Registered No: 8211361
Cambridge Cognition Holdings plc
Annual Report and Accounts
31 December 2018
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
11-14
15-16
17-23
24
25
26
27
28-48
49
50
51-52
Cambridge Cognition Holdings plc
Corporate Directory
Directors:
Michael Lewis
Steven Powell
Nicholas Walters
Eric Dodd
Nicholas Kerton
(Non-Executive Chairman)
(Chief Executive Officer)
(Chief Financial Officer)
(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
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
finnCap
60 New Broad Street
London
EC2M 1JJ
Dowgate Capital Limited
15 Fetter Lane
London
EC4A 1BW
2
Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2018
CHIEF EXECUTIVE’S REVIEW
Financial summary
Total revenues of £6.13m (2017: £6.73m)*
Gross profit of £5.23m (2017: £6.11m)*
Adjusted** loss before tax of £1.50m (2017: loss of £0.07m)*
Loss before tax of £1.49m (2017: loss of £0.28m)*
Loss per share of 7.0 pence per share (2017: loss of 1.3 pence per share)*
Cash balance at 31 December 2018 of £1.11m (2017: £1.86m)
Equity placing raised £2.50m in March 2019
* For each of these items, 2018 results were prepared using IFRS 15 and 2017 results prepared using IAS 18.
** Adjusted for share-based payments charge
Operational highlights
Sales orders won in the year up 49% to £7.93m (2017: £5.31m)
Contracted order book at year end: £6.08m (2017: £4.01m)
Wider application of Cambridge Cognition technology platform to host a broader range of electronic
clinical outcome assessments (‘eCOA’): £2.67m of sales orders won in the year (2017: nil)
Continued strong growth in digital healthcare: £0.63m of sales orders won in the year (2017 and
earlier: £0.12m in total)
Continued investment in research and innovative technology
Overview
2018 has seen the business progress into a new phase of commercial development with a strong increase in the
order book for both the core clinical trials outcomes and digital health businesses.
Four key contracts were announced during the year and whilst each of these contracts has unique features the
key common factor is their bespoke nature. It has become clear during the year that there is a key market
demand for a custom approach for both our core CANTAB proprietary products and our digital, near-patient
technologies. While this presents operational challenges, the equity placing enables us to capitalise on these
significant market opportunities more quickly than we otherwise would have been able to.
Our NeuroVocalix voice platform has been included in its first contract and continues to be the subject of
collaborative interest from many parties. We also launched our new healthcare offering – CANTAB BrainHealth -
and we won our first contracts with this product.
Taking all of these factors together, the Group remains on track with its previously stated corporate goals of
expanding our technology base, bringing cognitive testing closer to the user and positioning the Company’s offer
across the full clinical development cycle, including research and continuous monitoring. This was reflected in an
increase in our R&D costs from £1.13m in 2017 to £1.41m. We also deepened our relationships with many
academic and industrial collaborators during the year, not least through our partnership with the University of
Bristol announced in June 2018.
Financial Results
Group revenues for 2018 and 2017 by product segment are as follows:
2018 £m
2017 £m
Change £m
Change %
Software
Services
Total Software & Services
Hardware
Total Group Revenues
3.09
2.83
5.92
0.21
6.13
3.32
3.30
6.62
0.11
6.73
(0.23)
(0.47)
(0.70)
0.10
(0.60)
(6.9)
(14.2)
(10.6)
90.9
(8.9)
Software and Services revenue were lower than 2017 for two key reasons. First, a low order intake in 2017 meant
lower revenues carried forward into 2018 as a significant proportion of orders are recognised as revenue over
3
Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2018
several financial years as clinical trial contracts are implemented. Second, of those contracts signed in 2017 and
2018, a greater proportion of contracts than normal are for periods of more than one year. As the Company
performs more bespoke work, a pattern of higher value, but longer period contracts will become the norm, as
has been seen with key contract announcements made in 2018. This will give the Company much better visibility
over future revenues.
Hardware revenues remain a small proportion of overall revenues. While the quantum of hardware sales continues
to be insignificant, we are seeing a continuing desire of large pharmaceutical companies to source hardware from
us as part of the full service package.
Gross profit was £5.23m (85.3%) in 2018 compared with £6.11m (90.8%) in 2017, a reduction of 5.5 percentage
points. This reduction is a result of a slight increase in low-margin hardware sales and higher cost of sales relating
to the increased customisation of products.
Administration costs increased by 4% in the year from £6.49m in 2017 to £6.75m. Overheads, excluding research
and development, have been maintained at similar levels to the prior year. The ongoing commitment to
innovation, with a £0.28m rise in research and development costs, continues to position Cambridge Cognition as
a leader in its field and drives the development of its digital health business.
The loss before tax in the year was £1.49m, compared with a loss of £0.28m in 2017. R&D tax credits of £0.07m
offset tax charges in the United States of America of £0.02m. Loss for the year was £1.44m, which equates to a
loss per share for the year of 7.0 pence, compared with 1.3 pence in 2017.
Cash outflow from operating activities was £0.64m (2017: £0.62m outflow). In the second half of the year the
Company generated cash of £0.31m. The annual cash outflow was lower than the loss as our billing pattern will
typically result in invoicing ahead of revenue recognition. Capital expenditure remains low at £0.03m. The
Company’s Employee Benefit Trust purchased £0.05m of ordinary shares in the year to ensure that future
obligations under employee incentive schemes could be met. Our cash balance of £1.11m has been
subsequently boosted by the equity placing in March 2019.
The Company will use the net funds arising from the equity placing, being approximately £2.3 million to accelerate
expansion of the Company's operations and strengthen its balance sheet as follows:
Replicate US ‘prime’ and digital health activities in the EU and Far East
£0.5m
Expand software group for eCOA and digital health opportunities – additional sprint teams £0.6m
£0.6m
Digital intervention projects
£0.6m
Strengthen management team and balance sheet
£2.3m
Total
The major change in the balance sheet came on the adoption of IFRS 15 on 1 January 2018, when £1.96m was
added to deferred income and taken out of retained earnings. This adjustment, alongside the loss for the year
meant that the business entered a net liability position on the balance sheet. Of the £1.96m adjustment, £0.62m
remains on the balance sheet at 31 December 2018. The Group has no long-term debt and, after the completion
of the equity placing, has returned to a net asset position.
The impact of the new accounting standard for revenues: IFRS 15
The Group has adopted the new revenue accounting standard, IFRS 15, using the prospective method with effect
from 1 January 2018. Accordingly, 2018 reported figures are prepared using IFRS 15, whilst 2017 reported figures
were prepared under IAS 18. The main impact is that much of the Company’s software revenue is now recognised
as our customers use it, rather than on signature of contract as previously. We believe this new standard will
result in a smoother spread of revenue over the life of all contracts.
Our estimate of revenues and loss before tax on each accounting basis for each of 2018 and 2017 are as follows:
On an IFRS 15 basis:
2018 (as reported) 2017
Difference
Revenue
£6.13m
£6.89m
(£0.76m)
Loss before tax
£1.49m
£0.12m
(£1.37m)
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2018
On an IAS 18 basis:
2018
2017 (as reported) Difference
Revenue
£7.11m
£6.73m
£0.38m
Loss before tax £0.61m
£0.28m
(£0.33m)
Operational Review
Our new sales team delivered an improved performance this year. Sales orders booked in the year totalled
£7.93m representing a 49% increase on the prior year order intake figure of £5.31m. Accordingly, there has
been an increase in the value of contracted revenues yet to be recognised of £2.07m in the year to £6.08m at
31 December 2018 (2017: £4.01m).
We continue to raise the profile of products in our core neuroscience disease areas, particularly Alzheimer’s and
schizophrenia. As we announced in April 2018, our Recruit offering is now established in two major Phase III
trials for Alzheimer’s disease, and its profile is also rising through inclusion in large public-private and EU-funded
consortia such as Dementias Platform UK and the Europe-wide project Models of Patient Engagement for
Alzheimer’s Disease (MOPEAD). In schizophrenia, both our technology and our clinical trial design expertise are
being increasingly recognised as world-leading. Our scientists are leading international working groups building
industry consensus around schizophrenia trial design and are in demand as thought leaders, independent from
their product-specific expertise.
The number of clinical studies using our technology at any time continues to increase, with our Operations team
managing 55 studies in December 2018 (compared with 37 in December 2017). A growing number of these
studies use our cloud-based clinical trials platform (Connect) to deliver digital forms of questionnaires and other
electronic clinical outcomes assessments (eCOA) in addition to, or instead of, CANTAB cognitive tests. This
opportunity to expand the use of Connect has arisen as customers recognise the versatility of our Connect
platform and benefits the customer by being able to run more outcome measures on a single platform. By adding
non-cognition outcome measures into our capabilities it also means that we can target more customers in non-
CNS fields and so widens our potential customer audience.
In the USA, our ‘digital health hub’ in Boston has flourished in 2018 building a strong local presence and a
network of relationships through the East Coast pharmaceutical clusters. Under the Cognition Kit brand we
have continued to translate expertise in software and neuroscience into patient-centric applications that enable
our pharmaceutical company partners to assess patients beyond the clinical trial site. These applications,
whether delivered on patients’ own mobile phones or integrated into other digital systems, are in increasing
demand to enable lower cost data collection through remote or ‘virtual’ clinical trials and the opportunity to
collect ‘real world evidence’ more easily and at earlier stages in the drug development cycle. While customer
requirements for these purposes are typically of a bespoke product, we are gaining in efficiency as we build a
menu of interoperable modules and user interface available for re-use in subsequent mobile apps. As we have
noted in previous announcements, a significant attraction of this market is that each individual win in this area
brings the potential for recurring license revenue over time.
Matthew Stork agreed to join the Company as Chief Operating Officer on completion of the equity placing in
March 2019. This gives further breadth to the management and it is expected that Matthew will join the board
in due course.
Innovation
Our innovation and R&D activities continued apace during 2018, supported in part by grants from Innovate UK.
A project to develop and deliver voice-based cognitive tasks through our new Neurovocalix voice-based platform
has generated considerable interest from pharmaceutical partners. The funded project continues into 2019,
however we have already commercialised our first tests into voice-products for two pharmaceutical partners as
part of their drives to innovate clinical development in psychiatric and neurological indications. The second part
of this project, to derive new biomarkers of mental state from the voice signal, is now gaining momentum as we
collaborate with academic researchers to collect patient data from multiple disease states during 2019.
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2018
The digital phenotyping programme, using cognitive testing to match responsive sub-populations of patients with
specific drugs, progressed rapidly during 2018. The initial Innovate UK-funded project focussing on schizophrenia
was completed successfully at the end of 2018 and has led to a valuable development pipeline of biomarker-
indication combinations that will be explored further in 2019. We have developed a new partnership with the
University of Bristol School of Experimental Psychology in order to develop a broader pipeline of opportunities in
this space. This allows us to take advantage of the discovery and early stage research expertise of the Bristol
group, including access to clinical and experimental research facilities, and population cohorts such as the ALSPAC
study. In return, we provide insight into regulatory and commercialisation paths and scale-up and adoption
issues. We believe that as this joint team builds a portfolio of grant-funded projects it will rapidly accelerate our
ability to translate new ways of phenotyping and treating mental ill-health through from initial discovery to applied
R&D.
Outlook
In 2018 we identified a key opportunity to accelerate the growth of our core clinical trials business with the
addition of more outcome measures onto our Connect platform. We also made substantial progress in
commercialising our digital health business. With additional financial resources from the equity placing and over
£6m of future revenues already secured we believe we are well positioned to drive growth and fulfil our primary
objective of sustainable profitability. We also expect our digital phenotyping programme to make significant
advances in 2019 which will drive our corporate partnering activities.
We operate in a market with increasing levels of investment in both neuroscience and digital health. Our ability
to provide innovative, customised solutions from our R&D activities positions the Company well for growth and
recognition as a leader in its fields. As a result, we remain both optimistic and assured of more significant
contracts and partnerships being secured in 2019.
As always, none of this would be possible without the continued support of our investors and the creativity and
hard work of our operational teams.
6
Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2018
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 and so far only 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
new technologies will be limited to the extent of any surplus cash reserves of the Group and the positive cash
flow derived from the core business and recently launched products.
The directors have prepared a strategic plan, including financial forecasts and cash flows, for the period to
December 2021. 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.
Product and market development
Future success of the Group is principally focussed on growth of near term revenues through existing products
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. As noted in the Strategic Report, we have
seen early successes in our most recent product innovations. However, the rate of future growth will be
determined by the take up of these products in the various markets we serve.
Brexit
Uncertainty remains around the impacts of Brexit. The directors and management continue to monitor
developments and plan for potential impacts. The key considerations for the Group are as follows:
People: the group has a number or EU nationals as employees. The Group is working with these
employees to ensure that impacts of Brexit on our people are understood and can be managed. Whilst
longer-term implications may be unclear, what does seem clear is that there will be no immediate impact
on EU nationals working in the UK.
Currency: as the Group is a net exporter to the US and the EU, a decline in the value of GBP against the
USD and the EUR is of benefit to the group in the immediate term. Strengthening of the GBP will result
in a reduction in the GBP value of the Group’s revenues.
Regulations: the Group is working to ensure that compliance with regulations, especially those in relation
to data sharing, continue to be adhered to, regardless of the nature of the UK’s relationship with the
EU.
Impacts on the broader market: Directors and management continue to consider what impacts there
may be on our customers and the broader economy. Virtually all of the Group’s suppliers are UK based
so there is minimal risk to our supply chain.
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 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.
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.
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2018
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 2018, one customer accounted for 12% (2017: 14%) of the total revenue of the business
though no other customer accounted for more than 10%. Over recent years, the increased diversity of our product
offering has led to an increased diversity in our customer base that has continued to mitigate this risk.
Nonetheless, there is a risk that the loss of a major customer would result in a revenue shortfall.
KEY PERFORMANCE INDICATORS
The directors have monitored the performance of the Group with particular reference to the key performance
indicators being revenue and sales orders, 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
2018 result 2017 result Movement
Revenue
£6.13m (as
reported
under
15)
IFRS
£6.73m (as
reported
under
18)
IAS
£0.60m
decrease
(9%)
Summary management
commentary
Revenue has declined on an as
reported basis and a consistent
IFRS 15 basis given the low
volume of sales orders taken in
2017.
Sales orders
£7.93m
£5.31m
£6.08m
£4.01m
Order book (revenue yet
recognised on
to be
orders won – IFRS 15
basis for both years)
Operating margin
£2.62m
increase
(49%)
£2.07m
increase
(52%)
This increase reflects improved
commercial
infrastructure and
execution.
Increase principally due to sales
(29%)
orders being £1.80m
greater than revenue recognised.
(24%)
reported
under
15)
(as
IFRS
(4%)
reported
under
18)
(as
IAS
20
percentage
point
decrease
As well as the revenue result and
change in accounting basis, this
reflects the continued investment
in research and development.
Cash flow
£0.72m
outflow
£0.48m
outflow
Increase in
outflow of
£0.24m
This is driven by the operating
result, though billing in advance
affords us some positive cash
movement.
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, and in particular
the increased investment in research and development. Unfortunately, this cannot be readily measured in the
style of a KPI. The directors are pleased with the innovation successes during 2018, 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
21st March 2019
8
Cambridge Cognition Holdings plc
Report of the Directors for the year ended 31 December 2018
The Directors present their report on the affairs of the Group and Company together with the financial statements
for the year to 31 December 2018. 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’) specialises in
improving brain health by developing and marketing near-patient cognitive testing techniques.
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.
In particular this consideration includes the raising of £2.3m (net) through a share placement on 12 March 2019.
Further information on the Group’s financial risk management strategy can be found in note 25.
SHARE ISSUES
The issued share capital of the Company is set out at Note 19 to the accounts. During 2018, 2,000 Ordinary
shares were issued to satisfy the exercise of employee share options. On 12 March 2019 3,472,223 shares were
issued in connection with the raising of £2.3m (net) referred to above.
DIRECTORS
The Directors who held office at 31 December 2018 and their interest in the share capital of the Company were:
Name
Michael Lewis (Chairman)
Steven Powell
Nicholas Walters
Eric Dodd
Nicholas Kerton
Ordinary Shares of 1p each
2018
33,375
70,541
2017
33,375
70,541
186,937
186,937
-
-
22,899
22,899
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 2018
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 15 March 2019 were:
Name
Nigel Wray
Canaccord Genuity Group Inc
Michael Buxton
Octopus Investments Nominees Ltd
Lombard Odier
AUDITOR
No. of
Ordinary
Shares
4,651,547
3,620,150
2,889,589
1,429,771
1,388,889
%
19.2
15.0
12.0
5.9
5.7
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
21st March 2019
10
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2018
Chairman’s Statement
As Chairman of the Cambridge Cognition Holdings plc (“the Company”) Board, it is my responsibility to ensure
that the Board is performing its role effectively and has the capacity, ability, structure and support to enable it
to continue to do so.
We believe that a sound and well understood governance structure is essential to maintain the integrity of the
Group in all its actions, to enhance performance and to impact positively on our shareholders, staff, customers,
suppliers and other stakeholders.
After due consideration, the Company has adopted the QCA Corporate Governance Code (“the QCA Code”) as
the benchmark for measuring our adherence to good governance principles. These principles provide us with a
clear framework for assessing our performance as a board and as a company, and the report below shows how
we apply the Code’s ten guiding principles in practice.
The QCA Code requires that some disclosures are available on the Company website, whilst others are required
in the Company’s Annual Report and Accounts and the Company has followed this recommendation. The
Corporate Governance disclosure on our website can be found at
http://www.cambridgecognition.com/investors/corporate-governance/
All members of the Board of the Company believe in the value and importance of good Corporate Governance.
The Chairman is personally responsible for establishing and monitoring Corporate Governance.
The Company is listed on the AIM Market of the London Stock Exchange (“AIM”).
Whilst the Board considers that it does not depart from any of the principles of the QCA Code, the Board will
continue to develop its governance processes in the coming year.
Michael Lewis
Chairman
Disclosures recommended under the QCA Code
Principle 1: Establish a strategy and business model which promotes long-term value for
shareholders
The Company has a rolling three-year detailed strategic plan that is updated and approved by the Board
annually. This is supported by an annual operating plan, which is also subject to Board review.
The Company’s Strategic Report, including an assessment of principal risks and uncertainties and key
performance indicators can be found on pages three to eight of this Annual Report and Accounts.
Principle 4: Embed effective risk management, considering both opportunities and threats,
throughout the organisation
Risks are considered as part of the strategic planning process referred to above. The CEO is also ultimately
responsible for the quality management of the company and reports to the Board on key matters. The Board
will periodically receive presentations on specific operational and financial risks.
The principal risks and uncertainties of the Group are summarised on pages seven and eight of this Annual
Report and Accounts.
Principle 5: Maintain the Board as a well-functioning, balanced team led by the Chair
Profiles of each of the Directors are given below.
The Board consists of two executive directors, the non-executive Chairman and two further independent
directors. The non-executive Chairman has a small shareholding, and one non-executive director holds shares
and options, which are a result of their previous role as CEO. These holdings are not considered material.
11
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2018
All directors are expected to devote sufficient time to their duties as may be necessary. Typically, this would be
around two days per month for the non-executive directors.
The Board is provided with monthly business and finance reports from the CEO and CFO respectively. Further
information will be given to the Board for discussion at meetings as relevant.
The Board is supported by three sub-committees: the Audit Committee, the Remuneration Committee and the
Nomination Committee. All non-executive directors sit on all sub-committees. Board and Committee attendance
for 2018 is as follows:
Board
Audit
Nomination
Remuneration
No. of Meetings
M. Lewis
Dr S. Powell
N. Walters
E. Dodd
Dr N. Kerton
8
8
8
8
8
8
2
2
-
-
2
2
-
-
-
-
-
-
2
2
-
-
2
2
Principle 6: Ensure that between them the Directors have the necessary up-to-date experience,
skills and capabilities
Profiles of each of the Directors are given below.
Principle 7: Evaluate board performance based on clear and relevant objectives, seeking continuous
improvement
Since the Company’s listing in 2013, board evaluation has been an informal process led by the Chairman and
principally consisting of one on one meetings to gather, compare and consider the views of each of the
directors. This approach has, to date, been deemed appropriate given the small size of the Company.
With effect from 1st January 2019 the Board will conduct formal internal performance reviews every year
supplemented by an external evaluation review every alternate year.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours
The Board ensures that the Company culture is based on ethical values through the following means:
The employee handbook clearly setting out values and employment codes
All new employees benefit from an induction programme which emphasises our ethical values and
behaviours
These behaviours are re-iterated through the various employee communication and reward channels
outlined above
Particular training on topics relating to ethical behaviour, ranging from compliance in clinical trials to
share dealing rules are given at regular intervals and attendance monitored
Standard Operating Procedures (“SOPs”) that outline the Company’s process and the values that
underpin them are required to be read by employees and documentation of compliance maintained
Receiving monthly reports from human resources and other departments to ensure that any instances
of behaviours not being recognised or respected are considered and resolved appropriately
Principle 10: Communicate how the Company is governed and is performing by maintaining a
dialogue with shareholders and other relevant stakeholders
Descriptions of the work of the Board and its Committees are below. The Remuneration Report is on pages 15
and 16.
12
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2018
Further information on the Company’s Corporate Governance framework, including on those principle of the
QCA code not listed here can be found at http://www.cambridgecognition.com/investors/corporate-
governance/
Director profiles
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, Chairman of Glyconics Ltd, developing diagnostics for COPD
and 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.
Nick 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 Nicholas Kerton Non-Executive Director
Dr Kerton is an experienced director of public and private companies in the healthcare industry. Having
completed a PhD in Organic Synthetic Chemistry at Nottingham University, he progressed through the
Wellcome Foundation, and then joined DuPont and Whatman Reeve Angel plc in senior business development
and sales roles before moving into microbiology as Managing Director of Malthus Instruments, a subsidiary of
Radiometer of Denmark. Dr Kerton was a member of the management team who established Celsis PLC, one of
the first biotechnology companies to float on the London Stock Exchange, led the successful sale of Maybridge
to Fisher Scientific International, founded Lab21 (a molecular diagnostics service funded by Merlin Biosciences)
during which time he acquired three companies, and managed the Sirigen Group from initial venture capital
funding in 2008 through to selling the business to Becton Dickinson in August 2012.
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 ATTRAQT PLC, an AIM-listed software company.
Board sub-committees
The Board is supported by three sub-committees, the Audit Committee, Nomination Committee and
Remuneration Committee.
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 especially in light of the adoption of IFRS 15, adequacy of
13
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2018
systems of internal control and going concern. The Committee notes the auditors’ inclusion of revenue
recognition as a key audit matter.
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 reviews the Group’s risk management and continues to believe that 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.
14
Cambridge Cognition Holdings plc
Remuneration Report for the year ended 31 December 2018
The Company has established a Remuneration Committee. The members of the Remuneration Committee are:
Michael Lewis (Chair)
Eric Dodd
Nicholas Kerton
The Committee makes recommendations to the Board. No director plays a part in any discussion about his own
remuneration.
Components of Executive Directors’ remuneration
Executive remuneration packages are prudently designed to attract, motivate and retain directors of the high
calibre needed to enhance the Group’s market position and to reward them for increasing value to shareholders.
The performance measurement of the executive directors and key members of senior management and the
determination of their annual remuneration package are undertaken by the Committee.
There are five main elements of the remuneration package for the executive directors and senior management:
• Basic annual salary;
• Benefits-in-kind;
• Annual bonus payments;
• Share option incentives; and
• Pension arrangements.
Non-Executive Directors’ remuneration
The remuneration of Non-Executive Directors is determined by the Board and reflects their anticipated time
commitment to fulfill their duties. The Non-Executive Directors’ remuneration is subject to the same principles of
the Group Remuneration policy. The letters of appointment of Non-Executive Directors can be terminated with
one month’s notice given by either party.
Directors’ remuneration (audited)
The remuneration of the Directors is as follows:
Current Directors:
Executive Directors:
Steven Powell
Nicholas Walters
Non-Executive Directors:
Michael Lewis
Eric Dodd
Nicholas Kerton
Andrew Blackwell*
Total
Salary
/Fee
£’000
Benefits
Bonus
Pension
£’000
£’000
£’000
2018
Total
£’000
2017
Total
£’000
147
48
44
30
30
-
299
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
147
48
44
30
30
-
299
150
48
44
30
30
15
317
* Resigned as Non-Executive Director on 1 July 2017
Payments were also made to third parties for the services of Nicholas Walters. See note 26 to the consolidated
financial statements.
15
Cambridge Cognition Holdings plc
Remuneration Report for the year ended 31 December 2018
Share Options:
Granted
Nicholas Kerton
Sept 2014
Number of
Options
75,000
Performance
criteria
Vested (1)
Exercise price
in pence
60 pence
Exercise period
To 30 Sep 2024
Steven Powell
July 2015
May 2018
62,500
100,000
Vested (2)
(3)
82.5 pence
1 penny
Dec 2017 - July 2025
May 2021 – May 2028
Nicholas Walters
May 2018
25,000
(3)
1 penny
May 2021 – May 2028
Performance Criteria
(1) Options vest once the average of the closing price of shares in the Company over two consecutive
dealing days, as derived from the London Stock Exchange Daily Official List, has equalled or exceeded
90 pence. This condition was fulfilled on 1 October 2015
(2) Options vest once the average of the closing price of shares in the Company over two consecutive
dealing days, as derived from the London Stock Exchange Daily Official List, has equalled or exceeded
120 pence. This condition was fulfilled on 4 May 2017
(3) 55% of these options will vest if the average closing mid-market price of an Ordinary Share for the
final 10 trading days of 2019 is greater than 170 pence per share. A pro rata sliding scale will apply if
the average closing mid-market price of an Ordinary Share for the final 10 trading days of 2019 is
between 130 pence and 170 pence. 45% of these options granted will vest if the Group reports a
profit after tax in both of the years ended 31 December 2018 and 31 December 2019. In the case that
the Group reports a profit after tax in only one of these years, 10% of the total options granted will
vest.
On 31 December 2018, 550,000 options in favour of Steven Powell and 150,000 options in favour of
Nicholas Walters were forfeited as the performance criteria were not met. These criteria required that the
average closing mid-market price of an Ordinary Share for the final 10 trading days of 2018 was a
minimum of 100 pence; and that the total revenue of the three financial years ended 31 December 2018
exceeded £23m.
Upon his resignation as a Non-Executive Director on 1 July 2017, Andrew Blackwell forfeited 112,567
options. On 11 October 2017, he exercised 225,135 options at an exercise price of 70 pence.
16
Cambridge Cognition Holdings plc
Independent auditor’s report to the members of Cambridge Cognition
Holdings plc
Independent auditor’s report to the members of Cambridge Cognition Holdings plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Cambridge Cognition Holdings Plc (the ‘parent company’) and
its subsidiaries (the ‘group’) for the year ended 31 December 2018 which comprise the Consolidated
statement of comprehensive income, the Consolidated statement of financial position, the Consolidated
statement of changes in equity, the Consolidated statement of cash flows, the Parent company statement of
financial position, the Parent company statement of changes in equity and notes to the Consolidated and
Parent company financial statements, including a summary of significant accounting policies. The financial
reporting framework that has been applied in the preparation of the group financial statements is applicable
law and 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, including Financial Reporting
Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
the financial statements give a true and fair view of the state of the group’s and of the parent
company’s affairs as at 31 December 2018 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union;
the parent company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities
for the audit of the financial statements’ section of our report. We are independent of the group and the parent
company in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:
the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the group’s or the parent company’s ability to continue to adopt the
going concern basis of accounting for a period of at least twelve months from the date when the
financial statements are authorised for issue.
17
Cambridge Cognition Holdings plc
Independent auditor’s report to the members of Cambridge Cognition
Holdings plc
Overview of our audit approach
Overall materiality: £184,000 which represents 3% of the group’s
revenue;
Key audit matter identified was revenue recognition
We performed full scope audit procedures on the financial statements
of Cambridge Cognition Holdings Plc and on the financial information
of Cambridge Cognition Limited which itself accounts for 71% of the
group loss before tax.
We performed targeted audit procedures on Cambridge Cognition
LLC and analytical procedures on CANTAB Corporate Health
Limited, Cambridge Cognition Trustees Limited and Cognition Kit
Limited
Key audit matter
The graph below depicts the audit risks identified and their relative significance based on the extent of the
financial statement impact and the extent of management judgement.
Revenue
recognition
Management
override of
controls
High
Potential
financial
statement
impact
Low
Recoverability
of debtors
Goodwill
impairment
Low Extent of management judgement High
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters included those that had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of
the engagement team. These matters were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
18
Cambridge Cognition Holdings plc
Independent auditor’s report to the members of Cambridge Cognition
Holdings plc
Key Audit Matter – Group
How the matter was addressed in
the audit – Group
The risk of improper recognition of
revenue due to multiple revenue
streams with different recognition
criteria
Under International Standard on Auditing
(UK) 240 ‘The Auditor’s Responsibilities
Relating to Fraud in an Audit of Financial
Statements’, there is a rebuttable presumed
risk that revenue may be misstated due to
the improper recognition of revenue.
The Group adopted IFRS 15 ‘Revenue
from Contracts with Customers’ using the
modified retrospective method of adoption
with the date of initial application of 1
January 2018. Inappropriate interpretation
and application of the new and complex
standard could result in possible material
misstatement to the cumulative effect of
initial application of the standard
recognised as an adjustment to the opening
balance of retained earnings at 1 January
2018 and revenue recognised in the period.
The Group provides multiple products or
services to their customers as part of a
single arrangement that may include
licences of IP, sale of hardware, data
management services, study management
services, study support services, training, or
other maintenance services.
Management apply significant judgement
to:
identify the separate performance
obligations in an arrangement based on
the terms of the contract and the
Group’s customary business practices
determine whether the performance
obligation is satisfied over time or at a
point in time; and
select an appropriate method for
measuring progress of that
performance obligation if it is satisfied
over time.
A number of the products or services may
be sold together as a bundled contract.
Determining whether the products or
Our audit work included, but was not
restricted to:
Assessing whether revenue recorded in
the period was consistent with the
Group’s accounting policy and whether
that was compliant with IFRS 15
‘Revenue from Contracts with
Customers’;
For a sample of contracts, we:
checked that the performance
obligations have been
appropriately identified in
accordance with the Group’s
accounting policy;
checked that revenue recognised in
the year relates to amounts
allocated to performance
obligations that were satisfied in
the year;
inspected evidence of delivery of
the products or rendering of
services, such as delivery of licence
keys, number of assessments
completed in the period, and
notifications that the assessments
have been completed; and
evaluated the significant
judgements made by management
in identifying the separate
performance obligations and
selecting an appropriate method
for measuring progress
Testing the deferred revenue and
accrued income for a sample of
contracts that were not complete at 1
January 2018 (cumulative adjustment to
retained earnings as at the date of initial
application of IFRS 15) and at the
reporting date, as follows:
inspecting evidence that invoices
raised relate to milestones met in
the period in accordance with the
19
Cambridge Cognition Holdings plc
Independent auditor’s report to the members of Cambridge Cognition
Holdings plc
Key Audit Matter – Group
services are distinct from other goods and
services in an arrangement is key to the
appropriate recognition of revenue.
Revenue is a material figure in the financial
statements (2018: £6,134,000; 2017:
£6,730,000).
How the matter was addressed in
the audit – Group
payment schedule agreed with the
customer;
checking revenue has been
recognised in accordance with the
Group’s accounting policy
recalculating the deferred revenue
and accrued income
We therefore identified revenue occurrence
as a significant risk, which was one of the
most significant assessed risks of material
misstatement.
The group's accounting policy on revenue
recognition is set out in note 3.3 to the
financial statements and related disclosures
are included in note 27.
Key observations
Based on our audit work we consider the
Group’s revenue recognition to be
appropriate and in accordance with IFRS
15.
We did not identify any Key Audit Matters relating to the audit of the financial statements of the parent
company.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that
the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use
materiality in determining the nature, timing and extent of our audit work and in evaluating the results of that
work.
Materiality was determined as follows:
Materiality Measure Group
Financial statements
as a whole
£184,000 which is 3% of group
revenue. This benchmark is
considered the most
appropriate because the group’s
results fluctuate annually.
Materiality for the current year
is lower than the level that we
determined for the year ended
31 December 2017 to reflect
the decrease in the group’s
revenues.
20
Parent
£6,000 which is 5% of losses
before tax. This benchmark is
considered the most
appropriate because the entity
is cost based and not revenue
generative.
Materiality for the current year
is lower than the level that we
determined for the year ended
31 December 2017 to reflect
the decrease in the parent’s loss
before tax.
Cambridge Cognition Holdings plc
Independent auditor’s report to the members of Cambridge Cognition
Holdings plc
Performance
materiality used to
drive the extent of
our testing
Specific materiality
75% of financial statement
materiality.
75% of financial statement
materiality.
We also determine a lower level
of specific materiality for
certain areas such as directors'
remuneration and related party
transactions of £1,000 due to
the inherent sensitivity of these
transactions and related
disclosures.
We also determine a lower level
of specific materiality for
certain areas such as directors'
remuneration and related party
transactions of £1,000 due to
the inherent sensitivity of these
transactions and related
disclosures.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance
for potential uncorrected misstatements.
Overall materiality - group
Overall materiality - parent
25%
75%
Tolerance for
potential uncorrected
mistatements
Performance
materiality
25%
75%
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the group's business,
its environment and risk profile and in particular included:
Assessing the risk of material misstatement to the group’s financial statements. We considered the
transactions undertaken by each entity and therefore where the focus of our work was required;
Full scope audit procedures were completed for the main trading subsidiary, Cambridge Cognition Limited
and on Cambridge Cognition Holdings Plc. Targeted audit procedures were undertaken on Cambridge
Cognition LLC and analytical procedures on CANTAB Corporate Health Limited, Cambridge Cognition
Trustees Limited and Cognition Kit Limited
The total percentage coverage of full scope procedures over the Group’s total revenues was 99% and
Group’s total assets was 95%.
All accounting is centralised, and we completed our onsite audit work at the Group’s main operating
location with all audit work undertaken by the Cambridge based group audit team.
The audit risks identified for each trading component are the same audit risks identified for the Group as a
whole.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
21
Cambridge Cognition Holdings plc
Independent auditor’s report to the members of Cambridge Cognition
Holdings plc
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
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 the parent company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or the
directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns;
or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on pages 9-10, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the group or the
parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
22
Cambridge Cognition Holdings plc
Independent auditor’s report to the members of Cambridge Cognition
Holdings plc
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company
and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
David Newstead
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
21st March 2019
23
Cambridge Cognition Holdings plc
Consolidated statement of comprehensive income
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Loss before tax
Income tax
Loss for the year
Attributable to:
Equity holders in the Parent
Non-controlling interest
Earnings per share (pence)
Basic and diluted earnings per share
Other comprehensive income
(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
Notes
Year to
31 December
2018
Year to
31 December
2017
5
6
7
10
11
£’000
6,134
(900)
5,234
£’000
6,730
(622)
6,108
(6,749)
(6,485)
27
(1,488)
46
93
(284)
6
(1,442)
(278)
(1,442)
-
(1,442)
(257)
(21)
(278)
(7.0)
(1.3)
(1,442)
(278)
(92)
(1,534)
38
(240)
All items of other comprehensive income are attributable to the equity holders in the Parent.
The above results relate to continuing operations.
24
Cambridge Cognition Holdings plc
Consolidated statement of financial position
Assets
Non-current assets
Intangible assets
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
Total equity
Notes
At 31 December
2018
At 31 December
2017
£'000
£’000
12
13
15
16
390
58
448
26
1,868
1,110
352
88
440
33
2,246
1,859
3,004
4,138
3,452
4,578
18
3,978
1,547
19
20
20
3,978
1,547
207
7,707
5,931
(94)
207
7,707
6,023
(43)
(14,277)
(10,863)
(526)
3,031
Total liabilities and equity
3,452
4,578
The financial statements on pages 23 to 48 were approved by the Board of Directors and authorised for issue
on 21st March 2019 and were signed on its behalf by:
Steven Powell
Chief Executive Officer
25
Share
capital
Share
premium
Other
reserves
Own
shares
Retained
earnings
£'000
£'000
£'000
£'000
£'000
Non-
controlling
interest
£'000
Total
£'000
204
7,517
5,985
(47)
(10,748)
(50)
2,861
(257)
(21)
(278)
-
-
38
(257)
(21)
(240)
Cambridge Cognition Holdings plc
Consolidated statement of changes in equity
Balance at
1 January 2017
Profit for the year
Other comprehensive
income
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
Transfer of accumulated
loss on acquisition of
non-controlling interest
Balance at
31 December 2017
Impact of adopting IFRS
15
Balance at
1 January 2018
(restated)
Profit for year
Other comprehensive
income
Total comprehensive
income for the year
Purchase of own shares
Charge to equity for
equity-settled share-
based payments
Transactions with
owners
Balance at
31 December 2018
-
-
-
3
-
-
3
-
-
-
-
190
-
-
190
-
-
38
38
-
-
-
-
-
-
-
-
-
4
-
4
-
-
(4)
217
213
(71)
207
7,707
6,023
(43)
(10,863)
-
-
-
-
(1,957)
207
7,707
6,023
(43)
(12,820)
-
-
-
-
-
-
-
-
-
-
-
-
-
(92)
(92)
-
-
-
-
-
(1,442)
-
(1,442)
(51)
(1)
-
(14)
-
(51)
(15)
207
7,707
5,931
(94)
(14,277)
26
-
-
-
-
193
-
217
410
71
-
-
-
-
-
-
-
-
-
-
-
3,031
(1,957)
1,074
(1,442)
(92)
(1,534)
(52)
(14)
(66)
(526)
Cambridge Cognition Holdings plc
Consolidated statement of cash flows
Net cash flows from operating activities
21
(644)
(624)
Notes
Year to
31 December
2018
Year to
31 December
2017
£'000
£’000
Investing activities
Purchase of property, plant and equipment
Net cash flow used in investing activities
Financing activities
Proceeds from the issue of share capital
Purchase of own shares
Net cash flows from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Exchange differences on cash and cash equivalents
(25)
(25)
-
(51)
(51)
(720)
1,859
(29)
(48)
(48)
193
-
193
(479)
2,384
(46)
Cash and cash equivalents at end of year
21
1,110
1,859
27
Cambridge Cognition Holdings plc
Notes to the financial statements
1. General information
Cambridge Cognition Holdings plc (‘the Company’) and its subsidiaries (together, ‘the Group’) specialises in
improving brain health by developing and marketing near-patient cognitive testing techniques.
The Company is a public limited company which is listed on the AIM market 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 2017, other than
that IFRS 15: Revenue from contracts with customers, and IFRS 9 Financial Instruments which have been adopted
in the 2018 financial statements. See notes 3.3, 4 and 27 for more details on the impacts of adopting IFRS 15.
There is no material impact on the adoption of IFRS 9. The financial statements have been prepared under the
historical cost convention.
The subsidiary undertakings included within the consolidated financial statements as at 31 December 2018 are
given in note 14.
2. Outlook for adoption of future Standards (new and amended)
At the date of authorisation of the Consolidated Financial Statements, the following Standard which has not been
applied in the Consolidated Financial Statements were in issue but not yet effective:
IFRS 16 Leases (effective 1 January 2019) – see note 22 for discussion of the impact of IFRS 16 on
the Group.
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.
3.3 Revenue recognition
From 1 January 2018, revenue is accounted for in accordance with IFRS 15 Revenue from contracts with
customers.
Revenue is measured at the fair value of the consideration received or receivable and represents amounts
receivable for goods and services, net of discounts, VAT and other sales-related taxes. Contracts are identified
and the constituent parts are assessed separately to ensure that revenue is recognised appropriately. The Group
sales can be placed into three categories as follows: software, services and hardware. Revenue recognition for
each of these items are considered in turn below.
28
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.3 Revenue recognition (continued)
Software:
The Group sells licences to use its software and/or its software hosting platform. These licences can take different
forms, which are described in turn below:
Software licences hosted on our servers:
Where software is hosted on our servers the revenue is recognised over a period of time, as we have a continuing
performance obligation to provide services (e.g. to ensure our servers are available).
For contracts where the software value is greater than or equal to £20,000, and software is sold on a
cost per assessment basis, the Group uses the assessment price to recognise the revenue as the
assessments are used.
For contracts where the software value is less than £20,000, and software is sold on a cost per
assessment basis, the Group uses a portfolio estimate of the revenue being recognised over 12 months.
This period has been chosen as it best represents the average life of this portfolio of contracts.
For contracts where the licence is sold for unlimited uses over a limited period of time, the revenue is
taken equally over the course of the licence period.
Software licences not hosted on our servers:
Where software is not hosted on our servers, it is used as it exists at the point in time the licence is granted and
as such revenue is recognised at that point in time. The time of recognition is once the licence has been delivered
to the customer, either through delivery of a physical software key or installation on the client systems, as this
is when our performamce obligations are satisfied.
Services:
The Group provides a range of services that include supporting clinical studies, bespoke software development
and scientific consultancy. Some services will be ongoing services provided over a period of time, whilst some
will be clearly tied to a deliverable or other project milestone.
Services delivered over a period of time:
When services are delivered over a period of time (e.g. study support services) the revenue is recognised equally
over the relevant period. In some instances, the period in question may be for the life of the contract, and in
these instances management will estimate the length of the contract for this purpose. When that estimate
changes, revenue that has not yet been recognised will be adjusted prospectively to match the revised estimate.
Study support services can be separated into set-up, ongoing management and close out phases with separate
performance obligations. Where material and clearly identifiable, these phases will be recognised separately.
Where immaterial or not clearly identifiable, these revenues will be recognised evenly over the course of the total
relevant period.
Services delivered at a point in time:
Some services, such as training and delivery of scientific reports will be delivered at a point in time and as such
will be recognised at a point in time, as the performance obligation is discharged on delivery.
In some cases, whilst the end product is a specific deliverable, it may be that the work required is executed over
an extended period of time. In these cases, management may make an estimate of revenue earned to date
consistent with the principles of services delivered over a period of time.
Customer support services:
Aside from any specific services contracted, our customers have access to our customer support team should
they have problems with their software. The life of this support matches the life of the software licence, and as
such this support is not separated from the software licence revenue recognition as described above.
Hardware:
The Group does not manufacture hardware, but will acquire, configure and sell hardware to customers as part of
our offering. Hardware revenue is recognised when hardware is despatched to the customer, and the performance
obligation is discharged at this point.
Bill and hold arrangements:
On some occasions, a customer may ask that we purchase and configure hardware on their behalf and then store
the hardware awaiting specific despatch instructions. In these cases, the customer assumes ownership of the
assets even though they may still be in our physical possession. Once all of the specific criteria under IFRS 15
are met, the Group will recognise this hardware revenue, even though the hardware has not yet been despatched.
29
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.3 Revenue recognition (continued)
Revenue recognised in the 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’.
3.4 Grants
Grants of a revenue nature are credited to profit and loss to match with the expenses incurred. Where the grant
relates directly to the Group’s principal activities, it is taken as revenue. Where the grant relates to payments for
the use of the Group’s products or resources to support broader projects, the grant is taken as other income.
3.5 Sales commissions
Commissions are accrued and subsequently paid based on the contractual terms reached with the salesperson.
Where commissions are paid related to revenues that are not expected in the same accounting period, the
commission amount is capitalised and held as an asset on the balance sheet, before being amortised in line with
the related revenue.
3.6 Leasing
This policy is in accordance with IAS 17 Leases, which is replaced by IFRS 16 Leases as of 1 January 2019.
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 as a reduction to rental expense on a straight-line
basis, except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed.
3.7 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 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 the UK pound at the average monthly rates over the
reporting period. Exchange differences are charged or credited to other comprehensive income and recognised
in the currency translation reserve in equity.
3.8 Post employment benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
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
30
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.9 Taxation (continued)
recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries
except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or
the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the reporting
date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or
credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive
income.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
3.10 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. For impairment review purposes
the value in use is assessed with reference to cash flows arising from the Board approved three-year plan using
a 7.5% discount rate. If this calculation suggests the recoverability of goodwill is sensitive to any of these factors,
appropriate scenario modelling is performed.
3.11 Tangible and intangible assets
Property, plant and equipment
Property, plant 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.
Purchased licences
Where a licence for software used in the provision of services to customers in purchased, the amount is capitalised
and amortised over the period of the licence. The amortisation charge is charged to cost of sales.
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:
31
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.11 Tangible and intangible assets (continued)
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 are initially measured
at amortised cost, and financial liabilities at fair value, plus or minus directly attributable transaction costs.
Financial assets
Financial assets are subsequently measured at amortised cost. The Group currently holds no assets at fair value
through profit and loss or fair value through other comprehensive income. Accordingly, where the Group believes
that there is a change in the fair value of a financial instrument (e.g. a trade receivable is considered
unrecoverable) this amount will be adjusted through the income statement. A financial asset is derecognised
once the contractual rights expire (e.g. when cash has been received for a trade receivable).
Expected credit losses on trade receivables
The Group estimates expected credit losses by taking the credit losses over the preceding 36 months and
comparing this to the revenue over the same period. The percentage derived is then applied to the outstanding
trade receivables. This has resulted in an immaterial amount and as such no provision has been booked.
Financial liabilities
All the Group’s financial liabilities are subsequently measured at amortised cost using the effective interest
method, with interest expense recognised on an effective yield basis. Financial liabilities are derecognised when
the related obligation is discharged, cancelled or expires.
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 are recognised as the proceeds received, net of direct issue costs.
Hedge accounting
The Group does not have any relationships that qualify for hedge accounting.
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 23.
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.
32
Cambridge Cognition Holdings plc
Notes to the financial statements
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, supported by management have made in the process
of applying the Group’s accounting policies. Where estimation uncertainty exists, the directors, supported by
management take account of all available information in forming their judgement.
Revenue recognition
In the adoption and subsequent continuous application of IFRS 15, many judgements may be required in
recognising revenue and cost. These judgements include
The extent to which, and the way in which, contracts are separated into their component parts and the
values attributed to those parts;
Whether software licences are granted to allow the customer the benefit of use of our intellectual
property over a period of time (including benefitting from future maintenance and improvements) or
whether that right is given as the intellectual property exists at the point of time the licence is granted.
In the case of the former, software is recognised over the period of use, for the latter revenue is
recognised when the licence commences and the customer is able to use the software;
The adoption of the portfolio approach for lower value sales and the recognition criteria applied;
Where performance obligations are satisfied over time, the length of time remaining for performance,
and whether this needs revising over time; and
The length of time for performance also dictates the initial deferral and subsequent recognition of
commissions in cost of sales.
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 12.
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 which met
the requirements for capitalisation under IAS 38 Intangible Assets. The research and development expenditure
primarily relates to ongoing research as outlined in the Strategic Report. Therefore, no development costs have
been capitalised during 2018 (2017: £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 23. 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.
33
Cambridge Cognition Holdings plc
Notes to the financial statements
5. Segmental Information
An analysis of the Group’s revenue for each major product and service category is as follows:
Software
Services
Hardware
2018
£'000
3,088
2,831
215
6,134
2017
£'000
3,322
3,302
106
6,730
The accounting policies of the reportable segments are the same as the accounting policies described in note 3.
Costs cannot be directly attributed to the products and services above so profit measures are not presented.
Geographical information
The revenue from external customers by geographical location is detailed below:
United Kingdom
United States of America
European Union
Rest of world
All non-current assets are held in the United Kingdom.
Information about major customers
2018
£'000
745
4,070
612
707
6,134
2017
£'000
1,087
4,094
578
971
6,730
Revenue of £731,000 (2017: £966,000) can be attributed to one (2017: one) customer who accounted for more
than 10% of reported revenue for the related year. No other customers accounted for more than 10 per cent of
reported revenue.
6. Other operating income
Other operating income is made up of the following:
Grant income
Sub-lease income
7. Operating loss
Operating loss has been arrived at after charging:
Net foreign exchange losses
Research and development costs
Depreciation of property, plant and equipment
Staff costs (see note 9)
34
2018
£'000
2017
£'000
-
27
27
47
46
93
2018
£'000
68
1,414
55
4,434
2017
£'000
32
1,129
77
4,341
Cambridge Cognition Holdings plc
Notes to the financial statements
8. 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
Total fees payable to affiliate firms of the Company’s auditor
9. 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 24)
Share-based payments charge (see note 23)
2018
£'000
2017
£'000
15
24
39
9
9
-
18
27
27
14
21
35
8
9
2
19
45
45
2018
Number
2017
Number
45
16
12
73
2018
£'000
3,898
327
223
(14)
4,434
42
14
12
68
2017
£'000
3,605
315
204
217
4,341
35
Cambridge Cognition Holdings plc
Notes to the financial statements
10. Taxation
Corporation tax:
Current year
Adjustments in respect of prior years
Deferred tax (see note 17)
Total tax credit
2018
£'000
2017
£'000
23
(69)
(46)
-
(46)
4
(10)
(6)
-
(6)
Corporation tax is calculated at 19.00% (2017: 19.25%) of the estimated taxable loss for the year.
The tax charge for each year can be reconciled to the loss per statement of comprehensive income as follows:
Loss before tax on continuing operations
Tax at the UK corporation tax rate of 19.00%
(2017: 19.25%)
Difference in foreign tax rates
Expenses not deductible for tax purposes
Deduction on exercise of share options
Unrecognised deferred tax on IFRS 15 transition adjustment
Movement in unprovided deferred tax on losses
Adjustment in respect of prior years
Foreign tax charge
Tax credit for the year
2018
£’000
2017
£'000
(1,488)
(284)
(283)
(55)
(4)
(10)
-
69
(3)
(216)
120
180
(69)
23
(46)
-
202
(10)
4
(6)
The adjustment in respect of prior years relates to the receipt of R&D tax credits in respect of 2016 and 2017
(2017: in respect of 2015). No claim has yet been made for 2018 and no credit has been recognised in the
financial statements.
11. 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 loss
attributable to owners of the Company
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS
2018
£'000
(1,442)
2018
'000
20,553
2017
£'000
(257)
2017
'000
20,398
Weighted average number of ordinary shares for the purposes of diluted EPS
20,553
20,398
For 2018 and 2017, 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.
36
Cambridge Cognition Holdings plc
Notes to the financial statements
12. Intangible assets
Cost
At 1 January 2018
Additions
At 31 December 2018
Amortisation
At 1 January 2018
Charge for the year
At 31 December 2018
Net Book value
At 31 December 2018
At 31 December 2017
Goodwill
£'000
Licences
£'000
Total
£'000
352
-
352
-
-
-
352
352
-
40
40
-
2
2
38
-
352
40
392
-
2
2
390
352
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might
be impaired. Forecast cash flows for 2018 and beyond validate the value in use of the goodwill and no impairment
provision is required.
13. Property, plant and equipment
Cost
At 1 January 2018
Additions
Disposals
At 31 December 2018
Depreciation
At 1 January 2018
Charge for the year
Disposals
At 31 December 2018
Net Book value
At 31 December 2018
At 31 December 2017
Leasehold
Improvements
£'000
Fixtures
and fittings
£'000
76
-
(38)
38
73
3
(38)
38
-
3
552
28
(8)
572
467
52
(5)
514
58
85
Total
£'000
628
28
(46)
610
540
55
(43)
552
58
88
37
Cambridge Cognition Holdings plc
Notes to the financial statements
14. Subsidiaries and joint ventures
Details of the Company’s subsidiaries at 31 December 2018 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
Proportion
of
ownership
interest
%
100%
100%
100%
Cantab Corporate Health Limited
United Kingdom
100%
Cognition Kit Limited
United Kingdom
50%
Proportion
of
voting
power held
%
100%
100%
100%
100%
50%
The results and assets of Cognition Kit Limited are immaterial to the Group. Accordingly, detailed joint venture
disclosures have not been presented.
All the above companies, except Cambridge Cognition Limited, are held via Cambridge Cognition Limited. All UK
entities have their Registered Office at the Company’s registered office. The Registered Office of Cambridge
Cognition LLC is 2750 Rasmussen Road, Park City, UT 84098, USA.
All holdings are in ordinary shares.
15. Inventories
Finished goods and goods for resale
2018
£'000
2017
£'000
26
33
During the year inventories with a total value of £115,000 (2017: £77,000) were included in the income
statement as an expense.
38
Cambridge Cognition Holdings plc
Notes to the financial statements
16. Trade and other receivables
Amount receivable for the sale of goods and services
Accrued income
Prepayments
Other receivables
2018
£'000
823
223
165
657
1,868
2017
£'000
1,201
662
192
191
2,246
Trade receivables
Trade receivables disclosed above are classified as financial assets 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 29 days in 2018 (2017: 46 days).
Aging of past due but not impaired receivables:
31-60 days
61-90 days
91-120 days
121 or more days
Movement in the allowance for doubtful debts:
Balance at the beginning of the year
(Decrease) in provision
Balance at the end of the year
2018
£'000
29
21
42
38
130
2018
£'000
-
-
-
2017
£'000
72
8
-
36
116
2017
£'000
30
(30)
-
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. Under IFRS 9, the credit losses
provision for the Group would be immaterial and has not been booked.
A total of £5,000 of bad debt was written off in the year.
17. Deferred Tax
At the reporting date, the Group has unused tax losses of £8.9 million (2017: £8.7 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. Losses may be carried forward indefinitely. No deferred tax asset has
been recognised in respect of share options.
39
Cambridge Cognition Holdings plc
Notes to the financial statements
18. Trade and other payables
Amounts falling due within one year
Trade payables
Accruals
Deferred income
Social security and other taxes
Other payables
2018
£'000
406
604
2,847
93
28
3,978
2017
£'000
278
410
739
92
28
1,547
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
The average credit period taken for trade purchases is 38 days (2017: 48 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.
19. Share capital
Issued and fully paid
20,697,870 (2017: 20,697,870) Ordinary Shares of £0.01 each
2018
£’000
2017
£’000
207
207
During 2018, no Ordinary Shares were issued. On 12 March 2019, 3,472,223 Ordinary Shares were issued in a
placing that raised net proceeds of £2.3m.
20. Own Shares Reserve and Other Reserve
Own Shares Reserve
2018
£’000
2017
£’000
94
43
The Own Shares Reserve represents the cost of shares acquired by the two Cambridge Cognition Employee
Benefit Trusts to satisfy options under the Group’s share options schemes. The number of shares held by the UK
Employee Benefit Trust at 31 December 2018 was 102,693 (2017: 102,693).
During the year employees exercised 2,000 share options at an exercise price of £0.01 which were satisfied by
the UK Employee Benefit Trust. These shares were bought back by the UK Employee Benefit Trust and the value
of own shares held grew by £2,000 as a result of these transactions.
The Group established an Employee Benefit Trust in Jersey in 2018. The Jersey Employee Benefit Trust purchased
48,250 shares for consideration of £49,000 in the year.
The Other Reserve in the consolidated statement of changes in equity is made up of £5,981,000 which arose
when the Company became the new Group holding company in April 2013, and £50,000 of cumulative exchange
differences on the translation of foreign operations.
40
Cambridge Cognition Holdings plc
Notes to the financial statements
21. Notes to the cash flow statement
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
Decrease/ (increase) in receivables
Increase/ (decrease) in payables
Cash generated by operations
Tax credit received less tax paid
Net cash from operating activities
2018
£'000
2017
£'000
(1,488)
(284)
57
(14)
(1,445)
7
513
304
(621)
77
217
10
4
(52)
(592)
(630)
(23)
6
(644)
(624)
The total adjustments of £1,957,000 made to working capital as a result of the introduction of IFRS 15 (see note
27) are a non-cash item and accordingly excluded from this reconciliation.
Cash and cash equivalents
Cash and bank balances
2018
£'000
1,110
2017
£'000
1,859
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months
or less. The carrying amount of these assets is approximately equal to their fair value.
22. Operating lease arrangements
Lease payments under operating leases
recognised as an expense in the year
2018
£'000
2017
£'000
127
171
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
2018
£'000
113
85
-
2017
£'000
98
-
-
Operating lease payments represent rentals payable by the Group for rent. Property rental across two buildings
has an average of 21 months to expiry at 31 December 2018.
IFRS 16 Leases applies to the Group from 1 January 2019. On application, operating leases with a duration of
greater than one year will be recognised as both a fixed asset and a financial liability. These will be realised
subsequently in the income statement through depreciation and a combination of cash payments and finance
charges respectively. At 1 January 2019 an equal and opposite asset and liability of £201,000 was booked in
respect of the leases above.
41
Cambridge Cognition Holdings plc
Notes to the financial statements
23. 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:
2018
2017
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
1,793,606
(2,000)
404,500
(1,386,700)
809,406
0.17
0.01
0.01
0.01
0.36
2,155,708
(278,135)
287,200
(371,167)
1,793,606
0.35
0.70
0.01
0.71
0.17
Exercisable at the end of the year
389,406
0.73
391,406
0.73
The options outstanding at 31 December 2018 had a weighted average remaining contractual life of 7.3 years.
Options were granted on 2 May 2018. The performance conditions attached to some of 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 £222,000. The inputs into the
Binomial Option model for the performance related options were as follows:
Share price at date of issue
Exercise price
Expected volatility
Expected life
Risk-free rate
Expected dividend yields
May 2018
151p
1p
51%
3 years
0.77%
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 a total credit of £14,000 (2017: expense of £217,000) in relation to equity-settled share-
based payment transactions.
24. 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 £223,000 (2017: £204,000) represents contributions payable to these
schemes by the Group at agreed rates. As at 31 December 2018, contributions of £22,000 (2017: £19,000) due
in respect of the current reporting year had not been paid over to the schemes.
42
Cambridge Cognition Holdings plc
Notes to the financial statements
25. 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 2018.
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
2018
£'000
1,110
(526)
2017
£'000
1,859
3,031
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 at amortised cost
Cash and bank balances
Trade and other receivables
Financial liabilities at amortised cost
Trade and other payables
2018
£'000
2017
£'000
1,110
1,105
1,859
1,391
1,113
771
The Group has reviewed the requirements of IFRS 9 and ascertained that our financial assets that were
previously designated as loans and receivables under IAS 39 are now appropriately classified as debt
instruments at amortised cost, as they form both part of the Group’s business model and are solely payments
of principal and interest.
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 of at least a further
12 months. The Group maintains cash and cash equivalents to meet its liquidity requirements for up to a 30-
day period.
At 31 December 2018, the Group’s financial liabilities had contractual maturities which are summarised below:
Trade payables
Other payables
2017
£'000
Within 1 year Within 1 year
2018
£'000
406
707
1,113
278
493
771
43
Cambridge Cognition Holdings plc
Notes to the financial statements
25. Financial instruments (continued)
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.
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
Canadian Dollar
Liabilities
Assets
2018
£'000
115
-
-
-
2017
£'000
31
3
-
-
2018
£'000
809
263
57
21
2017
£'000
1,124
246
61
-
A movement in the £/$ exchange rate of +/- 5% from 31 December 2018 to the date of realising the US dollar
net asset position would result in a gain/loss of £52,000 (2017: £55,000). Similarly with the Euro, the gain/loss
would be £15,000 (2017: £12,000). With the Qatari Riyal, the gain/loss would be £3,000 (2017: £3,000). With
the Canadian Dollar, the gain/loss would be £1,000 (2017: £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. The Group has calculated its expected credit
losses and the amount is immaterial. This is consistent with the position under IAS 39 at 31 December 2017. No
guarantees have been given in respect to third parties.
Fair value of financial instruments
The directors consider that the carrying amounts of financial assets and financial liabilities recorded in the
Statement of Financial Position approximate their fair values.
44
Cambridge Cognition Holdings plc
Notes to the financial statements
26. 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
Cognition Kit Limited is the Group’s 50% owned joint venture.
During the year the Group invoiced £34,000 (2017: £47,000) in respect of the value of time and expenses of the
Group committed to the activities of Cognition Kit Limited. At year-end a balance of £nil (2017: £5,000) was
owed to the Group by Cognition Kit Limited. The Group has also accrued for the repayment of £88,000
representing the value of time and expenses of the Group (2017: £59,000).
Further, the Group paid Cognition Kit Limited £1,000 in referral fees in the year (2017: £7,000). No balance was
outstanding at 31 December 2018 (2017: nil). The Group has also accrued costs in respect of licence fees and
other services payable to Cognition Kit Limited of £101,000 (2017: nil).
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 2018 consist of the Directors and three additional senior staff.
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
2018
£'000
2017
£'000
626
19
-
(10)
635
631
12
-
148
791
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 2018 the Group incurred consultancy fees of £24,000 (2017: £36,000) from MCR
Holdings, a partnership of which Nicholas Walters is a partner. At 31 December 2018 a balance of £5,820 (2017:
£2,714) was outstanding to MCR Holdings.
27. Introduction of IFRS 15: Revenue from contracts with customers
IFRS 15 became effective for the Group on 1 January 2018. The Group has chosen to adopt IFRS 15 as of 1
January 2018 and recognise the cumulative effect of the initial application at that date. This means that the
results for 2017 in these financial statements are presented under IAS 18: Revenues.
Differences between IAS 18 and IFRS 15 for the Group
There are three changes in accounting policy for the Group given the adoption of IFRS 15.
1) For licences that are hosted on our own servers, we are now measuring these in one of two ways:
a.
b.
For contracts where we also provide study and data management services, and also for any
other contract greater than £20,000 in value, we are allocating a per assessment price to the
assessments sold and amortising the deferred revenue over the period the assessments are
used.
For all other sales, we are recognising revenue on a straight line period of 12 months. This
period has been chosen as it best represents the average life of this portfolio of contracts.
In either of these cases, the customer purchases a right to use our intellectual property as it exists
throughout the licence period, and our performance obligation is therefore executed over a period of
time.
45
Cambridge Cognition Holdings plc
Notes to the financial statements
27. Introduction of IFRS 15: Revenue from contracts with customers (continued)
2) For licences that are not hosted on our own servers, we now only recognise the revenue when the licence
period commences, even if the order has been placed and accepted, and software prepared, prior to this
date. In this case, the customer purchases a right to use our intellectual property at the point in time
the licence commences, and so our performance obligation is discharged upon delivery of the licence.
3) Where commissions are paid related to revenues that are not expected in the same accounting period,
the commission amount is capitalised and held as an asset on the balance sheet, before being amortised
in line with the related revenue. Previously, all commissions paid were recognised immediately in the
income statement.
Adjustment posted to the accounts on 1 January 2018
As described above, the Group posted an adjustment to its accounts on 1 January 2018. This adjustment impacts
the balance sheet, with the corresponding value being debited or credited to accumulated reserves.
The value of this adjustment with respect to each of the three changes detailed above was as follows:
1) Deferred revenue increased by £1,843,000
2) Deferred revenue increased by £164,000
3) An asset of £50,000 created
This resulted in a total debit to opening reserves of £1,957,000. The following table shows the 31 December 2017
values as per these financial statements and the revised balance as at 1 January 2018.
Balance sheet caption
Prepayments and accrued income
(part of trade and other receivables)
Total assets
Accruals and deferred income (part
of trade and other payables)
Total liabilities
Retained earnings
Total equity
Total liabilities and equity
As presented at 31
December 2017 (£’000)
854
As
revised on 1
January 2018 (£’000)
904
Difference
(£’000)
50
4,578
1,149
1,547
(10,863)
3,031
4,578
4,628
3,156
3,554
(12,820)
1,074
4,628
50
2,007
2,007
(1,957)
(1,957)
50
Comparison of 2018 results as reported under IFRS 15 to 2018 results under IAS 18
The statements below compare the reported results to the results that would have been recorded if IFRS 15
had not been adopted on 1 January 2018.
Consolidated Statement of Comprehensive Income:
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Loss before tax
Income tax
Note
Year to
31 December 2018
(Reported under
IFRS 15)
Year to
31 December
2018
(IAS 18)
Difference
A
B
£’000
6,134
(900)
5,234
£’000
7,108
(993)
6,115
(6,749)
(6,749)
27
(1,488)
46
27
(607)
46
£’000
974
(93)
881
-
-
881
-
Loss for the year
(1,442)
(561)
881
Basic and diluted earnings per share under IAS 18 would have been a loss of 2.7 pence, rather than the 7.0
pence loss as reported under IFRS 15.
46
Cambridge Cognition Holdings plc
Notes to the financial statements
Consolidated Statement of Financial Position:
Notes
Year to
31 December 2018
(Reported under IFRS 15)
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
B
Cash and cash equivalents
£’000
390
58
448
26
1,868
1,110
Difference
Year to
31 December
2018
(IAS 18)
£’000
£’000
390
58
448
26
1,775
1,110
-
-
-
-
(93)
-
Total current assets
3,004
2,911
(93)
Total assets
3,452
3,359
(93)
Liabilities
Current liabilities
Trade and other payables
A
3,978
3,004
(974)
Total liabilities
3,978
3,004
(974)
Equity
Share capital
Share premium account
Other reserves
Own shares
Retained earnings
207
7,707
5,931
(94)
207
7,707
5,931
(94)
-
-
-
-
A, B
(14,277)
(13,396)
881
Total equity
(526)
355
881
Total liabilities and equity
3,452
3,359
(93)
Note A: Under IAS 18, more revenue would have been recognised because software revenue would be
recognised upfront. In the year, the value of new software sales exceeded the value recognised under IFRS 15
so this impact would be to increase revenue if IAS 18 was still being used. The balance sheet impact would be
that the value of deferred income would be lower.
Note B: Under IAS 18, given more revenue would have been recognised, more commission would have been
expensed. Deferred commissions are held as a current receivable and so the value of current receivables would
be reduced under IAS 18.
47
Cambridge Cognition Holdings plc
Notes to the financial statements
Other required disclosures under IFRS 15
Of the £2,007k deferred revenue recognised on transition at 1 January 2018 £1,386,000 was
recognised as revenue in 2018.
Payment terms can vary from customer to customer and are subject to negotiation. Normally,
software will be invoiced at the point of initial sale and services invoiced as delivered. This will mean
that a deferred revenue balance is created in respect of software which will be reduced as the software
is used.
At 31 December 2018, the Group has sales orders worth £6,084,000 for which performance
obligations are currently unsatisfied. At that date the Group estimates that £3,391,000 of this will be
recognised in 2019, £1,321,000 will be recognised in 2020 and £1,372,000 in 2021 and thereafter.
Of the £50,000 deferred commission asset created on transition, £34,000 was amortised in the year,
in line with revenue recognition on the applicable contracts.
Results for 2018 and 2017 under IFRS 15 and IAS 18
For information, the summary below shows management’s estimate of key results had IFRS 15 been applied to
2017, and also if IAS 18 had been applied to 2018.
On an IFRS 15 basis:
2018 (as reported) 2017
£6.13m
Revenue
Loss before tax £1.49m
£6.89m
£0.12m
Difference
(£0.76m)
(£1.37m)
On an IAS 18 basis:
2018
Revenue
£7.11m £6.73m
Loss before tax £0.61m £0.28m
2017 (as reported) Difference
£0.38m
(£0.33m)
48
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
Retained earnings
Total equity
Notes
At 31 December
2018
At 31 December
2017
£'000
£’000
2
3
4
5
375
375
5,587
19
5,606
351
351
5,117
562
5,679
5,981
6,030
61
61
62
62
207
7,707
(1,994)
207
7,707
(1,946)
5,920
5,968
Total liabilities and equity
5,981
6,030
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 £34,000 (2017: £197,000).
The financial statements of Cambridge Cognition Holdings plc on pages 49 to 52 were approved and authorised
for issue by the Board on 21st March 2019 and were signed on its behalf by:
Steven Powell
Chief Executive Officer
49
Cambridge Cognition Holdings plc
Parent Company statement of changes in equity
Share
capital
£’000
Share
premium
£’000
Retained
earnings
£’000
Total
£’000
Balance at 1 January 2017
204
7,517
Loss for the year
Issue of new share capital
Credit to equity of equity-settled share-
based payments
Transactions with owners
At 31 December 2017
Loss for the year
Charge to equity of equity-settled share-
based payments
Transactions with owners
At 31 December 2018
Balance at 1 January 2018
207
7,707
(1,946)
207
7,707
(1,946)
5,968
-
3
-
3
-
190
-
190
-
-
-
-
-
-
(1,966)
(197)
5,755
(197)
-
217
193
217
217
410
(34)
5,968
(34)
(14)
(14)
(14)
(14)
207
7,707
(1,994)
5,920
50
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 26 of the Group
accounts and the Directors Remuneration Report)
- Capital management disclosures (though see note 25 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 23 of the consolidated financial statements
- Disclosure exemption on financial instrument disclosures (IFRS 7) as this information has been presented
for the Group in note 25 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. The Company accounts
for share options granted to the employees of subsidiary undertakings by recognising an increased investment
in the subsidiary, with the corresponding credit recognised in reserves.
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
Two Employee Benefit Trusts (EBTs) are maintained in order to facilitate the exercise of employee share
options. Assets and shares of the EBTs are not consolidated into the Parent company. 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.
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Cambridge Cognition Holdings plc
Notes to the Parent Company financial statements
2. Investments
Cost
At 1 January 2018
Additions
At 31 December 2018
Provisions for impairment
At 31 December 2017 and At 31 December 2018
Net Book value
At 31 December 2018
At 31 December 2017
Investment in
Subsidiaries
£'000
351
24
375
-
375
351
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 14 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
2018
£’000
5,568
19
5,587
2017
£'000
5,103
14
5,117
£5,100,000 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
2018
£’000
2017
£'000
28
10
23
61
27
13
22
62
The details on the share capital of the Company are provided at note 19 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.
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