allocation are as follows:
|
|
£ |
|
Consideration - shares |
245,545 |
|
Contingent consideration - shares |
50,909 |
|
Total consideration |
296,454 |
|
Net assets acquired |
(334,459) |
|
Bargain purchase |
38,005 |
The Group have not completed a full purchase price allocation exercise under IFRS 3. The Group has 12 months to finalise the purchase price allocation and adjust the provisional amounts stated above.
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