Advancing molecular
diagnostics to the
point-of-care
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genedrive plcAnnual Report and Accounts 2020
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 diagnostics.
Delivering our
strategy
Genedrive® is a focused
molecular diagnostics company
with four assays on-market and
with two more in development
supporting our strategy to get
material revenue from at least
three assays by 2021.
How Genedrive® works
Genedrive® utilises proprietary technology to rapidly
amplify and detect target nucleic acid sequences,
often without the requirement for nucleic acid isolation.
Genedrive® provides rapid nucleic acid amplification
and detection from various sample types, including
plasma, sputum or buccal swab (assay dependent).
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 assay, results are
available in as little as 27 minutes.
See pages 4 and 5
Acronyms used throughout this document:
HCV Hepatitis C Virus
mTB
DoD
AIHL Antibiotic Induced Hearing Loss
CoV-2 SARS CoV-2
Tuberculosis
US Department of Defense
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Our Performance
1
Financial Highlights
⊲ Revenue for the year to 30 June 2020 in line with expectations at
£1.1m (2019: £2.4m), with H2 revenues significantly impacted by
COVID-19 disruption
⊲ Year-end cash of £8.2m (Dec 2019: £3.5m) following a successful
equity fundraise in May 2020
⊲ Balance sheet further strengthened through conversion of the
US$8.0m Global Health Investment Fund bond
⊲ At year end over £1.0m of initial orders for Genedrive® 96
SARS-CoV-2 kit, pending regulatory approvals
⊲ Post year end, no material sales for 96 SARS-CoV-2 test as we
await further registrations, but further orders are anticipated
through a widened network of partners. Pipeline of sales
opportunities for 96 SARS-CoV-2 test continues to grow and
includes an advanced opportunity for supply to a Ministry of
Health of a European country, which if converted to a sale could
be for low double digit millions of pounds and delivered in the first
quarter of the new calendar year
⊲ Unaudited cash of £5.1m at 31 October 2020 after securing long
lead time supplies and building initial stocks
Operational Highlights
⊲ HCV test obtained WHO pre-qualification status
⊲ AIHL test CE-marked and distributor contracted for UK product
launch
⊲ Framework contract with the DoD increased by $2.0m
⊲ Genedrive® 96 SARS-CoV-2 test CE marked and modest first
commercial sales achieved
⊲ Genedrive® SARS-CoV-2 Kit for Point of Care demonstrates
positive results from saliva in approximately 15 minutes.
Development remains on track with launch anticipated in March
2021
⊲ Post CE mark for 96 SARS-CoV-2 Kit - expanded extraction claims
achieved and migrated Kit across wider range of RT-PCR
instrument platforms
⊲ First overseas regulatory approval in September 2020 with South
Africa Health Products Regulatory Authority validating the test
⊲ Initial feedback from FDA EUA submission received in November
2020 but no visibility on EUA timescales
⊲ Expecting additional regulatory approvals, but timing remains
undefined
⊲ Post year end significant progress made with collaboration
agreement with Beckman Coulter to bring a fully automated
testing solution to the market
⊲ Recent vaccine news is very welcome but the Board remains
confident that high throughput and point of care Covid-19 testing
opportunities will be a critical part of controlling the pandemic for
a considerable period of time
Strategic Report
1 Our Performance
2 Company Assay Update
4 Genedrive® Product
6 Our HCV Kit
7 Genedrive® Connect
8 Business Model
10 Chairman’s Statement
12 Chief Executive’s Review
14 Engaging with our Stakeholders
16
18 Financial Review
20 Key Performance Indicators
21 Principal Risks
Strategy in Action: Antibiotic Induced Hearing Loss
Introduction to Corporate Governance
Governance
22
24 Board of Directors
26 Corporate Governance
28 Report of the Audit and Risk Committee
30 Report of the Remuneration Committee
32 Remuneration Policy
36 Directors’ Report
Financial Statements
38
42
Independent Auditor’s Report
Consolidated Statement of
Comprehensive Income
43 Consolidated Balance Sheet
44 Consolidated Statement of Changes in Equity
45 Consolidated Cash Flow Statement
46
72 Company Balance Sheet
73 Company Statement of Changes in Equity
74 Company Statement of Cash Flows
75 Notes to the Company Financial Statements
77 Directors, Secretary and Advisers
Notes to the Consolidated Financial Statements
genedrive plc Annual Report and Accounts 2020
2
Company Assay Update
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.
Responding
to molecular diagnostic
opportunities
Rapid response to COVID-19 outbreak
Genedrive® 96 SARS-CoV-2 Kit
⊲⊲ High-throughput lab-based PCR test diagnose whether
someone has an active infection
⊲⊲ Freeze-dried plates offer testing simplicity and temperature
stability in high throughput format
⊲⊲ Cytiva’s manufacturing processes are capable of producing
10,000 polymerase chain reaction (PCR) beads per hour
⊲⊲ CE marked May 2020 and commercial launch June 2020.
South African HPRA approval in late September 2020
⊲⊲ Analyses assays from up to 94 patients in around 90 minutes
Future SARS-CoV-2 Point-of-Care Diagnostic Kit
Preliminary product expected December 2020.
Final CE marked version March 2021.
Designed for use outside hospital settings (e.g. care homes),
leveraging the Genedrive® qualities of size, portability and cost.
Collaboration on AIHL
Genedrive® MT-RNR1 is a molecular test to screen newborns
for a genetic predisposition to certain antibiotics that cause
irreversible hearing loss.
Genedrive® meets the clinical need, ease-of-use size, portability
and crucially speed – delivering a result in the 'golden hour'.
⊲ Initial grant award from NHS of £0.6m
⊲ Test CE Marked
⊲ Hospital trials began 2020 and progressing after some delays
owing to COVID-19, Anticipated to complete imminently
⊲ Distribution agreement with Inspiration Healthcare Plc
⊲ Commercial roll out now beginning
Gene defect is not geographically variable and so the Genedrive®
MT-RNR1 assay addresses a global market.
See pages 12 and 13
See pages 16 and 17
genedrive plc Annual Report and Accounts 2020
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Tuberculosis (under development)
Genedrive® tuberculosis test designed as an affordable rapid
PCR-based test for the detection of mTB and rifampicin ('RIF')
resistance.
The TB market is large and well defined and TB is the largest
single infectious disease causing deaths in the world.
⊲ Grant funding of £1.1m awarded in Feb 2018 and phase I project
completed in Mar 2020
⊲ New companion device and processing cartridge developed
⊲ System based on pathogen enrichment technology that has
technical capability for other targets
Product launch estimated 2022.
See pages 12 and 13
Complex analysis of Biohazard targets
Genedrive has been working with the US DoD since 2013 and
has recorded revenues of over $10m to date.
Point-of-need capability for HCV testing
A first-to-market opportunity to support the WHO's goal of
eliminating HCV by 2030.
The DoD has helped fund many of the unique properties of the
Genedrive® that make a versatile military specification piece of kit
very appropriate to conditions and extremities in the developing
world.
In almost 2,000 patient tests:
Specificity 100%
Sensitivity 96.5% = -100%
The current assays cover multi-plex targets for a broad range of
biopathogens.
⊲ Framework contract extended by $2m in November 2019
⊲ Customer had indicated their intention to enter a new
contract in Autumn 2020 and facilitate procuring around 500
Genedrive’s and associated assays over a number of years,
– timescales have slipped into the new calendar year owing
to COVID
⊲ Continue to receive and ship smaller orders in FY2020/21
The long term view remains very positive with high expectation of
recurring and growing revenue.
It is estimated that 70m people are living with chronic HCV
infection with over 1.7m new cases annually.
In 2015 only 7.4% of those diagnosed with HCV infection had
started treatment.
⊲ Product CE marked in 2017 and launched in 2018
⊲ Distributor partner network secured for main markets and
includes Sysmex for EMEA and Asia Pacific and Arkray for India
⊲ Registered in India, largest single market, January 2020
⊲ Sales activity disrupted by COVID-19 pandemic
⊲ WHO pre-qualification status achieved in June 2020
The long term need for molecular HCV testing remains and with
WHO pre-qualification status, the outlook and opportunity is
positive for the Genedrive® HCV test.
See pages 12 and 13
See pages 12 and 13
genedrive plc Annual Report and Accounts 2020
4
Genedrive® Product
Genedrive® is an
innovative, easy-
to-use platform
that brings molecular diagnostics
to decentralised laboratories
Overview
Genedrive® is a small patented molecular diagnostics 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 diagnostics results without the need for
specialist knowledge or data interpretation. With no manual
calibration required, Genedrive® is ideal for lower throughput
decentralized laboratories.
How Genedrive® works
Genedrive® utilises proprietary technology to rapidly amplify
and detect 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 27 minutes.
Simple
Versatile
Low cost
Portable
Fast
genedrive plc Annual Report and Accounts 2020
Results
available in
as little as
27
minutes
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genedrive plc Annual Report and Accounts 2020
This Genedrive® HCV assay may positively impact the continuum of HCV care from screening to cure by supporting real-time treatment decisions.BMJ GUT Journalshttp://gut.bmj.com/content/early/ 2018/04/03/gutjnl-2017-315783
6
Our HCV Kit
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
dropout 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. Despite the delays owing to COVID we expect
healthcare systems to revisit HCV and our product is well
positioned to support.
Providing
results within
90
minutes
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 plc Annual Report and Accounts 2020
Genedrive® Connect
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,
and will 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. 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.
Benefits
➔ Enhanced data capture and
supplementary patient
demographic data
➔ Improved laboratory management
to append data to test results
➔ Easy transfer of data to endpoint
locations
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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.
genedrive plc Annual Report and Accounts 2020
8
Business Model
genedrive plc Annual Report and Accounts 2020
Who we are
Underpinned
by our values
A highly specialised, agile company with a skill set relevant for developing high-quality PCR assays.Strong development, manufacturing and commercial relationships and well experienced in developing highly accurate molecular diagnostic assays for use on our Genedrive® instrument.We outsource a substantial part of our processes and retain key value-add items in-house.Our product is sold via a distributor network so that customers have global support.We are committed to generating shareholder value by pushing the boundaries of innovation to maximise the unique characteristics and capabilities of Genedrive®. 9
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How we
create value
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See page 21
See pages 22 to 37
genedrive plc Annual Report and Accounts 2020
Genedrive adds value through rapidly developing tests that lever the unique properties of the Genedrive® system. ⊲Niche positions in attractive growth markets ⊲A unique and differentiated technology ⊲Deep product and PCR expertise ⊲Highly skilled people ⊲Entrepreneurial culture ⊲Experienced management teamLong term delivery and growth underpinned by a set of values and frameworks that protect from unnecessary risk.Robust risk management framework ⊲Appropriate risk management structure ⊲Risk managed to ensure the Group delivers its objectives ⊲Integrated approach to risk Effective governance structure ⊲High standard of corporate governance that aligns with the needs of the Company ⊲Experienced and knowledgeable Board ⊲A desire to ‘punch above our weight’ in terms of controls, process and governanceOur people ⊲ Reward and recognition ⊲Employee wellbeing ⊲Personal development and sense of belongingOur partners ⊲ Quality and innovation ⊲Rapid development of new products ⊲Contribution to healthcare fightOur patient ⊲First-to-market solutions ⊲Availability of affordable testing
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Chairman’s Statement
Proven
to be resilient and innovative
programme was slowed, but still continued
throughout the period through the energy
and commitment of our clinical partners in
the NHS, and is now due to complete
imminently. Our HCV product saw limited
sales but with WHO pre-qualification status
achieved during the initial lockdown
period, we are hopeful to see a positive
pick-up in sales as and when the world
returns to the new normal. Our US DoD
contract was not directly impacted with
sales being approximately as expected,
but availability of funding may affect the
timing of the next phase of the customer’s
purchase plans.
Performance
Revenue for the first half of the year was
£0.6m and was on plan with our targets for
the full year. However when Covid-19 began
to impact in early 2020 it impacted our
ability to commercialise the HCV product
and full year revenues were £1.1m (2019:
£2.4m).
Operational performance in the first half of
the year was centred around the
development of our AIHL product that was
CE marked in November 2019 and
launched into NHS Hospital trials in
January 2020. We remain enthusiastic
about the product’s opportunities and
very pleased with the partnership entered
into with Inspiration Healthcare plc,
experts in neonatal care and able to
exploit the potential of this neonatal test.
Despite good progress on the AIHL test, the
second half of the year was defined by our
innovation and rapid development of two
Covid-19 tests. We made a decision in March
2020 to develop a high throughput test, CE
marked it at the end of May and began
commercial sales in June. Our historical
Dear Shareholder
The past 12 months have brought some
immense challenges and indeed some
significant opportunities as key industry
players found their place to contribute to
the global Covid-19 crisis. genedrive has
adapted well and emerged in a stronger
position with an expanded product
portfolio, a stronger balance sheet and a
growing pipeline of sales opportunities.
With the challenge of Covid-19 came the
opportunity for genedrive to innovate and
respond – which we did with the
development and launch of the
Genedrive® 96 SARS CoV-2 Kit.
Combining our deep technical capabilities
in PCR with our manufacturing partner’s
abilities in freeze drying, we developed a
unique and innovative Covid-19 test that
we launched in and began selling in June.
In parallel with the high volume test we
began to develop a point of care Covid-19
test to run directly on the Genedrive®
platform – a product that will be launched
in the coming months.
In order to develop and launch a range of
Covid-19 products the Group raised £8.0m
(gross) through an equity funding
announced in May 2020. Part of these
funds were used in June 2020 to pay the
interest due to Global Health Investment
Fund (GHIF) when they elected to convert
their $8.0m convertible bond. Conversion
of this bond significantly strengthened the
Group’s balance sheet, reducing cash debt
to £2.7m, (2019: £8.5m).
The focus of healthcare systems around
the world on Covid-19 clearly impacted our
assay strategies in the second half of the
year with little commercial traction owing
to low activity in hospitals on non-Covid
related products. Our AIHL hospital trial
genedrive plc Annual Report and Accounts 2020
Our adaptability and people drive the Company’s ability to bring innovation and rapid product development to customers.Ian Gilham, Ph.D.Chairman 11
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DoD
Fast results for
BioHazard sensor
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to be resilient and innovative
distribution partners do not cover Europe, so
we have been working to establish new
relationships in Europe while focusing on
opportunities in India, Africa and the United
States. The subsequent roll out and sales of
the test have been impacted by delays in
obtaining regulatory approvals from third
party agencies as well as expanding claims
to new platforms and both automated and
manual extraction processes, to further
improve product performance and
positioning. Post year end we received
South African approval for the test and also
entered into a collaborative relationship with
Beckman Coulter to deliver a high volume
testing solution on their automated
equipment. We have ongoing dialogue with
the Indian regulators but progress has been
slow. In November the FDA provided initial
feedback of our EUA application, and
requested additional information primarily
related to new requirements and
methodologies they introduced after our
initial submission earlier in the year. We also
provided additional data to the World Health
Authority (WHO) in November. At this time
we do not have visibility from the FDA, WHO
or the Indian regulatory agency on approval
timelines but we believe the opportunities in
these countries remain very significant. The
focus of our development on Covid-19
products will continue into early calendar
year 2021. Once development is complete
the team will revert to our Tuberculosis
product development activities.
Tuberculosis is still a significant unmet needs
and an attractive opportunity for the
Company and one which we are targeting to
launch a new product in 2022.
Governance and People
The Board has continued to focus on a
strong governance framework, ensuring
that internal controls, values and culture
align with our strategy. We aim to have a
governance structure that meets the
medium term requirements of the Company.
This can be reviewed in our Corporate
Governance Report on pages [26 and 27].
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
In the short term the Covid-19 global
crisis significantly impacts our ability to be
definitive in our outlook. With a focused
portfolio of products and our reliance
on healthcare markets, demand will be
impacted by the priorities of countries
Covid-19 responses. But conversely our
Covid-19 products, the on-market high
volume lab assay and the soon to be
launched point of care saliva based test,
provide great opportunities. Although
initial commercialisation of the high
volume assay has experienced some
delay we continue to focus on building
sales through collaborations such as the
one with Beckman Coulter and our other
existing relationships. Our pipeline of
sales opportunities for the 96 SARS-CoV-2
test is growing and includes a potential
supply contract to a Ministry of Health of
a European country. If converted to a sale
this would be for low double digit millions
of pounds of revenue and delivered in
the first quarter of the new calendar year
without the need for prolonged regulatory
approvals. For our point of care test we
are expecting to CE mark and launch the
product in March 2021. We expect it will
contribute significantly to the on-going
management of Covid-19 and will also
be an important contributor to sales for
genedrive. Until such opportunities with
our Covid-19 tests are crystalised we
will continue to manage the cost base
appropriately.
Despite these challenges our strategy is
to position ourselves to react decisively
and quickly to adapt to the changes and
take advantage of opportunities that
will emerge. In terms of AIHL and DoD
Pathogen detection we expect to see a
step up in demand through the coming
year as these products enter new phases
in their lifecycles. Whilst the past year
presented many challenges it has also
offered many opportunities which
have the potential to deliver significant
revenues and cashflows for the Group.
The level of demand for Covid-19
testing remains high and even with
vaccines on the horizon we believe this
demand will continue for a considerable
period of time and we will continue to
maintain focus on our two product strategy
with both lab based and point of care
solutions. I remain confident of genedrive’s
ability to deliver and grow significantly over
the coming years.
Dr Ian Gilham
Chairman
16 November 2020
genedrive plc Annual Report and Accounts 2020
12
Chief Executive’s Review
genedrive plc
is a commercial stage
company
The registration and regulatory approval
processes of the test has had to take
account of the various formats of our
product – we effectively have three distinct
product variants for different lab machines.
As indicated in July we obtained the CE
mark on the Roche Lightcycler and have
extended the validation to include the ABI
7500 FAST and BioRad CFX96 systems to
the range of instruments on which the assay
is CE Marked.
We have focused only in specific target
markets and obtained South African
approval in September 2020 which was a
clear validation of the product. We are
currently pending on regulatory approvals in
the US (EUA approval), with WHO and in
India but have limited information on
timescales which we believe is owing to the
huge burden of activity on their regulatory
bodies.
While there has been excellent sales funnel
progression since the summer, there have
been no material deliverable contracts to
date as further key registrations have not yet
been achieved. We have also focused
commercially on the larger, more strategic
opportunities that by their nature take longer
to come to fruition. These are higher risk, but
higher reward. We remain optimistic about
the full potential of the test, and our pipeline
of sales opportunities for 96 SARS-CoV-2
test includes a supply opportunity to a
Ministry of Health of European country
which the Company is engaged with directly.
This opportunity is at an advanced stage but
may not conclude successfully. If we are
successful the total revenue expectation is
for low double digit millions of pounds in the
first quarter of the new calendar year and we
Overview
During the first half of the year we continued
to execute on our product and commercial
strategy. However with the emergence of
Covid-19 in the second half of the year we
saw revenues on our core assays stall, just
as many companies found as global markets
went into quarantine. Despite the impact on
revenues, Covid-19 brought real opportunity
to genedrive as a commercial stage
molecular diagnostics company. We were
quick to develop solutions and brought a
genuinely unique product to market in rapid
time.
Our performance
Reacting to the COVID-19 global
crisis
As announced on 25 March 2020, following
the rapid global shift of healthcare emphasis
towards testing and treatment of Covid-19,
the Company refocused a significant part of
its core resources towards development of
two SARS-CoV-2 tests to detect active
Covid-19 infections.
The first test is a high throughput laboratory
test and the second test, expected to be
launched in March 2021, is a point-of-care
test that will run on the Genedrive®
instrument. The high throughput test was CE
marked in May 2020 and we commenced
modest commercial sales in June 2020.
Despite having CE marking, our historical
distribution partners focus on Africa, Asia
and India and so we have been working to
establish new relationships in Europe. In the
UK, we have not focused on opportunities in
the NHS due to their existing supply
contracts, and their migration to 384-well
format platforms in the ‘Lighthouse’ labs. We
do however believe our point of care device
should have considerable relevance to the
NHS.
After CE marking and initial launch, we
continued to extend the product’s claims,
including the introduction of automated
extraction processes and with the
development of the Genedrive® Exporter
tool to simplify analysis for the user.
genedrive plc Annual Report and Accounts 2020
The previous year brought some immense challenges and fantastic opportunities.David BuddChief Executive Officer S
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do not expect additional approval
processes. We expect that our high
throughput test will make a significant
contribution to revenue over the coming
periods. Finally, new relationships in new
markets, such as with Beckman Coulter are
presenting new and unique revenue
opportunities for the Company.
The second test, the point of care assay on
the Genedrive® device is due for preliminary
release (Research Use Only) around
December 2020 with a full CE marked
product targeted for March 2021. While first
to market opportunities are significant, the
underlying qualities and reliability of a test
are also of significant importance. I therefore
believe that customers are looking for
accurate validated products and that the
advantages of being deployable and rapid,
mean we can address a global market
flexibly with the Genedrive® device. Post
year end we announced that our test would
be a saliva based assay with a design goal
of achieving results within 15-20 minutes and
with a limit of detection within the accepted
product profile targets of the UK
Government. While recent vaccine news is
very welcome, we have a high degree of
confidence that high throughput and point of
care Covid-19 testing opportunities will be a
critical part of controlling the pandemic for a
considerable period of time. We remain fully
focused on exploiting the commercial
opportunities arising on testing for both
assays.
Our performance
HCV
The CE marked Genedrive® HCV ID Kit was
brought to market in March 2018. It is the first
low cost, qualitative molecular decentralised
testing product on the market. We achieved
World Health Organisation pre-qualification
status in May 2020. Prequalification means
the Genedrive® HCV ID kit will be included
in the WHO list of prequalified in vitro
diagnostics (IVDs) and becomes eligible to
participate in the procurement processes of
UN agencies. WHO Member States are
encouraged to use the WHO list of
prequalified IVDs for their respective
procurement decisions. To date, it has been
a challenging opportunity due to low funding
in market for HCV drugs and consequently
diagnostics. The redirection of healthcare’s
focus to Covid-19 saw sales activity reduce
significantly in the second half of the year.
Despite the Covid-19 market issues, the
market opportunity remains, and as
healthcare priorities move back away from
Covid-19 with our WHO pre-qualification
status and our experienced distribution
partners we are positioned to quickly and
efficiently exploit opportunities.
Pathogen detection tests for US DoD
Revenue in the year was £0.4m down £0.5m
on the prior year, but this was expected as
2019/20 was a transition year for the DoD
contract. The initial DoD development
contract that had been worth approximately
$10.0m over its life came to an end during
2019, and was extended by $2.0m in
November 2019. This extension allows the
DoD to continue ordering into their new
financial year when it is expected they will
enter a long-term supply contract. While final
unit numbers and assays will be subject to
confirmation and allocation of funding, the
expectation is that the DoD will procure up
to 500 Genedrive®’s and associated assays
over a three year period and we now expect
to begin contract discussions in early 2021.
The DoD development contract has been a
success for genedrive over the years
supporting development of the Genedrive®
capabilities, providing funding to the Group,
delivering a complex product to the
customer specification, and providing
ongoing revenue. We had significant
headwinds in being able to supply the DoD
for part of the year owing to supplier quality
issues. The Company ultimately transferred
production of DoD product to Cytiva. We
have every belief that the product and the
customer will form a significant part of the
business in the coming years.
Antibiotic Induced Hearing Loss
In June 2018 the Group was part of an award
from UK NHS National Health Research for
the development and implementation of a
point of care test for the prevention of
hearing loss in new-born children when
exposed to certain antibiotics. The
genedrive allocation of the award has been
used to fund the product through
development, and is now supporting our
in-hospital validation processes during
clinical trials at 2 NHS sites. The Genedrive®
MT-RNR1 assay has been designed and
manufactured to run a highly accurate test in
27 minutes – within the National Institute of
Clinical Excellence “golden hour” needed
for clinicians to assess and prescribe
alternative antibiotics. I am thoroughly
excited about the global commercial and
clinical prospects as well as the healthcare
benefits of this first use of a molecular test in
a neonatal emergency setting.
The product is due to be launched on a
targeted basis in UK and Ireland at the end
of 2020 with full commercial roll out planned
13
for June 2021. We signed a distribution
agreement with Inspiration Healthcare plc in
April 2020. With the neonatal sales
knowledge of Inspiration Healthcare we
expect commercial traction from early
adopters at launch, then 12-18 months later
waves of large demand following write-up
and inclusion in paediatric guidelines; if
successful there should be adoption in the
NHS and further afield.
The market is potentially very attractive as
being both large and at a higher margin
compared to global health-related tests. This
opportunity is well suited to the Genedrive®,
needing multiple, low-cost units to deliver
fast testing at a point of need.
mTB
Tuberculosis remains one of the largest
molecular testing markets in the world and in
terms of routes to market and process it is
well defined. It is an important market for the
Group and a vital component of our strategy.
We have therefore not changed our stance
on the importance of accessing this market,
but owing to the focus on Covid-19 have
pushed out our time horizon for product
launch to 2022.
Outlook
At the end of a challenging year, we are now
in a fundamentally stronger position, aided
by the £8m (gross) fund raise in May 2020
and the conversion of loan notes in June
2020 and post year end in September 2020.
We were nimble in reacting to Covid-19 and
we now have four assays on market: HCV,
DoD Biohazard, AIHL, and COVID 96 rapid
test, and while there have been delays and
there remain some uncertainties around
regulatory approvals for the Covid tests, we
remain confident in the product’s potential
and our pipeline. We also have two products
in development: mTB and a COVID
point-of-care test. These products are
expected to produce meaningful revenues
in the future.
It has been a challenging year, but
genedrive was in the fortunate position to
have invested in the capabilities and people
needed to exploit its position in PCR, and
emerge a better and stronger company. Our
products and pipeline provide us with
confidence that we will deliver strong
growth and much increased shareholder
value.
David Budd
Chief Executive Officer
16 November 2020
genedrive plc Annual Report and Accounts 2020
Shareholders
We create value for shareholders by
delivering sustainable growth. We engage
regularly with shareholders through a
planned programme of investor relation
activities to ensure that our strategy and
market trends are clearly understood.
Shareholder feedback along with details
of movements in our shareholder base are
regularly reported to and discussed by the
Board and forms part of its decision-
making.
Why we engage
⊲ We want to ensure that our strategy and
market trends are clearly understood
⊲ To explain how we aim to grow and
create shareholder value
How we engage
⊲ Corporate website investor relations
section
⊲ AGM, Annual Report, trading updates
and results presentations
⊲ Press releases
⊲ Analyst briefings
⊲ Investor roadshows with current and
prospective institutional shareholders
⊲ Meetings/consultation with
shareholders on relevant matters
Stakeholder areas of interest
⊲ Governance and transparency of
Company vision and our strategy
for growth
14
Engaging With Our Stakeholders
Customers
Shareholders
Employees
Suppliers
Understanding our stakeholders
enables the Board in performing its
duty under s172 of the Companies
Act 2006, to consider and discuss
each stakeholder group’s interests
and concerns and the potential
impact of any Board decision on
stakeholder groups. Stakeholder
interests are considered by the
Board through a combination of the
following: Executive Directors’
reports, H&S reports and customer
and supplier feedback.
genedrive plc Annual Report and Accounts 2020
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Suppliers
Our network of innovative, reliable and
quality-focused suppliers is critical to
ensuring we can meet the needs of our
customers. We work with our suppliers to
balance economical requirements with
environmental, social and ethical
considerations. Information relating to the
Group’s supply chain is used by the Board
to ensure that, in addition to business
needs, social and ethical requirements
are also being met.
Why we engage
⊲ To meet the needs of our customers,
ensuring and maintaining high-quality
materials and resources
⊲ To ensure high supplier standards, both
ethical and otherwise
How we engage
⊲ Regular communication
⊲ Regular evaluation of quality, service
and performance using onsite and
offsite audits
Stakeholder areas of interest
⊲ Quality and accreditations
⊲ Sustainability
⊲ Satisfaction/reputation
⊲ Corporate social responsibility
expectations
Customers
As a growing diagnostics group we
innovate, design and manufacture
diagnostics tests for customers worldwide.
We engage with our customers,
strengthening our understanding of their
needs and the core markets we serve.
We use our wealth of expertise and
knowledge to support their requirements
today and tomorrow. Updates and
feedback from customers are regularly
reported to the Board. This provides the
Board with specific and general market
intelligence, together with any potential
impact or opportunities for the business.
Why we engage
⊲ To understand and exceed customer
expectations – delivering focused
solutions that can meet the diverse
and changing requirements of our
global base
⊲ To drive continuous improvement in
customer service, by responding to
feedback and changes in the wider
industrial and healthcare markets we
serve
How we engage
⊲ Regular one-to-one interactions and
meetings
⊲ Industry exhibitions, customer site tours
and presentations
⊲ Company website
⊲ LinkedIn communications
⊲ Digital marketing
Stakeholder areas of interest
⊲ Customer service/quality standards and
compliance
⊲ Research and development
opportunities
15
Employees
Creating value for our customers relies
on the quality of the services and
products that we provide, and the skills
and knowledge of our employees.
We appreciate the value of diversity
and recognise the resilience, focus and
innovation that our employees all over
the world demonstrate on a daily basis.
Feedback from the employee engagement
survey was presented to the Board,
which assisted in its understanding and
ability to ensure the alignment of culture
and strategy. As part of the actions
determined, the CEO Town Hall
programme was commenced.
Why we engage
⊲ To ensure alignment of our culture and
strategy
⊲ To create a diverse and inclusive
workplace where every employee can
demonstrate entrepreneurship and help
build our business
⊲ To ensure we deliver and make the right
business decisions, which in turn means
we retain and develop the best talent
How we engage
⊲ Company communications, town hall
programmes, briefings, news bulletins
⊲ Training and development
⊲ Employee performance reviews
Stakeholder areas of interest
⊲ Reward and recognition
⊲ Internal communication
⊲ Diversity and inclusion
⊲ Personal development and sense of
belonging
⊲ Transparency of information
⊲ Reputation management
genedrive plc Annual Report and Accounts 2020
16
Strategy in Action: Antibiotic Induced Hearing Loss
Developing
a point-of-care test
with initial implementation
in the NHS
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
within 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.
Rapid progress from clinical need
to CE marking
⊲ 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
⊲ By December 2018 a test was developed to satisfy the
specificity and speed requirements: identifying the
mutant gene in under 30 minutes
⊲ Proof of principle batches were produced in Spring 2019
⊲ After assay optimisation, initial scale size batches were
produced and tested in Summer 2019
⊲ The assay was CE marked in November 2019
⊲ Clinical trials in two hospitals commenced January 2020
and are expected to conclude in November 2020
Outlook
⊲ Clinical trials expected to successfully complete during 2020
⊲ Product launch is expected shortly following trial completion
in 2020 with some initial uptake from participant Trusts
following swiftly
⊲ Longer term uptake will be by clinical guidelines and
evidence reviews but we are likely to see wholescale uptake
across the NHS if the trials prove successful
⊲ European markets provide similar potential and entry is
facilitated in part by CE marking
⊲ Entry to large North American market will be reviewed in
light of its regulatory hurdles and will likely result in entry
via partners
genedrive plc Annual Report and Accounts 2020
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Distribution agreement
announced 24 April 2020
We look forward to working
with genedrive plc to make
this test the standard of care in
the UK and the wider neonatal
community around the world.
Neil Campbell
CEO, Inspiration Healthcare plc
genedrive plc Annual Report and Accounts 2020
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 BuddChief Executive Officer
18
Financial Review
Strong
momentum
with coronavirus tests
Administration costs were £2.0m, up
slightly from the prior year £1.9m. The
majority of this cost increase was related
to the second half of the financial year
where certain share price linked costs
increased as the share price increased.
The trading loss for the year was £5.6m
(2019: £4.4m) and the increase was owing
to the reduced revenue in the year. There
were no exceptional costs in the year
(2019: £0.4m gain), giving an operating
loss of £5.6m (2019: £4.0m).
The financial results have been prepared
under IFRS and the Company’s accounting
policies are set out on pages 42 to 45.
Revenue and other income for the year
was £1.1m (2019: £2.4m). COVID-19 had an
impact on sales in the second half of the
year and the expected sales traction on
our HCV and DoD assays did not take
place as expected with customers
prioritising their activities elsewhere.
Research and development costs were
£4.7m (2019: £4.9m) and reflected an
increased spend in the second half of
the year related to the COVID-19 assay.
Overall spend was slightly down on the
year to June 2019 owing to reduced
activity and tight cost control in the first
half of the year.
Financing costs
Financing costs were £14.7m (2019: £0.5m).
The finance costs are associated with the
convertible bonds outstanding during the
year. The finance cost on the convertibles
has several elements: an interest charge that
unwinds the discount on these long term
liabilities, a foreign exchange impact from
the US dollar denominated GHIF bond and
finally a derivative charge for the ‘option’ of
the bond holders to convert the bond to
shares in the Group. The interest on
unwinding the discount and foreign
exchange movements were £1.0m and
were broadly in line with the prior year
£1.1m. Owing to the increase in the Group
share price from 20.5p at 30 June 2019 to
102p at 30 June 2020, the cost of the
conversion rights on the two bonds
genedrive plc Annual Report and Accounts 2020
The fund raise in May 2020 provided a net capital injection of £7.5m to help fund the development and launch of the Genedrive® COVID-19 products.Matthew FowlerChief Financial Officer increased by £13.8m and this is treated as
an expense through the finance costs. In
the prior year a falling share price since
30 June 2018 created a £0.3m gain. These
movements are non-cash and merely reflect
the changing value of the options to convert.
As GHIF converted their bond on the
16 June 2020 and BGF partially converted
their bond in September 2020, the only
financing costs remaining will relate to the
residue £1.5m BGF bond and as the share
price rises or falls against the 30 June 2020
price of 102p a further charge or release to
financing costs will be recognised.
Taxation
The tax credit for the year was £1.0m (2019:
£0.9m). The Group investment in R&D falls
under the UK Government’s R&D tax relief
scheme for small and medium companies
where it meets the qualifying criteria. The
tax credit was larger than originally
forecasted owing to the increase in
qualifying criteria as the Group invested
and developed the COVID-19 assay that
was not expected at the start of the year.
As the Group did not make a profit in the
year it collects the tax credit in cash
following submission of tax returns. The
expected receivable on the balance sheet
is £1.0m (2019: £1.0m).
The loss for the financial year after tax was
£19.4m (2019: £3.6m), with £14.7m of this
loss being non-cash financing costs
relating to convertibles bonds.
Cash resources
Net cash outflow from operations was
£4.8m (2019: £4.6m). The operating losses
were £5.6m (2019: £4.4m) with working
capital contributing £0.8m (2019: £0.2m
consumption) mainly from an increase in
trade and other payables.
The tax credit received was £1.0m (2019:
£1.0m) and relates to cash received under
the UK Governments R&D tax relief
scheme. The current year tax debtor is
£1.0m (2019: £1.0m) and we would expect
receipt in the months following release of
these statutory accounts.
The net proceeds from financing activities
were £6.9m (2019: £5.3m). The net proceeds
from equity were £7.5m. Cash paid to GHIF
as part of the conversion of their loan note
was £0.7m.
The increase in cash was £3.0m (2019:
£1.7m) meaning a closing cash position of
£8.2m (2019: £5.2m).
Balance sheet
Balance sheet net liabilities at 30 June
2019 totalled £2.5m and this increased
slightly to £3.3m at 30 June 2020. The
deficit is mainly owing to the non-cash
accounting adjustment on the BGF
derivative and without this item the
balance sheet would be in net assets as a
result of the equity raise in May 2020. As
the balance sheet position has remained
in net liabilities throughout the year, there
was no requirement under section 656 of
the Companies Act to call a meeting of
shareholders and discuss the net liabilities
position.
Current assets of £10.3m (2019: £6.9m)
included cash of £8.2m (2019: £5.2m)
following the successful May 2020 fund
raise. The tax receivable was £1.0m (2019:
£1.0m) for the current year Corporation Tax
Research and Development tax claim and
this should be paid by the end of the
calendar year. The remaining working
capital-related items make up £1.0m (2019:
£0.8m) with the largest increase in
inventory being high average balances of
COVID-related materials which are being
held to mitigate long lead time supply.
Current liabilities were £2.2m (2019:
£1.2m) with the large increase related to
the purchase commitment on COVID-19
materials as well as property rent that
was deferred during lockdown but that
was paid post year end.
Capital and reserves were affected by two
notable items in the second half of the
financial year. The fund raise in May 2020
provided a net capital injection of £7.5m to
help fund the development and launch of
the Genedrive® COVID-19 products.
Secondly in June 2020, GHIF, the holders
of an $8.0m convertible bond, exercised
their right to convert their bond into shares
in genedrive plc. As part of the settlement
with GHIF, the Group paid GHIF £0.7m and
issued 7.1m shares. The net equity impact
of the GHIF conversion was a £10.9m
credit to reserves. In addition to these two
large movements, there were share-based
payment movements of £46k and a loss
for the year of £19.4m, meaning an
increase in net liabilities of £0.8m.
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Going concern
We have experienced delays
commercialising the Genedrive® 96 SARS
CoV-2 test and the lack of revenue has
impacted our cash position. However we
continue to focus on obtaining product
approvals and securing sales and we are
managing the cost base until revenues are
assured. We are confident in our sales
forecasts but securing cash generative
revenue in the forthcoming months is
necessary otherwise the Group will have
to reduce costs and raise additional funds.
We continue to adopt a going concern basis
for the preparation of the accounts, but the
combination of the above factors represents
a material uncertainty that may cast significant
doubt on the Group and Company’s ability
to continue as a going concern.
Risk management and the
year ahead
Risk is managed closely and is spread
across our businesses and managed to
individual materiality. The Board has
reviewed and considered the impact of
the UK's departure from the EU and has
considered the issues relating to a no-deal
departure. The Board has considered all of
the above factors in its review of going
concern and has been able to conclude
the review satisfactorily.
Matthew Fowler
Chief Financial Officer
16 November 2020
genedrive plc Annual Report and Accounts 2020
£7.5mFunds raised (May 2020)
20
Key Performance Indicators
Diagnostics (Genedrive®)
Trading result
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2018
2019
2020
2018
2019
2020
Diagnostics revenue down impacted
by the effects of COVID in the second
half of the year.
Loss before exceptionals, tax, interest
and finance costs up over prior years
owing to reduced revenues.
Cash reserves
Research and development costs
Adminstration costs
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2018
2019
2020
2018
2019
2020
2018
2019
2020
Cash reserves of £8.2m, boosted by
the May 2020 fund raise.
Research and development declined
slightly to £4.7m; we continue to invest
in the Genedrive® offering.
Administration costs amounted to
£2.0m impacted by share price related
costs in the second half of the year.
genedrive plc Annual Report and Accounts 2020
21
Principal Risks
for the year ended 30 June 2020
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 is not presented in priority order.
Risk
Economic and political uncertainty
COVID-19 outbreak and Brexit trade negotiations,
which affect market and financial stability
Impact
Negative impact on long-term
prospects
Mitigation
y Clear strategy for COVID-19 assays
y Regular Board discussions on COVID-19
y Authorised key operators in place for key
regulatory matters
Risk movement
Business strategy
The Board develops the wrong strategy or fails to
implement strategy effectively
Competitor entry
New entrant to Company’s markets
Loss of first-to-market advantage
and reduction of potential market
share
Negative impact on long-term
prospects
y Clear strategy which is reviewed regularly
y Progress of strategy clear in KPIs and
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reporting
y Product improvement projects to
differentiate and protect Genedrive®
y Cost programmes in place to support
future price-down strategies
y Constant market monitoring and
competitor analysis
y Independent clinical studies performed
y Ongoing improvement programmes to
refine and update
y Close monitoring and review of in-field
performance
y Close working relationship with Sysmex
y Detailed registration plans per country
y Close monitoring and reporting to the
Board
N/A
Failure to generate material CoV-2 sales
The Genedrive 96-SARS-CoV-2 Kit® does not
achieve the desired market penetration/market
approvals or the prevalence of the disease reduces
Loss of revenue and profit
Loss of brand value and
reputation
Loss of revenue and profit
Loss of reputation
HCV sales slower than expected
Delays in the processes to register and commence
the sales of the Genedrive HCV ID Kit® in target
markets, accentuated in the light of healthcare
systems being focused on COVID-19
Regulatory and reimbursement
The Company strategy relies on regulatory
approval for Genedrive® products and the
availability of funds from Government and other
large organisations to fund drugs treatments
Supply chain
The Company is reliant on certain key suppliers of
raw materials and components
Financial position
The Company is loss-making and will continue to
have going concern challenges until it builds a
portfolio of profitable diagnostics assays
Negative impact on Company’s
prospects
Negative impact on long-term
prospects
Loss of revenue
Negative impact on brand
y Company is progressing preferred status
(e.g. pre-qualification) with key bodies
y Registration trackers are reported to the
Board monthly
Inability to fulfil demand
y Contractual arrangements exist where
Loss of revenue and profit
possible
y Secondary suppliers scoped and in
progress
y Selective forward buying of key
components
y Company continues to seek non-dilutive
sources of funding
y Cash consumption is a key Board metric
This report was approved by the Board of Directors on 16 November 2020 and signed on its behalf by M J Fowler.
genedrive plc Annual Report and Accounts 2020
22
Introduction to Corporate Governance
Maintaining
high standards
The statement of corporate
governance practices set out on
pages 23 to 27, including the
reports of Board Committees,
and information incorporated by
reference, constitutes the
Corporate Governance Report
of genedrive plc.
genedrive plc Annual Report and Accounts 2020
As a Board we fully acknowledge the importance of Corporate Governance and the expectations of stakeholders that encourage responsible corporate behaviour.Dr Ian GilhamChairman 23
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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 30 December
2020. In light of social distancing
measures as a response to the
Coronavirus (COVID-19) pandemic, and as
permitted by The Corporate Insolvency
and Governance Act 2020, this year’s
AGM will be run as a closed meeting and
shareholders will not be permitted to
attend the AGM. We hope that you
understand in these exceptional
circumstances that we are taking these
steps to adhere to the UK Government
guidelines and to protect our
shareholders, employees, the Board and
the wider community. Details of how
shareholders may submit questions into
the AGM will be issued as part of the AGM
notices.
Dr Ian Gilham
Chairman
16 November 2020
On behalf of the Board, I am pleased to
present genedrive plc’s Corporate
Governance Report for the year ended
30 June 2020.
As a Board we fully acknowledge the
importance of Corporate Governance and
the expectations of stakeholder that
encourage responsible corporate
behaviour. 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. Further details of the Code
and its adoption can be found on our
website http://www.genedriveplc.com/
investor-relations/corporate-governance.
php. 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.
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.
genedrive plc Annual Report and Accounts 2020
24
Board of Directors
The right mix of
skills & experience
Ian Gilham Ph.D.
Chairman
David Budd
Chief Executive Officer
Matthew Fowler
Chief Financial Officer
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 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 Cytox which is
focused on the development of polygenic
risk score algorithms to stratify dementia
risk and progression. Dr Gilham was
formerly Chief Executive Officer of
Axis-Shield Plc.
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
almost 20 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. Prior to that,
Matthew spent three years at British
Nuclear Group as Finance Manager for the
corporate centre. Matthew trained and
qualified in the audit department of
Deloitte & Touche before spending four
years working for Deloitte Consulting.
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Tom Lindsay
Non-Executive Director
Chris Yates
Non-Executive Director
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
South African Institute of Medical
Research in Johannesburg, South Africa.
Chris was appointed to the 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.
Committee Membership
Audit and Risk Committee
Remuneration Committee
Nominations Committee
Denotes Committee Chair
genedrive plc Annual Report and Accounts 2020
26
Corporate Governance
The Board has delegated certain responsibilities to the following Board Committees:
y the Audit and Risk Committee
y the Nominations Committee
y the Remuneration Committee
The reports of the Audit and Risk Committee and Remuneration Committee are set out on pages 28 to 35. 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.
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.
Nominations Committee
The Nominations Committee is responsible for Board recruitment and succession planning, to ensure that the Board is balanced and
comprises the correct skill sets.
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:
y approval of the annual budget;
y review of performance of the Company against the approved budget;
y review of key advisers;
y review of insurance premiums and coverage;
y review of governance issues affecting the Company; and
y 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.
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.
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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 10 Board meetings during the year to 30 June 2020. The normal pattern of meetings is to hold six main in-person
meetings every other month, with video conference meeting in between. Owing to Covid-19 social distancing issues all Board meetings
and Committee meetings took place by video conference from March 2020 onwards. The Board appointed a sub-committee to deal with
matters associated with the May 2020 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 below.
Attendance at meetings
The following table sets out the attendance of each Director at Board and Committee meetings held during the year, along with the
maximum number of meetings that it was possible to attend:
Ian Gilham
Tom Lindsay
Chris Yates
David Budda
Matthew Fowlera
a Attendance via invite.
Board
sub-committee
for fund raise
Audit and Risk
Committee
Remuneration
Committeea
Nominations
Committee
4/4
–
–
4/4
4/4
3/3
3/3
3/3
3/3
3/3
2/2
2/2
2/2
2/2
2/2
1/1
1/1
1/1
1/1
1/1
Board
10/10
10/10
10/10
10/10
10/10
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.
Key matters considered at each main meeting of the Board during the year included:
July 2019
September 2019
November 2019
y Review of R&D projects
y Commercial Presentation
y Review of year end results
y Reviewed and approved Annual Report
2018/19
y Review of R&D projects
y AGM and Proxy Results
y Annual review of advisers
y Commercial Presentation
January 2020
March 2020
June 2020
y Reviewed and approved Interim Results
y Reviewed long term forecasts
y Group strategy review
y Discussion of funding opportunities
y R&D review of CoV-2 opportunity
y Commercial Presentation
y Risk management and risk register
y Annual review of insurance risk
genedrive plc Annual Report and Accounts 2020
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Report of the Audit and Risk Committee
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 three times during the year as well as
the Board meeting to review and approve
the register of significant risks in the
Group.
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.
All 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 Chartered
Accountants of England and Wales.
Ian Gilham is Chairman of both Horizon
Discovery Group plc and Cytox Group Ltd
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:
y understand the risks facing a pre-profit
diagnostics business and approaches
to managing its risks;
y maintain an oversight of the Group’s
internal control environment through
the internal audit plan and risk
management framework;
y review strategic financial management
in a fledgling 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;
y 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 2019/20 and undertook the
following activities:
Audit tender and appointment of new
auditors
The Committee asked myself and Matthew
Fowler to review the audit activities of the
Group. A small tender process was
undertaken with a number of firms invited
to bid for the audit of the Group and the
Company. A recommendation was made
to the Committee and RSM UK Audit LLP
were appointed auditors in December
2019 following the passing of a resolution
at the Group’s AGM in November 2019.
Audit Committee Terms of Reference
and potential conflicts of interest
During the period the Committee formally
reviewed and revised the Audit
Committee’s Terms of Reference.
The Committee also checked on individual
directors’ conflicts of interest.
Chris Yates
Non-Executive Director
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 2020/21. 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.
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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 except for assurance
services. The Group adhere to The
Financial Reporting Council Revised
Ethical Standard 2019 which prohibits the
auditor from providing non-audit services
to listed companies except for certain
assurance-related services. The external
auditor did not undertake any non-audit
services during the year.
Tendering policy and review of
auditor effectiveness
During the year the Audit Committee
carried out a review of the Group’s audit
arrangements and invited a number of
firms to tender for the audit of the
Company and the Group. As a result of this
review a resolution was proposed to the
Annual General Meeting to Appoint RSM
UK Audit LLP (RSM) as the Group’s and
Company’s auditors. This resolution was
passed and RSM became auditors in
December 2019. The Committee looks
forward to a productive and interactive
relationship with RSM over the forth
coming years.
Chris Yates
Chairman of the Audit and Risk Committee
16 November 2020
Financial statements and reports
y 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
y Advised the Board that, taken as a
whole, the Annual Report and accounts
are fair, balanced and understandable
y Reviewed and considered the
Risk management
y 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
y Reported to the Board on how it has
discharged its responsibilities
y Reviewed and considered the Group’s
Whistleblowing Arrangements and
Anti-Bribery Policy
significant issues in relation to the
financial statements and how these
have been addressed, including:
— Requirements around going
concern and the Company’s viability
— 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 three year 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 level of uncertainty as to
the timing and quantum of revenues,
including reference to delays in regulatory
approvals and the uncertainty around the
Groups ability to both reduce costs and
raise additional funds, the stress testing
of the Group’s revenues forecasts
led to a recommendation to include a
material uncertainty paragraph relating
to going concern.
External audit
y Monitored and ensured the
independence and objectivity of the
external auditor
y Reviewed and approved the external
audit fees for 2019/20
y Reviewed and approved the scope and
methodology of the external audit
strategy for 2019/20
y Reviewed and agreed on a policy for
employing the external auditor for
non-audit services
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.
genedrive plc Annual Report and Accounts 2020
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Report of the Remuneration Committee
Ian Gilham, Ph.D.
Chairman of the Remuneration Committee
On behalf of the Board, I am
pleased to present the Directors’
Remuneration Report for the year
ended 30 June 2020.
This report sets out the activities of the
Remuneration Committee for the year
ended 30 June 2020. 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.
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 2020
Full details of the decisions of the
Committee made in 2020 are set out in
the Directors’ Annual Remuneration
Report on pages 30 to 35.
The Committee agreed to increase the
salary of the Chief Executive to £233,500
per annum effective from 1 July 2020.
This increase is in line with the general
workforce increase for the same period.
The Committee agreed to increase the
salary of the Chief Financial Officer to
£175,000 effective from 1 July 2020. This
increase is commensurate with additional
operational responsibilities incorporated
within the role during the year.
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 payment made for this financial
year was 90% of entitlement for both the
Chief Executive Officer and the Chief
Financial Officer.
Remuneration Committee
The Remuneration Committee is
responsible for determining reviews of 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.
genedrive plc Annual Report and Accounts 2020
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:
y this statement, which sets out a
summary of and explains the major
decisions on Directors’ remuneration;
y 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 2020.
The Directors’ Annual Remuneration
Report will be subject to an advisory vote
by shareholders at the 2020 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
16 November 2020
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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 Financial Officer received a contribution to pension equivalent to 3% of salary.
The Executives may elect for contributions to be paid via a salary sacrifice scheme.
Annual bonus: Schemes are designed to link individuals’ 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 was increased from 60% to 80% from July 2020 for the Chief Financial Officer.
Long Term Incentive Plans (‘LTIP'): The LTIP schemes are designed to discourage excessive risk-taking and inappropriate short-term
behaviours 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, although the scheme allows for up to 200% of salary for
exceptional circumstances.
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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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 2020 and 2019.
Executive
David Budd
Matthew Fowler
Non-Executive
Ian Gilham
Tom Lindsay
Chris Yates1
1 Appointed 22 August 2018.
Salary and fees
£
Bonus
£
Benefits in kind
£
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
230,049
226,650
146,395
144,230
65,000
65,000
24,000
24,000
24,000
20,000
207,044
90,660
79,054
34,615
–
–
–
–
–
–
1,100
1,100
–
–
–
–
–
–
–
–
Pension
£
6,422
6,422
4,087
4,087
–
–
–
–
–
–
Total
£
444,615
324,832
229,536
182,932
65,000
65,000
24,000
24,000
24,000
20,000
Additional disclosures for single figure total remuneration to 30 June 2020
Salary
The Chief Executive’s salary at 30 June 2019 was £230,049 and was increased by 1.5% from 1 July 2020 to £233,500. The Committee
believes that the increase of 1.5% awarded was in line with the performance of the Group and the individual, as well as being entirely
consistent with the pay increases awarded to other members of staff. The CFO's salary at 30 June 2019 was £146,395 and was
increased by 19.5% from 1 July 2020 to £175,000. During the course of the year the role of the Chief Financial Officer was increased to
include additional operational responsibilities. The increase in salary is commensurate with the extended role.
genedrive plc Annual Report and Accounts 2020
34
Remuneration Policy continued
Annual performance bonus
The 2020 bonus for the Executive Directors and senior management was based on:
y Revenue targets on sales of Genedrive® units and assays
y The cash position of the Group at 30 June 2020
y Milestone achievements on the mTB project
y Milestone achievements on the AIHL project
The specific targets have not been disclosed. The overall achievement was 90%.
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
Outstanding
30 June 2020
Date granted
Exercised
Lapsed
Exercise price
Earliest
exercise date
Expiry date
1,056,982 03/04/2020
04/04/2019
540,000
19/07/2018
222,260
04/04/2017
397,590
07/04/2016
244,444
672,626 03/04/2020
04/04/2019
340,000
19/07/2018
264,046
22/12/2016
141,666
50,000
100,000
07/04/2016
17/12/2014
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£0.090
04/04/2023 03/04/2030
£0.235 05/04/2022 04/04/2029
19/07/2028
£0.305
20/07/2021
04/04/2027
£0.430 05/04/2020
07/04/2019 06/04/2026
£0.900
£0.090 05/04/2022 03/04/2029
£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
07/04/2019 06/04/2026
16/12/2025
17/12/2018
The Company issues long term incentives under the management incentive plan dated July 2017. The incentive plan has the following
key features:
y 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
y The exercise price of options will not be below market price
y Awards vest over three years subject to performance criteria being met
y 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.
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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
30 June 2020
30 June 2019
213,710
99,457
503,174
202,217
41,304
145,380
86,957
266,424
65,217
16,304
Share Investment Plan
The details of the Epistem Share Investment Plan (‘SIP’) are outlined in note 20 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 it appropriate. In the current year the Committee received benchmarking data
and recommendations from Deloitte LLP.
This Remuneration Report was approved by a duly authorised Committee of the Board of Directors on 16 November 2020 and signed on
its behalf by:
Dr Ian Gilham
Chairman of the Remuneration Committee
16 November 2020
genedrive plc Annual Report and Accounts 2020
36
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 2020.
Genedrive plc is the holding company for a
group of companies operating in the disease
diagnostics markets. A review of the
performance of the Group’s businesses is
contained on pages 1 to 21 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.
The Directors are required by the AIM Rules
of the London Stock Exchange to prepare
Group financial statements in accordance
with International Financial Reporting
Standards (“IFRS”) as adopted by the
European Union (“EU”) and have elected
under company law to prepare the Company
financial statements in accordance with
United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards and applicable law).
The Group financial statements are required
by law and IFRS adopted by the EU to
present fairly the financial position and
performance of the Group; the Companies
Act 2006 provides in relation to such
financial statements that references in the
relevant part of that Act to financial
statements giving a true and fair view are
references to their achieving a fair
presentation.
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:
y select suitable accounting policies and
then apply them consistently;
y state whether applicable IFRSs as
adopted by the European Union have
been followed for the Group and
Company financial statements, subject
to any material departures disclosed
and explained in the financial
statements;
y make judgements and accounting
estimates that are reasonable and
prudent; and
y 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.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Genedrive Plc website.
Legislation in the United Kingdom governing
the preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
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
1 to 21 and forms part of this report.
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 42 to 45 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 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
to support the Group and Company, the
Directors have the options to reduce
ongoing spend and seek additional funds
from shareholders or debt providers. While
the Board is confident that it will achieve the
required revenue, and has a successful track
record in both reducing costs and raising
funds, there remains uncertainty as to the
level of sales that will be achieved in the
forthcoming months, especially in light of
on-going regulatory delays on the
Genedrive® 96 SARS CoV-2 test, in addition
to uncertainty around the amount of cost
reduction that may be required and the
amount of funding that could be raised from
shareholders or debt providers. 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 Company was unable to continue as a
going concern.
Annual General Meeting
The Annual General Meeting will be held on
30 December 2020 and in light of social
distancing measures as a response to the
Coronavirus (COVID-19) pandemic, and as
permitted by The Corporate Insolvency and
Governance Act 2020 this year’s AGM will
be run as a closed meeting and shareholders
will not be permitted to attend. Details of the
business to be considered at the Annual
General Meeting, how shareholders may
submit questions into the Meeting and the
Notice of Meeting are included in a separate
document.
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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:
y 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
y each Director has taken all the steps
that a Director might reasonably be
expected to be taken to be aware of
relevant audit information and to
establish that the Group’s auditors are
aware of that information.
Independent auditors
The independent auditors, RSM UK Audit
LLP, have indicated their willingness to
continue in office and a resolution that they
be reappointed will be proposed at the 2020
Annual General Meeting.
By order of the Board
Matthew Fowler
Company Secretary
16 November 2020
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 24 to the Company’s financial
statements on page 70. 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 Directors’
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 20 and 24
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.
In the year to June 2019 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 19 on pages 62 and 63.
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 500,000 shares will
be issued to the former owner of Visible
Genomics 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 30 December 2020, 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 at 30 June 2020:
Global Health Investment
Fund I LLC
Calculus Capital
BGF Investment Mgt Ltd
Holding
13.66%
10.4%
6.4%
Research and development
During the year ended 30 June 20120 the
Group has incurred research and
development costs of £4.7m (2019: £4.9m).
Expenditure on Intangible Assets (relating to
research and development activities) was
£nil (2019: £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.
Strategic Report
The information required by schedule 7 of
the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations
2008 has been included in the separate
Strategic Report in accordance with section
414C (11) of the Companies Act 2006
(Strategic Report and Directors’ Reports)
Regulations 2013.
Financial risk management
The Company’s approach to managing
financial risk is covered in note 21 to the
financial statements.
genedrive plc Annual Report and Accounts 2020
38
Independent Auditor’s Report to the members of genedrive plc
Report on the audit of the financial statements
Opinion
We have audited the financial statements of Genedrive plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended
30 June 2020 which comprise consolidated statement of comprehensive income, consolidated and company statements of financial
position, consolidated and company statements of changes in equity, consolidated and company statement of cash flows and notes to
the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied
in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as
regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
y the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 June 2020
and of the group’s loss for the year then ended;
y the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
y the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the Companies Act 2006; and
y the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our
report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical Standard as applied to SME listed entities and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Material uncertainty relating to going concern
We draw attention to note 1 on going concern in the financial statements concerning the group and parent company’s ability to continue
as a going concern. The going concern status of the group and parent company is dependent upon the achievement of a certain level of
sales. If an adequate sales level cannot be achieved to support the group and company, the Directors have the options to reduce
ongoing spend and seek additional funding from shareholders or debt providers. As stated in note 1 on going concern, these events or
conditions, indicate that a material uncertainty exists which may cast significant doubt on the group and parent company’s ability to
continue as a going concern. Our opinion is not modified in respect of this matter.
Summary of our audit approach
Key audit matters
Materiality
Group
y Valuation of convertible debt
y Going concern
Group
y Overall materiality: £328,000 (2019: £247,850)
y Performance materiality: £246,000
Parent Company
y Overall materiality: £114,000 (2019: £84,380)
y Performance materiality: £86,000
Scope
Our audit procedures covered 100% of revenue, 100% of total assets and 100% of loss before tax; as we
audited all companies within the group.
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Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the group and parent
company financial statements of the current period and include the most significant assessed risks of material misstatement (whether or
not due to fraud) we identified, 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 were addressed in the context of our audit of the group and
parent company financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
In addition to the matter described in the Material uncertainty related to going concern section we have determined the matters
described below to be the key audit matters to be communicated in our report.
Valuation of convertible debt
Key audit matter
description
(Refer to page 50 regarding the accounting policy in respect of financial instruments, including convertible
bond, and note 19 in respect of the accounting treatment of the convertible bond).
The group issued convertible debt instruments in 2014, which were subsequently amended in 2016 and
2018, and a convertible loan note issued in 2018.
The group’s accounting policies require the derivative components to be recorded at fair value.
The treatment of such instruments is complex, and the measurement requires use of judgement.
In June 2020 the holder of convertible bonds with a value of $8 million notified Genedrive that it intended to
exercise its right to convert all of its bonds for the maximum number of shares under the terms of the
instrument.
Management engaged external valuations experts to assist with the valuations performed at the date of the
agreements, the date of conversion and at the year end date.
How the matter was
addressed in the audit
We read the agreements relating to the conversion of the GHIF convertible debt instrument and assessed
management’s proposed accounting treatment and found it to be appropriate.
We used valuation specialists to review and challenge the valuations of the loan note instruments performed
by management’s expert. The specialists reviewed the valuation techniques and confirmed that they were
appropriate.
We assessed the inputs used in the measurement of derivatives by:
y Comparing share price volatility assumptions to movements in the company’s own share price and those
of peer companies.
y Comparing the risk free rate used to UK Government bond yields for appropriate maturities.
y Comparing the number of shares that were expected to be issued upon conversion to the number of
shares that were actually issued.
We have reviewed the disclosures in the financial statements and consider them to be sufficient and
appropriate.
genedrive plc Annual Report and Accounts 2020
40
Independent Auditor’s Report to the members of genedrive plc
Report on the audit of the financial statements continued
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our
audit procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as a whole,
could reasonably influence the economic decisions of the users we take into account the qualitative nature and the size of the
misstatements. Based on our professional judgement, we determined materiality as follows:
Overall materiality
£328,000 (2019: £247,850)
Group
Parent Company
£114,000 (2019: £84,380)
Overall materiality for the group changed from £307,000 to
£328,000 during the course of the audit as the initial
measure was based on forecast results.
Overall materiality for the group changed
from £69,100 to £114,000 during the course
of the audit as the initial measure was
based on forecast results.
Basis for determining
overall materiality
5% of loss before tax adjusted for exceptional items such as
gains or losses on revaluation of convertible bonds.
1% of net liabilities.
Rationale for benchmark
applied
We believe that loss before tax, adjusted for exceptional
items and gains or losses on revaluation of the convertible
bond, is an important measure of performance and is
consistent with the expectations of the users of the financial
statements of an AIM listed entity.
We believe that net liabilities is an
important measure in assessing the
performance of the parent company.
Performance materiality
£246,000
£86,000
Performance materiality for the parent company changed
from £230,250 to £246,000 during the course of the audit,
as a result of adjustments made.
Performance materiality for the parent
company changed from £51,825 to
£86,000 during the course of the audit, as
a result of adjustments made.
Basis for determining
performance materiality
75% of overall materiality
75% of overall materiality
Reporting of misstatements
to the Audit Committee
Misstatements in excess of £16,400 (2019: £12,393) and
misstatements below that threshold that, in our view,
warranted reporting on qualitative grounds.
Misstatements in excess of £6,000 (2019:
£4,219) and misstatements below that
threshold that, in our view, warranted
reporting on qualitative grounds.
An overview of the scope of our audit
The group consists of 3 components, all of which are based in the UK. Full scope audit procedures were performed for all entities. The
coverage achieved by our full scope audit procedures was 100% of revenue, 100% of loss before tax and 100% of net assets. No work was
undertaken by component auditors.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other
than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
genedrive plc Annual Report and Accounts 2020
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
y the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
y the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
41
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Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the
audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if,
in our opinion:
y adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
y the parent company financial statements are not in agreement with the accounting records and returns; or
y certain disclosures of directors’ remuneration specified by law are not made; or
y we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 36, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Graham Bond FCA (Senior Statutory Auditor)
for and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
20 Chapel St
Liverpool
L3 9AG
16 November 2020
genedrive plc Annual Report and Accounts 2020
42
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2020
Continuing operations
Revenue
Research and development costs
Administrative costs
Trading loss
Exceptional items
Operating loss
Finance costs
Loss on ordinary activities before taxation
Taxation on ordinary activities
Loss for the financial year
Loss/total comprehensive expense for the financial year
Loss per share (pence)
– Basic and diluted
Year ended
30 June
2020
£’000
Year ended
30 June
2019
£’000
Note
2
4
4
5
4
8
9
1,059
(4,673)
(2,026)
(5,640)
–
(5,640)
(14,744)
(20,384)
965
(19,419)
(19,419)
2,362
(4,877)
(1,934)
(4,449)
439
(4,010)
(508)
(4,518)
882
(3,636)
(3,636)
11
(55p)
(14p)
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Consolidated Balance Sheet
as at 30 June 2020
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
Net current assets
Total assets less current liabilities
Convertible bonds
Net liability
Capital and reserves
Share capital
Called-up equity share capital
Other reserves
Accumulated losses
Total deficit
43
30 June
2019
£’000
164
153
317
123
556
106
971
5,184
6,940
(88)
(1,129)
(1,217)
5,723
6,040
(8,518)
(2,478)
510
28,112
(31,100)
(2,478)
Note
12
13
14
15
13
16
17
18
19
24
30 June
2020
£’000
147
47
194
413
398
212
1,018
8,218
10,259
(67)
(2,129)
(2,196)
8,063
8,257
(11,599)
(3,342)
780
42,620
(46,742)
(3,342)
The financial statements were approved by the Board of Directors and authorised for issue on 16 November 2020. They were signed on
its behalf by:
David Budd
Chief Executive Officer
Matthew Fowler
Chief Financial Officer
Company number: 06108621
genedrive plc Annual Report and Accounts 2020
44
Consolidated Statement of Changes in Equity
for the year ended 30 June 2020
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 loss for the year
Balance at 30 June 2019
Share issue – deferred consideration
Share issue
Share issue – conversion of GHIF bond (note 19)
Equity-settled share-based payments
Transactions settled directly in equity
Total comprehensive loss for the year
Balance at 30 June 2020
Share
capital
£’000
282
228
–
–
–
228
–
510
13
150
107
–
270
–
780
Other
reserves
£’000
24,745
3,015
315
49
(12)
3,367
–
28,112
(13)
7,383
7,092
46
14,508
–
42,620
Accumulated
losses
£’000
(27,464)
–
–
–
–
–
(3,636)
(31,100)
–
–
3,777
–
3,777
(19,419)
(46,742)
Total
equity
£’000
(2,437)
3,243
315
49
(12)
3,595
(3,636)
(2,478)
–
7,533
10,976
46
18,555
(19,419)
(3,342)
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Consolidated Cash Flow Statement
for the year ended 30 June 2020
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
Operating loss before changes in working capital and provision
Increase in inventories
Decrease in trade and other receivables
Decrease in deferred revenue
Increase/(Decrease) in trade and other payables
Net cash outflow from operations
Tax received
Net cash outflow from operating activities
Cash flows from investing activities
Finance income
Finance costs
Acquisition of plant and equipment and intangible assets, net of loss on disposals
Proceeds from disposal of discontinued operations
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from share issue
Proceeds from bond issue
Cash paid to settle convertible bonds
Cash paid to settle deferred consideration
Net inflow from financing activities
Net increase in cash equivalents
Effects of exchange rate changes on cash and 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
45
Year ended
30 June
2020
£’000
Year ended
30 June
2019
£’000
Note
(5,640)
57
–
(53)
32
(5,604)
(290)
158
(21)
1,000
(4,757)
971
(3,786)
13
(15)
(40)
–
(42)
7,546
–
(685)
–
6,861
3,033
1
5,184
8,218
8,218
8,218
(4,010)
98
(439)
(89)
49
(4,391)
(12)
60
88
(346)
(4,601)
980
(3,621)
18
–
(97)
56
(23)
3,243
2,366
–
(300)
5,309
1,665
(10)
3,529
5,184
5,184
5,184
16
genedrive plc Annual Report and Accounts 2020
46
Notes to the Consolidated Financial Statements
for the year ended 30 June 2020
General information
genedrive plc (‘the Company’) is a company incorporated and domiciled in the UK. The registered head office is The CTF Building,
Grafton Street, Manchester M13 9XX, United Kingdom.
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.
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.
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.
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 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 to support the Group and Company, the Directors have the options to reduce ongoing spend and seek additional funds
from shareholders or debt providers. While the Board is confident that it will achieve the required revenue, and has a successful track
record in both reducing costs and raising funds, there remains uncertainty as to the level of sales that will be achieved in the forthcoming
months, especially in light of on-going regulatory delays on the Genedrive® 96 SARS CoV-2 test, in addition to uncertainty around the
amount of cost reduction that may be required and the amount of funding that could be raised from shareholders or debt providers. 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 Company was unable to continue as a going concern.
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.
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Revenue recognition
a. Product sales
Sales of goods are recognised when all the performance obligations have been completed and when the Group entity has no continuing
managerial involvement nor effective control over the goods. The transfer of control of goods can pass at various points depending on
the shipping terms of the contract with the customer, they can be at collection from a premises or delivery to the relevant port or
customer designated premises. Where items are sold with a right of return, accumulated experience is used to estimate and provide for
such returns at the time of sale.
b. Collaboration and 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
milestones.
Income which is related to ongoing research activity is recognised as the research activity is undertaken, in accordance with the
contract. Activity is measured based on progress and milestones and not cost.
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 Consolidated Statement of Comprehensive Income on a
systematic and rational basis over the useful lives of the related assets.
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.
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:
y demonstration that the product will generate profitable future economic benefit and of an intention and ability to sell the product;
y assessment of technical feasibility;
y confirmation of the availability of technical, financial and other resources to complete the development;
y management intends to complete the development so the product will be available for use; and
y the expenditure attributable to the development can be reliably measured.
genedrive plc Annual Report and Accounts 2020
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Notes to the Consolidated Financial Statements continued
for the year ended 30 June 2020
1. Significant accounting policies continued
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:
y Acquired intellectual property – the shorter of 5% straight-line basis or their estimated useful life
y Developed intellectual property – the shorter of 10% straight-line basis or their estimated useful life
y 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:
y Lab equipment – 25% reducing balance basis
y Fixtures and fittings – straight-line over 48 months
y Other equipment – straight-line over 48 months
Operating lease agreements
On transition to IFRS 16, the Group did not recognise a right-of-use asset and a lease liability and took the practical expedient to exclude
short term leases.
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months
or less and leases of low-value assets, including IT equipment. The Group recognises the lease payments associated with these leases
as an expense on a straight-line basis over the lease term.
Further detail on the accounting for leases can be found in ‘Adoption of new and revised standards’, IFRS 16 Leases, see page 51.
Impairment of non-financial assets
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.
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 21.
genedrive plc Annual Report and Accounts 2020
Share-based payments
The Group issues equity-settled share-based payments to certain employees (including 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.
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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.
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.
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.
Trade and other receivables
Trade and other debtors are recognised and carried forward at invoiced amounts less provisions for any expected credit losses.
Expected credit losses are estimated using reasonable and supportable information that is available at the reporting date and the
provisions are reviewed until debts are collected.
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.
genedrive plc Annual Report and Accounts 2020
50
Notes to the Consolidated Financial Statements continued
for the year ended 30 June 2020
1. Significant accounting policies continued
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 Statement 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
Administration 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.
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 bonds)
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 19, 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 8.
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Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is
based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence
of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in
their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation
techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used,
maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are
determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or
when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there
is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a
verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data.
Parent Company assets
The assets of the Parent Company are subject to impairment review in each financial period.
Adoption of new standards and revised standards
IFRS 16 is effective for annual periods beginning 1 January 2019 and replaced IAS 17 Leases. It introduced 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 had no impact on the reporting date because there was no material unexpired period left under the leases as the
leases for the Group’s property expired in April 2020. IFRS 16 is expected to have a larger impact on the interim accounts to be prepared
to 31 December 2020, however owing to the short term nature of property leases the Group enters into, the impacts will not be material.
The Group has not early adopted any Standards in the current or prior year.
The following new standards have been adopted in the year:
y IFRS 9 Prepayment Features with Negative Compensation
y IAS 28 Long-term Interests in Associates and Joint Ventures
y 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
y IAS 19 Employee Benefits Plan Amendment, Curtailment or Settlement
y IFRIC 23 Uncertainty over Income Tax Treatments
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Notes to the Consolidated Financial Statements continued
for the year ended 30 June 2020
1. Significant accounting policies continued
Adoption of new standards and revised standards continued
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):
y IFRS 17 Insurance Contracts
y IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets Between an Investor and its Associates or Joint Venture
y Amendments to IFRS 3 Definition of a Business
y Amendments to IAS 11 and IAS 8 Definition of a Material
y Conceptual Framework Amendments to References to the Conceptual Framework in IFRS Standards
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.
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:
y R&D tax credit of £1.0m (2019: £1.0m). 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 calculated 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 £100k.
y Convertible bond of £11.6m (2019: £8.5m). 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 an instrument of this nature. The single biggest variable is
the discount rate used to present value of the loan items. The Company assessed the variable and determined that 10% was an
appropriate discount rate. Sensitivity analysis performed on the discount rate shows that if the rate was 2.5% higher or lower than 10%
used the loan element of the bond would decrease/increase by £241k and £213k. In addition the valuation of the derivative element
of the bond liability is sensitive to the share price at the balance sheet date. If the share price had been 5p higher/ lower at the
balance sheet date, the impact would been to increase/decrease the value of the derivative liability by £560k.
y Deferred consideration of £0.3m (2019: £0.3m). 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 was originally based
on the value claimed in the period ending December 2018 and has subsequently been updated to reflect actual claims made by the
purchaser.
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.
The separate financial statements of genedrive plc are presented on pages 72 to 74.
2. Operating Segments
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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The results of the operating division of the Group are detailed below.
Business segments
Year ended 30 June 2020
Revenue
Segment EBITDA
Less depreciation and amortisation
Operating loss
Net finance costs
Loss on ordinary activities before tax
Taxation
Loss for the financial year
Total comprehensive expense for the year
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
Total comprehensive expense for the year
Year ended 30 June 2020
Segment assets
Segment liabilities
Year ended 30 June 2019
Segment assets
Segment liabilities
53
Total
£’000
1,059
(5,583)
(57)
(5,640)
(14,744)
(20,384)
965
(19,419)
(19,419)
Total
£’000
2,362
(4,351)
(98)
439
(4,010)
(508)
(4,518)
882
(3,636)
(3,636)
Total
£’000
Diagnostics
segment
£’000
Administrative
costs
£’000
1,059
(3,584)
(30)
(3,614)
–
(1,999)
(27)
(2,026)
Diagnostics
segment
£’000
Administrative
costs
£’000
2,362
(2,483)
(32)
–
(2,515)
–
(1,868)
(66)
439
(1,495)
Diagnostics
segment
£’000
Administrative
costs
£’000
800
9,653
(1,323)
(12,472)
10,453
(13,795)
720
(598)
6,532
(9,132)
7,252
(9,730)
genedrive plc Annual Report and Accounts 2020
54
Notes to the Consolidated Financial Statements continued
for the year ended 30 June 2020
2. Operating Segments continued
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
2020
£’000
597
35
420
7
1,059
Year ended
30 June
2019
£’000
1,439
16
907
–
2,362
Revenues from customers accounting for more than 10% of total revenue in the current or prior years are detailed below:
a. £420k of revenue was derived from the US Department of Defense (2019: £907k);
a. £280k of revenue was derived from Innovate UK (2019: £1,107k); and
b. £210k of revenue was derived from the UK National Institute for Health Research (2019: £300k).
3. Revenue
Revenue from customer contracts
Grant and other income
Year ended
30 June
2020
£’000
502
557
1,059
Year ended
30 June
2019
£’000
961
1,401
2,362
There were no sales with extended payment terms. Revenue from customers was all related to product sales.
Where customers pay consideration before the Group has transferred the goods or services to the customer the revenue is deferred
and a contract liability created; see note 17. Where goods have been shipped but an invoice has not been raised, revenue is accrued,
totalling £67k (2019: £88k).
genedrive plc Annual Report and Accounts 2020
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4. Operating loss
The Group operating loss is stated after charging/(crediting):
Research and development expenditure
ATL Research credits
Gain on settlement of deferred consideration payable in shares
Impairment of deferred consideration receivable
Depreciation of owned tangible fixed assets
Staff costs
Tax computations and creation of R&D tax credit
Auditors’ remuneration, fees payable for:
– the audit of the Parent Company and consolidated accounts
– the audit of subsidiary accounts
– agreed upon procedures for the interim accounts
Operating lease costs – property rent
5. Exceptional items
Exceptional gain on settlement of deferred consideration payable
Impairment of deferred consideration receivable
55
Note
9
5
12
6
Year ended
30 June
2020
£’000
Year ended
30 June
2019
£’000
4,673
(53)
–
–
57
2,893
16
45
5
4
300
4,877
(89)
(635)
196
98
2,778
16
81
10
–
294
Year ended
30 June
2020
£’000
–
–
–
Year ended
30 June
2019
£’000
635
(196)
439
During the year to June 2019 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 which was treated as exceptional.
genedrive plc Annual Report and Accounts 2020
56
Notes to the Consolidated Financial Statements continued
for the year ended 30 June 2020
6. Particulars of employees
The average number of staff employed by the Group during the financial year was:
Research and development
Administration
The aggregate employee costs (including Directors) were:
Wages, salaries and other benefits
Social security costs
Pension cost-defined contribution plans
Equity-settled share-based payments
7. Directors’ remuneration (key management)
Wages, salaries and other benefits
Social security costs
Equity-settled share-based payments
Pension cost-defined contribution plans
Year ended
30 June
2020
Number
Year ended
30 June
2019
Number
32
14
46
31
13
44
Year ended
30 June
2020
£’000
2,522
283
56
32
2,893
Year ended
30 June
2019
£’000
2,402
271
56
49
2,778
Year ended
30 June
2020
£’000
Year ended
30 June
2019
£’000
879
109
28
21
1,037
980
120
47
22
1,169
For the current and prior year the key management of the Company is the senior management team of the Company and compromises
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 are shown in the tables in the Remuneration Committee report on pages 30
to 35 and form part of these financial statements.
genedrive plc Annual Report and Accounts 2020
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8. Finance income/(costs)
Group
Interest income on bank deposits
Gain on amendment to convertible bonds
Movement in fair value of derivative embedded in convertible bonds
Finance cost on liabilities measured at amortised cost
Foreign exchange movement in convertible bonds
9. Taxation on ordinary activities
(a) Recognised in the income statement
Current tax:
Research and development tax credits
Less: recognised as ATL Research credits
Total tax credit for the year
57
Year ended
30 June
2020
£’000
13
–
(13,807)
(808)
(142)
(14,744)
Year ended
30 June
2019
£’000
18
325
318
(889)
(280)
(508)
Total
Year ended
30 June
2020
£’000
Year ended
30 June
2019
£’000
(1,018)
53
(965)
(971)
89
(882)
(b) Reconciliation of the total tax charge
The tax assessed on the loss on ordinary activities for the year is lower (2019: lower) that the weighted average applicable tax rate for
the year ended 30 June 2020 of 19.0% (2019: 19.0%). The differences are explained below:
Loss before taxation on continuing operations
Tax using UK corporation tax rate of 19.0% (2019:19.0%)
Adjustment in respect of R&D tax credit recognised as 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
2020
£’000
(20,384)
(3,873)
13
(415)
2,807
(6)
777
(268)
(965)
Year ended
30 June
2019
£’000
(4,518)
(858)
4
(379)
11
–
304
36
(882)
genedrive plc Annual Report and Accounts 2020
58
Notes to the Consolidated Financial Statements continued
for the year ended 30 June 2020
9. Taxation on ordinary activities continued
(b) Reconciliation of the total tax charge continued
No deferred tax assets are recognised at 30 June 2020 (2019: £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.
The Group had trading losses, as computed for tax purposes, of approximately £16,151k (2019: £11,733k) available to carry forward to
future periods; this excludes management expenses.
The Finance Bill 2020, which was subsequently enacted on 19 March 2020, includes provisions to keep the corporation tax rate at 19.0%
and not reduce the rate to 17.0%.
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 and
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 the year ended 30 June 2020
was £1,018k which included £53k disclosed as ATL Research credits deducted from research and development costs with the balance of
£965k disclosed within taxation on ordinary activities as detailed above.
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 £21,538k (2019: loss of £5,131k).
11. Earnings per share
Group
Loss for the year after taxation
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
2020
£’000
(19,419)
2020
Number
2019
£’000
(3,636)
2019
Number
35,556,905
–
26,037,433
–
35,556,905
26,037,433
(55)p
(55)p
(14)p
(14)p
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:
Group
Potentially dilutive shares on the convertible bond, net of interest charge*
Potentially dilutive shares on deferred consideration
Potentially dilutive shares from share options
Potentially dilutive shares within the SIP
Potentially dilutive ordinary shares
*
4,478,681 of these shares were issued on 30 September 2020, see note 19.
genedrive plc Annual Report and Accounts 2020
Number
11,196,703
500,000
4,125,562
198,050
16,020,315
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12. Plant and equipment
Group
Cost
At 1 July 2019
Additions
Disposals
At 30 June 2020
Accumulated depreciation
At 1 July 2019
Charge for the year
Depreciation on disposed assets
At 30 June 2020
Net book value
At 30 June 2019
At 30 June 2020
13. Contingent consideration receivable
Balance at 30 June 2018
Received in the period
Impairment of
Balance at 30 June 2019
Balance at 30 June 2020
Lab
equipment
£’000
Fixtures
and fittings
£’000
Other
equipment
£’000
298
34
–
332
182
30
–
212
116
120
114
–
–
114
108
6
–
114
6
–
232
9
(14)
227
190
21
(11)
200
42
27
Greater than
12 months
£’000
Less than
12 months
£’000
340
–
(187)
153
47
172
(57)
(9)
106
212
59
Total
£’000
644
43
(14)
673
480
57
(11)
526
164
147
Total
£’000
512
(57)
(196)
259
259
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 in 2019 was lower than the amount expected and so an impairment charge of £196k was posted to value the
deferred consideration at the new fair value.
The amount provided on the balance sheet of £259k represents 30 months’ trading. The amount owing for the period to June 2020 was
overdue at the balance sheet date and so there is effectively 24 months of consideration within the balance of £212k. A payment of
£137k was received in August 2020.
genedrive plc Annual Report and Accounts 2020
60
Notes to the Consolidated Financial Statements continued
for the year ended 30 June 2020
14. Inventories
Group
Raw materials
Finished goods
2020
£’000
188
225
413
2019
£’000
123
–
123
The inventory valuation at 30 June 2020 is stated net of a provision of £159k (2019: £60k) 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 £99k (2019: £60k).
15. Trade and other receivables
Group
Trade receivables
Less: provisions for expected credit loss
Trade receivables – net
Other receivables
Prepayments
Analysis of trade receivables
Neither impaired nor past due
Past due but not impaired
Trade receivables
At the year end, net trade receivables were aged as follows:
Group
Not overdue
Less than 1 month overdue
Later than 1 month but less than 3 months overdue
Later than 3 months overdue
Total
The movement in the impairment provision for expected credit loss is as follows:
Group
Opening provision
Written off in the year
Charge for the year
Closing provision at 30 June
genedrive plc Annual Report and Accounts 2020
2020
£’000
204
–
204
69
125
398
2020
£’000
204
–
204
2020
£’000
204
–
–
–
204
2020
£’000
–
–
–
–
2019
£’000
65
–
65
307
184
556
2019
£’000
65
–
65
2019
£’000
65
–
–
–
65
2019
£’000
23
(23)
–
–
Ageing of impaired receivables
Group
Greater than 3 months
61
2020
£’000
–
2019
£’000
–
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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
2020
£’000
8,218
8,218
2019
£’000
5,184
5,184
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 counterparties are banks with high credit ratings assigned by international credit rating agencies.
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
2020
£’000
67
2019
£’000
88
The brought-forward value of £88,000 was fully recognised as income in the year to June 2020. The balance at the year end of £67,000
is fully expected to be recognised as income in the early part of the new financial year and will be revenue in the year to June 2021.
18. Trade and other payables
Group
Trade payables
Accruals
Other payables
2020
£’000
980
865
284
2,129
2019
£’000
402
611
116
1,129
genedrive plc Annual Report and Accounts 2020
62
Notes to the Consolidated Financial Statements continued
for the year ended 30 June 2020
19. Convertible bonds
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
Amortised arrangement fees (BGF)
Arrangement costs
Movement in fair value of embedded derivative
Finance cost of convertible bonds
Foreign exchange movement (GHIF)
Balance prior to settlement
Payment of cash at settlement date
Conversion to shares at settlement date
GHIF
host
£’000
5,621
(563)
–
–
–
710
280
6,048
–
–
–
487
142
6,677
(685)
(5,992)
GHIF
derivative
£’000
4
238
–
–
(99)
–
–
143
–
–
4,841
–
–
4,984
–
(4,984)
BGF
host
£’000
–
BGF
derivative
£’000
–
Total
host
£’000
Total
derivative
£’000
Total
£’000
5,625
(325)
2,500
(122)
(318)
878
280
8,518
36
(15)
13,807
772
142
23,260
(685)
(10,976)
4
238
396
–
(318)
–
–
320
–
–
13,807
–
–
14,127
–
(4,984)
9,143
11,599
5,621
(563)
2,104
(122)
–
878
280
8,198
36
(15)
–
772
142
9,133
(685)
(5,992)
2,456
2,104
(122)
–
168
–
2,150
36
(15)
–
285
–
2,456
–
–
396
–
(219)
–
–
177
–
–
8,966
–
–
9,143
–
–
9,143
Balance at 30 June 2020
–
–
2,456
None of the fair value movements relate to changes in the entity credit risk.
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 and 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, and to split the GHIF bond into two tranches: the first tranche of US$2.0m has a conversion price of £1.50 per ordinary
share and the second tranche of US$6.0m 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 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 US$8.0m and 5% coupon convertible bond with GHIF as follows:
y The maturity date of the GHIF bond was extended from December 2021 to December 2023
y The deferment of interest period was extended from January 2019 to January 2022
y The strike price of the first US$2.0m tranche was reduced from 150p to 28.75p
y The strike price of the second US$6.0m tranche was reduced from 489p to 150p
On 6 June 2020, GHIF exercised its rights to convert tranches 1 and 2 simultaneously. Under the terms of the conversion, GHIF was
allotted and issued 7,100,000 new ordinary shares, which was the capped number of shares which can be issued under the convertible
bond, and was also be paid approximately £685k in cash reflecting the balance of accrued interest owed, in full satisfaction of the
obligations of the Company under the convertible bond.
genedrive plc Annual Report and Accounts 2020
As part of the conversion, GHIF has entered into a lock-in and orderly marketing agreement with Peel Hunt LLP, the Company’s
Nominated Adviser and Joint Broker. Under this arrangement 5,100,000 of the GHIF shares are subject to an orderly marketing
agreement until 30 June 2021 and the remaining 2,000,000 GHIF shares will not be sold prior to 30 June 2021 (subject to various
carve outs).
63
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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:
y £2.5m loan that matures on 30 June 2025
y Interest accrues on the loan at a rate of 7%, payable quarterly
y Interest can be deferred into the principal up until 31 December 2021 and then needs to be paid in full
y The loan converts at 28.75p which was 125% of the share price on 10 December
y Certain warranties have been granted by the Company and the Executive Directors to BGF and BGF consent is required on certain
matters
y The loan came conditional with a £1m subscription to the December 2018 fundraising process
y 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
Accounting for the convertible bonds
GHIF
Whilst the bond holder has the option to convert into a fixed number of shares, due to the GHIF convertible bond being denominated in
a different currency to the Company’s functional currency, IFRS requires the convertible bond to be accounted for as a compound
instrument, comprising a debt host (liability component) and a derivative (equity component). The debt host was required to be recorded
initially at fair value and subsequently measured at amortised cost.
The derivative was measured at the settlement date using a Quanto Option Valuation model which takes account of the multicurrency
aspects of the convertible bond. Changes in fair value are recorded in profit and loss. The variables used in running the model were
volatility of the Company’s share price of 40%, expected life of the derivative of 0.008 years, risk free interest rate of 0.098% and no
dividend yield.
On conversion, the compound instrument has been derecognised. The consideration received for the issue of shares was measured by
reference to the face value of the debt of £7,199,000, being the outstanding principal and accrued interest. The difference of £3,177,000
between the carrying amount of the instrument and the consideration received has been recognised directly in equity. No gain or loss
has been recorded in the profit and loss account as a result of the conversion.
BGF
The convertible nature of the loan grants BGF an option to convert to equity but the instrument includes adjustments to the conversion
price if additional equity is issued by the Company meaning that the number of shares that would be issued is not fixed. The bond also
includes options relating to early redemption by the Company subject to it making an early redemption payment. These features
represent embedded derivatives which are recognised separately from the debt host.
The debt host was initially recorded at fair value and is subsequently measured at amortised cost.
The derivative is measured at fair value and movements recorded in profit and loss. At 30 June 2020, the derivative has been valued
using a Black-Scholes pricing model using the following inputs: volatility of the Company’s share price of 40%, expected life of the
derivative of 1.5 years, risk free interest rate of 0.098% and no dividend yield.
On 30 September 2020, BGF Investments LP exercised its right to convert £1,000,000 of its £2,500,000 Loan Note instrument into new
ordinary shares of 1.5p each in the Company. Under the conversion BGF was allotted and issued 4,478,681 new ordinary shares and was
paid approximately £134,000 in accrued interest owed on this tranche of the loan.
genedrive plc Annual Report and Accounts 2020
64
Notes to the Consolidated Financial Statements continued
for the year ended 30 June 2020
20. Share-based payments
(A) Share options outstanding at 30 June 2020
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.
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
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
2017 Epistem Share Option Scheme
Epistem Unapproved Share Option
2017 Epistem Share Option Scheme
Number of
awards
Exercise
price
Period within which
options are exercisable
Fair value
per option
Fair value
£
750
30,000
750
1,725
21,400
4,000
20,000
100,000
6,750
244,444
50,000
20,000
50,000
20,000
38,000
9,000
141,666
70,589
377,001
59,750
43,024
88,063
222,260
264,046
30,000
20,000
690,000
710,000
10,000
245,000
1,226,982
942,626
5,757,826
£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
£0.31
£0.31
£0.33
£0.21
£0.24
£0.24
£0.23
£0.21
£0.09
£0.09
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
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
10 Nov 2022 to 10 Nov 2029
06 Apr 2023 to 10 Apr 2030
06 Apr 2023 to 10 Apr 2030
£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
£0.04p
£0.04p
£0.03p
£0.03p
£0.02p
£0.02p
£0.02p
£0.03p
£0.01p
£0.01p
1,230
43,800
1,095
3,847
25,894
2,400
12,000
52,000
2,228
70,889
13,500
5,400
15,500
2,400
4,180
720
11,333
4,235
22,620
2,390
1,721
3,523
8,135
9,664
732
522
13,8000
14,200
210
7,350
12,270
9,426
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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 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
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
Epistem Unapproved Share Option Scheme
2017 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
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
Expected
dividend
yield
%
(Note b)
Expected
volatility
%
(Note c)
Expected
term
(Note a)
Risk
% rate
(Note d)
Performance
condition
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
3 years
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
50
50
50
50
43
43
43
43
30
36
36
37
39
19
19
19
12
20
20
15
15
15
16
16
16
16
16
16
16
18
18
18
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
0.50
0.50
0.50
0.75
0.75
0.75
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)
Grant date
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
01 Oct 2016
15 Oct 2016
22 Dec 2016
04 Apr 2017
04 Apr 2017
30 Nov 2017
30 Nov 2017
05 Dec 2017
20 Jul 2018
20 Jul 2018
10 Sep 2018
19 Dec 2018
05 Apr 2019
05 Apr 2019
24 Apr 2019
10 Nov 2019
06 Apr 2020
06 Apr 2020
(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;
(d) The risk-free rate used is based upon the prevailing UK bank base rate at the date of the grant;
(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.
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Notes to the Consolidated Financial Statements continued
for the year ended 30 June 2020
20. Share-based payments continued
Option valuations continued
The number of options and their weighted average exercise prices are as follows:
Group
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
2020
2019
2020
2019
2020
2019
3,488,968
2,414,608
(16,000)
–
(129,750)
1,942,252
2,038,806
–
–
(492,090)
5,757,826
3,488,968
1,206,075
554,319
10p
91p
–
29p
37p
48p
25p
–
–
235p
132p
55p
8.5
5.9
8.6
6.1
Options over 16,000 shares were exercised in the year ended 30 June 2020 (2019: nil). All 16,000 were exercised simultaneously in
June 2020 when the share price was £1.53.
(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 three 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 2020 the number of Partnership Shares earnt by employees was 69,899 (2019: 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 139,793 (2019:
97,993). Of the 139,793 shares 16,393 (2019: 15,957) have vested under the three-year service rule. The Company accrues for the value
of shares that it expects to be purchased to satisfy the number of share earnt – this accrual at 30 June 2020, included within trade and
other payables, was £190k (2019: £15k).
In order to satisfy the shares accumulated as both Partnership and 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 17,882 (2019: 18,864) 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
2020
£’000
196
–
196
2019
£’000
196
–
196
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21. Financial risk management objectives and policies
Historic cost of shares acquired
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Convertible bonds
Classification
Amortised cost
Amortised cost
Amortised cost
Fair value
2020
£’000
8,218
273
2,129
11,599
2019
£’000
5,184
372
1,129
8,518
The convertible bond financial liabilities are categorised as Level 2 within the fair value hierarchy under IFRS 13. Further information is
contained in note 19.
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 a £2.5m Convertible Loan Note as detailed in note 19. The coupon 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.
2020
Cash and cash equivalents
2019
Cash and cash equivalents
Increase in
the basis
points
Before tax
and equity
£’000
25
25
10
10
A decrease in 25 basis points would have a similar opposite effect.
Capital management
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total
borrowings less cash and cash equivalents.
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 May 2020 the Company issued 10,000,000 new shares as described in note 24.
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Notes to the Consolidated Financial Statements continued
for the year ended 30 June 2020
21. Financial risk management objectives and policies continued
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
2020
£’000
182
22
204
2019
£’000
59
6
65
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 is detailed below:
Payable within 1 year
Payable within 1 – 2 years
Payable within 3 – 5 years
2020
£’000
2,129
–
2,456
4,585
2019
£’000
1,217
–
8,518
9,735
The derivative element of the Convertible Loan Note has been excluded from the above as it will be settled via the issuance of shares.
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 (2019: £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 bonds
2020
£’000
182
11
–
193
2019
£’000
235
18
(6,191)
(5,938)
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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.
Decrease in
the currency
rate
Effect on
equity
£’000
2020
Trade and other receivables
Cash and cash equivalents
2019
Trade and other receivables
Cash and cash equivalents
Convertible bonds
5%
5%
5%
5%
5%
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.
22. Commitments under operating leases
At 30 June 2020 the Group had annual commitments under non-cancellable operating leases as set out below.
Group
Operating leases which expire:
Within 1 year
1 – 2 years
Land and buildings
2020
£’000
–
–
9
1
12
1
(310)
2019
£’000
239
–
The only material operating leases relate to the rental of main premises. The premise lease expired in April 2020 and a new lease was
signed after the balance sheet date with an expiry date of 31 July 2022.
23. Related party transactions
Other than items relating to Directors’ remuneration and employment, there were no related party transactions during the year (2019: nil).
At the balance sheet date, in respect of T Lindsay, trade and other payables included amounts of £2,000 (2019: £2,000).
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Notes to the Consolidated Financial Statements continued
for the year ended 30 June 2020
24. Share capital
Allotted, issued and fully paid:
Balance at 30 June 2018
Shares issued
Balance at 30 June 2019
Share issue – deferred consideration
Share issue
Share issue – equity-settled share-based payments
Share issue – conversion of GHIF bond
Balance at 30 June 2020
Number
18,783,115
15,217,391
34,000,506
869,565
10,000,000
16,000
7,100,000
51,986,071
£’000
282
228
510
13
150
–
107
780
At the balance sheet date there are three convertible and potentially convertible arrangements that could result in the issue of additional
shares:
Note 19 details the option to convert the Loan Note held by BGF, being £2.5m at the balance sheet date and £1.5m following partial
conversion on 30 September 2020.
On 10 December 2021 the Company will issue 500,000 shares in genedrive plc to the former owner of Visible Genomics as part of a
Deed of Amendment agreed in December 2018 to the Visible Genomics Sale and Purchase Agreement.
Note 20 to these account details share options that could also be exercised and result in the issue of additional shares.
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25. Other reserves
Balance at 30 June 2018
Share issue
Deferred consideration – equity component
Transfer of shares to SIP members
Equity-settled share-based payments
FX on translation of overseas assets
Transactions settled directly in equity
Balance at 30 June 2019
Share issue – deferred consideration
Share issue
Share issue – conversion of GHIF bond
Equity-settled share-based payments
Transactions settled directly in equity
Balance at 30 June 2020
Employee
share
incentive
plan
reserve
£’000
Shares to be
issued
£’000
Share
options
reserve
£’000
Reverse
acquisition
reserve
£’000
Total equity
£’000
–
–
315
–
–
–
315
315
(200)
–
–
–
(200)
115
(196)
1,437
(2,484)
24,745
–
–
–
–
–
–
–
–
–
49
–
49
–
–
–
–
(12)
(12)
3,015
315
–
49
(12)
3,367
(196)
1,486
(2,496)
28,112
–
–
–
–
–
–
–
–
32
32
–
–
–
–
–
(13)
7,383
7,092
46
14,508
(196)
1,518
(2,496)
42,620
Share
premium
account
£’000
25,988
3,015
–
–
–
–
3,015
29,003
187
7,383
7,092
14
14,676
43,679
Shares to be issued relate to the equity component of deferred consideration, full details are contained in note 24.
The employee Share Incentive Plan reserve represents 17,882 shares in genedrive plc (2019: 18,864 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 2020 was
£1.02 per share or £18,240 (2019: £3,867). The nominal value held at 30 June 2020 was £268 (2019: £283).
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.
genedrive plc Annual Report and Accounts 2020
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Company Balance Sheet
as at 30 June 2020
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
Total assets less current liabilities
Non-current liabilities
Convertible bond
Net liabilities
Capital and reserves
Called-up equity share capital
Share premium account
Share options reserve
Shares to be issued
Accumulated losses:
At 1 July
Transactions settled directly in equity
Total comprehensive expense for the year
Total shareholders’ funds equity
Note
30 June
2020
£’000
a
b
c
d
a
–
–
178
178
–
–
–
178
178
(11,599)
(11,599)
(11,421)
780
43,679
1,852
115
(40,086)
(3,777)
(21,538)
(57,847)
(11,421)
30 June
2019
£’000
£’000
–
–
80
80
–
–
–
80
80
(8,518)
(8,518)
(8,438)
510
29,003
1,820
315
(34,955)
(5,131)
(40,086)
(8,438)
These financial statements were approved by the Directors and authorised for issue on 16 November 2020 and are signed on their
behalf by:
David Budd
Chief Executive Officer
Matthew Fowler
Chief Financial Officer
genedrive plc
Company number: 06108621
As permitted by s408 Companies Act 2006, the Company has not presented its own profit and loss account and related notes as it has
prepared Group accounts. The Company’s loss for the year was £21.5m (2019: £5.1m).
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for the year ended 30 June 2020
73
At 30 June 2018
Share issue
Recognition of equity-settled share-based payments
Transaction settled directly in equity
Total comprehensive expense for the year
At 30 June 2019
Share issue – deferred consideration
Share issue
Share issue – conversion of GHIF bond
Equity-settled share-based payments
Transactions settled directly in equity
Total comprehensive expenses for the year
Called-up
equity share
capital
£’000
282
228
–
228
–
510
13
150
107
–
270
–
Share
premium
account
£’000
25,988
3,015
–
3,015
–
Share
options
reserve
£’000
1,771
–
49
49
–
Shares
to be
issued
£’000
Accumulated
losses
£’000
Total
equity
£’000
–
(34,955)
(6,914)
–
315
315
–
–
–
–
3,243
364
3,607
(5,131)
(5,131)
29,003
1,820
315
(40,086)
(8,438)
187
7,383
7,092
14
14,676
–
–
–
–
32
32
–
(200)
–
–
–
(200)
–
–
3,777
–
3,777
–
7,533
10,976
46
18,555
–
(21,538)
(21,538)
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Balance at 30 June 2020
780
43,679
1,852
115
(57,847)
(11,421)
genedrive plc Annual Report and Accounts 2020
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Company Statement of Cash Flows
for the year ended 30 June 2020
Cash flows from operating activities
Operating loss for the year
Group undertaking loan impairment
Exceptional gain on amendment of 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 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 convertible bonds
Cash paid to settle deferred consideration
Net inflow from financing activities
Net 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
Year ended
30 June
2020
£’000
Year ended
30 June
2019
£’000
(6,781)
6,739
–
32
(10)
(6,739)
–
(6,749)
7,532
–
(685)
–
6,847
98
80
80
178
178
(4,604)
5,300
(635)
49
110
(5,300)
(109)
(5,299)
3,243
2,366
–
(300)
5,309
10
70
80
80
80
genedrive plc Annual Report and Accounts 2020
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75
Notes to the Company Financial Statements
for the year ended 30 June 2020
Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRSʼ) as adopted by the
European Union and therefore comply with Article 4 of the EU IAS Regulation, International Financial Reporting Interpretations
Committee (‘IFRICʼ) 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 cost 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 to support the Group and Company, the Directors have the options to reduce ongoing spend or seek additional funds from
shareholders or debt providers. While the Board is confident that it will achieve the required revenue, and has a successful track record
in both reducing costs and raising funds, there remains uncertainty as to the level of sales that will be achieved in the forthcoming
months, especially in light of on-going regulatory delays on the Genedrive® 96 SARS CoV-2 test, in addition to uncertainty around the
amount of cost reduction that may be required and the amount of funding that could be raised from shareholders or debt providers. 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 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. The principal activities of the subsidiary companies are:
y 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
y 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 30 June 2018
Additions in the year
Impairment
At 30 June 2019
Additions in the year
Impairment
At 30 Jun 2020
Investment in
subsidiaries
£’000
–
49
(49)
–
32
(32)
–
Additions in the year ended 30 June 2020 comprised the fair value of the share options issued to employees of the subsidiary
undertaking during the year of £32k (2019: £49k). Full details of the share options issued are set out in note 20 to the consolidated
financial statements. Following an impairment review, the carrying value of the investments were impaired by £32k (2019: £49k).
During the year the carrying value of investments and the recoverability of amounts receivable from Group undertakings were assessed
genedrive plc Annual Report and Accounts 2020
76
Notes to the Company Financial Statements continued
for the year ended 30 June 2020
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 cashflows 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 2020 was reduced to £nil (2019: £nil)
and an impairment charge of £32k (2019: £49k) 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
2020
£’000
–
6.739
(6,739)
–
2019
£’000
–
5,300
(5,300)
–
Amounts receivable from Group undertakings are held in intercompany accounts with no security and no specified repayment terms.
£6.7m of loans owing from Group undertakings were impaired during the year.
c. Cash and cash equivalents
Cash at bank and in hand
2020
£’000
178
178
2019
£’000
80
80
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 counterparties are banks with high credit ratings assigned by international credit rating agencies.
d. Convertible bonds
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 on 10 December 2018. On 6 June 2020 GHIF exercised its rights to convert the bond into shares. Full details of
the bond and the amendment can be found under note 19 of the Group 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 19 of the Group 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 21 to the Group’s financial statements.
genedrive plc Annual Report and Accounts 2020
Directors, Secretary and Advisers
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
RSM UK Audit LLP
14th Floor
20 Chapel Street
Liverpool
L3 9AG
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 CTF Building
Grafton Street
Manchester M13 9XX
United Kingdom
77
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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