Cabot Oil & Gas Corporation
Annual Report 2022

Plain-text annual report

Annual Report & Accounts 2022 Cambridge Cognition Holdings plc Results for the year ended 31 December 2022 Contents Corporate Directory Chair’s Statement Chief Executive Officer’s Review Chief Financial Officer’s Review Risks & Uncertainties Report of the Directors Corporate Governance Report Remuneration Report 2 3-4 5-14 15-17 18-20 21-23 24-28 29-32 Independent Auditor’s Report to the Members of Cambridge Cognition Holdings plc 33-43 Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Parent Company Statement of Financial Position Parent Company Statement of Changes in Equity Notes to the Parent Company Financial Statements 44 45 46 47 48-77 78 79 80-82 Corporate Directory (Non-Executive Chair) (Chief Executive Officer) (Chief Financial Officer) (Non-Executive Director) (Non-Executive Director) Directors: Registered Office: Steven Powell Matthew Stork Stephen Symonds Richard Bungay Debra Leeves Tunbridge Court Tunbridge Lane Bottisham Cambridge CB25 9TU Company Number: 8211361 Auditor: Grant Thornton UK LLP Chartered Accountants Statutory Auditor 101 Cambridge Science Park Legal Advisers: Bankers: Registrars: Milton Road Cambridge CB4 0FY Taylor Wessing LLP 5 New Street Square London EC4A 3TW Barclays 28 Chesterton Road Cambridge CB4 3AZ Link Group 10th Floor Central Square 29 Wellington Street Leeds LS1 4DL Nominated Advisor and Joint Broker: Panmure Gordon (UK) Limited 40 Gracechurch Street London EC3V 0BT Joint Broker: Dowgate Capital Limited 15 Fetter Lane London EC4A 1BW 1 Cambridge Cognition | Annual Report & Accounts 2022 2 Cambridge Cognition | Annual Report & Accounts 2022 Chair’s Statement 2022 was a pivotal year for our business, with significant achievements at all levels of the organisation. We achieved growth in like-for-like orders and revenues, underlying business profitability, cash generation and major progress in innovation. In addition, two acquisitions also further expanded our technology capabilities and future revenue growth. Cambridge Cognition’s strategy is to develop and In April 2022, we were pleased to welcome Stephen commercialise unique, well-protected, high-value Symonds as Chief Financial Officer and he was solutions supported by extensive scientific evidence appointed to the Board in August 2022. Stephen and expertise for central nervous system (“CNS”) brings a wealth of top-four audit and clinical trial clinical trials. There has been excellent progress in market expertise at a senior level and is already delivering this strategy, and we believe Cambridge making a strong contribution. The Board has Cognition is exceptionally well-placed for the future. concluded that with the Company’s continued Over the year, the Board has continued to focus would be beneficial later in 2023 to bring further on careful capital allocation as the Company independent guidance, scrutiny and experience. growth, adding a further Non-Executive Director has expanded organically and inorganically. The acquisitions of Clinpal (the trading name Cambridge Cognition is positioned for accelerated for eClinicalHealth Limited) in October 2022 and revenue growth and sustainable profitability in Winterlight Labs Inc at the start of 2023 enhance the coming years, both from its existing offerings our portfolio which have the benefit of expanding and new products in development. The Board the addressable market for our products as well expects the Company to grow rapidly and deliver as potential market share which is expected substantial, sustainable shareholder value in both to increase revenue growth. We also expect the short and medium term. their solutions to prompt incremental use of the Company’s existing products. Steven Powell Chairman 2 May 2023 Financial Highlights Cambridge Cognition had a transformative year in 2022, recording 25% revenue growth and a profit before acquisition-related costs, continuing to commercialise and develop new solutions, and making two bolt-on acquisitions (including one completed post period end), as it enhances its position as a leading digital health tech provider for CNS clinical trials. Corporate & Operational Highlights 25% revenue growth year-on-year and underlying profitability. Major contract wins, including two over £2m for sizeable clinical trials. Innovative new product development and acquisitions that added to the technology offering and expanded the addressable market. Leading market position with unique digital technology solutions and full commercial coverage of the clinical trial market for cognitive assessments. Sales order intake of £13.1m, up 8% on like-for-like prior year (2021: £12.1m excluding £3.6m of large one-off orders). Contracted order book increased to £19.1m following the acquisition of Winterlight Labs on 10 January 2023. Revenue Gross profit Profit for the year Loss per share Cash balance up 25% 2022 £12.6m 2021 £10.1m up 21% 2022 £9.3m 2021 £7.7m £0.1m adjusted for acquisition-related expenses of £0.5m 2021: £0.5m 1.3 pence 2021: 1.4 pence earnings per share £8.3m 31 December 2022 2021 £6.8m 3 Cambridge Cognition | Annual Report & Accounts 2022 4 Cambridge Cognition | Annual Report & Accounts 2022Chief Executive Officer’s Review I am delighted by Cambridge Cognition’s performance in 2022. We worked on a record number of clinical trials and increased revenue substantially, while laying the foundations for further growth in future years. In tandem with this growth, we have focused on delivering high-value technology solutions and excellent customer service. Our overarching strategy is to develop and l Invested in sales and marketing, bolstering our commercialise a unique set of high-value solutions brand presence and providing full coverage for CNS clinical trials. Those solutions are well across the US and Europe. Additionally, we have protected and supported by extensive scientific established a distributor relationship in Asia to evidence and expertise. Our product offerings expand our reach further. and capabilities have undergone a step-change through customer-oriented product development These accomplishments position Cambridge and strategic acquisitions. Specifically, we have: Cognition to secure more contracts and capture a more substantial share of the growing market l Further developed our suite of leading cognitive opportunity. assessments, making them accessible on more devices, in more than 50 languages, and in any Overall, our 2022 financial results were very strong, country. with revenue growth of 25% to £12.6m (2021: £10.1m) l Set up a global software infrastructure and orders growth of 8% (on a like-for-like basis) that adheres to stringent data protection over 2021 to £13.1m. Administrative expenses were well requirements and enables us to store patient managed during the year, and although the gross data locally, as mandated by regulations. margin percentage was slightly down on the prior l Acquired leading voice-based and decentralised year, this was in line with expectations. In 2022 we Activity has been high in the first quarter of 2023, and a positive response from customers to developments in 2022 and early 2023. The Company ended 2022 with a strong contracted order book of £17.6m which increased further to £19.1m in January 2023 following the acquisition of Winterlight. Moreover, with the broadened portfolio and additional business capabilities, we have a solid platform to achieve future profitable growth. Market Overview Cambridge Cognition operates across three main business areas: 1. Pharmaceutical clinical trials: The Company has a fully serviced digital outcomes assessment solution including software, configuration (with customisation options), consulting, and reporting services that accounts for approximately 90% of revenue. 2. Academic research: The supply of cognitive outcomes assessments is via a software- as-a-service solution for use in research by academics. clinical trial solutions to establish the broadest changed our accounting policy for cost of sales and 3. Healthcare: The Company has two products offering in CNS-related outcomes measurement. have included pay costs directly related to revenue l Brought in expert-level capability in machine (with the prior year restated to the same basis). learning for digital biomarkers, deep knowledge of computational linguistics, and new clinical The financial results for the year were tempered trial solutions, such as electronic consent and by a slightly slower-than-expected final quarter telemedicine. as we experienced delays and scope reduction l Expanded our software team to accelerate associated with large orders. Market forecasts the development of new modules, opening an suggest that this is not representative of a long- office and recruiting an entire team of software term trend. The Company’s strategy is designed to developers in South Africa. address intermittent slow periods through a broader product offering and increasing volumes across all contract sizes. to aid in the triage and diagnosis of cognitive impairment, one for primary care practitioners and one for secondary care specialists, that are FDA and EU-approved medical devices. Demand is currently limited as there is minimal reimbursement; this may change with more interest in using digital cognitive biomarkers for healthcare with new drugs being approved for Alzheimer’s disease. 5 Cambridge Cognition | Annual Report & Accounts 2022 6 Cambridge Cognition | Annual Report & Accounts 2022Chief Executive Officer’s Review Primarily related to clinical trials, five areas paper methods to collect outcomes. Taking a represent substantial market opportunities proportion of the reported global market for all for the Company: 1. Digital Cognitive Outcomes Assessments Approximately 500-600 clinical trials each year use measures of cognition1. The traditional therapeutic areas, the eCOA market for CNS disorders was estimated to be £160m in 2022, growing at 15% per annum5. 4. In-Clinic, Hybrid and Virtual/Decentralised assessment method requires clinicians to ask Clinical Trial Systems patients questions and score the answers, and Pharmaceutical companies and CROs depend can be subjective, costly, and inconvenient. on various information technology systems to Touchscreen or voice-based cognitive effectively communicate with patients, schedule assessments, can be used alongside or even events, gather and analyse clinical data, and replace traditional assessment methods. The prepare reports. Among the most used modules US market for digital cognitive assessments was are e-Consent, which captures participation estimated at £70m in the US in 2022 and growing at 10% per annum2. agreements, Electronic Document Management (“EDC”), which stores all the clinical data, and Telehealth, which enables clinician-patient 2. Automated Quality Assurance consults. A wide range of providers offer one In later phase clinical trials for diseases such or more of these systems, with some designed as Alzheimer’s and Parkinson’s Disease, patient for in-clinic or virtual use or both. No provider consults are reviewed for quality assurance. This currently markets a CNS-dedicated solution. The is a new market opportunity for the Company; global market for these solutions in CNS virtual our new offering automates part of the process and enables quality assurance at a lower overall clinical trials was estimated to be £140m per annum growing at 15%6. cost. We commissioned independent market research and estimate the market opportunity could be £16m per annum within five years3. 5. Patient Recruitment There is a market opportunity for Cambridge Cognition to recruit patients for a wide range 3. Electronic Clinical Outcomes Assessment of CNS clinical trials. Recruitment is notoriously (“eCOA”) eCOA systems are designed to capture challenging: less than half of studies meet enrolment goals7. We collaborate with several patient, carer, or clinician-reported data on a partners to provide clinical consulting, patient patient’s outcomes during a clinical trial. This is tracking systems and clinical screening as part accomplished through using licensed questions of a dedicated patient recruitment offering. The or scales that are usually widely used in clinical CNS clinical trial patient recruitment market, studies. Uptake is gradual and clinical trial sites report that they use eCOA half the time or less4. The remainder still rely on pen-and- excluding advertising, is estimated at £100m annually growing at 10% per annum8. Operational Review In 2022, the Group significantly enhanced its operational capability and performance across commercial, clinical services, product development, people management, and delivery. We successfully provided solutions to a more extensive customer base than ever before. Considerable investment has been made in expanding our commercial team, increasing the number of sales and sales support staff from four to eight. These investments were made towards the end of the year, with the aim of making an impact in 2023. As a result, we now have full coverage of the cognitive assessment market for clinical trials, a new sales team dedicated to virtual clinical trials, and an experienced proposal management function. We achieved 100% on-time-in-full delivery of clinical trial starts and a continued high customer service record, enhancing our brand position as a gold-standard provider of assessments. Excellent clinical project management and scientific support were provided to academic customers, scientific collaborators, and pharmaceutical clients. The numerous publications and presentations referencing new data by Cambridge Cognition employees, leading scientists, and pharmaceutical companies continue to provide valuable evidence to help secure contracts. The total number of papers citing studies using the Company’s assessments now stands at over 3,000. Two notable examples of such partnerships in 2022 are the Company’s participation in the IdeaFast project to develop new digital biomarkers of fatigue, and the Brain Health Registry programme, to understand mild cognitive impairment globally. Cambridge Cognition has continued to provide a single-source service by shipping hardware to support clinical trials. Chip shortages and production delays throughout 2022 increased the challenge of obtaining and shipping hardware to clients. Despite this, we achieved all contractual obligations and established an additional inventory of the most used tablets and mobile phones. Over the year, the Company transformed its product development function, introducing new systems and roles to streamline and improve the efficacy of product development and maintenance. We recruited considerable expertise in the product and research and development teams with several senior-level new starts. Software development resources were enhanced by opening a new office in South Africa. The region boasts a large pool of highly skilled software developers. As a result of natural attrition in the UK, most of the Company’s software development capacity at the year-end was based in South Africa. 7 Cambridge Cognition | Annual Report & Accounts 2022 8 Cambridge Cognition | Annual Report & Accounts 2022Chief Executive Officer’s Review Investments have been made in the management The acquisition of Winterlight was completed in Having made the two recent acquisitions, we team, training for people managers, and role- January 2023. Winterlight, based in Toronto, Canada, have prioritised our go-to-market strategy for Innovation Review specific training and development. We saw has developed machine-learning-based voice the combined business including opportunities some pay inflation as we ensured salaries were assessments using free-speech inputs or those to cross-sell from the enlarged portfolio, and competitive for the sector. At the same time, we that require deductive reasoning or interpretation, the focus is now on integrating operations and reduced our recruitment costs substantially during as well as a unique automated quality assurance supporting functions. These are critical next steps a growth period through more successful direct service for clinicians. Winterlight has an excellent to ensure we achieve the expected acquisition hires managed by our internal team. customer list, including five of the top ten global returns. While the Company remains open to other Corporate Business Development Review life sciences companies, and limited overlap with corporate business development opportunities, Cambridge Cognition’s existing customer base, such as partnerships, licensing opportunities, or providing the potential to cross-sell and generate mergers and acquisitions, future opportunities will further revenue growth. be considered primarily in relation to contribution to the Company’s profit. Cambridge Cognition has a well-established reputation for leadership in the sector and a history of firsts, which supports the brand’s reputation and creates unique differential advantages. These are protected mainly through trademarks, copyright, and some patents, establishing our intellectual property (or ‘moat’). With continued investment in innovation in 2022, the three companies, Cambridge Cognition, Clinpal, and Winterlight all made major advances. Over the last two years, Cambridge Cognition The acquisition of Winterlight was completed had established an ambitious strategic roadmap for a total amount payable of £7.0m. As at the to develop new product and service offerings, acquisition date, Winterlight had a strong pipeline including building out modules to support clinic- of opportunities and a contracted order book of £1.5 based and virtual clinical trials and developing a million (reduced subsequently from the previously free-speech-based verbal cognitive assessment. announced £2.5m as a Winterlight customer failed To accelerate the development of the business and to secure adequate financing and is now seeking respond to demand, we made two acquisitions to a sale of its assets). As well as actively cross-selling obtain those technologies and competencies. solutions at this time, the unique quality assurance In October 2022, the Company acquired Clinpal™ on a large tender for cognitive assessments and (the trading name for eClinicalHealth Limited), a clinician services as a single provider, differentiating offering has enabled Cambridge Cognition to bid digital technology provider of virtual clinical trial us from competitors. solutions that has been working on trials for three of the world’s top ten largest pharmaceutical In November 2022, Cambridge Cognition also companies. With a patient-centric platform that entered into an agreement with Luca Healthcare to connects patients, sites, and pharmaceutical commercialise our suite of cognitive assessment companies, Clinpal™ enables all the essential steps tools in the China market. Luca Healthcare, which has in a clinical trial. existing contracts with pharmaceutical companies in other therapeutic areas, is now offering solutions Clinpal was acquired for a total amount payable of for CNS clinical trials and developing a healthcare £1.7m, and the acquisition is expected to positively solution. Our assessments are hosted on a secure contribute to profitability in 2024. The Clinpal cloud-based server in China and can be run acquisition immediately allowed the Company to seamlessly on Luca Healthcare’s platform using offer full in-clinic and virtual clinical trial solutions, Application Process Interfaces (“APIs”). including specialised CNS clinical trial patient recruitment solutions. This has already enabled us to respond to a tender issued by a top-ten pharmaceutical company for a recruitment contract. 9 Cambridge Cognition | Annual Report & Accounts 2022 1 0 Cambridge Cognition | Annual Report & Accounts 2022Chief Executive Officer’s Review CANTAB™ Cognitive Assessments The use of these daily assessments is gaining The in-house solution developed by Cambridge Cambridge Cognition’s core product CANTAB™ traction. Two major pharmaceutical companies constitutes most of the Company’s revenues. It published the results of their studies in 2022: comprises 15 main tasks that cover all the cognitive domains typically measured in a clinical trial. 1. Takeda, together with the University of Cognition progressed by: l Establishing a roadmap for multi-language support development in 2023, essential for the widespread use of assessments in clinical In 2022, the number of publications supporting Toronto, presented data showing that a trials. CANTAB™ grew to 2,850 and as at the end of April short daily task was well correlated with the 2023 stands at over 3,000. CANTAB™ assessments are available on Apple iPads™ and most can be accessed through a web pen and paper version concluding that it could help with guiding treatment choice for patients with depression9. l Creating a short daily assessment prototype for a pharmaceutical company with a well- known verbal assessment but with daily monitoring, allowing for quicker observation of drug effects and potentially shorter and browser. In 2022, a development project enabled 2. Sage published data showing that patients more efficient trials. screen resizing and demonstrated validity of results with Parkinson’s and Alzheimer’s disease for an assessment on a mobile phone as well. This development will enable use of CANTAB™ in a much improved using a novel drug as measured by two quick daily cognitive assessments10. broader context in the future. Daily Cognitive Assessments In 2022, the Company broadened its existing range of daily mobile phone assessments by developing four additional prototypes, due for launch in 2023. Three of these are screen-based, and one voice- based. This will bring the Group’s total number of short daily assessments covering the main cognitive domains to six by the end of the current year. Early in 2023, Sage also published data showing that they could demonstrate the day-by-day impact of their drug on cognitive function. These new daily assessment are ground- breaking, novel application of digital technologies with the potential to objectively demonstrate drug effects in ways that have not been possible before. Voice-based Cognitive Assessments Significant progress was made in 2022, both within the Company and by Winterlight, in advancing the development of voice-based cognitive assessments. l Agreeing on collaborations with two major universities to validate existing assessments. These projects took considerable time, from initial discussion to full grant funding and commencing work though are now underway. Winterlight achieved a number of milestones with its free-speech solution. These milestones Academic Collaborations include: As well as co-creating solutions with pharmaceutical companies, Cambridge Cognition l Adding additional languages to bring the participated in several widely recognised academic total number to nine (more than any other collaborations in 2022. Some of the most high- company in the sector). profile ones include: the EU IMI grant-funded l Establishing a quality assurance solution IDEA-FAST study to identify digital endpoints for for clinical trials with considerable market fatigue; the US NIHR-funded Brain Health Registry potential. that assesses cognition worldwide; the Deep l Improving its automated solution with better and Frequent Phenotyping longitudinal study of speech recognition to simplify and reduce dementia and AI Brain, an EU Horizon grant-funded transcription costs. study developing multi-modal biomarkers for Cambridge Cognition is now the only company showcasing our solutions and gathering data, these offering such a wide range of automated have provided reference points for and contact voice-based cognitive assessments. These with target customers. By way of example, 13 major have the potential to replace many of the pharmaceutical companies take part in IDEA-FAST. dementia longitudinal study on dementia. As well as existing assessments commonly conducted in clinical trials. 1 1 Cambridge Cognition | Annual Report & Accounts 2022 1 2 Cambridge Cognition | Annual Report & Accounts 2022 Chief Executive Officer’s Review Clinical Trial Solutions 2022 saw significant progress in clinical trial solutions through the combined efforts of Cambridge Cognition and Clinpal. Prior to the acquisition, a proportion of the software development for the Clinpal solution was completed by Cambridge Cognition under contract. Progress made in the year included: l Moving from installed solutions in data centres to cloud-based servers in two regions with a plan to open a third in 2023. This improves patient data management and facilitates compliance. l The Clinpal solution added patient-data management communication features designed for a global virtual study that started in 2022. l A next-generation patient application for Android and iOS was designed for the IMI grant-funded Radial clinical trial due to start in 2023. l New or upgraded modules for eConsent and Telehealth with the release set for Q2 2023. Combined Product Offering A key objective is to provide a unified solution incorporating modules developed by Cambridge Cognition, Clinpal, or Winterlight. All three solutions feature APIs to allow seamless functionality within a single front-end user interface. This currently puts us in a strong position to select one of the solutions to run as the customer user interface while incorporating modules from the other two. We are now bidding with solutions that integrate the three platforms. We plan to converge all three solutions, which will require time and investment. We plan to accomplish this gradually, likely on a module-by-module basis, as we perform maintenance or make improvements to the system taking the best of each platform. In the medium term, there is the opportunity to create multi-modal digital biomarkers by combining solutions. As well as using touchscreen and voice data, this could also include actigraphy or other clinical information to provide even greater accuracy of diagnostic information. This is an exciting area of future development that is likely to be funded by grants or development partners. Growth Strategy Our overarching goal is to achieve profitable growth. Our strategy in the short to medium term from 2023-2025 is to complete development and commercialise our unique set of well-protected, high-value, and validated solutions. In addition, our strategy includes having a watching-brief on the healthcare market with the readiness to promote our medical devices should demand and reimbursement surface. To achieve our strategic goals, Cambridge Cognition’s areas of focus for 2023 are: 1. Driving sales of existing products, including Winterlight and Clinpal and winning a greater volume of clinical trial work for our broader portfolio, including combined offerings. 2. Establishing partnerships with high-impact organisations in the sector, such as major pharmaceutical companies and CROs. 3. Investing in innovation to maintain our brand position and complete the development of our offering. 4. Realising synergies from acquisitions and ensuring continued customer focus as we integrate the three businesses. 5. Focusing on our people and ensuring Cambridge Cognition is a ‘great place to work’. Economic & Political Environment Amidst the COVID-19 pandemic, there was a surge in the adoption of digital solutions, with virtual trials gaining remarkable traction among our customers. This interest continues. The ongoing war in Ukraine was and continues to be a cause for concern, and our thoughts are with all those affected, including several academic centres in the region that use our solution. No contracts are being progressed with Russian centres at this time. The conflict has had no material effect on revenues. Inflation has had an impact on salary levels and may be contributing to a reduced investment in the development of CNS drugs. This could lead to a short-term decline in demand. We expect the situation to normalise during 2023 and do not anticipate any material impact on the Group’s overall performance. Corporate Outlook The Company had a strong contracted order book at the end of 2022 that provides excellent revenue visibility through 2023 and a promising pipeline of further opportunities for the year. With our broader portfolio, we expect a considerable step-up in our total addressable market and there is the potential for a considerable increase in investment in CNS drugs with the successes recently in Alzheimer’s Disease with new drugs being approved. There does remain some uncertainty around the global macroeconomic outlook, though that is expected to be transitory to our markets. The Company has extensive market opportunities within existing and new growth markets. We estimate average growth rates across the markets we are targeting to currently be approximately 10 percent per annum, and we believe our revenue growth will exceed this rate of market growth. We will continue to manage costs carefully and aim to move back into profitability. The outlook is very exciting as we have a full commercial team and a much broader portfolio and can win many more sizeable contracts as we build on our current position over the coming years. Despite a turbulent global economic and political environment, 2022 was an excellent year for Matthew Stork Chief Executive Officer Cambridge Cognition. We saw remarkable growth in 2 May 2023 orders, strong revenue growth, cash generation, and considerable progress in innovation and corporate business development. References: 1. Global Data, April 2023. 2. Astute Analytica (2021) US Cognitive Assessment Market; Adjusted using internal data to 10% from 2022. 3. Extrapolated from independent market research report commissioned by Cambridge Cognition. 4. DT Consulting, Clinical Digital Tracker, 2022. 5. Grandview Research (2023), eCOA Market Analysis; Adjusted by CNS studies as a proportion of all. 6. Estimate from Global Data, April 2023, and Assessing the Financial Value of Decentralised Clinical Trials, Therapeutic Innovation & Regulatory Sciences, 57, 209-19, 2023. 7. Strategies to improve recruitment to randomised trials. Cochrane Database Syst Rev. 2018 Feb 22;2(2). 8. Grandview Research (2022), Clinical Trial Patient Recruitment Market; Adjusted by CNS studies as a proportion of all. 9. An App-Based DSST for Assessment of Cognitive Deficits in Adults With Major Depressive Disorder: Evaluation Study, JMIR Ment Health 2022;9(10). 10. Sage Therapeutics Conference Poster at CTAD 2022. 1 3 Cambridge Cognition | Annual Report & Accounts 2022 1 4 Cambridge Cognition | Annual Report & Accounts 2022 Chief Financial Officer’s Review The Company delivered another strong performance in 2022 with growth in the contracted order book and revenues, coupled with continued positive cash generation that has enabled the completion of two acquisitions, one in October 2022 and one in January 2023. This review includes a comparison of the financial KPIs used to measure progress over the year: Recognised revenue split by type was as follows: Revenue Software Services Total Software & Services Hardware Total Revenue 2022 £m 2021 £m Increase £m Increase 5.0 6.5 11.5 1.1 12.6 3.6 5.6 9.2 0.9 10.1 1.4 0.9 2.3 0.2 2.5 39% 16% 25% 22% 25% 2022 £12.6m 2021 Movement Three large, one-off contracts won in 2021 were for Maintaining our position at the forefront of the supplying and supporting digital wearables for CNS sector requires a sustained focus on research £10.1m £1.5m clinical trials in 2022. These had a high third-party cost and development, a subset of our administrative KPI Revenue Gross margin Profit before tax 73.9% 76.1% (220)bps £0.6m loss £0.3m profit £(0.9)m Profit after tax (after adjusting for acquisition related expenses) £0.1m £0.5m £(0.4)m Investment in R&D £2.2m £1.7m £0.5m Sales orders £13.1m £12.1m £1.0m of sales component that reduced overall gross margin expenses. In 2022, a total of £2.2m was invested, percentage in 2022. Gross profit was £9.3m (73.9% an increase from £1.7m in 2021. These funds were margin) compared with £7.7m (76.1% margin) in 2021. primarily allocated towards developing novel high-frequency cognitive assessments to broaden In 2022, we have changed our accounting policy the portfolio, moving to Amazon Web Services, for cost of sales and now include pay costs directly strengthening our cybersecurity, and conducting related to revenue, with the prior period restated. essential maintenance of existing products. R&D The impact on the current year was to include spending as a percentage of revenue was 17.4% £477,000 (2021: £394,000) of pay costs in cost of in 2022 (2021: 16.8%), reflecting our continued sales that would have been in administrative investment in our product portfolio, and we expect Contracted order book £17.6m £17.0m £0.6m expenses under the previous accounting policy. this to decrease as revenue grows. Cash £8.3m £6.8m £1.5m Revenues & Gross Profit We are pleased to report that our revenue grew by 25%, reaching £12.6m compared to £10.1m in 2021. A large proportion of our contracts are for clinical trials, which usually commence three to six months after the signing of the contract and run for several months or even a few years. As a result, most of the revenue recognised in the year came from orders won in previous years, with the remaining balance from in-year contract wins. We anticipate the £19.1m contracted order book as of 10 January 2023 (following the acquisition of Winterlight) will generate, subject to customer delivery schedules, at least £9.5m of revenue to be recognised in 2023, with the balance to be recognised in subsequent years. Services revenue grew by 16% in 2022 as more implementation and bespoke development work were carried out, as well as the additional data and study management provided as part of our support to larger clinical trials. Software revenue increased by 39%, but given the time lag between contract signature and software usage, we would expect this to grow further in 2023. Hardware, which is procured from third parties, is supplied by the Company to support specific projects. Expenditure Capital Expenditure & Cash Administrative expenses, excluding acquisition Capital expenditure was £0.2m, primarily related expenses, increased by 29% to £9.6m (2021: £7.4m), to IT hardware and office equipment. We have not driven by two main factors. Firstly, investment in capitalised any development expenditure in the year. commercial activities increased considerably as the team expanded to provide complete Excluding acquisition-related costs we had a market coverage and to support further sales of marginal loss before tax of £0.1m (2021: profit before decentralised clinical trial modules. Secondly, we tax of £0.3m). R&D tax credits receivable were £0.2m expanded our in-house software and product (2021: £0.2m). The post-tax loss for the year was teams to develop new and existing solutions to £0.4m (2021: profit after tax of £0.5m), which equates meet customer demands and provide future sales to a loss per share of 1.3 pence (2021: 1.4 pence opportunities. As with many technology companies, earnings per share). there was inflationary pressure on pay during the year, which we have addressed in part with the addition of a software team based in South Africa. 1 5 Cambridge Cognition | Annual Report & Accounts 2022 1 6 Cambridge Cognition | Annual Report & Accounts 2022Chief Financial Officer’s Review Risks & Uncertainties As of 31 December 2022, cash was at £8.3m While low double digit revenue growth is expected (31 December 2021: £6.8m), and the cash inflow in 2023, the positive impact of acquisitions and from operating activities during the year was £1.7m continued investment in product development is (2021: £3.9m), again driven by sales orders. During expected to see a decrease in cash balances and the year, £1.1m of cash was utilised to acquire operating losses for the year. With this investment eClinicalHealth Limited. Sales contracts for clinical and the associated increase in scale, we anticipate trials typically include a billable amount upon a return to profitability in the second half of 2024 signing, which means that cash flow is generally and growth in profitability thereafter. ahead of revenue recognition. The Company will continue to manage costs The Company continues to hold an investment in carefully with a focus on realising synergies as we Monument Therapeutics Limited (“Monument”), the review our operational structure following recent digital phenotyping drug development business that acquisitions. We anticipate that administrative was spun out in 2021. The investment in Monument is expenses and research and development costs carried at fair value and reflects the risks attributable will reduce through 2023 relative to revenues whilst to early-stage biotechnology companies. we continue to invest in the product portfolio and Monument’s progress with early clinical trials increase sales coverage. remains on track and aligned with our expectations. It is currently seeking Series A investment. We have set out five strategies to help improve Financial Outlook people’s health globally while generating future revenue growth above expected rates of growth, currently estimated at more than 10%, in the markets in which we are operating. Accordingly, the Cambridge Cognition ended 2022 with sufficient Company is targeting revenue growth in excess of cash to acquire Winterlight and fund expected the market growth with increasing levels of growth growth through to profitability. We are optimally in the medium-term driving towards material positioned for further growth in orders of our existing profitability in 2025. solutions and to support our continued commercial expansion. Considered investments will continue to Stephen Symonds be made to achieve our strategic goals. Chief Financial Officer 2 May 2023 Principal Risks & 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: for both existing and new markets will determine how successful the Group will be in growing. As noted in the Chief Executive Officer’s Review, 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. Financial The Group has a history of operating losses, with 2021 being the Group’s first profitable year since 2016, and this continued in 2022 with a profit after tax excluding acquisition related expenses. 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. The Group will continue to carefully monitor costs and cash flow to ensure 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, as well as the integration of acquisitions. The Directors have prepared a strategic plan, including financial forecasts and cash flows, for the period to December 2025. 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 Brexit and Related Changes The United Kingdom has left the European Union (‘EU’). The Group has kept the situation under review and there have not been any detrimental impacts to date. Nonetheless, the Group remains watchful, and in particular to the following factors: Regulations, especially General Data Protection Regulations (‘GDPR’), imports and exports; currency changes; inputs on the broader economy; and employees who are EU nationals. Cybersecurity Cybersecurity has become an increasing risk for all businesses, though particularly those offering cloud-based IT services. The Group takes the threat seriously, continuously monitoring and updating threat management software and using several specialist, expert consultants to assess and put in place measures as best possible to prevent ransomware, social engineering, and insider threats. Vulnerability is assessed by a well-known third party specialist company on an ongoing monthly basis with a deep assessment every six months. 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 1 7 Cambridge Cognition | Annual Report & Accounts 2022 1 8 Cambridge Cognition | Annual Report & Accounts 2022of the sector. The Group files patent applications pleased with the successes in developing products as it strives to protect and enhance its intellectual during 2022, and the plans for continued innovation. property. Growth Management Section 172(1) Statement The Group’s ability to manage its growth effectively requires it to continue to improve its operations, The directors consider, both individually and financial and management controls, reporting collectively that they have taken decisions in a systems and procedures and to train, motivate and manner they consider, in good faith, would be most manage its employees. The Group’s future success likely to promote the success of the Group for the depends on its ability to hire, train and retain key benefit of its stakeholders, having regard to the technical, scientific, regulatory, sales and marketing matters set out in s172(1) of the Companies Act 2006: personnel. The Group seeks to recruit and retain high calibre staff through offering share ownership The likely consequences of any decision in the long- and rewards commensurate with their seniority and term: the long-term success of the Group is always maintaining open communication with employees. a key factor when making strategic decisions. Strategic Plans are prepared every year focussing Reliance on Key Customers on a minimum three-year period. The Group maintains close relationships with a number of customers but aims not to be overly The interests of the Group’s employees: the dependent on any one of them. During 2022, three Group’s employees are our key asset and hence customers accounted for more than 10% of the we take their wellbeing and development very revenue of the business, amounting to just over 34% seriously. The Group believes it offers competitive in total. Over recent years, the increased diversity remuneration packages and seeks to engage of our product offering has led to an increased employees regularly. The Group has worked diversity in both our products and our customer hard to maintain contact with employees as we base that has continued to mitigate this risk. adopt to our new hybrid ways of working, through Nonetheless, there is a risk that the loss of a major regular team meetings and office events as well customer would result in a revenue shortfall. as fortnightly town hall meetings. The Group has Key Performance Indicators also invested in training for people managers and implemented individual development plans for all employees. All employee surveys on relevant issues have been undertaken during 2022 and the Group The Directors have monitored the performance has implemented appropriate action plans as a of the Group with particular reference to the key consequence. performance indicators being revenue and sales orders, gross margin and cash flow. An overview of The need to foster the Group’s business the financial results for the year is provided in the relationships with suppliers, customers and Chief Financial Officer’s Review. other: the Group has a dynamic relationship Shareholders are also a key stakeholder and we The need to act fairly as between members of the seek to engage shareholders through both generic Group: no single set of stakeholders is prioritised and specific outreach, covering both financial over another – all decisions aim to be equitable results and our innovation and future plans. across all stakeholders. The impact of the Group’s operations on the The Strategic Report comprises the Chief Executive community and the environment. The Group’s aims Officer’s Review, Chief Financial Officer’s Review and to execute its operations with due regard to the the Risks and Uncertainties. environment. Charities are supported by donations, fundraising, allowing employees two days leave for Approved by the Board of Directors and signed on charitable activities and the donation of equipment. behalf of the Board. with our customers with regular contacts across The desirability of the Group maintaining a The Group monitors progress on a regular basis organisations; we also seek to have constructive and will add to the key performance indicators as and mutually beneficial relationships with our circumstances dictate. The directors value greatly suppliers. Customers are regularly asked for specific the progress and innovation demonstrated by feedback, a feedback survey is completed at the the Group. Unfortunately, this cannot be readily end of each study we support and the feedback measured in the style of a KPI. The directors are received is used to help shape future engagements. reputation for high standards of business conduct: Matthew Stork integrity of individuals and corporate integrity are Chief Executive Officer at the heart of all we do and embedded in our 2 May 2023 culture through formal (e.g. Standard Operating Procedures) and informal means. 1 9 Cambridge Cognition | Annual Report & Accounts 2022 2 0 Cambridge Cognition | Annual Report & Accounts 2022Report of the Directors The Directors present their report on the affairs of the Group and Company together with the financial statements for the year ended 31 December 2022. The Group financial statements are prepared in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006. Principal Activities Cambridge Cognition Holdings plc (‘the Company’) and its subsidiaries (together, ‘the Group’) specialises in improving brain health by Accordingly, the accounts have been prepared on the going concern basis. More details are given in note 3.2 to the financial statements. Further information on the Group’s financial risk management strategy can be found in note 28 to developing and marketing near-patient cognitive testing techniques. The likely future developments the accounts. of the business and the nature of research and development activities are discussed in the strategic report. Share Issues Going Concern & Financial Risk Management The Directors have assessed the Group’s ability to continue as a going concern through June 2024. As noted in the Chief Financial Officer’s Review, the business has a strong contracted order book as well as having a strong cash balance at 31 December 2022. Whilst the Group expects to have net cash outflows during 2023 it has sufficient cash resources The issued share capital of the Company is set out at note 22 to the accounts. Subsequent to the year end the Company issued 3,445,595 ordinary shares as part consideration for the acquisition of Winterlight, see note 14. Directors The Directors who held office at 31 December 2022 and their interest in the share capital of the for its current strategy. Company were: The Directors believe that the Group will remain a going concern for the foreseeable future. Name 2 May 2023 31 December 2022 31 December 2021 Ordinary Shares of 1p each Steven Powell (Chairman) Matthew Stork Stephen Symonds Richard Bungay Debra Leeves 226,375 161,450 32,950 10,000 60,000 216,375 147,950 22,950 - 50,000 216,375 125,000 - - 50,000 Other directors who served in the year, details of l select suitable accounting policies and then appointment and resignation dates are given in the apply them consistently; Remuneration Report. Directors’ Remuneration & Share Options l make judgements and accounting estimates that are reasonable and prudent; l state whether the applicable IFRSs, or for the Parent Company, UK Generally Accepted Accounting Practice have been followed, subject Details of Directors’ remuneration and share options to any material departures disclosed and are provided within the Remuneration Report and are in addition to the interests in shares shown explained in the financial statements; and l prepare the financial statements on a going above. concern basis unless it is inappropriate to presume that the Company will continue in Directors’ Responsibilities for the Financial Statements business. The Directors are responsible for preparing the accounting records that are sufficient to show and Strategic Report, the Report of the Directors, the explain the Company’s transactions and disclose Remuneration Report and the financial statements with reasonable accuracy at any time the financial in accordance with applicable law and regulations. position of the Company and to enable them to The Directors are responsible for keeping adequate Company law requires the Directors to prepare the Companies Act 2006. They are also responsible financial statements for each financial year. Under for safeguarding the assets of the Company and that law, the Directors have to prepare the Group hence for taking reasonable steps for the prevention financial statements in accordance with UK- and detection of fraud and other irregularities. ensure that the financial statements comply with adopted international accounting standards (“IFRS”) and have elected to prepare the Parent Company The Directors confirm that: financial statements in accordance with United Kingdom Generally Accepted Accounting Practice l so far as each Director is aware, there is and applicable law including FRS 101 ‘Reduced no relevant audit information of which the Disclosure Framework’. Under company law the Company’s auditor is unaware; and Directors must not approve the financial statements l the Directors have taken all steps that they ought unless they are satisfied that they give a true and to have taken as Directors to make themselves fair view of the state of affairs and of the profit or aware of any relevant audit information and loss of the Company and Group for that year. In to establish that the auditor is aware of that preparing these financial statements, the Directors information. are required to: 2 1 Cambridge Cognition | Annual Report & Accounts 2022 2 2 Cambridge Cognition | Annual Report & Accounts 2022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. Auditor A resolution to re-appoint Grant Thornton UK LLP as the Company’s auditor will be proposed at the forthcoming Annual General Meeting. In accordance with normal practice, the Directors will be authorised to determine the Auditor’s remuneration. Approved by the Board of Directors and signed on behalf of the Board Stephen Symonds Chief Financial Officer 2 May 2023 Corporate Governance Report Chair’s Statement on Corporate Governance As Chair 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 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 Chair 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 and 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 Chair Disclosure of those principles recommended for the Annual Report and Accounts 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, comprising the Chief Executive Officer’s Review, Chief Financial Officer’s Review and an assessment of principal risks and uncertainties and key performance indicators can be found on pages 5 to 20 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 18 and 19 of this Annual Report and Accounts. 2 3 Cambridge Cognition | Annual Report & Accounts 2022 Cambridge Cognition | Annual Report & Accounts 2022 2 4 Principle 5: Maintain the Board as a well- The Board is provided with monthly business and functioning, balanced team led by the Chair finance reports from the CEO and CFO respectively. The Board consists of two executive directors, Further information will be given to the Board for the non-executive Chairman and two further discussion at meetings as relevant. independent directors. The non-executive Chair holds some shares, especially from his time as the The Board is supported by three sub-committees: Group’s CEO. The other two non-executive directors the Audit Committee, the Remuneration Committee hold shares as of the date of this report. These and the Nomination Committee. All non-executive holdings are not considered material. directors sit on all sub-committees. Board and Committee attendance for 2022 is as follows: 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. No. of Meetings Steven Powell Matthew Stork Richard Bungay Debra Leeves Stephen Symonds Board Audit Nomination Remuneration 10 10 10 10 10 6 1 1 - 1 1 - 2 2 - 2 2 - 4 4 - 4 4 - l 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. l Standard Operating Procedures (“SOPs”) that outline the Company’s processes and the values that underpin them are required to be read by employees and documentation of compliance maintained. l Receiving monthly reports from human resources and other departments to ensure that any instances of behaviours not being recognised or respected are considered and resolved appropriately. Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders Descriptions of the work of the Board and its Committees is provided below. The Remuneration Report is on pages 29 to 32. Further information on the Company’s corporate governance framework, including on those principle of the QCA code not listed here can be found at www.cambridgecognition.com/investors/ corporate-governance 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 on page 27. 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 as required. A review was undertaken in 2022. 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: l The employee handbook clearly setting out values and employment codes. l All new employees benefit from an induction programme which emphasises our ethical values and behaviours. l These behaviours are re-iterated through the various employee communication and reward channels. 2 5 Cambridge Cognition | Annual Report & Accounts 2022 2 6 Cambridge Cognition | Annual Report & Accounts 2022 Director Profiles Dr Steven Powell Chair Dr Powell graduated in microbiology from the University of Wales and was awarded a PhD from the University of Aberdeen. He has over thirty years of operational and investment experience in pharmaceutical and healthcare companies in the UK, USA and Scandinavia. He has held six CEO roles, three in public companies. His current roles include CEO of French oncology company, Ribonexus, and Chair of Norwegian oncology development company, Hemispherian. In 2003, he joined Gilde Healthcare, a pan-European life sciences investment fund, as a partner and remained an adviser to the fund until 2016. Dr Matthew Stork Chief Executive Officer Dr Stork has over 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. Stephen Symonds Chief Financial Officer Mr Symonds is an experienced finance professional and was previously the Chief Financial Officer of Envigo, a private equity backed provider of pre-clinical services for the pharmaceutical industry, where he spent eight years. Prior to that, he spent a decade with KPMG, working on a wide-ranging portfolio of clients. Earlier in his career, he built a broad experience in a variety of small to medium- size accounting companies and as the finance lead in a family-owned business. He is a fellow of the Association of Chartered Certified Accountants. Richard Bungay Non-Executive Director Mr Bungay has over 25 years’ experience in corporate roles with R&D-based companies within the biotechnology and pharmaceutical sector. A chartered accountant, Mr Bungay is currently CEO of Imophoron Limited, a private company developing treatments for infectious diseases. Prior to this, Mr Bungay was CFO then CEO of Diurnal Group plc, the AIM quoted specialty pharmaceutical company targeting patient needs in chronic endocrine diseases, where he led the sale of the company to Neurocrine Biosciences. Prior to that, Mr Bungay held CFO and Chief Operating Officer roles at Mereo BioPharma Group plc as well as being CFO of Glide Technologies and Verona Pharma plc. 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. Board Sub-Committees The Board is supported by three sub-committees, the Audit Committee, Nomination Committee and Remuneration Committee. 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 Audit Committee’s responsibilities include making recommendations to the Board on the appointment of the Company’s auditors, approving the auditor’s fees, safeguarding the objectivity and independence of the auditors, reviewing the findings of the audit and monitoring and reviewing effectiveness of the Company’s systems of risk management and internal control. The Audit Committee is also responsible for monitoring the integrity of the financial statements of the Company, including its annual and half yearly reports and interim management statements. The main issues considered by the Committee during the year in relation to the financial statements included the appropriateness of revenue recognition policies, fair value of investments, adequacy of systems of internal control, fair values arising from business combinations and cost of sales classification. The Committee notes the auditors’ inclusion of revenue recognition as the only 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 The Committee also reviews the Group’s risk management and continues to believe that the Group’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. 2 7 Cambridge Cognition | Annual Report & Accounts 2022 2 8 Cambridge Cognition | Annual Report & Accounts 2022Remuneration Report Remuneration Committee The Company has established a Remuneration Committee. The members of the Remuneration Committee are: l Steven Powell (Chair) l Richard Bungay l Debra Leeves The Committee makes recommendations to the Board. No director plays a part in any discussion about their own remuneration. The Company is not required to publish a Directors’ Remuneration Report, but the below information is given in the interests of transparency and good governance. 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: l Basic annual salary; l Benefits-in-kind; l Annual bonus payments; l Share option incentives; and l Pension arrangements. Non-Executive Directors’ Remuneration The remuneration of Non-Executive Directors is determined by the Board and reflects their anticipated time commitment to fulfil their duties. The Non-Executive Directors’ remuneration is subject to the same principles of the Groups Remuneration Richard Bungay (3) policy. The letters of appointment of Non-Executive Directors can be terminated with one month’s notice given by either party. Debra Leeves (7) Total Directors’ Remuneration (audited) The remuneration of the Directors was as follows: Current Directors: Executive Directors: Matthew Stork (1) Stephen Symonds (6) Nicholas Walters (4) Michael Holton (5) Non-Executive Directors: Steven Powell (2) Salary/Fee Benefits Bonus Pension 2022 Total 2021 Total £’000 £’000 £’000 £’000 £’000 £’000 264 83 - 45 30 30 452 - 1 - - - - - 1 63 87 - - - - - 15 5 - - - - 342 176 - - 45 30 30 467 - 12 216 45 30 30 150 20 623 800 1. Appointed to the Board 23 May 2019 5. Appointed to the Board on 27 May 2021 and Resigned from the Board 2. Executive Director until 23 May 2019, Non-Executive Director thereafter on 1 November 2021 3. Appointed to the Board on 14 September 2020 6. Appointed to the Board on 3 August 2022 4. Resigned from the Board on 27 May 2021 7. Appointed to the Board on 1 July 2019 2 9 Cambridge Cognition | Annual Report & Accounts 2022 3 0 Cambridge Cognition | Annual Report & Accounts 2022Remuneration Report Share Options Number of Performance Exercise price Exercise Granted Options criteria in pence period Steven Powell July 2015 62,500 Vested (1) 82.5 pence To July 2025 Matthew Stork October 2019 392,858 Vested (2) 28 pence To September 2023 Matthew Stork June 2020 196,429 Matthew Stork November 2020 103,774 Matthew Stork April 2021 90,000 Matthew Stork November 2021 40,000 Matthew Stork July 2022 171,297 Nicholas Walters June 2020 60,000 Stephen Symonds July 2022 152,671 (3) (4) (5) (6) (7) (3) (7) 28 pence 53 pence 125 pence 140 pence 1 pence 28 pence 1 pence June 2023 to May 2024 November 2023 to October 2024 April 2024 to March 2031 November 2024 to October 2031 July 2025 to July 2032 June 2023 to May 2024 July 2025 to July 2032 Performance Criteria 1. Options vested 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, equalled or exceeded 120 pence. This condition was fulfilled on 4 May 2017. 2. 50% of these options vested if the average closing mid-market price of an Ordinary Share for any three month period before 30 3. 50% of these options vested if the average 6. 50% of the Options granted vested if the average closing mid-market price of an Ordinary Share closing mid-market price of an Ordinary Share for any three month period before 31 May 2023 for any three month period exceeds 170 pence, exceeds 77.5 pence and on the last day of that with the price on the last day of that period period exceeds 70 pence. 50% of these options being at least 145 pence, and the last day of this will vest if the average closing mid-market price period being no later than 30 April 2024. 50% of an Ordinary Share for any three month period of the Options granted will vest if the average before 30 September 2022 exceeds 115 pence closing mid-market price of an Ordinary Share and on the last day of that period exceeds for any three month period exceeds 170 pence, 105 pence. with the price on the last day of that period being at least 145 pence, and the last day of this 4. 50% of these options vested if the average closing period being no later than 30 April 2024. mid-market price of an Ordinary Share for any three month period before 31 May 2023 exceeds 7. 50% of the Options granted vested if the 90 pence and on the last day of that period Company exceeds compound annual exceeds 80 pence. 50% of these options will vest growth targets in adjusted revenue over the if the average closing mid-market price of an performance period, being the 3 year financial Ordinary Share for any three month period before year ending 31 December 2024. 50% of the 30 September 2022 exceeds 130 pence and on the Options granted will vest if the Total Shareholder last day of that period exceeds 115 pence. Return (TSR) is in excess of the median value of the TSR Comparator Group. 5. 50% of the Options granted vested if the average closing mid-market price of an Ordinary Share for any three month period exceeds 142 pence, with the price on the last day of that period being at least 120 pence, and the last day of this period being no later than 30 April 2024. 50% of the Options granted will vest if the average closing mid-market price of an Ordinary Share for any three month period exceeds 170 pence, with the price on the last day of that period being at least 145 pence, and the last day of this September 2022 exceeds 100 pence and on the period being no later than 30 April 2024. last day of that period exceeds 90 pence. 50% of these options vested 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. These conditions were fulfilled on 30 September 2022. 3 1 Cambridge Cognition | Annual Report & Accounts 2022 3 2 Cambridge Cognition | Annual Report & Accounts 2022Independent Auditor’s Report to the Members of Cambridge Cognition Holdings plc Independent Auditors Report to the members of Cambridge Cognition Holdings plc Commercial in confidence 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 2022, which comprise the Consolidated statement of comprehensive income, the consolidated and parent company statement of financial position, consolidated and parent company statement of changes in equity, consolidated statement of cash flows, and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and UK adopted international accounting standards. 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 2022 and of the group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with UK adopted international accounting standards; the 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. Commercial in confidence Independent Auditors Report to the members of Cambridge Cognition Holdings plc Conclusions relating to going concern We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern. Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern basis of accounting included: • • • • • • discussions with management of their assessment of the Group’s ability to continue as going concern; assessing the reasonableness of projected cashflow and working capital assumptions and evaluating the revenue and cost projections underlying the cashflow model; assessing the accuracy of management’s historical forecasting by comparing management’s forecasts for the years ended 31 December 2022 and 31 December 2021 to the actual results for those periods and considering the impact on the base-case cashflow forecast. assessing how these cash flow forecasts were compiled, assessing their appropriateness by applying relevant sensitivities to the underlying assumptions, and challenging those assumptions including revenue growth assumptions; evaluating management’s reverse stress test to identify the scenario which would result in the removal of the cash headroom during the assessment period and assessing the probability of such a scenario; and assessing the adequacy of related disclosures within the annual report. In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the group’s and the parent company’s business model including effects arising from macro-economic uncertainties such as inflation, we assessed and challenged the reasonableness of estimates made by the directors and the related disclosures and analysed how those risks might affect the group’s and the parent company’s financial resources or ability to continue operations over the going concern period. In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. 3 3 25 Cambridge Cognition | Annual Report & Accounts 2022 3 4 24 Cambridge Cognition | Annual Report & Accounts 2022 Independent Auditors Report to the members of Cambridge Cognition Holdings plc Independent Auditors Report to the members of Cambridge Cognition Holdings plc Commercial in confidence Commercial in confidence Our approach to the audit Materiality Key audit matters Scoping Overview of our audit approach Overall materiality: Group: £230,000, which represents approximately 2% of the group’s revenue. Parent company: £98,000, which represents approximately 1% of the parent company’s total assets. Key audit matters were identified as : • Revenue recognition (same as previous year). Our auditor’s report for the year ended 31 December 2021 included one key audit matter that has not been reported as a key audit matter in our current year’s report. This relates to going concern which has not been included in the current year due to the level of cash held by the group in comparison to its cost base and the level of the group’s contracted order book. We performed full scope audits of the two financially significant components - Cambridge Cognition Limited and Cambridge Cognition LLC and the parent company using a component materiality. Together with an audit of one or more classes of transactions, account balances or disclosures relating to significant risks of material misstatement of the Group financial statements (specific-scope audit procedures) on one other subsidiary. In total, our audit procedures covered 97% of the Group’s total assets, 100% of the Group’s revenue and 85% of the Group’s loss before tax Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) 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. Description Audit reponse KAM Disclosures Our results In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit. High Potential financial statement impact Low Low Valuation of acquired intangibles arising on the acquisition of eClinicalHealth Revenue recognition Valuation of investment in Monument Therapeutics Ltd Management override of controls Going concern Capitalisation of development costs Extent of management judgement High Key audit matter Significant risk Other risk 3 5 26 27 Cambridge Cognition | Annual Report & Accounts 2022 3 6 Cambridge Cognition | Annual Report & Accounts 2022 Independent Auditors Report to the members of Cambridge Cognition Holdings plc Independent Auditors Report to the members of Cambridge Cognition Holdings plc Key Audit Matter – Group How our scope addressed the matter – Group Materiality was determined as follows: Commercial in confidence Commercial in confidence Revenue recognition We identified revenue recognition as one of the most significant assessed risks of material misstatement due to fraud. 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 there are risks of fraud in revenue recognition. We pinpointed the significant risk to those software and services contracts, where is recognised over time, which were ongoing at the year end. Such contracts require management to estimate the level of completion and as a result there is a risk that revenue could be recognised in the wrong accounting period. revenue In responding performed the following audit procedures: the key audit matter, we to • Obtained an understanding of the control environment around the revenue process and reviewed the design and implementation of relevant controls. • Evaluated the Group’s revenue recognition policies for consistency and compliance with from Contracts with IFRS15 Revenue Customers. • For a sample of contracts ongoing at the year end which related to the provision of software and services we: - Obtained the contract - Considered whether the performance obligations identified by management were consistent with the contract - Agreed the transaction price to the contract the various and assessed to transaction performance obligations the allocation of price the - to Inspected evidence of occurrence of the service and recalculated the expected revenue recognised in the year comparing our expectation that calculated by management. This included verifying a sample of study start dates to an external source and obtaining evidence for the estimated completion dates. Where we noted of management the reasons for this and to corroborated supporting documentation. variances we explanations enquired the Relevant disclosures in the Annual Report and Accounts 2022 • Financial statements: Note 3.3 ‘Revenue recognition’ and Note 5 ‘Critical accounting judgements and key sources of estimation uncertainty’ Our results We did not identify from our audit procedures indicators of inappropriate revenue recognition. We identified a number of differences between management’s calculations and the expected study timelines. The impact of these variances was immaterial individually and in aggregate. We have therefore concluded that revenue recognition is materially consistent with the stated accounting policies. We did not identify any key audit matters relating to the audit of the financial statements of the parent company. Our application of materiality We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report. Materiality measure Group Parent company Materiality for financial statements as a whole We define materiality as the magnitude of misstatement in the financial statements that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of these financial statements. We use materiality in determining the nature, timing and extent of our audit work. Materiality threshold £230,000, which is approximately 2% of the group’s revenue. £98,000, which is approximately 1% of the parent company’s total assets. Significant judgements made by auditor in determining materiality In determining materiality, we made the following significant judgements In determining materiality, we made the following significant judgements: We have determined revenue to be the most appropriate benchmark as the Group is essentially operating at a breakeven level. We selected total assets as benchmark as the parent company is not a trading entity, therefore total assets are of most relevance to users of the financial statements. Materiality for the current year is lower than the level that we determined for the year ended 31 December 2021 due to a percentage of 2% of total assets having been used in the year ended 31 December 2021. The reduction in percentage followed consideration of industry materiality benchmarks for entities of similar size. Total revenue is the most appropriate reflection of the Group's level of activity. It is also a key performance indicator used by management. Materiality for the current year is lower than the level that we determined for the year ended 31 December 2021 due to a percentage of 2.75% of group revenue having been used in the year ended 31 December 2021.The reduction in percentage applied to revenue was as a result of the increased complexity of the group and consideration of industry materiality benchmarks for entities of similar size. Performance materiality used to drive the extent of our testing We set performance materiality at an amount less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. Performance materiality threshold £160,000, which is approximately 70% of financial statement materiality. £68,000, which is approximately 70% of financial statement materiality. 3 7 28 29 Cambridge Cognition | Annual Report & Accounts 2022 3 8 Cambridge Cognition | Annual Report & Accounts 2022 Independent Auditors Report to the members of Cambridge Cognition Holdings plc Independent Auditors Report to the members of Cambridge Cognition Holdings plc Commercial in confidence Commercial in confidence Significant judgements made by auditor in determining performance materiality In determining performance materiality, we made the following significant judgements: the strength of the control environment and our experience auditing the financial statements of the Group, including the effect of misstatements identified in previous audits. In determining performance materiality, we made the following significant judgements: the strength of the control environment and our experience auditing the financial statements of the Group, including the effect of misstatements identified in previous audits. Specific materiality We determine specific materiality for one or more particular classes of transactions, account balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Specific materiality We determined a lower level of specific materiality for directors’ remuneration. We determined a lower level of specific materiality directors’ remuneration. Communication of misstatements to the audit committee Threshold for communication We determine a threshold for reporting unadjusted differences to the audit committee. £11,500 and misstatements below that threshold that, in our view, warrant reporting on qualitative grounds. £4,900 and misstatements below that threshold that, in our view, warrant reporting on qualitative grounds. The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential uncorrected misstatements. Overall materiality – Group Overall materiality – Parent company Revenue £12,613k PM £160k, 70% FSM £230k, 2% Total assets £9,878k PM £68k, 70% FSM £98k, 1% TFPUM £70k, 30% TFPUM £30k, 30% FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected An overview of the scope of our audit We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in particular matters related to: Understanding the group, its components, and their environments, including group-wide controls We obtained an understanding of the Group and its environment, including Group-wide controls. We performed walkthroughs across our identified risk areas such as management override of control and revenue. • • • The Group’s accounting process is structured around the centralised Group finance function based at the Group’s head office in Cambridge, UK, which provides accounting and administrative support for the Group’s operations. The Group’s revenue is generated by its two main subsidiaries, Cambridge Cognition Limited (registered in the UK) and Cambridge Cognition LLC (registered in USA); and eClinicalHealth Limited was acquired during the year. Due to the timing of the acquisition its contribution to the group’s revenue in the year was immaterial. Identifying significant components We identified and evaluated the components to assess their significance and to determine the planned audit response based on a measure of materiality. We determined significance as a percentage of the group’s revenue, as revenue recognition was identified as a key audit matter. The significant components identified were Cambridge Cognition Limited and Cambridge Cognition LLC. Type of work to be performed on financial information of parent and other components (including how it addressed the key audit matters) For those components which were scoped as significant as well as Cambridge Cognition Holdings plc, full-scope audit procedures were performed based on component materiality. In order to address the audit risks identified during our planning procedures, including the key audit matter as set out above, a further one component (eClinicalHealth Limited) was subject to an audit of one or more classes of transactions, account balances or disclosures relating to significant risks of material misstatement of the Group financial statements. At the Group level we also tested the consolidation process and the accounting for the acquisition of eClinicalHealth Limited including the valuation of the acquired intangibles. Performance of our audit As set out above, the Group has a centralised function based at the Group’s head office in Cambridge. All work was performed by the group engagement team. We identified revenue recognition as the key audit matter and the procedures performed in respect of that have been included in the key audit matters section of our report. Audit approach Full-scope audit Specific-scope audit Analytical procedures No. of components 3 % coverage total assets 95% % coverage revenue 100% 1 5 2% 3% - - % coverage LBT 85% - 15% misstatements 3 9 30 31 Cambridge Cognition | Annual Report & Accounts 2022 4 0 Cambridge Cognition | Annual Report & Accounts 2022 Independent Auditors Report to the members of Cambridge Cognition Holdings plc Independent Auditors Report to the members of Cambridge Cognition Holdings plc Commercial in confidence Commercial in confidence Changes in approach from previous period In the current year Cambridge Cognition LLC has been assessed as financially significant due to its contribution to the group’s revenue, whereas Cambridge Cognition Holdings plc has not been deemed financially significant due its size. In the prior year Cambridge Cognition Holdings plc was deemed financially significant with Cambridge Cognition LLC not being deemed financially significant. Other information The other information comprises the information included in the Annual report and Accounts, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the Annual report and Accounts. 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. 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 themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Our opinion on other matters prescribed by the Companies Act 2006 is unmodified In our opinion, based on the work undertaken in the course of the audit: • • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matter on which we are required to report under the Companies Act 2006 In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on pages 22 and 23 , 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. Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below: • We obtained an understanding of the legal and regulatory frameworks applicable to the parent company and the Group and the industry in which they operate. We determined that the following laws and regulations were most significant: UK adopted international accounting standards, Companies Act 2006, AIM Rules for Companies, QCA Corporate Governance Code and the relevant tax compliance regulations in the jurisdictions in which the Group operates. In addition, we concluded that there are certain significant laws and regulations that may have an effect on the determination of the amounts and disclosures in the financial statements, including laws and regulations relating to employment matters, data security and protection, and clinical trials regulations. • We obtained an understanding of how the parent company and the Group is complying with those legal and regulatory frameworks by making inquiries of management, those responsible for legal and compliance procedures and the company secretary. We corroborated our inquiries through our review of board minutes and minutes of Audit Committee meetings; • We enquired of management and the Audit Committee, whether they were aware of any instances of non- compliance with laws and regulations or whether they had any knowledge of actual, suspected or alleged fraud. We corroborated the results of our enquires to relevant supporting documentation; • We assessed the susceptibility of the parent company’s and the Group’s financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the Group engagement team included: o identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud; o challenging assumptions and judgements made by management in making its significant accounting estimates; and o journal entry testing, with a focus on those journal entries identified, as posing a higher risk of material misstatement, based on an assessment of quantitative and qualitative risk factors. 4 1 32 33 Cambridge Cognition | Annual Report & Accounts 2022 4 2 Cambridge Cognition | Annual Report & Accounts 2022 Independent Auditors Report to the members of Cambridge Cognition Holdings plc Commercial in confidence • These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it; • It is the Group audit engagement partner’s assessment that the Group audit engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. • We communicated relevant laws and regulations and potential fraud risks to all Group engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. • We completed audit procedures to conclude on the compliance of disclosures in the annual report and financial statements with applicable financial reporting requirements. 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. Andrew Hodgekins Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Cambridge 2 May 2023 Consolidated Statement of Comprehensive Income Year to 31 December 2021 Year to 31 December 2022 Revenue Cost of sales Gross profit Administrative expenses excluding acquisition expenses Administrative expenses – acquisition related Total administrative expenses Other operating income Operating (loss) / profit Interest receivable Finance costs (Loss) / profit before tax Tax credit (Loss) / profit for the year Notes 6 7 8 11 11 12 Other comprehensive (loss) / income Items that may subsequently be reclassified to profit or loss Exchange differences on translation of foreign operations 23 Total comprehensive (loss) / income for the year (Loss)/ earnings per share (pence) 13 Basic earnings per share Diluted earnings per share All items of income are attributable to the equity holders in the Parent. The above results relate to continuing operations. £’000 12,613 (3,291) 9,322 (9,616) (479) (10,095) 156 (617) 9 (16) (624) 215 (409) (302) (711) (1.3) (1.3) (Restated) £’000 10,094 (2,409) 7,685 (7,435) - (7,435) 14 264 - (11) 253 197 450 14 464 1.4 1.4 4 3 34 Cambridge Cognition | Annual Report & Accounts 2022 4 4 Cambridge Cognition | Annual Report & Accounts 2022 Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Assets Non-current assets Intangible assets Property, plant and equipment Investments Total non-current assets Current assets Inventories Trade and other receivables Current tax receivable Cash and cash equivalents Total current assets Total assets Liabilities Current liabilities Trade and other payables Total liabilities Equity Share capital Share premium Other reserves Own shares Retained earnings Total equity Total liabilities and equity At 31 December At 31 December 2022 £’000 2021 £’000 Notes Share Share Other Own Retained capital premium reserves shares earnings Total £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 January 2021 312 11,151 6,111 (78) (17,439) 57 15 16 17 18 19 24 21 22 23 23 1,421 188 49 1,658 216 4,680 231 8,322 13,449 15,107 15,012 15,012 312 11,151 5,823 (71) (17,120) 95 15,107 373 52 49 474 126 4,935 195 6,810 12,066 12,540 11,908 11,908 312 11,151 6,125 (78) (16,878) 632 12,540 Profit for year Other comprehensive income Total comprehensive income for the year Credit to equity for equity-settled share-based payments Transactions with owners Balance at 31 December 2021 Balance at 1 January 2022 Loss for year Other comprehensive income Total comprehensive income for the year Transfer of own shares Credit to equity for equity- settled share-based payments Transactions with owners - - - - - 312 312 - - - - - - - - - - - 11,151 11,151 - - - - - - - 14 14 - - 6,125 6,125 - (302) (302) - - - - - - - - 450 450 - 14 450 464 111 111 111 111 (78) (16,878) 632 (78) (16,878) 632 - - - 7 - 7 (409) (409) - (302) (409) (711) (7) - 174 174 167 174 95 Balance at 31 December 2022 312 11,151 5,823 (71) (17,120) The financial statements on pages 44 to 77 were approved by the Board of Directors and authorised for issue on 2 May 2023 and were signed on its behalf by: Stephen Symonds Chief Financial Officer 4 5 Cambridge Cognition | Annual Report & Accounts 2022 4 6 Cambridge Cognition | Annual Report & Accounts 2022 Consolidated Statement of Cash Flows Notes to the Financial Statements Notes 24 Net cash flows from operating activities Investing activities Interest received Purchase of property, plant and equipment Purchase of investment Net cash flow used in investing activities Financing activities Proceeds from exercise of share options Repayment of borrowings 24 Interest payments Lease payments Net cash flows used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at start of year Exchange differences on cash and cash equivalents Cash and cash equivalents at end of year 24 Year to Year to 31 December 2022 31 December 2021 £’000 1,668 9 (189) - (180) 1 (133) - - (132) 1,356 6,810 156 8,322 £’000 3,945 - (56) (49) (105) - - (11) (86) (97) 3,743 3,047 20 6,810 1. General information Cambridge Cognition Holdings plc (‘the Company’) and its subsidiaries (together, ‘the Group’) develops and markets digital solutions to assess brain health. 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 UK-adopted international accounting standards. The accounting policies adopted are consistent with those followed in the preparation of the consolidated financial statements for the year ended 31 December 2021, except as stated in note 4. The financial statements have been prepared under the historical cost convention. The accounts are presented in Pounds Sterling (“£”), and to the nearest £1,000. The subsidiary undertakings included within the Consolidated Financial Statements as at 31 December 2022 are given in note 17. 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 through June 2024. As noted in the Chief Financial Officer’s Review, the business has a strong contracted order book as well as having a strong cash balance at 31 December 2022. Whilst the Group expects to have net cash outflows during 2023 it has sufficient cash resources for its current strategy. The Group has a base case forecast for the period at least 12 months from the date of these financial statements with a growth case and downside case also being forecast. The base case is built on the current view of orders to be taken and the recognition of revenue and billing milestones associated with orders already taken. 4 7 Cambridge Cognition | Annual Report & Accounts 2022 4 8 Cambridge Cognition | Annual Report & Accounts 2022Notes to the Financial Statements Software licences hosted on our servers: 3. Significant accounting policies continued Where software is hosted on our servers the revenue is recognised over a period of time, as we have a The base case shows strong performance, driven by existing orders and supports a positive cash balance continuing performance obligation to provide services (e.g. to ensure our servers are available). Customers right through the going concern review period, with a positive outlook thereafter. The downside case also will also benefit from software and service enhancements which improve the functionality of the software shows positive cash through the going concern review period and would allow for further expenditure during the licence period. These improvements are not standalone products and are included in the modifications not yet budgeted. originally contracted price and so are not accounted for separately. The Directors believe that the Group will remain a going concern for the foreseeable future. Accordingly, the l For contracts where the software value is greater than or equal to £20,000, and software is sold on a cost 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. per assessment basis, the Group uses the assessment price to recognise revenue as the assessments are used, as this represents the customers’ consumption of their benefits of the contract, and the Group’s simultaneous performance of its obligations. l For contracts where the software value is less than £20,000, and software is sold on a cost per To determine whether to recognise revenue, the Group follows a five-step process: assessment basis, the Group uses a portfolio estimate of the revenue being recognised over 12 months. l l Identifying a contract with a customer Identifying the performance obligations l Determining the transaction price l Allocating the transaction price to the performance obligations l Recognising revenue when or as performance obligations are satisfied This period has been chosen as it best represents the average life of this portfolio of contracts. l 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 The Group often enters into contracts where a bundle of products or services are provided. Contracts software revenue is taken to the income statement. In addition, breakage will also be taken where software are assessed and obligation(s) are separated by applying the five steps to each element of the contract assessments on a project have not been used for 12 months, and management is not able to establish that to decide how revenue should be recognised. The Group’s portfolio of products and services each have the related project is ongoing. defined characteristics and performance obligations that inform revenue recognition decisions and the policy applied. 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 Management assesses the value of the standalone transaction prices of each unbundled element and and as such revenue is recognised at that point in time. The time of recognition is once the licence has believe them to be appropriately reflected in the contract prices for the respective element, which are the been delivered to the customer, either through delivery of a physical software key or installation on the client result of arm’s length market price negotiations with customers. Each are capable of being sold and used systems, as this is when the customer takes control of the asset and can direct its use. It is also when the by customers individually, and each are clearly identified within the contract. These values are then used Group’s performance obligations are satisfied as the Group is not responsible for hosting the software and for revenue recognition judgements related to the performance of obligations which fall within one of the is unable to make further software enhancements. accounting policies stated below depending upon the specific characteristic of that contract. Each of these are described below. Services: The timing of payments received from customers is based on contractual terms, is typically received at development and scientific consultancy. Some services will be ongoing services provided over a period of multiple points throughout a contract and does not necessarily match the timing of revenue recognition. time, whilst some will be clearly tied to a deliverable or other project milestone. The Group recognises the To the extent that payments are received ahead of income recognition, these amounts are carried within revenue from services over time only where it has the right to payment for services as they are performed. The Group provides a range of services that include supporting clinical studies, bespoke software the consolidated statement of financial position within trade and other payables as deferred income on contracts with customers. Where payments are received after revenue recognition these are carried in the Services delivered at a point in time: consolidated statement of financial position within trade and other receivables as accrued income from Some services, such as training and delivery of scientific reports will be delivered at a point in time and as contracts with customers. 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: such will be recognised at a point in time, as the performance obligation is discharged on delivery, as this is when the customer obtains control of the related asset or consumes the benefit. 4 9 Cambridge Cognition | Annual Report & Accounts 2022 5 0 Cambridge Cognition | Annual Report & Accounts 2022 Notes to the Financial Statements 3. Significant accounting policies continued Services delivered over a period of time: 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 operating income. When services are delivered over a period of time (e.g. study support services) the revenue is recognised equally over the relevant period, as the customer has access to the benefit of those services, using the 3.5 Sales commissions output method. 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, and hence can measure the proportion of time passed to measure the value of revenue that can be recognised. 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. 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 considering the progress towards satisfying the performance obligation. This will normally be measured by the output method – i.e. what proportion of the deliverable has been completed. This is Commissions are accrued and subsequently paid based on the contractual terms reached with the salesperson. Commissions relate to the whole of the respective customer contract and so are apportioned on the same basis as revenue recognition. Where commissions are paid related to revenues that are not recognised in the same accounting period, the commission amount is capitalised and held as an asset on the balance sheet, before being expensed in proportion with the related revenue, which will be recognised in accordance with the policy in 3.3 above. 3.6 Costs of sales Cost of sales includes costs arising in meeting our obligations to customers. The most significant items include third party costs for services and hardware, sales commissions, and the costs of hosting customer data. All other costs are included within administration costs unless separate presentation on the face of the Consolidated Statement of Comprehensive Income is mandated. measured by observable milestones, for example story-points completed in a software build or over time 3.7 Leasing where such observable milestones do not exist. 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 (as support can only be required whilst a licence is held), 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 the Group’s offering. Hardware revenue is recognised when hardware is despatched to the customer, as the performance obligation is discharged at this point. Bill and hold arrangements: On some occasions, a customer may ask that we purchase and configure hardware on their behalf and then store the hardware awaiting specific despatch instructions. In these cases, the customer assumes ownership of the assets even though they may still be in our physical possession. Once all of the specific criteria under IFRS 15 are met, the Group will recognise this hardware revenue, even though the hardware has not yet been despatched. The Group will normally bill ahead of revenue recognition, and so it is common that a contract liability is created. In particular, software amounts are normally billed on contract signature. These amounts are held on the Consolidated Statement of Financial Position within ‘Deferred income on contracts with customers’. Where revenue is recognised in the Consolidated Statement of Comprehensive Income but not yet invoiced, accrued income is held on the Consolidated Statement of Financial Position within ‘Accrued income from contracts with customers’. 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, 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 comprising 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 shorter of the length of the lease or the asset’s useful life. Upon any subsequent modifications to the lease, the values are reassessed in line with the process outlined for commencement above. Where a lease ends it is eliminated from the recorded cost and depreciation values. Where the Group enters into 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. 3.8 Foreign currencies The individual financial statements of each subsidiary are presented in the currency of the primary economic environment in which it operates (its functional currency). The UK pound is the functional currency of the Company and presentational 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, with differences recorded in profit or loss. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. 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 Other reserves. 5 1 Cambridge Cognition | Annual Report & Accounts 2022 5 2 Cambridge Cognition | Annual Report & Accounts 2022 Notes to the Financial Statements 3. Significant accounting policies continued 3.9 Post employment benefit costs Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. 3.10 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 The tax credit is accounted for within the taxation charge or credit for the year. 3.11 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 assets, less their estimated residual value, over their expected useful lives on the following bases: l Leased buildings (right of use) l Leasehold improvements l Fixtures, fittings and equipment Period of contracted use (i.e. length of lease) straight line over the lesser of 5 years or the term of the lease 25% - 33% per annum straight line The gain or loss arising on the disposal of an asset is 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 liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the ownership. 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 3.12 Intangible assets The Group uses the acquisition method of accounting for the acquisition of subsidiaries. The consideration is measured at the fair value of the assets given equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are expensed in the year. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the fair value of net identifiable assets and liabilities acquired. Goodwill is measured at cost less accumulated impairment losses. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the profit or other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. loss on the acquisition date. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in Purchased licences 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 profit or loss, 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. Research and Development tax credits The Group applies for Research and Development tax credits in respect of each financial year. As the Group has an established history of successful claims, the credit is recognised when an estimated value is reliable. Where a licence for software used in the provision of services to customers is purchased and controlled by the Group, the amount is capitalised and amortised over the period of the licence as long as future economic benefits are expected. 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 the Group can demonstrate all of the following: l l l the technical feasibility of completing the intangible asset so that it will be available for use or sale its intention to complete the intangible asset and use or sell it its ability to use or sell the intangible asset l how the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset its ability to measure reliably the expenditure attributable to the intangible asset during its development l l 5 3 Cambridge Cognition | Annual Report & Accounts 2022 5 4 Cambridge Cognition | Annual Report & Accounts 2022Notes to the Financial Statements 3. Significant accounting policies continued Amortisation Amortisation is charged to the consolidated statement of comprehensive income to allocate the cost of intangible assets over their estimated useful economic lives, using the straight line method. The estimated useful economic lives of intangible assets are as follows: l Technology based assets straight line over 5-11 years 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 IAS 36 Impairment of Assets 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 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 are received, net of direct issue costs. Hedge accounting The Group does not have any relationships that qualify for hedge accounting. of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. 3.15 Share-based payments 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 10.0% discount rate. If this calculation suggests the recoverability of goodwill is sensitive to any of these factors, appropriate scenario modelling is performed. 3.13 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. 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 26. 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. 3.14 Financial instruments Financial assets and financial liabilities are recognised in the Group’s Consolidated Statement of Financial 3.16 Employee Benefit Trust Position when the Group becomes a party to the contractual provisions of the instrument. Financial assets (excluding investments held at fair value) and financial liabilities are initially measured at fair value, plus or minus directly attributable transaction costs. Financial assets excluding investments held at fair value In order to facilitate the exercise of share options the Group maintains two Employee Benefit Trusts (EBTs). These are consolidated in accordance with IFRS10. The costs of purchasing own shares held by the EBTs are deducted from equity under the ‘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 Financial assets excluding investments held at fair value are subsequently measured at amortised cost. recognised directly in reserves. Accordingly, where the Group believes that there is a change in the value of a financial instrument (e.g. a trade receivable is considered unrecoverable) this amount will be adjusted through the profit or loss. A 3.17 Investments financial asset is derecognised once the contractual rights expire (e.g. when cash has been received for a The Group measures equity investments at fair value, with changes in fair value recognised in other gains/ 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 (losses) in the Consolidated Statement of Comprehensive Income. 4. Significant changes in the current reporting period During the year, the Group has seen an increase in contracts requiring higher levels of study support and data management services as well as logistics that require the Group’s operations staff to provide a greater proportion of time to these activities. Therefore, the Group has reconsidered its accounting policy 5 5 Cambridge Cognition | Annual Report & Accounts 2022 5 6 Cambridge Cognition | Annual Report & Accounts 2022 Notes to the Financial Statements 4. Significant changes in the current reporting period continued Fair value of investments The Group reviews the fair value of investments on an annual basis. This test requires a comparison of the observable equity transactions, discounted for appropriate matters specific to the Group’s holding in the for the presentation of expenses in the income statement to include staff and related costs relating to underlying investment. the delivery of those services within cost of sales. The prior year income statement has been restated for the reclassification of costs between cost of sales and administrative expenses. As a result, the prior year Accounting for investment in Monument Therapeutics Limited has been restated to reflect an increase in cost of sales of £394,000 with a corresponding decrease in Although the Company holds more than 20% of the voting shares in Monument, the Company recognises administrative expenses. The overall operating profit for 2021 remains unchanged. its holding as an investment because it does not have significant influence over the business due to the control exercised by all the other major shareholders to the exclusion of the Company. 5. 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 Business combinations required to make judgements, estimates and assumptions about the carrying amounts of assets and Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their liabilities that are not readily apparent from other sources. The estimates and associated assumptions are fair values at the acquisition date. Goodwill represents the excess of the cost of the acquisition over the based on historical experience and other factors that are considered to be relevant. Actual results may Group’s interest in the fair value of net identifiable assets and liabilities acquired. differ from these estimates. Goodwill The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting The Group reviews the carrying value of its goodwill balances by carrying out impairment tests at least estimates are recognised in the period in which the estimate is revised if the revision affects only that period on an annual basis. These tests require estimates to be made of the value in use of its CGUs which are or in the period of the revision and future periods if the revision affects both current and future periods. dependent on estimates of future cash flows and long-term growth rates of the CGUs. See note 15. Revenue recognition Capitalisation of development costs As noted in section 3.3 above, many of the judgements in relation to revenue recognition are directed The point at which development costs meet the criteria for capitalisation is critically dependent on by the characteristics of the contractual obligation being discharged. Accordingly, a limited amount of management judgement of the probability to reliably measure the future economic benefits. The research management judgement is required. Whilst these judgements do not carry a significant level of estimation and development expenditure primarily relates to ongoing research as outlined in the Chief Executive uncertainty, they are nonetheless described below: Officer’s Review. Therefore, no development costs have been capitalised during 2022 (2021: £nil). l The extent to which, and the way in which, contracts are separated into their component parts and the Recovery of deferred tax assets values attributed to those parts. This is based on the detail as per the contract, but other methods could Deferred tax assets in excess of any deferred tax liabilities have been recognised only to the extent that be used that would yield different results; there are deferred tax liabilities with no excess recognised for other deductible temporary differences, l Whether software licences are granted to allow the customer the benefit of use of the Group’s share options and tax losses as management considers that there is not sufficient certainty on when intellectual property over a period of time (including benefitting from future maintenance and future taxable profits will be available to utilise those temporary differences and tax losses. This judgement improvements) or whether that right is given as the intellectual property exists at the point of time the is reviewed at each year end and made based upon forecasts of taxable profit, considering the inherent licence is granted. In the case of the former, software is recognised over the period of use, for the latter uncertainties in these forecasts. revenue is recognised when the customer receives control of the licence; l The adoption of the portfolio approach for lower value sales and the recognition criteria applied 6. Revenue judgements of the upper limit (£20,000) and the period of recognition (12 months) impact the method of An analysis of the Group’s revenue for each major product and service category is as follows: valuation and hence the amount recognised in the financial statements; l Where performance obligations are satisfied over time, the length of time remaining for performance, and whether this needs revising over time. These judgements are based on best available information from customers at any given point in time, but can change given the nature of the customer’s business; and l The deferral and subsequent recognition of commissions in cost of sales, which is recognised in the same proportion as the revenue it is associated with. Critical estimates and 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. Software Services Hardware 2022 £’000 5,027 6,528 1,058 12,613 2021 £’000 3,609 5,638 847 10,094 Costs cannot be directly attributed to the products and services above so profit measures are not presented. 5 7 Cambridge Cognition | Annual Report & Accounts 2022 5 8 Cambridge Cognition | Annual Report & Accounts 2022Notes to the Financial Statements 6. Revenue continued Geographical information The revenue from external customers by geographical location is detailed below: Deferred commissions Deferred commissions are presented as part of ‘Trade and other receivables’ in note 19. The Company does not consider any of these amounts impaired. The movement of this account specifically is as follows: United Kingdom United States of America European Union Rest of World 2022 £’000 1,088 7,422 3,195 908 12,613 2021 £’000 888 6,167 2,261 778 10,094 Opening balance Amount recognised in Statement of comprehensive income Net addition from sales in year Closing balance 7. Other operating income Other operating income is made up of the following: All non-current assets are located in the United Kingdom. Information about major customers Three customers account for more than 10 per cent of reported revenue in 2022, amounting to just over 34% of the total (2021: two customers amounting to 20%). Grant income Revenue from contracts with customers All revenue in 2022 and 2021 comes from contracts with customers. 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 a point in time 2022 £’000 4,535 492 5,173 1,355 1,058 12,613 2021 £’000 3,344 265 4,694 944 847 10,094 Of the £8.8m deferred revenue at 31 December 2021, £6.0m was recognised as revenue in 2022. Of the £4.8m deferred revenue at 31 December 2020, £4.5m was recognised as revenue in 2021. 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. 8. Operating (loss)/profit Operating (loss)/profit has been arrived at after charging/(crediting): Net foreign exchange (gains)/losses Research and development costs Depreciation of property, plant and equipment Amortisation of intangible assets Staff costs (see note 10) 2022 £’000 728 (332) 310 706 2021 £’000 440 (174) 462 728 2022 £’000 156 2021 £’000 14 2022 £’000 (163) 2,165 57 37 6,689 2021 £’000 297 1,660 143 6 5,643 5 9 Cambridge Cognition | Annual Report & Accounts 2022 6 0 Cambridge Cognition | Annual Report & Accounts 2022Notes to the Financial Statements 9. Auditor’s remuneration The analysis of the auditor’s remuneration is as follows: 11. Interest receivable and finance costs Interest receivable comprises: Fees payable to the Company’s auditor for the audit of: the Company’s annual accounts the subsidiaries’ annual accounts Total audit fees Taxation compliance services Tax advisory services Total non-audit fees 10. Staff costs The average monthly number of employees (including directors) was: Operations Sales and business development Administrative support Their aggregate remuneration comprised: Wages and salaries Social security costs Other pension costs (see note 27) Share-based payments charge (see note 26) 2022 £’000 2021 £’000 Interest on bank deposits Finance costs comprise: Bank charges Unwinding of discount on lease creditor 12. Taxation Corporation tax: Current year Adjustments in respect of prior years Deferred tax (see note 20) Total tax credit 107 43 150 9 20 29 2022 £’000 55 12 13 80 2022 £’000 5,736 496 283 174 44 33 77 9 - 9 2021 £’000 42 9 9 60 20211 £’000 4,864 440 228 111 1 The amounts disclosed in relation to 2021 have been restated to include £543,000 of commissions paid to the sales team which had erroneously been omitted from the disclosure of wages and salaries. 6,689 5,643 2022 £’000 9 2022 £’000 16 - 16 2022 £’000 (98) (117) (215) - (215) 2021 £’000 - 2021 £’000 - 11 11 2021 £’000 (2) (195) (197) - (197) 6 1 Cambridge Cognition | Annual Report & Accounts 2022 6 2 Cambridge Cognition | Annual Report & Accounts 2022Notes to the Financial Statements 12. Taxation continued Corporation tax is calculated at 19% (2021: 19%) of the estimated taxable loss for the year. The tax credit for each year reconciles to the loss before tax as follows: Profit/(loss) before tax on continuing operations Tax at the UK corporation tax rate of 19% (2021: 19%) Difference in foreign tax rates Expenses not deductible for tax purposes Deduction on exercise of share options Movement in unrecognised deferred tax on losses Adjustment in respect of prior years Foreign tax (credit)/charge R&D tax credit – current year Tax credit for the year 2022 £’000 (624) (118) (3) 26 (7) 102 (117) 2 (100) (215) 2021 £’000 253 48 17 26 (48) (43) (195) (2) - (197) The adjustment in respect of prior years relates to the receipt of R&D tax credits in respect of 2021 (2021: in respect of 2020). No claim has yet been made for 2022, however the company is able to estimate the expected amount that will be received for the year. From 1 April 2023 the UK corporation tax rate will increase from 19% to 25%. Deferred tax assets and liabilities were calculated at the substantively enacted corporation tax rates, taking into account any known future changes. 13. Earnings per share The calculation of 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)/profit attributable to owners of the Company Number of shares Weighted average number of ordinary shares for the purposes of basic EPS Weighted average number of ordinary shares for the purposes of diluted EPS 2022 £’000 (409) 2022 £’000 31,170 31,170 2021 £’000 450 2021 £’000 31,170 31,519 The diluted loss per share is considered to be the same as the basic loss per share. Potential dilutive shares are not treated as dilutive where they would result in a loss per share. 14. Business combinations eClinicalHealth Limited On 25 October 2022, the Company acquired the entire share capital of eClinicalHealth Limited (“eCH”) , a UK based provider of Decentralised Clinical Trials software, for a total amount payable of £nil. The fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill of eCH are as follows: Property, plant and equipment Intangible assets – technology based assets Other current assets Cash and cash equivalents Deferred tax assets on losses Trade and other payables Other current liabilities Deferred tax liabilities on intangible assets Loans Net liabilities assumed Total purchase consideration Goodwill £’000 5 955 234 - 239 (740) (451) (239) (133) (130) - 130 The Company considers that the total amount payable for the acquisition of eCH to be up to £1.7 million, comprising assumed liabilities of £1.3 million and up to an additional £0.4 million of deferred amounts payable, contingent on performance targets and continued service of key individuals that will be recognised over the period from acquisition to December 2023. Deferred amounts that may be payable will be settled in shares of Cambridge Cognition Holdings plc. Since the acquisition date, eCH contributed £39,000 to the Group’s revenue and £0.1 million of loss for the year ended 31 December 2022. Had the acquisition occurred on 1 January 2022 eCH would have contributed £931,000 to the Group’s revenue and £82,000 to the loss for the year ended 31 December 2022. Goodwill includes the estimated value attributable to the assembled workforce. Winterlight Labs Inc Subsequent to the year end, on 10 January 2023, the Company acquired the entire share capital of Winterlight Labs Inc (“Winterlight”) a Toronto, Canada based company developing speech-based digital biomarkers for the assessing cognitive function. The total amount payable was £7.0 million, comprising £3.0 million in cash and £4.0 million in shares of Cambridge Cognition. 6 3 Cambridge Cognition | Annual Report & Accounts 2022 Cambridge Cognition | Annual Report & Accounts 2022 6 4 Notes to the Financial Statements 14. Business combinations continued The preliminary fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill of Winterlight are as follows: Property, plant and equipment Intangible assets – technology based assets Intangible assets – trade name Intangible assets – customer relationships and backlog Trade and other receivables Other current assets Cash and cash equivalents Deferred tax assets on losses Trade and other payables Deferred tax liabilities on intangible assets Other current liabilities Net assets acquired Total purchase consideration Goodwill £’000 18 3,055 520 370 233 37 - 1,065 (182) (1,065) (281) 3,770 7,002 3,232 Goodwill includes the estimated value attributable to the assembled workforce. 15. Intangible assets Technology Goodwill based assets Licences £’000 £’000 £’000 Total £’000 352 - - - 352 352 130 482 - - - 482 - - - - - - 955 955 - 32 32 923 40 13 6 19 21 40 - 40 19 5 24 16 392 13 6 19 373 392 1,085 1,477 19 37 56 1,421 Cost At 1 January 2021 and 31 December 2021 Amortisation At 1 January 2021 Charge for the year At 31 December 2021 Net Book Value at 31 December 2021 Cost At 1 January 2022 Acquisitions in the year At 31 December 2022 Amortisation At 1 January 2022 Charge for the year At 31 December 2022 Net Book Value at 31 December 2022 6 5 Goodwill represents the excess of consideration over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of the acquisition and is allocated to Cash Generating Units (“CGUs”) for impairment testing. The goodwill balance is allocated to the following CGUs: Cambridge Cognition eClinicalHealth 2022 £’000 352 130 482 2021 £’000 352 - 352 The recoverable value of the goodwill and other assets are assessed on a value in use basis considering the three-year future forecasts. These are a result of the overall Group budgeting process, and the key assumptions include sales order volumes, business costs, and the related cash flows. 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 10.0%. As well as the scenario based on these forecasts, management has run alternative scenarios with reasonable downside assumptions to test the valuation, in particular a reduction in sales orders taken by over 20% and consequential impacts on results and cashflow. In carrying out its assessment of goodwill, management believes that no impairment is required and no reasonably possible changes in assumptions would lead to an impairment. Cambridge Cognition | Annual Report & Accounts 2022 6 6 Cambridge Cognition | Annual Report & Accounts 2022Notes to the Financial Statements 16. Property, plant and equipment Cost At 1 January 2021 Additions At 31 December 2021 Depreciation At 1 January 2021 Charge for the year At 31 December 2021 Net Book Value at 31 December 2021 Cost At 1 January 2022 Additions Acquired through business combination Disposals At 31 December 2022 Depreciation At 1 January 2022 Charge for the year Disposals At 31 December 2022 Net Book Value at 31 December 2022 Leased Leasehold Fixtures and buildings improvements £’000 £’000 fittings £’000 Total £’000 126 24 150 32 118 150 - 150 - - - 150 150 - - 150 - 39 - 39 38 1 39 - 39 10 4 (3) 50 39 3 (3) 39 11 628 32 660 585 24 609 52 660 179 1 (359) 481 609 54 (359) 304 177 793 56 849 655 143 798 52 849 189 5 (362) 681 798 57 (362) 493 188 The results and assets of Cognition Kit Limited are immaterial to the Group. Accordingly, detailed disclosures have not been presented. All the above companies, except Cambridge Cognition Limited, Cambridge Cognition South Africa Pty Ltd and eClinicalHealth Limited, are held via Cambridge Cognition Limited. All UK entities except eClinicalHealth Limited have their Registered Office at the Company’s registered office. The Registered Office of eClinicalHealth Limited is 48 St. Vincent Street, Glasgow, Scotland, G2 5HS. The Registered Office of Cambridge Cognition LLC is 510 S. 200 W. Suite 200, Salt Lake City, UT 84101, USA. The Registered Office of Cambridge Cognition South Africa Pty Ltd is Lower Ground Suite Building 9, Somerset Office Park 5, Libertas Road, Bryanston, Gauteng, 2021, South Africa. All holdings are in ordinary shares. Details of the Company’s other investments include: l Monument Therapeutics Limited 28.88% The Company recognises its holding in Monument as an investment. Although it holds more than 20% of the voting shares, it does not have significant influence over the business due to the control exercised by all the other major shareholders to the exclusion of the Company. The Company performed a review of the fair value of the investment at 31 December 2022 and concluded that no change in the value was required. 18. Inventories Finished goods and goods for resale 2022 £’000 216 2021 £’000 126 During the year inventories with a total value of £274,000 (2021: £251,000) were included in the Consolidated Statement of Comprehensive Income as an expense. 17. Subsidiaries, joint ventures and other investments Details of the Group’s subsidiaries and joint ventures at 31 December 2022 are as follows: 19.Trade and other receivables Name Place of incorporation Proportion Proportion (or registration) of ownership of voting and operation interest % power held % Cambridge Cognition Limited Cambridge Cognition Trustees Limited United Kingdom United Kingdom Cambridge Cognition LLC Delaware, United States of America Cantab Corporate Health Limited Cognition Kit Limited Cambridge Cognition South Africa Pty Ltd eClinicalHealth Limited United Kingdom United Kingdom South Africa United Kingdom 100% 100% 100% 100% 50% 100% 100% 100% 100% 100% 100% 50% 100% 100% Trade receivables from contracts with customers Accrued income from contracts with customers Prepayments Deferred commissions Other receivables 2022 £’000 2,073 206 1,132 706 563 4,680 2021 £’000 2,047 401 1,592 728 167 4,935 6 7 Cambridge Cognition | Annual Report & Accounts 2022 6 8 Cambridge Cognition | Annual Report & Accounts 2022 Notes to the Financial Statements 19. Trade and other receivables continued 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. 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. Aging of past due but not impaired receivables: 31-60 days 61-90 days 91-120 days 121 or more days 2022 £’000 126 52 14 175 367 2021 £’000 652 299 4 79 1,034 At the reporting date, the Group has unused tax losses of £13.1 million (2021: £12.8 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. The unrecognised deferred tax asset amounts to approximately £3.3 million (2021: £2.5 million). Losses may be carried forward indefinitely. The unrecognised deferred tax asset on share options amounts to £142,000 (2021: £50,000). 21. 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 2022 £’000 1,038 1,356 12,294 177 18 129 15,012 2021 £’000 755 2,181 8,816 112 18 26 11,908 There is a provision for a credit loss of £14,000 (2021: £13,000). This loss is against a specific project costs. For all suppliers no interest is charged on the trade payables. Group policy is to ensure that payables denominated in US Dollar from which recovery is not presently anticipated. In determining the recoverability are paid within the pre-agreed credit terms and to avoid incurring penalties and/or interest on late of a trade receivable, the Group will also consider any change in the credit quality of the trade receivable payments. The Directors consider that the carrying amount of trade payables approximates their fair value. from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited Deferred income on contracts with customers has increased during the year due to the volume of sales due to the customer base being large and unrelated. Management considers that all the above financial orders received, and the amount of orders for which payments have been received ahead of revenue Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing assets that are not impaired or past due are of good credit quality. Under IFRS 9, we consider the expected recognition. credit losses on our receivables with reference to our past experiences of credit losses and calculate an expected credit loss. The expected credit loss for the Group would be immaterial and has not been booked 22. Share capital this year. Debts of £nil were written off during the year (2021: £10,000). A provision for credit loss of £nil was charged to the income statement (2021: £115). 20. Deferred tax Deferred tax assets comprise of temporary differences attributable to: Deferred tax asset recognised on business combination Total deferred tax assets Deferred tax liability for intangible assets Total deferred tax liabilities Net deferred tax asset/(liability) 2022 £’000 2021 £’000 239 239 239 239 - - - - - - Issued and fully paid 31,170,093 (2021: 31,170,093) Ordinary Shares of £0.01 each 312 312 2022 £’000 2021 £’000 All ordinary shares carry equal voting and distribution rights. There are no other classes of shares. 23. Own shares reserve and other reserve Own shares reserve 2022 £’000 71 2021 £’000 78 6 9 Cambridge Cognition | Annual Report & Accounts 2022 7 0 Cambridge Cognition | Annual Report & Accounts 2022Notes to the Financial Statements 23. Own shares reserve and other reserve continued Reconciliation of liabilities arising from financing activities 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 Net Debt as 1 January UK Employee Benefit Trust at 31 December 2022 was 36,765 (2021: 36,765). The number of shares held by the Debt acquired in business combination Jersey-based Employee Benefit Trust at 31 December 2022 was 38,150 (2021: 45,000). During the year employees exercised 6,850 (2021: 30,950) share options at an exercise price of £0.01 each which were satisfied by the Jersey-based Employee Benefit Trust. Financing cash flows Net Debt as at 31 December Other reserves includes a merger reserve and cumulative translation adjustments: Cash and cash equivalents 2022 £’000 - 133 (133) - 2022 £’000 8,322 2021 £’000 - - - - 2021 £’000 6,810 Cash and bank balances 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. 25. 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 16, being the column ‘Leased Buildings’. The changes in the lease liability are as follows: Liability outstanding at the beginning of the year Renewal lease signed Lease repayments Finance costs Liability outstanding at year end 2022 £’000 18 - - - 18 All remaining lease payments are due within one year. Included within the liability above is an amount of £18,000 for restoration of the property at the end of the lease. Other reserve – merger reserve Other reserve – cumulative translation adjustment Total other reserve 2022 £’000 5,981 (158) 5,823 2021 £’000 5,981 144 6,125 The Other reserve in the consolidated statement of changes in equity includes £5,981,000 which arose when the Company became the new Group holding company in April 2013. 24. Notes to the cash flow statement (Loss) / profit before tax Adjustments for: Depreciation of property, plant and equipment Amortisation of intangible assets Share-based payment expense Finance costs Acquisition related expenses deferred amounts Interest receivable Operating cash flows before movements in working capital Increase in inventories Decrease/(increase) in receivables Increase in payables Cash generated by operations Tax credit received less tax paid Net cash from operating activities 2022 £’000 (624) 57 37 174 - 6 (9) (359) (88) 1,012 912 1,477 191 1,668 2021 £’000 253 142 6 111 11 - - 523 (75) (2,285) 5,782 3,945 - 3,945 7 1 Cambridge Cognition | Annual Report & Accounts 2022 7 2 Cambridge Cognition | Annual Report & Accounts 2022Notes to the Financial Statements 26. 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: 2022 2021 Weighted average Weighted average Number of exercise price Number of exercise price share options (in £) share options (in £) 2,527,090 (6,850) 822,703 (89,917) 3,253,026 977,620 0.35 0.16 0.01 0.61 0.39 0.37 2,287,636 (38,259) 494,000 (216,287) 2,527,090 396,959 0.35 0.01 1.24 0.45 0.52 0.59 Outstanding at beginning of year Exercised during the year Granted during the year Forfeited during the year Outstanding at the end of the year Exercisable at the end of the year The options outstanding at 31 December 2022 had a weighted average remaining contractual life of 4.3 years (2021: 3.6 years). The exercise prices of share options outstanding at the period end was as follows: 2022 2021 Weighted average Weighted average Number of exercise price Number of exercise price share options (in £) share options (in £) Exercise price of one penny Exercise price of 28 pence Exercise price between 53 and 82.5 pence Exercise price between 125 and 272 pence Outstanding at the end of the year 962,279 1,417,857 389,958 482,932 3,253,026 0.01 0.28 0.63 1.29 0.39 160,843 1,427,857 455,458 482,932 2,527,090 0.01 0.28 0.66 1.29 0.52 Options were granted on 25 July 2022. 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 July is £690,000. The inputs into the Monte Carlo stochastic and Black Scholes models 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 2022 £’000 128.5p 1p 74% 3 years 1.76% 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 in the option contracts. The Group recognised a total charge of £174,000 (2021: £111,000) in relation to equity-settled share-based payment transactions. 27. 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 £283,000 (2021: £228,000) represents contributions payable to these schemes by the Group at agreed rates. As at 31 December 2022, contributions of £45,000 (2021: £25,000) due in respect of the current reporting year had not been paid over to the schemes. 28. Financial instruments Capital risk management The Group manages its capital to ensure the Group it 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 2022 (2021: £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 shareholders funds 2022 £’000 8,322 95 2021 £’000 6,810 632 7 3 Cambridge Cognition | Annual Report & Accounts 2022 7 4 Cambridge Cognition | Annual Report & Accounts 2022Notes to the Financial Statements 28. Financial instruments continued 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 fair value Investments Financial assets classified at amortised cost Cash and bank balances Trade and other receivables Accrued income on contracts with customers Financial liabilities at amortised cost Trade and other payables Deferred income on contracts with customers 2022 £’000 49 8,322 2,540 206 2,718 12,294 2022 £’000 49 6,810 2,388 401 3,092 8,816 Financial risk management objectives The Group’s finance function is responsible for all aspects of corporate treasury. It co-ordinates access to financial markets and 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 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 exposure to foreign currency exchange rates, primarily US Dollar, through its operating activities as well as having an investment in a US subsidiary. The Group continues to monitor its exposure to foreign currency risk but did not use any financial derivatives in 2022 or 2021. 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 South African Rand Liabilities Assets 2022 £’000 313 28 - 1 2021 £’000 119 138 - - 2022 £’000 1,876 116 62 - 2021 £’000 2,952 599 45 - A movement in the £/$ exchange rate of +/- 5% from 31 December 2022 to the date of realising the US dollar net asset position would result in a gain/loss of £78,000 (2021: £142,000). Similarly with the Euro, the gain/ loss would be £4,000 (2021: £23,000). With the Qatari Riyal, the gain/loss would be £2,000 (2021: £2,000). There would be no gain/loss on a similar movement in South African Rand. 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 Credit risk management financial projection as well as information regarding cash balances on a monthly basis, which includes Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial projections of at least a further 12 months. At 31 December 2022, the Group’s financial liabilities had contractual maturities which are summarised below: Trade payables Other payables Lease liability 7 5 2022 £’000 Within 1 year 2021 £’000 Within 1 year 1,038 1,662 18 2,718 755 2,319 18 3,092 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 counterparty 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. Cambridge Cognition | Annual Report & Accounts 2022 7 6 Cambridge Cognition | Annual Report & Accounts 2022Parent Company Statement of Financial Position Notes to the Financial Statements 28. Financial instruments continued The carrying amount recorded for financial assets in the Consolidated 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 Consolidated Statement of Financial Position approximate their fair values. 29. 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 £nil (2021: £21,000) 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 (2021: £nil) was owed to the Group by Cognition Kit Limited. 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 Further, the Group was invoiced £144,000 with respect to Cognition Kit Limited in the year (2021: £253,000) – Trade and other payables this has been recognised as cost of sales. The Group has also accrued costs in respect of licence fees and other services payable to Cognition Kit Limited of £nil (2021: £25,000) – 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 2022 consist of the Directors and five additional senior staff (2021: the Directors and five additional senior staff). Total liabilities Equity Share capital Share premium Retained earnings Total equity Total liabilities and equity Short-term employee benefits Post-employment benefits Termination benefits Share-based payments 2022 £’000 1,265 79 - 58 1,402 2021 £’000 1,402 55 30 57 1,544 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. 30. Subsequent events Subsequent to the year end, the Company acquired Winterlight Labs Inc for a total amount payable of £7.0 million (see note 14). 7 7 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 £169,000 (2021: loss £208,000). The financial statements of Cambridge Cognition Holdings plc on pages 78 to 82 were approved and authorised for issue by the Board on 2 May 2023 and were signed on its behalf by: Stephen Symonds Chief Financial Officer Company number: 08211361 Cambridge Cognition | Annual Report & Accounts 2022 7 8 Notes 2 3 4 5 At 31 December At 31 December 2022 £’000 978 978 3,969 4,931 8,900 9,878 461 461 312 11,151 (2,046) 9,417 9,878 2021 £’000 555 555 3,997 5,224 9,221 9,776 443 443 312 11,151 (2,130) 9,333 9,776 Cambridge Cognition | Annual Report & Accounts 2022Parent Company Statement of Changes in Equity Notes to the Parent Company Financial Statements Share capital £’000 Share premium £’000 Retained earnings £’000 Balance at 1 January 2021 312 11,151 Loss for the year Credit to equity of equity-settled share- based payments Transactions with owners Balance at 1 January 2022 Loss for the year Credit to equity of equity-settled share- based payments Transactions with owners - - - - - - 312 11,151 - - - - - - (1,953) (208) 31 31 (2,130) (169) 253 253 Balance at 31 December 2022 312 11,151 (2,046) Total £’000 9,510 (208) 31 31 9,333 (169) 253 253 9,417 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: l Disclosure exemption allowing no cash flow statement or related notes to be presented l Disclosure exemption allowing the Company not to disclose related party transactions when transactions are entered into wholly within the Group l Disclosure exemption around Key Management Personnel compensation (though see note 29 of the Group accounts and the Directors’ Remuneration Report) l Capital management disclosures (though see note 28 of the Group accounts) l Disclosure exemption on the effect of future accounting standards l Disclosure exemption on share-based payment information disclosures (IFRS 2), as this information has been presented for the Group in note 26 of the consolidated financial statements l Disclosure exemption on financial instrument disclosures (IFRS 7) as this information has been presented for the Group in note 28 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. The Company measures other equity investments at fair value, with changes in fair value recognised in other gains/ (losses) in the statement of financial position. 1.3 Financial instruments The Company’s financial instruments accounting policy is as per the Group’s policy (see note 3.14). 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 Group’s ability to continue as a going concern. As noted in the Strategic Review, the business has remained fully operational to date and order intake in 2022 was strong. The Group has a base case forecast for the period at least 12 months from the date of these financial statements with a growth case and downside case also being forecast. The base case is built on the current view of orders to be taken and the recognition of revenue and billing milestones associated with orders already taken. 7 9 Cambridge Cognition | Annual Report & Accounts 2022 8 0 Cambridge Cognition | Annual Report & Accounts 2022Notes to the Parent Company Financial Statements 1. Significant accounting policies continued The base case shows strong performance, driven by existing orders and supports a positive cash balance right through the going concern review period, with a positive outlook thereafter. The downside case also shows positive cash through the going concern review period and would allow for further expenditure modifications not yet budgeted. Other Group subsidiaries, all of which are owned indirectly through Cambridge Cognition Limited, are detailed in note 17 of the Group accounts. All subsidiaries have been included in the consolidated accounts. 3. Trade and other receivables 2022 £’000 3,670 299 3,969 2021 £’000 3,990 7 3,997 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. Amounts due from subsidiary undertaking Other receivables 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. 2. Investments Cost and net book value At 1 January 2022 Additions in the year At 31 December 2022 Investment £’000 555 423 978 During the year the company acquired of the entire share capital of eClinicalhealth Limited, a virtual clinical trial solution provider. The cost of investment includes deferred consideration at 31 December 2022 payable based on the achievement of targets and the retention of key personnel in 2023 and acquisition related expenses. Additions in the year also includes share-based payment charges of £186,000 related to employees of subsidiary companies. During the year the company formed a wholly owned subsidiary, Cambridge Cognition South Africa Pty Limited. The nature of the business is software development. The investments at the end of the year were as follows: Name Proportion of Ownership Country of and Voting Operation Power Held Nature of Business Development and Of the amounts due from subsidiary undertakings, £3.7m (2021: £4.0m) 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 2022, it was considered that Cambridge Cognition Limited has the ability to repay the debt if it were called, and as such any impairment would be immaterial. 4. Trade and other payables Trade payables Social security and other taxes Accruals 2022 £’000 5 26 430 461 2021 £’000 83 20 340 443 5. Share capital The details on the share capital of the Company are provided at note 22 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. The total amount of remuneration paid to the Directors, including share-based payments is £891,000 (2021: £609,000). 7. Subsequent events Subsequent to the year end, the Company acquired Winterlight Labs Inc for a total amount payable of £7.0 Cambridge Cognition Limited United Kingdom 100% sale of computerised million, as detailed in note 14 of the Group accounts. Monument Therapeutics Limited United Kingdom 28.88% Digital phenotyping Cambridge Cognition South Africa Pty Limited South Africa 100% Software development eClinicalHealth Limited United Kingdom 100% Virtual clinical trial solution provider neuropsychological tests 8 1 Cambridge Cognition | Annual Report & Accounts 2022 8 2 Cambridge Cognition | Annual Report & Accounts 2022cambridgecognition.com 

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