Company Registration No. 09910883
Belluscura plc
Annual report and financial statements
for the year ended 31 December 2023
Belluscura plc
Report and financial statements for the year ended 31 December 2023
TABLE OF CONTENTS
OFFICERS AND PROFESSIONAL ADVISORS
1
CHAIRMAN’S & CEO’S STATEMENT
2
FINANCIAL REVIEW
3
GOVERNANCE
5
DIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2023
8
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE STRATEGIC
REPORT, THE DIRECTORS’ REPORT AND THE FINANCIAL STATEMENTS
11
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BELLUSCURA PLC
12
CONSOLIDATED STATEMENT OF PROFIT & LOSS AND OTHER COMPREHENSIVE
INCOME
19
CONSOLIDATED BALANCE SHEET
20
COMPANY BALANCE SHEET
21
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
22
COMPANY STATEMENT OF CHANGES IN EQUITY
23
CONSOLIDATED STATEMENT OF CASHFLOWS
24
NOTES TO THE ACCOUNTS
25
Belluscura plc
Report and financial statements for the year ended 31 December 2023
1
OFFICERS AND PROFESSIONAL ADVISORS
Registered Office
Belluscura plc
15 Fetter Lane
Holborn
London
EC4A 1BW
Officers
Adam Reynolds
Non-Executive Chairman
Robert Rauker
Chief Executive Officer
Simon Neicheril
Chief Financial Officer
Robert Fary
Senior Vice President of Global Sales
Ric Piper
Non-Executive Director
David Poutney
Non-Executive Director
Dr Patrick Strollo
Non-Executive Director
Jonathan Satchell
Non-Executive Director
Paul Tuson
Non-Executive Director
Tony Dyer
Company Secretary
Auditor
Gerald Edelman LLP
73 Cornhill
London
EC3V 3QQ
Banks
Barclays Bank Plc
JPMorganChase
1 Churchill Place
2200 Ross Ave, Floor 8
Canary Wharf
Dallas
London
Texas
E14 5HP
TX 75201
Solicitor
DWF PLC
20 Fenchurch Street
London
EC3M 3AG
Nominated Advisor
Spark Advisory Partners Limited
5 St John's Ln
London
EC1M 4BH
Broker
Dowgate Capital Ltd
15 Fetter Ln
London
EC4A 1BW
Belluscura plc
Report and financial statements for the year ended 31 December 2023
2
CHAIRMAN & CEO’S STATEMENT
2023 – Laying the Foundation for Growth
We spent most of 2023 focusing on developing our next-generation DISCOV-R portable oxygen generator, improving
and expanding our manufacturing capabilities in the US and China and building, expanding and improving our sales
force capabilities in the US and China.
Lasting supply chain and manufacturing issues from COVID, mostly lack of availability of components and longer
than normal-lead times to order others, impacted sales of our X-PLOR portable oxygen concentrator product. The
issues were resolved the second half of 2023 setting up the Company to grow sales in 2024. As part of our push to
improve sales we made several strategic hires in the US and China and started a direct-to-consumer sales program
and as a consequence we have shown significant growth in the first half of 2024, exceeding 2023 sales.
We introduced prototypes of the DISCOV-R portable oxygen concentrator in Q3. Patient feedback was positive.
Distributor feedback was also positive. Over 6,500 preliminary orders were received for the DISCOV-R setting the
foundation for the initial product launch in June 2024 with full commercial launch in October 2024.
In August, we signed a royalty bearing license agreement with our manufacturing partner InnoMax Medtech to sell
and distribute the X-PLOR in China. In late December we received approval from China’s medical device authority
(“NMPA”) to sell X-PLOR in China. We also received approval to sell the X-PLOR in Singapore and Hong Kong.
Receiving approval in China allows us to start selling the X-PLOR in China in 2024. Sales in China continue to grow in
the first half of 2024.
We released our proprietary NOMAD biometric app on a trial basis in 2023. The NOMAD tracks data on the X-PLOR
and any connected third-party Bluetooth devices of the patient such as iWatch, pulse oximeters, Galaxy watches,
and Fitbit devices. The NOMAD generation 1 beta platform will be followed by a commercial generation 2 in by the
end of 2024.
2024 and Beyond
The Company anticipates strong growth in sales in 2024 and 2025 from both the X-PLOR and DISCOV-R devices.
US sales of X-PLOR have approximately doubled month-on-month in each of the last four months through to May
2024. Sales in May 2024 were approximately $450k and further significant monthly growth will be achieved in June
2024.
June also marked the initial launch of the DISCOV-R direct to consumer sales program with full commercial launch
of the product expected in H2.
Feedback in March of this year from distributors at the largest home healthcare trade show in the US, Medtrade, was
very positive. Sales in the first half of 2024 are trending significantly higher than in 2023 with the ramp up continuing
to grow with the initial launch of the DISCOV-R.
The global demand for medical oxygen continues to grow with an estimated 300m to 400m people suffering from
Chronic Obstructive Pulmonary Disease1.
The journey to commercialisation has been a long one, however we have one robust product in the market with our
second product to follow in June, the Board now looks forward to the Group capturing market share.
1 Source: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5921960/
Adam Reynolds – Chairman
Robert Rauker – Chief Executive Officer
Belluscura plc
Report and financial statements for the year ended 31 December 2023
3
FINANCIAL REVIEW
Independent Auditor’s Report to the Members of Belluscura plc
Shareholders’ attention is drawn to the Material uncertainty related to going concern in the Independent Auditor’s
Report on page 12.
Further information on the Board’s assessment of Fund Raising, Prospects and Forecasts is provided under Going
Concern in the Director’s Report starting on page 9.
Income statement
Revenue for the year to 31 December 2023 was $0.83m (2022: $1.40m). There was a Product Gross Loss in the year of
$65,088 (2022: Profit $68,105). With the Group trying to establish its products in the market, pricing was deliberately
competitive to establish early B2B sales combined with cost of goods sold reflecting the initial volume higher input
costs. Other operating income was $33,942 (2022: $8,703).
Inventory Impairment and Adjustments: Due to the early-stage nature of the business, minimum order quantities,
the rapid development of products and the need to bring manufacturing in-house the Company holds a large
quantity of Inventory. The Board have reviewed the Inventory and made a best assessment of its value and judged
that the impairment of obsolete raw materials, the value of finished goods and batteries are absolute. The total of
these adjustments in the year was $4.22m (2022: $0.74m).
Administrative expenses were $13.4m (2022: $7.5m), see note 6.4 to the accounts.
•
Operating Expenses. Normal operating expenses were consistent with the prior year, $6.00m (2022: $6.00m) with
slight increases in Staff and Other Costs netting off against reduced Sales and Marketing Expense.
•
Amortisation and Depreciation: Due to the rapid development of it products the Group continued to accelerate
the amortisation of development costs associated with the X-PLOR product, with a charge in the period
of $3.29m (2022: $2.91m).
•
Staff related Exceptional Costs: These include the Share-based Payments Charge, Accrued Executive Bonus and
Costs related to the Former CFO. $0.57m (2022: $0.39m).
•
Foreign exchange movements in Admin Expenses: The US$ weakened against £Sterling by 12% during the year
(1 January 2023 - $1.21:£1.00; 31 December 2023 - $1.27:£1.00). Due to the size of the Inter-Company Loan from the
PLC to the US subsidiary which is fixed in £Sterling, $2.25m loss (2022: $2.9m gain).
•
Royalties: Since the launch of X-PLOR in 2022, the Group’s minimum royalty payments due are charged to the
profit & loss account, $0.79m (2022: $0.76m).
Operating Loss for the year was $18.5m (2022: $8.2m), Total Comprehensive Loss was $16.3m (2022: $12.0m). Adjusted
EBITDA Loss of $6.3m (2022: $6.2m) (See note 26 to the accounts). The adjusted EBITDA measures the underlying
business performance by removing the impact of non-cash accounting adjustments which is a key performance
indicator for our shareholders.
Loss per share
The basic and diluted loss per share was $0.142 (2022: $0.055).
Financial position
The Group net assets as at 31 December 2023 were $17.7m (2022: $20.4m). This comprised total assets of $20.8m (2022:
$23.6m) and total liabilities of $3.1m (2022: $3.2m). The total assets included intangible assets (capitalised research
and development costs), property, plant and equipment and right-of-use assets of $10.3m (2022: $9.1m).
During the year we have transferred a significant amount of Raw Material Inventory to InnoMax in China, resulted in
significant reduction in Inventory which, at 31 December 2023, stood at $3.32m (2022: $ 8.43m).
Cashflow
At 31 December 2023 the Group had net cash of $0.9m (2022: $2.0m). During the year, net cash inflow from funds
raised in the year was $12.6m (2022: $7.5m), net cash outflow from operating activities was $9.1m (2022: $14.9m).
Dividends
No dividend is recommended (2022: £nil) due to the early stage of the development of the Group.
Events after the reporting period
Events after the reporting period are detailed in Note 28 to the Accounts.
Analysis of Financial and non-Financial Key Performance Indicators
The Board continues to monitor performance regularly throughout the year by reviewing a range of key performance
indicators. These include revenue growth, progress towards operational break even, expenditure (both current and
investment) control against budget and cash used and remaining.
Belluscura plc
Report and financial statements for the year ended 31 December 2023
4
The Directors expect further improvement in performance in future periods as it achieves success in the Group’s
strategy to launch its products and grow through continual investment.
Principal Risks and Uncertainties
The Group actively considers and manages its risks. The Directors consider the following areas of business and
operational risk and details how this risk is managed or mitigated:
•
Generating revenue. The Group’s primary source of revenue is from sales of its X-PLOR product. Management
performs regular reviews of the sector to ensure it is targeting large markets.
•
Successful product development. The Group received FDA 510(k) clearance for X-PLOR on 2 March 2022. The
Group’s follow-on products are in advanced development and are based upon shared technology with X-PLOR.
The Board regularly monitors the carrying value of capitalised product development in the light of plans for future
revenue and margin.
•
Credit risk. The Group’s principal financial assets are cash, and trade and other receivables. The Group monitors
receivables and should any be the subject of an identified loss event, allowance is made for impairment if
required. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings
assigned by international credit-rating agencies. Further, apart from Inter-company consolidated transactions,
the Group has no current debt outstanding (excluding leases capitalised under IFRS16).
•
Liquidity risk. To support expansion plans for future development, the Group regularly reviews its financing
arrangements and cash flows to ensure there is sufficient funding in place. Further information on the Board’s
assessment of Fund Raising, Prospects and Forecasts is provided under Going Concern in the Director’s Report
starting on page 9.
•
Foreign exchange risk. As the Group holds Sterling cash deposits and reports its financial performance in US
Dollars, this exposes the Group to a potential unrealised currency risk on its Sterling bank balances. This relates
to the raising of capital in the United Kingdom. The Directors review this exposure on a regular basis.
Contingent Liabilities
As reported in note 25, on 24 February 2017, the Company entered into a co-exclusive licence and development
agreement with Separation Design Group, LLC and SDG (together the “SDG Parties”) (“SDG Licence”) which was
subsequently amended by an amendment agreement dated 19 March 2023. Pursuant to the SDG Licence: if by 3
September 2025, cumulative sales of the X-PLOR and DISCOV-R have not exceeded $20 million dollars, Belluscura
must make a one-time payment of $3 million to the SDG Parties to maintain the exclusive SDG licence. By 31
December 2023 cumulative sales of X-PLOR were $1.8 million. No provision has been made in these Financial
Statements (see notes 4 and 25).
During 2023 the Company received a claim from a supplier regarding alleged default by the Company under an
ongoing contract. The Company has subsequently counter-claimed against the supplier for alleged poor service The
supplier has subsequently filed a lawsuit in the United States. The Company has received an independent legal
opinion and believes that any claim against the Company is lower than the claim made by the Company. Accordingly,
no provision has been made as at 31 December 2023.
Companies Act S.172
The Directors acknowledge their duty under s.172 of the Companies Act 2006 and consider that they have, both
individually and together, acted in the way that, in good faith, would be most likely to promote the success of the
Company for the benefit of its members as a whole. In doing so, they have had regard (amongst other matters) to:
•
the likely consequences of any decision in the long term. The Group’s long-term strategic objectives, including
progress made during the year and principal risks to these objectives, are shown in the Chairman Statement,
Chief Executive’s Review and Financial Review.
•
the interests of the Company’s employees. Our employees are fundamental to us achieving our long-term
strategic objectives. We aim to be a responsible employer in our approach to the pay and benefits our employees
receive. Further details can be found in the Remuneration Report.
•
the impact of the Company’s operations on the community and the environment. The Group operates honestly
and transparently. We consider the impact on the environment, the people who work for us and the wider
community and how we can minimise this.
•
the desirability of the Company maintaining a reputation for high standards of business conduct. Our intention is
to behave in a responsible manner, operate a high standard of business conduct and good corporate governance.
the need to act fairly as between members of the Company. Our intention is to behave responsibly towards our
shareholders and treat them fairly and equally so that they may benefit from the successful delivery of our
strategic objectives.
Simon Neicheril
Chief Financial Officer
27 June 2024
Belluscura plc
Report and financial statements for the year ended 31 December 2023
5
GOVERNANCE
Chairman’s Introduction
I am pleased to introduce the Corporate Governance Report outlining the Company’s approach to corporate
governance.
We remain committed to ensuring we remain fully compliant with the principles of the QCA’s Corporate Governance
Code (“the QCA Code”) believing that having high standards of corporate governance and internal controls enables
effective and efficient decision making. Further information is provided below.
A new edition of the QCA Code will be effective for accounting periods commencing on or after 1 April 2024. For
Belluscura this will be 1 January 2025. The QCA expects the first year to act as a transition period, so companies will
have flexibility to build the capacity they need to apply its principles. During the transition period companies can
focus more on using "explanations" on updated areas of the code to smooth the transition.
During 2024 the Board will be reviewing how to best comply with the new QCA Code and will report to shareholders
and other stakeholders in due course. This report explains how our framework of governance has continued to
support the Board’s strategic activities during the year.
Board of Directors
I believe that the Company has a strong Board, one with the right breadth and depth of energy and experience for
both executive and non-executive Directors. Experience includes engineering, finance, manufacturing, research &
development and sales.
We continue to keep the composition of the Board under very active review so that Belluscura remains well-placed
for the challenges and opportunities over the coming years. In 2023 we welcomed Bob Fary and Simon Neicheril to
the Board and so far in 2024 we have additionally welcomed Jonathan Satchell and Paul Tuson.
Adam Reynolds - Non-Executive Chairman - Joined Board in 2021
Adam began his career in the City in 1980 and in 2000 established his own PR/IR/Corporate finance firm which listed
on AIM in November 2000 and was then later sold in 2004 via a reverse takeover. In 2005 he became non-executive
Chairman of International Brand Licensing Plc (“IBL”). That business is today called EKF Diagnostic Holdings Plc. In
November 2012 Adam launched a successful agreed bid for the trading assets and business of Autoclenz Plc
alongside its management team. In addition, Adam is currently non-executive Chairman of Aquis-quoted OTAQ plc
and MyHealthChecked Plc, and a non-executive Director of Sosandar Plc.
Robert “Bob” Rauker - Chief Executive Officer - Joined Board in 2016
Bob is a senior management executive with a track record in the medical device sector. Over his career Bob has been
involved in the valuation, acquisition and sale of multiple medical devices. Bob has served as Head of Medical Device
& Life Sciences Group for Acacia Research Group (NASDAQ) in the role of SVP, where he built the medical device
business to $30 million in revenue. Previously he served as global chief IP counsel for Synthes Inc. (SIX) and the Boston
Scientific Corporation (NYSE) Endoscopy business, both multi-billion-dollar companies, where he managed the
medical products acquisition and licensing transactions along with other senior management roles. Bob has a
bachelor’s degree in mechanical engineering and an MBA from the University of Massachusetts and a juris doctorate
from the New Hampshire School of Law. He is a registered patent attorney.
Simon Neicheril - Chief Financial Officer - Joined Board in October 2023
Simon joins from Pace Industries LLC, a $600m revenue manufacturing Company with nine locations across the US
and Mexico, where he held an interim CFO role. He previously held the role of CFO at GlobalStep, a high growth global
software testing Company with operations in Canada, the United Kingdom, Romania, and India. He brings over 20
years of experience having served in a range of senior finance and CFO roles within a variety of industries and worked
as a consultant for Big 4 firms. In addition, his broader experience includes having built and scaled finance functions
for high-growth and international companies, and led IPO preparedness, investor relations, and ERP selection and
implementation. Simon graduated from Marquette University, USA, with a Bachelor of Science in Accounting. He
later went on to receive a Master of Business Administration from the Cox School of Business at Southern Methodist
University, USA. He is a Certified Public Accountant.
Robert “Bob” Fary - Group Vice-President of Global Sales - Joined Board in May 2023.
Bob has 30 years of experience in the respiratory industry where he has held leadership roles at major oxygen
concentrator manufacturers and durable medical equipment companies. During the past two decades, Bob’s
industry leading team was directly responsible or contributed to the sale of over 1 million portable oxygen
concentrators (“POCs”), generating revenues in excess of $1 billion.
Richard (“Ric”) Piper - Non-Executive Director - Joined Board in May 2021
Ric read Economics at Cambridge University and qualified as a Chartered Accountant in 1977. He held senior finance
roles in ICI, Citicorp, Logica and WS Atkins, where he was Group Finance Director from 1993 to 2002. He is currently a
non-executive Director of AIM-quoted GRCI plc, partner at Restoration Partners Limited and a Board Advisor to a
number of privately owned businesses.
Belluscura plc
Report and financial statements for the year ended 31 December 2023
6
David Poutney – Non-Executive Director - Joined Board in May 2021
David is Chief Executive of Dowgate Capital Limited. Previously he was Head of Corporate Broking at Numis Securities
Limited and Numis Corporation Plc, where he was an Executive Director until he stood down in February 2016. He
started his career in commercial banking before becoming a number one ranked financials analyst at a number of
leading firms including BZW, James Capel and UBS. David has worked directly on the listings of over 30 companies.
Jonathan Satchell - Non-Executive Director - Joined Board in February 2024
Jonathan Satchell is Chief Executive of Learning Technologies Group plc (“LTG”). LTG is listed on the AIM market of
London Stock Exchange (LTG.L) and headquartered in London. LTG is at the forefront of innovation and best-practice
in the learning and talent software sector and has received numerous awards for its achievements both corporately
and for clients.
Dr. Patrick Strollo - Non-Executive Director - Joined Board in April 2021
Dr. Strollo is Professor of Medicine and Clinical and Translational Science at the University of Pittsburgh. He has been
an active member of the American Thoracic Society and the American Academy of Sleep Medicine for over 25 years.
By profession, Dr. Strollo is a pulmonologist and has been in practice for over 20 years, he has over 100 publications
that include 81 papers in peer reviewed journals in Sleep and Pulmonary Medicine, and 67 book chapters and invited
papers. Dr. Strollo also served the United States Air Force for sixteen years and ultimately rose to the rank of
Lieutenant colonel.
Paul Tuson - Non-Executive Director - Joined the Board in February 2024
Paul qualified as a chartered accountant at KPMG, with over thirty years' post qualification experience, he has served
as Chief Financial Officer as well as Non-Executive Director on a number of AIM quoted companies in the media and
technology industries as well as CFO of a medical services company. Over this period, he has led successful IPOs,
fundraisings and venture capital exits.
Board Governance – QCA Code
The Directors acknowledge the importance of high standards of corporate governance and intend, given the
Company’s size and the constitution of the Board, to comply with the principles set out by the Quoted Companies
Alliance (“QCA”) in the QCA Code.
AIM-quoted companies are required to adopt a recognised corporate governance code with effect from their
admission to trading on AIM however, there is no prescribed corporate governance regime for AIM companies. The
QCA has published the QCA Code, a set of corporate governance guidelines, which include a code of best practice,
comprising principles intended as a minimum standard, and recommendations for reporting corporate governance
matters. The Directors acknowledge the importance of high standards of corporate governance and intend, given
the Company’s size and the constitution of the Board, to comply with the principles set out in the QCA Code.
The Board comprises nine Directors, three executive and six non-executive Directors, reflecting a blend of different
experiences and backgrounds. The Board believes that the composition of the Board brings a desirable range of skills
and experience in light of the Company’s challenges and opportunities over the coming years, while at the same
time ensuring that no individual (or a small group of individuals) can dominate the Board’s decision making. The
Board meets regularly (typically monthly) to review, formulate and approve the Group’s strategy, budgets, corporate
actions and oversee the Group’s progress towards its goals.
Board Responsibilities
The Company held 11 Board Meetings during 2023. The Audit Committee held 2 meetings. The Remuneration and
Nominations Committees held no meetings during the year.
The Board is responsible for the overall leadership of the Company and approves the Group’s aims, objectives, its
business plan and annual budgets
All Directors receive regular and timely information on the Group’s operational and financial performance, including
detailed Executive reports which are provided in advance of all Board meetings, and which report on performance
(actual and forecasted) against the agreed budget and any significant variances.
The Board usually meets formally monthly, and at such other times as required. The Board agenda for each meeting
is collated by the Chairman in conjunction with the Executive Directors.
In the event that Board approval is required between Board meetings, Board members are provided with supporting
information to assist in making a decision and the decision is recorded at the following Board meeting.
There are regular informal discussions between the Executive and Non-Executives.
The Matters Reserved for the Board are kept under regular review in the light of the Board’s plans for the business
and progress against those plans.
The Board is committed to communicating regularly with the Company’s shareholders and other stakeholders to
keep them appraised of the Company’s progress.
Belluscura plc
Report and financial statements for the year ended 31 December 2023
7
The Board recognises its employment, environmental and health and safety responsibilities and devotes appropriate
resources towards monitoring and improving compliance with existing standards.
The Executive Directors have responsibility for these areas at Board level, ensuring that the Group’s policies are
upheld and providing the necessary resources.
Governance Structures
The Company has established an Audit Committee, a Remuneration Committee and a Nomination Committee, each
with formally delegated duties and responsibilities and with written terms of reference – (https://ir.belluscura.com/
corporate-governance/board-committees). From time to time, separate committees may be set up by the Board to
consider specific issues when the need arises.
Audit committee
The Audit Committee has primary responsibility for monitoring the quality of internal controls and ensuring that the
financial performance of the Company is properly measured and reported on. It will receive and review reports from
the Company’s management and auditors relating to the interim and annual accounts and the accounting and
internal control systems in use throughout the Company. The Audit Committee meets regularly in each financial
year, including ahead of the publication of the interim and annual accounts. It has unrestricted access to the
Company’s auditors, including for agreeing the audit plan. Members of the Audit Committee are Adam Reynolds,
David Poutney, Ric Piper , with Ric Piper acting as chairman.
The Board considers Ric to have recent and relevant financial experience that befits his role as Chair of the Audit
Committee. All members of the Audit Committee are considered independent. The Board considers that the
Committee as a whole has competence relevant to the sector in which the Group operates.
Remuneration committee
The Remuneration Committee will review the performance of the executive Directors and make recommendations
to the Board on matters relating to their remuneration and terms of employment. It will also make recommendations
to the Board on proposals for the granting of share options and other equity incentives pursuant to any share option
scheme or equity incentive scheme in operation from time to time. In exercising this role, the Directors shall have
regard to the recommendations put forward in the QCA Code. No Director is permitted to participate in discussions
or decisions concerning his own remuneration. The Remuneration Committee will meet not less than twice in each
financial year. Members of the Remuneration Committee are Adam Reynolds, David Poutney and Ric Piper, with
Adam Reynolds acting as chairman.
Nomination committee
The Nomination Committee will lead the process for board appointments and make recommendations to the Board.
The Nomination Committee shall evaluate the balance of skills, experience, independence and knowledge on the
board and, in the light of this evaluation, prepare a description of the role and capabilities required for a particular
appointment. The Nomination Committee will meet as and when necessary, but at least once each year. Members
of the Nomination Committee are Adam Reynolds, David Poutney and Ric Piper, with Adam Reynolds acting as
chairman.
Board Independence
In line with the QCA Code the Board has considers that Adam Reynolds (Chairman), Ric Piper, Dr Patrick Strollo, Ric
Piper, Jonathan Satchell and Paul Tuson are independent Directors. Mr Reynolds has assisted the Company by
introducing investors since 2019. The Board does not consider Mr Reynolds’ involvement in this capacity adversely
impacts the assessment of his independence.
David Poutney is a substantial shareholder in the Company and is not considered independent.
By order of the Board of Directors and signed on behalf of the Board
Adam Reynolds
Non-Executive Chairman
27 June 2024
Belluscura plc
Report and financial statements for the year ended 31 December 2023
8
DIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2023
The Directors present their annual report and the audited financial statements for the year ended 31 December 2023.
The principal activity of the parent Company is that of a holding management Company and that of the Group is to
develop and commercialise in oxygen related medical device products. This is achieved by using its proprietary
oxygen enrichment technologies to advance the use of oxygen in medical products.
Review of the Business
Belluscura is a public English Company limited by shares founded on the principle of making healthcare both more
affordable and more available while returning a strong profit to our shareholders.
In February 2017, the Company entered into a co-exclusive licence and development agreement with Separation
Design Group (“SDG”) to complete the development of the X-PLOR, a portable oxygen concentrator, used to deliver
concentrated oxygen to a patient requiring oxygen therapy. Belluscura and SDG delivered a working prototype
within five months of acquiring the X-PLOR licence. X-PLOR received 510k clearance from the FDA on 2 March 2022.
In 2023, the Company initially brough production of X_PLOR in-house as a result of problems with a third-party
manufacturer. Later in 2023 an agreement was signed with InnoMax to produce X-PLOR units in China where they
are now primarily being produced. In December of 2023, the Company successfully registered X-PLOR with the
NMPA for sale in China.
Further information about the business (including an indication of likely future developments in the business and
particulars of significant events which have occurred since the end of the financial year) is provided in the Group’s
Strategic Report, being together the Chairman and Chief Executive’s Review on page 2 and the Financial Review on
page 3.
Research and development
The Group continues to invest in the development of the X-PLOR range of products.
Proposed dividend
No dividend was paid or was proposed during the period ended 31 December 2023.
Directors
The following Directors held office during the period, and to the date of this report.
Director
Appointed
Resigned
Adam Reynolds
21 April 2022
Robert (“Bob”) Rauker
18 August 2016
Simon Neicheril
4 October 2023
Robert (“Bob”) Fary
14 June 2023
Richard (“Ric”) John Piper
28 May 2022
Dr Patrick Strollo
12 April 2022
David Poutney
28 May 2022
Jonathan Satchell
9 February 2024
Paul Tuson
9 February 2024
Anthony (“Tony”) Stephen Dyer
13 November 2017
3 October 2023
Going concern
Commercial Background
US FDA 510(k) clearance of the Group’s X-PLOR was received on 2 March 2021 and was launched in the US in
September 2021. The Group launched the next generation X-PLOR in October 2022 and released the DISCOV-R for
Pre-Market Evaluation in June 2023.
In March 2022, we signed a manufacturing Master Supply Agreement ("MSA") with InnoMax Medical Technology,
Ltd ("InnoMax") to manufacture our devices in China alongside US manufacturing.
In April 2022, the Group took the decision to transfer its US manufacturing in-house, to increase production output
at high quality standards, and achieve a significant reduction in production costs. This was successfully completed at
the end of July 2022. The decision to bring our US manufacturing in-house from our contract manufacturer along
with the initial support of the set-up of InnoMax manufacturing in China, resulted in significant investment in Raw
Material Inventory and Deposits which at 31 December 2022 stood at $10.8m. During the year the Group transferred
Raw Materials to InnoMax for utilisation in China manufacturing and alongside this, as anticipated, InnoMax is
beginning to directly source most of their own components, which will progressively result in a significant margin
improvement through lower unit cost of sales and has resulted in a reduction in the Company's inventory levels of
Belluscura plc
Report and financial statements for the year ended 31 December 2023
9
components. Raw Material inventory at 31 December 2023 was $1.9m. The Group has reviewed and assessed the value
of inventory, with adjustments and impairment made of $4.1m (2022: $0.6m), as detailed in note 6.1.
X-PLOR is now almost exclusively manufactured and assembled by InnoMax and InnoMax has begun tooling to
manufacture a DISCOV-R units commercially in October 2024, after initial test production units are developed and
perfected in the US beginning in June 2024.
Cash at 31 December 2023 was $0.9m (2022: $2.0m).
Position at 31 May 2024
At 31 May 2024, the Group held $2.9M in Inventory and Finished Goods, $3.9m in Accounts Receivable (of which $3.5m
was due from InnoMax for the supply of components) and had Cash of $1.1m.
Fundraising
The Group raised $22.5m after expenses in its IPO on 28 May 2022 and $7.1m after expenses from investors in May
2023 to support the inventory requirements of the new manufacturing agreement. In addition, $5.1m after expenses
was raised through the placing of Loan Notes in February 2023, and $3.7m after expenses through an equity placing
in June 2023 and a further $4m in October 2023. In March 2024, $5.2m was raised after expenses through the
acquisition of TMT Acquisition plc, which operated as a cash shell.
In June 2024 the Company raised $0.3m from the issue of equity. In July 2024 the Board expects to raise up to $3M
with a combination of a straight equity and through convertible loan notes (subject to shareholder approval at a
General Meeting).
Prospects and Forecasts
The Board is confident the phased launch beginning in Summer 2024 of the award winning DISCOV-R product will
be transformational for the Group. Demand is expected to be very strong because a major competitor has left the
market, the two others have larger, more bulky products, and the small size of our product is very appealing to the
customer base. Additionally, most of the development and capital costs for DISCOV-R have already been incurred.
Strong sales of X-PLOR and the expected significant demand for the DISCOV-R, alongside the release of working
capital through the sale of goods from its existing inventory, and a capital raise in June and the expected one in July
together totalling up to $3M (as noted above) indicate that the Group has sufficient cash reserves to operate within
the level of its current facilities for a period of 12 months from the date of approval of the financial statements.
Should projected sales and prices not materialize as anticipated in the Group’s forecasts, then the Board would
actively consider further fundraising and other mitigating actions (these conditions are necessarily considered to
represent a material uncertainty that may cast significant doubt over the Group's and the Company’s ability to
continue as a going concern).
The Group's forecasts, taking account of reasonably possible downsides in trading performance and development
costs/timelines, and the risks to these projections (set out in the Principal Risks and Uncertainties section of the Group
Strategic Report on page 4) have been considered by the Board in its assessment of these forecasts.
Based on the above, the Directors believe it remains appropriate to prepare the financial statements on a going
concern basis.
Political contributions
Neither the Company nor any subsidiaries made any political donations or incurred any political expenditure during
the period.
Remuneration Report
Directors’ Emoluments
Directors’ emoluments are detailed in note 7.1.
Belluscura plc
Report and financial statements for the year ended 31 December 2023
10
Directors’ beneficial interests in shares
As at 27 June 2024
No of Shares
As at 31 December 2023
No of Shares
David Poutney
14,255,731
14,255,731
Adam Reynolds
2,033,176
1,808,176
Jonathan Satchell
1,396,900
106,900
Robert Rauker
1,035,684
1,035,684
Robert Fary
32,000
32,000
Ric Piper
80,000
80,000
Disclosure of information to auditor
The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are each
aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken
all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and
to establish that the Company’s auditor is aware of that information.
Auditor
In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of Gerald Edelman
LLP as auditor of the Company is to be proposed at the forthcoming Annual General Meeting.
By order of the Board of Directors and signed on behalf of the Board
Robert Rauker
Chief Executive Officer
27 June 2024
Belluscura plc
Report and financial statements for the year ended 31 December 2023
11
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE STRATEGIC REPORT, THE
DIRECTORS’ REPORT AND THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the Group and parent
Company financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare group and parent Company financial statements for each financial
year. Under that law they have elected to prepare the group financial statements in accordance with International
Financial Reporting Standards as adopted by the UK as adopted IFRS and applicable law and have elected to prepare
the parent Company financial statements in accordance with UK accounting standards and applicable law (UK
Generally Accepted Accounting Practice), including FRS 101 Reduced Disclosure Framework.
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 Group and parent Company and of their profit or loss for that period.
In preparing each of the Group and parent Company financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them consistently;
•
make judgements and estimates that are reasonable, relevant, reliable and prudent;
•
for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted
by the UK;
•
for the parent Company financial statements, state whether applicable UK accounting standards have been
followed, subject to any material departures disclosed and explained in the financial statements;
•
assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern; and
•
use the going concern basis of accounting unless they either intend to liquidate the Group or the parent
Company or to cease operations or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent
Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are
responsible for such internal control as they determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking
such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and
other irregularities.
Belluscura plc
Report and financial statements for the year ended 31 December 2023
12
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BELLUSCURA PLC
Opinion
We have audited the financial statements of Belluscura Plc (the ‘Company') and its subsidiaries (the ‘Group') for the
year ended 31 December 2023 which comprise the Consolidated Statement of Profit & Loss and Other
Comprehensive Income, the Consolidated Balance Sheet, the Company Balance Sheet, the Consolidated Statement
of Changes in Equity, the Company Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the
notes to the Consolidated and Company Financial Statements, including a summary of significant accounting
policies.
The financial reporting framework that has been applied in the preparation of the Group financial statements is
applicable law and UK adopted International Accounting Standards in conformity with the requirements of the
Companies Act 2006. The financial reporting framework that has been applied in the preparation of the Company
financial statements is applicable law and United Kingdom Adopted International Accounting Standards, including
Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting
Practice).
In our opinion:
• the financial statements give a true and fair view of the state of the Group's and of the Company's affairs as at 31
December 2023 and of the Group's loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted international
accounting standards;
• the Company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice 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 believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remain independent of the Group and the Company in accordance with the ethical requirements that are
relevant to our audit of 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.
Material uncertainty related to going concern
We draw attention to note 2.1.1 of the financial statements which notes the uncertainty in the Group’s and Company’s
level of projected production of DISCOV-R products and financial returns thereon following the expected launch of
the new product in Summer 2024 and the potential consequential impact on the Group’s ability to secure additional
funding. As stated in note 2.1.1, these conditions are necessarily considered to represent a material uncertainty that
may cast significant doubt over the Group's and the 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. Given the conditions and uncertainties
disclosed in note 2.1.1, we considered going concern to be a Key Audit Matter. Our evaluation of the Directors’
assessment of the Group and the Company’s ability to continue to adopt the going concern basis of accounting and
in response to the Key Audit Matter included evaluating the following:
•
We obtained an understanding of the Group and Company's relevant controls over the preparation and review
of cash flow projections and assumptions used in the cash flow forecasts to support the going concern
assumption and assessed the design and implementation of these controls;
•
We obtained and evaluated the Directors' financial forecasts through comparing actual outcomes in the current
year against prior forecasts. We challenged the underlying key assumptions, including revenue, production
volumes, operating and capital expenditure by considering factors such as commitments under manufacturer
agreements, forecasted production levels, and operating expenditure historic actuals in order to assess the
reasonableness of the forecasts.
•
We considered the Group’s and Company’s ability to launch the DISCOV-R product by Summer 2024 and
achieve the forecasted production and sales levels during a period of at least twelve months from the date of
approval of the financial statements. We considered sensitivities over sales volumes and the launch date.
Belluscura plc
Report and financial statements for the year ended 31 December 2023
13
•
We assessed the reasonableness of key assumptions underpinning the forecasts by reference to latest sales
volumes and prices, expenditure and commitments on the Group and Company. As appropriate we confirmed
the key inputs to publicly available information and underlying source documentation.
•
We assessed the mathematical accuracy of the Group’s and Company’s cash flow forecasts;
•
We assessed the ability of the Directors’ to raise additional funding based on historic successful fundraising. We
also assessed alternative sources of funding available to the Group and Company.
•
We performed sensitivity analysis on the cash flow forecast to consider the funding requirement under different
reasonably possible scenarios such as a decrease in sales volumes and prices and a delayed launch of DISCOV-
R products.
•
We performed a reverse stress test that considered the possible impact on cash flows if no production and sales
of the DISCOV-R product occurs.
•
We made enquiries of Management and Directors and reviewed Board minutes and key operational contracts
to assess the completeness of commitments considered in the cash flow forecasts.
•
We evaluated the adequacy of disclosures made in the financial statements in respect of going concern.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the
relevant sections of this report.
Overview
Coverage
98% (2022: 100%) of Group loss before tax
99% (2022: 100%) of Group total assets
Key audit matters
2023
2022
1. Going concern X X
2. Valuation of product development
- carrying value of intangible assets X X
and capitalization of development cost
3. Inventory valuation X
The valuation of inventory included significant impairment in the financial year due to
stock becoming absolute as well as replacement of raw materials. These events were
not present in the year ending 31 December 2022 and are therefore considered a Key
Audit Matter for the first time in the year ending 31 December 2023.
Materiality
Group financial statements as a whole $208,000 (2022: $296,000) based on 1% (2022:
1.25%) of Total Assets. Company financial statements as a whole $145,000 (2022:
$100,000) based on 1% of Total Assets capped to 70% of Group materiality (2022: 1.25% of
Total Assets capped to Group materiality)
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the Directors made subjective judgments, for example in
respect of significant accounting estimates that involved making assumptions and considering future events that
are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal
controls, including evaluating whether there was evidence of bias by the Directors that represented a risk of material
misstatement due to fraud.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the structure of the Group and the Company, the accounting
processes and controls, and the industry in which they operate.
The Company and Belluscura LLC are significant components and were subject to full scope audit procedures by the
Group audit team. Our scope on the non-significant components were the performance of analytical review
procedures by the Group audit team. We also performed specified audit procedures over certain account balances
and transaction classes that we regarded as material to the Group.
Key audit matters
Key audit matters are those matters that, in our professional judgement, 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 to be the key
audit matter to be communicated in our report.
Belluscura plc
Report and financial statements for the year ended 31 December 2023
14
Key audit matter
How our audit addressed the key audit matter
Valuation of product development - carrying
value of intangible assets and capitalization of
development cost
The Group is focused on product development in
relation to its series of medical equipment.
Consequent to this, there is a material intangible
asset (product development) balance on the
balance sheet of $9.9m as at 31 December 2023
($8.6m; 31 December 2022).
There is a risk that the development cost is not
capitalized
appropriately
under
the
relevant
accounting standard. There is also a risk that the
carrying value of this is not assessed appropriately
for impairment.
As explained in Note 2 and 13 to the consolidated
financial statements, the indicators of impairment
assessment in relation to the intangible assets under
the relevant accounting standard require the
exercise of significant judgement by Management
and the Directors. Management and the Directors
are required to assess whether there are any
potential impairment triggers which would indicate
that the carrying value of the assets may not be
recoverable
for
each
cash
generating
unit.
Management and the Directors did not identify any
indicators of impairment. Given the significance of
the assets to the Group’s consolidated statement of
financial position and the significant management
judgements and estimates involved in this area, we
considered this area to be a key audit matter.
Refer to Accounting Policies and Note 13
We have performed the following audit procedures:
•
We assessed the Directors’ and Management’s
impairment indicator review to establish whether it
was
performed
in
accordance
with
the
requirements of the relevant accounting standard.
•
We obtained and inspected third party documents
relating to the product licence status to check legal
title and validity of each of the licences.
•
We assessed the status of development of the
products
through
enquiries
of
Directors,
Management and Product Development Engineers
in order to confirm our understanding of the
products and in order to assess whether there are
any indicators of impairment, as well as inspected
board
minutes
and
other
publicly
available
information.
•
We challenged if the capitalization of development
asset in line with the relevant accounting standard,
specifically whether the intangible assets can be
measured reliably and there is probably future
economic benefit attributable to the asset. We
agreed a sample of capitalized costs to supporting
evidence such as timecards and invoices.
•
We assessed the adequacy and reasonableness of
disclosures in the financial statement in this regard.
Key observations:
Based on the audit work performed, we are satisfied with
the carrying valuation of intangible assets and that these
balances are not impaired as at year ended 31 December
2023.
Inventory Valuation
The Group holds $3.3m of inventory as at 31
December 2023 ($8.4m; 31 December 2022). This
balance comprises $1.4m of finished goods and
$1.9m of raw materials.
There is a risk that the inventory is incorrectly valued
per the relevant accounting standard, being valued
at the lower of cost or net realizable value.
As explained in Note 2 and 14 to the consolidated
financial
statements,
the
Group
holds
large
quantities of inventory which increase its operational
complexity. The nature of the inventory and
arrangements with their manufacturer comprise of
complex arrangements and included the transfer of
raw materials and finished goods of $4.8m.
Management recognized significant impairment of
$2.8m against the inventory balances in the year
resulting from obsolete stock and the replacement of
raw materials. Given the significance of the assets to
the Group’s consolidated statement of financial
position
and
the
significant
management
judgements and estimates involved in this area, we
considered this area to be a key audit matter.
We have performed the following audit procedures:
•
We obtained an understanding of the inventory
management processes and controls inclusive of
those lined to additions and subtractions to
inventory by performing walkthroughs and design
and implementation assessment on key controls;
•
We virtually attended a stock count to test
existence and valuation of inventory.
•
We challenged the valuation of inventory for any
key
estimates
and
judgements
applied
by
management
particularly
in
relation
to
the
valuation of raw material inventory. We agreed a
sample of finished goods to subsequent year-end
sales invoices.
•
We challenged the estimates and Management’s
judgement applied in the impairment recognition,
by agreeing a sample of inputs to underlying
support, Board meeting minutes and through
enquiries to product development engineers.
•
We reviewed and challenged the agreement in
place with the Group’s manufacturer with regards
to movement of raw material and finished goods to
a receivable balance from the manufacturer and
assessed the appropriateness of this classification
Belluscura plc
Report and financial statements for the year ended 31 December 2023
15
Refer to Accounting Policies and Note 14
and measurement against the relevant accounting
standards.
•
We assessed the adequacy and reasonableness of
disclosures in the financial statement in this regard.
Key observations:
Based on the work performed we considered the key
assumptions used by Management and the Directors in
performing their assessment of the valuation of inventory to
be reasonable and appropriate.
Our application of materiality
Materiality is assessed as the magnitude of an omission or misstatement that, individually or in the aggregate, could
reasonably be expected to influence the economic decisions of the users of the financial statements. Misstatements
below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole. Materiality provides a basis for determining the nature and extent of our audit procedures.
Based on our professional judgment, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Company financial statements
Overall
materiality
$208,000 (PY: $296,000)
$145,000 (PY: $100,000)
How we
determined it
Based on 1% (PY: 1.25%) of gross assets. A
lower percentage was applied in the
current year to take into consideration the
change in the Group’s Management in
the year.
Based on 1% (PY: 1.25%) of gross assets capped
to 70% (PY: 33%) of Group materiality given
the assessment of the components
aggregation risk, and size based on total
assets of the Group. A lower percentage was
applied in the current year given the change
in the Group’s Management in the year.
Rationale for
benchmark
applied
We considered total assets to be the most
significant consideration for users of the
financial
statements
as
the
Group
continues to develop its intangible assets.
We considered gross assets to be the primary
measure used by shareholders in assessing the
performance of the Company as it is the
holding Company within the group.
Performance
materiality
$135,000 (PY: $185,000)
$94,000 (PY: $65,000)
Basis for
determining
performance
materiality
65% (PY: 65%) of materiality. In reaching
our conclusion on the level of performance
materiality to be applied we considered a
number of factors including the expected
total
value
of
known
and
likely
misstatements (based on past experience),
our knowledge of the Group’s control
environment and management’s attitude
towards proposed adjustments.
65% (PY: 65%) of materiality. In reaching our
conclusion on the level of performance
materiality to be applied we considered a
number of factors including the expected total
value of known and likely misstatements
(based on past experience), our knowledge of
the
Group’s
control
environment
and
management’s attitude towards proposed
adjustments.
Component materiality
For each component in the scope of our Group audit, we allocated a materiality that is equal to or less than our
overall Group materiality. The range of materiality allocated across components is ranged from $145,000 to $186,000.
We set materiality for each significant component of the Group based on a percentage of between 70% and 80% of
Group materiality dependent on the size and our assessment of the risk of material misstatement of that
component. In the audit of each component, we further applied performance materiality levels of 65% of the
component materiality to our testing to ensure that the risk of errors exceeding component materiality was
appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them misstatements identified during our audit
above $11,650 (2022: $14,800) for the Group and $8,200 (2022: $5,000) for the Company audit as well as misstatements
below those amounts that, in our view, warranted reporting for qualitative reasons.
Belluscura plc
Report and financial statements for the year ended 31 December 2023
16
Other information
The Directors are responsible for the other information. The other information comprises the information included in
the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the 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.
In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. 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
• the information given in the strategic report and the Directors' report for the financial year 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 Company and its 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 Group and Company, or returns adequate for our audit
have not been received from branches not visited by us; or
• the Group and 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 statement set out on page 12, the Directors
are responsible for the preparation of the 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 financial statements, the Directors are responsible for assessing the Group's and 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 Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
The objectives of our audit, in respect to fraud are; to identify and assess the risks of material misstatement of the
financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of
material misstatements due to fraud, through designing and implementing appropriate responses; and to respond
appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the
prevention and detection of fraud rests with both those charged with governance of the entity and management.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including
fraud and non-compliance with laws and regulations, was as follows:
• the senior statutory auditor ensured the engagement team collectively had the appropriate competence,
capabilities and skills to identify or recognise non-compliance with applicable laws and regulations in the United
Kingdom, China and the United States of America;
• we identified the laws and regulations applicable to the Group and Company through discussions with Directors
and other management, and from our knowledge and experience of the entity's activities.
• we focused on specific laws and regulations which we considered may have a direct material effect on the
financial statements or the operations of the Group and Company, including Companies Act 2006, taxation
legislation, data protection, employment and health and safety legislation.
Belluscura plc
Report and financial statements for the year ended 31 December 2023
17
• we assessed the extent of compliance with the laws and regulations identified above through making enquiries
of management and reviewing legal expenditure; and
• identified laws and regulations were communicated within the audit team regularly and the team remained
alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the Group and Company's financial statements to material misstatement,
including obtaining an understanding of how fraud might occur, by:
• making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge
of actual, suspected and alleged fraud; and
• considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and
regulations.
To address the risk of fraud through management bias and override of controls, we:
• performed analytical procedures to identify any unusual or unexpected relationships;
• tested journal entries to identify unusual transactions;
• assessed whether judgements and assumptions made in determining the accounting estimates were indicative
of potential bias. Key judgements and assumptions are comprised in the impairment assessment of the carrying
value of intangible assets, including appropriateness of the capitalization of development costs of intangible
assets and inventory valuation as assessed within our Key Audit Matters above; and
• investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures
which included, but were not limited to:
• agreeing financial statement disclosures to underlying supporting documentation which included our evaluation
of Management’s assessment on the impact of climate change on the Group and Company and related
disclosures;
• reading the minutes of meetings of those charged with governance; and
• enquiring of management as to actual and potential litigation and claims.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations
are from financial transactions, the less likely it is that we would become aware of non-compliance.
Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations
to enquiry of the Directors and other management and the inspection of regulatory and legal correspondence, if
any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may
involve deliberate concealment or collusion.
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 this report
This report, including the opinions, has been prepared for and only for the Company's members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Hemen Doshi (Senior Statutory Auditor)
For and on behalf of Gerald Edelman LLP,
Chartered Accountants
Statutory Auditor
73 Cornhill
London
EC3V 3QQ
27 June 2024
Belluscura plc
18
CONSOLIDATED STATEMENT OF PROFIT & LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2023
Group
2023
2022
Note
US $
US $
Continuing Operations
Revenue
5
825,409
1,398,082
Cost of sales
(890,497)
(1,329,977)
Product Gross (Loss)/Profit
(65,088)
68,105
Inventory Impairment and Adjustments
6.1
(4,138,030)
(609,848)
Gross (Loss)
(4,203,118)
(541,743)
Other operating income
6.2
33,942
8,703
Other direct costs
6.3
(103,991)
(136,825)
Administrative expenses
6.4
(13,418,554)
(7,459,047)
Operating Loss
(17,691,721)
(8,128,912)
Finance income
8.1
2,127
-
Finance costs
8.2
(828,025)
(24,073)
Loss before income tax
(18,517,619)
(8,152,985)
Income tax expense
9
-
-
Loss after tax for the period
(18,517,619)
(8,152,985)
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences – foreign operations
2,248,588
(3,827,808)
Total other comprehensive income
2,248,588
(3,827,808)
Total comprehensive loss for the year attributable to the equity holders
(16,269,031)
(11,980,792)
Earnings per share
Basic & Diluted: Loss per share
10
(0.142)
(0.055)
The notes on pages 25 to 46 are an integral part of these consolidated financial statements.
Adjusted EBITDA1
Group
2023
2022
US $
US $
Total comprehensive loss for the year
(16,269,031)
(11,980,792)
Add back:
Administrative expenses Realised & unrealised FX movements in
2,424,237
(2,877,886)
Other comprehensive income FX currency translation differences
(2,248,588)
3,827,808
Net foreign exchange movement2
175,649
949,922
Finance Income and Costs
19,337
24,073
Accrued Interest on Convertible Loan Notes
806,561
-
Product development amortisation
3,293,232
2,911,988
Costs relating to fundraising activities
92,536
-
Former CFO compensation
96,393
-
Share option costs
-
162,505
Minimum royalties in excess of sales royalties
792,818
763,430
Contract Manufacturer Capacity Costs
86,440
128,607
Inventory Impairment and Adjustments
4,138,030
609,848
Accrued Bonus
315,000
-
Issue of share-based payments
163,061
229,241
Adjusted EBITDA
(6,289,974)
(6,201,178)
1
Reconciliation to Adjusted EBITDA measure
Adjusted EBITDA is the Group’s key adjusted profit measure. Total comprehensive loss for the year is adjusted to exclude non-recurring and
exceptional items.
2
Net foreign exchange movements
The US$ weakened against £Sterling by 5% during the year (1 January 2023 - $1.21:£1.00; 31 December 2023 - $1.27:£1.00). Due to the size of the
Inter-Company Loan from the PLC to the US subsidiary which is fixed in £Sterling, this creates an accounting presentational impact
between Administration Expenses and Other Comprehensive Income, which to a large extent can be netted off against one another.
•
Realised FX movements in administrative expenses arise from the revaluation of £Sterling cash balances into US$
•
Unrealised FX movements in administrative expenses arise from the revaluation of the Inter-Company Loan fixed in £Sterling into US$
•
Foreign currency translation differences in Other Comprehensive Income arise from the revaluation of the PLC balance sheet into US$
Belluscura plc
19
CONSOLIDATED BALANCE SHEET
As at 31 December 2023
Group
2023
2022
Note
US $
US $
Assets
Non-current assets
Tangible assets
12
186,928
152,717
Product development
13
9,987,516
8,668,732
Other long-term receivable
15
1,952,649
-
Right of use asset
12
136,887
246,924
Non-current assets
12,263,980
9,068,373
Current assets
Inventory
14
3,320,652
8,431,031
Trade and other receivables
15
4,306,492
4,054,102
Cash and cash equivalents
16
932,926
2,044,836
Current assets
8,560,070
14,529,969
Total assets
20,824,050
23,598,342
Current liabilities
Trade and other payables
20
(3,070,621)
(3,045,788)
Current liabilities
(3,070,621)
(3,045,788)
Non-current liabilities
Trade and other payables
20
(61,267)
(200,432)
Non-current liabilities
(61,267)
(200,432)
Total liabilities
(3,131,888)
(3,246,220)
Net assets
17,692,162
20,352,122
Equity attributable to the owners of the parent
Share capital
18
1,845,523
1,662,185
Share premium
18
37,494,672
33,379,947
Other Equity Instruments
18
9,167,689
-
Capital contribution
19
165,000
165,000
Retained earnings
19
(28,635,114)
(10,310,673)
Translation reserve
19
(2,345,608)
(4,544,337)
Total equity
17,692,162
20,352,122
The notes on pages 25 to 46 are an integral part of these financial statements.
The financial statements on pages 19 to 46 were authorised for issue by the Board of Directors on 27 June 2024
and were signed on its behalf.
Robert Rauker
Simon Neicheril
Chief Executive Officer
Chief Financial Officer
Belluscura plc
registered number 09910883
Belluscura plc
20
COMPANY BALANCE SHEET
At 31 December 2023
Company
Note
2023
US $
2022
US $
Assets
Non-current assets
Tangible assets
12
4,424
7,107
Intangible assets
13
-
-
Right of use asset
12
55,181
67,169
Investment in subsidiaries
11
301,307
-
Loans to subsidiaries
15
36,397,060
26,725,430
Non-current assets
36,757,972
26,799,706
Current assets
Trade and other receivables
15
204,511
471,965
Cash and cash equivalents
16
265,807
1,237,288
Current assets
470,318
1,709,253
Total assets
37,228,290
28,508,959
Current liabilities
Trade and other payables
20
(171,514)
(155,682)
Current liabilities
(171,514)
(155,682)
Non-current liabilities
Trade and other payables
20
(41,978)
(56,563)
Non-current liabilities
(41,978)
(56,563)
Total liabilities
(213,492)
(212,245)
Net assets
37,014,798
28,296,714
Equity attributable to the owners of the parent
Share capital
18
1,845,523
1,662,185
Share premium
18
37,542,672
33,427,947
Other equity instruments
18
9,167,689
-
Capital contribution
19
165,000
165,000
Retained earnings
19
(9,342,188)
(2,414,081)
Share option reserve
19
(20,180)
-
Translation reserve
19
(2,343,718)
(4,544,337)
Total equity
37,014,798
28,296,714
The Parent Company’s loss before tax for the period 31 December 2023 was $7,144,338 (2022: $3,820,378).
The Group has used the exemption under S408 CA 2006 not to disclose the Company income statement.
The notes on pages 25 to 46 are an integral part of these financial statements.
The financial statements on pages 19 to 46 were authorised for issue by the Board of Directors on xx June 2024.
Robert Rauker
Simon Neicheril
Chief Executive Officer
Chief Financial Officer
Belluscura plc
registered number 09910883
Belluscura plc
21
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
Group
Note
Ordinary
Shares
US $
Share
Premium
US $
Other
Equity
Instruments
US $
Translation
Reserve
US $
Capital
Contribution
US $
Retained
Earnings
US $
Total
US $
Balance at 1 January 2022
1,548,227
26,025,760
-
(716,529)
165,000
(2,349,966)
24,672,492
Issue of ordinary shares
18
113,958
7,354,187
-
-
-
-
7,468,145
Loss for the year
19
-
-
-
-
(8,152,985)
(8,152,985)
Other comprehensive income
19
-
-
(3,827,808)
-
-
(3,827,808)
Total comprehensive income
(3,827,808)
-
(8,152,985)
(11,980,793)
Issue of share-based payments
19
-
-
-
-
192,278
192,278
Balance at 31 December 2022
1,662,185
33,379,947
-
(4,544,337)
165,000
(10,310,673)
20,352,122
Balance at 1 January 2023
1,662,185
33,379,947
-
(4,544,337)
165,000
(10,310,673)
20,352,122
Issue of ordinary shares
18
183,338
4,114,725
-
-
-
-
4,298,063
Issue of other equity instruments
18
-
-
9,167,689
-
-
-
9,167,689
Loss for the year
19
-
-
-
-
-
(18,517,619)
(18,517,619)
Other comprehensive income
19
-
-
-
2,198,729
-
-
2,198,729
Total comprehensive income
-
-
-
2,198,729
-
(18,517,619)
(16,318,890)
Issue of share-based payments
19
-
-
-
-
-
193,178
193,178
Balance at 31 December 2023
1,845,523
37,494,672
9,167,689
(2,345,608)
165,000
(28,635,114)
17,692,162
The notes on pages 25 to 46 are an integral part of these financial statements.
Belluscura plc
22
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
Company
Note
Ordinary
Shares
US $
Share
Premium
US $
Other
Equity
Instruments
US $
Translation
Reserve
US $
Capital
Contribution
US $
Retained
Earnings
US $
Total
US $
Balance at 1 January 2022
1,548,227
26,025,760
-
(716,529)
165,000
1,214,019
28,236,477
Issue of ordinary shares
18
113,958
7,402,187
-
-
-
-
7,516,145
Loss for the year
19
-
-
-
-
-
(3,820,378)
(3,820,378)
Other comprehensive income
19
-
-
-
(3,827,808)
-
-
(3,827,808)
Total comprehensive income
-
-
-
(3,827,808)
-
(3,820,378)
(7,648,186)
Share-based payments
19
-
-
-
-
-
195,151
195,151
Balance at 31 December 2022
1,662,185
33,427,947
-
(4,544,337)
165,000
(2,411,208)
28,299,587
Balance at 1 January 2023
1,662,185
33,427,947
-
(4,544,337)
165,000
(2,411,208)
28,299,587
Issue of ordinary shares
18
183,338
4,114,725
-
-
-
-
4,298,063
Issue of other equity instruments
18
-
-
9,167,689
-
-
-
9,167,689
Loss for the year
19
-
-
-
-
-
(7,144,338)
(7,144,338)
Other comprehensive income
19
-
-
-
2,200,619
-
-
2,200,619
Total comprehensive income
-
-
-
2,200,619
-
(7,144,338)
(4,943,719)
Issue of share-based payments
19
-
-
-
-
-
193,178
193,178
Balance at 31 December 2023
1,845,523
37,542,672
9,167,689
(2,343,718)
165,000
(9,362,368)
37,014,798
The notes on pages 25 to 46 are an integral part of these financial statements.
Belluscura plc
23
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2023
Group
2023
2022
Note
US $
US $
Cash flows from operating activities
Cash generated from operations
24
(9,131,571)
(14,906,368)
Net cash used in operating activities
(9,131,571)
(14,906,368)
Cash flows from investing activities
Purchases of property, plant and equipment
12
(85,409)
(144,776)
Intangible assets under development
13
(4,447,282)
(4,856,846)
Purchase of Right of Use asset
-
(75,509)
Net cash used in investing activities
(4,532,691)
(5,077,131)
Cash flows from financing activities
Proceeds from issuance of ordinary shares (net)
18
4,236,474
7,467,030
Proceeds from issuance of other equity instruments (net)
18
8,401,168
-
Purchase of share by Employee Benefit Trust
18
-
(48,000)
Lease Payments
22
(126,347)
(130,780)
Net cash generated from financing activities
12,511,295
7,288,250
Net (decrease) in cash and cash equivalents
(1,152,967)
(12,695,249)
Cash and cash equivalents at beginning of year
2,044,836
15,889,552
Exchange loss on cash and cash equivalents
41,057
(1,149,467)
Cash and cash equivalents at end of year
932,926
2,044,836
The notes on pages 25 to 46 are an integral part of these financial statements.
Belluscura plc
24
1.
General Information
Belluscura plc is a public Company limited by shares incorporated in England and Wales and domiciled in the
UK. Company Registration No. 09910883. On 28 November 2017 the Company changed its name from
Belluscura Limited to Belluscura plc.
The principal accounting policies applied in the preparation of these consolidated financial statements are set
out below. These policies have been consistently applied, unless otherwise stated.
2.
Accounting Policies
2.1
Statement of compliance
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as
the “Group”, see note 11). The parent Company financial statements present information about the Company
as a separate entity and not about its Group.
These consolidated financial statements are prepared in accordance with United Kingdom adopted
International Financial Reporting Standards (IFRS) and issued by the International Accounting Standards
Board (IASB). The consolidated financial statements are presented in US Dollars, the Group’s functional
currency.
The financial statements for the Company have been prepared in accordance with Financial Reporting
Standard 101 by applying the recognition and measurement requirements of United Kingdom adopted
International Financial Reporting Standards (“IFRS”), amended where necessary in order to comply with
Companies Act 2006. The Company has notified shareholders of this disclosure.
Critical accounting estimates and judgements made by the Directors, in the application of these accounting
policies that have significant effect on the financial statements are disclosed in note 4 (a)-(c) applicable for the
whole Group and 4 (d) applicable for the Company only.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of
the following disclosures:
•
Profit & Loss account and related notes;
•
Statement of financial position and related notes;
•
Cash Flow Statement and related notes
•
Disclosures in respect of transactions with wholly owned subsidiaries;
•
Disclosures in respect of capital management;
•
The effects of new but not yet effective IFRSs;
•
Disclosures in respect of the compensation of Key Management Personnel; and
•
Related party transactions with wholly owned members of the Group
As the consolidated financial statements include the equivalent disclosures, the Company has also taken the
exemptions under FRS 101 available in respect of the following disclosures
•
Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7
Financial Instrument Disclosures.
•
IFRS 2 Share-based Payments in respect of group settled share-based payments
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods
presented in these financial statements
2.1.1 Going concern
Commercial Background
US FDA 510(k) clearance of the Group’s X-PLOR was received on 2 March 2021 and was launched in the US in
September 2021. The Group launched the next generation X-PLOR in October 2022 and released the DISCOV-
R for Pre-Market Evaluation in June 2023.
In March 2022, we signed a manufacturing Master Supply Agreement ("MSA") with InnoMax Medical
Technology, Ltd ("InnoMax") to manufacture our devices in China alongside US manufacturing.
In April 2022, the Group took the decision to transfer its US manufacturing in-house, to increase production
output at high quality standards, and achieve a significant reduction in production costs. This was successfully
completed at the end of July 2022. The decision to bring our US manufacturing in-house from our contract
manufacturer along with the initial support of the set-up of InnoMax manufacturing in China, resulted in
significant investment in Raw Material Inventory and Deposits which at 31 December 2022 stood at $10.8m.
During the year the Group transferred Raw Materials to InnoMax for utilisation in China manufacturing and
alongside this, as anticipated, InnoMax is beginning to directly source most of their own components, which
will progressively result in a significant margin improvement through lower unit cost of sales and has resulted
in a reduction in the Company's inventory levels of components. Raw Material inventory at 31 December 2023
was $1.9m. The Group has reviewed and assessed the value of inventory, with adjustments and impairment
made of $4.1m (2022: $0.6m), as detailed in note 6.1.
Belluscura plc
25
X-PLOR is now almost exclusively manufactured and assembled by InnoMax and InnoMax has begun tooling
to manufacture a DISCOV-R units commercially in October 2024, after initial test production units are
developed and perfected in the US beginning in June 2024.
Cash at 31 December 2023 was $0.9m (2022: $2.0m).
Position at 31 May 2024
At 31 May 2024, the Group held $2.9M in Inventory and Finished Goods, $3.9m in Accounts Receivable (of which
$3.5m was due from InnoMax for the supply of components) and had Cash of $1.1m.
Fundraising
The Group raised $22.5m after expenses in its IPO on 28 May 2022 and $7.1m after expenses from investors in
May 2023 to support the inventory requirements of the new manufacturing agreement. In addition, $5.1m after
expenses was raised through the placing of Loan Notes in February 2023, and $3.7m after expenses through
an equity placing in June 2023 and a further $4m in October 2023. In March 2024, $5.2m was raised after
expenses through the acquisition of TMT Acquisition plc, which operated as a cash shell.
In June 2024 the Company raised $0.3m from the issue of equity. In July 2024 the Board expects to raise up to
$3M with a combination of a straight equity and through convertible loan notes (subject to shareholder’s
approval at a General Meeting).
Prospects and Forecasts
The Board is confident the phased launch beginning in Summer 2024 of the award winning DISCOV-R product
will be transformational for the Group. Demand is expected to be very strong because a major competitor has
left the market, the two others have larger, more bulky products, and the small size of our product is very
appealing to the customer base. Additionally, most of the development and capital costs for DISCOV-R have
already been incurred.
Strong sales of X-PLOR and the expected significant demand for the DISCOV-R, alongside the release of
working capital through the sale of goods from its existing inventory, and a capital raise in June and the
expected one in July together totalling up to $3M (as noted above) indicate that the Group has sufficient cash
reserves to operate within the level of its current facilities for a period of 12 months from the date of approval of
the financial statements.
Should projected sales and prices not materialize as anticipated in the Group’s forecasts, then the Board would
actively consider further fundraising and other mitigating actions (these conditions are necessarily considered
to represent a material uncertainty that may cast significant doubt over the Group's and the Company’s ability
to continue as a going concern).
The Group's forecasts, taking account of reasonably possible downsides in trading performance and
development costs/timelines, and the risks to these projections (set out in the Principal Risks and Uncertainties
section of the Group Strategic Report on page 4) have been considered by the Board in its assessment of these
forecasts.
Based on the above, the Directors believe it remains appropriate to prepare the financial statements on a going
concern basis.
2.1.2 Measurement convention
The financial statements are prepared on the historical cost basis except that assets and liabilities are stated at
their fair value.
2.1.3 Changes in accounting policy
In these financial statements, where the Group has adopted new or updated standards, there is not a material
impact on the financial information.
2.2
Basis of Consolidation
Belluscura plc was incorporated on 10 December 2015. On 16 May 2016, a US incorporated Company, Belluscura
LLC, was formed as a 100% owned subsidiary. Subsidiaries are entities controlled by the Group.
The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity. In assessing control, the
Group takes into consideration potential voting rights. The acquisition date is the date on which control is
transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control ceases. Losses applicable to the
non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes
the non-controlling interests to have a deficit balance.
Belluscura plc
26
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated. Unrealised losses are eliminated in the same way as unrealised gains, but only to
the extent that there is no evidence of impairment.
2.3
Foreign currencies
(a) Functional and presentation currency
These consolidated financial statements are presented in US Dollars which is the presentation currency of
the Group, because the majority of the Group’s transactions are undertaken in US Dollars. Each entity within
the Group has its own functional currency which is dependent on the primary economic environment in
which that subsidiary operates.
(b) Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing
at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation at the year-end exchange
rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income
statement. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are
presented in the income statement within ‘finance income or costs’.
(c) Group companies
The results and financial position of all Group entities (none of which has the currency of a hyper-inflationary
economy) that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:
(i)
assets and liabilities for each balance sheet presented are translated at the closing exchange rates at
the date of that balance sheet
(ii)
income and expense for each income statement are translated at the average rates of exchange
during the year (unless this average is not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income and expenses are translated at the
rate on the dates of the transactions)
(iii)
all resulting exchange differences are recognised in other comprehensive income.
2.4
Business combinations
All business combinations are accounted for by applying the acquisition method. Business combinations are
accounted for using the acquisition method as at the acquisition date, which is the date on which control is
transferred to the Group.
For acquisitions on or after 1 January 2010, the Group measures goodwill at the acquisition date as:
•
the fair value of the consideration transferred; plus
•
the recognised amount of any non-controlling interests in the acquiree; plus
•
the fair value of the existing equity interest in the acquiree; less
•
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. Costs related
to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as
incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent
consideration is classified as equity, it is not remeasured and settlement is accounted for within equity.
Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or
loss.
On a transaction-by-transaction basis, the Group elects to measure non-controlling interests, which have both
present ownership interests and are entitled to a proportionate share of net assets of the acquiree in the event
of liquidation, either at its fair value or at its proportionate interest in the recognised amount of the identifiable
net assets of the acquiree at the acquisition date. All other non-controlling interests are measured at their fair
value at the acquisition date.
2.5
Employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the
related service is provided. A liability is recognised for the amount expected to be paid under short-term cash
bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as
a result of past service provided by the employee and the obligation can be estimated reliably.
Share-based payment transactions
Share-based payment arrangements in which the Group receives goods or services as consideration for its own
equity instruments are accounted for as equity-settled share-based payment transactions.
The grant date fair value of share-based payment awards granted to employees is recognised as an employee
expense, with a corresponding increase in equity, over the period that the employees become unconditionally
Belluscura plc
27
entitled to the awards. The fair value of the options granted is measured using an option valuation model, taking
into account the terms and conditions upon which the options were granted (See Note 18).
The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related
service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised
as an expense is based on the number of awards that do meet the related service and non-market performance
conditions at the vesting date.
For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based
payment is measured to reflect such conditions and there is no true-up for differences between expected and
actual outcomes.
2.6
Interest income and expenses
Interest income and interest payable are recognised in P&L as they accrue, using effective interest method.
2.7
Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation and accumulated impairment
losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the
cost of the item can be measured reliably. All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Depreciation of assets is calculated is provided to write off the cost less the estimated residual value of tangible
fixed assets by equal instalments over the estimated useful economic lives as follows: Furniture - 5 years;
Computer equipment - 3 years; Leasehold improvements - 5 years.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the
assets carrying value is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are
recognised within administrative expenses in the income statement. When re-valued assets are sold, the
amounts are included in other reserves are transferred to retained earnings.
2.8
Intangible assets
Licences and development costs
Costs associated with the acquisition of Licences for technologies and distribution rights are recognised as an
intangible asset when they meet the criteria for capitalisation. That is, they are separately identifiable,
measurable and it is probable that economic benefit will flow to the entity.
Further development costs attributable to the licenced technology and recognised as an intangible asset when
the following criteria are met:
(i)
it is technically feasible to complete the technology for commercialisation so it will be available for use;
(ii)
management intends to complete the technology and use or sell it;
(iii) there is an ability to use or sell the technology;
(iv) it can be demonstrated how the technology will generate probable future economic benefits;
(v)
adequate technical, financial and other resources to complete the development and to use or sell the
technology are available; and
(vi) the expenditure attributable to the technology during its development can be reliable measured.
Licences and their associated development costs are amortised over the life of the licence or the underlying
patents, whichever is shorter. The estimated useful life of the licences and development costs is 3-15 years.
Development costs are amortised from the date products are launched, taking into account the Directors
opinion as to the expected further development of the technology and is regularly reassessed.
2.9
Impairment of non-financial assets
The carrying amounts of the non-financial assets, other than inventories and deferred tax assets, are reviewed
at each reporting date to determine whether there is any indication of impairment. If any such indication exists,
then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful
lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value
less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are
grouped together into the smallest group of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit” or “CGU”).
Due to the close technological nature of it’s two products, Belluscura has assessed the business has one CGU.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated
recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in
Belluscura plc
28
respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and
then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis. The
Company’s current product technology generates cash inflow in the same manner and therefore the
management have assessed there to be one CGU.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses
recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased
or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
2.10
Financial assets
2.10.1 Classification
The Group classifies its financial assets depending on the purpose for which the asset was acquired.
Management determines the classification of its financial assets at initial recognition. During the financial
period the Group held loans and receivables that are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They are included in current assets, except for maturities
that are greater than 12 months after the end of the reporting year. These are classified as noncurrent assets.
The Group’s loans and receivables comprise ‘trade and other receivables’ in the balance sheet. The Group also
has cash and cash equivalents.
2.10.2 Recognition and measurement
Loans and receivables are recognised on the trade date in which the transaction took place, and are recognised
at their fair value with transaction costs expensed in the income statement. Financial assets are derecognised
when the rights to receive cash flows from the loans or receivables have been collected, expired or transferred
and the Group has subsequently transferred substantially all risks and rewards of ownership.
2.11
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a
legally enforceable right to offset the recognised amounts and there is the intention to settle on a net basis or
realise the asset and settle the liability simultaneously.
2.12
Impairment of financial assets
Assets carried at amortised cost
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine
whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence
indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a
negative effect on the estimated future cash flows of that asset that can be estimated reliably.
The Group recognises a provision for expected credit loss (ECL) for all financial assets not held at fair value
through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance
with the contract and all the cash flows that the Group expects to receive, discounted at the original effective
interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms (if any). ECLs are recognised in two
stages. For credit exposures for which there has not been a significant increase in credit risk since initial
recognition, ECLs are provided for credit loss that results from default events that are possible within the next
12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit
risk since initial recognition, a loss provision is required for credit loss expected over the remaining life of the
exposure, irrespective of the timing of the default (a lifetime ECL).
The ECL model is applicable to financial assets classified at amortised cost and contract assets under IFRS 15
Revenue from Contracts with Customers. The measurement of ECL includes where relevant, an unbiased and
probability-weighted amount that is determined by evaluating a range of possible outcomes, time value of
money and reasonable and supportable information that is available without undue cost or effort at the
reporting date, about past events, current conditions and forecasts of future economic conditions.
The Group applies both the simplified approach, using a provision loss rate matrix which is based on its
historical credit loss experience, adjusted for forward-looking factors specific to the receivables and the
economic environment; and the three-stage general approach to determine impairment of trade receivables
depending on their respective nature.
The three-stage approach assesses impairment based on changes in credit risk since initial recognition using
the past due criterion and other qualitative indicators such as increase in political concerns or other
macroeconomic factors and the risk of legal action, sanction or other regulatory penalties that may impair
future financial performance. Financial assets classified as stage 1 have their ECL measured as a proportion of
their lifetime ECL that results from possible default events that can occur within one year, while assets in stage
2 or 3 have their ECL measured on a lifetime basis. Under this approach, the ECL is determined by projecting
the probability of default (PD), loss given default (LGD) and exposure at default (EAD) for each ageing category
and for each individual exposure. The PD and LGD is based on default rates determined by external rating
Belluscura plc
29
agencies for the counterparties. The EAD is the total amount of outstanding receivable at the reporting period.
These three components are multiplied together and adjusted for forward-looking information, which includes
relevant country: GDP data; inflation rates; interest rates; and FX rates and product selling prices, to arrive at an
ECL. The discount rate used in the ECL calculation is the original effective interest rate or an approximation
thereof.
For receivables from related parties, the Group applies the general approach. The general approach involves
tracking the changes in the credit risk and recognising a loss allowance based on a 12-month ECL at each
reporting date. When the Group acquires credit impaired assets, the ECL that is netted against the gross
receivable balance is released to the consolidated statement of comprehensive income when the original
invoice that the ECL relates to is settled.
For amounts due from Group companies, the Company recognises an allowance equal to the 12-month ECL
where there has been no significant increase in credit risk since initial recognition. If it has been determined
that there has been a significant increase in credit risk since initial recognition, a lifetime ECL is recognised
2.13
Leases
At the inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.
As a lessee
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-
use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any
lease payments made at or before the commencement date, plus any initial direct costs incurred, less any lease
incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement
date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by
the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase
option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which
is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise the following:
-
fixed payments, including in-substance fixed payments;
-
variable lease payments that depend on an index or a rate, initially measured using the index or rate as
at the commencement date
-
amounts expected to be payable under a residual value guarantee; and
-
the exercise price under a purchase option that the Group is reasonably certain to exercise,
-
lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension
option, and
-
penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when
there is a change in future lease payments arising from a change in an index or rate, there is a change in the
Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes
its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-
substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount
of the right-of-use asset, to the extent that the right-of-use asset is reduced to nil, with any further adjustment
required from the remeasurement being recorded in profit or loss.
The Group presents right-of-use assets that do not meet the definition of investment property in 'property,
plant and equipment' and lease liabilities in 'loans and borrowings' in the statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for lease of low-value assets
(liabilities under $5,000 per annum) and short-term leases (less than 12 months). The Group recognises the
lease payments associated with these leases as an expense on a straight-line basis over the lease term.
2.14
Inventory
Inventory comprises goods held for resale and are stated at the lower of cost or net realisable value. Cost is
based on First In, First Out (“FIFO”) principle and includes all direct expenditure and other appropriate
attributable costs incurred in bringing the inventory to its present location and condition.
Belluscura plc
30
2.15
Trade receivables
Trade receivables are amounts due from customers for the sale of goods in the ordinary course of business.
Collection is normally expected within three months or less (in the normal operating cycle of the business) and
is classified as current assets. In the rare circumstances that they exceed a period of greater than one year they
are presented as non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less any provision for impairment.
2.16
Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at
call with other banks, other short term highly liquid investments with maturities of three months or less and
bank overdrafts.
2.17
Equity
Share capital and share premium
The share capital account has been established to represent the nominal value for all share issues. The share
premium account has been established to represent the excess of proceeds over the nominal value for all share
issues, including the excess of the exercise share price over the nominal value of the shares on the exercise of
share options as and when they occur. Incremental costs directly attributable to the issue of new ordinary
shares and new shares options are shown in equity as a deduction, net of tax, from the proceeds.
Other Equity Instruments
The Company has raised funds through the issues of Convertible Loan Notes. The issue of the Loan Notes is a
form of equity instrument as detailed in Note 4 (f). The Company has a small number of Warrants outstanding
to which the Company has not applied a value to (see note 18).
Warrants
The Company accounts for issued warrants either as a liability or equity in accordance with the substance of
the transaction, depending on whether the warrants are issued in exchange for goods or services, or not. When
there is an exchange of goods or services, warrants are accounted for as share-based payments. If there is no
exchange of goods or services, the warrants are considered an equity instrument if it includes: (i) no contractual
obligation either to deliver cash or another financial asset to another entity; and
(ii) the instrument will or may be settled in the Company’s own equity instrument if it is a non-derivative that
includes no contractual obligation for the Company to deliver a variable number of its own equity instruments
or a derivative that will be settled only by the issuer exchanging a fixed amount of cash or another financial
asset for a fixed number of its own equity instruments.
For this purpose, rights, options or warrants to acquire a fixed number of the entity’s own equity instruments
for a fixed amount of any currency are equity instruments if the entity offers the rights, options or warrants pro
rata to all of its existing owners of the same class of its own non-derivative equity instruments. Liability-
classified warrants are measured at fair value on the grant date and at the end of each reporting period. Any
change in the fair value of the warrants after the grant date is recorded as FVTPL. Equity-classified warrants are
accounted for at fair value on grant date with no changes in fair value recognised after the grant date.
Capital contribution
Capital contributions are contributions made by the ultimate parent for which no consideration is given.
Retained earnings
Retained earnings are the consolidated retained earnings and share-based payments reserve for the Group or
Company.
Translation reserve
The translation reserve is the accumulated reserves created by Foreign Exchange Differences on the
consolidation of Group balances into the reporting currency of US$.
2.18
Trade payables
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of
business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year
or less (or in the normal operating cycle of business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest rate method.
2.19
Current and deferred tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated
income statement, except to the extent that it relates to items recognised in other comprehensive income or
directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity,
respectively.
Belluscura plc
31
The current income tax charge is calculated on the basis of tax laws enacted or substantively enacted at the
balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation and establishes provisions where appropriate on amounts
expected to be paid to the tax authorities.
Deferred income tax is recognised on temporary timing differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities
are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet
date and are expected to apply when the related deferred income tax asset is realised or the deferred income
tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in
subsidiaries except for deferred income tax liability where the timing of the reversal of the temporary difference
is controlled by the Group and probably will not reverse in the foreseeable future.
Deferred income tax assets are recognised on deductible temporary differences arising from investments in
subsidiaries only to the extent that it is probable the temporary difference will reverse in full in the future and
there is sufficient taxable profit available against which the temporary difference can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where
there is an intention to settle balances on a net basis.
2.20 Provisions
Provisions and any other anticipated foreseen liabilities are recognised: when the Group has a present legal or
constructive obligation as a result of past events; it is probable that an outflow of resources will be required to
settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease
termination penalties, and employee termination payments. Provisions are not recognised for future operating
losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement
is determined by considering a class of obligations as a whole. A provision is recognised even if the likelihood
of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money and the
risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an
interest expense.
2.21
Revenue recognition
Revenue comprises the value of consideration received for sales of our developed products. Substantially all of
our revenue is derived or denominated in U.S. dollars, regardless of where the customer is located. At inception
of a contract with a customer the terms are assessed to determine whether they products or services are
distinct, whereby the customer can benefit from the good or service either on its own or together with other
resources that are readily available from third parties or from us, and are distinct in the context of the contract,
where the transfer of the good or service is separately identifiable from other promises in the contract and
should be accounted for as separate performance obligations.
Revenues from the sale of goods are recognised upon delivery.
The Group bases its estimate of return on historical results taking into consideration type of customer, type of
transaction and specifics of each arrangement.
Where an agreement involves several performance obligations, the total fee is allocated to individual
performance obligations based on their relative standalone selling price. The standalone selling price is
assessed by reference to prices regularly charged for the performance obligation when it is sold separately, or
if this cannot be used, then other factors may be considered, such as the excess of the total transaction price
over the sum of the observable stand-alone selling prices of other goods or services promised in the agreement.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective
interest rate applicable.
Belluscura plc
32
3.
Financial Risk Management
The Company’s Directors review the financial risk of the Group. Due to the early stage of its operations the
Group has not entered into any form of hedging instruments to assist in the management of risk during the
period under review.
3.1
Financial risk factors
Liquidity Risk
Cash flow forecasting is performed on a Group basis. Directors monitor rolling forecasts of the Group’s liquidity
requirements to ensure it has sufficient cash to meet operational needs.
At the reporting date the Group held bank balances of US $932,926 (2022: $2,044,836). The contractual
maturities of financial liabilities are shown in note 17.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices will affect the Group’s income or the value of its holdings of financial instruments.
Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency
other than their functional currency. The Group’s policy is, where possible, to allow Group entities to settle
liabilities denominated in their functional currency, with the cash generated from their own operations in that
currency. Where Group entities have liabilities denominated in a currency other than their functional currency
(and have insufficient reserves of that currency to settle them), cash already denominated in that currency will,
where possible, be transferred from elsewhere within the Group.
Due to low value and number of financial transactions that involve foreign currency and the fact that the Group
has no external borrowings to manage, the Directors have not entered into any arrangements, adopted or
approved the use of derivative financial instruments to assist in the management of the exposure of these risks.
The Group’s exposure to foreign currency risk is based on the carrying amount for monetary financial
instruments.
The gross foreign currency exposure below is with respect of pound Sterling to US Dollars.
31 December 2023
31 December 2022
Cash and cash equivalents
260,678
553,070
Trade receivables (gross)
49,897,060
35,725,430
Trade payables
(213,492)
(212,246)
Net exposure
49,944,246
36,066,254
The trade receivables shown above relates to the UK entity’s intercompany balance with the US entity, which
will be repaid in Sterling.
A 10% percent strengthening of the pound sterling against the US Dollar at 31 December 2023 would have
increased (decreased) equity and profit or loss by the amounts shown below. This calculation assumes that the
change occurred at the balance sheet date and had been applied to risk exposures existing at that date.
This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain
constant. The analysis is performed on the same basis for 31 December 2022.
Equity
Profit or Loss
2023
US $
2022
US $
2023
US $
2022
US $
(4,994,424)
(3,606,625)
(4,994,424)
(3,606,625)
A 10% percent weakening of the above currencies against the pound sterling at 31 December 2023 would have
had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all
other variables remain constant.
Translation exposures
The Group’s results, as presented in US Dollars, are subject to fluctuations as a result of exchange rate
movements. The Group does not hedge this translation exposure to its earnings.
Gains or losses arise on the retranslation of the net assets of foreign operations at different reporting dates and
are recognised within the consolidated statement of comprehensive income. They will predominantly relate to
the retranslation of opening net assets at closing foreign exchange rates, together with the retranslation of
retained foreign profits for the year (that have been accounted for in the consolidated income statement at
average rates) at closing rates. Exchange rates for major currencies are set out below
The following exchange rates have been used in the translation of the results of foreign operations:
Belluscura plc
33
Closing rate
for 2021
Weighted
average rate
for 2022
Closing rate
for 2022
Weighted
average rate
for 2023
Closing rate
for 2023
US Dollar
1.3534
1.23.72
1.2098
1.2438
1.2740
3.2
Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
In order to adjust or maintain the capital structure, the Group may adjust the level of dividends paid to its
shareholders, return capital to shareholders, issue new shares or sell assets to reduce borrowings. This policy is
periodically reviewed by the Directors, and the Group’s strategy remains unchanged for the foreseeable future.
The capital structure of the Group consists of cash and bank balances and equity consisting of issued share
capital, reserves and retained earnings of the Group.
3.3
Fair value
Financial instruments are measured at fair value including cash and cash equivalents trade and other payables,
and borrowings.
Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables,
and trade and other payables approximate their fair value.
4.
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
Key judgement
The following judgements and estimates have had the most significant effect on amounts recognised in the
financial statements.
(a) Intangible fixed assets (see note 13)
Intangible fixed assets, are depreciated over their useful lives taking into account residual values, where
appropriate. The actual lives of the assets and residual values are assessed annually and may vary
depending on the number of factors. In re-assessing asset lives, factors such as technological innovation,
product life cycles and maintenance programmes are taken into account. Residual value assessments
consider issues such as future market conditions, the remaining life of the asset and projected disposal
values. Development costs attributable to the licenced technology and recognised as an intangible asset
when the criteria in note 2.8 are met.
(b) Impairment reviews
The Group undertakes an impairment review annually, or more frequently if events or changes in
circumstances indicate that the carrying value may not be recoverable. In respect of impairment reviews,
the key assumptions are as follows:
•
Growth rates. The value in use of the intangible assets is calculated from cash flow projections for the
relevant business activities based on the latest financial projections covering the anticipated useful
economic life of the intangible assets.
•
Discount rates. The pre-tax discount rate used to calculate value is determined in relation to the
relevant business activities and their geographic location, using external benchmarks where possible
to arrive at a relevant weighted average cost of capital.
(c) Deferred taxes
Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary differences will be able to be offset against future
taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are
expected to apply to their respective period of realisation, provided they are enacted or substantively
enacted at the balance sheet date. Deferred tax is recognised as a component of the tax expense in the
income statement, except where it relates to items charged or credited to other comprehensive income
or directly to equity.
(d) Other equity instruments
The Directors assess the accounting principles for the issues of other equity instruments. The issue of the
Loan Notes are a form of equity financing because:
1)
They fall within the parameters of section 560(1)(b) of the CA 2006, being the relevant statutory
provision in this jurisdiction;
2)
They fall within the parameters of IAS 32 being the internationally recognised accounting standard.
IAS 32 has three tests to determine whether the instrument is equity or has a debt element;
a.
an unavoidable contractual obligation to pay cash to the loan note holders;
b.
an obligation to issue a variable number of shares; and
Belluscura plc
34
c.
an obligation to issue a fixed number of shares to settle an instrument whose book value is
variable
In respect of the Loan Notes, the answer to all three of the above is “no”. Therefore, the Instrument falls
within the accepted definition of equity and are accounted for as equity from day one.
(e)
Contingent liabilities
SDG Licence - On 24 February 2017, the Company entered into a co-exclusive licence and development
agreement with Separation Design Group, LLC and SDG (together the “SDG Parties”) (“SDG Licence”)
which was subsequently amended by an amendment agreement dated 19 March 2023. Pursuant to the
SDG Licence: if by 3 September 2025, cumulative sales of the X-PLOR and DISCOV-R have not exceeded
$20 million dollars, Belluscura must make a one-time payment of $3 million to the SDG Parties to maintain
the exclusive SDG licence. By 31 December 2023 cumulative sales of X-PLOR were $1.8 million. The
Directors assess that the Group will meet the minimum obligations and therefore no provision has been
made in these Financial Statements.
Supplier Claim - During 2023 the Company received a claim from a supplier regarding alleged default by
the Company under an ongoing contract. The Company has subsequently counter-claimed against the
supplier for alleged poor service The supplier has subsequently filed a lawsuit in the United States.
The Company has received an independent legal opinion and believes that any claim against the
Company is lower than the claim made by the Company. Accordingly, no provision has been made as at
31 December 2023. The Directors believe that based on their current assessment of the facts the current
$nil provision is appropriate. However, the final amount is dependent upon the outcome of the
agreements between the two parties and/or the lawsuit.
Key estimates
The following judgements and estimates have had the most significant effect on amounts recognised in
the financial statements.
(a) Recoverability of Inter-Company debt by the Company from its subsidiaries.
The Directors assess the recoverability of amounts owed by the subsidiary to the parent Company, which
requires judgement to be made. This involves forecasting sales revenues to be earned by the subsidiary
which will enable it to repay the parent Company.
(b) Share-based payments charge
The Group’s share-based payment charge is calculated using the Black-Scholes model with an assessment
of: the expected volatility based on a comparator set of similar stocks; the risk-free rate of return which is
commensurate with the expected term and the expected forfeiture rates are based on recent experience
of staff turnover levels. The charge is spread over the vesting period on a straight-line basis.
5.
Segmental reporting
The chief operating decision makers consider that in the year to 31 December 2023 there is only one
operating segment, being the sale of oxygen concentrators in the United States.
The Group generated gross revenue of $1,320,433 less discounts of $495,024 in the year (2022: $1,542,948;
$144,866). All sales were in the United States.
6.
Inventory Impairment and Adjustments, other operating income and administrative expenses
6.1
Inventory Impairment and Adjustments
Group
2023
US$
2022
US$
Obsolete raw material inventory and inventory adjustments
845,827
609,848
Impairment of Batteries
1,077,626
-
Impairment of Finished Goods Value
1,888,122
-
Provision for 2024 RMA’s (“Return to Manufacturer Authorization’s”)
326,455
-
Total
4,138,030
609,848
6.2
Other operating income
Group
2023
US$
2022
US$
Freight Charged
14,795
6,805
Rent recharged
19,147
1,898
Total
33,942
8,703
6.3
Other direct costs
Group
2023
US$
2022
US$
Sales Royalties
40,884
69,904
Freight Costs
63,107
66,921
Total
103,991
136,825
Belluscura plc
35
6.4
Expenses by nature
Group
2023
2022
US $
US $
Operating Expenses
Employee benefit expense
3,433,042
2,999,299
Sales & Marketing
655,229
1,420,134
Other administration expenses
1,903,776
1,578,231
5,992,047
5,997,664
Depreciation & Amortisation
Depreciation of property plant and equipment
49,559
38,619
Depreciation of right of use asset
113,231
104,869
Amortisation of product development
3,293,232
2,911,998
3,456,022
3,055,486
Staff Related Exceptional Costs
IFRS2 Share-based Payment Charge
163,061
229,241
Share option costs
-
162,505
Accrued Bonus
315,000
-
Former CFO Compensation
96,393
-
574,454
391,746
Foreign Exchanges movements in Administration Expenses
Realised and Unrealised foreign exchange movements
2,424,237
(2,877,886)
Other
Minimum Royalties in excess of Sales Royalties
792,818
763,430
Costs related to fundraising activities
92,536
-
Contract Manufacturer Capacity Costs
86,440
128,607
971,794
892,037
Administration expenses
13,418,555
7,459,050
6.5
Auditor remuneration
During the period, the Group obtained the following services provided by the auditor and its associates:
Group
2023
US$
2022
US$
Fees payable to the Group’s auditor for the audit of the Group and
Company financial statements
84,000
69,283
Total
84,000
69,283
7.
Employees
7.1
Directors’ emoluments
Salary &
fees
US $
Bonus
US$
Benefits
in kind
US $
Pension
US $
2023
US $
2022
US $
Adam Reynolds
84,371
-
-
-
84,371
74,231
Robert Rauker 1
325,000
157,500
35,975
32,500
550,975
571,121
Simon Neicheril 2
51,923
11,250
-
-
63,173
-
Robert Fary
187,692
-
23,108
-
210,800
-
Dr Patrick Strollo
20,000
-
-
-
20,000
35,000
David Poutney
37,314
-
-
-
37,314
49,488
Ric Piper
43,533
-
-
-
43,533
43,302
Anthony Dyer 3
177,242
-
13,841
17,724
208,807
313,752
Total
927,075
168,750
72,924
50,224
1,218,973
1,086,894
13 Robert Rauker deferred his bonus at the Company’s request and as at the date of this report this bonus has not been paid.
2 Appointed 4 October 2023
3 Resigned 4 October 2023
7.2
Employee benefit expense
Group
2023
US$
2022
US$
Wages and salaries
2,922,837
2,173,897
Social security costs
203,076
209,648
Medical Insurance
185,467
199,090
Pension and other benefits
131,662
119,091
3,443,042
2,701,726
Issue of share-based payments
163,061
229,241
Share option costs
-
162,505
Total employee benefit expense
3,606,103
3,093,472
Belluscura plc
36
7.3
Average number of people employed
Group
2023
US$
2022
US$
Average number of people (including executive Directors) employed
Directors
3
2
Operations
29
19
Administration
3
3
Total average headcount
35
24
8.1
Finance income
8.2
Finance costs
9.
Income tax expense
Group
2023
US$
2022
US $
Current tax on profits for the year
-
-
Adjustments in respect of prior year
-
-
Total current tax
-
-
Income tax expense
-
-
The charge for the year can be reconciled to the loss per the Income Statement as follows:
Group
2023
US$
2022
US$
(Loss) before tax
(18,947,539)
(8,152,895)
Tax calculated at domestic tax rates applicable to profits in the
respective countries
(3,789,508)
(1,630,579)
Tax effects of:
-
Expenses not deductible for tax purposes
-
-
-
Capital allowances in excess of depreciation
(21,317)
(30,542)
-
Unrelieved tax losses
3,286,548
1,661,121
Total income tax charge
-
-
The tax on the Group’s loss before tax differs from the theoretical amount that would arise using the weighted
average tax rate applicable to losses. The weighted average applicable UK tax rate was 19%. Unused tax losses
for which no deferred tax assets have been recognised is attributable to the uncertainty over the recoverability
of those losses through future profits.
10
Earnings/(Loss) per share
Group
2023
US$
2022
US$
Profit/(Loss) for the year US$
(18,497,539)
(8,152,895)
Weighted Average Shares in Issue
130,395,343
119,398,219
Basic Loss per Share US$
(0.142)
(0.068)
Weighted Average Shares, Warrants and Options in Issue
131,949,445
131,797,259
Diluted Loss per Share US$
(0.142)
(0.068)
All potentially dilutive items are disregarded for the purpose of the diluted earnings per share as they are
considered antidilutive.
Group
2023
US$
2022
US$
Finance Income:
-
Other Interest Income and Costs
2,127
-
Finance Income
2,127
-
Group
2023
US$
2022
US$
Interest cost on Right of Use Asset
19,256
23,617
Accrued Interest on Other Equity Instruments
806,561
-
Other Interest and Costs
2,208
456
Finance Cost
828,025
24,073
Belluscura plc
37
11.
Investment in subsidiaries
Principal subsidiaries name
Belluscura LLC
Belluscura Shenzhen
Technology Company
Limited
Country of Incorporation & place of business
USA
China
Class of share held
Ordinary
Ordinary
% of ordinary shares directly held 2023
100%
100%
% of ordinary shares directly held 2022
100%
100%
Nature of business
Sale of medical devices
Sale of medical devices
Registered office
160 Greentree Drive
Suite 101,
Dover
Delaware 19904
County of Kent
USA
Room 1603, No. 3,
Yinxing Zhijie (Shen Guo Dian
Building),
Guanguang Road,
Xinlan Community,
Guanlan Street,
Longhua District,
Shenzhen,
China
Company
2023
US$
2022
US $
Capital Investment in Belluscura Shenzhen Technology Company Ltd
301,307
-
Total
301,307
-
12.
Property, plant and equipment
Group
Cost
Land &
buildings
(Right of
Use Asset)
US$
Furniture
and
Equipment
US $
Computer
Equipment
US $
Production
Equipment
US $
Leased
Units
US $
Vehicles
US $
Total
US $
At 1 January 2022
571,950
52,042
34,253
-
-
-
658,245
Additions during the year
73,838
1,664
44,170
65,025
-
33,173
217,870
At 31 December 2022
645,788
53,706
78,423
65,025
-
33,173
876,115
At 1 January 2023
645,788
53,706
78,423
65,025
-
33,173
876,115
Additions during the year
-
1,802
12,278
6,841
65,104
-
86,025
FX Revaluation
3,918
184
353
-
-
-
4,455
At 31 December 2023
649,706
55,692
91,054
71,866
65,104
33,173
966,595
Accumulated depreciation
At 1 January 2022
(294,147)
(32,029)
(7,110)
-
-
-
(333,286)
Depreciation charge
(104,717)
(7,356)
(19,461)
(10,272)
-
(1,382)
(143,188)
At 31 December 2022
(398,864)
(39,385)
(26,571)
(10,272)
-
(1,382)
(476,474)
At 1 January 2023
(398,864)
(39,385)
(26,571)
(10,272)
-
(1,382)
(476,474)
Depreciation charge
(113,955)
(3,081)
(27,908)
(13,889)
(1,944)
(5,529)
(166,306)
At 31 December 2023
(512,819)
(42,466)
(54,479)
(24,161)
(1,944)
(6,911)
(642,780)
Net book value
At 31 December 2022
246,924
14,321
51,852
54,753
-
31,791
399,641
At 31 December 2023
136,887
13,226
36,575
47,705
63,160
26,262
323,815
Right-of-use assets related to lease properties that do not meet the definition of investment properties are
presented as Land & Building (see note 22).
Belluscura plc
38
Company
Cost
Land & buildings
(Right of Use Asset)
US$
Furniture and
Equipment
US $
Computer
Equipment
US $
Total
US $
At 1 January 2022
-
2,102
3,909
6,011
Additions during the year
73,838
1,364
2,730
77,932
At 31 December 2022
73,838
3,466
6,639
83,943
At 1 January 2023
73,838
3,466
6,639
83,943
Additions during the year
-
-
-
FX Revaluation
3,918
184
353
4,455
At 31 December 2023
77,756
3,650
6,992
88,398
Accumulated depreciation
At 1 January 2022
-
(297)
(638)
(935)
Depreciation charge for the year
(6,669)
(450)
(1,613)
(8,732)
At 31 December 2022
(6,669)
(747)
(2,251)
(9,667)
At 1 January 2023
(6,669)
(747)
(2,251)
(9,667)
Depreciation charge for the year
(15,906)
(769)
(2,451)
(19,126)
At 31 December 2023
(22,575)
(1,516)
(4,702)
(28,793)
Net book value
At 31 December 2022
67,169
2,719
4,388
74,276
At 31 December 2023
55,181
2,134
2,290
59,605
13.
Intangible assets
Group
Cost
Product Development
US$
Total
US$
At 1 January 2022
7,150,807
7,150,807
Additions during the year
4,856,846
4,856,846
Disposal during the year
(270,150)
(270,150)
At 31 December 2022
11,737,503
11,737,503
At 1 January 2023
11,737,503
11,737,503
Additions during the year
4,447,282
4,447,282
At 31 December 2023
16,184,785
16,184,785
Accumulated amortisation and impairment
At 1 January 2022
(426,924)
(426,924)
Additions during the year
(2,911,997)
(2,911,997)
Disposal during the year
270,150
270,150
At 31 December 2022
(3,068,771)
(3,068,771)
At 1 January 2023
(3,068,771)
(3,068,771)
Amortisation in the year
(3,128,498)
(3,128,498)
At 31 December 2023
(6,197,269)
(6,197,269)
Net book value
At 31 December 2022
8,668,732
8,668,732
At 31 December 2023
9,987,516
9,987,516
14.
Inventory
Group
2023
US $
2022
US $
Finished goods
1,426,357
1,737,785
Raw Materials
1,894,295
6,693,246
Total inventory
3,320,652
8,431,031
Inventory adjustments and impairments are detailed in note 6.1. The Company held no inventory.
Belluscura plc
39
15.
Trade and other receivables
Group - Current
2023
US $
2022
US $
Trade receivables
170,719
305,194
Less provision for impairment of trade receivables
(70,922)
-
Trade receivables – net
99,797
305,194
Inventory sold to and Prepaid Inventory sent to InnoMax
2,913,684
1,021,073
VAT
85,300
40,068
Deposits, prepayments and other debtors
1,207,711
2,687,767
Total trade and other receivables
4,306,492
4,054,102
Group – Non-Current
2023
US $
2022
US $
Inventory sold to and Prepaid Inventory sent to InnoMax
1,952,649
-
Total other long-term receivable
1,952,649
-
The fair value of trade and other receivables are not materially different to those disclosed above. The Groups
exposure to credit risk is detailed in note 3 on page 32. Inventory sold to InnoMax to be paid on the transfer
of manufactured units. The long term receivable has been discounted by 10%.
Company – Current
2023
US $
2022
US $
Trade receivables
5,957
2,858
VAT
85,300
40,068
Prepayments and other debtors
113,254
429,039
Total trade and other receivables
204,511
471,965
Company – Non-Current
2023
US $
2022
US $
Receivables from Group companies
49,897,060
35,725,430
Less provision for impairment of Inter-Company receivables
(13,500,000)
(9,000,000)
Total trade and other receivables
36,397,060
26,725,430
Ageing of trade receivables:
Group
0-30 days
US $
30-60 days
US $
60-90 days
US $
90+ days
US $
Total Gross
US $
ECL
US $
Total Net
US $
2022
174,062
110,972
15,040
5,120
305,194
-
305,194
2023
8,449
(2,772)
66,679
98,364
170,720
-
170,720
Company
The Company had no trade receivables relating to sale of products.
The amount receivable from Group companies is an interest free loan given and is repayable on demand.
Management do not intend to recall in the next 12 months and hence has been disclosed as Non-Current.
The basis of the impairment of Inter-Company receivables is the management intends to recall it within 4
years (2022: 5 years) so it is discounted over 5 years at 7%. The investment has been used to develop products
in the US market. The Group expects the US entity to become profitable and cash positive within 2 years.
A 10% percent increase in the discount rate would increase the impairment by $1,111,000 (2022: $795,000)
and a 10% reduction in the discount rate would reduce impairment by $1,032,000 (2022: 740,000).
16.
Cash and cash equivalents
Group
2023
US $
2022
US $
Cash and bank and in hand
932,926
2,044,836
Total cash and cash equivalents
932,926
2,044,836
Company
2023
US $
2022
US $
Cash at bank and in hand
265,807
1,237,288
Total cash and cash equivalents
265,807
1,237,288
Belluscura plc
40
17.
Categories of financial assets and financial liabilities
Group
2023
US $
2022
US $
Financial assets
Trade and other receivables at amortised cost
6,259,141
3,834,080
Cash and equivalents
932,926
2,044,836
7,192,067
5,878,916
Financial liabilities
Trade and other payables at amortised cost
2,953,037
2,294,956
Lease liability
178,852
302,619
3,131,889
2,597,575
Company
2023
US $
2022
US $
Financial assets
Loans and receivables at amortised cost
49,897,060
35,725,430
Provision
(12,500,000)
(9,000,000)
Net loans and receivables at amortised cost
37,397,060
26,725,430
Other receivables at amortised cost
57,199
305,308
Cash and equivalents
265,807
1,237,288
37,720,066
28,268,026
Financial liabilities
Trade and other payables at amortised cost
17,463
60,783
Maturity Analysis of financial liabilities
The following are the contractual maturities of financial liabilities at the reporting date. The amounts are gross
and undiscounted, and include estimated contractual interest payments and exclude the effect of netting
agreements:
Group
Carrying
amount
US $
Contractual
cashflows
US $
1 year or
less
US $
1-5 years
US $
5 years
and over
US $
2022
Trade & other payables at amortised cost
2,294,956
2,294,956
2,294,956
-
-
Lease liability
302,619
302,619
126,693
176,926
-
2,597,575
2,597,575
2,421,649
176,926
-
2023
Trade & other payables at amortised cost
2,582,637
2,582,637
2,582,637
-
-
Lease Liability
178,852
302,619
260,641
41,978
-
2,761,489
2,885,256
2,843,278
41,978
-
18.
Share capital and premium
Share capital
Group
No of shares
of £0.01 each
Total
US $
Issued and fully paid up
At 1 January 2022
113,835,444
1,548,227
Shares issued for cash
9,181,717
113,958
At 31 December 2022
123,017,161
1,662,185
Shares issued for cash
14,515,406
183,338
At 31 December 2023
137,532,567
1,845,523
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to one vote per share at meetings of the Company.
Belluscura plc
41
Share premium
Group
Ordinary Shares
US $
Total
US $
Allotted and fully paid up
At 1 January 2022
26,025,760
26,025,760
Premium on shares issued
7,858,078
7,858,078
Cost of issue of shares
(455,891)
(455,891)
Purchase of shares by EBT
(48,000)
(48,000)
At 31 December 2022
33,379,947
33,379,947
Premium on shares issued
4,573,624
4,573,624
Cost of issue of shares
(458,899)
(458,899)
At 31 December 2023
37,494,672
37,494,672
At the end of the year there were 500,000 share warrants in issue at an average subscription price of $0.45
(2022: 766,666 at $0.47 per share). There was no consideration paid for the warrants.
During the year staff were granted share options, vesting 100% on an exit or in three equal annual thirds.
Award
2023
000’s
2022
000’s
Date of
Grant
Exercise
Price
Exercise Period
From To
Avg remaining
contractual life
Unapproved
40
09/03/2022
$1.251
09/03/2022
09/03/2032
8.3 years
Unapproved
15
1403/2022
$1.219
1403/2022
1403/2032
8.3 years
Unapproved
100
01/04/2022
$1.540
01/04/2022
01/04/2032
8.3 years
Unapproved
20
04/04/2022
$1.518
04/04/2022
04/04/2032
8.3 years
Unapproved
100
18/04/2022
$1.508
18/04/2022
18/04/2032
8.4 years
Unapproved
20
18/04/2022
$1.508
18/04/2022
18/04/2032
8.4 years
Unapproved
1
26/05/2022
$1.115
26/05/2022
26/05/2032
8.4 years
Unapproved
1
26/05/2022
$1.115
26/05/2022
26/05/2032
8.4 years
Unapproved
20
11/07/2022
$0.941
11/07/2022
11/07/2032
8.5 years
Unapproved
40
18/07/2022
$0.948
18/07/2022
18/07/2032
8.5 years
Unapproved
20
19/08/2022
$0.870
19/08/2022
19/08/2032
8.6 years
Unapproved
20
29/08/2022
$0.785
29/08/2022
29/08/2032
8.6 years
Unapproved
20
10/10/2022
$0.540
10/10/2022
10/10/2032
8.8 years
Unapproved
20
24/10/2022
$0.500
24/10/2022
24/10/2032
8.9 years
Unapproved
300
16/01/2023
$0.505
16/01/2023
16/01/2033
9.1 years
Unapproved
400
16/01/2023
$0.505
16/01/2023
16/01/2033
9.1 years
Total
700
437
Key assumptions used in the calculation of share option fair value
a.
Black-Scholes model is used to value both the options.
b. The expected volatility is based on a comparator set of similar stocks.
c. The risk-free rate of return which is commensurate with the expected term.
d. Expected forfeiture rates are based on recent experience of staff turnover levels.
e. The charge is spread over the vesting period on a straight-line basis.
Date of Grant
Award
Share price
on the date of
grant
$
Exercise
price
$
Volatility
%
(%)
Vesting
period
Years
Risk-free
rate of
interest
%
Fair
value
$
Unapproved
1.251
1.251
28.5
3.00
2.1
0.19
1403/2022
Unapproved
1.219
1.219
28.5
3.00
2.1
0.19
01/04/2022
Unapproved
1.540
1.540
28.5
3.00
2.1
0.19
04/04/2022
Unapproved
1.518
1.518
28.5
3.00
2.1
0.15
18/04/2022
Unapproved
1.508
1.508
28.5
3.00
2.1
0.14
18/04/2022
Unapproved
1.508
1.508
28.5
3.00
2.1
0.15
26/05/2022
Unapproved
1.115
1.115
28.5
3.00
2.1
0.18
26/05/2022
Unapproved
1.115
1.115
28.5
3.00
2.1
0.13
11/07/2022
Unapproved
0.941
0.941
28.5
3.00
2.1
0.12
18/07/2022
Unapproved
0.948
0.948
28.5
3.00
2.1
0.12
19/08/2022
Unapproved
0.820
0.820
28.5
3.00
2.1
0.11
29/08/2022
Unapproved
0.790
0.790
28.5
3.00
2.1
0.11
10/10/2022
Unapproved
0.505
0.505
28.5
3.00
2.1
0.06
24/10/2022
Unapproved
0.500
0.500
28.5
3.00
2.1
0.06
16/01/2023
Unapproved
0.505
0.505
28.5
3.00
2.1
0.06
16/01/2023
Unapproved
0.505
0.505
28.5
3.00
2.1
0.06
Belluscura plc
42
Movement in share options
Number
000’s
Weighted average
exercise price
$
Weighted average
share price
$
Outstanding at 1 January 2022
12,400
0.259
0.303
Granted
437
1.141
1.023
Lapsed/forgiven
(1,223)
0.121
0.187
Outstanding at 31 December 2022
11,614
0.290
0.324
Outstanding at 1 January 2023
11,614
0.290
0.324
Granted
700
0.505
0.505
Lapsed
(135)
0.089
0.089
Outstanding at 31 December 2023
12,179
0.296
0.329
Share-based payments charge
Group
2023
US $
2022
US $
Charge in year
229,241
180,091
19.
Reserves
Retained earnings
Group
US $
Company
US $
At 1 January 2022
(2,349,966)
1,214,019
Loss for the year
(8,152,985)
(3,820,378)
Share-based payments charge
192,278
192,278
At 31 December 2022
(10,310,673)
(2,414,081)
Loss for the year
(18,517,619)
(7,141,465)
Share-based payments charge
213,358
213,358
At 31 December 2023
(28,614,934)
(9,342,188)
On 7 October 2022, the shareholders of the Group passed a special resolution, pursuant to Chapter 2 of Part 13
of the Companies Act 2006, to cancel the balance standing to the credit of the share premium account and
transfer the same to reserves.
Capital Contribution
Group
US $
Company
US $
At 31 December 2020
165,000
165,000
Capital contribution received
-
-
At 31 December 2022
165,000
165,000
Capital contribution received
-
-
At 31 December 2023
165,000
165,000
The Capital Contribution relates to the acquisition of intangible product licences.
Share Option Reserve
Group
US $
Company
US $
At 1 January 2022
-
-
Lapsed share options
-
-
At 31 December 2022
-
-
Lapsed share options
(20,180)
(20,180)
At 31 December 2023
(20,180)
(20,180)
Translation reserve
Group
US $
Company
US $
At 1 January 2022
(716,529)
(716,529)
Foreign exchange (loss)/gain
(3,827,808)
(3,827,808)
At 31 December 2022
(4,544,337)
(4,544,337)
Foreign exchange (loss)/gain
2,198,729
2,200,619
At 31 December 2023
(2,345,608)
(2,343,718)
Belluscura plc
43
The translation reserve comprises all foreign exchange differences arising from the translation of the financial
statements of foreign operations, primarily relating to the statement of financial position at the reporting dates.
The reporting date foreign exchange rates by major currency are provided in note 3.
20.
Trade and other payables
Group – Current
2023
US $
2022
US $
Trade creditors
657,128
2,545,948
Payroll accruals
151,262
-
Accrued Bonus
315,000
-
Social security and other taxes
24,316
19,871
Lease liability
159,563
125,693
Vehicle hire purchase
4,179
3,832
Provision for 2024 RMA’s
326,454
-
Accrued inventory purchases
512,705
-
Accruals and other creditors
920,014
350,444
Total current trade and other payables
3,070,621
3,045,788
Group – Non-current
2023
US $
2022
US $
Lease liability
41,978
176,926
Vehicle hire purchase
19,289
23,506
Total non-current trade and other payables
61,267
200,432
There are no amounts included with lease liability repayable after five years
Company – Current
2023
US $
2022
US $
Trade creditors
17,463
60,783
Social security and other taxes
24,316
19,871
Lease liability
16,572
12,182
Accruals and other creditors
113,163
62,846
Total trade and other payables
171,514
155,682
Company – Non-current
2023
US $
2022
US $
Lease liability
41,978
56,563
Total trade and other payables
41,978
56,563
The fair values of trade and other payables are not materially different to those disclosed above. The Group’s
exposure to currency and liquidity risk is detailed in note 3 .
21.
Deferred income tax
Unused tax losses for which no deferred tax assets have been recognised are attributable to the uncertainty
over the recoverability of those losses through future profits. A blended tax rate, based upon the UK and US
corporate tax rates, of 20% has been used to calculate the potential deferred tax.
Group
Deferred tax
2023
US $
2022
US $
Accelerated capital allowances
(22,094)
(9,431)
Share-based payments
100,551
57,113
Tax losses
9,141,967
2,815,024
9,220,424
2,862,706
Unprovided deferred tax asset
(9,220,424)
(2,862,706)
Deferred Tax
-
-
Company
Deferred tax
2023
US $
2022
US $
Accelerated capital allowances
-
-
Share-based payments
100,551
90,279
Short term timing difference
735,000
551,250
Tax losses
1,675,639
520,430
2,511,190
1,161,959
Unprovided deferred tax asset
(2,511,190)
(1,161,959)
Deferred Tax
-
-
The Group has cumulative unused tax losses of $9.1m.
Belluscura plc
44
22.
Leases as a lessee
Right-of-use assets
Right-of-use assets related to lease properties that do not meet the definition of investment properties are
presented as property, plant and equipment (see note 11):
Group
Land & buildings
US$
Total
US $
At 1 January 2022
277,803
277,803
Additions
73,838
73,838
Depreciation charge for the year
(104,717)
(104,717)
At 31 December 2022
246,924
246,924
Depreciation charge for the year
(109,886)
(109,886)
At 31 December 2023
136,887
136,887
Amounts recognised in profit or loss
2023
US $
2022
US $
Interest expense on lease liability
19,399
23,617
Depreciation on right of use assets
109,886
104,869
Amounts recognised in statement of cash flows
2023
US $
2022
US $
Total cash outflow for leases
146,721
130,780
Lease Liabilities
Group
Land and
buildings
US$
Total
US $
At 1 January 2023
335,830
335,830
Additions
73,838
73,838
Interest
23,617
23,617
Payment
(130,666)
(130,666)
At 31 December 2023
302,619
302,619
At 1 January 2023
302,619
302,619
Additions
-
-
Interest
19,399
19,399
Payment
(146,721)
(146,721)
At 31 December 2023
175,297
175,297
Maturity analysis of undiscounted cash flows due for leases
2023
US$
2022
US $
Within one year
120,362
125,693
After one year but not more than five years
41,743
176,926
After five years
-
-
Total
162,105
302,619
23.
Dividends
No dividend has been declared for the year ended 31 December 2023 and no dividend was paid during the
year.
24.
Cash generated from operating activities
Group
2023
US $
2022
US $
Loss before income tax
(18,497,540)
(8,152,985)
Adjustments for
-
Depreciation
51,503
38,619
-
ROU Depreciation
122,517
104,869
-
Amortisation and impairment
3,128,499
2,911,999
-
No cash interest expense
813,041
20,279
-
Movement in foreign exchange
(620,714)
(914,776)
-
Issue of share-based payments
142,981
229,241
Movement in trade and other receivables
(1,502,346)
(3,502,980)
Inventory movement
5,109,920
(8,121,873)
Movement in trade and other payables
2,120,568
2,481,239
Cash generated from operating activities
(9,131,571)
(14,906,368)
Belluscura plc
45
25.
Contingent Liabilities
SDG Licence
On 24 February 2017, the Company entered into a co-exclusive licence and development agreement with
Separation Design Group, LLC and SDG (together the “SDG Parties”) (“SDG Licence”) which was subsequently
amended by an amendment agreement dated 19 March 2023. Pursuant to the SDG Licence: if by 3 September
2025, cumulative sales of the X-PLOR and DISCOV-R have not exceeded $20 million dollars, Belluscura must
make a one-time payment of $3 million to the SDG Parties to maintain the exclusive SDG licence. By 31
December 2023 cumulative sales of X-PLOR were $1.8 million.
The Directors assess that the Group will meet the minimum obligations and therefore no provision has been
made in these Financial Statements.
Supplier Claim
During 2023 the Company received a claim from a supplier regarding alleged default by the Company under
an ongoing contract. The Company has subsequently counter-claimed against the supplier for alleged poor
service The supplier has subsequently filed a lawsuit in the United States.
The Company has received an independent legal opinion and believes that any claim against the Company is
lower than the claim made by the Company.
Accordingly, no provision has been made as at 31 December 2023. The Directors believe that based on their
current assessment of the facts the current $nil provision is appropriate. However, the final amount is
dependent upon the outcome of the agreements between the two parties and/or the lawsuit.
26.
Alternative Performance Measures
Adjusted EBITDA1
Group
2023
2022
US $
US $
Total comprehensive loss for the year
(16,269,031)
(11,980,792)
Add back:
Administrative expenses Realised & unrealised FX movements in
2,424,237
(2,877,886)
Other comprehensive income FX currency translation differences
(2,248,588)
3,827,808
Net foreign exchange movement2
175,649
949,922
Finance Income and Costs
19,337
24,073
Accrued Interest on Convertible Loan Notes
806,561
-
Product development amortisation
3,293,232
2,911,988
Costs relating to fundraising activities
92,537
-
Former CFO compensation
96,393
-
Share option costs
-
162,505
Minimum royalties in excess of sales royalties
792,818
763,430
Contract Manufacturer Capacity Costs
86,440
128,607
Inventory Impairment and Adjustments
4,138,030
609,848
Accrued Bonus
315,000
-
Issue of share-based payments
163,061
229,241
Adjusted EBITDA
(6,289,973)
(6,201,178)
1
Reconciliation to Adjusted EBITDA measure
Adjusted EBITDA is the Group’s key adjusted profit measure. Total comprehensive loss for the year is adjusted to exclude non-recurring and
exceptional items.
2
Net foreign exchange movements
The US$ weakened against £Sterling by 5% during the year (1 January 2023 - $1.21:£1.00; 31 December 2023 - $1.27:£1.00). Due to the size of
the Inter-Company Loan from the PLC to the US subsidiary which is fixed in £Sterling, this creates an accounting presentational impact
between Administration Expenses and Other Comprehensive Income, which to a large extent can be netted off against one another.
o Realised FX movements in administrative expenses arise from the revaluation of £Sterling cash balances into US$
o Unrealised FX movements in administrative expenses arise from revaluation of the Inter-Company Loan fixed in £Sterling into US$
o Foreign currency translation differences in Other Comprehensive Income arise from revaluation of the PLC balance sheet into US$
27.
Related party transactions
As disclosed in the Admission Document, prior to Robert Rauker joining the Company, he undertook
independent patent work for Separation Design Group IP Holdings LLC (“SDG”). Pursuant to a Patent Broker
Agreement dated 22 October 2015 SDG entered into an agreement with Medicinus IP LLC (“Medicinus”), of
which Robert Rauker is the sole shareholder, under which Medicinus has agreed to facilitate the sale and/or
licence of intellectual property owned by SDG which includes soliciting potential buyers and licensees of such
intellectual property. In consideration for the provision of these services, Medicinus receives a fee of 12.5 per
cent. of the licence fees, sales price and/or royalties received by SDG which will include 12.5 per cent. of the
royalties the Company will pay to SDG in relation to sales of the X-PLOR, pursuant to the agreement entered
into between SDG and the Company. The agreement can be terminated by either party by written notice.
The non-executive fees paid to Adam Reynolds were paid through his Company Reyco Limited.
Belluscura plc
46
In the year the Company paid $436 thousand (2022: $1,065 thousand) to Dowgate Capital Limited in relation
to brokerage fees, research and fundraising activities. David Poutney is the Chief Executive Officer of
Dowgate Capital Limited.
In 2023, Robert Rauker was awarded a bonus program worth $625 thousand based on milestones on
commercial progress with InnoMax. To date $312 thousand has been earned, although payment of $157
thousand (See Note 7.1) of the earned amount has been deferred until 2025 at the Company’s election.
28.
Events after the reporting period
In March 2024 the Group completed the acquisition of TMT Acquisition plc, which operated as a cash shell.
On 31 October 2023, Belluscura announced a recommended all share offer for TMT Acquisition plc, which
became wholly unconditional on 9 February 2024.
Based on the Closing Price of 21.0 pence per Belluscura Share on the Latest Practicable Date, the Offer was
equivalent in value to 21.0 pence for each TMT Acquisition Share and the Offer valued the entire issued ordinary
share capital of TMT Acquisition at approximately £5.78 million.
The value of a TMT Acquisition Share under the Offer, based on the Closing Price per Belluscura Share of 30.5
pence on 2 October 2023 (being the latest practicable date prior to the commencement of the Offer Period), is
30.5 pence representing a premium of approximately 79% to the Closing Price of 17.0 pence per TMT Acquisition
Share on 2 October 2023 (being the latest practicable date prior to the commencement of the Offer Period).
TMT Shareholders received 27,499,994 Belluscura shares.
In June 2024 the Company raised $0.3m from the issue of equity.