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Advancing molecular
diagnostics to the
point of care
Annual Report and Accounts 2019
INTRODUCTION
Genedrive® is a low cost,
rapid and reliable solution that
provides molecular diagnostic testing
where speed and timely delivery of
results is vital.
Financial Statements
Independent Auditor’s Report
Consolidated Statement of
Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of
Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Company Balance Sheet
Company Statement of Changes in Equity
Company Statement of Cash Flows
Notes to the Company Financial Statements
Directors, Secretary and Advisers
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Strategic Report
Our Performance
Our Genedrive® Solution
Our HCV Kit
Genedrive® Connect
Chairman’s Statement
Chief Executive’s Statement
Business Review
Financial Review
Key Performance indicators
Principal Risks and Uncertainties
Governance
Introduction to Corporate Governance
Board of Directors
Corporate Governance
Report of the Audit and Risk Committee
Report of the Remuneration Committee
Remuneration Policy
Directors’ Report
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genedrive plc Annual Report and Accounts 2019
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OUR PERFORMANCE
Financial Highlights
➔ Revenue of £2.36m (2018: £1.94m), up 21.6%
➔ Successful fund raise of £6.0m (gross), a combination of £3.5m
equity and £2.5m convertible loan
➔ Cash at 30 June 2019 of £5.2m (2018: £3.5m)
Operational Highlights
➔ Genedrive® Hepatitis C (HCV) assay registered in 12 countries
➔ World Health Organization process under way to Pre-Qualify
the Genedrive® Hepatitis C test
➔ £0.9m of orders fulfilled for the US Department of Defense
(DoD) with further orders on hand for delivery in 2019/20
➔ Antibiotic Induced Hearing Loss (AIHL) test cycle time reduced
to under 30 minutes and hospital training for trials commenced
post year end
Delivering the strategy
Genedrive is now a focused
molecular diagnostics company,
with two assays on-market and
with two more in development;
supporting our strategy to get
material revenues from three
assays by 2021.
Acronyms used throughout this document
Hepatitis C Virus
HCV
Tuberculosis
mTB
US Department of Defense
DoD
Antibiotic Induced Hearing Loss
AIHL
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genedrive plc Annual Report and Accounts 2019
OUR GENEDRIVE® SOLUTION
Genedrive® is an innovative, easy
to use platform that brings
molecular diagnostics to
decentralised laboratories
Overview
Genedrive® is a patented small molecular diagnostic platform which
enables rapid nucleic acid amplification and detection from various
sample types, including plasma, sputum and buccal swabs. With
minimal hands-on time and single button operation, it provides
diagnostic results, without the need for specialist knowledge or data
interpretation. With no manual calibration or maintenance required,
Genedrive® is ideal for lower throughput, decentralised laboratories.
How Genedrive® works
Genedrive® utilises proprietary technology to rapidly amplify and
detect target nucleic acid sequences without the requirement for
nucleic acid isolation.
Following amplification, melt curve analysis is used to establish the
presence of the target sequence in the sample and the results are
automatically interpreted by Genedrive®. Depending on the specific
assay, results can be available in as little as 30 minutes.
LOW COST
VERSATILE
SIMPLE
genedrive plc Annual Report and Accounts 2019
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FAST
HCV assay
®
This Genedrive
may positively impact the
continuum of HCV care from
screening to cure by supporting
real-time treatment decisions.
BMJ GUT Journals
http://gut.bmj.com/content/early/2018/04/03/
gutjnl-2017-315783
PORTABLE
Results
available in
as little as
30 minutes
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genedrive plc Annual Report and Accounts 2019
OUR HCV KIT
Since signing our distribution
agreements with Sysmex,
we have continued to build
momentum in the market and
we are beginning to see initial
commercial sales.
Genedrive® HCV ID Kit is a qualitative molecular
HCV assay, providing results within 90 minutes.
Many clinics and smaller hospital laboratories lack the appropriate
resources to perform confirmatory molecular testing and so are
forced to send patient samples away for testing. Many patients
have to wait weeks for their test results and often have to schedule
a subsequent follow-up appointment at the local clinic.
Indirect patient cost is a significant burden. When samples are sent
away for molecular testing, between 5-50% of patients do not
return for their result and required treatment. The patient drop-out
rate and indirect patient cost can be significantly reduced by
performing the molecular confirmatory HCV test on-site using
the Genedrive® HCV ID Kit.
The Genedrive® HCV ID Kit is a simple and cost-effective molecular
solution for HCV testing. The assay is ideal for use in low
throughput, decentralised laboratories by providing rapid results
direct from plasma without any requirement for viral RNA extraction.
Process
We have commenced commercial sales and shipments of the
Genedrive® HCV ID Kit and Genedrive® platform into the EMEA
region. The products have been shipped from genedrive’s
distributor, Sysmex Corporation ('Sysmex'), a world leader in
clinical laboratory systemisation and solutions, and are now
destined for use in various initial target countries. In addition, the
first commercial sales and shipments of the Genedrive® HCV ID
Kit and Genedrive® platform are expected to commence in the
Asia Pacific region.
GENEDRIVE® CONNECT
By developing a mobile
app that allows added data
management flexibility and
results transmission, we will
help improve the customer
experience and help drive
wider adoption.
Benefits
➔ Enhanced data capture
supplementary patient demographic data
➔ Improve laboratory management
append data to test results
➔ Easily transfer data
to a secondary endpoint location for storage/processing
We have developed our Genedrive® connectivity
solution, allowing for clinical data transmission
from decentralised testing facilities.
The Genedrive® Connect app is designed to enhance usability,
but will also provide functional surveillance-based data to further
promote product adoption in the longer term. Genedrive® Connect
is an android-based mobile app, providing wireless data
management to a single Genedrive® or a larger network
installation. The phase 1 release of Genedrive® Connect allows
Genedrive® users to manage patient demographics and user
data, device and instrument data, and append this supplementary
information to test results. The comprehensive data can then be
transferred if needed to another local or distant location for rapid
patient management or longer-term data storage.
genedrive plc Annual Report and Accounts 2019
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Over the longer term, subsequent phases of Genedrive® Connect
are planned to target collection of market surveillance capabilities
for treatment facilities or funding agencies, to facilitate cost and
performance analysis of their investments in Genedrive®
technology.
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genedrive plc Annual Report and Accounts 2019
CHAIRMAN’S STATEMENT
WE ARE EXECUTING OUR STRATEGY
TO DRIVE MATERIAL REVENUES BY
JUNE 2022.
genedrive plc is on track
with its assay strategy and
well-positioned for growth
Introduction
The Company remains focused and increasingly positioned to
exploit opportunities in low- and middle-income countries with our
Global Health assays (HCV and mTB) and in developed markets
with our military and hearing assays (DoD and AIHL). We remain
committed to the opportunities achievable by a focused molecular
testing company. Core to the execution of our plan was the
fund-raise of £6.0m (gross) in December 2018, which supports
our aims and has strengthened our cash position.
Delivering Our Strategy
I am pleased that we are executing on our strategy to deliver
material revenues from multiple assays by the end of our financial
year 2022. During the year we saw revenue growth from our
on-market assays and good progress with our
new product development programmes.
Despite the positive progress overall, commercialisation of our
HCV assay has lagged behind our previous expectations
principally owing to a slower than anticipated rate of country
registrations and the overall level of funding for HCV drugs and
diagnostics. Funding remains in its infancy in many countries,
requiring increased focus on those countries where we believe
the opportunity looks likely to grow. We now expect the revenue
ramp for the assay to occur in the year to June 2020, behind our
original plans.
Our commercial relationship with the DoD exceeded our
expectations in the year and underpinned much of our financial
performance. We fulfilled large orders for both assays and units
during the year totalling £0.9m. Discussions with the customer
have progressed and we are confident of further orders. Owing
to the nature of the work we still lack clarity on the potential but
the continued engagement and order flow provides us with
confidence on the future business and the performance of
Genedrive® as an effective molecular diagnostic technology.
genedrive plc Annual Report and Accounts 2019
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“During the year we saw growth
from our on-market assays and
excellent progress with our new
product development programmes.”
Dr Ian Gilham
Chairman
Governance and People
The Board recognises that a strong governance framework,
internal controls, values and culture firmly embedded across
the organisation are vitally important and, as such, the Board
remains focused on ensuring its own effectiveness and that of
the governance processes throughout the Group. We believe
we have a Board that reflects our strategy and ambition and
will continue to review its effectiveness.
Outlook
Overall our on-market assays are beginning to build commercial
traction. Multiple orders for DoD products were fulfilled in the year
and we already have new orders for 2019/20. HCV
commercialisation has been slower than anticipated, but we hope to
overcome delays encountered in the next 12 months and remain
optimistic of WHO pre-qualification by the end of the calendar year.
Looking further ahead, we have exciting opportunities with AIHL
and mTB. The AIHL assay could be transformative to the lives of
many children as well as placing genedrive at the front line of NHS
urgent care for neonates. In addition to the UK market, the test has
applicability across Europe and North America and represents
significant potential for the Company should we be able to access
these markets. The mTB assay would also give the Company
access to the large and well-funded tuberculosis testing market.
I remain confident of genedrive’s ability to deliver growth from its
on-market assays and genuinely excited by the potential of our
in-development assays.
Finally I would like to take this opportunity to thank our staff,
customers and shareholders for their valuable support during
the year.
Dr Ian Gilham
Chairman
3 October 2019
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genedrive plc Annual Report and Accounts 2019
CHIEF EXECUTIVE’S STATEMENT
We are entering exciting phases
with both our on-market and
in-development assays
Overview
The opportunities for genedrive plc are significant. We are
working and developing products for important global healthcare
and environmental pathogen concerns, based in the dynamic and
scientifically rich city of Manchester. Over the past few years we
have recruited and cultivated a talented team of experienced,
clever, and knowledgeable IVD professionals that share my vision
of building a business that contributes to global efforts in the
eradication of disease and providing more immediate patient care.
Each week we make strides forward in our development,
positioning in .the market, and commercial capability of the
Company and its products.
During the year we continued to execute on our strategy to bring
material assay revenues to genedrive by the financial year ending
June 2022. The fund raising in December 2018 (£6.0m gross)
improved our cash position and strengthened our balance sheet. We
now have two products on market: HCV and our military portfolio for
the US DoD; and two exciting products in development: AIHL and
mTB. Continued successful execution of this strategy will leave the
Company well placed to generate returns for our shareholders.
Our Performance with On Market Assays
HCV
The Genedrive® HCV ID Kit is the first low cost, qualitative HCV
molecular decentralised testing product on the market. Molecular
testing for HCV represents a potentially large market for Genedrive®
that should be efficiently serviced via our partnerships, which include
Sysmex for EMEA and Asia, Arkray for India and others for rest of
world regions.
The process to Pre-qualify (PQ) the HCV product with WHO is
currently on-going. The process of registrations and approvals is often
not in our direct control, and we use our experience and judgement to
predict timelines. The WHO PQ site Quality Audit was completed in
January with no significant findings. However, the clinical study is
taking much longer than expected, originally owing to a shortage of
certain low viral level samples for analysis, and then subsequently the
need to repeat some small sets of data collection. So while the
process continues past our originally expected timelines, we remain
optimistic that we can achieve WHO pre-qualification by the end of the
calendar year.
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genedrive plc Annual Report and Accounts 2019
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Similarly, in country registrations are taking longer than anticipated.
As it is the first entry of Genedrive® into these markets most countries
require a performance study after the registration process, the
duration of which can be unpredictable. At June 2019 Genedrive® was
registered in 12 countries, below our initial target. We are targeting
additional registrations during 2019/20 and significantly we expect
the product will be approved for distribution in India by January. India
is the largest single market for our product and we are confident of
attracting demand during 2019/20.
Pathogen detection tests for US DoD
The initial development phase of the DoD agreement ended in the
prior year and transitioned into a standard commercial arrangement.
We were very pleased to see the strong uptick in the commercial
orders received during 2019. We fulfilled multiple large orders and
booked £0.9m of revenue.
Quality issues with a component supplier meant another large DoD
order was delayed into the 2019/20 fiscal year. The supply issue was
ultimately resolved and we will soon complete establishment of dual
sourcing for this key component. The DoD have placed orders for
2019/20, remained positive during this supply issue and supported
the move to a second supplier.
The DoD work has been a real success for genedrive, supporting the
development of Genedrive® capabilities, providing funding to the
Group, delivering a complex product to the customer specification,
and providing ongoing revenue. Their continued engagement and
support makes us very optimistic about the future potential of the
business and we remain confident it will be a recurring part of our
future revenues.
implications of testing neonates in a variety of intensive care
environments. Product launch is planned for Autumn 2020 and it is
expected that commercial traction from early adopters will follow
swiftly on from clinical approvals, with further demand anticipated
following write-up and inclusion in pediatric care guidelines; if
successful there is every reason to be positive for widespread
adoption across the NHS.
The market is attractive as being both large and at a higher margin
compared to Global Health related tests. Outside of the UK the test
will be equally applicable in Europe and North America, although we
would likely need to partner for entrance into North America owing
to the costs of regulatory hurdles.
mTB (Tuberculosis)
The market for mTB testing is one of the largest molecular testing
market in the world and in terms of market dynamics it is well defined.
It is an important market for the Group and a vital component of our
strategy.
We were awarded a £1.1m development grant from Innovate UK in
January 2018 to develop an automated sample module for the
Genedrive® system. The project commenced at the start of the
financial year and much of the product development performed to
date has been covered under the grant. During the year we have also
reformulated the test and designed the Innovate funded companion
product to the Genedrive® that automates the extraction and
concentration of mTB from a patient sample. As price is a significant
driver in the developing world, we positioned costings at the core
of design and have the potential to deliver at a market leading cost
point at volume.
In-Development Assays
AIHL
The Group was part of an award from UK NHS National Health
Research in June 2018 for the development and implementation
of a point of care test for the prevention of hearing loss in newborn
children. This opportunity is well suited to genedrive's design, needing
multiple, low cost units to deliver fast testing at a point of need.
The full value ofthe award was just over £1m with £0.6m allocated to
genedrive. The programme is approximately halfway through, now
entering clinical validation. Since commencing the grant work we have
reduced the test time to under 30 minutes, which easily exceeds the
clinical turn-around time requirement. Hospital trials for the clinical
validation are scheduled to commence in November, and should take
circa six months. These trials will assess the application of the assay in
an urgent care setting, and are focused around the practical
We remain on track to bring a product to market during the financial
year ending June 2021, further supporting our assay strategy
by 2022.
Outlook
We have two assays on market and two assays in development.
While the year has seen slower commercial traction on HCV than we
hoped, growth in DoD and the prospects for 2019/20 are positive
and the Group is focused on generating material revenues across
multiple assays during the financial year ending June 2022. Our
pipeline provides us with confidence that we will continue to make
good progress.
David Budd
Chief Executive Officer
3 October 2019
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genedrive plc Annual Report and Accounts 2019
BUSINESS REVIEW
ON MARKET ASSAYS
HEPATITIS C
A First to Market Opportunity to support the
WHO’s goal of eliminating HCV by 2030
Progress
➔ Product launched in March 2018.
➔ Distribution partner network
secured for main markets, and
includes Sysmex for EMEA and
Asia Pacific, and Arkray in India.
➔ WHO site audit fundings completed
in May 2019. WHO clinical trials
taking longer than expected owing
to lack of availability of low viral
load samples – but expected to
complete before the calendar
year end.
➔ Product registered in 12 countries
at June 2019.
➔ Completion of various independent
studies in the year confirming the
performance of the product in
real-world settings.
Outlook
➔ The largest single market, India,
should be registered by January
2020 – we now expect sales to
India during financial year 2019/20.
➔ The WHO pre-qualification steps
are virtually complete (site audit
and clinical study) and we are
awaiting the final reports. We are
confident of qualified status in the
forthcoming months.
➔ The market dynamics for HCV
remain largely unchanged since
our product was launched and the
potential for point-of-need testing
still represents huge potential for
the Group as funding becomes
available.
➔ Although disappointed with the
rate of commercial progress to
date, we are confident with the
Genedrive® HCV ID kit performance
and expect traction to June 2020
should the funding of the market
continue to grow.
Market Overview
➔ It is estimated that 70 million
people are living with chronic HCV
infection with 1.7 million new cases
annually.
➔ In 2015, only 7.4% of those
diagnosed with HCV infection (or
1.1 million people) had started
treatment.
➔ Low- and middle-income countries
account for the largest proportion
of people living with HCV (72%),
yet access to testing and treatment
is limited in these geographies.
➔ 15-45% of patients spontaneously
clear the virus after infection. With
antibodies still present in the
immune system, a molecular test is
needed to assess the presence of
active viral infection in their blood
prior to treatment.
The increased availability of Direct
Acting Antivirals (DAAs) for HCV offer
the promise of cost-effective
eradication for the developing world.
As the availability of cheaper generic
HCV DAAs increases, genedrive’s
CE-marked HCV test is the first
decentralised qualitative molecular
test in the market that can be used to
identify patients eligible for therapy.
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“With a strong commercial
partner now in place for
HCV in EMEA, ASIA and
India, we look forward to
gaining commercial
traction.”
David Budd
Chief Executive Officer
HCV Launch
➔ Prioritised list of countries based on
HCV dynamics.
➔ Positive engagement with global and
regionals NGOs to support roll-out.
Launch locations
Excellent Product Performance
Six Independent studies and in-country evaluations
are now complete.
In almost 2,000 patient tests the sensitivity has ranged
from 96.5% to 100% and the specificity has been 100%
in all studies.
96.5% 100%
SENSITIVITY RATE
Partners
Distribution deals signed with:
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genedrive plc Annual Report and Accounts 2019
BUSINESS REVIEW
ON-MARKET ASSAYS
PATHOGEN DETECTION
Portable, rugged, accurate – ideally suited
to pathogen detection markets
Market Overview
genedrive has been working with the
US Department of Defense since 2013
and the business has contributed close
to $10.0m in revenues.
The programme of work has been
centred on developing a set of
pathogen detection tests appropriate
for military requirements. This work has
been integral to the development of the
Genedrive® unit over the years, as well
as a key source of funding for the
Group. The development programme
concluded in 2018 and we understand
genedrive was the only successful
participant in the programme. Following
deployment we have now moved into
commercial stage with the product
being used and tested by a number
of end users within the DoD.
Progress
➔ During the year, total revenues
from the DoD were £0.9m (2018:
£1.6m), with Genedrive® unit and
assay sales of £0.9m (2018: £0.5m).
➔ We understand the customer base
within the DoD has widened, and
the ‘marketing’ of our molecular
testing solution continues to attract
additional DoD interested parties.
➔ During the second part of the year
we experienced some quality
issues with a component supplier
that delayed shipment of an order.
This issue is now resolved and we
have secured a second source of
supply for the product.
Outlook
➔ Our customer does not provide
forecasts, but remains supportive
and active with both assays and
units.
➔ We have received additional
orders for 2019/20 and continue
to work to build visibility of the
pipeline.
➔ We understand that a wider
portfolio of end users have been
working with final product and
have high expectation of recurring
and growing revenues.
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£0.9m
US Department
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commercial sales
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BUSINESS REVIEW
IN-DEVELOPMENT ASSAYS
ANTIBIOTIC INDUCED HEARING LOSS
Development of a point-of-care test with initial
implementation in the NHS, targeted to avoid
antibiotic-related hearing loss in newborn children.
Market Overview
In the UK, approximately 90,000 babies
are admitted to intensive care settings,
with approximately 80% being treated
with antibiotics on admission. Owing
to an identified genetic predisposition,
when exposed to certain antibiotics,
a fraction of these babies will develop
irreversible hearing loss. Alternative
treatments can be prescribed, but lack
of testing means that unfortunately a
number of infants suffer profound hearing
loss each year, which also creates a
lifetime cost to the NHS. Genedrive® suits
the requirements for a point-of-need
device as it is small, portable and quick
– providing results with the ‘golden hour’
of admittance. The gene defect is not
geographically specific and therefore the
assay addresses a global market – with
European and North American markets
each being around seven times larger
than the size of the UK.
Progress
➔ In June 2018 Genedrive was part of
a grant award for the development
and implementation of a point-of-
care test for the prevention of
hearing loss in newborn children.
➔ During the year, the test has been
developed to satisfy the specificity
and speed requirements – work
under the grant has developed a
test for the mutant gene which will
return results in under 30 minutes.
➔ Proof of principle batches and
initial scale size batches have been
successfully manufactured and
tested, providing excellent initial
specificity and sensitivity.
Outlook
➔ Clinical trials will commence in
November 2019 and are expected
to last circa six months depending
on enrollment.
➔ Product launch is expected in
2020 with some initial uptake from
participant Trusts following swiftly.
➔ Longer term uptake will be by
clinical guidelines and evidence
reviews but likely to see
wholescale uptake across the NHS
if the trials prove successful.
➔ European markets provide similar
potential and entry with CE
marking should not be overly
onerous.
➔ Entry to the large North American
market will be reviewed in light of
its regulatory hurdles and may
result in entry via partners.
genedrive plc Annual Report and Accounts 2019
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£550,000 grant award
to genedrive1
“We look forward to working with genedrive and our
colleagues in Manchester and Liverpool to assess the
impact of rapid genetic testing as a method of avoiding
irreversible hearing loss in babies.”
Professor William Newman
Professor of Translational Genomic Medicine at the University of Manchester
and Consultant at Manchester University NHS Foundation Trust
1. Through the UK National Institute for Health Research’s Innovation programme and in
Partnership with Manchester University NHS Foundation Trust and other partners
“This is a very exciting
opportunity that has the
®
potential for the Genedrive
unit to be distributed across
all NHS emergency settings
as well as Europe and the
rest of the world.”
David Budd
Chief Executive Officer
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genedrive plc Annual Report and Accounts 2019
BUSINESS REVIEW
IN-DEVELOPMENT ASSAYS
TUBERCULOSIS (mTB/RIF)
Genedrive tuberculosis test designed as an
affordable, rapid PCR-based test for the
detection of mTB and rifampicin (RIF) resistance
Market Overview
The TB market is large and well-
defined. The Genedrive® mTB/RIF assay
aims to increase the adoption and
availability of sophisticated molecular
diagnostic analysis.
➔ TB is the largest single infectious
disease causing death among
young people and adults globally.
➔ TB diagnosis in many countries is
still reliant on microscopy, which is
manual, prone to human error and
provides no information for
proposed treatment options.
➔ Molecular testing is the fastest
growing TB test segment and
provides quicker diagnosis and
therefore faster TB treatment.
Progress
➔ The Group was awarded grant
funding of £1.1m in February 2018
to design and develop a sample
preparation process for the
Genedrive® mTB assay.
➔ A new companion device and
associated processing cartridge is
being developed, which will deliver
full automation, simplicity of design
and ultimately a low cost of goods
for the user. The system is based
on a pathogen enrichment
technology that has the potential to
be applied to targets other than
mTB.
Outlook
➔ Design and development to be
locked and completed during
2020.
➔ CE certification to follow design
completion with country specific
registrations via Sysmex and
Arkray to follow.
➔ Product launch is targeted for the
year ending June 2021 with first
commercial revenues following
thereafter.
genedrive plc Annual Report and Accounts 2019
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£ 1.1m
Innovation UK grant
for our Tuberculosis
System
“The grant-funded projects
have performed well and
we are excited about the
opportunities these provide.”
David Budd
Chief Executive Officer
18
genedrive plc Annual Report and Accounts 2019
FINANCIAL REVIEW
We are committed to
achieving material
revenues by 2022
Overview
Revenue and other income for the year was £2.4m (2018: £1.9m).
Research and development costs were £4.9m (2018: £5.2m) while
administration costs were £1.9m, down slightly from the prior year
(£2.0m). The operating loss for the year was £4.0m (2018: £7.4m)
and is stated after the effects of exceptional items.
Financing costs were £0.5m (2018: £0.4m), broadly in line with the
prior year. The finance cost of the convertible loans was £0.9m (2018:
£0.5m), offsetting this finance cost were £0.6m (2018: £nil) of gains;
which arose on the December 2018 amendment of the convertible
loan and on share price movements in the year. In addition there was
a £0.3m loss (2018: £0.1m gain) on the US dollar denominated
convertible loan owing to the dollar exchange rate.
The tax credit for the year was £0.9m (2018: £0.8m) and the
expected tax receivable on the balance sheet is £1.0m
(2018: £1.0m).
The loss for the financial year after tax was £3.6m (2018: £6.0m).
Exceptional items
Two items have been separated out on the income statement to
give a clear picture of underlying trading for the year.
As part of the fund-raise that closed in December 2018, the terms
of deferred consideration payable to the former owner of Visible
Genomics were amended. The fair value of the amended terms
was £0.6m lower than the pre-amendment figure and this gain has
been treated as exceptional on the face of the income statement.
On 8 June 2018 the Group disposed of the business and assets
of its Services Divisions. The balance sheet at that time included
deferred consideration of £0.5m. During June 2019 the acquirer
made a payment under the terms of the deferred consideration
clauses for its first six months of trading. The payment was under
the forecasted amount and as such the deferred consideration on
the balance sheet has been written down to its expected value.
A charge of £0.2m has been recorded to reflect the lower than
expected first six months payment.
The exceptional income in the period was £0.4m compared to an
exceptional cost of £2.1m in the prior year which was an
impairment to the carrying value of intangible assets.
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genedrive plc Annual Report and Accounts 2019
19
Current liabilities were £1.2m (2018: £2.7m) with the large reduction
related to the amendment to the Visible genomic contingent
consideration agreement that saw elements of the prior year
liability move to equity £0.3m, an element paid £0.3m and the
remainder credited to the income statement as an exceptional
gain £0.6m.
Capital and reserves were bolstered by the December 2018
fund-raise, with a £3.2m equity injection in addition to the £0.3m of
shares to be issued as part of the Visible Genomics amendment.
Matthew Fowler
Chief Financial Officer
3 October 2019
Cash Resources
Net cash outflow from operations was £4.6m (2018: £3.8m).
The Operating losses were £4.4m (2018: £4.3m) with working
capital consuming £0.2m (2018: £0.6m contribution).
The tax credit received was £1.0m (2018: £1.2m) and relates to cash
received under the Corporation Tax Research and Development
tax relief scheme operated in the UK. The current year tax
receivable is £1.0m (2018: £1.0m).
The net proceeds from financing activities were £5.6m (2018: £nil).
The proceeds from equity were £3.2m and £2.4m from the issue
of the new convertible loan note. Cash paid to the former owner
of Visible Genomics of £0.3m has been included in net financing
as the payment was contingent on a successful fund-raise.
The increase in cash was £1.7m (2018: £1.6m decrease) meaning
a closing cash position of £5.2m (2018: £3.5m).
Balance Sheet
Balance sheet net liabilities at 30 June 2019 totaled £2.5m
(30 June 2018: £2.4m). The Company was in a net liability position
throughout the year and so section 656 of the Companies Act
2006 was not a requirement.
Non-current assets closed at £0.3m (2018: £0.5m). The decline
is owing to the write-down in the carrying value of deferred
consideration receivable on the disposal of the Services business.
The portion of consideration for Services that will be received at
least 12 months from the balance sheet date has been fair valued,
discounted and reported as non-current, £0.2m (2018: £0.3m).
Current assets of £6.9m (2018: £5.4m) included cash of £5.2m
(2018: £3.5m) following the successful December 2018 fund-raise
and tax receivable of £1.0m (2018: £1.0m) for the current year
Corporation Tax Research and Development tax claim. The
remaining working capital related items make up £0.8m
(2018: £0.9m).
20
genedrive plc Annual Report and Accounts 2019
KEY PERFORMANCE INDICATORS
Diagnostics (Genedrive®)
Diagnostics revenue up on prior year
owing to sales to DoD.
Trading Result
Loss before tax, interest, finance costs
and exceptionals, down over prior years
owing to lower costs and higher revenues.
Cash Reserves
Cash reserves of £5.2m, boosted by the
£6.5m fund-raise in December 2018.
Research and
Development Costs
Research and Development costs
declined slightly to £4.9m, but we continue
to invest in the Genedrive® offering.
Administration Costs
Administration costs amounted to £1.9m,
down on prior years following tight control
of costs.
2019 £2.4m2019 £4.9m2019 (£4.4m)2019 £1.9m2018 £1.9m2018 £5.2m2018 (£5.3m)2018 £2.0m2017 £2.6m2017 £5.0m2017 (£5.0m)2017 £2.6m2019 £5.2m2018 £3.5m2017 £5.1m S
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genedrive plc Annual Report and Accounts 2019
21
PRINCIPAL RISKS AND UNCERTAINTIES
FOR THE YEAR ENDED 30 JUNE 2019
Risk is an inherent part of our business and it is important for
us to identify and understand the degree to which its impact
and likelihood of occurrence will affect the delivery of our
key objectives.
genedrive records risks using the following risk management
model that is centred around a corporate risk register: The Board
has overall responsibility for ensuring that genedrive has an
effective risk management framework which is aligned to our
objectives. The Executive Team, Audit and Risk Committee and
Board review risks which could affect the Group throughout the
year. Risk and issue tracking systems are reviewed on a regular
basis, to ensure that the framework is in line with good practice in
risk management and that agreed mitigation plans are being
followed. In determining the relative importance of risks in our
business, we use a scoring mechanism to identify the likelihood
of a risk crystallising and the impact this would have on the
achievement of our strategic objectives, assuming that no controls
are in place (inherent risk score).
The table below outlines the principal risks and uncertainties
which the Group faces together with relevant key controls and
mitigating factors. The list does not constitute a list of all risks
faced by the Group and they are not presented in priority order.
Risk
Impact
Mitigation
Risk Movement
Business Strategy
The Board develops the wrong strategy
or fails to implement strategy effectively
Competitor Entry
HCV Efficacy
The Genedrive® HCV ID Kit does not
work as intended in real-world settings
HCV sales slower than expected
Delays in the processes to Register and
commence the sales of the Genedrive®
HCV ID kit in target markets
Regulatory & Reimbursement Risk
The Company strategy relies on the
availability of funds from Government
and other large organisations to fund
drug treatments
Supply Risk
The Company is reliant on certain key
suppliers of raw materials and
components
Financial Position
The Company is loss making and will
continue to be so until it builds a portfolio
of profitable diagnostics assays
Negative impact on
long-term prospects
Clear strategy which is reviewed regularly
Progress of strategy clear in KPIs and reporting
Loss of first to market
advantage and reduction
of potential market share
Product improvement projects to differentiate and
protect Genedrive®
Cost programmes in place to support future
price-down strategies
Constant market monitoring and competitor analysis
Loss of revenue and profit
Loss of brand value and
reputation
Independent clinical studies performed
Ongoing improvement programmes to refine and
update
Close monitoring and review of in-field performance
Loss of revenue and profit
Loss of reputation
Close working relationship with Sysmex and Arkvay
Detailed registration plans per country
Close monitoring and reporting to the Board
Negative impact on
long-term prospects
Company is progressing preferred status
(eg WHO pre-qualification) with key bodies
Registration trackers are reported to the Board
monthly
Inability to fulfil demand
Loss of revenue and profit
Contractual arrangements exist where possible
Secondary suppliers scoped and in progress
Programme of audits for key suppliers
Negative impact on
Company’s prospects
Company continues to seek non-dilutive sources of
funding
Cash consumption a key Board metric
22
genedrive plc Annual Report and Accounts 2019
INTRODUCTION TO CORPORATE
GOVERNANCE
The statement of corporate governance practices set out on
pages 22 to 39, including the reports of Board Committees, and
information incorporated by reference, constitutes the Corporate
Governance Report of genedrive plc.
On behalf of the Board, I am pleased to present genedrive plc’s
Corporate Governance Report for the year ended 30 June 2019.
This report seeks to provide shareholders and stakeholders with
a clear understanding of how we discharge our governance duties.
As a Group we apply the principles of good governance as set
down in the Quoted Companies Alliance Corporate Governance
Code (the QCA Code), which was adopted for the first time in the
prior year. The Board continues to remain fully supportive of the
principles laid down in that Code and keeps under review its
systems, policies and procedures that support the Group’s
sustainability and governance practices.
The Board is responsible for maintaining high standards
of corporate governance which necessitates managing the
business in a transparent and accountable way. Transparency is
fundamental to delivery of the Group’s strategy and to enabling
value creation for shareholders and stakeholders. We continue to
communicate our strategy and progress through clear published
announcements and presentations and feel this is fundamental to
maintaining the support of our shareholders.
genedrive plc Annual Report and Accounts 2019
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The composition of the Board has been reviewed to ensure that
we have the diverse balance of skills, experience and industry
knowledge required to achieve our strategic goals. Board
succession planning is an important element of our corporate
governance regime and procedures are in place to attract, assess
and develop Board and Executive Team talent. All appointments
are made on merit, and the Board will consider suitably qualified
applicants from as diverse a range as possible, with no restrictions
on age, gender, religion, and ethnic background or current
executive employment.
In line with our previous practice all Directors will be proposed for
re-election at the Annual General Meeting of the Company to be
held on 27 November 2019 in Manchester, details of which are
included in this report. Together with my Board colleagues, I look
forward to meeting shareholders at that meeting.
Dr Ian Gilham
Chairman
3 October 2019
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genedrive plc Annual Report and Accounts 2019
BOARD OF DIRECTORS
THE RIGHT MIX OF SKILLS AND EXPERIENCE
Ian Gilham
Ph.D.
Chairman
Ian was appointed a Director
on 24 November 2014 and as
Non-Executive Chairman on
11 May 2015. He is currently
Non-Executive Chairman of
two other life sciences
companies: AIM-quoted
Horizon Discovery Group Plc,
which provides gene-editing
tools to support translational
genomics and the
development of personalised
medicine; and Biosurfit SA,
focused on development and
commercialisation of point-
of-care diagnostic products.
Dr Gilham was formerly
Chief Executive Officer
of Axis-Shield Plc.
David Budd
Matthew Fowler
Chief Executive Officer
Chief Financial Officer
David was appointed a Director
and Chief Executive on 1 March
2016. He has over 20 years of
international commercial and
operational experience in the
diagnostics and medical
devices field. He previously
served as General Manager of
Leica Biosystems Amsterdam
and Commercial Director at
Leica Biosystems Newcastle,
with global responsibility
for marketing, product
development, and commercial
launches for diagnostic tests.
Prior to Leica, David’s roles
included point-of-care,
molecular, and central
laboratory marketing and
commercialisation
responsibilities at Siemens
Healthcare Diagnostics,
Bayer Diagnostics, and
Visible Genetics.
Matthew was appointed
Chief Financial Officer on
13 December 2016. He has
over 15 years of experience
in senior positions in the
manufacturing, power and
support services industries.
Prior to joining genedrive,
Matthew spent eight years
as Group Financial Controller
of Scapa Group plc, a
multinational manufacturing
AIM-quoted business. At Scapa
Group plc, Matthew was
responsible for shaping and
managing finance within the
Group as well as strategy
development and other core
processes. Prior to that,
Matthew spent three years
at British Nuclear Group
as Finance Manager where
he managed the corporate
centre’s finance team and
was responsible for planning,
reporting and accounting.
Matthew trained and qualified
in the audit department of
Deloitte & Touche.
Committee Membership
Audit and Risk Committee
Remuneration Committee
Nominations Committee
Chairman
genedrive plc Annual Report and Accounts 2019
25
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Tom Lindsay
Chris Yates
Non-Executive Director
Non-Executive Director
Chris was appointed to Board
on 22 August 2018. He is CEO
of Abingdon Health, a position
he has held since July 2015.
Chris co-founded Abingdon in
2008 and was a non-executive
of the Company prior to his
appointment as CEO. Chris has
over 20 years’ experience of
working in listed environments
and prior to working at
Abingdon, was CFO at
Immunodiagnostic Systems
Holdings PLC and Cozart plc.
Chris is a Chartered Accountant
and has a degree in economics
from Cambridge University.
Tom was appointed to the
Board on 9 April 2018. He has
35 years of global sales and
marketing experience in the
diagnostics sector. He most
recently worked for Alere Inc in
Africa, where he held a range
of executive posts including
President of Africa, President
Commercial Operations Africa
and Business Development
Director for Africa. Prior to
Alere Tom held senior
commercial roles at Trinity
Biotech (Ireland) including
Marketing and Sales Director
(Global) and Business
Development Director for
Africa, Middle East and India.
Tom studied Microbiology at
Glasgow Caledonian University
and completed a national
Diploma in Microbiology at
the Sought African Institute
of Medical Research in
Johannesburg South Africa.
26
genedrive plc Annual Report and Accounts 2019
CORPORATE GOVERNANCE
The Board has delegated certain responsibilities to the following Board Committees:
• The Audit and Risk Committee.
• The Nominations Committee.
• The Remuneration Committee.
The reports of the Audit and Risk Committee and Remuneration Committee are set out on pages 28 to 31. There is no separate report
provided for the Nominations Committee.
Each Committee operates under clearly defined Terms of Reference. Each Committee provides update reports to the Board via the
Chairman of the Committee. Each Committee has sufficient resources to undertake their duties, including access to the Company
Secretary and external advisers, where appropriate.
Audit and Risk Committee
The Audit and Risk Committee’s main responsibilities are to monitor the integrity of the Group’s financial statements, to review internal
and external audit activity and to monitor the effectiveness of risk management and internal controls.
Nominations Committee
The Nomination Committee is responsible for Board recruitment and succession planning, to ensure that the Board is balanced and
comprises the correct skill sets.
Remuneration Committee
The Remuneration Committee is responsible for determining all elements of remuneration for the Executive Directors and Executive
Team and for reviewing the appropriateness and relevance of the Group’s remuneration policy.
Leadership
The Role of the Board
The Board is responsible for the long-term success of the Group and is ultimately accountable for the Group’s strategy, risk management
and performance. The Board’s primary roles are: to provide leadership to the Group within a framework of prudent and effective control
which enables risk to be assessed and managed; to set the Group’s strategic objectives; and to ensure that the necessary resources are
made available so that those objectives can be met. The Board also sets the Group’s values and standards and is responsible for
ensuring that its obligations to shareholders and other stakeholders, including employees, suppliers, customers and the community,
are understood and met.
The Board has adopted an annual programme ensuring that key matters are routinely considered in addition to non-standard items.
The annual programme includes:
• approval of the annual budget;
• review of performance the Company against the approved budget;
• review of governance issues affecting the Company; and
• assessment of the corporate risk register.
The Board currently comprises two Executive Directors, a Non-Executive Chairman and two Non-Executive Directors. The names,
biographical details and Committee memberships of the current Board members are set out on pages 24 and 25 of this report. Given the
size and strategy of the Company, the Board believes that two Non-Executive directors as well as a Non-Executive Chairman is an
appropriate structure going forwards.
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Division of Responsibilities of the Chairman and Chief Executive
There is a clear division of responsibilities between the Chairman and the Chief Executive. Each role has its own formal written
description of specific responsibilities.
The Chairman’s principal responsibility is to lead the Board in the determination of its strategy and the achievement of its objectives. The
Chairman is responsible for organising the business of the Board, ensuring its effectiveness by facilitating full and constructive contributions
to the development and determination of the Group’s strategy and its overall commercial objectives from each member of the Board.
The Chief Executive is directly responsible for all executive management matters affecting the Group. His principal responsibility is
ensuring achievement of the agreed strategic objectives and leadership of the business on a day-to-day basis. The Chief Executive
is accountable to the Board for the financial and operational performance of the Group.
The Role of the Non-Executive Directors
The Non-Executive Directors bring independence and a wide range of experience to the Board. Their role is to help develop strategy
and to promote constructive debate and challenge in Board discussions. The Non-Executive Directors ensure that the financial controls
and systems of risk management are robust and defensible.
The Role of the Company Secretary
The Company Secretary advises the Board through the Chairman on all governance matters. All Directors have access to the services
of the Company Secretary and may take independent professional advice at the Company’s expense in conducting their duties.
Operation of the Board
The Board held 12 Board meeting during the year to 30 June 2019, seven in-person Board meetings and five by telephone. The Board
met more regularly than in previous years to deal with matters associated with the December 2018 fund-raising. The provision of
relevant, up-to-date information is fundamental to the effective leadership delivered by the Board. Reports from the Executive Directors,
which focus on major operational matters, are circulated in advance of every Board meeting. To ensure that the Board are kept fully
informed on the status of the business, reports and presentations are also produced by key Executive management. Attendance at each
meeting is set out in the table below.
Attendance at Meetings
Ian Gilham
Tom Lindsay
Chris Yates
David Budda
Matthew Fowlera
a Attendance via invitation.
Board
Audit and Risk
Committee
Remuneration
Committeea
Nominations
Committee
11
12
12
12
12
3
3
3
3
3
2
2
2
2
2
–
–
–
–
–
Although not members of the Committees, the Executive Directors attend meetings of the Audit and Risk Committee, Remuneration
Committee and Nominations Committee as invited attendees when appropriate.
28
genedrive plc Annual Report and Accounts 2019
REPORT OF THE AUDIT AND
RISK COMMITTEE
Composition
The Audit and Risk Committee is comprised of Ian Gilham,
Tom Lindsay and myself. In addition David Budd and Matthew
Fowler were invited and attended meetings during the year.
The two members of the Committee are independent Non-
Executive Directors and the Committee as a whole has
competence relevant to our sector. Since July 2015 I have been
the CEO of Abingdon Health Limited. Prior to this I served as
CFO at two AIM-listed medical diagnostic companies:
Immunodiagnostic Systems Holdings PLC and Cozart plc. I am
a Fellow of the Institute of Charted Accountants of England and
Wales. Ian Gilham is Chairman of both Horizon Discovery Group
plc and Biosurfit SA and previously was CEO at Axis Shield Plc as
well as having held a number of independent director roles at
various life sciences and healthcare businesses. Tom Lindsay has
held a number of senior roles within major diagnostics businesses,
with specific focus and knowledge of the Africa region. This
relevant experience allows the members to:
• understand the risks facing a pre-profit diagnostics business
and approaches to managing its risks;
• maintain an oversight of the Group’s internal control
environment through the internal audit plan and risk
management framework;
• review strategic financial management in a diagnostics
company and provide constructive challenge to the reports
and assurances given by management, and guide the design
and implementation of a suitable assurance framework; and
• provide practical insights on the Group’s approach to
corporate governance.
Audit and Risk Committee Activities
During the year the Committee met three times in 2018/19 and
undertook the following activities:
Audit Committee Terms of Reference
The Committee formally reviewed and revised the Audit
Committee’s Terms of Reference in November 2018.
Financial Statements and Reports
• Reviewed the interim financial statements and related
statements and discussed key accounting judgements,
Income Statement for the half year, specifically convertible
loans, share issue, revenue and cash projections.
Chris Yates
Non-Executive Director
The Audit and Risk Committee (‘the Committee’) report for the year
ended 30 June 2019 is set out on the following pages 28 and 29.
The Committee completed its work for the year and continuously
reviewed internal control, risk, accounting policies and regulatory
guidance. There is nothing to bring to your attention as a result
of the work. In summary, the Committee considers that it has
delivered what it set out to do and has a clear plan for 2019/20.
Together with members of the Committee, I will be available at the
Annual General Meeting to respond to any questions on any of the
Committee’s activities.
Aims and Objectives
The overall aim of the Committee is to monitor the integrity of the
Group’s financial statements and announcements, its accounting
processes, and the effectiveness of internal controls and risk
management. At this stage of the Group’s size and development
the Committee has decided that an internal audit function is not
required as the Group’s internal controls system in place is
appropriate for its size. The Audit and Risk Committee has met
twice during the year as well as the Board meeting to review
and approve the register of significant risks in the Group.
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29
• Advised the Board that, taken as a whole, the Annual Report
and accounts are fair, balanced and understandable.
• Reviewed and considered the significant issues in relation to
the financial statements and how these have been addressed,
including:
– Requirements around going concern.
– Adjustment and treatment of Convertible Loans on the
Balance Sheet.
– Fund-raising and the renegotiation of historic earn-out
arrangements.
Going Concern
The Committee reviewed whether it was appropriate to adopt the
going concern basis for the preparation of the Annual Report.
Consideration was given to the Group’s forecasts and the current
cash resources. The forecasts were stress-tested and factors
which impact on risks and uncertainties were properly considered.
Following the Committee’s review, it recommended to the Board
that it was appropriate to adopt the going concern basis. However,
given the business is in the early-stages of commercialising its
products, and the level of uncertainty as to the timing and quantum
of these revenues, the stress-testing of the Group’s revenues
forecasts led the Director’s to conclude that a material uncertainty
exists regarding the Group’s ability to continue as a going concern
and therefore the financial statements include disclosure of this
matter on page 49.
Risk Management
• Reviewed and approved the key risks (financial and
operational) facing the Group and the ongoing development
and implementation of action plans to mitigate these risks.
• Reported to the Board on how it has discharged its
responsibilities.
• Reviewed and approved the Group’s insurance coverage and
extended cover in certain areas.
• Reviewed and considered the Group’s Whistleblowing
Arrangements and Anti-Bribery Policy.
• Received a presentation, along with the wider Board, on the
current AIM Rules and related legislation from the Company’s
Nominated Adviser, Peel Hunt.
External Audit
• Monitored and ensured the independence and objectivity of
the external auditor.
• Reviewed and approved the external audit fees for 2018/19.
• Reviewed and approved the scope and methodology of the
external audit strategy for 2018/19.
The Committee continues to monitor the external auditor’s
compliance with applicable guidance and guidelines and
considers the independence and objectivity of the external auditor
as part of the Committee’s duties. The Committee received and
reviewed written confirmation from the external auditor on all
relationships that, in their judgement, may bear on their
independence. The external auditor has also confirmed that they
consider themselves independent within the meaning of UK
regulatory and professional requirements.
In all services purchased, the Group selects the provider best
placed to deliver the work in terms of quality and cost. As a
general principle the external auditor is excluded from consultancy
work and other non-audit work. However, there may be occasions
when it is appropriate to use our external auditor for non-audit
services and this will be reviewed on an individual basis and
allocated according to merit. The external auditor did not
undertake any non-audit services during the year.
Tendering Policy and Review of
Auditor Effectiveness
Since the year end the Group’s Board, advised by the Audit
Committee, has carried out a review of Group audit arrangements
and invited a number of firms to tender for the audit of the Group
and the Company. As a result of this review the Board intends to
propose a resolution to appoint a new auditor to the Group and
the Company with effect from the close of the forthcoming Annual
General Meeting and to authorise the Directors to determine
their remuneration.
Chris Yates
Chairman of the Audit and Risk Committee
3 October 2019
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genedrive plc Annual Report and Accounts 2019
REPORT OF THE
REMUNERATION COMMITTEE
Executive Remuneration and Link to Strategy
Our Remuneration Policy focuses on rewarding sustained
performance. It is our belief that Executives should be rewarded
on the basis of their individual performance and the value created
for shareholders. Variable elements of pay are therefore focused
on simple and transparent measures of key strategic objectives,
sales, cash and building shareholder value. Bonus and long-term
incentive scheme targets are purposely designed to be
challenging and drive the long-term success of the Group.
Remuneration Outcomes of 2019
Full details of the decisions of the Committee made in 2019 are
set out in the Directors’ Annual Remuneration Report on pages
32 to 35.
The Committee agreed to increase the salary of the Chief
Executive to £230,049 per annum and the Chief Financial Officer
to £146,395 (both representing an increase of 1.5%) with effect from
1 September 2019. This increase is in line with the projected
general workforce increase for 2019.
The annual bonus targets for the Executive Directors and
Executive Team were set by the Committee at the beginning of
the financial year. The Chief Executive Officer and Chief Financial
Officer could receive an annual bonus equivalent to 100% and
60% of salary for 2019. Having reviewed the targets, the bonus
achieved was 40% of entitlement for both the Chief Executive
Officer and the Chief Financial Officer.
Remuneration Committee
The Remuneration Committee is responsible for determining
the scale and structure of the Executive Directors’ and senior
management’s remuneration and the terms of their service
contracts. The remuneration and terms of appointment of the
Non-Executive Directors are set by the Board. The Remuneration
Committee also approves the issue of share options under
schemes approved by the Board. None of the Committee
members have any personal financial interest (other than as
shareholders), conflicts of interest arising from cross-directorships
or day-to-day involvement in the running of the business.
No Director plays a part in any final decision about his or her
own remuneration.
Dr Ian Gilham
Chairman
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ended 30 June 2019.
This report sets out the activities of the Remuneration Committee
for the year ended 30 June 2019. The report has been prepared
in accordance with the requirements of Schedule 2 Pt1 to the
Companies Act 2006 (‘the Schedule’) and describes how the
Board has applied the Principles of Good Governance relating
to Directors’ Remuneration. Section 497 of the Act requires the
auditors to report to the Company’s members on the ‘auditable
part’ of the Directors’ Remuneration Report and to state whether,
in their opinion, that part of the report has been properly prepared
in accordance with Part 3 of the Schedule. This report has
therefore been divided into separate sections for audited and
unaudited information. The information provided in this part of
the Directors’ Remuneration Report is not subject to audit.
Our Strategy
We aim to shape the success of genedrive by maintaining a
disciplined approach in executing our strategy to create a focused
molecular diagnostics business. We are focused on bringing at
least three revenue generating assays to market in the near term.
genedrive plc Annual Report and Accounts 2019
31
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Meeting Frequency and Attendance
The Committee is scheduled to meet at least twice a year,
with other meetings taking place as required. Only members of the
Committee have the right to attend Committee meetings. However,
other individuals including the Group Chief Executive and external
advisers may be invited to attend for all or part of any meetings,
as and when appropriate and necessary.
Transparency
The Committee seeks to operate in a clear and transparent
manner and to demonstrate good practice in Executive
remuneration. The Committee’s report comprises two sections,
namely:
• this statement, which sets out a summary of and explains
the major decisions on Directors’ remuneration; and
• the Directors’ Annual Remuneration Report, which provides
details on how the proposed amended Remuneration Policy
will operate in the forthcoming year and states the
remuneration earned by the Directors in the year to
30 June 2019.
The Directors’ Annual Remuneration Report will be subject to
an advisory vote by shareholders at the 2019 Annual General
Meeting. As Chairman of the Committee, I will be available to
respond to any questions you may wish to raise on any of the
Committee’s activities.
Dr Ian Gilham
Chairman of the Remuneration Committee
3 October 2019
32
genedrive plc Annual Report and Accounts 2019
REMUNERATION POLICY
Remuneration Policy
This report sets out the Company’s policy on the remuneration of its Executive Directors and Non-Executive Directors (‘the policy’).
The Executive Directors have written terms of engagement with no fixed expiry date. Executive remuneration packages are prudently
designed to attract, motivate and retain Directors of the necessary calibre and to reward them for enhancing value to shareholders.
The performance measurement of the Executive Directors and key members of senior management and the determination of their
annual remuneration package is undertaken by the Remuneration Committee.
Salary: Salaries are set to attract and retain the right calibre of executive. Salaries are usually determined by reference to market data.
All increases and changes are at the discretion of the Committee.
Pension: Both the Chief Executive and the Chief Finance Officer received a contribution to pension equivalent to 2% of salary up to
August 2018 and then 3% for the remainder of the year. The executives may elect for contributions to be paid via a salary sacrifice
scheme.
Annual bonus: Schemes are designed to link an individual’s performance to rewards and encourage the achievement of results aligned
to the strategy and objectives of the Company. Bonus decisions are based on Executive Directors performance during the year
measured against Group and personal objectives. The value of bonus is limited to a percentage of salary. The current maximum
percentages are 100% for the Chief Executive and 60% for the Chief Finance Officer.
Long-Term Incentive Plan (LTIP): The LTIP schemes are designed to discourage excessive risk-taking and inappropriate short-term
behaviors as well as aligning interests with shareholders. Awards vest after three years subject to the achievement of vesting criteria.
Awards are made annually up to a maximum percentage of 100% of salary.
Service contracts: Executive Directors’ service contracts are subject to six months’ notice of termination.
External appointments: Executive Directors are entitled to accept appointments outside the Company provided the Board’s permission
is sought. Neither Executive Director currently holds an external appointment.
Non-Executive Directors’ Terms of Engagement
The remuneration of the Non-Executive Directors is determined by the Board within limits set out in the Articles of Association. Each
Non-Executive Director has specific terms of engagement. Their remuneration is determined by the Board. In the event that a Non-
Executive undertakes additional assignments for the Company, the Non-Executive’s fee will be agreed by the Company in respect
of each assignment.
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genedrive plc Annual Report and Accounts 2019
33
Audited information
Single Figure for Total Remuneration
The following table sets out the single figure for total remuneration for Directors for the financial years ended 30 June 2019 and 2018.
Executive
David Budd
Matthew Fowler
Non-Executive
Ian Gilham
Tom Lindsay
Chris Yates1
Robert Nolan2
Roger Lloyd2
Salary & fees
£
Bonus
£
Benefits in kind
£
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
226,650
223,300
144,230
142,100
90,660
103,332
34,615
70,000
65,000
65,000
24,000
6,000
10,000
—
12,000
24,000
12,000
24,000
—
—
—
—
—
—
—
—
—
1,100
1,100
—
—
—
—
—
—
—
—
—
—
—
Pension
£
6,422
4,466
4,087
2,842
—
—
—
—
—
—
—
—
—
Total
£
324,832
332,198
182,932
214,942
65,000
65,000
24,000
6,000
10,000
—
12,000
24,000
12,000
24,000
1 Appointed 22 August 2018.
2 Resigned from the Board on 31 December 2018.
Additional Disclosures for Single Figure Total Remuneration to 30 June 2018
Salary
The Chief Executive’s salary at 30 June 2018 was £226,650 and was increased by 1.5% from 1 July 2019 to £230,049. The CFO's salary
at 30 June 2018 was £144,230 and was increased by 1.5% from 1 July 2019 to £146,395. The Committee believes that the increase of 1.5%
awarded was in line with the performance of the Group and the individuals, as well as being entirely consistent with the pay increases
awarded to other members of staff.
34
genedrive plc Annual Report and Accounts 2019
REMUNERATION POLICY
CONTINUED
Annual Performance Bonus
The 2019 bonus for the Executive Directors and Senior Management was based on:
• Revenue targets on sales of Genedrive® units and assays.
• The cash position of the Group at 30 June 2019.
• Progress on attaining WHO pre-qualification.
• Milestone achievement on projects.
The specific targets have not been disclosed. The overall achievement was 40%.
Long-Term Incentive Plans
Details of the options for Directors who served during the year are as follows:
Executive
David Budd
Matthew Fowler
Non-Executive
Ian Gilham
Roger Lloyd
Outstanding 30
June 2019
Date granted
Exercised
Lapsed
Exercise price
Earliest
exercise date
Expiry date
540,000
222,260
397,590
244,444
340,000
264,046
141,666
04/04/2019
19/07/2018
04/04/2017
070/4/2016
04/04/2019
19/07/2018
22/12/2016
100,000
50,000
17/12/2014
07/04/2016
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
30,000
£0.235 05/04/2022 04/04/2029
£0.305
19/07/2028
£0.430 05/04/2020 04/04/2027
07/04/2019 06/04/2026
£0.900
20/07/2021
£0.235 05/04/2022 04/04/2029
19/07/2028
£0.305
13/12/2026
£0.600
20/07/2021
14/12/2019
£2.78
£2.78
£2.78
17/12/2018
16/12/2025
07/04/2019 06/04/2026
17/12/2018
16/12/2025
The Company issues long-term incentives under the management incentive plan dated July 2017. The incentive plan has the following
key features:
• Executives may be awarded up to 100% of salary per annum in the form of options, with allowance for up to 200% in exceptional
circumstances.
• The exercise price of options will not be below market price.
• Awards vest over three years subject to performance criteria being met.
• The Board retains the right to scale back or reduce to zero the size of vesting awards if they are not satisfied that the status and
performance of the business is sufficient or the individual has not met an acceptable level of personal performance.
The Company has a policy to issue awards to the Executive Directors and other senior management annually.
genedrive plc Annual Report and Accounts 2019
35
Directors and their Interests in Shares
The Directors of the Company who held office throughout the year, unless otherwise stated, and their interests in the share capital of
the Company, including family and pension scheme trust interests, were as follows:
Executive
David Budd
Matthew Fowler
Non-Executive
Ian Gilham
Tom Lindsay
Chris Yates
Roger Lloyd
Robert Nolan
30 June 2019
30 June 2018
145,380
86,957
266,424
65,217
16,304
12,500
5,065
31,250
—
114,250
—
—
12,500
5,065
Share Investment Plan
The details of the Epistem Share Investment Plan (SIP) are outlined in note 21 to the financial statements. None of the current Directors
participate in the SIP.
Advice Received by the Committee
The Committee has access to advice when it considers appropriate. In the current year the Committee did not receive any formal
external advice.
This Remuneration Report was approved by a duly authorised Committee of the Board of Directors on 3 October 2019 and signed on its
behalf by:
Dr Ian Gilham
Chairman of the Remuneration Committee
3 October 2019
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genedrive plc Annual Report and Accounts 2019
DIRECTORS’ REPORT
The Directors present their Annual Report for genedrive plc (‘the Company’) and its subsidiaries (together ‘Genedrive’ or ‘the Group’)
for the year ended 30 June 2019. genedrive plc is the holding company for a group of company’s operating in the disease diagnostics
markets. A review of the performance of the Group’s businesses is contained on pages 10 to 17 and forms part of this report.
Statement of Directors’ Responsibilities in Respect of the Financial Statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared
the Group financial statements in accordance with International Financial Reporting Standards (‘IFRSs') as adopted by the European
Union and company financial statements in accordance with IFRSs as adopted by the European Union. Under company law the Directors
must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group
and Company and of the profit or loss of the Group and Company for that period. In preparing the financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable IFRSs as adopted by the European Union have been followed for the Group financial statements and
IFRSs as adopted by the European Union have been followed for the Company financial statements, subject to any material
departures disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will
continue in business.
The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable
them to ensure that the financial statements comply with the Companies Act 2006.
Principal Activities and Business Review
genedrive plc is the holding company for a group operating in the design, development and manufacture of molecular diagnostics
testing equipment for applications in the Healthcare and other markets. A review of the performance and future development of the
Group’s business is contained on pages 10 to 17 and forms part of this report.
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genedrive plc Annual Report and Accounts 2019
37
Results
The trading results for the year and the Group’s financial position at the end of the financial year are shown in the financial statements
on pages 45 to 48 of this report. The Directors do not recommend paying a dividend.
Going Concern
The Directors have concluded that it is necessary to draw attention to the revenue and cost forecasts in the business plans. In order for
the Group and Company to continue as a going concern, there is a requirement to achieve a certain level of sales. Given the Company
is in the early stages of commercialising its products, the forecast level of sales in the next 12 months is subject to uncertainty. If an
adequate sales level cannot be achieved to support the Group and Company, the Directors have the options to reduce on-going spend
or seek additional funding from shareholders. While the Board is confident that it will achieve the required revenue and has a successful
track record in both cutting costs and raising funds, there remains uncertainty as to the level of sales that will be achieved, the amount
of cost reduction that may be required and the amount of funding that could be raised from shareholders. This combination of factors
represents a material uncertainty that may cast significant doubt on the group and company’s ability to continue as a going concern.
However, based on the relative likelihood of achieving versus not achieving, the Board believe it is appropriate to continue to adopt the
going concern basis of accounting in preparing these financial statements. These financial statements do not include the adjustments
that would result if the Group and Company were unable to continue as a going concern.
Annual General Meeting
The Annual General Meeting will be held on 27 November 2019 at 46 Grafton Street, Manchester M13 9XX. Details of the business to be
considered at the Annual General Meeting and the Notice of Meeting are included in a separate document.
Share Capital
Details of the issued share capital, together with details of movements in the Company’s issued share capital during the year are shown
in note 25 to the Company’s financial statements on page 77. The Company has one class of ordinary share which carries the right to
one vote at General Meetings of the Company. The nature of the Director’s Holdings is disclosed on page 35. No person has any special
rights of control over the Company’s share capital and all issued shares are fully paid. Subject to the provisions of the Company’s
Articles of Association and the Companies Act 2006, at a General Meeting of the Company the Directors may request authority to allot
shares and the power to disapply pre-emption rights and the authority for the Company to purchase its own ordinary shares in the
market. The Board requests such authority at each Annual General Meeting. Details of the authorities to be sought are set out in the
Notice of Annual General Meeting.
Share Options
Details of the Company’s share capital and options over the Company’s shares under the Company’s employee share plans are given in
notes 21 and 25.
38
genedrive plc Annual Report and Accounts 2019
DIRECTORS’ REPORT
CONTINUED
Significant Agreements
All of the Company’s share plans contain provisions relating to a change of control. On a change of control, outstanding awards would
normally vest and become exercisable, subject to the satisfaction of any performance criteria. There are no agreements between the
Company and its Directors or employees that provide for compensation for loss of office on a change of control.
The Company issued a convertible bond to the Global Health Investment Fund 1 LLC in July 2014. Under the terms of this arrangement the
bond holder has various options to convert its bond into shares over the term of the bond as detailed in note 20 on pages 69 and 70.
The Company issued a convertible bond to the Business Growth Fund in December 2018. Under the terms of this arrangement the bond
holder has various options to convert its bond into shares over the term of the bond as detailed in note 20 on pages 69 and 70.
On 10 December 2018 the Company amended the terms of the sale and purchase agreement related to the acquisition of Visible
Genomics Limited in July 2010. As part of the amendment 869,565 shares will be issued to the former owner of Visible Genomics on
10 December 2019 followed by a further 500,000 shares on 10 December 2021.
Board of Directors
The names of the present Directors and their biographical details are shown on pages 24 and 25. At the Annual General Meeting, to be
held on 27 November 2019, all the Directors will offer themselves for re-election.
Significant Shareholdings
In addition to the Directors’ holdings, the Company has been advised of the following interests of over 5% of the issued ordinary shares:
Calculus Capital
M&G Investment Mgt
BGF Investment Mgt Ltd
Odey asset Mgt
River & Mercantile asset Mgt
Holding
19.4%
15.2%
12.8%
5.5%
5.4%
Research and Development
During the year ended 30 June 2019 the Group has incurred research and development costs of £4.9m (2018: £5.2m). Expenditure on
intangible assets (relating to research and development activities) was £nil (2018: £nil) as detailed in note 11 to the financial statements.
A review of this expenditure is included within the Strategic Report on pages 1 to 21.
Financial Risk Management
The Company’s approach to managing financial risk is covered in note 22 to the financial statements.
genedrive plc Annual Report and Accounts 2019
39
Provision of Information to Auditors
The Directors who were members of the Board at the time of approving the Directors’ Report are listed on pages 24 and 25. Having
made enquiries of fellow Directors and of the Group’s auditors, each of these Directors confirms that:
• to the best of each Director’s knowledge and belief, there is no information (that is, information needed by the Group’s auditors
in connection with preparing their report) of which the Group’s auditors are unaware; and
• each Director has taken all the steps that a Director might reasonably be expected to take to be aware of relevant audit information
and to establish that the Group’s auditors are aware of that information.
Independent Auditors
As a result of a review performed shortly after the year end, the Board intends to propose a resolution to appoint a new auditor to the
Group and the Company with effect from the close of the forthcoming Annual General Meeting and to authorise the Directors to
determine their remuneration.
Approved by the Board of Directors and signed on its behalf by:
Matthew Fowler
Company Secretary
3 October 2019
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Financial Statements
Page Title at start:
Independent Auditor’s Report
40
genedrive plc Annual Report and Accounts 2019
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GENEDRIVE PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion, genedrive plc’s group financial statements and company financial statements (the ‘financial statements’):
• give a true and fair view of the state of the group’s and of the company’s affairs as at 30 June 2019 and of the group’s loss and the
group’s and the company’s cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union
and, as regards the company’s financial statements, as applied in accordance with the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts 2019 (the ‘Annual Report’), which comprise:
consolidated statement of comprehensive income for the year ended 30 June 2019, consolidated balance sheet as at 30 June 2019,
consolidated statement of changes in equity for the year ended 30 June 2019, consolidated cash flow statement for the year ended 30
June 2019, company balance sheet as at 30 June 2019, company statement of changes in equity for the year ended 30 June 2019,
company statement of cash flows for the year ended 30 June 2019; and the notes to the financial statements, which include a
description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Emphasis of matter – Group and Company – material uncertainty relating to going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in
note 1 to the financial statements concerning the Group’s and the Company’s ability to continue as a going concern. Note 1 describes the
uncertainty related to the Group’s and Company’s ability to generate future revenue and cash inflows and, if necessary, reduce costs
and / or raise additional funding from shareholders. This condition indicates the existence of a material uncertainty which may cast
significant doubt about the Group’s and the Company’s ability to continue as a going concern. The financial statements do not include
the adjustments that would result if the Group and Company were unable to continue as a going concern.
Explanation of material uncertainty
As described in note 1 the Directors have prepared a cash flow forecast extending to December 2020 in order to assess the Group’s
and Company’s ability to continue as a going concern. The cash flow forecast indicates the Group will be able to meet its liabilities as
they fall due for a period of at least 12 months from the date of approval of the financial statements, however this is dependent on the
Group’s ability to achieve its revenue forecasts which show growth versus the prior year. If the Group is not able to achieve its revenue
forecasts it would need to reduce costs and / or raise additional funding from shareholders.
There is a risk that the Group will not achieve its anticipated revenue growth and, if necessary, reduce costs and / or raise additional
funding from shareholders. If this were the case, the Group may not have sufficient cash to meet its obligations as they fall due. Given
this risk, the directors have drawn attention to this in disclosing a material uncertainty relating to going concern in the basis of
preparation to the financial statements.
Content Section at start: Independent Auditor’s Report
genedrive plc Annual Report and Accounts 2019
41
What audit procedures we performed
In concluding there is a material uncertainty, our audit procedures included:
• obtaining management’s cash flow forecast, which supports its use of the going concern basis of accounting, and tested the
mathematical accuracy of this model. We compared significant forecast revenue to supporting information including purchase orders
and found these to be consistent. We compared forecast costs to equivalent amounts incurred in the current year and discussed with
management the reasons for any significant variances;
• considering the historical accuracy of management’s forecasting; and
• reviewing management’s downside sensitivities and performing our own sensitivity analysis, focusing on reasonable downside
scenarios including lower than, or a deferral of, forecast revenue. We also understood the level of committed versus discretionary
spend to determine where costs could be reduced if necessary to mitigate any short term cash shortfall.
If the Group does not achieve its anticipated revenue growth and, if necessary, reduce costs and/or raise additional funding from
shareholders it may not have sufficient cash to meet its obligations as they fall due. This has been deemed a material uncertainty which,
if realised, may affect the Group’s and Company’s ability to continue as a going concern.
Our audit approach
Overview
Materiality
Audit scope
Key audit
matters
• Overall group materiality: £247,850 (2018: £232,650), based on 5% of loss before tax adjusted for exceptional
items.
• Overall company materiality: £84,380 (2018: £69,140), based on 1% of net liabilities.
• We performed work over genedrive plc (the parent company of the Group) and Genedrive Diagnostics Limited, a
100% owned subsidiary, which account for 100% of revenue and 99% of loss before tax, adjusted for exceptional
items.
• We performed audit work over all material financial statement line items of the company financial statements.
• Accounting treatment and disclosure of convertible bonds (Group and Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In
particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the
risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that
represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the 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)
identified by the auditors, including those which 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, and any comments we make on the results of our procedures
thereon, 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. This is not a complete list of all risks identified by our audit.
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genedrive plc Annual Report and Accounts 2019
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GENEDRIVE PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
CONTINUED
Key audit matter
How our audit addressed the key audit matter
Accounting treatment and disclosure of convertible bonds
(Group and Company)
Refer to note 20.
During the year, the Group entered into the following agreements
related to convertible bonds:
• a second Deed of Amendment related to its existing bond held
by the Global Health Investment Fund 1 LLC (‘GHIF’); and
• the issue of a new convertible bond to the Business Growth
Fund (‘BGF’).
The Deed of Amendment to the bond held by GHIF was
accounted for as a modification of the existing instrument, rather
than an extinguishment.
The debt and derivative financial liability components of the
compound financial instrument were remeasured at the
amendment date with the difference in the total fair values being
recognised as a gain in the Income Statement.
The convertible bond issued to BGF was accounted for as a
compound financial instrument comprised of a debt host and a
derivative financial liability. Both elements of the compound
financial instruments were measured at fair value on inception.
Management engaged external valuations experts to assist with
the valuations performed at the date of the agreements and at the
year end date.
We read the GHIF Deed of Amendment and the BGF bond
agreement and assessed management’s proposed accounting
treatment and consider it to be appropriate.
We audited the valuations performed by management including
the following key elements:
• we assessed the conclusion that the Deed of Amendment
represented a modification rather than an extinguishment with
reference to the qualitative terms of the amendment and the
quantitative change in the net present value of the contractual
cash flows;
• we compared the contractual cash flows included in
management’s calculations to the signed bond agreements;
• we agreed other key terms from the signed bond agreements
to management’s calculations, including share price conversion
amounts;
• we assessed the market rate of interest used by comparing it to
the yield to maturity of comparable traded debt securities with
a similar credit rating;
• we compared the risk free rate used to UK Government bond
yields for appropriate maturities; and
• we compared the volatility assumption used to convertible
debt arrangements with similar characteristics.
We found the assumptions used and the resultant valuations to be
within a reasonable range.
We have reviewed the disclosures in the financial statements and
consider these to be sufficient and appropriate.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as
a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in
which they operate.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
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Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Group financial statements
£247,850 (2018: £232,650).
5% of loss before tax adjusted for
exceptional items.
Company financial statements
£84,380 (2018: £69,140).
1% of net liabilities.
Rationale for benchmark applied We believe that loss before tax adjusted for
exceptional items is an important measure in
assessing the performance of the group, and is
a generally accepted benchmark.
We believe that net liabilities is an important
measure in assessing the performance of the
entity, and is a generally accepted auditing
benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range
of materiality allocated across components was between £80,000 and £240,000.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £12,393 (Group
audit) (2018: £11,600) and £4,219 (Company audit) (2018: £3,450) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any
form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report
certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’
Report for the year ended 30 June 2019 is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we
did not identify any material misstatements in the Strategic Report and Directors’ Report.
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genedrive plc Annual Report and Accounts 2019
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GENEDRIVE PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
CONTINUED
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities in respect of the financial statements set out on page 36, the
directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being
satisfied that they give a true and fair view. The directors are also responsible for such internal control as they 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 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 company or to cease operations, or have no realistic alternative but to do so.
Auditors’ 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 auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Hazel Macnamara (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
3 October 2019
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Comprehensive Income
genedrive plc Annual Report and Accounts 2019
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Continuing operations
Revenue
Research and development costs
Administrative costs
Trading loss
Exceptional items
Operating Loss
Net finance costs
Loss on ordinary activities before taxation
Taxation on ordinary activities
Loss for the financial year from continuing operations
Discontinued operations
Profit for the year from discontinued operations
Loss/total comprehensive expense for the financial year
Loss per share (pence) from continuing operations
– Basic and diluted
Loss per share (pence) from continuing and discontinued operations
– Basic and diluted
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
Note
2
3
3
4
3
7
8
9
11
11
2,362
(4,877)
(1,934)
(4,449)
439
(4,010)
(508)
(4,518)
882
(3,636)
1,938
(5,180)
(2,022)
(5,264)
(2,111)
(7,375)
(413)
(7,788)
758
(7,030)
–
1,063
(3,636)
(5,967)
(14.0)
(37.6)
(14.0)
(31.9)
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genedrive plc Annual Report and Accounts 2019
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2019
Assets
Non-current assets
Plant and equipment
Contingent consideration receivable
Current assets
Inventories
Trade and other receivables
Contingent consideration receivable
Current tax asset
Cash and cash equivalents
Liabilities
Current liabilities
Deferred revenue
Trade and other payables
Deferred consideration payable in shares
Net current assets
Total assets less current liabilities
Convertible bond
Net liabilities
Capital and reserves
Share capital
Called-up equity share capital
Other reserves
Accumulated losses
Total deficit
Consolidated Balance Sheet
30 June
2019
£’000
30 June
2018
£’000
Note
12
13
14
15
13
16
17
18
19
20
25
26
164
153
317
123
556
106
971
5,184
6,940
(88)
(1,129)
–
(1,217)
5,723
6,040
(8,518)
(2,478)
165
340
505
171
551
172
980
3,529
5,403
–
(1,470)
(1,250)
(2,720)
2,683
3,188
(5,625)
(2,437)
510
28,112
(31,100)
282
24,745
(27,464)
(2,478)
(2,437)
The financial statements were approved by the Board of Directors and authorised for issue on 3 October 2019. They were signed on its
behalf by:
David Budd
Chief Executive Officer
Matthew Fowler
Chief Financial Officer
Company number: 06108621
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Consolidated Balance Sheet
Consolidated Statement of
Changes in Equity
genedrive plc Annual Report and Accounts 2019
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
Balance at 30 June 2017
Share issue
Transfer of shares to SIP members
Equity-settled share-based payments
Transactions settled directly in equity
Total comprehensive expense for the year
Balance at 30 June 2018
Share issue
Deferred consideration equity component
Equity-settled share-based payments
FX on translation of overseas assets
Transactions settled directly in equity
Total comprehensive expense for the year
Balance at 30 June 2019
Share capital
£’000
Other
reserves
£’000
Accumulated
losses
£’000
Total equity
£’000
281
24,657
(21,497)
3,441
1
–
–
1
–
282
228
–
228
–
510
–
33
55
88
–
–
–
–
–
(5,967)
24,745
(27,464)
3,015
315
49
(12)
3,367
–
–
–
–
(3,636)
1
33
55
89
(5,967)
(2,437)
3,243
315
49
(12)
3,595
(3,636)
28,112
(31,100)
(2,478)
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genedrive plc Annual Report and Accounts 2019
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Operating loss for the year
Depreciation, amortisation and impairment
Exceptional items (all non-cash)
ATL Research credits
Share-based payment (credit)/expense
Operating loss before changes in working capital and provision
Decrease/(increase) in inventories
Decrease in trade and other receivables
Increase/(Decrease) in deferred revenue
(Decrease) in trade and other payables
Cash flow from discontinued operations
Net cash outflow from operations
Tax received
Net cash outflow from operating activities
Cash flows from investing activities
Finance income
Acquisition of plant and equipment and intangible assets, net of loss on disposals
Proceeds from disposal of discontinued operations
Cash paid to settle deferred consideration
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from share issue
Proceeds from bond issue
Net inflow from financing activities
Net increase/(decrease) in cash equivalents
Cash and cash equivalents at beginning of year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Analysis of net funds
Cash at bank and in hand
Net funds
Consolidated Cash Flow Statement
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
(4,010)
98
(439)
(89)
49
(4,391)
(12)
60
88
(346)
–
(4,601)
980
(3,621)
18
(97)
57
(300)
(322)
3,243
2,366
5,609
1,666
3,529
(11)
5,184
5,184
5,184
(7,375)
3,117
–
(59)
(12)
(4,329)
241
119
(115)
(547)
864
(3,767)
1,220
(2,547)
13
(24)
957
–
946
–
–
–
(1,601)
5,129
1
3,529
3,529
3,529
7
13
16
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Notes to the Financial Statements
genedrive plc Annual Report and Accounts 2019
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
General Information
genedrive plc (‘the Company’) is a company incorporated and domiciled in the UK.
genedrive plc and its subsidiaries (together, ‘the Group’) is a molecular diagnostics business developing and commercialising a
low-cost, rapid, versatile, simple to use and robust point-of-need or point-of-care diagnostics platform for the diagnosis of infectious
diseases and for use in patient stratification (genotyping), pathogen detection and other indications.
genedrive plc is a public limited company, whose shares are listed on the London Stock Exchange Alternative Investment Market.
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1. Significant accounting policies
This note provides a list of the principal accounting policies adopted in the preparation of these consolidated financial statements to the
extent that they have not already been disclosed in the other notes below. The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods represented in these consolidated financial statements.
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Basis of accounting
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS') as
adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation, IFRS Interpretations Committee (‘IFRSIC')
and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared on a historical cost basis as modified by the revaluation of financial assets and financial
liabilities (including derivative instruments) at fair value through profit or loss.
The consolidated financial statements consolidate those of the Company and its subsidiaries (together referred to as ‘the Group’).
They are presented in pounds sterling and all values are rounded to the nearest one thousand (£k) except where otherwise indicated.
Following the disposal of the Group’s Services business, on 8 June 2018, the respective prior year results for this business are disclosed
as a discontinued operation.
The Group has elected to take exemption under section 408 of the Companies Act 2006 from presenting the parent company profit and
loss account.
The Group funds its day-to-day working capital requirements through its bank resources.
Going concern: The Directors have concluded that it is necessary to draw attention to the revenue and cost forecasts in the business
plans. In order for the Group and Company to continue as a going concern, there is a requirement to achieve a certain level of sales.
Given the Company is in the early stages of commercializing its products, the forecast level of sales in the next 12 months is subject to
uncertainty. If an adequate sales level cannot be achieved to support the Group and Company, the Directors have the options to reduce
ongoing spend or seek additional funding from shareholders. While the Board is confident that it will achieve the required revenue
and has a successful track record in both cutting costs and raising funds, there remains uncertainty as to the level of sales that will be
achieved, the amount of cost reduction that may be required and the amount of funding that could be raised from shareholders. This
combination of factors represents a material uncertainty that may cast significant doubt on the Group and Company’s ability to continue
as a going concern. However, based on the relative likelihood of achieving versus not achieving, the Board believe it is appropriate to
continue to adopt the going concern basis of accounting in preparing these financial statements. These financial statements do not
include the adjustments that would result if the Group and Company were unable to continue as a going concern.
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genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
1. Significant accounting policies continued
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that
are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases. Inter-company transactions, balances and
unrealised gains on transaction between Group companies are eliminated. Unrealised losses are also eliminated. Where necessary,
amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.
Revenue
Revenue is measured at the fair value of the consideration received or receivable and net of discounts and sales-related taxes.
Revenue recognition
a. Contract revenue
Contract revenue is recognised by reference to the stage of completion of the related transaction at the end of the reporting period.
The Group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic
benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities, as described below.
b. Collaboration & licensing revenue
Contractually agreed upfront payments and similar non-refundable payments in respect of collaboration or licence agreements which
are not directly related to ongoing research activity are recorded as deferred income and recognised as revenue over the anticipated
duration of the agreement. Where the anticipated duration of the agreement is modified, the period over which revenue is recognised
is also modified.
Non-refundable milestone and other payments that are linked to the achievement of significant and substantive technological or regulatory
hurdles in the research and development process are recognised as revenue upon the achievement of the specified milestone.
Income which is related to ongoing research activity is recognised as the research activity is undertaken, in accordance with the contract.
c. Other income – development grant funding
Income receivable in the form of Government grants to fund product development is recognised as development grant funding over the
periods in which the Group recognises, as expenses, the related eligible costs which the grants are intended to compensate and when
there is reasonable assurance that the Group will comply with the conditions attaching to them and that the income will be received.
Government grants whose primary condition is that the Group should purchase or otherwise acquire non-current assets are recognised
as deferred revenue in the Consolidated Balance Sheet and transferred to the Statement of Comprehensive Income on a systematic and
rational basis over the useful lives of the related assets.
d. Product sales
Revenue from product sales is recognised on shipment to customers in line with contractual agreements.
Segment reporting
A segment is a group of assets, liabilities and operations engaged in providing products or services that are subject to risks and returns
that are different from those of other parts of the business. Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating
resources and assessing performance of the operating segments, has been identified as the Board of Directors.
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Research and development
Research expenditure is written off as it is incurred. Development expenditure is written off as it is incurred up to the point of technical
and commercial validation. Thereafter, costs that are measurable and attributable to the project are carried forward as intangible assets,
subject to having met the following criteria:
• demonstration that the product will generate profitable future economic benefit and of an intention and ability to sell the product;
• assessment of technical feasibility;
• confirmation of the availability of technical, financial and other resources to complete the development;
• management intends to complete the development so the product will be available for use; and
• the expenditure attributable to the development can be reliably measured.
Intangible assets
Intangible assets are stated at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated so
as to write off the cost of an intangible asset, less its estimated residual value, over the useful economic life of that asset, as follows:
• Acquired intellectual property – the shorter of 5% straight-line basis or their estimated useful life.
• Developed intellectual property – the shorter of 10% straight-line basis or their estimated useful life.
• Patents – over the shorter of 17 years or their estimated useful lives on a straight-line basis.
No amortisation is charged on those assets which are not yet available for use.
Plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is
calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:
Lab equipment – 25% reducing balance basis
Fixtures & fittings – straight-line over 48 months
Other equipment – straight-line over 48 months
Operating lease agreements
Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged
to the income statement over the period of the lease.
Impairment of non-financial assets
Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are
tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of
disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely
independent cash inflows (‘Cash Generating Units’). Prior impairments of non-financial assets are reviewed for possible reversal at each
reporting date.
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genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
1. Significant accounting policies continued
Foreign currencies
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in sterling
which is the Group’s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement, except
when deferred in equity as qualifying net investment hedges. Non-monetary items carried at fair value and denominated in foreign
currencies are retranslated at the rates prevailing on the date when fair value is determined. The foreign currency risks relating to assets
and liabilities are detailed in note 22.
Share-based payments
The Group issues equity-settled share-based payments to certain employees (including Executive Directors). The fair value of the
employee services received in exchange for the grant of the options is calculated using appropriate valuation models and is recognised
as an expense over the vesting period.
The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted. Fair value is
measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management’s best
estimate, experience and behavioural considerations.
At each Balance Sheet date, the entity revises its estimates of the number of options that are expected to become exercisable.
It recognises the impact of the revision of original estimates, if any, in the Income Statement, and a corresponding adjustment to equity,
over the remaining vesting period.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium
when the options are exercised.
The issuance by the Company of share options to employees of its subsidiary represents additional capital contributions and the fair
value of such options and awards is therefore recognised as an increase in the Company’s investment in Group undertakings with a
corresponding increase in total equity shareholders’ funds.
Share Incentive Plan (SIP)
The Company operates a SIP scheme and both issues new shares to settle the liability and offers the cash equivalent to employees.
The liability to settle the shares accrued under the SIP scheme is thus treated as a cash-settled liability on the balance sheet with the
cost of the liability being expensed to the income statement. The balance sheet liability is adjusted periodically to reflect the change
in the share price over the life of the scheme with the movement taken to the income statement. Any shares bought in anticipation of
settling the SIP scheme are held as a debit in reserves. Where a leaver requests to take shares instead of cash, as permitted under the
SIP scheme, the historic cost of shares acquired is moved from reserves to the balance sheet liability.
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Pension contributions
Contributions to personal pension plans of employees on a defined contributions basis are charged to the income statement in the
period in which they are payable.
Exceptional items
Items which are both material, either qualitatively or quantitatively, and infrequent in nature are presented as exceptional items so as to
provide a better indication of the Company’s underlying business performance and are shown separately on the face of the Income Statement.
Items classed as exceptional in the Income Statement are treated as exceptional in the cash flow until the items are fully unwound.
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Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated on a first-in and first-out basis and includes
bought-in cost and, where appropriate, other direct costs. Net realisable value represents the estimated selling price less applicable
selling costs. Where applicable, provision is made for slow-moving and obsolete inventory.
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Trade and other receivables
Trade and other debtors are recognised and carried forward at invoiced amounts less provisions for any doubtful debts. Bad debts are
written off when identified. After initial recognition, these are carried forward at amortised cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents are included in the balance sheet at cost. Cash and cash equivalents comprise cash at bank and in hand and
short-term deposits with an original maturity of three months or less.
Interest-bearing loans and borrowings
All loans and borrowings are recognised initially at cost, which is the fair value of the consideration received, net of issue costs
associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are measured at amortised cost using the
effective interest method. Gains or losses are recognised in the consolidated income account when liabilities are derecognised or
impaired, as well as through the amortisation process.
Investments
Investments in subsidiaries are stated at cost less any provisions for impairment. An impairment is recognised when the recoverable
amount of the investment is less than the carrying amount.
Taxation
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted, or
substantively enacted, by the balance sheet date.
Taxation credits which fall under the category of Above the Line Research & Development credits (‘ATL Research credit’) as detailed in
the Finance Act 2013 are offset against the expenditure to which they relate and, in the Statement of Profit and Loss, are disclosed within
Contract and Discovery and development costs, as appropriate.
Deferred tax is recognised in respect of all temporary differences identified at the balance sheet date, except to the extent that the
deferred tax arises from the initial recognition of goodwill (if amortisation of goodwill is not deductible for tax purposes) or the initial
recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither
accounting profit nor taxable profit and loss. Temporary differences are differences between the carrying amount of the Group’s assets
and liabilities and their tax base.
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genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
1. Significant accounting policies continued
Deferred tax liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the
deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where an entity has a legally
enforceable right to offset and either intends to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax is provided on temporary differences arising in subsidiaries, jointly controlled entities and associates, except where the
timing of reversal of the temporary difference will not reverse in the foreseeable future. Deferred tax is measured at the average tax
rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have
been enacted or substantially enacted by the balance sheet date. Measurement of deferred tax liabilities and assets reflects the tax
consequence expected to fall from the manner in which the asset or liability is recovered or settled.
Financial instruments (including convertible bond)
Financial instruments are classified and accounted for, according to the substance of the contractual arrangement, as either financial
assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of
the Company after deducting all of its liabilities.
As disclosed in note 20, the Company has in issue a convertible bond which is a compound instrument comprising a liability component,
or debt host, and an equity derivative component.
On initial recognition, convertible bonds are recorded at fair value net of issue costs. The initial fair value of the debt host is determined
using the market interest rate applied by a market participant for an equivalent non-convertible debt instrument. Subsequent to initial
recognition, the debt host is recorded using the effective interest method until extinguished on conversion or maturity of the bonds.
The amortisation of the debt host and the interest payable in each accounting period is expensed as a finance cost.
Equity derivatives embedded in the convertible instruments which are required to be recorded as financial liabilities are initially
recognised at fair value. At each reporting date, the fair values of the derivative are reassessed by management. Where there is no
market for such derivatives, the Company uses option pricing models to measure the fair value.
The amortisation of the debt host, interest payable in the period and gains or losses on the fair value of the derivative are disclosed
with Finance income and costs detailed in note 7.
Parent Company assets
The assets of the Parent Company are subject to impairment review in each financial period.
New standards and interpretations not applied
The Group has not early adopted any Standards in the current or prior year.
The following new standards have been adopted in the year:
IFRS 9 Financial Instruments: The Standard was adopted on 1 July 2018, replacing IAS 39 Financial Instruments. This Standard
covers the classification, measurement, impairment and derecognition of financial assets and financial liabilities together with a new
hedge accounting model. IFRS 9 requires the Group to recognise expected credit losses and to update these estimates periodically
to reflect changes in the credit risk of financial assets. The Group transition to this Standard has not had a material impact on the
financial statements.
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IFRS 15 Revenue from Contracts with Customers: The Standard was adopted on 1 July 2018, replacing IAS 11 Construction Contracts
and IAS 18 Revenue. This Standard requires the separation of performance obligations within contracts with customers and the
contractual value to be allocated to each of the performance obligations. Revenue is then recognised as each performance obligation
is satisfied. The Group transition to this standard has not had a material impact on the financial statements.
The following amendments have been adopted in the year:
• IFRS 2 (amendments) Classification and Measurement of Share-based Payment Transactions
• IAS 40 (amendments) Transfers of Investment Property
• Annual Improvements to IFRS Standards 2014–2016 Cycle
• Amendments to IAS 28 Investments in Associates and Joint Venture
• IFRS IC 22 Foreign Currency Transactions and Advance Consideration
The above interpretations and revised Standards have not had any material impact on the amounts reported in these financial
statements or the disclosures required. At the date of authorisation of these financial statements, the following Standards and
Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had
not yet been adopted by the EU):
• IFRS 16 Leases
• IFRS 17 Insurance Contracts
• Amendments to IFRS 9 Prepayment Features with Negative Compensation
• Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures
• Annual improvements to IFRS Standards 2015–2017 Cycle, Amendments to IFRS 3 Business Combinations, IFRS 11 Joint
Arrangements
• IAS 12 Income Taxes and IAS 23 Borrowing Costs
• Amendments to IAS 19 Employee Benefits, Plan Amendment, Curtailment or Settlement
• IFRS 10 Consolidated Financial Statements and IAS 28 (amendments) Sale or Contribution of Assets Between an Investor and its
Associates or Joint Venture
• IFRS IC 23 Uncertainty over Income Tax Treatments
The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements
of the Group in future periods except as follows:
IFRS 16 is effective for annual periods beginning 1 January 2019 and will replace IAS 17 Leases. It will introduce changes to lessee
accounting by removing the distinction between operating and finance leases, requiring the recognition of a right-of-use asset and a
lease liability at the commencement of all leases. Leases previously classified as operating leases with lease payments recorded in the
Consolidated Income Statement will now be included in the Consolidated Balance Sheet.
IFRS 16 application will result in an increase in current assets and financial liabilities due to the recording of the right-of-use asset and
future lease liabilities. The Group estimates that upon transition on 1 July 2019, the Group will recognise a right-of-use lease asset that is
expected to be between £0.2m and £0.4m and a financial lease liability that matches the right-of-use asset. Operating profit will not be
impacted materially as the operating leases in the Group are less than 18 months in duration.
The Group results announcement for the half year ending 31 December 2019 will be the first to be prepared under IFRS 16.
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genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
1. Significant accounting policies continued
Critical accounting estimates
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree
of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are
disclosed below:
• Determining what components of expenditure fit the definitions of the R&D tax credit regime requires an estimation and interpretation
of tax rules on research and development costs. There have been no changes to historic assumptions in the year and there is no
expectation of a change in the level of uncertainty within the next financial year. If the qualifying costs used to calculate the R&D tax
credits are 10% higher/lower than estimated then the value of the tax debtors in the balance sheet would increase/(decrease) by £97k.
• Determining the market value of the debt component of the convertible bond requires the Board to make a judgement about the
market rate of interest to apply to instrument of this nature. The single biggest variable is the discount rate used to present the value
of the loan items. The Company assessed the variable and determined that 10% was an appropriate discount rate. If the discount rate
used to value the convertible items was 2.5% higher, 12.5%, the value of the balance sheet liability would fall by £0.8m. If the discount
rate used to value the convertible items was 2.5% lower, 7.5%, the value of the balance sheet liability would increase by £0.9m.
• Determining the going concern basis of preparation of the accounts required judgment as to the level of cash at the balance sheet
date and the forecasted performance over the projected period. Judgment was required to assess the expected level of cash
generation from revenue and cash consumption from R&D spend.
• The consideration for the disposal of the Services business included deferred consideration based on the R&D tax credits claimed by
the business in the three years post disposal. The deferred consideration is carried at the discounted fair value of the expected R&D
tax credits. The estimated value of the R&D tax credits is the value claimed in the period ending December 2018.
Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
2. Segmental reporting
For internal reporting and decision-making, the Group is organised into one segment – Diagnostics. Diagnostics is commercialising the
Genedrive® Point-of-Need molecular testing platform. In future periods, and as revenue grows, the Group may review management
account information by type of assay and thus split out Diagnostics into segments – however for now the single segment is appropriate.
The chief operating decision maker primarily relies on turnover and operating profit to assess the performance of the Group and make
decisions about resources to be allocated to each segment. Geographical factors are reviewed by the chief operating decision maker,
but as substantially all operating activities are undertaken from the UK, geography is not a significant factor for the Group. Accordingly,
only sales have been analysed into geographical statements.
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Diagnostics
segment
£’000
Administrative
costs
£’000
2,362
(2,483)
(32)
–
–
(1,868)
(66)
439
Total
£’000
2,362
(4,351)
(98)
439
(2,515)
(1,495)
(4,010)
(508)
(4,518)
882
(3,636)
(3,636)
Total
£’000
1,938
(4,259)
(1,005)
(2,111)
Diagnostics
segment
£’000
Administrative
costs
£’000
1,938
(2,325)
(917)
–
–
(1,934)
(88)
(2,111)
(3,242)
(4,133)
(7,375)
(413)
(7,788)
758
(7,030)
1,063
(5,967)
The results of the operating division of the Group are detailed below.
Business segments
Year ended 30 June 2019
Revenue
Segment EBITDA
Less depreciation and amortisation
Exceptional items
Operating loss
Net finance costs
Loss on ordinary activities before tax
Taxation
Loss for the financial year from continuing operations
Total comprehensive expense for the year
Business segments
Year ended 30 June 2018
Revenue
Segment EBITDA
Less depreciation and amortisation
Exceptional items
Operating loss
Net finance costs
Loss on ordinary activities before tax
Taxation
Loss for the financial year from continuing operations
Profit for the year from discontinued operations
Total comprehensive expense for the year
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genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
2. Segmental reporting continued
Year ended 30 June 2019
Segment assets
Segment liabilities
Year ended 30 June 2018
Segment assets
Segment liabilities
Diagnostics
segment
£’000
Administrative
costs
£’000
720
(598)
608
(584)
6,532
(9,132)
5,300
(7,761)
Total
£’000
7,252
(9,730)
5,908
(8,345)
Geographical segments
The Group’s operations are located in the United Kingdom. The following table provides an analysis of the Group’s revenue by
customer location:
All on continuing operations
United Kingdom
Europe
United States of America
Rest of world
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
1,439
16
907
–
2,362
230
59
1,602
47
1,938
Revenue from continuing operations during the year related to grant income and funded development programmes of £1,401k
(2018: £1,811k) and product sales of £961k (2018: £127k).
Revenue from product sales and development was £961k (2018: £1,716k).
Revenue from grants was £1,401k (2018: £222k).
Revenues from customers accounting for more than 10% of total revenue in the current or prior years are detailed below:
(a) £907k of revenue was derived from the US Department of Defense (2018: £1,602k); and
(b) £1,100k of revenue was derived from Innovate UK (2018: £221k).
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7
4
12
5
Year ended
30 June
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£’000
Year ended
30 June
2018
£’000
4,877
(89)
–
(635)
196
98
–
2,775
10
81
294
5,180
(177)
897
–
–
182
2,111
4,051
10
52
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3. Operating loss
The Group operating loss is stated after charging/(crediting):
Research and development expenditure
ATL Research credit
Amortisation of intangible assets
Gain on settlement of deferred consideration payable in shares
Impairment of deferred consideration receivable
Depreciation of owned tangible fixed assets
Impairment of intangible assets
Staff costs
Auditors’ remuneration, fees payable for
– the audit of the Parent Company and consolidated accounts
– the audit of the Company’s subsidiaries
Operating lease costs – property rent
The auditors remuneration for the current year includes £26,500 for auditing costs associated with risks related to the 2018 fund-raise.
4. Exceptional items
Exceptional gain on settlement of deferred consideration payable
Impairment of deferred consideration receivable
Impairment of intangible assets
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
635
(196)
–
439
–
–
2,111
2,111
During the year the Company entered into a fifth deed of amendment in relation to the Visible Genomics Sale and Purchase Agreement.
The fifth deed of amendment became effective on 10 December 2018 and varied the remaining £1,250,000 consideration payable. The
difference between the total fair value of amended consideration payable and the £1,250,000 created a gain of £635,000 (2018: £nil)
which has been treated as exceptional.
The carrying value of deferred consideration receivable on the disposal of Epistem trade assets was reviewed in the year following
receipt of an amount received for an initial part period. The value of expected deferred consideration receiveable has been written
down to £446k and created an impairment charge of £196k (2018: £nil).
In the prior year management undertook a carrying value review of intangible assets and determined that the carrying value should be
written down to £nil and this created an impairment charge of £2,111k in the income statement. The write down results in no intangible
assets on the balance sheet.
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genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
5. Particulars of employees
The average number of staff employed by the Group during the financial year was:
Discontinued operations
Research and development
Administration
The reduction in headcount follows the disposal of the Services Divisions in 2018.
The aggregate employee costs (including Directors) were:
Wages, salaries and other benefits
Social security costs
Equity-settled share-based payments
Pension cost – defined contribution plans
Cost of SIP matching shares provision
6. Directors’ remuneration (key management)
Wages, salaries and other benefits
Social security costs
Equity-settled share-based payments
Pension cost – defined contribution plans
Cost of SIP matching shares provision
Year ended
30 June
2019
No
Year ended
30 June
2018
No
–
31
13
44
28
32
12
72
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
2,402
271
49
56
(3)
2,775
3,557
350
55
65
24
4,051
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
980
120
47
22
(1)
1,168
1,183
154
45
18
4
1,404
For the current and prior year the key management of the Company is the senior management team of the Company and comprises
Executive Board members plus four members of the senior staff.
Disclosure of individual Directors’ remuneration, share interests, share options, long-term incentive schemes, pension contributions and
pension entitlements required by the Companies Act 2006 is shown in the tables in the Remuneration Committee Report on pages 30
to 31 and forms part of these financial statements.
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7. Net finance costs
Group
Interest income on bank deposits
Gain on amendment to convertible bond
Movement in fair value of derivative embedded in convertible bond
Finance cost of convertible bond
Foreign exchange movement in convertible bond
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
18
325
318
(889)
(280)
(508)
13
–
–
(531)
105
(413)
8. Taxation on ordinary activities
(a) Recognised in the income statement
Current tax:
Research and development tax credits
Less: recognised as ATL Research credit
Total tax credit for the year
Continuing operations
Discontinued operations
Total
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
(971)
89
(882)
(817)
59
(758)
–
–
–
(163)
118
(45)
(971)
89
(882)
(980)
177
(803)
(b) Reconciliation of the total tax charge
The tax assessed on the loss on ordinary activities for the year is lower (2018: higher) than the weighted average applicable tax rate for
the year ended 30 June 2019 of 19.00% (2018: 19.00%). The differences are explained below:
Loss before taxation on continuing operations
Tax using UK corporation tax rate of 19.00% (19.00%)
Adjustment in respect of R&D tax credit recognised above the line (ATL)
Adjustment in respect of R&D tax credit claimed
Items not deductible for tax purposes – permanent
Items not deductible for tax purposes – temporary
Deferred tax not recognised
Rate differences
Total tax credit for the year
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
(4,518)
(858)
4
(379)
11
–
304
36
(882)
(7,788)
(1,480)
59
(380)
543
(11)
490
21
(758)
No deferred tax assets are recognised at 30 June 2019 (2018: £nil). Having reviewed future profitability in the context of trading losses
carried, it is not probable that there will be sufficient profits available to set against brought forward losses.
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genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
8. Taxation on ordinary activities continued
The Group had trading losses, as computed for tax purposes, of approximately £11,733k (2018: £9,854k) available to carry forward to
future periods; this excludes management expenses.
The Finance Act 2016, which was subsequently enacted on 15 September 2016, includes provisions to reduce the corporation tax rates
to 19.0% with effect from 1 April 2017 and 18.0% with effect from 1 April 2020. In addition, the Finance Bill 2017 was substantively enacted
on 6 September 2017 which introduced a further reduction in the main rate of corporation tax from 18.0% to 17.0% from 1 April 2020.
Both changes are reflected in the balance sheet figures and the overall effect on the deferred tax balance and tax credit for the year
is not material.
In accordance with the provisions of the Finance Act 2000 in respect of research and development allowances, the Group is entitled to
claim tax credits for certain research and development expenditure. These credits are disclosed partly as Above the line research &
development credits (‘ATL Research credits’) within Research and development costs and partly as Research and development tax
credits within Taxation on ordinary activities. The total amount included in the financial statements in respect of Continuing operations
for the year ended 30 June 2019 was £971k (2018: £817k) which included £89k (2018: £59k) disclosed as ATL Research credit deducted
from Research and development costs with the balance of £882k (2018: £758k) disclosed within Taxation on ordinary activities as
detailed above.
9. Disposal of business segment
Group
Fair value of sales proceeds
Costs of disposal
Net assets disposed of
Profit on disposal
Year ended
30 June
2018
£’000
1,521
(163)
(717)
641
On 8 June 2018 the Group disposed of the business and assets of its ‘Services’ business. This division comprised the segments
previously reported as Preclinical Research Services and Pharmaco-genomics Services. The consideration was £1,150k subject to
normal working capital adjustments, plus up to an additional £750k deferred consideration based on the Research and development tax
credits earned by the business in the 36 months post disposal. Management have made their best estimate of the future cash flows
expected from the disposal and discounted these using the Company’s WACC of 12.5%. The costs of the disposal of £163k include legal
costs and corporate finance costs.
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Result of discontinued operations
The results of the discontinued operation, which have been included in the income statement, were as follows:
Discontinued operations
Revenue
Operating costs
Above the line tax credit
Profit before tax
Attributable tax credit
Profit on disposal of discontinued operations
Profit attributable to discontinued operations
Year ended
30 June
2019
£’000
Period ended
8 June
2018
£’000
–
–
–
–
–
–
–
2,783
(2,524)
118
377
45
641
1,063
The disposed business was not a separate legal entity. Any theoretical tax expense in the periods above would have been settled via
Group relief.
During the year to 30 June 2018, the business contributed £332k to the Company’s net operating cash flows. All of these cash flows
were from operating activities and there were no investing or financing cash flows in the period.
Discontinued operations
Proceeds from disposal of business
Operating cash flows from discontinued operations
Net cash flow from discontinued operations
Year ended
30 June
2019
£’000
Period ended
8 June
2018
£’000
57
–
57
957
332
1,289
10. Loss attributable to members of the parent company
genedrive plc has not presented its own statement of comprehensive income as permitted by Section 408 of the Companies Act 2006.
The loss dealt with in the accounts of genedrive plc was £5,131k (2018:loss £9,401k).
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
11. Earnings per share per share
Group
Loss for the year after taxation continuing operations
Profit for the year after taxation discontinued operations
Group
Weighted average number of ordinary shares in issue
Potentially dilutive ordinary shares
Adjusted weighted average number of ordinary shares in issue
Loss per share on continuing operations
– Basic
– Diluted
Loss per share on continuing operations and discontinuing operations
– Basic
– Diluted
Earnings per share on discontinued operations
– Basic
– Diluted
2019
£’000
(3,636)
–
2019
Number
2018
£’000
(7,030)
1,063
2018
Number
26,037,433
–
18,692,269
–
26,037,433
18,692,269
(14.0)p
(14.0)p
(14.0)p
(14.0)p
–
–
(37.6)p
(37.6)p
(31.9)p
(31.9)p
5.7p
5.7p
The basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders for the year by the weighted
average number of ordinary shares in issue during the year.
As the Company is loss making, no potentially dilutive options have been added into the EPS calculation. Had the Company made a
profit in the period: there would be no potentially dilutive share options because, as shown in note 21 all share options in issue are
underwater; there would be 79,129 of dilutive SIP shares, (as described in note 21, the total accrued shares under the SIP should all
shares meet their vesting criteria is 97,993 and the Company holds 18,864 to meet the SIP commitments).
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Lab
equipment
£’000
Fixtures
& fittings
£’000
Other
equipment
£’000
220
78
–
298
150
32
–
182
70
116
114
–
–
114
84
24
–
108
30
6
215
21
(4)
232
150
42
(2)
190
65
42
Greater than
12 months
£’000
Less than
12 months
£’000
–
340
340
–
(187)
153
–
172
172
(57)
(9)
106
Total
£’000
549
99
(4)
644
384
98
(2)
480
165
164
Total
£’000
–
512
512
(57)
(196)
259
12. Plant and equipment
Group
Cost
At 1 July 2018
Additions
Disposals
At 30 June 2019
Accumulated depreciation
At 1 July 2018
Charge for the year
Depreciation on disposed assets
At 30 June 2019
Net book value
At 30 June 2018
At 30 June 2019
13. Contingent consideration receivable
Balance at 30 June 2017
Disposal of Services Business
Balance at 30 June 2018
Received in the period
Impairment of
Balance at 30 June 2019
Under the terms of sale and purchase agreement for the disposal of the Services business, a total of £512k of future contingent
consideration was held on the balance sheet at June 2018. In June 2019 £57k was received for the first six months of trading of the new
entity. The amount received was lower than the amount expected and so an impairment charge of £196k (2018: £nil) was posted to value
the deferred consideration at the new fair value.
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genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
14. Inventories
Group
Raw materials
Finished goods
2019
£’000
123
–
123
2018
£’000
171
–
171
Genedrive units are treated as raw materials. The units are required to go through a testing and software process before being sold.
The inventory valuation at 30 June 2019 is stated net of a provision of £60k (2018: £nil) to write down inventories to their net realisable
value. The net charge to the income statement in the year in respect of inventory net realisable value was £60k (2018: £nil).
15. Trade and other receivables
Group
Trade receivables
Less: provisions for impairment
Trade receivables – net
Other receivables
Prepayments
Analysis of trade receivables
Neither impaired nor past due
Past due but not impaired
Trade receivables
2019
£’000
65
–
65
307
184
556
2019
£’000
65
–
65
2018
£’000
182
(23)
159
132
260
551
2018
£’000
127
32
159
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2019
£’000
65
–
–
–
65
2019
£’000
23
(23)
–
–
2019
£’000
–
2018
£’000
127
–
–
32
159
2018
£’000
218
(218)
23
23
2018
£’000
23
At the year end, net trade receivables were aged as follows:
Group
Not overdue
Less than 1 month overdue
Later than 1 month less than 3 months overdue
Later than 3 months overdue
Total
The movement in the impairment provision for trade receivables is as follows:
Group
Opening provision
Written off in the year
Charge for the year
Closing provision at 30 June
Ageing of impaired receivables
Group
Greater than 3 months
There is no other class of financial assets that is past due but not impaired except for trade receivables. The Group’s credit period
generally ranges up to 60 days.
16. Cash and cash equivalents
Group
Cash at bank and in hand
2019
£’000
5,184
5,184
2018
£’000
3,529
3,529
Cash and cash equivalents comprise current accounts held by the Group with immediate access and short-term bank deposits with a
maturity of three months or less. Market rates of interest are earned on such deposits. The credit risk on such funds is limited because
the counter parties are banks with high credit ratings assigned by international credit rating agencies.
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genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
17. Deferred revenue
The items recorded as deferred revenue are to be recognised over future periods as follows:
Group
Amounts to be recognised within 1 year
Deferred revenue relates to the AIHL grant where cash received was ahead of revenue recognised at 30 June 2019.
18. Trade and other payables
Group
Trade payables
Accruals
Other payables
19. Deferred consideration payable in shares
Group
Payable in shares
2019
£’000
88
2018
£’000
–
2019
£’000
402
611
116
2018
£’000
392
886
192
1,129
1,470
2019
£’000
–
2018
£’000
1,250
During the year the Company entered into a fifth deed of amendment in relation to the Visible Genomics Sale and Purchase Agreement.
The fifth deed of amendment became effective on 10 December 2018 and varied the remaining £1,250,000 consideration payable to:
i) A payment of £300,000 in cash 20 business days after 10 December 2018.
ii) An allotment of 869,565 shares in genedrive plc on 10 December 2019.
iii) An allotment of 500,000 shares in genedrive plc on 10 December 2021.
The fair value of the future shares to be issued was calculated based on the share price on the date the deed became effective and was
23.0p per share. The aggregate value of shares to be issued was booked into reserves as a separate component of equity, see note 26.
The difference between the total fair value of the shares (£315,000) and the cash payment made (£300,000) and the £1,250,000
provision on the balance sheet immediately before the deed became effective has been taken to the income statement and disclosed
as an exceptional item.
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genedrive plc Annual Report and Accounts 2019
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20. Convertible bond
Balance at 30 June 2017
Increase in fair value
Finance costs on convertible bond
Foreign exchange movement in convertible bond
Balance at 30 June 2018
Fair value impact of Deed of Amendment
Issue of loan note (BGF)
Prepaid arrangement fees (BGF)
Movement in fair value of embedded derivative
Finance cost of convertible bonds
Foreign exchange movement (GHIF)
Balance at 30 June 2019
GHIF
host
£’000
5,195
227
304
(105)
5,621
(563)
–
–
–
710
280
6,048
GHIF
derivative
£’000
BGF
host
£’000
BGF
derivative
£’000
4
–
–
–
4
238
–
–
(99)
–
–
143
–
–
–
–
–
–
2,104
(122)
–
168
–
2,150
–
–
–
–
–
–
396
–
(219)
–
–
177
Total
host
£’000
5,195
227
304
(105)
5,621
(563)
2,104
(122)
–
878
280
8,198
Total
derivative
£’000
4
–
–
–
4
238
396
–
(318)
–
–
320
Total
£’000
5,199
227
304
(105)
5,625
(325)
2,500
(122)
(318)
878
280
8,518
Global Health Investment Fund 1 LLC (GHIF)
On 21 July 2014, the Company entered into a Collaboration and Convertible Bond Purchase Agreement (‘Agreement’) with the Global
Health Investment Fund 1 LLC (‘GHIF’). The purpose of the Agreement was to fund the Company’s development, production and
commercialisation of Genedrive® to address Global Health Challenges and achieve Global Health Objectives. Further, as part of the
Agreement, GHIF and the Company entered into a Global Access Commitment. Under the Global Access Commitment, the Company
will undertake appropriate regulatory strategic steps and registrations to secure access for Genedrive® in developing countries in
tuberculosis, malaria or other infectious diseases as agreed between the parties.
On 23 June 2016, the Company and GHIF entered into a Deed of Amendment & Restatement of the Agreement, which came into effect
on 11 July 2016. The principal effects of the Deed of Amendment were to extend the maturity of the GHIF Bond by two years to 21 July
2021. To split the GHIF Bond into two tranches: the first tranche of US$2m has a Conversion Price of £1.50 per ordinary share and the
second tranche of US$6m has a Conversion Price remaining at £4.89 per ordinary share.
During the year to 30 June 2019, the Company entered into a second deed of amendment with the Global Health Investment Fund 1 LLC
(GHIF) that became effective on the 10 December 2018. The principal effects of the Deed of Amendment were to alter the June 2016
Deed of Amendment and Restatement of the five-year $8.0m and 5% coupon convertible bond with GHIF as follows:
• The maturity date of the GHIF bond was extended from December 2021 to December 2023.
• The deferment of interest period was extended from January 2019 to January 2022.
• The strike price of the first $2m tranche was reduced from 150p to 28.75p.
• The strike price of the second $6m tranche was reduced from 489p to 150p.
All other terms remained the same. The amendment has been treated as a modification and not an extinguishment because material
elements of the changes are unaffected and the difference of the cash flows before and after the amendment are approximately equal
to 10.4%. The future cash flows from the bond have been discounted at a cost of capital rate of 10.0%.
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genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
20. Convertible bond continued
Business Growth Fund (BGF)
The Company entered into an agreement with the Business Growth Fund (BGF) that became effective on 10 December 2018. Under the
terms of the agreement BGF and the Company entered into a convertible loan arrangement. The main terms of the convertible loan note
are:
• £2.5m loan that matures on 30 June 2025.
• Interest accrues on the loan at a rate of 7%, payable quarterly.
• Interest can be deferred into the principal up until 31 December 2021 and then needs to be paid in full.
• The loan converts at 28.75p which was 125% of the share price on 10 December.
• Certain warranties have been granted by the Company and the Executive Directors to BGF and BGF consent is required on
certain matters.
• The loan came conditional with a £1m subscription to the December 2018 fund-raising process.
• The maximum number of shares to be issued to BGF on conversion of the loan notes, when aggregated with the ordinary shares held
by BGF and persons acting in concert with BGF, is capped at 29.9% of the issued share capital of the Company.
The convertible loan has been stated at its fair value and will be subsequently measured at amortised cost. The future cash flows from
the bond have been discounted at a cost of capital rate of 10.0%, with loan arrangement costs being prepaid and amortised against the
life of the loan.
The convertible nature of the loan grants BGF an option to convert to equity at a certain share price; this has been valued as the residual
amount, representing the value of the equity conversion component, and treated as a derivative option.
Accounting for the convertible bonds
IFRS requires the convertible bonds to be accounted for as a compound instrument, comprising a Debt host (liability component) and a
Derivative (equity component). The Debt host is required to be recorded initially at fair value. Whilst the coupon is 5%, IFRS requires that
the fair value is calculated based on the rate of interest which a market participant would lend to the Company.
Given the nature of the Company’s activities, the Company has used a rate of 10.0% in calculating this liability. The Derivative has been
valued using a Quanto Option Valuation model which takes account of the multicurrency aspects of the convertible bond. The variables
used in running the model are as follows: volatility of the Company’s share price 24%, expected life of the Derivative 4.4 years, risk-free
interest rate 0.58% and a dividend yield of 0%.
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21. Share-based payments
(A) Share options outstanding at 30 June 2018
Prior to 28 November 2007, the Company operated a number of HMRC approved and unapproved share option schemes for employees
(including Directors). The original options were granted by Epistem Ltd but, following its acquisition in 2007 by Epistem Holdings Plc,
these were released in exchange for equivalent options over the ordinary shares of Epistem Holdings Plc. On 28 November 2007, the
Company established the 2007 Epistem Share Option Scheme. The 2007 Epistem Share Option Scheme was replaced by the 2017
Epistem Share Option Scheme that was adopted at the 2017 AGM.
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Share Options
Award
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2014 Unapproved Share Options
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
Epistem Unapproved Share Options
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
Epistem Unapproved Share Option
2017 Epistem Share Option Scheme
Epistem Unapproved Share Option
2017 Epistem Share Option Scheme
2017 Epistem Share Option Scheme
Epistem Unapproved Share Option
2017 Epistem Share Option Scheme
2017 Epistem Share Option Scheme
2017 Epistem Share Option Scheme
Epistem Unapproved Share Option
2017 Epistem Share Option Scheme
2017 Epistem Share Option Scheme
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Number of
awards
750
30,000
750
1,725
21,400
4,000
20,000
100,000
11,250
244,444
50,000
20,000
50,000
20,000
51,500
9,000
141,666
70,589
377,001
65,000
43,024
88,063
30,000
222,260
264,046
30,000
20,000
690,000
802,500
10,000
3,488,968
Exercise
price
£4.03
£3.60
£3.60
£5.50
£3.22
£3.25
£3.25
£2.75
£1.20
£0.90
£2.78
£0.82
£0.90
£0.90
£0.80
£0.80
£0.60
£0.43
£0.43
£0.36
£0.36
£0.36
£0.40
£0.37
£0.37
£0.34
£0.26
£0.21
£0.21
£0.21
Period within which
options are exercisable
Fair value
per option
10 Dec 2013 to 09 Dec 2020
10 May 2014 to 09 May 2021
10 Feb 2015 to 09 Feb 2022
28 Mar 2016 to 27 Mar 2023
29 Jan 2017 to 28 Jan 2024
12 Aug 2017 to 11 Aug 2024
20 Sep 2017 to 19 Sep 2024
17 Dec 2017 to 16 Dec 2024
11 Dec 2018 to 19 Sep 2025
07 Apr 2019 to 06 Apr 2026
07 Apr 2019 to 06 Apr 2026
02 May 2019 to 01 May 2026
01 Jun 2019 to 31 May 2026
14 Jul 2019 to 13 Jul 2026
01 Oct 2019 to 01 Oct 2026
15 Oct 2019 to 14 Oct 2026
22 Dec 2019 to 21 Oct 2026
04 Apr 2020 to 03 Apr 2027
04 Apr 2020 to 03 Apr 2027
30 Nov 2020 to 30 Nov 2027
30 Nov 2020 to 30 Nov 2027
05 Dec 2020 to 05 Dec 2027
28 Mar 2021 to 28 Mar 2028
20 Jul 2021 to 20 Jul 2028
20 Jul 2021 to 20 Jul 2028
20 Sep 2021 to 20 Sep 2028
19 Dec 2021 to 19 Dec 2028
05 Apr 2022 to 05 Apr 2029
05 Apr 2022 to 05 Apr 2029
20 Apr 2022 to 20 Apr 2029
£1.64p
£1.46p
£1.46p
£2.23p
£1.21p
£0.60p
£0.60p
£0.52p
£0.33p
£0.29p
£0.27p
£0.27p
£0.31p
£0.12p
£0.11p
£0.08p
£0.08p
£0.06p
£0.06p
£0.04p
£0.04p
£0.04p
£0.05p
£0.04p
£0.04p
£0.03p
£0.03p
£0.02p
£0.02p
£0.02p
Fair value
£
1,230
43,800
1,095
3,847
25,894
2,400
12,000
52,000
3,523
70,889
13,500
5,400
15,500
2,400
10,478
720
11,333
4,235
22,620
2,600
1,721
3,523
1,500
8,135
9,664
732
522
14,490
15,120
210
Note the share price at grant is the exercise price of the award.
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genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
21. Share-based payments continued
Option valuations
The options were valued using the Black-Scholes option-pricing model. The fair value per option granted and the assumptions used in
the calculations are in the table below. The Group’s effective date for IFRS 2, (‘Share-Based Payments’) implementation is 1 July 2006
and the IFRS has been applied to all options granted after 7 November 2002 which have not been vested by this effective date.
Award
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2014 Unapproved Share Options
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
Epistem Unapproved Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
2007 Epistem Share Option Scheme
Epistem Unapproved Share Option Scheme
2017 Epistem Share Option Scheme
Epistem Unapproved Share Option
2017 Epistem Share Option Scheme
2017 Epistem Share Option Scheme
Epistem Unapproved Share Option
2017 Epistem Share Option Scheme
2017 Epistem Share Option Scheme
2017 Epistem Share Option Scheme
Epistem Unapproved Share Option
2017 Epistem Share Option Scheme
2017 Epistem Share Option Scheme
Expected
dividend
yield
%
(Note b)
Expected
volatility
%
(Note c)
Risk
% rate
(Note d)
Performance
condition
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
40
50
50
50
50
43
43
43
43
30
36
36
37
39
19
19
19
19
12
20
20
15
15
15
15
16
16
16
16
16
16
16
5.00
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.50
0.50
0.50
0.50
0.75
0.75
0.75
0.75
0.75
0.75
0.75
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Note(e)
Expected
term
(Note a)
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
3 years
3 years
3 years
3 years
3 years
3 years
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
Grant date
31 Jul 2008
10 Dec 2010
10 May 2011
10 Feb 2012
26 Mar 2013
29 Jan 2014
12 Aug 2014
20 Sep 2014
17 Dec 2014
11 Dec 2015
07 Apr 2016
07 Apr 2016
02 May 2016
01 Jun 2016
14 Jul 2016
1 Oct 2016
15 Oct 2016
31 Oct 2016
22 Dec 2016
04 Apr 2017
04 Apr 2017
30 Nov 2017
30 Nov 2017
05 Dec 2017
28 Mar 2018
20 Jul 2018
20 Jul 2018
10 Sep 2018
19 Dec 2018
05 Apr 2019
05 Apr 2019
24 Apr 2019
(a) The expected term used in the model is three to five years and is based upon the Directors’ best estimates for the effects of exercise restrictions and
behavioural considerations;
(b) The dividend yield of 0% reflects the absence of a history of paying dividends and a clear dividend policy at the relevant grant dates;
(c) Prior to 2011, the expected volatility was estimated by the Directors after inspection of the financial statements of comparable businesses in the same business
sector as the Group. Thereafter, the expected volatility has been calculated by reference to the historic share price of the Company;
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(d) The risk-free rate used is based upon the prevailing UK bank base rate at the date of the grant; and
(e) These options may be exercised following the third anniversary of grant and are subject to performance criteria which are appropriate to the option holders’
role within the Company and which are assessed by the Remuneration Committee.
The number of options and their weighted average exercise prices are as follows:
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Outstanding as at 1 July
Granted during the year
Exercised during the year
Forfeited during the year
Lapsed during the year
Outstanding as at 30 June
Options exercisable at 30 June
Number
Weighted average exercise price
Weighted average remaining
contracted life – Years
2019
2018
2019
2018
2019
2018
1,942,252
2,038,806
–
–
(492,090)
2,060,675
340,337
–
–
(458,760)
3,488,968
1,942,252
554,319
497,715
25p
–
–
235p
132p
55p
36p
–
–
123p
132p
310p
i
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S
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m
e
n
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s
8.6
6.1
7.8
4.0
There were no options exercised in the year ended 30 June 2019 (2018: nil).
(B) Share Investment Plan
The Company operates a share investment plan, SIP, (‘The Epistem Share Investment Plan’) which is open to Directors and employees in
accordance with Inland Revenue approved rules. Under the terms of the SIP, Directors and employees may invest up to £150 per month
to be invested in ordinary shares (‘Partnership Shares’) in the Company at the prevailing market price. Participants, may withdraw their
Matching Shares once their associated Partnership Shares have been held for three years. At the same time as each monthly
subscription, a maximum of two Matching Shares for each Partnership Share is accrued by the Company on behalf of the SIP’s
participants. The Matching shares vest after 3 years, if an employee leaves the Company, unvested shares lapse. The monthly cost of
the Matching Shares is expensed to the income statement.
At 30 June 2019 the number of Partnership Shares earnt by employees was 48,994. The total number of potential Matching Shares
provided for employees at 30 June should all the employees meet the three-year vesting rule was 97,993. Of the 97,993 shares 15,957
have vested under the three years service rule.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
21. Share-based payments continued
In order to satisfy the shares accumulated as both Partnership and the Matching Shares, Epistem SIP Trustee Ltd, a wholly owned
subsidiary of the Company, periodically purchases shares on behalf of the scheme’s participants. At the balance sheet date Epistem SIP
Trustee Ltd owned 18,864 (2018: 28,050) shares in the Company. The historic cost of the purchased shares is recorded as a debit in
reserves and the movement over the year period is recorded below.
Historic cost of shares acquired
Brought forward
Transferred out to participants
Outstanding at 30 June
2019
£’000
196
–
196
2018
£’000
229
(33)
196
22. Financial risk management objectives and policies
The Group holds or issues financial instruments in order to achieve two main objectives, being:
(a) to finance its operations;
(b) to manage its exposure to interest and currency risks arising from its operations and from its sources of finance.
In addition, various financial instruments (e.g. trade receivables, trade payables, accruals and prepayments) arise directly from the
Group’s and the Company’s operations.
Transactions in financial instruments result in the Group assuming or transferring to another party one or more of the financial risks
described below.
Interest rate risk
The Group currently finances its operations through reserves of cash and liquid resources. In addition to equity, the Group’s capital
structure includes $8m convertible bond and £2.5m convertible loan note as detailed at note 20. The coupon on the convertible bond is
fixed at 5% and on the convertible loan note is 7%. Surplus cash at bank is placed on deposits at variable rates. The Board monitors the
financial markets and the Group’s own requirements to ensure that the policies are exercised in the Group’s best interests.
The following table demonstrates the sensitivity to a possible change in interest rates on the Group’s profit before tax through the
impact of floating rate cash balances.
2019
Cash and cash equivalents
2018
Cash and cash equivalents
An decrease in 25 basis points would have a similar opposite effect.
Increase in
the basis
points
Before tax
and equity
£’000
25
25
10
10
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Capital management
The Group’s objective in managing its capital is to ensure that the Group has adequate capital to fund its trading operations and ensure
the Group’s ability to continue as a going concern. In achieving this objective, the Group seeks to maintain an optimal capital structure to
reduce its cost of capital and provide returns for shareholders.
In managing its capital, the Group may from time to time issue new shares, sell assets or issue other capital instruments to optimise its
capital structure. In December 2018 the Company issued 15,217,391 new shares as described in note 25.
Credit risk
The Group monitors credit risk closely and considers that its current policies of credit checks meet its objectives of managing exposure
to credit risk.
Amounts shown in the balance sheet best represent the maximum credit risk exposure in the event that other parties fail to perform their
obligations under financial instruments. The credit status of the Trade receivables is detailed below:
Government-related agencies
Independent companies
2019
£’000
59
6
65
2018
£’000
122
37
159
Liquidity risk
The Board’s policy aims to ensure that sufficient funds are held on a short-term basis in order to meet operational needs. The age profile
of the Group’s obligations at the balance sheet date are detailed below:
Payable within 1 year
Payable within 1 – 2 years
Payable within 3 – 5 years
2019
£’000
1,217
–
8,518
9,735
2018
£’000
2,720
–
5,625
8,345
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76
genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
22. Financial risk management objectives and policies continued
Currency risk
The Group’s functional currency is sterling. The exposure to currency risk relates to licence income, those short-term trade receivables
which are not invoiced in sterling and foreign denominated cash held in UK banks. There are no significant costs incurred that involve
payments in foreign currency. The Group has no forward contracts at the year end (2018: £nil) to manage foreign currency risk.
Balances which are denominated in US dollars are detailed below:
Group
Trade and other receivables
Cash and cash equivalents
Less: convertible bond
2019
£’000
235
18
(6,191)
(5,938)
2018
£’000
47
217
(5,625)
(5,361)
The following table demonstrates the sensitivity to a possible change in currency rates on the Group’s loss before tax through the
impact of sterling weakening against the US dollar.
2019
Trade and other receivables
Cash and cash equivalents
Convertible bond
2018
Trade and other receivables
Cash and cash equivalents
Convertible bond
Decrease in
the currency
rate
Effect on
equity
£’000
5%
5%
5%
5%
5%
5%
12
1
(310)
2
11
(260)
An increase in currency rate of 5% would have a similar opposite effect.
Fair values of financial assets and liabilities
There is no material difference between the book value and the fair value of the Group’s financial assets or liabilities.
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77
23. Commitments under operating leases
At 30 June 2018 the Group had annual commitments under non-cancellable operating leases as set out below.
Group
Operating leases which expire:
Within 1 year
1 year to 2 years
Land and buildings
2019
£’000
239
–
2018
£’000
283
–
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The only material operating leases relate to the rental of main premises. The premise lease expires in April 2020.
24. Related party transactions
Other than items relating Director’s remuneration and employment, there were no related party transactions during the year (2018: nil).
At the balance sheet date, in respect of T Lindsay, Trade and other payables included amounts of £2,000 (2018: £2,000).
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25. Share capital
Allotted, issued and fully paid:
Brought forward at 1 July 2017
Shares issued
Balance at 30 June 2018
Shares issued
Balance at 30 June 2019
No
18,689,446
93,669
18,783,115
15,217,391
34,000,506
£’000
281
1
282
228
510
At the balance sheet date there are three convertible and potentially convertible arrangements that could result in in the issue of
additional shares:
1. Note 19 details the shares to be issued to the former owner of Visible Genomics on 10 December 2019 and 10 December 2021.
2. Note 20 details the option to convert the loan note held by BGF (£2.5m) at 28.75p.
3. Note 21 details the option to convert the loan note held by GHIF ($8.0m) as follows:
a. Tranche 1 $2.0m plus deferred interested at 28.75p per share.
b. Tranche 2 $6.0m plus deferred interest at 150.0p per share.
Note 20 details employee share options that could also be exercised and result in the issue of additional shares.
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genedrive plc Annual Report and Accounts 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
26. Other reserves
Balance at 30 June 2017
Transfer of shares to SIP members
Equity-settled share-based payments
Transactions settled directly in equity
Balance at 30 June 2018
Share issue
Deferred consideration- equity component
Transfer of shares to SIP members
Equity-settled share-based payments
Transactions settled directly in equity
Share
premium
account
£’000
25,988
–
–
–
25,988
3,015
–
–
–
–
Employee
share
incentive plan
reserve
£’000
Shares to be
issued
£’000
–
–
–
–
–
–
315
Share
options
reserve
£’000
1,382
–
55
55
Reverse
acquisition
reserve
£’000
Total equity
£’000
(2,484)
24,657
–
–
–
33
55
88
(229)
33
–
33
(196)
1,437
(2,484)
24,745
–
–
–
–
–
–
–
–
49
49
–
–
–
–
–
3,015
315
–
49
49
Balance at 30 June 2019
29,003
315
(196)
1,486
(2,484)
28,124
Shares to be issued relate to the equity component of deferred consideration, full details are contained in note 19.
The employee share incentive plan reserve represents 18,864 shares in genedrive plc (2018: 28,050 shares) all of which are held by
Epistem SIP Trustee Ltd. These shares are listed on the Alternative Investment Market and their market value at 30 June 2018 was
£3,867 (2018: £10,098). The nominal value held at 30 June 2018 was £283 (2018: £421).
The reverse acquisition reserve arises as a difference on consolidation under merger accounting principles and is solely in respect of
the merger of the Company and Epistem Ltd, during the year ended 30 June 2007.
The separate financial statements of genedrive plc are presented on pages 79 to 81.
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Company Balance Sheet
genedrive plc Annual Report and Accounts 2019
79
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
Notes
a
b
c
a
d
a
–
–
80
80
–
–
–
80
80
–
(8,518)
(8,518)
(8,438)
510
29,003
1,820
315
–
–
70
70
(109)
(1,250)
(1,359)
(1,289)
(1,289)
–
(5,625)
(5,625)
(6,914)
282
25,988
1,771
–
(34,955)
(5,131)
(25,554)
(9,401)
(40,086)
(34,955)
(8,438)
(6,914)
COMPANY BALANCE SHEET
AS AT 30 JUNE 2019
Assets
Non-current assets
Investment in subsidiaries
Current assets
Amounts receivable from Group
undertakings and other receivables
Cash and cash equivalents
Liabilities
Current liabilities
Other payables
Deferred consideration payable in shares
Net current assets/(liabilities)
Total assets less current liabilities
Non-current liabilities
Deferred consideration payable in shares
Convertible bond
Net (liabilities)/assets
Capital and reserves
Called-up equity share capital
Share premium account
Share options reserve
Shares to be issued
Accumulated losses:
At 1 July
Total comprehensive expense for the year
Total shareholders’ funds equity
These financial statements were approved by the Directors and authorised for issue on 3 October 2019 and are signed on their
behalf by:
David Budd
Chief Executive Officer
Matthew Fowler
Chief Financial Officer
Genedrive Plc
Company number: 06108621
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genedrive plc Annual Report and Accounts 2019
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
At 30 June 2017
Share issue
Recognition of equity-settled share-based payments
Transaction settled directly in equity
Total comprehensive expense for the year
At 30 June 2018
Share issue
Recognition of equity-settled share-based payments
Transaction settled directly in equity
Total comprehensive expense for the year
Called-up
equity share
capital
£’000
Share
premium
account
£’000
281
25,988
Share
options
reserve
£’000
1,683
33
55
88
–
–
–
–
–
25,988
1,771
3,015
–
3,015
–
–
49
49
–
1
–
1
–
282
228
–
228
–
Company Statement of Changes in Equity
Shares to be
issued
£’000
Accumulated
losses
£’000
Total
equity
£’000
–
–
–
–
–
315
315
–
(25,554)
2,398
–
–
–
(9,401)
(34,955)
–
–
–
34
55
89
(9,401)
(6,914)
3,243
364
3,607
(5,131)
(5,131)
At 30 June 2019
510
29,003
1,820
315
(40,086)
(8,438)
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Company Statement of Cash Flows
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Operating loss for the year
Group undertaking loan impairment
Exceptional gain on amendment o equity portion of deferred consideration
Share-based payment expense
Operating loss before changes in working capital and provision
Increase in amount owed from Group companies
(Decrease)/increase in trade and other payables
Net cash outflow from operating activities
Cash flows from financing activities
Proceeds from share issue
Proceeds from bond issue
Cash paid to settle deferred consideration
Net inflow from financing activities
Net (decrease)/increase in cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Analysis of net funds
Cash at bank and in hand
Net funds
genedrive plc Annual Report and Accounts 2019
81
Year ended
30 June
2019
£’000
Year ended
30 June
2018
£’000
(4,604)
5,300
(635)
49
110
(5,300)
(109)
(5,299)
3,243
2,366
(300)
5,309
10
70
80
80
80
(8,975)
8,975
–
–
–
(4,035)
–
(4,035)
–
–
–
–
(4,035)
4,105
70
70
70
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Notes to the Company Financial Statements
82
genedrive plc Annual Report and Accounts 2019
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS') as adopted by the
European Union and therefore comply with Article 4 of the EU IAS Regulation, International Financial Reporting Interpretations
Committee (‘IFRIC') interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared on a historical cost basis as modified by the revaluation of financial assets and financial
liabilities (including derivative instruments) at fair value through profit or loss.
The principal accounting policies adopted in the preparation of these financial statements have been disclosed in the notes to the
consolidated financial statements of the Group above.
Going concern: The Directors have concluded that it is necessary to draw attention to the revenue and costs forecasts in the business
plans. In order for the Company to continue as a going concern, there is a requirement to achieve a certain level of sales. If an adequate
sales level cannot be achieved, the ongoing spend of the Company will have to be reduced. While the Board is confident that it will
achieve the required revenue, or reduce spending if this is not achieved, there remains uncertainty as to the level of sales and the
amount of cost reduction that may be required. However, based on the relative likelihood of achieving versus not achieving, the Board
believes it is appropriate to continue to adopt the going concern basis of accounting in preparing these financial statements. These
financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.
a. Investments
The Company is the holding company of the Group. The Company owns 100% of the issued share capital of Genedrive Diagnostics Ltd
(formerly called Epistem Ltd) and Epistem SIP Trustees Ltd. Epistem Inc., incorporated in the United States of America, was wound up
during the year. The principal activities of the subsidiary companies are:
• Genedrive Diagnostics Ltd – the provision of services to the biotechnology and pharmaceutical industries; incorporated in England,
and with registered address 48 Grafton Street, Manchester , M13 9XX, United Kingdom.
• Epistem SIP Trustees Ltd – to act as trustee to the Epistem Share Incentive Plan; incorporated in England and with registered address
48 Grafton Street, Manchester , M13 9XX, United Kingdom.
At June 2017
Additions in the year
Impairment
At 30 June 2018
Additions in the year
Impairment
At June 2019
Investment in
subsdiaries
£’000
4,101
55
(4,156)
–
49
(49)
–
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genedrive plc Annual Report and Accounts 2019
83
Additions in the year ended 30 June 2019 comprised the fair value of the share options issued to employees of the subsidiary
undertaking during the year of £49k (2018: £55k). Full details of the share options issued are set out in note 21 to the consolidated
financial statements. Following an impairment review, the carrying value of the investments were impaired by £49k (2018: £4,156k).
During the year the carrying value of investments and the recoverability of amounts receivable from Group undertakings were assessed
for impairment in accordance with the Company’s Accounting Policies. The recoverable amount was determined on a value in use basis
using the management approved 12-month forecasts. The base 12-month projection was inflated for years two and three using specific
growth numbers in the Company’s business plan. For years four to seven there was no growth assumed. A seven-year life cycle was
chosen as appropriate for the business and technology of the Company. These projected cash flows were discounted at a pre-tax
discount rate of 12.5%. As a result of this analysis the carrying value of the investments at 30 June 2018 was reduced to £nil (2018: £nil)
and an impairment charge of £49k (2018: £4,156k) was booked during the year.
b. Amounts receivable from Group undertakings and other receivables
Company
Opening amounts receivable from Group undertakings
Additions in the year
Impairment provision
Closing amounts receivable from Group undertakings
2019
£’000
–
5,300
(5,300)
–
2018
£’000
784
4,035
(4,819)
–
Amounts receivable from Group undertakings are held in intercompany accounts with no security and no specified repayment terms.
£5.3m of loans owing from Group undertakings were written off during the year. In the prior year an impairment provision of £4,819k was
required at the balance sheet date.
c. Cash and cash equivalents
Company
Cash at bank and in hand
2019
£’000
80
80
2018
£’000
70
70
Cash and cash equivalents comprise current accounts held by the company with immediate access and short-term bank deposits with a
maturity of three months or less. Market rates of interest are earned on such deposits. The credit risk on such funds is limited because
the counter parties are banks with high credit ratings assigned by international credit rating agencies.
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84
genedrive plc Annual Report and Accounts 2019
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
CONTINUED
d. Convertible bond
The Company issued a convertible bond to the Global Health Investment Fund 1 LLC in July 2014. This bond was amended and restated
on 11 July 2016 and again 10 December 2018. Full details of the bond and the amendment can be found under note 20 of the Group’s
financial statements.
The Company issued a convertible bond to the Business Growth Fund on 8 December 2018. Full details of the bond and the amendment
can be found under note 20 of the Group’s financial statements.
e. Related party transactions
All of the employees of the Group are employed by Genedrive Diagnostics Ltd. There are no employees of the Company.
f. Financial risk management
The Company’s approach to managing financial risk is covered in note 22 to the Group’s financial statements.
Page Title at start:Content Section at start: DIRECTORS, SECRETARY AND ADVISERS
Directors
Ian Gilham
David Budd
Matthew Fowler
Tom Lindsay
Chris Yates
Company Secretary
Matthew Fowler
Registrars
Neville Registrars Ltd
Neville House
Steelpark Road
Halesowen B62 8HD
Legal Advisers
Addleshaw Goddard LLP
Cornerstone
107 West Regent Street
Glasgow G2 2BA
Registered Office
The Incubator Building
Grafton Street
Manchester M13 9XX
United Kingdom
Nominated Adviser & Broker
Peel Hunt Ltd LLP
Moor House
120 London Wall
London EC2Y 5ET
Principal Banker
Natwest Commercial Banking
1 Spinningfields Square
Deansgate
Manchester M3 3AP
Independent Auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
No1 Spinningfields
1 Hardman Square
Manchester M3 3EB
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9
genedrive plc
48 Grafton Street
Manchester M13 9XX
United Kingdom
T +44 (0)161 989 0245
F +44 (0)161 989 0262
www.genedriveplc.com