Registered No: 8211361
Cambridge Cognition Holdings plc
Annual Report and Accounts
31 December 2014
Cambridge Cognition Holdings plc
Contents
CORPORATE DIRECTORY
STRATEGIC REPORT
REPORT OF THE DIRECTORS
CORPORATE GOVERNANCE REPORT
REMUNERATION REPORT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CAMBRIDGE COGNITION HOLDINGS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
PARENT COMPANY BALANCE SHEET
NOTES TO THE PARENT FINANCIAL STATEMENTS
PAGE
2
3-6
7-8
9-10
11-12
13
14
15
16
17
18-38
39
40-43
Cambridge Cognition Holdings plc
Corporate Directory
Directors:
Michael Lewis (Chairman)
Nicholas Kerton (Chief Executive Officer)
Andrew Blackwell (Chief Scientific Officer)
Nicholas Walters (Chief Financial Officer)
Eric Dodd (Non-executive)
Secretary:
Nicholas Walters
Registered Office:
Tunbridge Court
Tunbridge Lane
Bottisham
Cambridge
CB25 9TU
Company number:
8211361
Auditor:
Legal Advisers:
Bankers
Registrars
Nominated Advisor
and Broker
Grant Thornton UK LLP
Chartered Accountants
Statutory Auditor
101 Cambridge Science Park
Milton Road
Cambridge
CB4 0FY
Baker Botts (UK) LLP
41 Lothbury
London
EC2R 7HF
Barclays
28 Chesterton Road
Cambridge
CB4 3AZ
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
finnCap
60 New Broad Street
London
EC2M 1JJ
2
Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2014
REVIEW OF BUSINESS
I am pleased to provide a report on our results for the full year which demonstrates the group's return to
growth after a challenging 2013 and a profitable second half to the year. We have worked hard to establish a
commercial infrastructure across Cambridge Cognition and we are well placed to continue this growth through
2015.
The return to profitability enables us to increase our investment in the Healthcare Technology division which
until now has focused solely on supplying its Cantab Mobile product to the NHS. The combination of sales of
Cantab Mobile to new geographic markets using channel partners, the launch of an extension of the Mobile
product for secondary care and the application of the product in allied, non-clinical markets is a key focus for
2015.
Financial Results
Revenue in the period increased by 40% to £5.80m (2013: £4.15m), which reflects the successful
establishment of a good infrastructure across the three divisions and the adoption of a more structured
commercial approach. This was seen particularly in the Clinical Trials division by focusing on drug
characterisation, safety and Human Abuse Liability (HAL) following launch of our ‘Cloud based’ Connect
products for these applications.
The Clinical Trials division, which provides products and services for use in pharmaceutical clinical trials,
performed well, increasing revenues by 57% to £3.93m (2013: £2.50m). The group has seen the benefit of a
new focus on drug characterisation, safety and HAL, both of which have the ability to deliver higher quality and
predictable revenues. The impact of this focus and the establishment of a US commercial team was seen
throughout the year and will provide a platform for additional growth in 2015.
Revenues from our Academic Research division, also performed well with sales up 12% to £1.68m (2013:
£1.49m) driven by a new marketing focus introduced during 2014 whereby we concentrated on the top 200
academic institutions worldwide in a more structured way.
The Healthcare Technology division, recorded Cantab Mobile sales of £0.20m during the year (2013:
£0.16m). Cantab Mobile was launched in 2013 and focuses on delivering services to the primary healthcare
market. Over 15,000 patients have now been assessed using Cantab Mobile with the results affirming the
efficacy of the product. In 2015 the focus will be on extending the commercialisation of this product into other
countries and other allied healthcare applications.
Gross profit grew by 35% to £4.94m (2013: £3.66m), reflecting an increase in turnover offset by a modest
reduction in margin. The gross margin during 2014 reduced to 85% as budgeted (2013: 88%), and this reflects
the change in sales mix. Adjusted EBITDA (adjusted for depreciation, and with the 2013 comparison also
adjusted for one-off restructuring costs and expenses associated with the Admission to AIM) showed a
significant reduction in losses to £0.27m (2013: £2.19m loss). Reported Losses before tax were also reduced to
£0.29m (2013: £2.99m loss). As a result, loss per share reduced considerably to 1.1p (2013: 21.3p loss).
These results reflect not only the improved trading conditions within the business, but also the significant work
undertaken to correctly align our cost base and ensure that the group is on track to move into profitability
during 2015. Good progress has been made towards that goal already and we were pleased to record a profit
before tax of £0.18m for the second half of the year compared to a loss of £0.47m in the first half.
There was a significant improvement in the net cash outflow from operations during the period, with net cash
outflow from operating activities reduced to £0.69m (2013: £2.47m outflow). The reduction would have been
greater but for an increase in working capital due largely to an increase in credit terms negotiated with certain
customers taking total debtor days to 67 (2013: 42 days). Cash balances at 31 December 2014 were £1.52m
(2013: £2.26m).
Operating Review
2014 has been a year of commercial focus based on the structural changes we implemented in the business
during 2013. Our three business units are now delivering to a more commercial strategy and we have
established robust infrastructures to drive future growth in each division. The performance during the year has
shown that these changes are already bearing fruit and that we have been able to capitalise on our unique
position within the process of understanding and treating mental health - from initial research, through to drug
discovery and into the diagnosis and treatment of patients in the community.
3
Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2014 (continued)
Clinical Trials
I can report that we have been successful in returning our Clinical Trials business to growth and producing high
margin predictable revenue streams. Our strategy of focussing on drug characterisation, safety and HAL has
proven to be the correct one with the considerable potential that this business has going forward.
As we’ve already reported larger pharmaceutical companies are now taking a more cautious view to their
implementation of trials relating to the Central Nervous System (CNS) and so a shift to drug characterisation,
safety and HAL studies was an important step for the group.
In the first half of 2014 we were able to announce a number of drug characterisation, safety and HAL studies
which provides an indication of the demand for Cambridge Cognition's technology in this area. Most importantly
we were able to announce in June our participation in a non-CNS global multi-year study focussed on drug
characterisation. The award of the contract for this phase III trial is typical of the need drug development
companies have for an objective and scientifically rigorous measurement of the impact that a new drug may
have on cognitive function in a consistent and cost-efficient manner. The contract is worth £1.6m to Cambridge
Cognition, half of which has been recognised in these numbers.
During the year we developed three partnerships with companies who are selling our HAL product. Towards the
end of June we announced eight new contracts for HAL studies totalling around £710,000, of which we have
recognised £680,000 during 2014. We also had a number of additional trials that converted in the second half
of the year making a total of 23 new trials in 2014 with revenue in the year of £1.17m and we continue to have
a strong pipeline of additional trials which will impact the 2015 results and beyond.
In October, we launched the Clinical Trials Information System -Profile 2+ ('CTIS-Profile 2+') enabling us to
provide pharmaceutical and biotechnology companies with cognitive safety and tolerability testing across all
phases of the clinical development of new therapeutic compounds; an addressable market estimated to be in
excess of £105m.
Academic Research
With sales up 12% during the year, this business division has benefitted from a far more proactive and
structured approach to marketing our products to academic institutions. We have employed a new Business
Manager who introduced a strategy to concentrate on the top 200 academic institutions. During the year we
trained a new customer services team for digital marketing activities and in early 2015 we launched an e-
commerce platform and new Academic Cloud-based Connect product that allows us to more effectively exploit
the changing trends in research from single centre, small scale studies to large, multi-centre collaborative
programmes.
As a result of this focused sales approach we have seen a healthy uplift in the order book with an increase in
the number of orders converting during the year, including three substantial multi-site orders worth c. £70,000
each, demonstrating our ability to target higher value opportunities when average invoice values have been
historically around £5,000. In addition we established an enlarged US sales team to target the lucrative North
American Academic market.
Healthcare Technology
To date we have now completed 15,000 patient assessments using Cantab Mobile, our iPad based CE-marked
Class II medical device which detects the earliest signs of memory loss associated with dementia. During the
year over 260 GP surgeries and over 40 Clinical Commissioning Groups (CCGs) in the UK used Cantab Mobile.
The results from the 15,000 patient assessments completed to date show that on average one in four patients
were identified with mild cognitive impairment with the remaining 75% reassured that their cognitive function
remained within normal parameters and that referral to secondary care units for dementia, which would cost
the NHS time, resources and money, was unnecessary.
Whilst we still expect sales of Cantab Mobile to continue to grow in the UK, the redistribution of NHS dementia
funding away from CCGs to GPs will make the sale process a more challenging one in 2015. Despite this we
plan to roll out Cantab Mobile in other geographical markets during 2015 by forming strategic partnerships with
channel partners. We have also begun to extend the use of the product into private and occupational health
settings in the UK which is a substantial and largely unexplored market. We are piloting a business model
which, if successful, could be rolled out internationally. These healthcare growth strategies will be enhanced by
the launch of a new product in the middle of 2015 which will enable us to link the early detection of memory
loss in primary care with additional secondary care diagnosis thus supporting the diagnosis and management of
patients along their treatment pathways.
4
Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2014 (continued)
PRINCIPAL RISKS AND UNCERTAINTIES
The group is exposed to a number of risks and uncertainties in the undertaking of its day to day operations.
The key business risks affecting the group and how they are managed are set out below:
Financial
The group has a history of operating losses. Profitability depends on the success and market acceptance of
current and new products without which the group will continue to make losses and consume cash. Until the
commercialisation of new products and markets is successful the group will carefully monitor cost and cash flow
with reference to ensuring the group is able to continue as a going concern. The directors have prepared a
strategic plan, including financial forecasts and cashflows, for the period to December 2017. The key
assumptions are the level and timing of sales which are expected to improve over this period, and the sales
pipeline is therefore included in the regular board review.
Product and market development
Future success of the group is primarily based on growth of the Healthcare Technology division. The success in
translating current products to new markets and the adaptation of existing technology into new products will
determine how successful the group will be in growing the division. At the present time there can be no
certainty that new products will be adopted or new markets successfully opened up with the risk that future
growth prospects could be restricted.
Technology and regulation
The success of the group and its ability to compete effectively with other companies partly depends upon its
ability to protect its intellectual property, obtain patent protection in its key markets and exploit its technology.
During the year significant development work has continued on the product range across all three divisions to
ensure that the group’s products remain at the forefront of the sector. The clinical evaluation, development and
marketing of the group's products remains subject to regulatory approval by government and regulatory
agencies, and these requirements are incorporated into the business plan and product roadmap monitored by
the board.
Growth management
The group's ability to manage its growth effectively will require it to continue to improve its operations,
financial and management controls, reporting systems and procedures, and to train, motivate and manage its
employees and, as required, to install new management information and control systems. The group will
require additional management and systems as it seeks to establish sales and marketing infrastructure in the
UK, the US and the rest of Europe and moreover, the group’s future success depends in part on its ability to
hire, train and retain key technical, scientific, regulatory, sales and marketing personnel. The group seeks to
recruit and retain high calibre staff through offering share ownership incentives and rewards commensurate
with their seniority in the business and maintaining open communication with employees.
Reliance on key customers
The group maintains close relationships with a number of customers but aims not to be overly dependent on
any one of them. During 2014 two customers accounted for 14% and 13% of the total revenue of the business
although no other customer accounted for more than 10%. Measures are being taken to correct this
overdependence by growing revenues in other areas as the loss of a key customer would impact the group in
the short term although as the group increases in size the impact of any loss is reduced. There is a risk that
the loss of a major customer before any growth in revenue was sufficient to compensate would result in a
revenue shortfall.
5
Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2014
KEY PERFORMANCE INDICATORS
The directors have monitored the performance of the group with particular reference to the key performance
indicators being revenue and order pipeline, operating margin and cash flow. An overview of the financial
results for the year is provided under ‘Financial Results’ in the Chief Executive’s Review. Revenue and
operating results are significantly improved on prior year with operating cash being impacted by an increased
credit period being taken by major customers. The results reflect the benefits of the commercial plans
implemented in 2014 as outlined in the ‘Operating Review’ above.
The group monitors progress on a regular basis and will add to the key performance indicators as
circumstances dictate. In particular, non-financial key performance indicators will be considered for addition to
those monitored by the directors.
OUTLOOK
The strong performance seen at the end of 2014 has continued into the new financial year and we remain on
track to move into profitability in 2015. We started the year with better visibility than last year with the
contracted order book at £2.46m at the start of the year compared with £1.81m a year earlier.
The growing contribution from our clinical trials and academic businesses provide us with confidence that we
will deliver continued growth and profitability in line with expectations. In particular the enlarged US sales team
offers a significant opportunity to drive North American sales and we already have a healthy pipeline of
contracts in the safety and tolerability trial space that we expect to convert over the year. In addition our new
customer service team in the Academic division is confident of delivering further growth in that business
through effective digital marketing of our cloud based Connect product on our new e-commerce platform.
In 2015 we will invest in the Healthcare Technology division to take full advantage of the platform for growth in
the broader healthcare environment afforded by the Cantab Mobile product. We will expand our marketing
coverage for Cantab Mobile outside of the UK using distribution partners in addition to expanding the
applications for the product and we will update shareholders on our progress as our plans come to fruition.
We also expect to exploit opportunities for the use of the division’s key technologies to assess cognition in
pharmaceutical and healthcare settings beyond the existing Cantab Mobile applications. The current areas of
focus are for customised products for pharmaceutical companies identified through the Clinical Trials business,
as well as healthcare applications for private health clinics or home use.
Overall, I am pleased to be able to present such a positive set of results and a healthy outlook for 2015 which
shows we are on track to deliver further growth and profitability. I would like to thank shareholders for their
support and my colleagues for their continued hard work in accelerating growth across all parts of the business.
Approved by the Board of Directors
And signed on behalf of the Board
Nicholas Kerton
Chief Executive Officer
11th March 2015
6
Cambridge Cognition Holdings plc
Report of the Directors for the year ended 31 December 2014
The Directors present their report on the affairs of the Group and Company together with the financial
statements for the year to 31 December 2014. The Group financial statements are prepared under
International Financial Reporting Standards (EU-adopted IFRS).
PRINCIPAL ACTIVITIES
Cambridge Cognition Holdings plc ('the Company') and its subsidiaries (together, 'the Group') develops and
commercialises computerised neuropsychological tests for sale worldwide, principally in the UK, the US and
Europe. The group trades through its UK subsidiary Cambridge Cognition Limited.
GOING CONCERN AND FINANCIAL RISK MANAGEMENT
Having reviewed the financial forecasts and business plan of the Company and its subsidiaries and taking into
account the level of cash resources available to them, the directors have, at the time of approving the financial
statements, a reasonable expectation that the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of
accounting in preparing the financial statements.
Further information on the Group’s financial risk management strategy can be found in note 27.
SHARE ISSUES
The issued share capital of the Company is set out at Note 21 to the accounts. Following the exercise of
options, 45,451 Ordinary shares were issued during the year at a price of £0.01 each.
DIRECTORS
The Directors who held office at 31 December 2014 and their interest in the share capital of the company were:
Name
Michael Lewis (Chairman)
Nicholas Kerton
Andrew Blackwell
Nicholas Walters
Eric Dodd
Ordinary Shares of 1p each
2013
2014
27,969
172,900
281,095
119,369
-
14,285
14,285
281,095
-
-
Eric Dodd was appointed a director of the company on 1st January 2014. Jane Warlock resigned as a director
on 8th May 2014.
Directors’ remuneration and share options
Details of Directors’ remuneration and share options are provided within the Remuneration Report and are in
addition to the interests in shares shown above.
DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare such financial statements for each financial year. Under that
law, the Directors have elected to prepare the Group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union and have elected to prepare the
parent company financial statements in accordance with United Kingdom Generally Accepted Accounting
Practice. 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 and of the profit or loss of the Company and Group for
that year. In preparing these financial statements, the Directors are required to:
!
!
!
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether the applicable IFRSs, or for the parent company, applicable UK GAAP have been followed,
subject to any material departures disclosed and explained in the Company’s financial statements
7
Cambridge Cognition Holdings plc
Report of the Directors for the year ended 31 December 2014
!
prepare the financial statements on a going concern basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Company's transactions and disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors confirm that:
!
!
so far as each Director is aware, there is no relevant audit information of which the Company’s auditor is
unaware; and
the Directors have taken all steps that they ought to have taken as Directors to make themselves aware
of any relevant audit information and to establish that the auditor is aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company's website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
DIRECTORS’ INDEMNITY ARRANGEMENTS
During the year the Company purchased Directors' and Officers' liabilities insurance in respect of itself and its
directors.
SUBSTANTIAL SHAREHOLDERS
The Company’s major shareholders at 31 December 2014 were:
Name
Euroblue Investments Limited
Octopus Investments Nominees Ltd
Michael Buxton
Axa Investment Managers UK Ltd
Artemis Fund Managers Ltd
WH Ireland
LGT Capital Management
FUTURE DEVELOPMENTS
No. of
Ordinary Shares
3,435,714
3,042,242
2,889,589
714,285
714,285
650,275
595,000
%
20.3%
18.0%
17.1%
4.2%
4.2%
3.8%
3.5%
A summary of future developments can be found in the Strategic Report.
RESEARCH AND DEVELOPMENT
Comments on Research and Development activities can be found in the Strategic Report.
AUDITOR
A resolution to re-appoint Grant Thornton UK LLP as the Company’s auditor will be proposed at the forthcoming
Annual General Meeting. In accordance with normal practice, the Directors will be authorised to determine the
Auditor’s remuneration.
Approved by the Board of Directors
And signed on behalf of the Board
Nick Walters
Company Secretary
8
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2014
The Board of Cambridge Cognition Holdings plc is responsible for the long term financial success of the
business. The Directors recognise the value and importance of high standards of corporate governance and so
far as is practicable and appropriate for a company of its size, stage of development and nature as a Company
whose securities are traded on AIM, adopts policies and principles of good corporate governance.
The current members of the Board of Directors are:
Michael Lewis – Non-Executive Chairman – Mr Lewis has 25 years global Health and Pharma industry
experience. He is now Executive Chairman/CEO at Ranier Technology, developing bio-materials for medical and
consumer use, is also Chairman of Haem02, a biotechnology company developing artificial haemoglobin,
Chairman of iPlato an m-Health provider with 6M patient connections in the UK and director of Luminate Ltd. Mr
Lewis is also a lecturer, speaker and invited chair of innovation sessions at NHS Expo. He previously has held
senior roles at Gambro (Brussels), Boston Scientific (Paris), C.R. Bard (New Jersey), Sybron (Switzerland) and
Becton Dickinson (UK).
Eric Dodd – Non-Executive Director – Mr Dodd brings significant experience in board-level positions to the
Company, including having been Chief Financial Officer of Antisoma plc between 2008 and 2011. Currently, he
acts as Chief Financial Officer of Stanmore Implants Worldwide Holdings Limited, a rapidly growing medical
devices company supported by venture capital investors, where he is responsible for the finance, funding,
corporate development and investor relations activities of the business. Previously Mr Dodd held positions in
three FTSE 100 companies across the pharmaceutical, leisure and IT sectors.
Dr. Nicholas Kerton – Chief Executive Officer – Dr Kerton is an experienced director of public and private
companies in the healthcare industry. Having completed a Ph.D. in Organic Synthetic Chemistry at Nottingham
University, he progressed through the Wellcome Foundation, and then joined DuPont and Whatman Reeve
Angel plc in senior business development and sales roles before moving into microbiology as Managing Director
of Malthus Instruments, a subsidiary of Radiometer of Denmark. Dr Kerton was a member of the management
team who established Celsis PLC, one of the first biotechnology companies to float on the London Stock
Exchange, led the successful sale of Maybridge to Fisher Scientific International, founded Lab21 (a molecular
diagnostics service funded by Merlin Biosciences) during which time he acquired three companies, and
managed the Sirigen Group from initial venture capital funding in 2008 through to selling the business to
Becton Dickinson in August 2012.
Dr. Andrew Blackwell – Chief Scientific Officer - Following an MA and a PhD in psychology from the University of
St Andrews, Dr Blackwell undertook postdoctoral
training
in
cognitive neuropsychology and
psychopharmacology at the University of Cambridge, working closely with the main inventors of CANTAB,
Professors Trevor Robbins and Barbara Sahakian. Dr Blackwell has published numerous papers in quality
journals, including Science, American Journal of Psychiatry and Neuropsychopharmacology. He joined
Cambridge Cognition in 2006 and was appointed as a director and Chief Scientific Officer in 2007. As well as
providing vision and innovation, Andrew also plays a key role in the general management of the Group,
overseeing all scientific activity required for business development, product research and development and in-
contract service delivery.
Nicholas Walters – Chief Financial Officer - A chartered accountant, Mr Walters has served as Finance Director,
Deputy Chairman and Chairman on a number of Boards. Mr Walters has over thirty years experience across a
wide range of industry sectors and a track record for addressing the fundamentals in these companies and
setting them up for sustainable growth. He has experience of start-ups in both the USA and the Far East as
CFO. He has previously worked with Dr. Kerton at Sirigen Group and Maybridge.
The Company has adopted a code for share dealings by directors and employees which is appropriate for an
AIM company and which complies with Rule 21 of the AIM Rules on “Restrictions on deals”.
The Company has established an Audit Committee, a Nomination Committee and a Remuneration Committee.
The Audit Committee is comprised of Eric Dodd (Chair), Michael Lewis and Nicholas Walters. The Nomination
9
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2014 (continued)
Committee is comprised of Michael Lewis (Chair), Eric Dodd and Nicholas Kerton. The Remuneration Committee
is comprised of Michael Lewis (Chair), Eric Dodd and Nicholas Kerton.
The Audit Committee’s responsibilities include making recommendations to the Board on the appointment of
the Company’s auditors, approving the auditor’s fees, safeguarding the objectivity and independence of the
auditors, reviewing the findings of the audit and monitoring and reviewing effectiveness of the Company’s
internal audit function. The audit Committee is also responsible for monitoring the integrity of the financial
statements of the Company, including its annual and half yearly reports and interim management statements.
The Nomination Committee’s responsibilities include reviewing the structure, size and composition of the Board,
making recommendations to the Board concerning membership of Board committees and identifying and
nominating candidates for the Board for Board approval.
The Remuneration Committee’s responsibilities include determining the remuneration of the executive
directors, reviewing the design of all share incentive plans and determine each year whether awards will be
made, and if so, the overall amount of such awards, the individual awards to executive directors and the
performance targets to be used. Annual performance evaluation is based on targets set at the outset of each
year and bonuses paid, as appropriate, in line with the agreed incentive plan.
10
Cambridge Cognition Holdings plc
Remuneration Report for the year ended 31 December 2014
The Company has established a Remuneration Committee. The members of the Remuneration Committee are
and the committee is chaired by:
Michael Lewis (Chair)
Eric Dodd
Nicholas Kerton
The Committee makes recommendations to the board. No director plays a part in any discussion about his own
remuneration.
Components of Executive Directors’ remuneration
Executive remuneration packages are prudently designed to attract, motivate and retain directors of the high
calibre needed to enhance the group’s market position and to reward them for increasing value to
shareholders. The performance measurement of the executive directors and key members of senior
management and the determination of their annual remuneration package are undertaken by the Committee.
There are five main elements of the remuneration package for the executive directors and senior management:
• Basic annual salary;
• Benefits-in-kind;
• Annual bonus payments;
• Share option incentives; and
• Pension arrangements.
Non-Executive Directors’ remuneration
The remuneration of Non-Executive Directors is determined by the Board and reflects their anticipated time
commitment to fulfill their duties. The Non-Executive Directors’ remuneration is subject to the same principles
of the Group Remuneration policy. The letters of appointment of Non-Executive Directors can be terminated
with one month’s notice given by either party.
Directors’ remuneration (audited)
The remuneration of the Directors is as follows:
Current Directors:
Executive
Nicholas Kerton
Andrew Blackwell
Nicholas Walters
Non Executive
Michael Lewis
Eric Dodd
Former Directors:
Jane Worlock
(resigned 8 May 2014)
Ruth Keir
David Blair
J Hainlein
E Hayton
M Bauer
Total
Salary/Fee
Benefits
Bonus
Pension
£’000
£’000
£’000
£’000
2014
Total
£’000
2013 Total
£’000
152
96
32
40
30
16
-
-
-
-
-
366
2
1
-
-
-
-
-
-
-
-
-
3
38
5
24
-
-
-
-
-
-
-
-
67
-
9
-
-
-
-
-
-
-
-
-
9
192
111
56
40
30
16
-
-
-
-
-
445
76
205
8
25
-
57
270
168
2
2
2
815
11
Cambridge Cognition Holdings plc
Remuneration Report for the year ended 31 December 2014
(continued)
Share Options (re-denominated where appropriate):
Granted
Number of
Options
Performance
criteria
Exercise price in
pence
Exercise period
Andrew Blackwell
Nicholas Kerton
Nicholas Walters
Apr 2013
Apr 2013
Apr 2013
Sept 2014
Sept 2014
Sept 2014
Sept 2014
Sept 2014
Sept 2014
Sept 2014
112,568
112,568
112,567
75,000
75,000
250,000
75,000
250,000
75,000
75,000
-
-
-
(1)
(2)
(3)
(4)
(5)
(3)
(5)
70 pence
70 pence
70 pence
60 pence
60 pence
60 pence
60 pence
60 pence
60 pence
60 pence
Apr 2014 – Apr 2023
Apr 2015 – Apr 2023
Apr 2016 – Apr 2023
To 30 Sep 2024
To 30 Sep 2024
To 30 Sep 2024
To 30 Sep 2024
To 30 Sep 2024
To 30 Sep 2024
To 30 Sep 2024
Performance Criteria
(1) Options vest once the average of the closing price of shares in the Company over two consecutive
dealing days, as derived from the London Stock Exchange Daily Official List, has equalled or exceeded
90 pence
(2) Options vest once the average of the closing price of shares in the Company over two consecutive
dealing days, as derived from the London Stock Exchange Daily Official List, has equalled or exceeded
115 pence
(3) Options vest once the average of the closing price of shares in the Company over two consecutive
dealing days, as derived from the London Stock Exchange Daily Official List, has equalled or exceeded
120 pence
(4) Options vest once the average of the closing price of shares in the Company over two consecutive
dealing days, as derived from the London Stock Exchange Daily Official List, has equalled or exceeded
150 pence
(5) Options vest once the average of the closing price of shares in the Company over two consecutive
dealing days, as derived from the London Stock Exchange Daily Official List, has equalled or exceeded
200 pence
12
Cambridge Cognition Holdings plc
Co. regd no: 8211361
Independent Auditor’s Report to the Members of Cambridge Cognition
Holdings plc
We have audited the financial statements of Cambridge Cognition Holdings Plc for the year ended 31 December 2014
which comprise the consolidated statement of comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity, the consolidated statement of cash flows, the related
notes and the parent company balance sheet and related notes. The financial reporting framework that has been
applied in the preparation of the group financial statements is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the
preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on pages 7 and 8, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website
at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
•
the financial statements give a true and fair view of the state of the group's and of the parent company's affairs
as at 31 December 2014 and of the group's loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the parent company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006
•
•
•
Opinion on other matter prescribed by the Companies Act 2006
In our opinion 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.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to
you if, in our opinion:
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
•
•
•
Alison Seekings
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
11th March 2015
13
Cambridge Cognition Holdings plc
Consolidated Statement of Comprehensive Income
Revenue
Cost of sales
Gross profit
Administrative expenses
Other income
Operating (loss)
Analysed as:
Adjusted EBITDA
Depreciation
Restructuring costs
AIM listing expenses
Operating (loss)
Finance income
Finance costs
(Loss) before tax
Income tax
Loss and total comprehensive income for the period
attributable to the equity shareholders of the parent
Earnings per share (pence)
Basic earnings per share
Diluted earnings per share
Notes
Year to
31 December
2014
Year to
31 December
2013
£’000
£’000
5
7
8
11
12
13
5,802
(866)
4,936
4,148
(490)
3,658
(5,583)
(6,761)
343
145
(304)
(2,958)
(266)
(38)
-
-
(2,193)
(40)
(352)
(373)
(304)
(2,958)
9
-
3
(35)
(295)
122
(2,990)
129
(173)
(2,861)
(1.1)
(1.1)
(21.3)
(21.3)
The above results relate to continuing operations.
Total comprehensive income equates to the loss for the period reported above.
14
Cambridge Cognition Holdings plc
Consolidated statement of financial position
Assets
Non-current assets
Goodwill
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total Current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Equity
Share capital
Share premium account
Other reserve
Own shares
Retained earnings
Total equity
Notes
At 31 December
2014
At 31 December
2013
£'000
£’000
14
15
17
18
352
64
416
185
1,632
1,519
352
53
405
123
976
2,261
3,336
3,360
3,752
3,765
20
1,703
1,635
21
22
1,703
1,635
169
6,335
5,981
(174)
169
6,335
5,981
(204)
(10,262)
(10,151)
2,049
2,130
Total liabilities and equity
3,752
3,765
The financial statements on pages 14 to 38 were approved by the Board of Directors and authorised for issue
on 11th March 2015 and were signed on its behalf by:
Nicholas Kerton
Chief Executive Officer
15
Cambridge Cognition Holdings plc
Consolidated statement of changes in equity
Share
capital
£'000
Share
premium
Own
shares
Other
reserve
Equity
reserves
Retained
earnings
£'000
£'000
£'000
£'000
£'000
Total
£'000
(204)
5,981
168
(7,696)
(1,683)
Balance at 1 January 2013
68
Total comprehensive income
for the year
Reclassification following
conversion of loan
-
-
Issue of new share capital
101
Premium of new share capital
Share issue costs
Credit to equity for equity
settled share based payments
-
-
-
-
-
-
-
6,922
(587)
-
-
-
-
-
-
-
Transactions with owners
101
6,335
-
-
-
-
-
-
-
-
-
(2,861)
(2,861)
(168)
168
-
-
-
-
-
-
-
-
101
6,922
(587)
238
238
(168)
406
6,674
Balance at 31 December
2013
169
6,335
(204)
5,981
Balance at 1 January 2014
169
6,335
(204)
5,981
Total comprehensive income
for the period
Issue of new share capital
Transfer on allocation of shares
held in trust
Credit to equity for equity-
settled share-based payments
Transactions with owners
Balance at 31 December
2014
-
-
-
-
-
-
-
-
-
-
-
-
30
-
30
-
-
-
-
-
-
-
-
-
-
-
-
(10,151)
2,130
(10,151)
2,130
(173)
(173)
-
(30)
92
62
-
-
92
92
169
6,335
(174)
5,981
-
(10,262)
2,049
16
Cambridge Cognition Holdings plc
Consolidated statement of cash flows
Notes
Year to
31 December
2014
Year to
31 December
2013
£'000
£’000
Net cash flows from operating activities
23
(693)
(2,472)
Investing activities
Payment of deferred consideration
Purchase of property, plant and equipment
Net cash flow used in investing activities
Financing activities
Proceeds from the issue of share capital net
Net cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of period
-
(49)
(49)
-
-
(742)
2,261
(300)
(21)
(321)
4,413
4,413
1,620
641
Cash and cash equivalents at end of period
23
1,519
2,261
17
Cambridge Cognition Holdings plc
Notes to the financial statements
1. General information
Cambridge Cognition Holdings plc (‘the Company’) and its subsidiaries (together, ‘the Group’) develops and
commercialises computerised neuropsychological tests for sale worldwide, principally in the UK, the US and
Europe. The group trades through its UK subsidiary Cambridge Cognition Limited (“CCL”).
The Company is a public limited company which is listed on the Alternative Investment Market (‘AIM’) of the
London Stock Exchange (COG) and is incorporated and domiciled in the UK. The address of its registered office
is Tunbridge Court, Tunbridge Lane, Bottisham, Cambridge, CB25 9TU.
The Group develops and commercialises computerised neuropsychological tests. In the period since CCL’s
formation in 2002, it has created a well-established business through sales of its proprietary CANTAB®
(Cambridge Neuropsychological Test Automated Battery) software into academic and pharmaceutical research
locations around the world.
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (‘IFRS’) as adopted by the European Union, IFRIC interpretations and the Companies Act 2006
applicable to companies operating under IFRS. The accounting policies adopted are consistent with those
followed in the preparation of the consolidated financial statements for the year ended 31 December 2013. The
financial statements have been prepared under the historical cost convention.
The Group has chosen to utilise the exemption available under IFRS 1, ‘First time adoption of IFRS’, for
reassessing acquisitions completed before 31 December 2009. The goodwill arising on business combinations of
the Group prior to 31 December 2009 remains unchanged up to 1 January 2010 and is subject to an annual
impairment review. The date of transition to IFRS was 1st January 2010.
Companies in the consolidated financial information
The subsidiary undertakings included within the consolidated financial statements as at 31 December 2014 are
as follows:
Company
Name
Cambridge
Cognition
Limited
Cambridge
Cognition
Trustees Ltd
Cambridge
Cognition LLC
Country of
registration/
incorporation
UK
UK
Principal Activity
Date
Incorporated
Class of
shares
%
Development and sale of
computerised
neuropsychological tests
Investment company
12 Dec 2001
Ordinary
100
5 June 2002
Ordinary
100
USA
Non-trading company
11 July 2006
Ordinary
100
2. Outlook for adoption of future Standards (new and amended)
At the date of authorisation of the Consolidated Financial Information, the following Standards and
Interpretations which have not been applied in the Consolidated Financial Information were in issue but not yet
effective (and in some cases had not yet been adopted by the EU):
•
•
IFRS 9 Financial Instruments (effective 1 January 2018)
IFRS 15 Revenue from contracts with customers (effective 1 January 2017)
During the year the following standards came into effect:
•
•
•
•
•
IFRS 10 Consolidated Financial Statements (effective 1 January 2014)
IFRS 11 Joint Arrangements (effective date 1 January 2014)
IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2014)
IAS 27 (Revised), Separate Financial Statements (effective 1 January 2014)
IAS 28 (Revised), Investments in Associates and Joint Ventures (effective 1 January 2014)
The adoption of the standards listed above, to the extent applicable, have had no material impact on the
Consolidated Financial Information of the Group.
18
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies
3.1 Basis of consolidation
The consolidated financial statements incorporate the results of the company and of its subsidiaries all of which
are wholly owned.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
The share exchange by Cambridge Cognition Holdings plc in 2013 was outside the scope of IFRS 3 and hence
was not treated as a business combination. The principles of reverse acquisition accounting were applied with
the financial statements being a continuation of the results and balances of the legal subsidiary. Share capital
represents the equity structure of the legal parent with comparatives restated using the exchange ratio of
1.138 established on acquisition. The difference between the equity of the legal parent and the issued equity
instruments of Cambridge Cognition Limited pre combination is recognised as a separate component of equity.
The amount recognised as retained earnings are those of Cambridge Cognition Limited pre combination
together with the results of the whole Group post transaction date.
3.2 Going concern
At the time of approving the financial statements, and based on a review of the group’s forecasts and business
plan, the directors have a reasonable expectation that the Company and the Group have adequate resources to
continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing the financial statements. The directors’ conclusion comes on the back of a
year of solid growth and a return to profitability in the second half of the year. The markets served by the
company continue to grow offering new opportunities for the coming year.
3.3 Business combinations
The Group has made no acquisitions or disposals during the period under review.
3.4 Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the
acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount
of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest
(if any) in the entity over the net of the acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment
testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from synergies
arising from the combination. Cash-generating units to which goodwill has been attributed under IFRS 3
Business Combinations are tested for impairment annually, or more frequently when there is an indication that
the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying
amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
3.5 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts
receivable for goods and services provided in the normal course of business, net of discounts, VAT and other
sales-related taxes.
Sales of goods and licences
The Group recognises revenue when all the following conditions are satisfied:
•
•
the significant risks and rewards of ownership of the goods are transferred to the buyer;
the Group retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the entity; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
•
•
•
Revenue recognised in Statement of Comprehensive Income but not yet invoiced is held on the Statement of
Financial Position within ‘Trade and other receivables’. Revenue invoiced but not yet recognised in the
Statement of Comprehensive Income is held on the Statement of Financial Position within ‘Deferred revenue’.
19
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.5 Revenue recognition (cont.)
Revenue is classified as follows:
Supply of software licences
Sales from software licences are recognised in full when the licences are provided since there is no significant
ongoing obligation to the Group.
Supply of product
Supply of product consists of hardware sold in conjunction with software licence fees and associated other
services. Revenue is recognised on despatch of the product when the significant risks and rewards of
ownership are transferred to the buyer.
Supply of associated services
Sales of clinical testing services are recognised based on work done subject to achieving milestones set out in
the related service agreements, provided a right to consideration has been established. Sales from training are
recognised as the training services are performed.
A number of the above elements may be sold together as a bundled contract. Revenue is recognised separately
for each component if it is considered to represent a separable good or service and a fair value can be reliably
established. The Group derives fair value for its professional services based on day rates for consultants.
Where software is included within a bundled arrangement, the residual value of the contract is ascribed to the
software after a fair value has been allocated to all other components.
Interest income
Interest income is recognised when it is probable that the economic benefits will flow to the Group and the
amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying
amount on initial recognition.
3.6 Grants
Grants of a revenue nature are credited to profit and loss to match with the expenses incurred.
3.7 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the
relevant lease.
In the event that lease incentives are received at the time the entity enters into an operating lease agreement,
such incentives are recognised as a liability and released through profit and loss over the term of the lease
agreement. The aggregate benefit of incentives is recognised in profit and loss as a reduction to rental expense
on a straight-line basis, except where another systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
3.8 Foreign currencies
The individual financial statements of each subsidiary are presented in the currency of the primary economic
environment in which it operates (its functional currency). The UK pound is the functional currency of
companies within the Group and presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the
entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates
of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing at that date.
Exchange differences are recognised in profit or loss in the period in which they arise.
3.9 Operating profit
Operating profit is stated after charging restructuring costs but before finance income and finance costs.
3.10 Post employment benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
20
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.11 Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as
reported in the income statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability
for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting
date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the
computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax
liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which deductible temporary differences
can be utilised. However such assets and liabilities are not recognised if the temporary difference arises from
the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries
except where the group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled
or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the
reporting date. Deferred tax is charged or credited in the income statement, except when it relates to items
charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other
comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority
and the Group intends to settle its current tax assets and liabilities on a net basis.
3.12 Tangible and intangible assets
(a) Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is provided at rates calculated to write off the cost of fixed assets, less their estimated residual
value, over their expected useful lives on the following bases:
Fixtures, fittings & equipment
-
Leasehold improvements
25% - 33% per annum straight line
-
straight line over 5 years or over the term of the lease
The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in profit and loss on the transfer of the risks and
rewards of ownership.
21
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.12 Tangible and intangible assets (cont.)
(b) Internally-generated intangible assets – research and development expenditure
The Group undertakes research and development expenditure in view of developing new products. Expenditure
on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from the group’s development is recognised only if all of the
following conditions are met:
•
•
•
an asset is created that can be identified (such as software and new processes);
it is probable that the asset created will generate future economic benefits, for example it is
technically and commercially feasible and the group has sufficient resources to complete
development; and
the development cost of the asset can be measured reliably.
Where no internally-generated intangible asset can be recognised, development expenditure is recognised as
an expense in the period in which it is incurred.
3.13 Impairment of intangible assets
At each reporting date, the Group performs an impairment review in respect of goodwill and reviews the
carrying amounts to determine whether there is any impairment. For the purposes of impairment testing,
goodwill is allocated to each of the Group’s cash generating units. Any impairment loss is recognised as an
expense in the income statement in the period in which it was identified. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
3.14 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where
applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their
present location and condition. Cost is calculated using either the First-In-First-Out method or, for fast moving
items, the average cost method. Net realisable value represents the estimated selling price less all estimated
costs of completion and costs to be incurred in marketing, selling and distribution.
3.15 Financial instruments
Financial assets and financial liabilities are recognised in the Group’s Statement of Financial Position when the
Group becomes a party to the contractual provisions of the instrument.
Financial assets
Financial assets are classified into the following specified categories: financial assets at ‘fair value through profit
or loss’ (“FVTPL”), ‘held-to-maturity’ investments, ‘available-for-sale’ (“AFS”) financial assets and ‘loans and
receivables’. The classification depends on the nature and purpose of the financial assets and is determined at
the time of initial recognition.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash flows (including all fees and points paid or received that form an integral part of the
effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt
instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets
classified as at FVTPL.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted
in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised
cost using the effective interest method, less any impairment. Interest income is recognised by applying the
effective interest rate, except for short term receivables when the recognition of interest would be immaterial.
22
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.15 Financial instruments (cont.)
Impairment of financial assets
Financial assets, are assessed for indicators of impairment at each reporting date. Financial assets are impaired
where there is objective evidence that, as a result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows of the investment have been affected.
For all financial assets, objective evidence of impairment could include:
•
•
•
significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for
a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the
number of delayed payments in the portfolio past the average credit period, as well as observable changes in
national or local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the differences between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial
asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with
the exception of trade receivables, where the carrying amount is reduced through the use of an allowance
account. When a trade receivable is considered uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes
in the carrying amount of the allowance account are recognised in profit or loss.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of
direct issue costs.
Financial liabilities
Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Financial liabilities are subsequently measured at amortised cost using the effective interest
method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period, to the net carrying amount on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged,
cancelled or they expire.
3.16 Share-based payments
Equity-settled share-based payments to employees and others providing similar services are measured at the
fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based
vesting conditions. Details regarding the determination of the fair value of equity-settled share-based
transactions are set out in note 25.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will
eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments
expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of
the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to equity reserves.
23
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.17 Employee Benefit Trust
In order to facilitate the exercise of share options the group maintains an Employee Benefit Trust (EBT). This is
consolidated in accordance with IFRS10. The costs of purchasing own shares held by the EBT are deducted
from equity under ‘Own Shares’ reserve. Neither the purchase nor sale of own shares leads to a gain or loss
being recognised in the Group’s profit and loss or other comprehensive income. When shares are subsequently
transferred to employees for less than their purchase price the difference is a realised loss recognised directly
in reserves.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 3, the directors are required
to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods.
Critical judgements in applying the Group’s accounting policies
The following are the critical judgements that the directors have made in the process of applying the Group’s
accounting policies and that have the most significant effect on the amounts recognised in the Consolidated
Financial Information.
Revenue recognition
Trading operations within the Group recognise revenue with regard to amounts chargeable to customers under
service contracts. The policy is to recognise revenue in respect of testing services upon achievement of
milestones set out in the related agreements. This is expected to approximate to the timing of the physical
performance of the service activity on such contracts.
In making its judgement, management consider the detailed criteria for the recognition of revenue from the
provision of continuous services set out in IAS 18 Revenue. The Directors are satisfied that the significant risks
and rewards are transferred and that recognition of the revenue over the duration of the contractual period is
appropriate.
Goodwill
The Group reviews the carrying value of its goodwill balances by carrying out impairment tests at least on an
annual basis. These tests require estimates to be made of the value in use of its CGUs which are dependent on
estimates of future cash flows and long-term growth rates of the CGUs. Further details of these estimates are
set out in Note 14.
Capitalisation of development costs
The point at which development costs meet the criteria for capitalisation is critically dependent on management
judgment of the probability of future economic benefits. No development was completed in the year ended 31
December 2014 whose benefits could be reliably evaluated separate from existing revenue streams. No
development costs have therefore been capitalised during 2014 (2013 £nil).
24
Cambridge Cognition Holdings plc
Notes to the financial statements
4. Critical accounting judgements and key sources of estimation uncertainty (continued)
Recovery of deferred tax assets
Deferred tax assets have not been recognised for deductible temporary differences, share options and tax
losses as management considers that there is not sufficient certainty that future taxable profits will be available
to utilise those temporary differences and tax losses.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined using either a Black-
Scholes model or a Binomial Option model, with the assumptions detailed in note 25. The accounting estimates
and assumptions relating to equity settled share-based payments would have no impact on the carrying
amounts of assets and liabilities within the next annual reporting period but may impact profit and loss and
equity.
5. Revenue
An analysis of revenue by reportable business unit is as follows:
Continuing operations
Healthcare
Academic Research
Clinical Trials
2014
£'000
2013
£'000
201
1,675
3,926
158
1,493
2,497
5,802
4,148
An analysis of the Group’s revenue for each major product and service category is as follows:
Continuing operations
Hardware
Software
Services
2014
£'000
2013
£'000
1,080
2,689
2,033
494
1,796
1,858
5,802
4,148
6. Business and geographical segments
Products and services from which reportable segments derive their revenues
Information reported to the Group’s Chief Executive for the purposes of resource allocation and assessment of
segment performance is focused on the location of markets in which the Group operates. The Group’s
reportable segments under IFRS 8 are therefore as follows:
Healthcare
Academic Research
Clinical Trials
-
-
-
Medical software for use in healthcare delivery settings
Cognitive test products for researchers working in a non
regulated environment, typically in academia
Products and services for use in regulated pharmaceutical clinical
trials
25
Cambridge Cognition Holdings plc
Notes to the financial statements
6. Business and geographical segments (continued)
Segment revenues and results
The following is an analysis of the Group’s revenue and results by reportable segment:
Revenue
External sales
Result
Segment result
Central administration costs
Other income
Operating loss
Finance income
Loss before tax
Tax
Loss after tax
Revenue
External sales
Result
Segment result
Central administration costs
Other income
Operating (loss)
Finance income
Finance costs
Loss before tax
Tax
Loss after tax
Healthcare
2014
£'000
Academic
Research
2014
£'000
Clinical
Trials
2014
£'000
Consolidated
2014
£'000
201
1,675
3,926
5,802
(666)
1,194
1,328
1,856
(2,503)
343
(304)
9
(295)
122
(173)
Healthcare
2013
£'000
Academic
Research
2013
£'000
Clinical
Trials
2013
£'000
Consolidated
2013
£'000
158
1,493
2,497
4,148
(945)
1,014
216
285
(3,394)
151
(2,958)
3
(35)
(2,990)
129
(2,861)
26
Cambridge Cognition Holdings plc
Notes to the financial statements
6. Business and geographical segments (continued)
The accounting policies of the reportable segments are the same as the accounting policies described in note 3.
Segment profit represents the profit earned by each segment without allocation of the share of central
administration costs including Directors’ salaries, investment revenue and finance costs, and income tax
expense. This is the measure reported to the Chief Executive for the purpose of resource allocation and
assessment of segment performance.
Central administration costs comprise principally the employment related costs and other overheads incurred
by the group.
Segment net assets
Healthcare
Academic Research
Clinical Trials
Total allocated assets
Unallocated assets
Consolidated total assets
All assets are based in the UK.
2014
£'000
2013
£'000
10
686
865
10
567
410
1,561
2,191
987
2,778
3,752
3,765
For the purposes of monitoring segment performance and allocating resources between segments the group
monitors the assets of each segment. Inventory and trade receivables are allocated to reportable segments.
Due to the size and nature of the other assets within the group these are monitored on a consolidated basis.
Goodwill has been allocated to reportable segments as described in note 14.
Geographical information
The revenue by geographical location is detailed below:
United Kingdom
United States of America
European Union
Rest of world
Revenue from external
customers
2014
£'000
1,337
2,806
1,233
426
2013
£'000
1,754
1,059
790
545
5,802
4,148
Information about major customers
Revenue amounting to £777,000 and £798,000 of reported sales can be attributed to two customers in 2014
who accounted for more than 10% of reported revenue. The customers were in the Clinical business in the
USA. No other customers accounted for more than 10 per cent of reported revenue. In 2013 only one
customer accounted for more than 10% of reported revenue (£1,091,000) – a clinical business unit customer.
27
Cambridge Cognition Holdings plc
Notes to the financial statements
7. Other operating income
Other operating income is made up of the following:
Grant income
8. Loss for the year
Loss for the year has been arrived at after charging/(crediting):
Net foreign exchange (gains)/losses
Research and development costs
Depreciation of property, plant and
equipment
AIM listing expenses
Restructuring costs
9. Auditor’s remuneration
The analysis of the auditor’s remuneration is as follows:
Fees payable to the company’s auditor for the audit of:
the company’s annual accounts
the subsidiaries’ annual accounts
Total audit fees
Taxation compliance services
Other services
Total non-audit fees
10. Staff costs
The average monthly number of employees (including executive directors) was:
Operations
Business development
Administrative support
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs (see note 26)
Share based payments charge (see note 25)
28
2014
£'000
2013
£'000
343
145
2014
£'000
(70)
1,242
38
-
-
2013
£'000
10
1,240
40
373
352
2014
£'000
2013
£'000
11
17
28
6
-
6
10
16
26
6
11
17
2014
Number
2013
Number
40
7
12
59
2014
£'000
2,600
247
121
92
37
6
10
53
2013
£'000
3,124
305
174
238
3,060
3,841
Cambridge Cognition Holdings plc
Notes to the financial statements
11. Finance costs
Interest on convertible loan notes
12. Tax
Corporation tax:
Current year
Adjustments in respect of prior years
Deferred tax (see note 19)
2014
£'000
2013
£'000
-
-
35
35
2014
£'000
-
(122)
(122)
-
2013
£'000
-
(129)
(129)
-
(122)
(129)
Corporation tax is calculated at 21.49% (2013: 23.25%) of the estimated taxable profit for the year.
The tax charge for each year can be reconciled to the profit per statement of comprehensive income as follows:
Loss before tax on continuing operations
Tax at the UK corporation tax rate of 21.49%
(2013 : 23.25%)
Expenses not deductible for tax purposes
Unrelieved tax losses arising
Deduction on exercise of share options
Movement in unprovided deferred tax
Adjustment in respect of prior years
Tax (credit) for the year
2014
£’000
2013
£'000
(295)
(2,990)
(63)
(695)
41
48
(18)
(8)
178
501
-
16
(122)
(129)
(122)
(129)
The credit in respect of prior years relates to the receipt of R&D tax credits in respect of 2013 (2013: 2011 and
2012). No claim has yet been made for 2014 and no credit has been recognised in the financial statements.
29
Cambridge Cognition Holdings plc
Notes to the financial statements
13. Earnings per share
From continuing operations
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
Earnings for the purposes of basic and diluted earnings per share being net loss
attributable to owners of the Company
2014
£'000
2013
£'000
(173)
(2,861)
2014
'000
2013
‘000
Number of shares
Weighted average number of ordinary shares for the purposes of basic and
diluted earnings per share
16,439
13,423
As the effect of options would be to reduce the loss per share the diluted loss per share is the same as the
basic loss per share.
14. Intangible assets
Cost and net book value
At 1 January 2013 & 31 December 2013
At 1 January 2014 & 31 December 2014
Goodwill
£'000
352
352
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs)
that are expected to benefit from that business combination. The carrying amount of goodwill had been
allocated to Academic.
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill
might be impaired. In the year to 31 December 2014 the Academic business CGU produced a segment profit of
£1,194,000 (see note 6) and with encouraging prospects for 2015 and beyond, the carrying value of goodwill is
fully supported by the Academic results and no impairment provision is required.
30
Cambridge Cognition Holdings plc
Notes to the financial statements
15. Property, plant & equipment
Cost
At 1 January 2013
Additions
At 31 December 2013
At 1 January 2014
Additions
At 31 December 2014
Depreciation
At 1 January 2013
Charge for the year
At 31 December 2013
At 1 January 2014
Charge for the year
At 31 December 2014
Net Book value
At 31 December 2014
At 31 December 2013
Leasehold
Improvements
£'000
Fixtures &
fittings
£'000
Total
£'000
38
-
38
38
-
38
38
-
38
38
-
38
-
-
323
21
344
344
49
393
251
40
291
291
38
329
64
53
361
21
382
382
49
431
289
40
329
329
38
367
64
53
16. Subsidiaries
Details of the Company’s subsidiaries at 31 December 2014 are as follows:
Name
Place of
incorporation
(or registration)
and operation
Cambridge Cognition Limited
United Kingdom
Proportion
of
ownership
interest
%
100%
Proportion
of
voting
power held
%
100%
Cambridge Cognition Trustees
Limited
Cambridge Cognition LLC
17. Inventories
Finished goods and goods for resale
United Kingdom
100%
100%
Delaware, United
States of America
100%
100%
2014
£'000
185
185
2013
£'000
123
123
During the year inventories with a total value of £654,000 (2013: £383,000) were included in the income
statement as an expense.
31
Cambridge Cognition Holdings plc
Notes to the financial statements
18. Trade and other receivables
Amount receivable for the sale of goods
Allowance for doubtful debts
Prepayments
Other receivables
2014
£'000
1,058
(20)
1,038
381
213
1,632
2013
£'000
512
(25)
487
303
186
976
Trade receivables
Trade receivables disclosed above are classified as loans and receivables and are measured at amortised cost.
The average credit period offered on sales of goods varies from 30 days to 90 days. The Group has recognised
an allowance for doubtful debts based on estimated irrecoverable amounts determined by reference to past
default experience of the counterparty and an analysis of the counterparty’s current financial position.
Trade receivables disclosed above include amounts (see below for aged analysis) which are past due at the
year-end but against which the Group has not recognised an allowance for doubtful receivables. There has not
been a significant change in credit quality and the amounts are still considered recoverable. The average age of
these receivables is 67 days in 2014 (2013: 42 days) but this increase is due to an extension to agreed terms
rather than overdue payments.
Ageing of past due but not impaired receivables:
31-60 days
61-90 days
91-120 days
Total
Movement in the allowance for doubtful debts:
Balance at the beginning of the period
(Decrease)/Increase in provision
Balance at the end of the period
2014
£'000
178
108
61
2013
£'000
245
36
16
347
297
2014
£'000
25
(5)
2013
£'000
23
2
20
25
In determining the recoverability of a trade receivable the Group considers any change in the credit quality of
the trade receivable from the date credit was initially granted up to the reporting date. The concentration of
credit risk is limited due to the customer base being large and unrelated. Management considers that all the
above financial assets that are not impaired or past due are of good credit quality.
19. Deferred Tax
At the reporting date, the group has unused tax losses of £8.3 million (2013: £8.0 million) available for offset
against future profits. No deferred tax asset has been recognised in respect of these losses as there is
uncertainty over the timing of future taxable profits. Other losses may be carried forward indefinitely. No
deferred tax asset has been recognised in respect of share options.
32
Cambridge Cognition Holdings plc
Notes to the financial statements
20. Trade & other payables
Amounts falling due within one year
Trade payables
Social security and other taxes
Other payables
Accruals and deferred income
2014
£'000
543
79
99
982
2013
£'000
526
92
126
891
1,703
1,635
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
The average credit period taken for trade purchases is 44 days (2013 : 52 days). For all suppliers no interest is
charged on the trade payables. Group policy is to ensure that payables are paid within the pre-agreed credit
terms and to avoid incurring penalties and/or interest on late payments. The Directors consider that the
carrying amount of trade payables approximates their fair value.
21. Share capital
Issued and fully paid
16,930,556 (2013: 16,885,105) Ordinary Shares of £0.01 each
2014
£
2013
£
169
169
During the year 45,451 Ordinary shares were issued following the exercise of share options at an exercise price
of £0.01 per share.
No other shares were issued during the year.
22. Own Shares
Own Shares Reserve
2014
£
2013
£
174
204
The Own Shares Reserve represents the cost of shares acquired by the Cambridge Cognition Employee Benefit
Trust to satisfy options under the group’s share options schemes. The number of shares held by the Employee
Benefit Trust at 31 December 2014 was 415,783 (2013: 488,683).
During the year employees exercised 72,900 share options at an exercise price of £0.01. A transfer of £30,432
was made from Own Shares Reserve to Retained Earnings in respect of these exercised options.
33
Cambridge Cognition Holdings plc
Notes to the financial statements
23. Notes to the cash flow statement
Loss before tax
Adjustments for:
Finance costs
Depreciation of property, plant and equipment
Share-based payment expense
Operating cash flows before movements in working capital
(Increase) in inventories
(Increase)/Decrease in receivables
Increase/(Decrease) in payables
2014
£'000
2013
£'000
(295)
(2,990)
-
38
92
(165)
(62)
(663)
68
35
40
238
(2,677)
(10)
372
(157)
Operating cash flows plus movements in working capital
(822)
(2,472)
Tax credit received
Interest received/(paid)
Net cash from operating activities
Cash and cash equivalents
Cash and bank balances
129
-
-
-
(693)
(2,472)
2014
£'000
2013
£'000
1,519
2,261
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three
months or less, net of outstanding bank overdrafts. The carrying amount of these assets is approximately equal
to their fair value.
24. Operating lease arrangements
Lease payments under operating leases
recognised as an expense in the year
2014
£'000
173
2013
£'000
140
At the reporting date, the group had outstanding commitments for future minimum lease payments under non-
cancellable operating leases, which fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
2014
£'000
163
82
-
2013
£'000
78
5
1
Operating lease payments represent rentals payable by the group for rent, phone systems, copiers and
franking machines. Property rental on 2 units had 6 months and 9 months to expiry at 31 December 2014, with
an option to extend for a further year at the then prevailing market rate. The property rental on another unit
had 21 months to expiry at 31 December 2014. The average rental period for other leases is 5 years.
34
Cambridge Cognition Holdings plc
Notes to the financial statements
25. Share based payments
Equity-settled share option scheme
The Company has a share option scheme for key employees of the Group. The vesting periods vary between 0
and 3 years. Options are forfeited if the employee leaves the Group before the options vest. Details of the
share options outstanding during the year are as follows.
2014
2013
Number of
share
options
Weighted
average
exercise price
(in £)
Number of
share options
Weighted
average
exercise price
(in £)
Outstanding at beginning of period
Exercised during the period
Option modification
Option modification
Exchanged during the period
Granted during the period
Forfeited during the period
1,119,344
(118,351)
-
-
-
875,000
(25,567)
Outstanding at the end of the period
1,850,426
Exercisable at the end of the period
705,911
0.43
(0.01)
-
-
-
0.60
(0.67)
0.53
0.38
331,884
(24,868)
(255,000)
255,000
42,364
1,116,758
(346,794)
0.60
(0.01)
(0.47)
(0.009)
0.26
0.57
(0.68)
1,119,344
0.43
385,741
0.30
The options outstanding at 31 December 2014 had a weighted average exercise price of £0.53, and a weighted
average remaining contractual life of 7.0 years. The weighted average share price at the date of exercise of
options during the year was £0.67.
Options were granted on 30 September 2014. The performance conditions attached to these options are such
that options vest dependent on the company achieving certain share price hurdles. The performance conditions,
which are market conditions, have been incorporated into the measurement by actuarial modelling. The
aggregate of the estimated fair values of the options granted is £88,384. The inputs into the Binomial Option
model are as follows:
Share price at date of issue
Exercise price
Expected volatility
Expected life
Risk-free rate
Expected dividend yields
September
2014
70p
60p
40%
10 years
1.96%
0.0%
Expected volatility was determined by considering the expected share price movements and other comparable
listed companies in the sector. For each option tranche a minimum share price hurdle for the options to vest
was set in accordance with the individual terms set out in the option contracts.
The Group recognised total expenses of £92,000 (2013: £238,000), related to equity-settled share-based
payment transactions.
26. Post employment benefit schemes
Defined contribution schemes
The group operates a defined contribution retirement benefit scheme for all qualifying employees. The assets of
the scheme are held separately from those of the group in funds under the control of independent trustees.
The total cost charged to income of £121,000 (2013: £174,000) represents contributions payable to these
schemes by the group at agreed rates. As at 31 December 2014, contributions of £17,000 (2013: £23,000) due
in respect of the current reporting period had not been paid over to the schemes.
35
Cambridge Cognition Holdings plc
Notes to the financial statements
27. Financial instruments
Capital risk management
The Group manages its capital to ensure the Group is able to continue as a going concern while maximising the
return to stakeholders through optimising the balance between the Group debt and equity. The Group had no
borrowings at 31 December 2014. To satisfy these objectives the Group successfully raised £5 million (before
expenses) in equity during 2013.
The current capital structure of the Group consists of cash and cash equivalents and equity attributable to
equity holders of the parent, comprising issued capital, reserves and retained earnings as follows:
Cash and cash equivalents
Equity shareholder funds
2014
£'000
1,519
2,049
2013
£'000
2,261
2,130
The Group is not subject to any externally imposed capital requirements.
Significant accounting policies
Details of the significant accounting policies and methods adopted (including the criteria for recognition, the
basis of measurement and the bases for recognition of income and expenses) for each class of financial asset,
financial liability and equity instrument are disclosed in note 3.
Categories of financial instruments
Financial assets classified as loans and receivables
Cash and bank balances
Trade and other receivables
Financial liabilities at amortised cost
Trade and other payables
2014
£'000
2013
£'000
1,519
1,092
2,261
650
1,037
1,073
Financial risk management objectives
The Group’s Finance function is responsible for all aspects of corporate treasury. It co-ordinates access to
financial markets, monitors and manages the financial risks relating to the operations of the Group through
internal reports which analyse exposures by degree and magnitude. The risks reviewed include market risk
(including currency risk), credit risk and liquidity risk.
Liquidity Risk
Liquidity risk is that the Group might be unable to meet its obligations. The Group manages its liquidity needs
by monitoring cash outflows due in day-to-day business. The Board reviews an annual 12 month financial
projection as well as information regarding cash balances on a monthly basis. The Group maintains cash and
cash equivalents to meet its liquidity requirements for up to a 30-day period.
At 31 December 2014, the Group’s financial liabilities had contractual maturities which are summarised below:
Trade payables
Other payables
2014
£'000
Within 6
months
2013
£'000
Within 6
months
543
481
-----------
1,024
-----------
526
503
-----------
1,029
-----------
36
Cambridge Cognition Holdings plc
Notes to the financial statements
27. Financial instruments (continued)
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates
and interest rates (see below). The Group has limited exposure to foreign currency exchange rates and does
not believe the use of financial derivatives is appropriate.
There has been no change to the Group’s exposure to market risks or the manner in which these risks are
managed and measured.
Foreign currency risk management
The Group undertakes transactions denominated in foreign currencies; consequently exposures to exchange
rate fluctuations arise.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at
the year end were as follows:
US Dollar
EURO
Liabilities
2014
£'000
25
-
2013
£'000
7
-
Assets
2014
£'000
989
214
2013
£'000
647
229
A movement in the £/$ exchange rate of +/- 5% from 31 December 2014 to the date of realising the US dollar
net asset position would result in a gain/loss of £48,000 (2013: £32,000). Similarly with the Euro, the
gain/loss would be £11,000 (2013: £11,000).
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and
obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from
defaults. The Group makes appropriate enquiries of the counter party and independent third parties to
determine credit worthiness. Use of other publicly available financial information and the Group’s own trading
records is made to rate its major customers. The Group’s exposure and the credit worthiness of its
counterparties are continuously monitored and the aggregate value of transactions is spread amongst approved
counterparties. Credit exposure is also controlled by counterparty limits that are reviewed and approved by
Group management continuously.
The Group does not have any significant credit risk exposure to any single counterparty or group of
counterparties having similar characteristics. The Group defines counterparties as having similar characteristics
if they are related entities.
The carrying amount recorded for financial assets in the Statement of Financial Position is net of impairment
losses and represents the Group’s maximum exposure to credit risk. No guarantees have been given in respect
to third parties.
Fair value of financial instruments
Fair value of financial instruments carried at amortised cost
The directors consider that the carrying amounts of financial assets and financial liabilities recorded at
amortised cost in the Statement of Financial Position approximate their fair values.
37
Cambridge Cognition Holdings plc
Notes to the financial statements
28. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note. Transactions between the Group and other
related parties are disclosed below.
Remuneration of directors and key management personnel
The remuneration of the senior Executive Management Committee members, who are the key management
personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related
Party Disclosures.
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
2014
£'000
2013
£'000
479
9
-
50
538
720
32
60
161
973
Payments in respect of each director are set out in the Remuneration Report. The audited section of that Report
forms part of the financial statements.
Other transactions
During 2014 the Group incurred consultancy fees of £64,000 (2013: £28,000) from MCR Holdings, a
partnership of which N. Walters is a partner. At the year end a balance of £5,517 (2012: £7,657) was
outstanding to MCR Holdings.
38
Cambridge Cognition Holdings plc
Parent Company Balance Sheet
Fixed Assets
Investments
Current assets
Debtors
Cash at bank
Notes
At 31 December
2014
At 31 December
2013
£'000
£’000
3
4
195
152
4,579
41
3,802
1,501
4,620
5,303
Creditors : Amounts falling due within one year
5
(156)
(93)
Net current assets
Total assets
Capital and Reserves
Called up Share capital
Share premium account
Investment in own shares
Share based payment reserve
Retained earnings
4,464
5,210
4,659
5,362
6
7
7
7
169
6,335
(174)
258
169
6,335
(204)
166
(1,929)
(1,104)
Equity Shareholders’ Funds
4,659
5,362
The financial statements of Cambridge Cognition Holdings plc on pages 39 to 43 were approved and authorised
for issue by the board on 11th March 2015 and were signed on its behalf by:
Nick Kerton
Chief Executive Officer
39
Cambridge Cognition Holdings plc
Notes to the parent company financial statements
1. Significant accounting policies
1.1 Basis of accounting
The separate financial statements of the company are presented as required by the Companies Act 2006. They
have been prepared under the historical cost convention and in accordance with applicable United Kingdom
Accounting Standards and law.
The principal accounting policies are summarised below. They have all been applied consistently throughout the
period from incorporation.
The company has taken advantage of the exemption of FRS8 from disclosing transactions with other wholly
owned members of the Group.
No profit and loss account is presented for Cambridge Cognition Holdings plc as provided by section 408 of the
Companies Act 2006. The company’s loss after tax for the financial year was £795,000 (2013: £1,104,000).
1.2 Investments
Fixed asset investments in subsidiaries are shown at cost less provision for impairment.
For investments in subsidiaries acquired for consideration including the issue of shares qualifying for merger
relief, cost is measured by reference to the nominal value only of the shares issued. Any premium is ignored.
1.3 Going concern
The directors have, at the time of approving the financial statements, a reasonable expectation that the
Company has adequate resources to continue in operational existence for the foreseeable future. Thus they
continue to adopt the going concern basis of accounting in preparing the financial statements.
1.4 Share-based payments
The Company issues equity-settled share-based payments to its directors, as well as employees (including
directors) of its subsidiary, Cambridge Cognition Limited. In accordance with FRS 20, for all grants of share
options and awards the cost of these payments is measured at fair value at the date of grant. Where
employees are rewarded using share-based payments, the fair values of employees’ services are determined
indirectly by reference to the fair value of the instrument granted to the employee. The fair value is appraised
at the grant date and excludes the impact of non-market vesting conditions. That fair value is expensed on a
straight-line basis over the vesting period for the related options based upon the Company’s estimate of the
shares that will eventually vest. The corresponding credit is to share-based payments reserve. The fair value
for directors and employees of the Company’s subsidiary is added to the cost of the investment in that
subsidiary. No expense is recognised for awards that do not ultimately vest as a result of the relevant
employee ceasing to be employed by the Group. Fair value is measured using an appropriate Option Pricing
Model.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to
the value of the shares issued are allocated to share capital with any excess being recorded as share premium.
1.5 Employee Benefit Trust
An Employee Benefit Trust (EBT) is maintained in order to facilitate the exercise of these share options. This is
aggregated into the parent company in accordance with UITF Abstract 38. The costs of purchasing own shares
held by the EBT are deducted from equity. Neither the purchase nor sale of own shares leads to a gain or loss
being recognised in the Company’s profit and loss account or statement of total recognised gains and losses.
When shares are subsequently transferred to employees for less than their purchase price the difference is a
realised loss recognised directly in reserves.
40
Cambridge Cognition Holdings plc
Notes to the parent company financial statements
2. Share based payments
The company has granted options to directors over ordinary shares. The vesting period ranges between 0 and 3
years. If the options remain unexercised after a period of 10 years from the date of the grant, the options
expire. Options are forfeited if the employee leaves the company before the options vest.
Movement in the number of share options outstanding and their related average weighted exercise prices are
as follows:
2014
No
Outstanding at beginning of year
Exercised
Granted
Forfeited
552,004
(45,451)
875,000
-
WAEP
pence
64
(1)
60
-
Outstanding at end of year
─────────
1,381,553
═════════
──────
64
══════
2013
No
WAEP
pence
-
-
898,798
(346,794)
─────────
552,004
═════════
-
-
66
68
──────
64
══════
Exercisable at period end
281,418
70
133,091
70
═════════
══════
═════════
══════
The fair value of options granted during the year are calculated using the Binomial Options model. The
weighted average fair value of options granted during the period was 10 pence. The significant inputs into the
model in respect of these options were the exercise price shown below, volatility of 40%, dividend yield of nil,
expected option life of between 2 and 5 years and an annual risk free rate of 1.9%.
The weighted average share price at the date of exercise of options during the year was £0.60.
At 31 December 2014 1,381,553 options remain outstanding (2013 : 552,004 options) with an exercise price
as follows:
Options over
Ordinary Shares
in the Company
Options over
Ordinary Shares
in the Company
Exercise Price
Pence
2014
No. of Options
2013
No. of Options
Granted April 2013
Granted April 2013
Granted September 2014
70
1
60
506,553
-
875,000
506,553
45,451
-
1,381,553
552,004
Employees of the company’s subsidiary, Cambridge Cognition Limited have also been granted options over the
Company’s shares. These are dealt with at note 25 to the consolidated financial statements.
41
Cambridge Cognition Holdings plc
Notes to the parent company financial statements
3. Fixed asset investments
Cost
At 1st January 2014
Additions
At 31 December 2014
Provisions for impairment
At 31 December 2013 and At 31 December 2014
Net Book value
At 31 December 2014
At 31 December 2013
Investment in
Subsidiaries
£'000
152
43
195
-
195
152
The following were subsidiary undertakings at the end of the year and have all been included in the
consolidated accounts.
Name
Country of
Operation
Cambridge Cognition Limited
England
Proportion of
Ownership and
Voting Power
Held
100%
Cambridge Cognition Trustees Limited
Cambridge Cognition LLC
England
USA
100%
100%
Nature of Business
Development and sale of
computerised neuropsychological
tests
Trustee company
Sales office
4. Debtors
Amounts due from subsidiary undertakings
Other debtors
5. Creditors : amounts falling due within one year
Trade creditors
Social security and other taxes
Other creditors
2014
£’000
4,570
9
2013
£'000
3,786
16
4,579
3,802
2014
£’000
2013
£'000
156
-
-
156
61
16
16
93
42
Cambridge Cognition Holdings plc
Notes to the parent company financial statements
6. Share capital
The details on the share capital of the Company are provided at note 21 to the Group’s accounts.
7. Reconciliation of Movement in Reserves and Shareholders’ Funds
On incorporation
Issue of shares
Share issue costs
Loan to Trustees of Employee
Benefit Trust
Provision for Share-based payment
Loss for the year
Called up
Share
Capital
£’000
-
169
-
-
-
-
Share
premium
Own
Shares
£’000
-
6,922
(587)
-
-
-
£’000
-
-
-
(204)
-
-
Share-
based
Payment
£’000
-
Profit and
Loss
£’000
-
-
-
-
166
-
-
-
-
Total
£’000
-
7,091
(587)
(204)
166
-
(1,104)
(1,104)
At 31 December 2013
169
6,335
(204)
166
(1,104)
5,362
At 1 January 2014
Issue of shares
Transfer on allocation of shares held
in trust
Provision for Share-based payment
Loss for the year
169
6,335
(204)
166
(1,104)
5,362
-
-
-
-
-
-
-
-
-
30
-
-
-
-
92
-
-
(30)
-
(795)
-
-
92
(795)
At 31 December 2014
169
6,335
(174)
258
(1,929)
4,659
43