Registered No: 8211361
Cambridge Cognition Holdings plc
Annual Report and Accounts
31 December 2016
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 STATEMENT OF FINANCIAL POSITION
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
PAGE
2
3-8
9-10
11-13
14-15
16-17
18
19
20
21
22-41
42
43
44-45
Cambridge Cognition Holdings plc
Corporate Directory
Directors:
Michael Lewis
Steven Powell
Nicholas Walters
Andrew Blackwell
Eric Dodd
Nicholas Kerton
(Non-Executive Chairman)
(Chief Executive Officer)
(Chief Financial Officer)
(Non-Executive)
(Non-Executive)
(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 Joint Broker
Joint 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
Dowgate Capital Stockbrokers Limited
82 St John Street
London
EC1M 4DZ
2
Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2016
CHIEF EXECUTIVE’S REVIEW
Key highlights
Revenue growth of 37% to £6.88m and first operating profit reported
First contracts won for new wearable and Recruit products
Business now targeting every stage of the drug development cycle in multiple disease areas
Oversubscribed placing raised £1.14m, and investment commitments fulfilled
Net cash of £2.38m (2015: £0.76m)
Overview
2016 was a year of profitable growth, cash generation and strategically significant achievement in both
technical and commercial development. Early in 2016 we made a number of important commitments to invest
in and advance our Company; the primary commitment being to invest in our sales infrastructure to accelerate
revenue growth. This was implemented to plan and resulted in an increase in both field and in-house sales
personnel in Europe and the USA. In parallel we launched several new products for application in
pharmaceutical clinical trials resulting in our broadest product portfolio to date.
Expansion of the sales team facilitated Group revenue growth of 37% driven by our core offerings of software
and services. Throughout the year we also diversified our scientific and clinical focus across a wider range of
neurological disorders, including Alzheimer’s disease, Multiple Sclerosis and Parkinson’s disease as well as
psychiatric disorders such as Schizophrenia and ADHD. Our existing core products are supported by depth of
data and peer reviewed publications across the breadth of these diseases and we have added a data analytics
capability and scientific consultancy to assist both researchers and pharmaceutical companies in their clinical
trials.
Another commitment was to develop and commercialise our technical innovation programmes to improve
clinical trial efficiency. As a result 2016 was our most productive R&D year to date with the highest number of
new products and technologies launched into our core business areas. This was achieved despite reducing the
overall R&D spend - £0.89m in 2016 compared to £1.30m in 2015.
Group financial results
£’000
Hardware
Software and services
Other
Group
2016
552
6,193
131
6,876
2015
329
4,592
121
5,042
The trading performance for the year was strong combining growth in revenue with a first reported operating
profit and positive cash generated from operations.
Revenue grew across all categories by £1.84m (37%). Software and Services continued to dominate
contributing 90% of total sales. Although sales of hardware increased in the year, this was attributable to one
contract and the underlying shift in product mix from hardware to higher margin software and services
continues in line with our long term strategy and following completion of the migration of our test products to
our Cantab Connect cloud platform.
Gross margins of 86% were slightly down on the 2015 level of 88%. This was due to the large hardware sale
noted above.
Despite the growth in our sales team, as well as other costs associated with a growing business, we were able
to restrict increases in administrative costs to a 4% year on year increase (£5.86m in 2016 compared to
£5.62m in 2015). One of the cost reductions has been in the area of R&D where spend has fallen to £0.89m in
2016 from £1.30m in 2015. This is in line with the decision taken last year to focus on commercialising our
new and emerging technologies through pharmaceutical sales channels and corporate partners.
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2016
Grant income of £0.09m (2015: £0.51m) fell significantly as the innovation model moves from direct
investment (even if grant supported) to collaborations and partnerships.
These factors combined to produce an operating profit of £0.12m. This contrasts with an operating loss in 2015
of £0.87m, or a £0.66m loss when the exceptional item is excluded.
The profit attributable to shareholders after tax credit and minority interests is £0.27m, which equates to
earnings per share for the year of 1.4 pence. This contrasts to a loss of 4.6 pence per share in 2015, or 3.4
pence per share when the exceptional item is excluded.
Following the result of the Brexit referendum, the value of the pound fell against most major currencies. The
Group generated 47% of its revenue in US dollars and 7% in Euros but has a natural hedge against dollar
revenues by way of its US based office and employee costs. The post Brexit decline in the value of the pound
is estimated to have increased revenue by £0.23m and increased profit for the year by £0.10m when compared
to results on a constant currency basis.
The Group generates the majority of its cash from operations, further supplemented by grant income and R&D
taxation credits. Accordingly, profit before tax excluding non-cash items such as depreciation and share-based
payments will broadly equate to cash income, subject to working capital movements. Despite the revenue
growth, working capital in 2016 was managed such that operations generated £0.28m of cash from a profit
excluding depreciation and share-based payments of £0.27m. Tax credits in respect of both 2014 and 2015
were received during the year, meaning that operating activities generated £0.47m of cash. This, along with
the net placing proceeds of £1.14m drove net cash to a year-end position of £2.38m, an increase of £1.62m
over the previous year end.
Operational Development
Following a review of our sales and marketing resources, we identified that we could reduce future costs and
realise efficiency gains in sales by combining the previously separate business units of Pharmaceutical Clinical
Trials, Academic Research and Healthcare into a single Product group.
The technology and innovation team now report as a separate Innovations group and has been tasked with
making a growing contribution to income via licensing and collaborative agreements.
For comparative purposes we have set out the results of the three business units as reported previously in Note
6 to the Accounts but we will report these as a single Products division next year.
Products
£’000
Pharma Clinical
Academic
Healthcare
Group
2016
4,799
2,001
76
6,876
2015
3,395
1,544
103
5,042
During the year we announced additions to our product portfolio, based on the CANTAB cognitive assessment
software, which have extended our product offer across all stages of the drug development cycle.
CANTAB Recruit is an online patient recruitment portal that accelerates the identification of qualified
participants for both academic studies and clinical trials. This is key to the success of clinical trials as one-third
of total trial costs are within the recruitment phase and 80% of clinical trials are delayed due to recruitment
issues. The first sale of this product was secured within five months of its launch.
The 41% growth in our Pharmaceutical Clinical Trials business is a reflection of both underlying growth as well
as large contract wins such as the £2.82m double success announced in September 2016. The expansion of
the sales team in both the US and Europe is beginning to generate results with both the order book and
pipeline of opportunities increasing over the same time last year.
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2016
The Academic Research business grew 30% this year and our products have now been used in over 800
universities and research institutions worldwide, leading to over 2,000 peer-reviewed publications and over
100,000 citations. We secured our first sale to an international biobank during the year. Biobanks collect large
amounts of data which they catalogue and make available to researchers across many fields. Accordingly, they
play a crucial role in biomedical research and we believe similar opportunities can be pursued. Overall,
revenues in the Academic Research sector continue to be an encouraging mix of returning customers and new
opportunities being developed.
Healthcare Technologies remain an important part of our business both in the UK and overseas markets.
CANTAB Mobile, already a Class II Medical Device in the UK, was awarded 510(k) clearance from the United
States Food and Drug Administration (‘FDA’), enabling it to be marketed as a medical device in the United
States. Significant interest has developed in both primary and secondary markets in the US for this iPad-based
product designed to detect clinically relevant memory impairment in older adults. A follow on submission of
CANTAB Insight will further add to the product suite. Our main focus continues to be near patient testing in
primary care both in public service health but also in private clinics and occupational health providers.
Innovation
With the creation of the Innovation group, we have established a cross-functional activity with all R&D projects
now targeted with specific, near term commercial goals. Each project is not only focused on a specific sales
channel but also has to satisfy a pre-determined customer need. In prior years innovation projects were not
always given such clear commercial direction with the result we have now accelerated the time to get new
products to market.
The most obvious example of the effectiveness of this is in the development of a novel digital application that
provides real-time measurement of mental health. Mental health disorders are characterised by symptoms that
can fluctuate regularly, which can create problems for healthcare professionals who see patients infrequently
and have little insight to their patients’ health in everyday life. By using wearables and smart devices to
monitor patients’ health more regularly, a richer and more natural profile of mental health can be developed
and used to improve the understanding, diagnosis and treatment of mental health disorders. This near-user
technology provides greater and more meaningful cognitive data (including, for example, sleep patterns) whilst
reducing the need for clinical visits.
The original concept was conceived late in 2015, a development partner was sourced in March 2016, the
feasibility study completed by August 2016 and the first commercial order for a pilot study was received as
early as February 2017. The pilot study uses a specially designed application on the Apple Watch to monitor
and assess cognitive function in patients with major depressive disorder and the next step is an expanded
study with greater revenue potential.
However, perhaps the most disruptive technology innovation was announced in March 2017 with the launch of
web based testing which enables researchers to run near-patient testing of participants remotely. The
innovation will allow studies to gather digital cognitive biomarkers at frequent time-points for more accurate
and rapid data to aid earlier decision-making and conduct large-scale research projects virtually, reducing the
overall running costs of studies using proven neuropsychological assessments.
Current and future innovations will support one of the Group’s aims of expanding our IP portfolio across disease
areas and all stages of the drug development cycle. It is these IP products, along with the Group’s expertise in
tailoring and applying them to specific situations that will create greater value in the Group.
Outlook
Our Company made significant commercial and technical progress in 2016. The current financial year has
started well, with continued progress towards both our short and long term goals. The Company is well-
positioned to pursue appropriate opportunities for partnerships that drive organic growth and moves the
Company into sustainable profitability.
Business partnerships, as exemplified by the recently announced collaboration with Takeda, demonstrate that
the Pharmaceutical sector is willing to invest in the validation and adoption of digital health products. We are
well placed to take advantage of these opportunities and lead some of the thinking within the industry as to
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2016
how to deploy disruptive cognitive assessment technologies. Commercialising our IP, both through traditional
sales routes and through licensing our technology and IP for use in customers’ bespoke products, remains key
for future growth.
There are, of course, wider macro economic uncertainties of note when planning for 2017 and beyond. The
shape of the United Kingdom’s future relationship with the European Union is not yet known and is unlikely to
be known and in The US there is likely to be a significant impact on the pharmaceutical and healthcare sectors
arising from the political change brought about by the new President.
We will continue to work closely with our customers to understand developments which should position the
company well for future growth. It is our goal to establish the Group as an innovative leader in cognitive
neuroscience and innovation. Whilst there is still work to do, progress has been encouraging and we look
forward to another productive and value-enhancing year.
6
Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2016
PRINCIPAL RISKS AND UNCERTAINTIES
The Group is exposed to a number of risks and uncertainties in undertaking 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, with 2016 being the Group’s first profitable year. Profitability
depends on the success and market acceptance of current and new products and investment in sales
infrastructure, without which the Group will make losses and consume cash. Until the profitable
commercialisation of new products and markets is proved sustainable the Group will carefully monitor costs and
cash flow with reference to ensuring the Group is able to continue as a going concern. In particular the rate of
investment in the Healthcare Technology business will be limited to the extent of any surplus cash reserves of
the Group and the positive cash flow derived from the Pharmaceutical Clinical Trials and Academic Research
businesses.
The directors have prepared a strategic plan, including financial forecasts and cash flows, for the period to
December 2018. The monitoring of cash and future projected cash flows, as well as the sales pipeline is
included in the monthly finance report to the Board.
As noted in the Strategic Report, the UK’s future relationship with the EU is unclear. Currently, sales to the EU
amount to 16%, based on 2016 sales, however, we plan to grow in this market so we will continue to monitor
developments closely and respond accordingly.
Product and market development
Future success of the Group is principally focussed on growth of near term revenues through existing products
and in particular their application in Pharmaceutical Clinical Trials and Academic Research as well as the
successful commercialisation of innovative new products and services. The ability to transition current products
to new markets and the development of new products and services for both existing and new markets 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 and this could limit future
growth prospects.
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 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
competitive and at the forefront of the sector. The Group files patent applications as it strives to protect and
enhance its intellectual property.
Growth management
The Group's ability to manage its growth effectively requires it to continue to improve its operations, financial
and management controls, reporting systems and procedures and to train, motivate and manage its
employees. During the year, significant recruitment in sales has occurred. The Group’s future success depends
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 2016 the two biggest customers accounted for 21% and 11% (2015: 17% and 13%)
of the total revenue of the business although no other customer accounted for more than 10%. Measures are
being taken to continue to diversify the customer base by growing revenues in other areas as the loss of a key
customer could 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.
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2016
KEY PERFORMANCE INDICATORS
The directors have monitored the performance of the Group with particular reference to the key performance
indicators being revenue and clinical order pipeline, operating margin and cash flow. An overview of the
financial results for the year is provided earlier in this report.
KPIs at a glance:
KPI
2016 result
2015 result
Movement
Summary management
commentary
Revenue
£6.88m
£5.04m
Clinical order pipeline
£2.68m
£2.52m
Operating margin before
exceptional item
2%
(13%)
£1.84m
increase
(37%)
£0.16m
increase
(6%)
15
percentage
point
increase
Cash flow
£1.57m
inflow
£0.76m outflow
Increase in
inflow of
£2.33m
and
software
Revenue growth has been led by
our
service
products, which have grown by
£1.60m in the year. Revenue
from our other products also
grew.
Despite increased revenues, the
been
pipeline
strengthened.
value
has
The increase represents a move
into profitability which was led by
the increased revenues above.
Administrative costs grew by
£0.24m (4%) and our direct
income from grants has fallen by
£0.42m.
Key elements of inflow are the
share placing of £1.14m and
cash from operations of £0.47m
(including receipt of R&D tax
credits of £0.19m).
The Group monitors progress on a regular basis and will add to the key performance indicators as
circumstances dictate. The directors value greatly the progress and innovation demonstrated by the Group,
but this cannot be readily measured in the style of a KPI. The directors are pleased with the innovation
successes during 2016, and the plans for continued innovation going forward.
Approved by the Board of Directors and signed on behalf of the Board.
Steven Powell
Chief Executive Officer
28th March 2017
8
Cambridge Cognition Holdings plc
Report of the Directors for the year ended 31 December 2016
The Directors present their report on the affairs of the Group and Company together with the financial
statements for the year to 31 December 2016. 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’) is a neuroscience
digital health company specialising in the precise measurement of clinical outcomes in neurological disorders. It
develops and markets validated near patient assessment products using cognition as a biomarker to improve
understanding, diagnosis and treatment in brain health worldwide.
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. In April 2016, 3,386,111
Ordinary shares were issued pursuant to a share placement priced at £0.37 per share.
DIRECTORS
The Directors who held office at 31 December 2016 and their interest in the share capital of the Company were:
Name
Michael Lewis (Chairman)
Steven Powell
Nicholas Walters
Andrew Blackwell
Eric Dodd
Nicholas Kerton
Ordinary Shares of 1p each
2015
2016
33,375
70,541
186,937
131,095
-
27,969
-
119,369
131,095
-
172,900
172,900
On 15 February 2016, Steven Powell was appointed Chief Executive Officer. On the same date, Nicholas Kerton
left his post as Chief Executive Officer but remains on the Board as a Non-Executive Director.
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 Accounting Standards and applicable
laws including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’. Under company law the
Directors must not approve the financial statements unless they are satisfied that they give a true and fair view
of the state of affairs 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;
9
Cambridge Cognition Holdings plc
Report of the Directors for the year ended 31 December 2016
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
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 2016 were:
Name
Euroblue Investments Limited
Octopus Investments Nominees Ltd
Michael Buxton
Hargreave Hale
AXA Investment Mangers UK Limited
LGT Capital Partners AG
WH Ireland
Artemis Fund Managers Ltd
AUDITOR
No. of
Ordinary
Shares
4,312,714
2,941,782
2,889,589
1,877,398
979,457
863,470
857,620
714,285
%
21.1
14.4
14.1
9.2
4.8
4.2
4.2
3.5
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
28th March 2017
10
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2016
The Directors are committed to a high standard of corporate governance and although the Company is not
obliged to comply with the UK Corporate Governance Code, the twelve principles of good governance produced
by the Quoted Companies Alliance have been adopted by the Company as far as is practicable and appropriate
given its size, stage of development and status as a Company whose securities are traded on AIM. Without
such a sound governance platform the Company will be unable to achieve the strategic ambitions set out in the
Strategic Report.
The Board
The Board of Cambridge Cognition Holdings plc is responsible for the long term financial success of the
business. 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 currently Executive Chairman of iPlato an m-Health provider with 9M patient connections in
the UK, Chairman of Haem02, a biotechnology company developing artificial human haemoglobin, and
Chairman of Glyconics Ltd, developing diagnostics for COPD director of Mikale Ltd. Mr Lewis is also a lecturer,
speaker and invited Chair of innovation sessions at NHS Expo, Chairs the KTN Medtech group, and was past
Chair of the Assisted Living Innovation platform. He previously has held senior roles at Gambro (Brussels),
Boston Scientific (Paris), C.R. Bard (New Jersey), Sybron (Switzerland) and Becton Dickinson (UK).
Dr. Steven Powell – Chief Executive Officer – Dr Powell graduated in microbiology from the University of Wales
and was awarded a PhD from the University of Aberdeen. He has over thirty years operational and investment
experience in pharmaceutical and healthcare companies in the UK, USA and Scandinavia. Including his current
role at Cambridge Cognition he has held five CEO roles, three in public companies. In 2003, he joined Gilde
Healthcare, a pan-European life sciences investment fund as a partner and remained an adviser to the fund
until 2016.
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.
Dr. Andrew Blackwell – Non-Executive Director - Following an MA and a PhD in psychology from the University
of St Andrews, Dr Blackwell undertook postdoctoral
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. Dr Blackwell
became a Non-Executive Director in July 2015.
training
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, Morse plc, Stanmore Implants
Worldwide Holdings Limited and KBC plc. Mr Dodd is presently Chief Financial Officer at Iptor plc, a private-
equity backed technology company.
Dr. Nicholas Kerton – Non-Executive Director – 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
11
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2016
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.
The Board is responsible for the long term success of the Company. The Chairman’s role is to ensure the Board
operates effectively and functions in such a way as to meet its objectives each year. The Chief Executive’s role
is to ensure the executive team implements and successfully delivers on the strategy to ensure the long term
success of the Company. The Non-Executive Directors are expected to offer constructive challenge to the
executives and input to the strategic thinking as well as contribute to the working of the three committees
detailed below.
Board Committees
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, Nicholas Kerton and Andrew Blackwell.
The Nomination Committee is comprised of Andrew Blackwell (Chair), Michael Lewis, Eric Dodd and Nicholas
Kerton. The Remuneration Committee is comprised of Michael Lewis (Chair), Eric Dodd, Nicholas Kerton and
Andrew Blackwell.
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
systems of risk management and internal control. 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 main issues considered by the Committee during the year in relation to the financial statements included
the appropriateness of revenue recognition policies, adequacy of systems of internal control and going concern.
None of these were highlighted by the auditors as being an area of high risk and in the case of going concern,
with the successful placing in April 2016 and the Company now trading profitably, any lingering doubts have
been removed.
No significant fees were paid in the year to the auditors for services other than audit and tax compliance and
related work. The independence and objectivity of the auditors is important to the Company and the
Committee keeps track of fees paid to the auditors for any change in this position. Periodically the Audit
Committee chairman speaks directly with the audit partner to set out the needs of the committee and to
receive any feedback without the presence of any executive directors.
The Committee also commissioned a risk management review in the year and a report was tabled in July 2016.
As a consequence of the review and subsequent debate the Company’s risk management strategy properly
addresses the main risk areas.
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. Every director appointed by the Board is subject to
re-election by the shareholders at the AGM following their appointment and every third AGM thereafter.
The Remuneration Committee’s responsibilities include determining the remuneration of the executive
directors, reviewing the design of all share incentive plans and determining 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.
12
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2016
Board and Committee attendance during 2016 was as follows:
Board
Audit
Nomination
Remuneration
No. of Meetings
M. Lewis
Dr S. Powell
N. Walters
Dr A. Blackwell
E. Dodd
Dr N. Kerton
10
10
10
10
10
10
9
2
2
-
-
2
2
2
1
1
-
-
1
1
1
2
2
-
-
2
2
2
13
Cambridge Cognition Holdings plc
Remuneration Report for the year ended 31 December 2016
The Company has established a Remuneration Committee. The members of the Remuneration Committee are:
Michael Lewis (Chair)
Eric Dodd
Nicholas Kerton
Andrew Blackwell
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:
Salary
/Fee
£’000
Benefits
Bonus
Pension
£’000
£’000
£’000
2016
Total
£’000
2015
Total
£’000
Current Directors:
Remuneration as Executives:
Steven Powell*
Nicholas Walters
Nicholas Kerton**
Andrew Blackwell***
Remuneration as Non-Executives:
Michael Lewis
Eric Dodd
Andrew Blackwell***
Nicholas Kerton**
Total
131
48
17
-
44
30
30
27
327
-
-
-
-
-
-
-
-
-
43
29
-
-
-
-
-
-
72
-
-
-
-
-
-
-
-
-
174
77
17
-
44
30
30
27
399
10
48
153
55
44
30
15
-
355
* Appointed 6 July 2015
** Resigned as Executive Director and appointed as a Non-Executive Director on 15 February 2016
***Resigned as an Executive Director and appointed as a Non-Executive Director on 1 July 2015
Payments were also made to third parties for the services of Steven Powell, Nicholas Walters and Nicholas
Kerton. See note 28 to the consolidated financial statements.
14
Cambridge Cognition Holdings plc
Remuneration Report for the year ended 31 December 2016
Share Options:
Andrew Blackwell
Granted
Apr 2013
Apr 2013
Apr 2013
Number of
Options
112,568
112,568
112,567
Performance
criteria
Vested
(1)
(2)
Exercise price
in pence
70 pence
70 pence
70 pence
Exercise period
To Apr 2023
Jul 2017 - Apr 2023
Jul 2018 – Apr 2023
Nicholas Kerton
Sept 2014
75,000
Vested (3)
60 pence
To 30 Sep 2024
Steven Powell
July 2015
July 2015
Nov 2016
62,500
62,500
550,000
Nicholas Walters
Nov 2016
150,000
(4)
(5)
(6)
(6)
82.5 pence
82.5 pence
1 penny
Dec 2017 - July 2025
Dec 2017 - July 2025
Nov 2019 – Nov 2026
1 penny
Nov 2019 – Nov 2026
Performance Criteria
(1) Options will vest if Dr Blackwell continues to be engaged as a non-executive Director until 1 July 2017
(2) Options will vest if Dr Blackwell continues to be engaged as a non-executive Director until 1 July 2018
(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
90 pence. This condition was fulfilled on 1 October 2015
(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
120 pence. This condition must be met prior to 31 December 2017
(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. This condition must be met prior to 31 December 2017
(6) 55% of these options will vest if the average closing mid-market price of an Ordinary Share for the
final 10 trading days of 2018 is greater than 140 pence per share. A pro rate sliding scale will apply if
the average closing mid-market price of an Ordinary Share for the final 10 trading days of 2018 is
between 100 pence and 140 pence. 45% of the options granted will vest if the cumulative revenue of
the Company reported in the audited accounts for the three financial years ended 31 December 2018
exceeds £23m.
On 31 December 2016, 650,000 options in favour of Nicholas Kerton were forfeited as the performance
criteria of a share price of at least 115 pence for two consecutive dealing days before 31 December 2016
was not met. Also, on 31 December 2016, 150,000 options in favour of Nicholas Walters were forfeited as
the performance criteria of a share price of at least 120 pence for two consecutive dealing days before 31
December 2016 was not met.
15
Cambridge Cognition Holdings plc
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 2016
which comprise the consolidated statement of comprehensive income, the consolidated and parent company
statements of financial position, the consolidated and parent company statements of changes in equity, the
consolidated statement of cash flows and the 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 9 and 10, 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 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 2016 and of the group's profit 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 matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic Report and Directors' Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
the Strategic Report and Directors' Report has been prepared in accordance with applicable legal
requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and parent company and its environment obtained in
the course of the audit, we have not identified any material misstatements in the Strategic Report and
Directors' Report.
16
Cambridge Cognition Holdings plc
Independent Auditor’s Report to the Members of Cambridge Cognition
Holdings plc
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.
David Newstead
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
Date:
17
Cambridge Cognition Holdings plc
Consolidated Statement of Comprehensive Income
Notes
Year to
31 December
2016
Year to
31 December
2015
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating profit/ (loss) before exceptional item
Exceptional item
Profit/ (loss) before tax
Income tax
Profit/ (loss) for the year
Attributable to:
Equity holders in the Parent
Non-controlling interest
Earnings per share (pence)
Basic and diluted earnings per share
Basic and diluted earnings per share excluding exceptional items
5
7
8
9
12
13
£’000
6,876
(986)
5,890
(5,860)
86
£’000
5,042
(590)
4,452
(5,620)
509
116
(659)
-
(208)
116
106
222
272
(50)
222
1.4
1.4
(867)
85
(782)
(782)
-
(782)
(4.6)
(3.4)
Other comprehensive income
Profit/ (loss) for the year
Items that may subsequently be reclassified to profit or
loss
Exchange differences on translation of foreign operations
Total comprehensive income for the year
222
(782)
4
226
-
(782)
All items of other comprehensive income are attributable to the equity holders in the Parent.
The above results relate to continuing operations.
18
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 reserves
Own shares
Retained earnings
Equity attributable to Parent
Non-controlling interest
Total equity
Notes
At 31 December
2016
At 31 December
2015
£'000
£’000
14
15
17
18
352
117
469
37
2,177
2,384
352
141
493
58
1,641
756
4,598
2,455
5,067
2,948
20
2,206
1,535
21
22
2,206
1,535
204
7,517
5,985
(47)
170
6,412
5,981
(51)
(10,748)
(11,099)
2,911
(50)
1,413
-
2,861
1,413
Total liabilities and equity
5,067
2,948
The financial statements on pages 16 to 41 were approved by the Board of Directors and authorised for issue
on 28th March 2017 and were signed on its behalf by:
Steven Powell
Chief Executive Officer
19
Cambridge Cognition Holdings plc
Consolidated statement of changes in equity
Balance at
1 January 2015
Total comprehensive
income for the year
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 2015
Total comprehensive
income for the year
Issue of new share
capital
Share issue costs
Transfer on allocation of
shares held in trust
Credit to equity for
equity-settled share-
based payments
Transactions with
owners
Equity attributable to
Parent
Non-controlling interest
Balance at
31 December 2016
Share
capital
Share
premium
Other
reserves
Own
shares
Retained
earnings
£'000
£'000
£'000
£'000
£'000
Non-
controlling
interest
£'000
169
6,335
5,981
(174)
(10,262)
-
1
-
-
1
-
77
-
-
77
-
-
-
-
-
-
-
(782)
-
123
(123)
-
68
123
(55)
-
-
-
-
-
-
Total
£'000
2,049
(782)
78
-
68
146
170
6,412
5,981
(51)
(11,099)
-
1,413
272
(50)
226
-
-
4
34
1,219
-
-
-
(114)
-
-
34
1,105
-
-
-
-
-
-
-
-
4
-
4
-
-
(4)
83
79
-
-
-
-
-
-
1,253
(114)
-
83
1,222
2,911
204
7,517
5,985
(47)
(10,748)
-
-
-
-
-
(50)
(50)
204
7,517
5,985
(47)
(10,748)
(50)
2,861
20
Cambridge Cognition Holdings plc
Consolidated statement of cash flows
Notes
Year to
31 December
2016
Year to
31 December
2015
£'000
£’000
Net cash flows from operating activities
23
473
(708)
Investing activities
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 increase/ (decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Exchange differences on cash and cash equivalents
Cash and cash equivalents at end of year
23
(44)
(44)
1,139
1,139
1,568
756
60
2,384
(133)
(133)
78
78
(763)
1,519
-
756
21
Cambridge Cognition Holdings plc
Notes to the financial statements
1. General information
Cambridge Cognition Holdings plc (‘the Company’) and its subsidiaries (together, ‘the Group’) is a neuroscience
digital health company specialising in the precise measurement of clinical outcomes in neurological disorders. It
develops and markets validated, near patient assessment products using cognition as a biomarker to improve
understanding, diagnosis and treatment in brain health.
The Company is a public limited company which is listed on the Alternative Investment Market (‘AIM’) of the
London Stock Exchange (symbol: COG) and is incorporated and domiciled in the UK. The address of its
registered office is Tunbridge Court, Tunbridge Lane, Bottisham, Cambridge, CB25 9TU.
In the period since the principal trading company, Cambridge Cognition Limited was formed 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 2015. The
financial statements have been prepared under the historical cost convention.
The subsidiary undertakings included within the consolidated financial statements as at 31 December 2016 are
given in note 16.
2. Outlook for adoption of future Standards (new and amended)
No standards or interpretations that impacted the Group financial statements came into effect during the year.
At the date of authorisation of the Consolidated Financial Statements, the following Standards and
Interpretations which have not been applied in the Consolidated Financial Statements 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 2018)
IFRS 16 Leases (effective 1 January 2019)
Management has not yet completed detailed analysis of how these new standards may impact the calculation
and presentation of the Group’s financial statements. It is not anticipated that any of these standards will be
early adopted.
All other Standards and Interpretations that are in issue but not yet effected are considered to have no impact
on the Group as they do not apply to the Group at present.
3. Significant accounting policies
3.1 Basis of consolidation
The consolidated financial statements incorporate the results of the Company and of its subsidiaries.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Where a
subsidiary is not wholly-owned, it is consolidated in full, and the percentage not owned by the Group is
recorded as a non-controlling interest.
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 reached their conclusion following the successful placing of Ordinary shares in April 2016 as well
as profitability and cash flow generation at both operating and overall levels in 2016.
22
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.3 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 ‘Accrued income’. Revenue invoiced but not yet recognised in the Statement of
Comprehensive Income is held on the Statement of Financial Position within ‘Deferred revenue’.
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, which can include straight-line recognition
or be subject to achieving milestones set out in the related service agreements, provided a right to
consideration has been established. For example, study management services will normally be recognised over
the length of the contract, whereas 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.
3.4 Grants
Grants of a revenue nature are credited to profit and loss to match with the expenses incurred.
3.5 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.
23
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.6 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 the
Company 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.
On consolidation, assets and liabilities have been translated into the UK pound at the closing rate at the
reporting date. Income and expenses have been translated into UK pound at the average rate over the
reporting period. Exchange differences are charged or credited to other comprehensive income and recognised
in the currency translation reserve in equity.
3.7 Post employment benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
3.8 Exceptional items
Where, in the opinion of the Directors, an event or a series of closely linked events that are outside the normal
operations of the business have a material impact on the operating result, the impact of this event will be
disclosed separately on the face of the income statement. Other key metrics, for example earnings per share,
may also include a distinction which excludes any exceptional items. In all cases, amounts will be shown both
excluding and including exceptional items.
3.9 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.
24
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.10 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.
3.11 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 and equipment
Leasehold improvements
-
-
25% - 33% per annum straight line
straight line over the lesser of 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.
(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.
3.12 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 the First-In-First-Out 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.
3.13 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.
25
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.13 Financial instruments (continued)
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.
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 as 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.
26
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.14 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.
3.15 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.
Revenue recognition
Trading operations within the Group recognise revenue with regard to amounts chargeable to customers under
service 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. See note 14.
Capitalisation of development costs
The point at which development costs meet the criteria for capitalisation is critically dependent on management
judgement of the probability of future economic benefits. No development was completed in the year ended 31
December 2016 whose benefits could be reliably evaluated separate from existing revenue streams. No
development costs have therefore been capitalised during 2016 (2015: £nil).
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.
27
Cambridge Cognition Holdings plc
Notes to the financial statements
5. Revenue
An analysis of revenue by reportable business unit is as follows:
Pharmaceutical Clinical Trials
Academic Research
Healthcare Technology
2016
£'000
4,799
2,001
76
6,876
An analysis of the Group’s revenue for each major product and service category is as follows:
Hardware
Software and services
Other
6. Business and geographical segments
2016
£'000
552
6,193
131
6,876
2015
£'000
3,395
1,544
103
5,042
2015
£'000
329
4,592
121
5,042
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 three types of market in which the Group operates. The Group’s
reportable segments under IFRS 8 are therefore as follows:
Pharmaceutical Clinical Trials: Products and services for use in regulated pharmaceutical clinical trials
Academic Research: Cognitive test products for researchers working in a non-regulated environment,
typically in academia
Healthcare Technology: Medical software for use in healthcare delivery settings
28
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 profit/ (loss)
Central costs
Other income
Operating profit
Tax
Profit after tax
Revenue
External sales
Result
Segment profit/ (loss)
Central costs
Other income
Operating (loss) before exceptional item
Exceptional item
Operating (loss) after exceptional item and (loss)
before tax
Tax
(Loss) after tax
Pharmaceutical
Clinical Trials
2016
£'000
Academic
Research
2016
£'000
Healthcare
Technology
2016
£'000
Consolidated
2016
£'000
4,799
2,001
76
6,876
1,060
411
(797)
674
(644)
86
116
106
222
Pharmaceutical
Clinical Trials
2015
£'000
Academic
Research
2015
£'000
Healthcare
Technology
2015
£'000
Consolidated
2015
£'000
3,395
1,544
103
5,042
197
303
(1,102)
(602)
(566)
509
(659)
(208)
(867)
85
(782)
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 with an allocation of support function costs.
Central costs represent the Company’s corporate costs. This measure is reported to the Chief Executive for the
purpose of resource allocation and assessment of segment performance.
29
Cambridge Cognition Holdings plc
Notes to the financial statements
6. Business and geographical segments (continued)
Segment net assets
Pharmaceutical Clinical Trials
Academic Research
Healthcare Technology
Total allocated assets
Unallocated assets
Consolidated total assets
2016
£'000
969
794
13
1,776
3,291
5,067
2015
£'000
895
510
12
1,417
1,531
2,948
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 from external customers by geographical location is detailed below:
United Kingdom
United States of America
European Union
Rest of world
Information about major customers
2016
£'000
746
4,042
1,101
987
6,876
2015
£'000
1,054
2,620
785
583
5,042
Revenue amounting to £1,440,000 and £745,000 (2015: £854,000 and £660,000) of reported sales can be
attributed to two customers who each accounted for more than 10% of reported revenue for the related year.
Both these customers were in the Pharmaceutical Clinical Trials business unit. No other customers accounted
for more than 10 per cent of reported revenue.
7. Other operating income
Other operating income is made up of the following:
Grant income
2016
£'000
2015
£'000
86
509
8. Operating profit/(loss) before exceptional item
Operating profit/(loss) before exceptional item has been arrived at after charging/ (crediting):
Net foreign exchange (gains)
Research and development costs
Depreciation of property, plant and equipment
Staff costs (see note 11)
2016
£'000
(164)
890
68
3,810
2015
£'000
(18)
1,304
56
3,587
30
Cambridge Cognition Holdings plc
Notes to the financial statements
9. Exceptional item
In the final quarter of 2015, the Company investigated the possibility of acquiring a US based Group. The
acquisition was not completed. Expenses in 2015, which principally related to professional fees, totalled
£208,000. As these expenses are of a magnitude and nature that the Directors consider to be outside of the
Group’s normal operating business, they have been separately disclosed as an exceptional item.
10. 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
Audit-related assurance services
Taxation compliance services
Other taxation advisory services
Total non-audit fees
Fees payable to affiliate firms of the Company’s auditor:
Taxation compliance services
Other services
Total fees payable to affiliate firms of the Company’s auditor
11. Staff costs
The average monthly number of employees (including executive directors) was:
Operations
Sales and 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)
2016
£'000
2015
£'000
14
21
35
7
8
10
25
14
-
14
12
18
30
7
6
-
13
-
11
11
2016
Number
2015
Number
33
14
12
59
2016
£'000
3,280
277
170
83
3,810
41
9
13
63
2015
£'000
3,067
269
183
68
3,587
31
Cambridge Cognition Holdings plc
Notes to the financial statements
12. Taxation
Corporation tax:
Current year
Adjustments in respect of prior years
Deferred tax (see note 19)
Total tax (credit)
2016
£'000
2015
£'000
-
(106)
(106)
-
(106)
-
(85)
(85)
-
(85)
Corporation tax is calculated at 20.00% (2015: 20.25%) 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:
Profit/(loss) before tax on continuing operations
Tax at the UK corporation tax rate of 20.00%
(2015: 20.25%)
Expenses not deductible for tax purposes
Deduction on exercise of share options
Movement in unprovided deferred tax
Adjustment in respect of prior years
Tax (credit) for the year
2016
£’000
2015
£'000
116
(867)
23
40
(6)
(57)
(106)
(106)
(176)
72
(45)
149
(85)
(85)
The credit in respect of prior years relates to the receipt of R&D tax credits in respect of 2015 (2015: in respect
of 2014). No claim has yet been made for 2016 and no credit has been recognised in the financial statements.
13. Earnings per share
The calculation of the basic and diluted earnings per share (“EPS”) is based on the following data:
Earnings
Earnings for the purposes of basic and diluted EPS per share being net profit/
(loss) attributable to owners of the Company
2016
£'000
2015
£'000
272
(782)
Earnings for the purposes of basic and diluted EPS excluding exceptional item
272
(574)
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS
2016
'000
19,402
2015
'000
16,831
Weighted average number of ordinary shares for the purposes of diluted EPS
19,473
16,831
For 2016, the impact of diluted shares is so minimal that there is no impact on EPS when rounded to 0.1 pence.
For 2015, the effect of options would be to reduce the loss per share and as such the diluted loss per share is
the same as the basic loss per share.
32
Cambridge Cognition Holdings plc
Notes to the financial statements
14. Goodwill
Cost and net book value
At 1 January 2016 and 31 December 2016
At 1 January 2015 and 31 December 2015
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 Research.
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 2016 the Academic business CGU produced a segment profit of
£411,000 (see note 6) and with encouraging prospects for 2016 and beyond, the carrying value of goodwill is
fully supported by the Academic results and no impairment provision is required.
15. Property, plant and equipment
Leasehold
Improvements
£'000
Fixtures
and fittings
£'000
Total
£'000
Cost
At 1 January 2015
Additions
Disposals
At 31 December 2015
At 1 January 2016
Additions
Disposals
At 31 December 2016
Depreciation
At 1 January 2015
Charge for the year
Disposals
At 31 December 2015
At 1 January 2016
Charge for the year
Disposals
At 31 December 2016
Net Book value
At 31 December 2016
At 31 December 2015
38
38
-
76
76
-
-
76
38
9
-
47
47
13
-
60
16
29
393
95
(27)
461
461
45
(2)
504
329
47
(27)
349
349
55
(1)
403
101
112
431
133
(27)
537
537
45
(2)
580
367
56
(27)
396
396
68
(1)
463
117
141
33
Cambridge Cognition Holdings plc
Notes to the financial statements
16. Subsidiaries and joint ventures
Details of the Company’s subsidiaries at 31 December 2016 are as follows:
Name
Place of
incorporation
(or registration)
and operation
Cambridge Cognition Limited
United Kingdom
Cambridge Cognition Trustees Limited
United Kingdom
Cambridge Cognition LLC
Delaware, United
States of America
Cantab Corporate Health Limited
United Kingdom
Cognition Kit Limited
United Kingdom
Proportion
of
ownership
interest
%
100%
Proportion
of
voting
power held
%
100%
100%
100%
70%
50%
100%
100%
70%
50%
Cognition Kit Limited was incorporated on 21 March 2016. For the period to 31 December 2016, and as at 31
December 2016, the results and assets of Cognition Kit Limited are immaterial to the Group. Accordingly,
detailed joint ventures disclosures have not been presented.
All the above Companies, except Cambridge Cognition Limited, are held via Cambridge Cognition Limited.
17. Inventories
Finished goods and goods for resale
2016
£'000
2015
£'000
37
58
During the year inventories with a total value of £343,000 (2015: £234,000) were included in the income
statement as an expense.
34
Cambridge Cognition Holdings plc
Notes to the financial statements
18. Trade and other receivables
Amount receivable for the sale of goods and services
Allowance for doubtful debts
Prepayments and accrued income
Other receivables
2016
£'000
1,454
(30)
1,424
596
157
2,177
2015
£'000
1,008
(20)
988
226
427
1,641
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 which are past due at the year-end (see below for aged
analysis) 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 66 days in 2016 (2015: 59 days).
Ageing of past due but not impaired receivables:
31-60 days
61-90 days
91-120 days
121 or more days
Of the £191k aged 121 or more days, £162k was collected in January 2017.
Movement in the allowance for doubtful debts:
Balance at the beginning of the year
Increase in provision
Balance at the end of the year
2016
£'000
97
219
27
191
534
2015
£'000
168
126
11
37
342
2016
£'000
20
10
30
2015
£'000
20
-
20
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 £8.5 million (2015: £8.4 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.
35
Cambridge Cognition Holdings plc
Notes to the financial statements
20. Trade and other payables
Amounts falling due within one year
Trade payables
Social security and other taxes
Other payables
Accruals and deferred income
2016
£'000
265
71
20
1,850
2,206
2015
£'000
486
70
24
955
1,535
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
The average credit period taken for trade purchases is 28 days (2015: 44 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
20,429,235 (2015: 17,043,124) Ordinary Shares of £0.01 each
2016
£’000
2015
£’000
204
170
In April 2016, 3,386,111 Ordinary shares were issued pursuant to a share placement priced at £0.37 per share.
22. Own Shares
Own Shares Reserve
2016
£’000
2015
£’000
47
51
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 2016 was 112,193 (2015: 122,193).
During the year employees exercised 10,000 share options at an exercise price of £0.01. A transfer of £4,000
was made from Own Shares Reserve to Retained Earnings in respect of these exercised options.
36
Cambridge Cognition Holdings plc
Notes to the financial statements
23. Notes to the cash flow statement
Profit/ (loss) before tax
Adjustments for:
Depreciation of property, plant and equipment
Share-based payment expense
Operating cash flows before movements in working capital
Decrease in inventories
(Increase) in receivables
Increase/ (Decrease) in payables
Cash generated by operations
Tax credit received
Net cash from operating activities
Cash and cash equivalents
Cash and bank balances
2016
£'000
2015
£'000
116
(867)
68
83
267
21
(575)
567
280
193
473
56
68
(743)
127
(44)
(168)
(828)
120
(708)
2016
£'000
2,384
2015
£'000
756
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
2016
£'000
2015
£'000
162
173
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
2016
£'000
139
91
-
2015
£'000
115
45
-
Operating lease payments represent rentals payable by the Group for rent, copiers and franking machines.
Property rental across four buildings has an average of 18 months to expiry at 31 December 2016. The average
outstanding rental period for other leases is 18 months.
37
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:
2016
2015
Number of
share
options
Weighted
average
exercise price
(in £)
Number of
share
options
Weighted
average
exercise price
(in £)
Outstanding at beginning of year
Exercised during the year
Granted during the year
Forfeited during the year
Outstanding at the end of the year
1,874,888
(10,000)
1,150,000
(859,180)
2,155,708
0.68
(0.01)
0.01
(0.61)
0.35
1,850,426
(406,158)
547,200
(116,580)
1,874,888
0.53
(0.20)
0.83
(0.81)
0.68
Exercisable at the end of the year
333,374
0.64
369,661
0.65
The options outstanding at 31 December 2016 had a weighted average remaining contractual life of 8.6 years.
Options were granted on 3 November 2016. The performance conditions attached to these options are such
that options vest dependent on the Company achieving certain performance hurdles. The performance
conditions, which are both market and non-market conditions, have been incorporated into the measurement
by actuarial modelling. The aggregate of the estimated fair values of the options granted is £455,933. 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
November 2016
68p
1p
44%
3 years
0.30%
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 £83,000 (2015: £68,000), 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 £170,000 (2015: £183,000) represents contributions payable to these
schemes by the Group at agreed rates. As at 31 December 2016, contributions of £18,000 (2015: £17,000)
due in respect of the current reporting year had not been paid over to the schemes.
38
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 2016.
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
2016
£'000
2,384
2,861
2015
£'000
756
1,413
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
2016
£'000
2015
£'000
2,384
1,538
756
1,339
1,015
920
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, which includes projections to at
least the end of the present year. The Group maintains cash and cash equivalents to meet its liquidity
requirements for up to a 30-day period.
At 31 December 2016, the Group’s financial liabilities had contractual maturities which are summarised below:
Trade payables
Other payables
2015
£'000
Within 1 year Within 1 year
2016
£'000
246
769
1,015
486
434
920
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange 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.
39
Cambridge Cognition Holdings plc
Notes to the financial statements
27. Financial instruments (continued)
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
Qatari Riyal
Liabilities
Assets
2016
£'000
11
-
-
2015
£'000
40
-
-
2016
£'000
1,139
147
207
2015
£'000
921
179
-
A movement in the £/$ exchange rate of +/- 5% from 31 December 2016 to the date of realising the US dollar
net asset position would result in a gain/loss of £56,000 (2015: £44,000). Similarly with the Euro, the
gain/loss would be £7,000 (2015: £9,000), and with the Qatari Riyal the gain/loss would be £10,000 (2015:
nil).
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.
40
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.
Transactions with Cognition Kit Limited
During the year the Group spent £16,198 in relation to costs for Cognition Kit Limited, the Group’s 50% owned
joint venture. At the year end, the Group has accrued for the repayment of these costs and £19,000 of revenue
for time spent by the Group’s personnel in relation to Cognition Kit Limited.
Remuneration of directors and key management personnel
The remuneration of 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. The key management personnel of the Group at 31
December 2016 consist of the Directors and three additional senior staff.
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
2016
£'000
2015
£'000
609
9
-
72
690
527
5
-
47
579
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
In addition to the above, during 2016 the Group incurred consultancy fees of £48,000 (2015: £48,000) from
MCR Holdings, a partnership of which Nicholas Walters is a partner. At 31 December 2016 a balance of £5,481
(2015: £12,965) was outstanding to MCR Holdings.
Prior to Steven Powell’s appointment as CEO on 15 February 2016, the Group incurred consultancy fees of
£8,375 from The Truffaldino Partnership, a company of which Steven Powell is a Director. No further amounts
were incurred and there is no outstanding balance at 31 December 2016.
Between Steven Powell’s appointment as a Director on 6 July 2015 and 31 December 2015, the Group incurred
consultancy fees of £40,448 from The Truffaldino Partnership, with a balance of £11,863 outstanding at 31
December 2015.
In addition to the above, during 2016 the Group incurred consultancy fees of £21,000 (2015: £nil) from
Actionreaction Limited, a company of which Nicholas Kerton is a director. At 31 December 2016 a balance of
£2,000 (2015: £nil) was outstanding to Actionreaction Limited.
41
Cambridge Cognition Holdings plc
Parent Company statement of financial position
Assets
Non-current assets
Investments
Total non-current assets
Current assets
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
Own shares
Retained earnings
Total equity
Notes
At 31 December
2016
At 31 December
2015
£'000
£’000
2
3
4
5
232
232
207
207
4,976
699
4,763
40
5,675
4,803
5,907
5,010
152
260
152
260
204
7,517
(47)
(1,919)
170
6,412
(51)
(1,781)
5,755
4,750
Total liabilities and equity
5,907
5,010
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 £217,000 (2015: £396,000).
The financial statements of Cambridge Cognition Holdings plc on pages 42 to 45 were approved and authorised
for issue by the board on 28th March 2017 and were signed on its behalf by:
Steven Powell
Chief Executive Officer
42
Cambridge Cognition Holdings plc
Parent Company statement of changes in equity
Share
capital
£’000
Share
premium
£’000
Own
shares
£’000
Retained
earnings
£’000
Total
£’000
6,335
(174)
(1,330)
5,000
Balance at 1 January 2015
Issue of new share capital
Transfer on allocation of shares held in
trust
Credit to equity of equity-settled
share-based payments
(Loss) for the year
At 31 December 2015
Balance at 1 January 2016
Issue of new share capital
Share issue costs
Transfer on allocation of shares held in
trust
Credit to equity of equity-settled
share-based payments
(Loss) for the year
At 31 December 2016
78
-
68
(396)
4,750
4,750
1,253
(114)
-
83
(217)
5,755
169
1
-
-
-
77
-
-
-
-
-
123
-
-
(123)
68
(396)
170
6,412
(51)
(1,781)
170
34
-
-
-
-
6,412
1,219
(114)
-
-
-
(51)
(1,781)
-
-
4
-
-
-
-
(4)
83
(217)
204
7,517
(47)
(1,919)
43
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 Company has elected to use Financial Reporting Standard – ‘The Reduced
Disclosure Framework’ (FRS 101). The Company has taken advantage of the following disclosure exemptions
afforded by FRS 101:
- Disclosure exemption allowing no cash flow statement or related notes to be presented
- Disclosure exemption allowing the Company not to disclose related party transactions when transactions
are entered into wholly within the Group
- Disclosure exemption around Key Management Personnel compensation (though see note 28 of the
Group accounts and the Directors Remuneration Report)
- Capital management disclosures (though see note 27 of the Group accounts)
- Disclosure exemption on the effect of future accounting standards
- Disclosure exemption on share-based payment information disclosures (IFRS 2), as this information has
been presented for the Group in note 25 of the consolidated financial statements
- Disclosure exemption on financial instrument disclosures (IFRS 7) as this information has been
presented for the Group in note 27 of the consolidated financial statements.
The principal accounting policies are summarised below. They have all been applied consistently throughout the
year. The accounts are presented in Pounds Sterling (“£”), and to the nearest £1,000.
1.2 Investments
Fixed asset investments in subsidiaries are shown at cost less provision for impairment.
1.3 Financial instruments
The Company’s financial instruments accounting policy is as per the Group’s policy (see note 3.13).
1.4 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.
1.5 Employee Benefit Trust
An Employee Benefit Trust (EBT) is maintained in order to facilitate the exercise of employee 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.
44
Cambridge Cognition Holdings plc
Notes to the Parent Company financial statements
2. Investments
Cost
At 1 January 2016
Additions
At 31 December 2016
Provisions for impairment
At 31 December 2015 and At 31 December 2016
Net Book value
At 31 December 2016
At 31 December 2015
Investment in
Subsidiaries
£'000
207
25
232
-
232
207
The subsidiary undertaking at the end of the year was as follows:
Name
Cambridge Cognition Limited
Country
of
Operation
United
Kingdom
Proportion of
Ownership and
Voting Power Held
100%
Nature of Business
Development and sale of
computerised
neuropsychological tests
Other Group subsidiaries, all of which are owned indirectly through Cambridge Cognition Limited are detailed in
note 16 of the Group accounts. All subsidiaries have been included in the consolidated accounts.
3. Trade and other receivables
Amounts due from subsidiary undertakings
Other receivables
2016
£’000
4,951
25
4,976
2015
£'000
4,738
25
4,763
£4,400,000 of the amounts due from subsidiary undertakings is considered a long term loan to Cambridge
Cognition Limited, and the Company receives interest at a rate of 7.5% per annum on this amount. The
remaining balance is of an operating nature and is cleared regularly.
4. Trade and other payables
Trade payables
Social security and other taxes
Accruals
5. Share capital
2016
£’000
2015
£'000
31
13
108
152
131
13
116
260
The details on the share capital of the Company are provided at note 21 to the Group’s accounts.
6. Employment costs
The only employees of the Company are the Directors. 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.
45