Registered No: 8211361
Cambridge Cognition Holdings plc
Annual Report and Accounts
31 December 2019
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
3-9
10-11
12-15
16-17
18-24
25
26
27
28
29-47
48
49
50-52
Cambridge Cognition Holdings plc
Corporate Directory
Directors:
Steven Powell
Matthew Stork
Nicholas Walters
Eric Dodd
Debra Leeves
(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
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2019
CHIEF EXECUTIVE’S REVIEW
Financial summary
Total Revenues of £5.04m (2018: £6.13m)
Gross profit of £3.89m (2018: £5.23m)
Loss before tax of £3.12m (2018: loss of £1.49m)
Loss for the year of £2.90m (2018: loss of £1.44m)
Loss per share of 12.4 pence (2018: loss of 7.0 pence per share)
Cash balance at 31 December 2019 of £0.90m (31 December 2018: £1.11m)
Equity placing raised £1.40m post period end in March 2020
Operational highlights
Order book at 31 December 2019: £5.69m (31 December 2018: £6.08m)
Q1 2020 order intake of £2.61m (Q1 2019: £2.12m)
Strong finish to 2019 and equally strong start to 2020 lays foundation for expected growth in 2020
New configurable eCOA solution launched in Q3 2019 with early sales wins
Doubling of digital solution sales including a major contract announced in March 2019
Focus on commercialising solutions, with new products launched in 2019, and reducing R&D over 2020
as the business moves towards profitability
Cost reduction measures for 2020 already implemented
New commercially focussed CEO appointed in May 2019 and subsequently the leadership team
strengthened in early 2020 with the appointment of new Chief Operating and Chief Commercial Officers
Overview
I am pleased to present my first annual CEO’s review having been appointed to the position in May 2019.
2019 was a year of transition as a shift to a more commercial focus and new technology solutions began to make
an impact on sales. At the heart of this transition was the implementation of a new strategy to target two fast
growth markets with multiple solutions.
The Group also achieved several product development milestones using the funds raised early in 2019. These
included completing the development of a configurable electronic Clinical Outcomes Assessment (eCOA) platform,
further development of the digital health solution, completion of a proof of concept of our voice solution, and
preparing the digital phenotyping project for spin out.
These developments resulted in first sales of new digital, eCOA and voice solutions. Sales of digital solutions
doubled for the second year running, with major contract wins with global pharmaceutical companies. This
provides a great platform for potential future growth.
Despite good progress with both development and commercialisation of new technologies, there were several
market factors that impacted sales in 2019 and these are outlined below. The Group took action to respond to
these factors during the period, continuing product development and expanding marketing, while managing costs
to ensure that the loss in 2019 was in line with the expectation set at the half-year.
R&D spending was increased in 2019 to complete the development of new products. In 2020 and beyond, as
products become available for commercialisation, we plan to reduce R&D spending to a lower, sustainable level.
At the same time, operational cost savings and efficiencies were implemented within the organisation as part of
our overall drive towards profitability.
The year-ended with a strong Q4 sales performance with £3.60m of orders taken prior to the end of the year
expected to be recognised as revenue in 2020. In 2020, we have already seen a significant contract win of
£1.37m and the award of an Innovative Medicines Initiative grant, which we have separately announced.
Despite the global impact of COVID-19, our customers continue to place orders at a level that is most encouraging
for the outlook for this year. A strong order intake in Q1 2020 is being followed by good progress with qualified
order prospects in Q2 combined with careful cost and cash management.
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2019
It is difficult to predict the absolute impact that delays to clinical trials might have on our recognised revenue for
the year. A number of customers have temporarily delayed new clinical trials because of the redirection of
medical facilities to treat COVID-19 patients and to support social isolation, but once lockdown restrictions begin
to lift, these trials should resume. The FDA and other regulatory bodies have announced guidelines to assist the
conduct of clinical trials during this period, confirming that there is a willingness to find ways to continue to
operate during these difficult times.
Financial Results
Transient, negative market factors impacted on sales of one of the Group’s core products, CANTAB™, in 2019.
The merger of two large customers meant that an anticipated large order was not placed and the same merger
delayed progress (and hence revenue recognition) of a study that was won in 2018. Collectively, these had an
adverse impact of approximately £1m on revenues in 2019.
There was also a reduction in the number of clinical trials in two key areas of our business: drug safety and
Alzheimer’s disease. This reduced sales orders from 2018 levels by approximately £1m in 2019. We believe this
dip is temporary, as we have seen a resurgence in opportunities through Q4 2019 and into early 2020, but the
arrival of COVID-19 has added a degree of uncertainty.
Despite the positive effect of a large digital order win in March 2019, bespoke work required to fulfil this order
did reduce gross margins and also delayed the completion of our new eCOA platform. The impact on gross
margins was £0.40m. With the digital developments now complete and the large digital study underway, we are
looking forward to seeing the benefits from both these areas in 2020.
The collective impact of these factors was to reduce the value of sales orders booked by the Group in the year to
£4.93m, representing a 38% decrease on the prior year order intake figure of £7.93m. Whilst this clearly reduced
our revenue for the year, there is comfort that contracted revenues yet to be recognised remain strong at £5.69m
as at 31 December 2019. Furthermore, the amount that is estimated to be recognised within one year is £3.60m,
ahead of the equivalent value of £3.39m at 31 December 2018. Going forward, we have improved our sales
process and operation by, amongst other measures, increasing our sales coverage and having a more targeted
lead generation programme.
Group revenues for 2019 by product segment, together with comparative figures, are as follows:
Software
Services
Total Software & Services
Hardware
Total Group Revenues
2019 £m
2018 £m
Change £m
Change %
2.53
2.34
4.87
0.17
5.04
3.09
2.83
5.92
0.21
6.13
(0.56)
(0.49)
(1.05)
(0.04)
(1.09)
(18.1)
(17.3)
(17.7)
(19.0)
(17.8)
Overall software and service revenues were lower in the year, compared to 2018. The timing of orders is
significant to revenues as there is usually a lag between receipt of order, implementation of study and revenue
recognition. The timing of study execution impacts our revenues as the flow of revenue from a committed order
can be disrupted when a study is delayed or postponed. With a greater volume and greater product mix of sales,
the Group will become increasingly resilient against such external factors.
Hardware revenues are a small proportion of overall revenues, but the requirement for us to provide and provision
hardware for a minority of customers remains a necessary part of our business, especially as we increasingly
deliver a full range of solutions, particularly for bespoke projects.
Gross profit was £3.89m (77.2% margin) compared with £5.23m (85.3% margin) in 2018. This reduction is a
result of a higher cost of sales relating to a large digital sale announced in March 2019, which required a significant
level of bespoke work as well as increased hardware supply. We are planning some bespoke work in 2020,
though less than in 2019, and so expect margins to improve.
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2019
Administration costs increased by 3.9% in the year from £6.75m in 2018 to £7.01m. The key element of this
increase was the growth in R&D costs of £0.30m as set out above. Other overhead costs reduced in aggregate,
despite investment in strategic and commercial reviews. Indeed, the run rate of costs at the year-end was
considerably lower than at the mid-point and costs in 2020 are expected to be at least 15% lower than in 2019.
The loss before tax for the year was £3.12m, compared with a loss of £1.49m in 2018. R&D tax credits were
£0.22m. The loss for the year after tax was £2.90m, which equates to a loss per share for the year of 12.4
pence, compared with 7.0 pence in 2018.
Cash outflow from operating activities was £2.32m (2018: £0.64m outflow). Capital expenditure was minimal.
After accounting for the £2.27m net received from an equity placing in Q1 2019, overall, cash outflow was limited
to £0.21m.
The cash balance of £0.90m at the 2019 year-end was subsequently supplemented by the £1.40m placing in Q1
2020 (£1.28m net) meaning that, as far as can reasonably be forecast given the uncertain impact of COVID-19,
after running a series of scenarios the Group has sufficient resources for its ongoing operations and development
plans.
The balance sheet remains consistent year-on-year, notwithstanding the introduction of IFRS 16 on leases. The
Group has no long-term debt.
Strategic Review
A full strategic review was performed in mid-2019 following my appointment as CEO. The opportunity to
accelerate the growth of the business was evident and a well-balanced, multi-product strategy has been agreed.
This is being implemented to increase market share in two growth markets in which the Group has strong
competitive advantages:
1.
2.
The market for eCOA, which is a c.US$1bn market growing at 17% per annum. Products in this market
measure clinical outcomes and ultimately help pharmaceutical and biotech companies gain approvals
and differentiated label claims for new drugs. The Group targets both clinical trials for drugs for central
nervous systems (CNS) disorders, which account for 15% of all clinical trials, and for other drugs that
may affect cognition.
The market for digital health solutions for CNS disorders, which is estimated to be a US$250m market
growing at 20% per annum. The Group is primarily targeting the provision of digital solutions to
pharmaceutical companies in this market.
In order to achieve this, the strategy has been refined to:
1. Create the opportunity to build a smoother revenue line through revenue growth, ironing out the
fluctuations caused by larger orders for clinical trials, and through longer-term contracts for post-
marketing licensing solutions to pharmaceutical companies.
2. Build a diversified product mix based on four product categories of CANTAB™, eCOA, and digital and
voice solutions. There is minimal additional sales resource required to support the additional products
as they are all purchased by the same target customer groups (pharmaceutical and biotechnology
companies and clinical research organisations).
Focus on commercialising products, building sales of products already developed and reducing R&D
spend as a percentage of revenue as the Group naturally evolves.
3.
4. Build partnerships to access wider opportunities and geographies. There are sizeable healthcare and
business-to-consumer opportunities for cognitive assessments, though they take specialist skills and
considerable resources. In addition, there are potential partnerships to be made with major clinical
research organisations and with companies with existing footprints in major markets such as China.
5. Reduce investment in non-strategic activities. As a direct result, the Group plans to spin out its digital
phenotyping programme, which has considerable potential as a separately funded entity.
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2019
Operational Review
Improving commercial execution is an ongoing operational goal. There was considerable progress in 2019 with
a Group-wide focus on winning new orders supported by an increased spending on sales and marketing. These
initiatives began to reap rewards in the second half of the year in terms of lead generation – the Group generated
double the number of leads in the second half of the year compared to the first half – and that translated into a
sales recovery in the final quarter and a strong, qualified pipeline at the start of the year for the first half of 2020.
There was also good progress in building partnerships that could generate incremental sales growth in 2020.
These are supporting geographic expansion in India and China and building commercial relationships with
companies that specialise in CNS drugs and clinical trials.
We delivered significant progress across our key areas of innovation in 2019. In the eCOA area, we completed
the development of our new, configurable eCOA solution in Q3 2019. This is a significant advance as it provides
unique advantages over many competitors. It is an excellent complementary product to our existing core
CANTAB™ products and is also applicable outside of the cognition market. We believe there is significant potential
for growth in this area.
The digital cognitive assessments that the Group markets are specifically designed to measure cognition day-to-
day during clinical trials. During 2019, we achieved a major milestone in developing software to collect, store
and report on data from wearable devices as well. This means that the Group can provide information on both
cognition and functional – such as the number of steps per day – performance by patients. We won a major
order for a clinical trial requiring both sets of data from a top 10 pharmaceutical company in Q1 2019 worth
£1.3m. We have seen that the interest and demand for these products is strong and that we are able to build
solutions to suit individual customers’ complex needs. Overall, digital health orders taken in 2019 were £1.64m,
more than double the £0.72m taken in 2018.
In the digital healthcare field we concluded development of our first voice prototype. We completed a proof-of-
concept study with 2,868 people, demonstrating that the solution can automate verbal clinical assessments in
any environment and that it has the potential to be developed further into a potential digital biomarker. We
gained our first sales for the voice solution in clinical trials, which is encouraging evidence of demand of this
nascent solution. Whilst this market is not as mature as the eCOA market this is clearly an area of great potential.
Over 2020, we will continue development of the voice solution and will develop our minimum viable product,
which we aim to launch in Q4 2020.
Our digital phenotyping project has progressed well during 2019, and this is now ready for spin-out, which we
aim to complete in 2020, subject to securing an investment partner.
Our operations team continues to provide outstanding customer service, providing essential support needed for
clinical trials, for example, working with clinical trial managers to set up studies and ensuring clinical trial sites
are well prepared to use the cognitive assessments we are providing. They help differentiate us and provide
confidence to customers that their clinical trials will be completed on time and with accurate, reliable data.
Responses to our customer survey in 2019 were extremely positive and the satisfaction level was at 100%. This
is a testament to the dedication of the Cambridge Cognition team.
In all of these areas and others we continue to take a leadership position in the science that underpins our
products. We continue to produce and support publications detailing advances in the area, as well as presenting
at conferences and supporting leading academics in the field.
Board Changes
As we transition to the next stage in the development of the Company, we are also implementing change to the
Board of Directors. With my appointment as CEO, Steven Powell was appointed as the new non-executive
Chairman of the Company, following the retirement of Michael Lewis from his position as non-executive Chairman.
Michael had been a board member for 6 years and we thank him for his contribution to the Company.
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2019
In the summer of 2019, we were saddened to report the death of Dr. Nick Kerton after a battle with cancer. Nick
had been CEO of Cambridge Cognition before moving to a non-executive director role after the diagnosis of his
illness. Nick is missed greatly by his family, friends and colleagues.
In building a Board for a new era of the Company, we welcomed Debra Leeves as a non-executive director who
brings extensive leadership, commercial and board experience gained in public and private life science companies.
We are also announcing the intention of Eric Dodd to retire from the Board and he will not stand for re-election
at the forthcoming AGM. Eric has been a Board member for six years and chaired the audit committee. We are
grateful to Eric for all of his support. We anticipate appointing at least one new non-executive director to the
Board during 2020.
COVID-19
With the arrival of COVID-19, the business has been presented with a new challenge. The Group continues to
be fully operational throughout the pandemic, with a flexible workforce using remote systems and working from
home. We are also seeing a considerable increase in interest in virtual clinical trials, which we are able to support.
So far, there has been no significant net impact on the business. While certain customers are deferring the start
date for their clinical trials and others whose trials are already underway have either halted or slowed the
recruitment of subjects into their trials temporarily, our order intake continues at an encouraging rate while other
customers trials continue as planned. Where trials are halted or slowed, this can delay revenue recognition and
less frequently, billing.
All indications from our scenario planning suggest that our business can withstand reasonable downside risks
from COVID-19. We have reduced our costs to conserve our cash and have continued to work to deliver to our
contractual obligations. Our current assumptions are that most clinical trials that have been delayed will begin
late Q2 or early Q3 2020. However there remains some uncertainty as to when operations will return to near
normal and we will be monitoring developments closely in all those countries where we are involved with trials
and will adapt our plans accordingly if there is any indication that there will be further delays.
Outlook
With core CANTAB and new eCOA products, the Group is well positioned to address the growing demands in our
market. With our eCOA solution we are already winning new business and generating positive customer feedback
on early sales of the new offering. Further developments in the digital area, in particular with our voice offering,
maintain the Group’s profile as a leader in innovation.
We start 2020 with a platform for profitable growth and a strong well-tuned strategy and business plan. We
have both a solid commercial base, having made excellent progress with our customers and partners, and
competitive product offerings from our innovation advances made during 2019. We have also made internal
changes to create more efficient and nimble teams, as demonstrated during the current COVID-19 pandemic.
Following an excellent Q1 2020, we are working through the difficulties caused by the pandemic and we are
continuing to build a solid base for growth over the medium-term.
With the financial support from our investors, which is gratefully received, we see an increasing number of
opportunities ahead within fast-growth markets and have the resources to capitalise on them. We are developing
an exciting digital health business which we believe can build substantial, sustainable shareholder value.
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2019
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 2022. The monitoring of cash and future projected cash flows, as well as the sales pipeline is included
in monthly reporting 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. As well as driving commercial
success, 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 continued success in this area over the last year and more. However, the
rate of future growth will be determined by the take up of these products in the various markets we serve.
Covid-19
The impacts of the Covid-19 pandemic have been addressed on page seven above, with the impacts on going
concern further discussed in note 3.2. to the accounts. As noted, the business remains fully operational, and we
believe the business can withstand reasonable downside risk. However there remains some uncertainty as to
when operations will return to near normal, and as such the situation is under constant review.
Brexit
The United Kingdom has left the European Union and we are now in the transition period. Nonetheless, uncertainty
remains around the long-term 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.
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Cambridge Cognition Holdings plc
Strategic Report for the year ended 31 December 2019
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 and rewards commensurate with their seniority and maintaining open communication with employees.
Reliance on key customers
The Group maintains close relationships with a number of customers but aims not to be overly dependent on any
one of them. During 2019, one customer accounted for 20% (2018: 12%) 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. It is useful
to note that for this large customer in 2019, revenue came from a number of projects using a number of our
products. 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
2019 result 2018 result Movement
Revenue
£5.04m
£6.13m
Sales orders
£4.93m
£7.93m
Order book (revenue yet
to be
recognised on
orders won)
£5.69m
£6.08m
Operating margin
(62%)
(24%)
Cash flow
£0.21m
outflow
£0.72m
outflow
£1.09m
decrease
(18%)
£3.00m
decrease
(38%)
£0.39m
decrease
(6%)
38
percentage
point
decrease
Decrease in
outflow of
£0.51m
Summary management
commentary
Revenue has declined due to both
a fall in order intake and delays
on some studies that were out of
the Group’s control.
This decrease has prompted a full
review of the Group’s commercial
function. We are already seeing
improved results in 2020.
Despite the headwinds described
above, the Group’s order book
remains strong and gives us a
good platform
for 2020 and
beyond.
As well as the revenue result and
change in accounting basis, this
reflects the continued investment
in research and development. The
Group
to move
investment away from research
and
into
development
commercialisation in 2020.
This is driven by the operating
result, though was mitigated by
the March 2019 fundraise.
expects
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. Unfortunately, this
cannot be readily measured in the style of a KPI. The directors are pleased with the successes in developing
products during 2019, and the plans for continued innovation.
Approved by the Board of Directors and signed on behalf of the Board.
Matthew Stork
Chief Executive Officer
29 June 2020
9
Cambridge Cognition Holdings plc
Report of the Directors for the year ended 31 December 2019
The Directors present their report on the affairs of the Group and Company together with the financial statements
for the year to 31 December 2019. 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
The Directors have assessed the Group’s ability to continue as a going concern, in particular in light of the Covid-
19 pandemic. As noted in the Strategic Review, the business has remained fully operational to date and order
intake has been encouraging. The Group also benefitted from the £1.4m equity fundraise in March 2020.
Whilst having proper regard to the possibilities of an extended lockdown period, or a so-called second spike, the
Directors believe that the Group will remain a going concern for the foreseeable future. Accordingly, the accounts
have been prepared on the going concern basis. More details are given in note 3.2. to the financial statements.
In particular this consideration includes the raising of £1.3m (net) through a share placement on 10 March 2020.
Further information on the Group’s financial risk management strategy can be found in note 26 to the accounts.
SHARE ISSUES
The issued share capital of the Company is set out at Note 20 to the accounts. In 2019 3,472,223 shares were
issued to raise £2.3m (net). On 10 March 2020, 7,000,000 shares were issued in connection with the raising of
£1.3m (net) referred above.
DIRECTORS
The Directors who held office at 31 December 2019 and their interest in the share capital of the Company were:
Name
23 June 2020
31 December 2019
31 December 2018
Ordinary Shares of 1p each
Steven Powell (Chairman)
Matthew Stork
Nicholas Walters
Eric Dodd
Debra Leeves
216,375
125,000
300,826
-
50,000
141,375
50,000
200,826
-
-
70,541
-
186,937
-
-
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 financial statements for each financial year. Under that law, the
Directors have to prepare the Group financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and have elected to prepare the Parent Company financial
statements in accordance with United Kingdom Generally Accepted Accounting Practice and applicable law
including FRS 101 ‘Reduced Disclosure Framework’. Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a true and fair view of the state of affairs 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;
10
Cambridge Cognition Holdings plc
Report of the Directors for the year ended 31 December 2019
make judgements and accounting estimates that are reasonable and prudent;
state whether the applicable IFRSs, or for the Parent Company, UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the 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 23 June 2020 were:
Name
Nigel Wray
Canaccord Genuity Group Inc
Michael Buxton
W B Nominees
AXA Investment Managers S.A.
Octopus Investments Nominees Ltd
Lombard Odier
Brett Gordon
AUDITOR
No. of
Ordinary
Shares
4,851,547
3,116,475
2,889,589
1,730,208
1,650,000
1,429,771
1,388,889
1,300,000
%
15.6
10.0
9.3
5.6
5.3
4.6
4.4
4.2
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
29 June 2020
11
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2019
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.
In 2018, the Company 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”).
The Board considers that it does not depart from any of the principles of the QCA Code, the Board continues to
monitor and develop its governance processes to maintain best practice. The Board recognises the importance
of our wider stakeholders in delivering our strategy and business sustainability.
Steven Powell
Chairman
Disclosure of those principles 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 nine 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 eight and nine 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.
12
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2019
The Board consists of two executive directors, the non-executive Chairman and two further independent
directors. The non-executive Chairman holds some shares, especially from his time as the Group’s CEO. One
non-executive director holds shares after the March 2020 placing. These holdings are not considered material.
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 2019 is as follows:
No. of Meetings
S. Powell
M. Stork
N. Walters
E. Dodd
D. Leeves
M. Lewis
N. Kerton
Board
12
12
8 (of 8)
12
12
6 (of 6)
4 (of 4)
4 (of 4)
Audit
2
1 (of 1)
-
-
2
1 (of 1)
1 (of 1)
1 (of 1)
Nomination
Remuneration
1
-
-
-
1
-
1
1
2
1 (of 1)
-
-
2
1 (of 1)
1 (of 1)
1 (of 1)
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.
On adoption of the QCA code, the Board intended to conduct formal internal performance reviews every year
supplemented by an external evaluation review every alternate year. However, given the numerous changes to
the Board in 2019 the introduction of this was postponed to 2020.
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
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
13
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2019
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 16
and 17.
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
Dr Steven Powell Chairman
Steven has over thirty years operational and investment experience in pharmaceutical and healthcare
companies in the UK, USA, Benelux and Scandinavia. Including his previous executive role at Cambridge
Cognition he has held five CEO roles, three in public companies. He was also a partner with a Life Sciences
venture capital fund in the Netherlands for 12 years. He graduated in microbiology from the University of Wales
and was awarded a PhD from the University of Aberdeen.
Dr Matthew Stork Chief Executive Officer
Dr Stork has twenty-five years’ experience of managing companies in the med tech sector and expertise in AI,
IT, diagnostics, medical equipment, and pharmaceuticals. Before becoming CEO of Cambridge Cognition in
2019, he held managing director and divisional leadership roles within GE Healthcare Digital, InHealth Group,
ArjoHuntleigh, Canon Medical Systems (formerly Toshiba) and Smith & Nephew. He has a degree in pharmacy
from the University of Bath, a PhD in Artificial Intelligence in Medicine from King’s College London, and an MBA
from London Business School.
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.
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.
Debra Leeves Non-Executive Director
Ms Leeves is currently CEO of Vertual, the leading provider of virtual and augmented reality training simulation
systems in radiotherapy. She has over 25 years of experience in the medical technology and biotechnology
industries, and has previously been COO of Beckley Canopy Therapeutics, CEO of Physeon and also held senior
roles with companies such as Rex Bionics, Avita Medical, Merck, GlaxoSmithKline, GE Healthcare and Pfizer.
Michael Lewis and Nick Kerton did not offer themselves for re-election at the AGM on 23 May 2019 and hence
resigned from the Board at that date. The Board was deeply saddened by Nick Kerton’s death in August 2019.
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.
14
Cambridge Cognition Holdings plc
Corporate Governance Report for the year ended 31 December
2019
The main issues considered by the Committee during the year in relation to the financial statements included
the appropriateness of revenue recognition policies, adequacy of systems of internal control and going concern.
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.
Section 172(1) Statement
The directors consider, both individually and collectively that they have taken decisions in a manner they consider,
in good faith, would be most likely to promote the success of the Group for the benefit of its stakeholders, having
regard to the matters set out in s172(1) of the Companies Act 2006:
a) The likely consequences of any decision in the long-term: the long term success of the Group is always
a key factor when making strategic decisions.
c)
b) The interests of the Group’s employees: the Group’s employees are our key asset and hence we take
their wellbeing and development very seriously. The Group believes it offers competitive remuneration
packages, and seeks to engage employees regularly.
The need to foster the Group’s business relationships with suppliers, customers and other: the Group
has a dynamic relationship with our customers with regular contacts across organisations; we also seek
to have constructive and mutually beneficial relationships with our suppliers. Shareholders are also a
key stakeholder and we seek to engage shareholders through both generic and specific outreach,
covering both financial results and our innovation and future plans.
d) The impact of the Group’s operations on the community and the environment. The Group’s aims to
execute its operations with due regard to the environment. Charities are supported by donations,
fundraising, allowing employees two days leave for charitable activities and the donation of equipment.
e) The desirability of the Group maintaining a reputation for high standards of business conduct: integrity
of individuals and corporate integrity are at the heart of all we do, and embedded in our culture through
formal and informal means.
The need to act fairly as between members of the Group: no single set of stakeholders is prioritised over
another – all decisions aim to be equitable across all stakeholders.
f)
15
Cambridge Cognition Holdings plc
Remuneration Report for the year ended 31 December 2019
The Company has established a Remuneration Committee. The members of the Remuneration Committee are:
Steven Powell (Chair)
Eric Dodd
Debra Leeves
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 (1)
Nicholas Walters
Matthew Stork (2)
Non-Executive Directors:
Steven Powell (1)
Eric Dodd
Debra Leeves (3)
Michael Lewis (4)
Nicholas Kerton (4)
Total
Salary
/Fee
£’000
Benefits
Bonus
Pension
£’000
£’000
£’000
2019
Total
£’000
2018
Total
£’000
59
48
146
27
30
15
18
12
355
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9
-
-
-
-
-
9
59
48
155
27
30
15
18
12
364
147
48
-
-
30
-
44
30
299
(1) Executive Director until 23 May 2019, Non-Executive Director thereafter
(2) Appointed to the Board 23 May 2019
(3) Appointed to the Board on 1 July 2019
(4) Resigned from the Board on 23 May 2019
Payments were also made to third parties for the services of Steven Powell and Nicholas Walters. See note 27
to the consolidated financial statements.
16
Cambridge Cognition Holdings plc
Remuneration Report for the year ended 31 December 2019
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 August 2020
Steven Powell
July 2015
62,500
Vested (2)
82.5 pence
To July 2025
Matthew Stork
October
2019
Performance Criteria
392,858
(3)
28 pence
Oct 2022 to Sep 2023
(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. The rules of the scheme permit Dr Kerton’s
personal representatives to exercise the options within twelve months of the date of his death.
(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) 50% of these options will vest if the average closing mid-market price of an Ordinary Share for any
three month period before 30 September 2022 exceeds 100 pence and on the last day of that period
exceeds 90 pence. 50% of these options will vest if the average closing mid-market price of an
Ordinary Share for any three month period before 30 September 2022 exceeds 150 pence and on the
last day of that period exceeds 135 pence.
On 31 December 2019, 100,000 options in favour of Steven Powell and 25,000 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 2019 was a
minimum of 130 pence; and that the Group made a profit after tax in at least one of the years to 31
December 2018 or 31 December 2019.
17
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 2019 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 2019 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.
The impact of macro-economic uncertainties on our audit
Our audit of the financial statements requires us to obtain an understanding of all relevant uncertainties, including those
arising as a consequence of the effects of macro-economic uncertainties such as Covid-19 and Brexit. All audits
assess and challenge the reasonableness of estimates made by the directors and the related disclosures and the
appropriateness of the going concern basis of preparation of the financial statements. All of these depend on
assessments of the future economic environment and the group’s and parent company’s future prospects and
performance.
Covid-19 and Brexit are amongst the most significant economic events currently faced by the UK, and at the date of
this report their effects are subject to unprecedented levels of uncertainty, with the full range of possible outcomes and
their impacts unknown. We applied a standardised firm-wide approach in response to these uncertainties when
assessing the group’s and parent company’s future prospects and performance. However, no audit should be expected
to predict the unknowable factors or all possible future implications for a group and parent company associated with
these particular events.
18
Cambridge Cognition Holdings plc
Independent auditor’s report to the members of Cambridge Cognition
Holdings plc
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.
In our evaluation of the directors’ conclusions, we considered the risks associated with the group’s and parent
company’s business model, including effects arising from macro-economic uncertainties such as Covid-19 and Brexit,
and analysed how those risks might affect the group’s and parent company’s financial resources or ability to continue
operations over the period of at least twelve months from the date when the financial statements are authorised for
issue. In accordance with the above, we have nothing to report in these respects.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that
are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a
material uncertainty in this auditor's report is not a guarantee that the group and parent company will continue in
operation.
Overview of our audit approach
Overall group materiality: £134,000, which represents 5% of the
group’s estimated loss before taxation at the planning stage of the
audit;
Key audit matters were identified as going concern and revenue
recognition; and
We performed full scope audit procedures on the financial statements
of Cambridge Cognition Holdings Plc and on the financial information
of Cambridge Cognition Limited. 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. There were no changes in scope
from prior year.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) 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.
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Going concern
As stated in ‘the impact of macro-economic
uncertainties on our audit’ section of our report,
Covid-19 is one of the most significant economic
events currently faced by the UK, and at the date
of this report its effects are subject to
We undertook procedures to evaluate
management’s assessment of the impact of
Covid-19 on the company’s forecasted cashflow.
This included, but was not restricted to:
19
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
unprecedented levels of uncertainty. This event
could adversely impact the future trading
performance of the company and as such
increases the extent of judgement and estimation
uncertainty associated with management’s
decision to adopt the going concern basis of
accounting in the preparation of the financial
statements.
As such we identified going concern as a
significant risk, which was one of the most
significant assessed risks of material
misstatement.
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
Obtaining management’s original forecasts
covering the period to December 2021. We
assessed how these forecasts were
compiled, including assessing their accuracy
by validating the reasonableness of
underlying assumptions;
Assessing the reliability of management’s
forecasting by comparing the accuracy of
actual financial performance to the forecast
information;
Obtaining management’s revised forecasts
prepared to assess the potential impact of
Covid-19. We evaluated the assumptions
applied, including the estimated, extended
period of disruption due to Covid-19 and the
resultant reduction in revenue and cashflow
during the estimated period of extended
Covid-19 disruption. We also considered
whether the assumptions are consistent with
our understanding of the business;
Assessing and corroborating mitigating
actions taken by management to relevant
documentation and evaluation of their
application in the revised forecasts for
accuracy;
Obtaining management’s reverse stress test
forecasts and assessing the circumstances
and likelihood of events that would lead to
elimination of the headroom in their original
cash flow forecasts; and
Assessing the adequacy of the going
concern disclosures included within the
financial statements.
Key observations
Based on the procedures performed, we have
identified no issues regarding management’s
assessment of the impact of Covid-19 on the
company’s forecasted cashflow. We have nothing
to report in addition to that stated in the
‘Conclusions relating to going concern’ section of
our report.
Our audit work included, but was not restricted to:
Obtaining management’s assessment of
income recognition in accordance with
IFRS 15 ‘Revenue from Contracts with
Customers’.
20
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
be misstated due to the improper recognition of
revenue due to fraud.
The Group recognised revenues of £5.0m (2018:
£6.1m). The nature of the Group’s revenue
includes providing multiple products or services
as part of a single arrangement. These products
and services may include but are not limited to
licences of IP, sale of hardware, study set up,
data management services, study management
services, support services, training, and 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 services are distinct from
other goods and services in an arrangement is
key to the appropriate recognition of revenue.
We have therefore identified revenue recognition
as a significant risk of material misstatement,
which is one of the most significant assessed
risks of material misstatement.
Completing an evaluation of revenue
recognition policies for consistency and
compliance with IFRS 15.
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;
evaluated the significant
judgements made by management
in identifying the separate
performance obligations and
selecting an appropriate method
for measuring progress
inspected evidence that invoices
raised relate to milestones met in
the period in accordance with the
payment schedule agreed with the
customer; and
recalculated the revenue
recognised for performance
obligations delivered over time and
checked the accuracy of deferred
revenue and accrued income.
Obtaining an understanding of the
performance and progress of material
contracts through discussions with the
internal study managers to corroborate
that revenue has been recognised as
performance obligations have been
satisfied.
Obtaining management’s assessment of
revenue recognised under bill and hold
arrangements, critically challenging the
21
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
judgements made and corroborating
facts to supporting documentation.
Recalculating the deferred income
element of a sample of revenue
contracts to test the completeness of the
deferred income creditor at the year end.
The group’s accounting policy on revenue
recognition is shown in note 3 to the financial
statements and related disclosures are included
in note 5.
Key observations
Our audit work did not identify any material
misstatements in the occurrence of revenue
recognised during the year or any instances of
revenue not being recognised in accordance with
stated accounting policies.
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
Parent
Financial statements as a
whole
Performance materiality
used to drive the extent
of our testing
Specific materiality
£134,000 which is 5% of estimated group
losses before tax at the planning stage of
the audit. This benchmark is considered
the most appropriate as this is a key
measure of performance from the
perspective of the Group’s stakeholders.
Materiality for the current year is lower
than the level that we determined, on the
basis of group revenue, for the year
ended 31 December 2018.
£133,000 which is 2% of estimated total
assets at the planning stage of the audit.
This benchmark is considered the most
appropriate because the entity is a
holding company and therefore its asset
base is more relevant to the activities of
the parent company.
Materiality for the current year is higher
than the level that we determined, on the
same basis, for the year ended 31
December 2018.
75% of financial statement materiality.
75% of financial statement materiality
We determined a lower level of specific
materiality for certain areas such as
directors' remuneration, auditors’
remuneration and related party
transactions of £1,000 due to the inherent
sensitivity of these transactions and
related disclosures.
We determined a lower level of specific
materiality for certain areas such as
directors' remuneration, auditors’
remuneration and related party
transactions of £1,000 due to the inherent
sensitivity of these transactions and
related disclosures.
Communication of
misstatements to the
audit committee
£6,700 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£6,700 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
22
Cambridge Cognition Holdings plc
Independent auditor’s report to the members of Cambridge Cognition
Holdings plc
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:
Cambridge Cognition Holdings plc has centralised processes and controls over the key areas of audit focus. Group
management are responsible for all judgemental processes and significant risk areas. In assessing the risk of
material misstatement to the Group financial statements we assessed the significance of each component and
determined the planned audit response based on a measure of materiality.
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 and targeted procedures over the Group’s revenue was 100%.
The total percentage coverage of full-scope and targeted procedures over the Group’s total assets was 97%.
Our audit approach in the current year is consistent with the audit approach adopted for the year ended 31
December 2018 being substantive in nature.
Other information
The directors are responsible for the other information. The other information comprises the information included in the
annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
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.
Matters 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
23
Cambridge Cognition Holdings plc
Independent auditor’s report to the members of Cambridge Cognition
Holdings plc
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 10 to 11, 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 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.
Paul C Brown
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
29 June 2020
24
Cambridge Cognition Holdings plc
Consolidated statement of comprehensive income
Notes
Year to
31 December
2019
Year to
31 December
2018
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating loss
Interest receivable
Finance costs
Loss before tax
Income tax
Loss for the year
Earnings per share (pence)
Basic and diluted earnings per share
Other comprehensive income
Loss for the year
5
6
7
10
10
11
12
Items that may subsequently be reclassified to profit or
loss
Exchange differences on translation of foreign operations
21
Total comprehensive loss for the year
All items of income are attributable to the equity holders in the Parent.
The above results relate to continuing operations.
£’000
5,042
(1,149)
3,893
(7,011)
-
£’000
6,134
(900)
5,234
(6,749)
27
(3,118)
(1,488)
5
(4)
(3,117)
216
-
-
(1,488)
46
(2,901)
(1,442)
(12.4)
(7.0)
(2,901)
(1,442)
87
(2,814)
(92)
(1,534)
25
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
2019
At 31 December
2018
£'000
£’000
13
14
16
17
22
385
117
502
53
1,703
901
390
58
448
26
1,868
1,110
2,657
3,004
3,159
3,452
19
4,103
3,978
20
20
21
21
4,103
3,978
242
9,943
6,018
(81)
207
7,707
5,931
(94)
(17,066)
(14,277)
(944)
(526)
Total liabilities and equity
3,159
3,452
The financial statements on pages 24 to 46 were approved by the Board of Directors and authorised for issue
on 29 June 2020 and were signed on its behalf by:
Matthew Stork
Chief Executive Officer
26
Cambridge Cognition Holdings plc
Consolidated statement of changes in equity
Balance at
1 January 2018
Loss for the 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
1 January 2019
Loss for year
Other comprehensive income
Total comprehensive income for
the year
Issue of new share capital
35
2,465
Share issue costs
Transfer on allocation of shares
held in trust
Credit to equity for equity-
settled share-based payments
-
-
-
(229)
-
-
Transactions with owners
35
2,236
Share
capital
£'000
Share
premium
Other
reserves
Own
shares
Retained
earnings
£'000
£'000
£'000
£'000
Total
£'000
207
7,707
6,023
(43)
(12,820)
1,074
-
-
-
-
-
-
-
-
-
-
-
-
-
(92)
(92)
-
-
-
-
-
-
(1,442)
(1,442)
-
(92)
(1,442)
(1,534)
(51)
(1)
-
(14)
(52)
(14)
(51)
(15)
(66)
207
7,707
5,931
(94)
(14,277)
(526)
-
-
-
-
-
-
-
87
87
-
-
-
-
-
-
-
-
-
-
(2,901)
(2,901)
-
87
(2,901)
(2,814)
-
-
2,500
(229)
13
(13)
-
-
125
125
13
112
2,396
Balance at
31 December 2019
242
9,943
6,018
(81)
(17,066)
(944)
27
Cambridge Cognition Holdings plc
Consolidated statement of cash flows
Net cash flows from operating activities
22
(2,320)
(644)
Notes
Year to
31 December
2019
Year to
31 December
2018
£'000
£’000
Investing activities
Interest received
Purchase of property, plant and equipment
Purchase of intangible asset
Net cash flow used in investing activities
Financing activities
Proceeds from the issue of share capital, net of issue costs
Purchase of own shares
Finance lease payments
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
5
(15)
(40)
(50)
2,271
-
(113)
2,158
(212)
1,110
3
-
(25)
-
(25)
-
(51)
-
(51)
(720)
1,859
(29)
Cash and cash equivalents at end of year
22
901
1,110
28
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.
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 2018, other than
that IFRS 16: Leases which has been adopted in the 2019 financial statements. See notes 3.6 and 23 for more
details on the impacts of adopting IFRS 16. The financial statements have been prepared under the historical
cost convention.
The subsidiary undertakings included within the Consolidated Financial Statements as at 31 December 2019 are
given in note 15.
2. Outlook for adoption of future Standards (new and amended)
At the date of authorisation of the Consolidated Financial Statements, the standards and amendments that are
in issue but not yet effective 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. All of the Group’s
subsidiaries are wholly-owned.
3.2 Going concern
The Directors have assessed the Group’s ability to continue as a going concern, in particular in light of the Covid-
19 pandemic. As noted in the Strategic Review, the business has remained fully operational to date and order
intake has been encouraging.
With the Group already informed of a great majority of revenue and billing impacting delays, the Group formed
two forecasts. The first was a base case based on the information known and a realistic view of future sales,
especially in the near term. This case can be characterised as business beginning to return towards pre-Covid
levels at the beginning of Q3. There is also a worse case, which builds in further delays, a more pessimistic
sales forecast but also some initial cost reduction activities. This case can be characterised as a return towards
pre-Covid levels at the beginning of Q4.
The base case shows strong performance, especially in sales which in turn supports a positive and comfortable
cash balance right through to the end of 2021, with a positive outlook thereafter. The worse case also shows
positive cash through the period, and with the long period to December 2021, would allow for further
expenditure modifications not yet budgeted.
The Directors have also given regard to the Group’s performance against these two scenarios since they were
set and this has been encouraging, especially in the securing of sales orders that will drive future billings and
revenue. The Group also benefitted from the £1.4m equity fundraise in March 2020.
Whilst having proper regard to the possibilities of an extended lockdown period, or a so-called second spike, the
Directors believe that these two realistic scenarios both show that the Group will remain a going concern for the
foreseeable future. Accordingly, the accounts have been prepared on the going concern basis.
3.3 Revenue recognition
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’s
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.
29
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 breakage:
Software is generally sold as non-refundable and so at the end of a contract any remaining deferred software
revenue is taken to the income statement, subject to the related cash being received or reasonable expected. In
addition, breakage will also be taken where software assessments on a project have not been used for 12 months,
and management is not able to establish that the related project is ongoing.
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 performance 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, as the performance
obligation is discharged at this point.
30
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.3 Revenue recognition (continued)
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.
Revenue recognised in the Statement of Comprehensive Income but not yet invoiced is held on the Statement of
Financial Position within ‘Accrued income on contracts with customers’. Revenue invoiced but not yet recognised
in the Statement of Comprehensive Income is held on the Statement of Financial Position within ‘Deferred income
on contracts with customers’.
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
The Group adopted IFRS 16 Leases on 1 January 2019.
A contract contains a lease if the contract gives the Group the right to control the use of an asset for a period of
time. On commencement of a lease (and on adoption of IFRS 16), the lease liability is measured at the present
value of the contracted lease payments, using an estimation of the Group’s incremental cost of borrowing, or a
rate implicit in the contract if that can be determined. Right-of-use assets are measured at cost compromising
the amount of the initial investment of the lease liability and restoration costs.
Subsequent to initial recognition, the lease liability is increased for the related finance charges, and reduced for
instalments paid. The asset is depreciated on a straight-line basis over the length of the lease. Upon any
subsequent modifications to the lease, the values are reassessed in line with the process outlined for
commencement above.
Should the Group enter into any leases with a period of under 12 months, or for assets with a low value, these
costs would be recognised directly into the income statement. For 2019, there are no such assets.
Lease disclosures, including those related to the transitional impacts of adopting IFRS 16 are given in note 23.
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.
31
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.9 Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported
in the income statement because it excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the
computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities
are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it
is probable that taxable profits will be available against which deductible temporary differences can be utilised.
However, such assets and liabilities are not recognised if the temporary difference arises from the initial
recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries
except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or
the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the reporting
date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or
credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive
income.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
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:
Leased buildings (right of use)
Fixtures, fittings and equipment
Leasehold improvements
-
-
-
Period of contracted use (i.e. length of lease)
25% - 33% per annum straight line
straight line over the lesser of 5 years or over the term of the lease
32
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.11 Tangible and intangible assets (continued)
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:
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 applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables and contract assets. 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 historical rates are adjusted to reflect current conditions and the Group’s view of economic conditions
over the expected lives of the receivables. 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.
33
Cambridge Cognition Holdings plc
Notes to the financial statements
3. Significant accounting policies (continued)
3.14 Share-based payments
Equity-settled share-based payments to employees and others providing similar services are measured at the
fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based
vesting conditions. Details regarding the determination of the fair value of equity-settled share-based
transactions are set out in note 24.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-
line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest.
At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as
a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates,
if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to equity reserves.
3.15 Employee Benefit Trust
In order to facilitate the exercise of share options the Group maintains an Employee Benefit Trust (EBT). This is
consolidated in accordance with IFRS10. The costs of purchasing own shares held by the EBT are deducted from
equity under ‘Own Shares’ reserve. Neither the purchase nor sale of own shares leads to a gain or loss being
recognised in the Group’s profit and loss or other comprehensive income. When shares are subsequently
transferred to employees for less than their purchase price the difference is a realised loss recognised directly in
reserves.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 3, the directors are required to
make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period or in the
period of the revision and future periods if the revision affects both current and future periods.
Critical judgements in applying the Group’s accounting policies
The following are the critical judgements that the directors, 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 13.
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 2019 (2018: £nil).
34
Cambridge Cognition Holdings plc
Notes to the financial statements
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 24. The accounting estimates
and assumptions relating to equity settled share-based payments would have no impact on the carrying amounts
of assets and liabilities within the next annual reporting period but may impact profit and loss and equity.
5. Revenue
An analysis of the Group’s revenue for each major product and service category is as follows:
Software
Services
Hardware
2019
£'000
2,526
2,339
177
5,042
2018
£'000
3,088
2,831
215
6,134
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
Information about major customers
2019
£'000
508
2,522
1,325
687
5,042
2018
£'000
745
4,070
612
707
6,134
Revenue of £992,000 (2018: £731,000) can be attributed to one (2018: 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.
Revenue from contracts with customers
All revenue comes from contracts with customers, with the exception of £63,000 (2018: £276,000) which came
from contracts with grant issuing bodies. This amount is included in the Services and United Kingdom sections in
the above tables.
Timing of revenue recognition
As explained in note 3.3, some software and services are recognised over a period of time, and some at a point
in time. The split of revenue in line with these factors is as follows:
Software – delivered over a period of time
Software – delivered at a point in time
Services – delivered over a period of time
Services – delivered at a point in time
Hardware – recognised at despatch or on satisfaction of bill and hold criteria
2019
£'000
2,167
359
1,605
734
177
5,042
2018
£'000
2,619
469
2,397
434
215
6,134
35
Cambridge Cognition Holdings plc
Notes to the financial statements
5. Revenue (continued)
Of the £2,847,000 deferred revenue at 31 December 2018, £1,948,000 was recognised as revenue in 2019. Of
the £2,007,000 deferred revenue at 1 January 2018 (on transition to IFRS 15), £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 2019, the Group has sales orders (including both billed and unbilled amounts) worth £5,864,000
for which performance obligations are currently unsatisfied. At that date the Group estimates that £3,598,000 of
this will be recognised in 2020, £873,000 will be recognised in 2021 and £1,393,000 in 2022 and thereafter.
Deferred commissions
Deferred commissions is presented as part of ‘other receivables’ in note 17. The movement of this account
specifically is as follows:
2019
£'000
320
(158)
111
273
2018
£'000
50
(34)
304
320
2019
£'000
2018
£'000
-
-
27
27
2019
£'000
70
1,715
157
5
4,647
2018
£'000
68
1,414
55
2
4,434
Opening balance
Amount of opening balance recognised in year
Net addition from sales in year
Closing balance
6. Other operating income
Other operating income is made up of the following:
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
Amortisation of intangibles
Staff costs (see note 9)
36
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
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 25)
Share-based payments charge (see note 24)
10. Interest receivable and finance costs
The interest receivable for the year can be analysed as follows:
Interest on bank deposits
The finance costs for the year can be analysed as follows:
Unwinding of discount on finance lease creditor
37
2019
£'000
2018
£'000
22
25
47
11
9
20
12
12
15
24
39
9
9
18
27
27
2019
Number
2018
Number
50
9
12
71
2019
£'000
3,939
336
247
125
4,647
45
16
12
73
2018
£'000
3,898
327
223
(14)
4,434
2019
£'000
2018
£'000
5
-
2019
£'000
2018
£'000
4
-
Cambridge Cognition Holdings plc
Notes to the financial statements
11. Taxation
Corporation tax:
Current year
Adjustments in respect of prior years
Deferred tax (see note 18)
Total tax credit
2019
£'000
2018
£'000
3
(219)
(216)
-
(216)
23
(69)
(46)
-
(46)
Corporation tax is calculated at 19.00% (2018: 19.00%) 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%
(2018: 19.00%)
Difference in foreign tax rates
Expenses not deductible for tax purposes
Deduction on exercise of share options
Movement in unprovided deferred tax on losses
Adjustment in respect of prior years
Foreign tax charge
Tax credit for the year
2019
£’000
2018
£'000
(3,117)
(1,488)
(592)
(283)
(8)
27
(1)
574
(219)
3
(4)
(10)
(3)
300
(69)
23
(216)
(46)
The adjustment in respect of prior years relates to the receipt of R&D tax credits in respect of 2018 (2018: in
respect of 2016 and 2017). No claim has yet been made for 2019 and no credit has been recognised in the
financial statements.
Factors that may affect future tax charges
Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2016 (on 6 September
2016). These include reductions to the main rate to reduce the rate to 17% from 1 April 2020. Deferred taxes at
the balance sheet date have been measured using these enacted tax rates and reflected in these financial
statements. In November 2019, the Prime Minister announced that he intended to cancel the future reduction in
corporate tax rate from 19% to 17%. This was confirmed in the UK Budget presented on 11 March 2020. These
announcements do not constitute substantive enactment and therefore deferred taxes at the balance sheet date
continue to be measured at the enacted tax rate of 17%. However, it is possible that the corporation tax rate
remains at 19% after 1 April 2020.
38
Cambridge Cognition Holdings plc
Notes to the financial statements
12. 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
2019
£'000
2018
£'000
(2,901)
(1,442)
2019
'000
23,414
2018
'000
20,553
Weighted average number of ordinary shares for the purposes of diluted EPS
23,414
20,553
For 2019 and 2018, 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.
13. Intangible assets
Cost
At 1 January 2019
Additions
At 31 December 2019
Amortisation
At 1 January 2019
Charge for the year
At 31 December 2019
Net Book value
At 31 December 2019
At 31 December 2018
Goodwill
£'000
Licences
£'000
Total
£'000
352
-
352
-
-
-
352
352
40
-
40
2
5
7
33
38
392
-
392
2
5
7
385
390
The goodwill held by the Group is held within Cambridge Cognition Limited and was recognised when the initial
trade and assets for Cambridge Cognition Limited were acquired in 2002. The initial amount recognised was the
difference between the amount paid for the trade and assets by Cambridge Cognition Limited and the fair value
of those assets. The goodwill represents Cambridge Cognition’s proprietary software. This software is used
across the Group’s product offerings, and the group monitors the value of the goodwill at the Cambridge
Cognition Limited level. Accordingly, the cash generating unit (“CGU”) for the purposes of testing impairment
under IAS 36 is the statutory entity of Cambridge Cognition Limited.
The recoverable value of the goodwill and other assets in Cambridge Cognition Limited has been assessed on a
value in use basis considering the three-year future forecasts for Cambridge Cognition Limited. These budgets
are a result of the overall Group budgeting process. This process considers both prior performance and future
projections based on both external and internal factors. A terminal value is calculated based on the third year
of forecasts with a nil growth rate. The discount rate used was 7.5%.
As well as the scenario based on these forecasts, management has run alternative scenarios with reasonable
downside assumptions to test the valuation. In all scenarios, the goodwill amount is recovered within the initial
three year period. Accordingly, no impairment provision has been recorded.
39
Cambridge Cognition Holdings plc
Notes to the financial statements
14. Property, plant and equipment
Cost
At 1 January 2019
Additions
Disposals
At 31 December 2019
Depreciation
At 1 January 2019
Charge for the year
Disposals
At 31 December 2019
Net Book value
At 31 December 2019
At 31 December 2018
Leased
Buildings
£’000
Leasehold
Improvements
£'000
Fixtures
and fittings
£'000
Total
£'000
-
201
-
201
-
115
-
115
86
-
38
1
-
39
38
-
-
38
1
-
572
14
-
586
514
42
-
556
30
58
610
216
-
826
552
157
-
709
117
58
15. Subsidiaries and joint ventures
Details of the Company’s subsidiaries at 31 December 2019 are as follows:
Name
Place of
incorporation
(or registration)
and operation
Cambridge Cognition Limited
United Kingdom
Cambridge Cognition Trustees Limited
United Kingdom
Cambridge Cognition LLC
Delaware, United
States of America
Cantab Corporate Health Limited
United Kingdom
Monument Therapeutics Limited
United Kingdom
Proportion
of
ownership
interest
%
100%
Proportion
of
voting
power held
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
Cognition Kit Limited
United Kingdom
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 and Monument Therapeutics 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 510 S. 200 W. Suite 200, Salt Lake City, UT 84101, USA.
All holdings are in ordinary shares.
16. Inventories
Finished goods and goods for resale
2019
£'000
2018
£'000
53
26
During the year inventories with a total value of £131,000 (2018: £115,000) were included in the income
statement as an expense.
40
Cambridge Cognition Holdings plc
Notes to the financial statements
17. Trade and other receivables
Trade receivables from contracts with customers
Accrued income from contracts with customers
Prepayments
Other receivables
2019
£'000
690
148
298
567
1,703
2018
£'000
823
223
165
657
1,868
Trade receivables
Trade receivables disclosed above are classified as financial assets and are measured at amortised cost.
The average credit period offered on sales of goods varies from 30 days to 90 days. The Group has recognised
an allowance for doubtful debts based on estimated irrecoverable amounts determined by reference to past
default experience of the counterparty and an analysis of the counterparty’s current financial position.
Trade receivables disclosed above include amounts which are past due at the year-end (see below for aged
analysis) but against which the Group has not recognised an impairment loss. There has not been a significant
change in credit quality and the amounts are still considered recoverable. The average age of these receivables
at 31 December is 37 days in 2019 (2018: 29 days).
Aging of past due but not impaired receivables:
31-60 days
61-90 days
91-120 days
121 or more days
2019
£'000
28
3
18
23
72
2018
£'000
29
21
42
38
130
There is no impairment loss allowance (2018: nil). 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 in this or the prior year.
No bad debts were written off in the year (2018:£5,000).
18. Deferred Tax
At the reporting date, the Group has unused tax losses of £10.5 million (2018: £8.9 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.
41
Cambridge Cognition Holdings plc
Notes to the financial statements
19. Trade and other payables
Amounts falling due within one year
Trade payables
Accruals
Deferred income on contracts with customers
Social security and other taxes
Lease liabilities
Other payables
2019
£'000
775
363
2,746
94
92
33
4,103
2018
£'000
406
604
2,847
93
-
28
3,978
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
The average credit period taken for trade purchases is 48 days (2018: 38 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.
20. Share capital
Issued and fully paid
24,170,093 (2018: 20,697,870) Ordinary Shares of £0.01 each
2019
£’000
2018
£’000
242
207
On 12 March 2019, 3,472,223 Ordinary Shares were issued in a placing that raised net proceeds of £2.3m.
On 10 March 2020, 7,000,000 Ordinary Shares were issued in a placing that raised net proceeds of £1.3m.
21. Own Shares Reserve and Other Reserve
Own Shares Reserve
2019
£’000
2018
£’000
81
94
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 2019 was 72,893 (2018: 102,693). The number of shares held by the
Jersey-based Employee Benefit Trust at 31 December 2019 was 48,250 (2018: 48,250).
During the year employees exercised 28,600 share options at an exercise price of £0.01, and 1,200 share options
at an exercise price of £0.70 which were satisfied by the UK Employee Benefit Trust.
Other reserves – merger reserve
Other reserves – cumulative translation adjustment
Total other reserves
2019
£’000
5,981
37
6,018
2018
£’000
5,981
(50)
5,931
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 £37,000 of cumulative exchange
differences on the translation of foreign operations.
42
Cambridge Cognition Holdings plc
Notes to the financial statements
22. Notes to the cash flow statement
Loss before tax
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of software licences
Share-based payment expense
Finance costs
Interest receivable
Operating cash flows before movements in working capital
(Increase)/ Decrease in inventories
Decrease in receivables
Increase in payables
Cash generated by operations
Tax credit received less tax paid
Net cash from operating activities
Cash and cash equivalents
Cash and bank balances
2019
£'000
2018
£'000
(3,117)
(1,488)
157
5
125
4
(5)
(2,831)
(27)
148
110
(2,600)
55
2
(14)
-
-
(1,445)
7
513
304
(621)
280
(23)
(2,320)
(644)
2019
£'000
901
2018
£'000
1,110
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.
23. Lease arrangements
The Group holds leases for its headquarters and one additional storage building on the same site. These are the
Group’s only leases. A summary of the lease asset is within note 14, being the column ‘Leased Buildings’. The
asset addition of £201,000 is the amount brought into the accounts on 1 January 2019 on adoption of IFRS 16.
The changes in the lease liability are as follows:
Liability recognised on adoption of IFRS 16
Lease repayments
Finance costs
Liability outstanding at year-end
2019
£'000
201
(113)
4
92
All remaining lease payments are due within one year. Included within the liability above is an amount of
£16,000 for restoration of the property at the lease’s end.
Impact of adoption of IFRS 16
These were the only leases the Group held at 31 December 2018 and the Group has adopted IFRS 16
retrospectively with the cumulative effect of applying the standard at 1 January 2019. These leases were classified
as operating leases under the previous leasing standard, IAS 17. At adoption, a ‘leased building’ tangible fixed
asset of £201,000 was created. An equal and opposite lease liability of £201,000 was created. Accordingly, there
was no impact on the net opening retained earnings position of the Group. The initial valuation used an
incremental borrowing rate of 5.75%.
At 31 December 2018, the Group reported that £198,000 was payable in future lease commitments under IAS
17. When measured at present value under IFRS 16 these cash flows are valued at £185,000. The £16,000
restoration liability is then added to create an opening liability under IFRS 16 of £201,000.
43
Cambridge Cognition Holdings plc
Notes to the financial statements
24. 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:
2019
2018
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
809,406
(29,800)
944,215
(407,500)
1,316,321
0.36
0.04
0.35
0.01
0.46
1,793,606
(2,000)
404,500
(1,386,700)
809,406
0.17
0.01
0.01
0.01
0.36
Exercisable at the end of the year
378,106
0.75
389,406
0.73
The options outstanding at 31 December 2019 had a weighted average remaining contractual life of 3.8 years
(2018 7.3 years). The exercise prices of share options outstanding at the period end was as follows:
2019
2018
Number of
share
options
Weighted
average
exercise price
(in £)
Number of
share
options
Weighted
average
exercise price
(in £)
Exercise price of one pence
Exercise price of 28 pence
Exercise price between 60 and 82.5 pence
Exercise price between 136 and 272 pence
Outstanding at the end of the year
71,490
750,715
456,184
37,932
1,316,321
0.01
0.28
0.74
1.63
0.46
477,590
-
293,884
37,932
809,406
0.01
-
0.75
1.63
0.36
Options were granted on 16 April 2019 and 30 October 2019. The performance conditions attached to some of
these options are such that options vest dependent on the Group 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 in April
is £13,000, and for those granted in October is £55,000. The inputs into the Monte Carlo stochastic 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
Share price at date of issue
Exercise price
Expected volatility
Expected life
Risk-free rate
Expected dividend yields
April 2019
69p
72p
48%
3 years
0.80%
0.0%
October 2019
27.5p
28p
74%
3 years
0.45%
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 charge of £125,000 (2018: credit of £14,000) in relation to equity-settled share-
based payment transactions.
44
Cambridge Cognition Holdings plc
Notes to the financial statements
25. 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 £247,000 (2018: £223,000) represents contributions payable to these
schemes by the Group at agreed rates. As at 31 December 2019, contributions of £30,000 (2018: £22,000) due
in respect of the current reporting year had not been paid over to the schemes.
26. 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 2019 (2018: nil). The Group is not subject to any externally imposed capital
requirements.
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
2019
£'000
901
(944)
2018
£'000
1,110
(526)
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
2019
£'000
2018
£'000
901
847
1,110
1,105
1,355
1,113
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 2019, the Group’s financial liabilities had contractual maturities which are summarised below:
Trade payables
Other payables
Lease liability
45
2018
£'000
Within 1 year Within 1 year
2019
£'000
775
488
92
406
707
-
1,355
1,113
Cambridge Cognition Holdings plc
Notes to the financial statements
26. 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
2019
£'000
9
427
-
-
2018
£'000
115
-
-
-
2019
£'000
819
469
52
-
2018
£'000
809
263
57
21
A movement in the £/$ exchange rate of +/- 5% from 31 December 2019 to the date of realising the US dollar
net asset position would result in a gain/loss of £41,000 (2018: £35,000). Similarly with the Euro, the gain/loss
would be £2,000 (2018: £13,000). With the Qatari Riyal, the gain/loss would be £3,000 (2018: £3,000). With
the Canadian Dollar, the gain/loss would be nil (2018: £1,000).
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining
sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group
makes appropriate enquiries of the counter party and independent third parties to determine credit worthiness.
Use of other publicly available financial information and the Group’s own trading records is made to rate its major
customers. The Group’s exposure and the credit worthiness of its counterparties are continuously monitored and
the aggregate value of transactions is spread amongst approved counterparties. Credit exposure is also controlled
by counterparty limits that are reviewed and approved by Group management continuously.
The Group does not have any significant credit risk exposure to any single counterparty or group of counterparties
having similar characteristics. The Group defines counterparties as having similar characteristics if they are
related entities.
The carrying amount recorded for financial assets in the Statement of Financial Position is net of impairment
losses and represents the Group’s maximum exposure to credit risk. The Group has calculated its expected credit
losses and the amount is immaterial. 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.
46
Cambridge Cognition Holdings plc
Notes to the financial statements
27. 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 £16,000 (2018: £34,000) in respect of the value of time and expenses of the
Group committed to the activities of Cognition Kit Limited - this has been recognised in revenue. At year-end a
balance of £nil (2018: £nil) was owed to the Group by Cognition Kit Limited. The Group has also accrued income
of £99,000 representing the value of time and expenses of the Group (2018: £88,000) – this has been recognised
in accrued income from contracts with customers.
Further, the Group paid Cognition Kit Limited £75,000 in the year (2018: £1,000) – this has been recognised as
a cost of sale. A balance of £178,000 was outstanding at 31 December 2019 (2018: nil) in respect of licence fees
– this has been included in trade payables. The Group has also accrued costs in respect of licence fees and other
services payable to Cognition Kit Limited of £74,000 (2018: £101,000) – this has been included in accruals.
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 2019 consist of the Directors and four additional senior staff.
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
2019
£'000
2018
£'000
786
37
-
12
835
626
19
-
(10)
635
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 2019 the Group incurred consultancy fees of £24,000 (2018: £24,000) from MCR
Holdings, a partnership of which Nicholas Walters is a partner and consultancy fees of £33,000 (2018: nil) from
The Truffaldino Partnership, a company of which Steven Powell is a Director. At 31 December 2019 a balance of
£2,699 (2018: £5,820) was outstanding to MCR Holdings.
28. Post Balance Sheet Events
The following events since the balance sheet date require reporting:
Equity Fundraise: as described in the Strategic Report and in note 20, the Group raised £1.40m gross through
an equity fundraise in March 2020.
Covid-19: Since the balance sheet date, the Covid-19 pandemic has affected the world. As described in the
Strategic Report and in note 3.2, the Group continues to be fully operational throughout the pandemic, with a
flexible workforce using remote systems and working from home. While certain customers are deferring the start
date for their clinical trials and others whose trials are already underway have either halted or slowed the
recruitment of subjects into their trials temporarily, our order intake continues at an encouraging rate while other
customers trials continue as planned. So far, there has been no significant net impact on the business, but we
remain cautious over the outcome for the full year 2020 until we have a complete understanding of when our
customers will return to full operation.
Both of these matters are non-adjusting balance sheet events, and have not led to any changes in the numbers
presented for 2019 in this Annual Report and Accounts.
47
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
2019
At 31 December
2018
£'000
£’000
2
3
4
5
475
475
6,804
23
6,827
375
375
5,587
19
5,606
7,302
5,981
81
81
61
61
242
9,943
(2,964)
207
7,707
(1,994)
7,221
5,920
Total liabilities and equity
7,302
5,981
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 £1,095,000 (2018: £34,000).
The financial statements of Cambridge Cognition Holdings plc on pages 48 to 52 were approved and authorised
for issue by the Board on 29 June 2020 and were signed on its behalf by:
Matthew Stork
Chief Executive Officer
48
Cambridge Cognition Holdings plc
Parent Company statement of changes in equity
Balance at 1 January 2018
Loss for the year
Charge to equity of equity-settled share-
based payments
Transactions with owners
At 31 December 2018
Balance at 1 January 2019
Loss for the year
Issue of new share capital
Share issue costs
Credit to equity of equity-settled share-
based payments
Transactions with owners
At 31 December 2019
Share
capital
£’000
207
Share
premium
£’000
7,707
-
-
-
-
-
-
Retained
earnings
£’000
(1,946)
(34)
Total
£’000
5,968
(34)
(14)
(14)
(14)
(14)
207
7,707
(1,994)
5,920
207
-
35
-
-
7,707
(1,994)
5,920
-
(1,095)
(1,095)
2,465
(229)
-
-
-
125
2,500
(229)
125
35
242
2,236
9,943
125
2,396
(2,964)
7,211
49
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 27 of the Group
accounts and the Directors Remuneration Report)
- Capital management disclosures (though see note 26 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 24 of the consolidated financial statements
- Disclosure exemption on financial instrument disclosures (IFRS 7) as this information has been presented
for the Group in note 26 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).
Additionally, with respect to intercompany loans, these are assessed for expected credit losses and provision is
made where the recoverable value is less than the book value of the receivable.
1.4 Going concern
The Directors have assessed the Company’s ability to continue as a going concern, in particular in light of the
Covid-19 pandemic. The status of the Company is ultimately dependant on the status of the Group. As noted in
the Directors’ Report, the business has remained fully operational to date and order intake has been encouraging.
With the Group already informed of a great majority of revenue and billing impacting delays, the Group formed
two forecasts. The first was a base case based on the information known and a realistic view of future sales,
especially in the near term. This case can be characterised as business beginning to return towards pre-Covid
levels at the beginning of Q3. There is also a worse case, which builds in further delays, a more pessimistic
sales forecast but also some initial cost reduction activities. This case can be characterised as a return towards
pre-Covid levels at the beginning of Q4.
The base case shows strong performance, especially in sales which in turn supports a positive and comfortable
cash balance right through to the end of 2021, with a positive outlook thereafter. The worse case also shows
positive cash through the period, and with the long period to December 2021, would allow for further
expenditure modifications not yet budgeted.
The Directors have also given regard to the Group’s performance against these two scenarios since they were
set and this has been encouraging, especially in the securing of sales orders that will drive future billings and
revenue. The Group also benefitted from the £1.4m equity fundraise in March 2020.
Whilst having proper regard to the possibilities of an extended lockdown period, or a so-called second spike, the
Directors believe that these two realistic scenarios both show that the Group will remain a going concern for the
foreseeable future. Accordingly, the accounts have been prepared on the going concern basis.
50
Cambridge Cognition Holdings plc
Notes to the Parent Company 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.
2. Investments
Cost
At 1 January 2019
Additions
At 31 December 2019
Provisions for impairment
At 31 December 2018 and At 31 December 2019
Net Book value
At 31 December 2019
At 31 December 2018
Investment in
Subsidiaries
£'000
375
100
475
-
475
375
The subsidiary undertakings at the end of the year was as follows:
Name
Cambridge Cognition Limited
Monument Therapeutics Limited
Country
of
Operation
United
Kingdom
United
Kingdom
Proportion of
Ownership and
Voting Power Held
100%
Nature of Business
Development and sale of
computerised
neuropsychological tests
100%
Dormant entity
Other Group subsidiaries, all of which are owned indirectly through Cambridge Cognition Limited are detailed in
note 15 of the Group accounts. All subsidiaries have been included in the consolidated accounts.
3. Trade and other receivables
Amounts due from subsidiary undertaking
Provision against amounts due from subsidiary undertaking
Other receivables
2019
£’000
7,769
(983)
18
6,804
2018
£'000
5,568
-
19
5,587
£7,750,000 of the amounts due from subsidiary undertakings are considered a long term loan to Cambridge
Cognition Limited, but are technically repayable on demand. The Company receives interest at a rate of 7.5%
per annum on this amount. At 31 December 2019, the recoverable value was estimated at £6,786,000, and
hence an expected credit loss of £983,000 was recorded (2018: no impairment charge).
51
Cambridge Cognition Holdings plc
Notes to the Parent Company financial statements
4. Trade and other payables
Trade payables
Social security and other taxes
Accruals
5. Share capital
2019
£’000
2018
£'000
29
16
36
81
28
10
23
61
The details on the share capital of the Company are provided at note 20 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.
52