Valaris Annual Report 2019

Plain-text annual report

Group Strategic Report, Report of the Directors and Audited Consolidated Financial Statements for the Year Ended 31 December 2019 for ValiRx Plc ValiRX Plc Contents of the Consolidated Financial Statements for the year ended 31 December 2019 Company Information Independent Directors Report Chief Executive’s Report Group Strategic Report Corporate Governance Report of the Directors Statement of Directors’ Responsibilities Report of the Independent Auditors Consolidated Statement of Proﬁt or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Page 3 4 5 9 16 27 30 31 36 37 38 39 40 41 42 43 2 ValiRX Plc Company Information for the year ended 31 December 2019 DIRECTORS: SECRETARY: REGISTERED OFFICE: K J Alexander Dr K Cox G Desler M Lampshire Dr S J Dilly K J Alexander Stonebridge House Chelmsford Road Hatﬁeld Heath Essex CM22 7BD REGISTERED NUMBER: 03916791 (England and Wales) AUDITORS: Chartered Accountants & Statutory Auditor Adler Shine LLP Aston House Cornwall Avenue London N3 1LF 3 ValiRX Plc Independent Directors Report for the year ended 31 December 2019 The period from 1 January 2019 to date has marked some profound changes in the composition of the Company’s board. the Chairman, Oliver It was with great sadness that we reported that Degiorgio-Miller, passed away suddenly in October 2019. He was a key member of the board and is greatly missed. In more recent times, the former Chief Executive, Dr Satu Vainikka ceased to be a director, and Chief Operating Ofﬁcer, Dr George Morris, resigned. They had both been founder-directors of ValiRx since 2006 and had made signiﬁcant contributions to the selection of the drug candidates which still form a large part of the Company’s drug development activities. We wish them well for the future. Dr Suzanne Dilly has been appointed to the board as Chief Executive to take the Company forward into the future. We were fortunate to have her as an employee within the Group, and for many years she has been a member of our Senior Management Team. She is therefore very familiar with the Company’s operations at the time of these signiﬁcant changes to the board. Her familiarity with the Company has permitted operations to continue with minimum disruption as is indicated in her Chief Executive’s Report. Martin Lampshire, an experienced small cap corporate ﬁnancier who also knew the Company well, joined the board in May and will be a valuable source of advice. Finally, we have also been fortunate to attract a well-respected biotechnology professional, Dr Kevin Cox, as the Non-Executive Chairman of the board. We look forward to working with him following his appointment to the board. The departures from the board led to some ﬁnancial and organisational disruption but we have been able to stabilise the situation. Since the year end, we have completed three share issues in February, April and May 2020, raising an aggregate of approximately £1.4m, before expenses, and the raising of concluded a consolidation and subdivision of capital. the issued share capital to permit We very much look forward to the continued development of implementation of an exciting and sustainable growth strategy. the Company and supporting the K Alexander Director Date: 30 June 2020 4 ValiRX Plc Chief Executive’s Report for the year ended 31 December 2019 After a brief period of transition at ValiRx, I am pleased to report on our progress over the period of 2019, and to reﬂect on the post period changes in the ﬁrst half of 2020. With the coronavirus SARs-CoV2 pandemic dominating world events in 2020, the public spotlight is I ﬁnd it hard to believe that any on biotech and pharmaceuticals companies as never before. investigative scientist has been able to resist considering their own area of science to understand the challenges and help to search for solutions. The area of drug repurposing, where drugs developed for one disease are recycled into another, has become of particular interest as many known drugs are being tested for beneﬁcial effects in infection. In ValiRx, this technique is well known, with VAL401 being patients affected by the viral the repurposing of an anti-psychotic treatment into being tested for use in oncology, and our oncology therapeutic, VAL201 also being tested in endometriosis, as well as more latterly being evaluated for use in patients following SARS-CoV2 infection. The ongoing pandemic presents an unpredictable economic environment, which ValiRx faces with renewed strength by the post-period changes on the board. In particular, we look forward to welcoming our new chairman, Dr Kevin Cox, and the strength his presence will contribute to the board. The reporting period saw scientiﬁc development in both VAL201 and VAL301, with the ﬁnal patients being recruited and dosed in the VAL201 clinical trial, and the clinical development plan for VAL301 being deﬁned and developed, leading to a clearer understanding of the steps required. Commercial development was ongoing for VAL401, with the post-period announcement of a Letter Intent signed with UK SME, Black Cat Bio Limited (‘Black Cat’). This development could see of VAL401 move from the ValiRx Joint Venture subsidiary, ValiSeek Limited, for development using third party private ﬁnancing. into Black Cat The current status of review on 19 May 2020. the scientiﬁc programs is shown below and was published as a scientiﬁc Clinical Programs: VAL201 has been subject to an open label Phase 1/2 clinical trial in patients with prostate cancer entitled: “A Phase I/II, Dose Escalation Study to Assess the Safety and Tolerability of VAL201 in Patients with Locally Advanced or Metastatic Prostate Cancer and Other Advanced Solid Tumours”. Brief details of this trial are disclosed below. Details can also be found on the Clinical Trials register identiﬁer number: NCT02280317; when results are available, at www.clinicaltrials.gov, using trial these will also be available within this database. Recruitment open End of Trial Documentation submitted December 2014 – January 2020 27thJanuary 2020 Patients dosed Single Site 12 UCLH (University College London Hospital, UK) Eligible Patients: Adult men (over the age of 18), with incurable locally advanced or metastatic prostate cancer who have relapsed following radiotherapy treatment, are in ‘watchful waiting’ or where a policy of intermittent hormone therapy had been decided. Patients were expected to have no or only mild symptoms relating to their prostate cancer. Primary endpoint: “To estimate the Maximum Tolerated Dose (MTD) or Maximum Administered Dose (MAD) of VAL201” This states the principal aim of the clinical trial as assessing how high a dose can or should be given to the patient in order to attempt to elicit a disease relevant response. As a dose escalation 5 ValiRX Plc Chief Executive’s Report for the year ended 31 December 2019 trial, as is typical for ﬁrst in human studies, the dose level was started at a fraction of the dose tested in Pre-clinical studies (in this case 0.5 mg/kg – so a typical 80 kg adult man received 40 mg per dose), and gradually increased to 8 mg/kg. As well as assessing the tolerability of the dose (MTD) the trial considers the MAD, hence which doses are practical to give, based primarily on pharmacokinetics (a measure of how the body processes the drug) – considering how long the drug stays in the body, at what level, and whether that level continues to increase with increasing dose in a predictable manner. Secondary endpoints: “To assess the safety and tolerability of VAL201” This endpoint requires a listing of adverse events that occur for each patient, regardless of whether is related to either the drug or the disease. These events are categorised by or not whether the severity of the drug; whether it results in the patient stopping or reducing intake of the drug; and how many patients the event occurs in. is they require signiﬁcant medical is likely to be related to administration of that the event; whether it intervention to resolve; they are “serious”, the event As previously reported, the most common event during VAL201 administration was the occurrence of an injection site reaction, reported varyingly as bruising, rash or pain. No drug-related events were reported that prematurely from the clinical trial. resulted in the patient being removed “To evaluate the pharmacokinetics of VAL201” Full pharmacokinetic proﬁles were successfully collected and analysed in two patients, on different doses, at multiple time points during their dosing schedule. When the data has been veriﬁed and entered into the database, this will be fully analysed to aid understanding of how the drug behaves in the body. “To assess anti-tumour activity of VAL201” Although primarily a safety and tolerability focussed trial, the patients involved undergo continuous monitoring of trial participation). This includes measurement of disease markers (such as PSA), regular CT or MRI scans and symptom assessments to assess disease progression. their disease throughout (as they would have regardless of Outlook When the datasets have been formally veriﬁed and locked against further alteration, analysis and success against each endpoint can be assessed. Until the analyses are complete it would be premature to remark with conﬁdence on the achievement or the content of any of the endpoints. Headline data will be released on completion of the initial analysis; after which the clinical study report will be compiled and submitted to the relevant regulatory authorities; the clinicialtrial.gov database will be updated according to regulatory requirements; and ﬁnally details of the results will be assembled into research papers – authored by ValiRx and the clinical trial team for publishing in peer-reviewed journals. Data veriﬁcation requires access to the clinic by staff on our behalf, which is currently restricted due is anticipated that headline to the ongoing Coronavirus pandemic. Dependent on this access, results will be available and announced in Q3. Reporting will then be completed in line with regulatory requirements. it VAL401 VAL401 has been developed by ValiSeek Limited, a 55% owned ValiRx subsidiary. ValiSeek was set up in 2014 as a Joint Venture between ValiRx and Tangent Reproﬁling Limited (a SEEK group company) whereby ValiRx provided funding and Tangent Reproﬁling provided a licence to the patents for VAL401. 6 ValiRX Plc Chief Executive’s Report for the year ended 31 December 2019 VAL401 has completed an open label, pilot phase 2 clinical trial in late stage non-small cell lung cancer patients. Although in a small patient group, with just 8 patients receiving VAL401, data indicated that some patients beneﬁted from an improved quality of life, in particular in measures of pain and nausea; and when compared to a case-matched group of 20 patients from the same clinic who did not participate in the trial, demonstrated statistically signiﬁcant improved overall survival from time of diagnosis. Pharmacokinetic data was collected in all patients, and the analysis of this data published in 2019 Eur J Drug Metab Pharmacokinet 44, 557–565 (2019). https://doi.org/10.1007/s13318-018-00538-4 A randomised, placebo controlled clinical trial has been planned to test VAL401 in recently diagnosed patients with pancreatic ductal adenocarcinoma in combination with standard of care therapy. ValiRx recently announced (14thJanuary 2020) an arrangement with UK SME, Black Cat, whereby on completion of successful the VAL401 project will be exclusively licenced to Black Cat with the ValiSeek shareholders each holding a share in the equity of Black Cat; and the ValiSeek shareholders having an entitlement to future royalty payments. fund-raising by Black Cat, Under this agreement Black Cat would be solely responsible for the funding and execution of the next VAL401 clinical trial. Outlook Conﬁrmation of funding is expected within Q2 or Q3 2020, with licensing to be completed shortly after. If this arrangement is unsuccessful, alternative exploitation will be sought. Pre-clinical Programs VAL301 VAL301 uses the same active drug as VAL201 but endometriosis. is focussed on the treatment of women with On 4 July 2019 it was announced that Aptus Clinical had been engaged to work with ValiRx to develop an outline of the work required to prepare VAL301 for a clinical trial. Endometriosis typically affects women of child-bearing potential who are otherwise healthy, therefore different Pre-clinical toxicology requirements are considered than were required for the clinical trial of men with prostate cancer. Aptus has helped to identify these requirements, and to outline appropriate clinical trial designs. Outlook On 1 May 2020 it was announced that a Japanese pharma company has agreed a Material Transfer Agreement with ValiRx whereby ValiRx are supplying the VAL301 drug material, and the Japanese company will carry out a series of Pre-clinical proof of concept and efﬁcacy studies of VAL301. VAL201 in treatment of patients following SARS-CoV2 infection On 2 June 2020, ValiRx announced entering into a collaboration agreement with Oncolytika Limited (“Oncolytika”) and Black Cat Bio Limited (“Black Cat”) to evaluation the potential use of VAL201 in a combination treatment for patients suffering a hyperimmune response to Coronavirus SARS-CoV2 infection. Many patients infected with Coronavirus SARS-CoV2 exhibit more severe symptoms, with signiﬁcant damage believed to be caused by an excessive response of the immune system, even after the viral infection has reduced. This is known as a hyperimmune response. Oncolytika, a private UK based technical consultancy, has proposed a combination therapy which includes a selective SRC kinase inhibitor, such as VAL201 (which inhibits a potential oncogenic pathway), alongside one or two complementary treatments to treat the excessive response of the immune system. Oncolytika and Black Cat have ﬁled a patent to protect the proposed use of the combination therapy. ValiRx’s contribution to the collaboration is to provide samples of its proprietary SRC kinase inhibitor, VAL201, for preclinical testing, and provide access to safety and tolerability data collected 7 ValiRX Plc Chief Executive’s Report for the year ended 31 December 2019 in the recently completed clinical trial in men with prostate cancer. No cash funding is committed to the project by ValiRx under this agreement. Under this agreement, ValiRx will receive 40% of all licensing income generated. The collaboration addresses an emergent and immediate unmet medical need and details the commencement of a short-term experimental plan, with the agreement covering a maximum of two years. Non-core Programs GeneICE GeneICE is a technology platform designed to control expression levels of genes that may be over or under expressed in disease states. VAL101 is the lead candidate produced by the platform, proposed to modulate BCl2 expression – implicated in many cancers. At an early discovery/Pre-clinical stage of development, the GeneICE program requires further signiﬁcant scientiﬁc development. As announced on 30thApril 2020, GeneICE was considered a “non-core” program and as announced on 16thJune 2020 will not be further maintained by the Company. TRAC TRAC is a technology acquired by ValiRx for 75,000 Euros on 5 February 2015. Announced as conditionally sold for 800,000 Euros on 7 July 2016, 202,000 Euros was received, and, following the failure of the purchaser to settle the balance, the technology reverted to ValiRx in 2018, as reported in the 2018 ﬁnancial statements. TRAC is a tool to study expression characteristics of genes and has potential use in the diagnostics arena – and has been used by a previous owner as part of a commercial service provision. As announced on 30thApril 2020, TRAC was considered a “non-core” program and was transferred out of the ValiRx pipeline under the patent assignment announced on 29thMay 2020. FitBio The Intellectual Property assets acquired from FitBiotech Oy by ValiRx for 5,000 Euros on 2 May 2019 encompass a gene transfer unit, initially envisaged to be paired with the GeneICE products to create potential therapeutic products. As announced on 30 April 2020, FitBio was considered a “non-core” program and was transferred out of the ValiRx pipeline under the patent assignment announced on 29 May 2020. Financial overview Our ﬁnancial results show the total comprehensive loss for the year ended 31 December 2019 of £2,388,707 (2018: £4,298,822) and a loss per share of 0.26p (2018: Loss 0.94p). Research and developments costs were £984,457 for compared to £1,698,791 in 2018, a decrease of £714,334. the year ended 31 December 2019 as Administrative expenses were £1,860,379 for the year ended 31 December 2019 as compared with £2,166,798 in 2018, a decrease of £306,419 I would like to thank the staff and Board members for all their contributions and shareholders for their continued support during these difﬁcult times. Dr S J Dilly Director Date: 30 June 2020 8 ValiRX Plc Group Strategic Report for the year ended 31 December 2019 The directors present the strategic report and ﬁnancial statements for the year ended 31 December 2019. It aims to make a signiﬁcant contribution in precision medicine and science, namely, Principal activities therapeutics and associated biomarkers for ValiRx is a biotechnology company developing novel cancer. to engineer a breakthrough in human health and well-being, through the early detection of cancer and its therapeutic intervention. The Company listed on the Alternative Investment Market (“AIM”) of the London Stock Exchange in October 2006. STRATEGY The Group has a pipeline of therapeutic drugs, which are currently progressing towards clinical trials. The product focus is in the targeted analysis and treatment of cancer, but the technologies can potentially be applied to other ﬁelds as well, such as neurology and inﬂammatory diseases. It actively manages projects within its portfolio as a trading company. The ValiRx business model life science technology development by minimising ﬁnancial exposure and spreads the risks of running a set of projects to deﬁned commercial endpoints. This maximises returns to shareholders by adding value at the earlier stages of drug development where value increases per investment unit are the greatest. The Group operates through the following divisional companies: 1. ValiPharma is a biopharmaceutical division of ValiRx focused on developing personalised medicines to bring more advanced therapeutic options for the treatment of cancer. 2. Currently, ValiPharma is primarily focused on three drug candidates in both clinical and/or in late stage pre-clinical development – androgen independent prostate cancer (VAL201), (VAL201), endometriosis (VAL301) and gene activity hormone refractory prostate cancer regulation (VAL101). ValiSeek is ValiRx’s joint venture company with Tangent Reproﬁling Limited (a SEEK group company), which was formed in 2014 and has progressed product VAL401 through pre-clinical lung development and through a pilot Phase II clinical trial for the treatment of non-small cell cancer. VAL401 is a reformulation of risperidone which has a well-established safety record derived from decades of clinical use in the treatment of psychosis. The reformulation enables anti-cancer activity, and this is the subject of multiple granted patents in US and other world territories. Business review A review of the development and performance of the Group, including important events, progress during the year, and likely future developments, can be found in the Chief Executive’s Report. THERAPEUTICS VAL201 Prostate Cancer The Company’s leading anti-cancer therapeutic VAL201 is currently in clinical trials for the treatment of prostate cancer and potentially other indications of hormone induced unregulated growth including trial at University College London Hospital (UCLH) concluded on endometriosis. The Phase I/II 27thJanuary 2020 and this follows the Company receiving approval from the Medicines and Healthcare products Regulatory Agency (MHRA) to escalate VAL201 dosing. Progressing through the dose escalation and expansion stages, the study is then designed to investigate further safety and tolerability aspects as well as efﬁcacy. Particular emphasis will be placed on evaluating the pharmacokinetics, pharmacodynamics and early assessment of anti-tumour activity in response to VAL201. 9 ValiRX Plc Group Strategic Report for the year ended 31 December 2019 VAL201 is designed to selectively prevent tumour growth by speciﬁcally inhibiting the proliferation of tumour cells. As a result, tumour growth is suppressed, and metastasis is signiﬁcantly reduced. The approach is a targeted therapeutic with pre-clinical results indicating that due to the speciﬁc nature of this treatment, VAL201 is likely to have less side effects than many other therapeutic options. The target for VAL201 is also associated with other cancers and there is potential for VAL201 to be used as a treatment for other hormone-induced cancers, such as breast and ovarian cancer. Endometriosis Endometriosis is a gynaecological medical condition in which cells from the lining of the uterus (endometrium) appear and ﬂourish outside the uterine cavity lined by endometrial cells, which are under the inﬂuence of female hormones. These endometrial-like cells in areas outside the uterus (endometriosis) are inﬂuenced by hormonal changes and respond in a way that is similar to the cells found inside the uterus. Symptoms often worsen during the menstrual cycle. The treatments chosen will depend on symptoms, age, and lifestyle plans. In pre-clinical testing, VAL201 has been leaving other hormone-induced activities shown to reduce abnormal endometrial growth, whilst working normally. ValiRx’s initial pre-clinical results show a reduction in endometrial lesion size directly related to dose and two generations of offspring produced by treated animals. This strongly suggests that the peptide does not affect fertility in the same way as other treatments. VAL 401 Lung Cancer VAL401 is the reformulation of a generic drug that has over 20 years of clinical use for treatment of a chronic non-oncology disease in an oral capsule. The re-formulation allows the drug to access trial previously unexploited anti-cancer activity. VAL401 has completed a clinical Phase II for the treatment of indicating a lung cancer with data from the completed trial palliative effect and an improvement of quality of life in the patients treated. late-stage non-small cell Progress of VAL401 through its clinical trials will follow an accelerated route to Market Authorisation through the use of prior clinical data gathered on the original generic drug. Pre-clinical efﬁcacy data lung, pancreatic and prostate cancers. Pre-clinical toxicology has been collected in non-small cell has revealed no side effects beyond those expected from the parent drug, with both pre-clinical and clinical pharmacokinetc data allowing bridging from VAL401 to the historical full clinical data package on the parent. ValiSeek is currently in discussions with potential partners for starting the next clinical trial. SECTION 172(1) STATEMENT Each Director is required by the Companies Act 2006 to act in the way they consider, in good faith, would be most likely to promote the success of the Company for the beneﬁt of its members as a whole and in doing so are required to have regard for the following: — the likely long-term consequences of any decision; — the interests of the Company’s employees; — the need to foster the Company’s business relationships with suppliers, customers and others; — the impact of the Company’s operations on the community and the environment; — the desirability of conduct; and the Company maintaining a reputation for high standards of business — the need to act fairly as between shareholders of the Company. In 2018, the Company adopted the Corporate Governance Code for Small and Mid-Sized Quoted Companies from The Quoted Companies Alliance (the “QCA Code”). The QCA Code is an appropriate code of conduct for the Company’s size and stage of development. In the Corporate Governance Report, on page 15 are comments regarding the application of the ten principles of the in the Corporate Governance QCA Code. Some s.172 considerations are addressed in more detail Report. 10 ValiRX Plc Group Strategic Report for the year ended 31 December 2019 The Board considers the Company’s major stakeholders to include employees, suppliers, partners and shareholders. When making decisions, the interest of each stakeholder group individually and collectively is considered. Certain decisions require more weight attached to some stakeholders than others and while generally seeing the long-term interest of the shareholders is of primary importance, the directors consider those interests are best served by having regard to the interests of the other key stakeholder groups and, in fact, to all the s. 172 considerations. Long term value The aim of all business resources allocation is to create long-term value, being the development and commercialisation of novel drugs. The Chief Executive’s Report on page 5 describes the Company’s activities, strategy and future prospects. Some s. 172 considerations are also addressed in the Chief Executive’s Report, including the considerations for long term decision making. Our people Given the size of the Company and the nature of its business, there are only a few employees of which the majority are themselves directors. The Board considers the Company’s employees essential to the success of the Company. Business relationships The Group endeavours to maintain good relationships with its suppliers by contracting on their standard business terms and paying them promptly, within agreed and reasonable terms. Community and environment As a relatively small organisation the Group’s impact on the community and the environment modest but environmentally conscious manner. is the business acts ethically and in an the Board endeavours to ensure that Business conduct The Board recognises its responsibility for setting and maintaining a high standard of behaviour and information is business conduct. There is no special treatment for any stakeholders and all material disseminated though appropriate channels and is available to all through the company’s corporate presentations, news releases and website, www.ValiRx.com. This is described in more details in the Corporate Governance Report Principle 8. Shareholders its decision-making The Directors are committed to treating all shareholders equally. As part of process, the Board considers the interests of shareholders as a whole. All shareholders are provided with equivalent information through RNS announcements, circulars and the ValiRx website. All shareholders are invited to attend the Annual General Meeting and have the opportunity to ask questions of the Directors. For more information see Principles 2 and 3 in the Corporate Governance Report. 11 ValiRX Plc Group Strategic Report for the year ended 31 December 2019 PRINCIPAL RISKS AND UNCERTAINTIES ValiRx is a biopharmaceutical Group and, in common with other companies operating in this ﬁeld, is to a number of risks and uncertainties. The principal risks and uncertainties identiﬁed by subject ValiRx for the year ended 31 December 2019 are below. Risk Description Mitigation its clinical The Group manages and regulatory risk by working closely with its external expert scientiﬁc, regulatory and clinical advisors and, where appropriate, seeking advice from regulatory authorities on the design of key development plans for its pre-clinical and clinical programmes. is to on and likely depend Successful commercialisation of ValiRx’s products its successful progress through clinical studies, licensing and/or partnering and registration. The Group’s include major competitors companies, pharmaceutical multinational biotechnology research companies institutions. Many of its competitors have substantially greater ﬁnancial, technical and other resources, such as larger numbers of research staff. Competition that may lead to third parties discovering or developing products earlier or more successfully than ValiRx, may also the Company’s ability to secure impair funding, trials and to advance its clinical have a successful relationship with a co- development partner. development and As at 31 December 2019, the Group had cash resources of £nil. Following the year end, the Company has raised approximately three £1.4m, before expenses, by way of Placings. Research development and Commercial Cash ﬂow of the and design The Group is at a relatively early stage of in development and may not be successful its efforts to use and to build a pipeline of product candidates and develop approved or marketable products. The success of the Group’s programmes depends upon the the quality implementation of each programme. The Group utilises a range of external scientiﬁc, regulatory and clinical experts to help guide its development programmes. The progress of the development programmes therefore represents the best indicator of the Group’s performance. Successful commercialisation of the Group’s products is likely to depend through clinical on successful progress licensing and or partnering and studies, registration. product Development candidates involves a lengthy and complex process and products may not meet the necessary requirements in terms of toxicity, efﬁcacy or safety, or the relevant regulators may not agree with the conclusions of the Group’s research and may require further testing or withhold approval altogether. of induced hormone ValiRx has products in clinical trials and is dependent on successfully advancing these to lead candidates. They include VAL201, and treat abnormal re- purposed compound to treat non-small cell through the Clinical Trial lung cancer, pathway. The business model is to ensure these compounds with future partnering of larger co-development partners. and VAL401, cancers growth a from The Group has a history of operating losses which are anticipated to continue until the Group is able to generate sufﬁcient development revenues the Group may programmes. However, need to seek further capital through equity or debt ﬁnancings in the future and if this is not successful, the ﬁnancial condition of the Group may be adversely affected. its 12 ValiRX Plc Group Strategic Report for the year ended 31 December 2019 Risk Description Mitigation Clinical trials Regulatory its clinical The Group manages and regulatory risk by working closely with its and, where expert appropriate, seeking advice from bodies on clinical and regulatory risk relevant to the Group’s programmes and activities. regulatory advisors through studies of clinical Development Successful commercialisation of the Group’s products is dependent on the successful and progress product registration. candidates involves an expensive, lengthy and complex process and products may not meet the necessary requirements in terms of toxicity, efﬁcacy or safety, or the relevant regulators may the not the Group’s research and conclusions of may require further testing or withhold approval altogether. agree with Clinical trials could be delayed or prevented from completion by a number of factors, including: – – – – – – – – – delays or funding; failures to raise additional results of MHRA, EMA, FDA and/or regulatory bodies; future meetings with the other a limited number of, and competition for, suitable patients with particular types of cancer for enrolment in our clinical trials; failures delays or regulatory approval clinical trial; in obtaining to commence a delays in sufﬁcient clinical materials; failures or obtaining protocol amendments; failure of patients to complete the clinical trial; the need to expand the clinical trial; unforeseen safety issues. the Group’s clinical Additionally, trials may be suspended or terminated at any time by the MHRA, other regulatory authorities, or by the Group itself. Any failure to complete, or a signiﬁcant delay in completing, clinical the Group’s product candidates trials for could harm the commercial prospects for its product its ﬁnancial results. candidates, therefore, and and The Group’s operations are subject to laws, regulatory certain approvals governmental directives, recommendations and guidelines relating to, amongst other things, product health claims, occupational safety, the use and handling of hazardous materials, prevention environmental of protection and human clinical studies. There can be no assurance that future legislation government will laboratory practice, impose further illness injury, and not 13 The Group manages its regulatory risk by working closely with its expert regulatory advisors and, where appropriate, seeking risk advice from bodies on regulatory to the Group’s programmes and relevant activities. ValiRX Plc Group Strategic Report for the year ended 31 December 2019 Risk Description Mitigation regulation, which may adversely affect the business or ﬁnancial condition of the Group. Intellectual property Operational Return on investment Environmental matters its and intellectual The Group’s success depends, in part, on its ability to obtain and maintain protection for proprietary information, so that it can stop others from making, using or selling its inventions or proprietary patent applications may not be granted, and its existing patent rights may be successfully challenged and revoked. rights. The Group’s The Group’s continuing development and future prospects depend to a signiﬁcant degree on the experience, performance and continued service of its senior management including the Directors. The Group team, has invested in its management team at all levels. The Directors also believe that the senior management team is appropriately structured for the Group’s size and is not overly particular individual. The Group has entered into contractual these arrangements individuals with the aim of securing the them. Retention of services of each of the identiﬁcation of these individuals or suitable replacements, however, cannot be guaranteed. dependent upon with any team and the services of any of the The loss of the senior Directors or other members of management of costs the recruiting replacements may have a material adverse effect on the Group and its commercial and ﬁnancial performance and reduce the value of an investment in the Ordinary Shares. The drug development process is inherently risky and is conducted over several years and consequently is costly. Many drug candidates fail in development due to the clinical and regulatory risks, and even in those circumstances where drugs are sold, licensed or partnered prior to or subsequent to potential or actual approval, sales levels can be disappointing due to competition, healthcare intellectual property challenges. As a result, the returns achieved may be insufﬁcient the costs incurred. regulation to cover and/or The Board is committed to minimising the Group’s impact on the environment and environmental ensuring compliance with its legislation. The Board considers that activities have a low environmental impact. to ensure that all The Group strives emissions of including the gaseous, liquid and solid waste products are controlled in accordance with applicable disposal 14 this property intellectual in maintaining and The Group invests to protecting the enforceability and reduce risks over the Group’s patents. The Group validity of works closely with its legal advisors and obtains where necessary opinions on the intellectual property landscape relevant to the Group’s programmes and activities. The Board continually monitors these risks and uncertainties corrective and action if considered necessary. takes looks to mitigate the The Group risk by development commercial and late-stage partnering drug candidates for development commercialisation. By and partnering in this way, part of the risk proﬁle is reduced and the cost to the Company of programme development is minimised. its The Group recognises responsibility towards the environment and in the way it conducts its business. It works closely with all its expert scientiﬁc advisors to ensure its compliance with environmental legislation and to ensure that all emissions including liquid and solid the disposal of gaseous, in products waste controlled are ValiRX Plc Group Strategic Report for the year ended 31 December 2019 Risk Description Mitigation legislation and regulations. Disposal of hazardous waste is handled by specialist agencies. accordance with applicable legislation and regulations. of the the effect distancing We have implemented the following to mitigate disruption including: Organising for as many staff as Improved possible to work from home; social physical limiting by meetings and 2expanding ﬂexible working; Utilising any central or regional Government funding available to support businesses during the pandemic; Banning international travel travel; Increasing supplier contact so as to be able to anticipate issues and react quickly; Increasing cleaning and disinfection cycles domestic limiting and Coronavirus (COVID-19) Pandemic disruption signiﬁcant in the short The rapid emergence of the coronavirus pandemic since the start of 2020 has caused to many businesses and has created uncertainty in the market term. Government action is having a signiﬁcant effect on economies across the world. The eventual severity economic disruption is impossible to forecast. There is a risk that we will be forced to suspend that we research and development, or source cannot for ship leading to delay in completion of analysis, projects. samples length and and the of ON BEHALF OF THE BOARD: G Desler Director Date: 30 June 2020 15 ValiRX Plc Corporate Governance for the year ended 31 December 2019 The Board recognises that good corporate governance is essential to building a successful business that is sustainable for the long term. The Corporate Governance Statement that follows, explains how our governance framework works and how the Group has applied the 10 principles of the QCA Code this year. Corporate Governance Statement We are again able to report full compliance with each of the 10 principles of the Quoted Companies Alliance the Corporate Governance Code (QCA Code) and that our governance framework continues to ensure that Group operates effectively and with integrity. As well as ensuring compliance with the QCA Code, we also continue to monitor any developments in the UK Corporate Governance Code to keep abreast of matters which we feel should also be considered for an AIM company like ourselves, and this year, we have considered the Company’s purpose, ensuring that it is aligned to our values, strategy and culture. The Board has adopted the Quoted Companies Alliance Corporate Governance Code (QCA Code). The Board believes that this Code provides an appropriate and suitable governance framework for a Group of our size and complexity. This Corporate Governance Statement addresses how the Group complies with each of the 10 principles of the QCA Code. Principle How Company complies 1. a Establish strategy and business model which promote long-term value for shareholders a is ValiRx focused personalised, otherwise called precision medicines advanced therapeutic options for the treatment of cancer. biopharmaceutical company on developing to bring more For many years the Company has progressively exploited its proprietary epigenomic technology, which has led to the discovery of promising therapeutics that may prove in clinical trials to treat, among other conditions, cancer safely and more effectively than currently used chemotherapeutics, which act indiscriminately, attacking the whole body and causing irreparable damage to normal cellular processes. ValiRx has four lead drug candidates at varying stages of development for multiple indications. The Company’s business model focuses on out- licensing therapeutic candidates early in the development process. By aiming for early-stage value creation, the Company reduces costs considerably while increasing the potential for realising value. The Group is already in licensing discussions with major players in the oncology ﬁeld. ValiRx operates through the following divisional companies: ValiPharma: a biopharmaceutical company focused on developing personalised medicines to bring more advanced therapeutic options for the treatment of cancer. Currently, ValiPharma is primarily focused on three drug candidates in clinical and late stage pre-clinical development for four indications – androgen independent prostate cancer (VAL201), hormone refractory prostate cancer (VAL201), endometriosis (VAL301), and pancreatic cancer (VAL101); and ValiSeek: a joint venture company with Tangent Reproﬁling Limited (a SEEK group company), which was formed in 2014 and has progressed product VAL401 through pre-clinical development and into a Phase II clinical trial for the treatment of non-small cell lung cancer. ValiRx’s therapeutics have each shown potential for meeting hitherto unmet clinical needs by existing treatments, have worldwide patent ﬁlings and agreed commercial rights. They originate or derive from World class institutions, such as Cancer Research UK and Imperial College. 16 ValiRX Plc Corporate Governance for the year ended 31 December 2019 Principle How Company complies 2. Seek to understand and meet shareholder needs and expectations responsible for The Board is accountable to shareholders and other stakeholders and is ultimately sound corporate the Group. Our Board of Directors is governance practices throughout committed to ensuring that the Group adheres to high standards of corporate governance in the conduct of its business. the implementation of The Board attaches considerable importance to providing shareholders with clear and transparent information on the Group’s activities, strategy, and ﬁnancial position. Details of all shareholder communications are provided on the Group’s website. Company’s Private shareholders constitute the main body of investors in ValiRx. As such, the Board regards the annual general meeting as the principal opportunity for shareholders to meet and discuss the Group’s business with the Directors. There is an open question and answer session during which shareholders may ask questions both about the resolutions being proposed and the business in general. The Directors are also available after the meeting for an informal discussion with shareholders. Moreover, the details the website: https:// Questions@valirx.com www.ValiRx.com/contact-us/contact/ to communicate with the Board. Announcements on the Group’s half and the full-year results presenting all shareholders with an assessment of Group’s position and prospects are found on https://www.ValiRx.com/aim- rule-26/annual-reports/. Shareholders vote on each resolution, by way of a poll. For each resolution we announce the number of votes received for, against and withheld and subsequently publish them on our website. contact info@ValiRx.com, shareholders provided should wish and are on The Directors actively seek to build a mutual understanding of objectives with institutional shareholders. The Chair and CEO make presentations to institutional shareholders and analysts immediately following the release the full-year and half-year results. We communicate with institutional of investors frequently through a combination of formal meetings, roadshows and informal brieﬁngs with management. The majority of meetings with shareholders and potential investors are arranged by the Company’s broker. Following meetings, the broker provides feedback to the Board from all fund managers met, from which sentiments, expectations and intentions may be gleaned. In addition, we review analysts’ notes to achieve a wide understanding of investors’ views. customers, The Board recognises its prime responsibility under UK corporate law is to promote the success of the Company for the beneﬁt of its members as a whole. The Board also understands that it has a responsibility towards employees, partners, suppliers, and the patients who ultimately beneﬁt from its research and drug development programmes. Our corporate social these responsibility approach continues to meet it has a responsibility to expectations. The Board also understands that take into account, where practicable, the social, environmental and economic impact of its approach. Responsibility for the Company’s corporate activities lies with the Senior Management Team (“SMT”) who set the Group’s strategic approach and develop key policies. The Company engages with stakeholders through a number of channels, which include shareholder communications via the 17 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success ValiRX Plc Corporate Governance for the year ended 31 December 2019 Principle How Company complies Regulatory News Service (“RNS”), the Company’s website and its Annual Report & Accounts, results presentations and the Annual General Meeting and via interviews in the broadcast media and attendance at investor shows around the country. through these Corporate communication and shareholder engagement channels not only gives shareholders a deeper into and understanding of the Company’s activities and of its development, but it also invites feedback, either face-to-face at such meetings or via email, on how the Company can improve its communications with stakeholders to better support their needs. By so doing, such engagement enables the SMT to more effectively work with stakeholders in the future to their mutual advantage. The Board receives formal feedback from the SMT on a quarterly basis on the nature of interaction with the stakeholders they meet during each period. insight the Chief Executive Ofﬁcer and the Chief The SMT is comprised of Financial Ofﬁcer who take leading roles in key strategic areas such as Gender, HR, and Environmental Management. The SMT is also responsible for ensuring global compliance with key internal and external policies including: – – – – Anti-human trafﬁcking and slavery policy Diversity policy Anti-corruption and bribery policy Whistleblowing policy- UK modern slavery act. 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation according risk management in place and An important aspect of consistently work unambiguous Standard Operating Procedures (SOPs). A SOP is a compulsory instruction to carry out a series of operations correctly and always in the same manner, avoiding the integrity of scientiﬁc deviations or non-conformances to ensure that investigations and drug manufacture are consistently maintained. is to put to an ValiRx operates internal Quality Management System (QMS) comprising 14 SOPs to comply with the most stringent quality standards expected of a drug development company. Furthermore, the Company regularly audits its suppliers to ensure the manufacturing process, quality process, and also the drug’s shipment process all conform to the standard required. 18 ValiRX Plc Corporate Governance for the year ended 31 December 2019 SOP Title Description 001 002 003 004 005 006 Quality Management SOP describes the QMS, its structure and maintenance at ValiRx. ValiRx Organisation and Training SOP describes the organisation of ValiRx as a company, and the internal training programme. Clinical Project Management SOP describes the general process by which ValiRx manages and coordinates the development programme for an Investigational Medicinal Product (IMP). Document Review and Approval SOP describes the general process by which ValiRx reviews and approves essential documents in support of product development activities. Document Management, Filing and Archiving SOP describes the general process by which ValiRx Plc manages, ﬁles and archives essential documents in support of product development activities. Selection and Management of Vendors/Consultants SOP describes the process followed at ValiRx to identify, select and manage external service providers. 007 Contracts 008 Investigational Medicinal Product Management 009 Investigator’s Brochure 010 Safety Reporting SOP describes the process followed at ValiRx to ensure appropriate contracts and agreements are in place with vendors or consultants, and that these are put in place in a timely manner. SOP describes the general process for ValiRx to establish that a chain of custody is maintained and documented for the supply of Investigational Product for a clinical trial from release from the manufacturer site, shipment, delivery and receipt at an investigational site, accountability, and then for return or destruction of used/unused product. SOP describes the process for ValiRx to prepare and maintain an Investigator’s Brochure, including review process. SOP describes the responsibilities for reporting of safety information from clinical trials to Competent Authorities, Ethics Committees, Investigators and other parties as appropriate. 011 012 013 014 Clinical Trial Transparency SOP describes the process for ValiRx to follow when registering clinical trials and posting trial results in order to fulﬁl requirements. Medical Monitoring of Clinical Trials SOP describes the role of the Medical Monitor (MM) in maintaining and documenting safety oversight and pharmacovigilance during clinical trials. Risk Management, Issue Escalation and Management of Corrective and Preventative Actions (CAPA) Management of Non- compliance and Serious breaches SOP describes the processes implemented by ValiRx to manage risk, escalate issues and ensure Corrective and Preventative Actions (CAPA) are in place for all clinical studies where ValiRx is the Sponsor. SOP describes the procedures for identifying, documenting and reporting non-compliance, misconduct and serious breaches of the trial protocol and associated approved documents, and the principles of Good Clinical Practice (GCP), SOPs and all applicable regulatory requirements. 19 ValiRX Plc Corporate Governance for the year ended 31 December 2019 Principle How Company complies 5. Maintain the board as a well- functioning, balanced team led by the chair Board Composition – The Board currently consists of two Executive Directors, one proposed Non-Executive Chairman, and two Non-Executive Directors, who collectively hold scientiﬁc, ﬁnancial, legal, and business experience necessary to advance the Company and apply corporate governance best practices. The Board is satisﬁed with its composition and the balance between Executive and Non-Executive Directors. These are: Dr Kevin Cox (Non-Executive Chairman – appointed 26 June 2020) Dr Suzanne Dilly (Chief Executive Ofﬁcer – appointed 8 June 2020) Gerry Desler (Chief Financial Ofﬁcer) Kevin Alexander (Independent Non-Executive Director) Martin Lampshire (Non-Executive Director – appointed 7 May 2020) the Board by meeting the management During the year under review, the following were also directors: Oliver De Giorgio-Miller (Non-Executive Chairman – Died 21 October 2019) Dr Satu Vainikka (Chief Executive Ofﬁcer – Ceased to be a director 14 April 2020) Dr George Morris (Chief Operating Ofﬁcer – Resigned 14 April 2020) Role of CEO – Leads and manages the day-to-day running of the Group’s business in accordance with the business plans and within the to ensure budgets approved by the Board;- Leads the management effective working or relationships with communicating on a regular basis to review key developments, issues, the Group’s opportunities and concerns;- Develops and proposes strategies and policies for the Board’s consideration;- Implements, with the strategies and policies as the support of team, the Group’s approved by the Board and its committees in pursuit of objectives;- Maintains regular dialogue with the Chairman on important and strategic issues facing the Group, and ensures bringing these issues to the Board’s attention;- Ensures that the management gives appropriate priority to providing reports to the Board which contain relevant, accurate, timely and clear information necessary for the Board to fulﬁl its duties;- Ensures that the Board is alerted to forthcoming complex, contentious or sensitive communication the Group- programme with stakeholders including shareholders;- Conducts the the Group in accordance with the practices and procedures affairs of adopted by the Board and promotes the highest standards of integrity, probity and corporate governance within the Group Role of the Non-Executive Directors – As members of the Board, all Non-Executive directors have key accountabilities, which include the following:- Provision of entrepreneurial leadership of the Company within a framework of prudent and effective controls, which enable risk to be assessed and managed;- Setting the Company’s strategic aims, ensure the necessary ﬁnancial and human resources are in place for the that Company to meet its objectives, and review management performance;- Setting the Company’s values and standards and ensure that its obligations to shareholders are understood and met;- Constructively challenge and help develop strategy, participate actively in the decision- making process of the Board, and scrutinise the performance of management in meeting agreed goals and objectives; and affecting issues Leads the 20 ValiRX Plc Corporate Governance for the year ended 31 December 2019 Principle How Company complies the Director Independence – The Board will identify in the annual report each Non- it considers to be independent. The Board will Executive Director determine whether in character and independent is judgement and whether there are relationships or circumstances which the Director’s judgement. are likely to affect, or could appear to affect, is The Board will state its reasons if or independent circumstances which are relevant the Director: it determines that a Director existence relationships including if to its determination, notwithstanding the of – – – – – – Has been an employee of the Company or Group within the last ﬁve years; Has, or has had within the last relationship with the Company either directly, or as a Director or senior employee of a body that has such a relationship with the Company; three years, a material business Has received or receives additional remuneration from the Company apart from a Director’s fee;- Has received or receives additional remuneration from the Company apart from a Director’s fee;- Has close family ties with any of the Company’s advisers, directors or senior employees;- Holds cross- directorships or has signiﬁcant links with other directors through involvement in other companies or bodies; or Has served on the Board for more than nine years form the date of their ﬁrst election; Has a close family tie with any of the Company’s advisers, Directors or senior employees. Role of Board Committees The Board has established three committees: remuneration, audit and risk and nomination and governance. these committees have terms of reference, which set out clearly All of their or make is role, recommendations to the Board of Directors. These are available on the Company’s website: stating whether decisions take to it 6. that Ensure between them the directors have the necessary up-to- date experience, skills and capabilities (https://www.ValiRx.com/aim-rule-26/corporate-governance/). the Directors can be found on the Company Biographical details of website at https://www.ValiRx.com/about-us/board-directors/. ValiRx seeks to recruit the best candidates at Board level and considers candidates on merit and against objective criteria and with due regard for the beneﬁts of diversity on the Board (including gender), taking care that appointees have the necessary experience and time available to allocate to the position. Each Director appointed by the Board is subject to election by the shareholders at their appointment. Following advice from the Nomination and Governance Committee, the Board has concluded that each Director is qualiﬁed for election or re-election. the ﬁrst AGM after The current Board members are individuals with extensive industry- speciﬁc experience as well as professionals that bring to the Board the its strategic, operational and compliance skill sets required to meet objectives. Their suitability as Directors has therefore been determined largely on the basis of their ability to deliver outcomes in accordance with 21 ValiRX Plc Corporate Governance for the year ended 31 December 2019 Principle How Company complies the Company’s short and longer-term objectives and thus add value to shareholders. 7. board Evaluate performance based on clear and relevant objectives, seeking continuous improvement the Chief Executive, ValiRx considers that assessments of the performance of the Board, the the Company Secretary and Board Committees, to good the individual Non-Executive Directors are pivotal each of corporate governance, bringing signiﬁcant beneﬁts and performance improvements on three levels: organisational; board and individual level. Establishing an effective process for board evaluation member to the organisation that board members are sends a positive signal committed to acting professionally. Performance assessments are conducted annually across the board, applying a matrix of key areas of focus to identify collective and individual continuous strengths improvement. and weaknesses within the Company for Board Composition: – – – – – – – – – – Appropriate ratio between Executive and Independent Directors; responsibilities at Awareness of social, professional and legal individual, company and community level; ability to identify independence conﬂicts; applies sound professional judgement; identiﬁes when external counsel should be sought; upholds Board conﬁdentiality; respectful in every situation; Effective in working within deﬁned corporate communications policies; makes constructive and precise contribution to the Board both verbally and in written form; Negotiation skills to engender stakeholder support for implementing Board decisions; and- Experienced with the mechanisms, controls and channels to deliver effective governance and manage risks. Effectiveness of the Board of Directors in: – – – – – – – Monitoring ﬁnancial performance against agreed ﬁnancial objectives; Monitoring the implementation of Board; the strategy approved by the Appointing, removing and monitoring the performance of Executive Ofﬁcer, Chief Financial Ofﬁcer and Company Secretary; the Chief Ensuring appropriate succession planning for Board members and senior management via the Nomination and Governance Committee; Approving and monitoring ﬁnancial and other reporting; Approving management, funding, acquisitions and divestments; and monitoring major capital expenditure, capital Overseeing risk management, control, accountability and compliance systems; 22 ValiRX Plc Corporate Governance for the year ended 31 December 2019 Principle How Company complies – – – – – Setting standards of behaviour Company in the market and the community; to enhance the reputation of the Ensuring proper organisation and management so as to achieve conformity goals across all aspects of the business; Setting appropriate delegated powers between CEO and Board of Directors; Ensuring quality and continuity of members of Committees, managers and heads of control functions; and Setting clear strategy for the Company reﬂecting goals short to mid- long term. relations with the Group CEO, Effectiveness of Executive Management in: – – – – – – – – Implementing the strategic objectives set by the Board; Operating within the risk parameters set by the Board; Operational and business management of the Company; Managing the Company’s reputation and operating performance in accordance with parameters set by the Board; The day-to-day running of the Company; Providing the Board with accurate, enable the Board to perform its responsibilities; timely and clear information to Interfacing with shareholders and stakeholders, Nomad and Broker; and Approving capital expenditure (except acquisitions) within delegated authority levels. Structure and competency of Committees to: – – – Advise the Board on the suitability of external auditors and critical accounting policies for ﬁnancial reports, in particular YE audited accounts, and the Company’s risk management and internal control systems; Provide independent and transparent pay arrangements linked to achievements over a given period; and Lead the Board appointment and succession planning process considering the requirements of the Company. The Board understands the importance of setting the right culture for a biotechnology oncology-focused Company specialising in developing novel treatments for cancer that will provide a breakthrough into human health and wellbeing through the early detection of cancer and its therapeutic the Company’s strategies and intervention. Moreover, requirements for excellence and good governance are instilled into the culture of our business. The Executive Directors interface regularly with all personnel within ValiRx. In this way we encourage them to take responsibility for advancing their projects within parameters and controls set by the Board. This approach creates a culture that motivates and enables our personnel to develop and express their talents and skills. Moreover, in the performance of its duties the Board listens to the views it ensures that 23 8. Promote a corporate culture that is based on ethical values and behaviours ValiRX Plc Corporate Governance for the year ended 31 December 2019 Principle How Company complies 9. Maintain governance structures and processes that are ﬁt for purpose and support good decision-making by the board 10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders of key stakeholders, suppliers and is mindful of the potential impacts of decisions it makes. including scientists, clinicians, regulators and The Board of Directors, with the support of the Executive Management and Committees, is ultimately responsible for establishing and maintaining good standards of governance. This can be achieved by creating that enhance overall Board’s and individual Directors’ conditions effectiveness in order that all key issues are addressed, and sound decisions are taken in a timely manner. Other responsibilities of the Board of Directors include: – – – – – Promoting effective relationships and open communication, and creates an environment that allows constructive debates and challenges, both inside and outside the boardroom, between Non- Executive Directors and the management; Ensuring that the Board as a whole plays a full and constructive part in the development and determination of the Group’s strategies and policies, and that Board decisions taken are in the Group’s best interests and fairly reﬂect Board’s consensus; in consultation with the Chief Executive and Company Setting, Secretary, the Board meeting schedule and agenda to take full account of the important issues facing the Group and the concerns of all Directors, and ensures that adequate time is available for thorough discussion of critical and strategic issues; the strategies and policies agreed by the Board are Ensuring that effectively implemented by the Chief Executive and the management; and there is effective communication with shareholders, Ensuring that and that each Director develops and maintains an understanding of the stakeholders’ views. on risk and strategy, judgment performance. is assessed at The Board recognises the importance of sound corporate governance. The Board is satisﬁed with its composition. The Non-Executive Director brings a wide range of skills and experience to the Company, as well as The independent independence of each Non-Executive Director least annually and are considered to be independent at the date of this report. Attendance at Board meetings – A minimum of ten (10) Board meetings are held each year at which it is expected that all Directors attend in addition to relevant Committee meetings, General Meetings and the Annual General Meeting. Where Directors are unable to attend meetings due to conﬂicts in their schedules, they will receive the papers scheduled for discussion in the relevant meetings, giving them the opportunity to relay any comments to board members in advance of the meeting. Directors are required to leave the meeting where matters relating to them, or which may constitute a conﬂict of to them, are being discussed. The following table shows the Directors’ attendance at scheduled Board meetings, which they were eligible to attend in the 12-month period to December 2019: interest 24 ValiRX Plc Corporate Governance for the year ended 31 December 2019 Principle How Company complies 10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders Oliver de Giorgio-Miller 11/11 (Died 21 October 2019) Dr Satu Vainikka 10/11 (Ceased to be a director 14 April 2020) Dr George Morris 9/11 (Resigned 14 April 2020) Gerry Desler 11/11 Kevin Alexander 11/11 Matters reserved for the Board – – – – – – – – – Approval of framework; the Group vision, values and overall governance the Company’s Annual Report and Accounts and Half Approval of Yearly Financial Statements; Approval of Group ﬁnancial policy; Approval to enter into discussions with Biotech companies reference potential joint-partnering projects or licensing of Company’s Pre- clinical and clinical assets; the Company’s long-term ﬁnance plan and annual Approval of capital budget; Approval of any signiﬁcant change in Group accounting policies or practices; Approval corresponding documentation sent to shareholders; listing particulars, circulars, all of resolutions and Establishing committees of reference (including membership and ﬁnancial authority), reviewing their activities and, where appropriate, ratifying their decisions; the Board, approving their terms of Approval of this schedule of Matters Reserved to the Board. The Board is responsible to the Company’s shareholders with its main objective to increase the value of assets and long-term sustainability of the Company. The Board reviews business opportunities and determines It also makes decisions on budgets, the risks and control day-to day Group strategy management of the business is delegated to the Executive Directors. expenditure. The and major framework. capital The Board meets monthly with agendas, Committee papers and other appropriate information distributed prior to each meeting to allow the Board to meet its duties. Effective procedures are in place to deal with conﬂicts of interest. The Board knows other interests and commitments of Directors and any changes to their commitments are reported. In addition to the Executive Committee, the Board has established a Remuneration Committee, an Audit and Risk Committee, and a into ValiRx’s Nomination and Governance Committee, which also report Board. the Company for approval by the Board. The Executive Committee is in charge of the daily management of the Group and is mandated to prepare and plan the overall policies and strategies of It may approve intra-group transactions, provided that they are consistent with the the Company, as well as speciﬁc consolidated annual budget of transactions with third parties provided that the cost per transaction is within speciﬁed spending limits. It informs the Board at its next meeting on each such transaction. Prior to the beginning of each ﬁscal year, the 25 ValiRX Plc Corporate Governance for the year ended 31 December 2019 Principle How Company complies Executive Committee submits to the Board those measures that it deems necessary to be taken in order to meet the objectives of the Company and a consolidated budget for approval. This committee comprises: Gerry Desler (Chief Financial Ofﬁcer) Dr Suzanne Dilly (Chief Executive Ofﬁcer) The Audit and Risk Committee meets at least twice per annum and is responsible for assisting the Board in carrying out its oversight responsibilities in relation to corporate policies, risk management, internal control, internal and external audit and ﬁnancial and regulatory reporting practices. The Committee has an oversight function, providing a link between the external auditors and the Board; it also determines the terms of engagement of the Company’s auditors. The current members of the Audit and Risk Committee are: Gerry Desler (Executive Chief Financial Ofﬁcer); and Kevin Alexander (Non-Executive Director) least remuneration policies applied throughout The Remuneration Committee meets at twice per annum to determine and agree with the Board the framework or broad policy for the remuneration of executive directors of the Company and advises on the overall the Company. The this committee is to attract, retain and motivate executives objective of capable of delivering the Company’s objectives. Agreed personal objectives and targets including ﬁnancial and non-ﬁnancial metrics are set each year the executive directors and other personnel and performance measured against these metrics. The committee is made up of Non-Executive Directors, namely: for Kevin Alexander (Non-Executive Director) Martin Lampshire (Non-Executive Director) The Chief Executive Ofﬁcer is consulted on remuneration packages and policy but does not attend discussions regarding her own package. The Board determines the remuneration and terms and conditions of the appointment of Non-Executive Directors. the selection and proposal The Nomination Committee is a sub-committee of the whole Board responsible for to the Board of suitable candidates for appointment as Executive and Non-Executive Directors The Committee may engage external search consultants to identify candidates for Board vacancies before recommending a preferred candidate to the Board for consideration. The Committee comprises: Kevin Alexander (Non-Executive Director) Gerry Desler (Chief Financial Ofﬁcer) The Directors present ended 31 December 2019. their report and ﬁnancial statements for the year 26 ValiRX Plc Report of the Directors for the year ended 31 December 2019 DIVIDENDS No dividends will be distributed for the year ended 31 December 2019. RESEARCH AND DEVELOPMENT The Group will continue its policy of investment in research and development. In accordance with International Financial Reporting Standards (IFRS), during the year the Group expensed to the income statement £984,457 (2018: £1,698,791) on research and development. Further details on the Group’s research and development are included in the Chief Executive’s Report on page 7. FUTURE DEVELOPMENTS Details of future developments can be found in the Strategic Report on pages 12 to 15. EVENTS SINCE THE END OF THE YEAR Information relating to events since the end of statements. the year is given in note 22 to the ﬁnancial DIRECTORS The Directors shown below have held ofﬁce during the whole of the period from 1 January 2019 to the date of this report. K J Alexander G Desler Other changes in directors holding ofﬁce are as follows: M Lampshire Dr S J Dilly Dr K Cox Dr G S Morris Dr S Vainikka — Appointed 7 May 2020 — Appointed 8 June 2020 — Appointed 26 June 2020 — Resigned 14 April 2020 — Ceased to be a director 14 April 2020 It is with deep regret that the Board announced the passing of O De Giorgio-Miller on 21 October 2019. DIRECTORS’ SHAREHOLDINGS The Directors of the Company held the following beneﬁcial Company at the balance sheet date: interests in the ordinary shares of the K J Alexander O De Giorgio-Miller (Died 21 October 2019) G Desler Dr G S Morris (Resigned 14 April 2020) Dr S Vainikka (Ceased to be a director 14 April 2020) 2019 No. of shares 2018 No. of shares 104,278 N/A 1,875,208 1,821,620 1,958,242 104,278 1,392,888 1,875,208 1,821,620 1,958,242 27 ValiRX Plc Report of the Directors for the year ended 31 December 2019 DIRECTORS’ SHARE OPTIONS The Directors of the Company share option scheme, as indicated below. No share options were exercised during the year. Full details of the share options held are disclosed in note 25 to the ﬁnancial statements. the Company held share options granted under K J Alexander O De Giorgio-Miller (Died 21 October 2019) G Desler Dr G S Morris (Resigned 14 April 2020) Dr S Vainikka (Ceased to be a director 14 April 2020). 2019 No. of shares 2018 No. of shares 3,041,800 N/A 3,589,760 3,716,000 4,311,000 3,045,000 3,305,000 3,592,960 3,722,000 4,319,000 COMPANY SHARE PRICE The market value of the Company’s shares at 31 December 2019 was 0.12p and the high and low share prices during the period were 1.13p and 0.12p respectively. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Note 26 to the ﬁnancial statements gives details of management of ﬁnancial instruments. the Group’s objectives and policies for risk SIGNIFICANT SHAREHOLDERS As at 2 June 2020, so far as the Directors are aware, the following shareholders held more than 3% of the Company’s issued share capital: Nicholas Slater Monecor (London) Limited M J Bown % of issued share capital held 9.1% 7.7% 6.6% DIRECTORS’ INSURANCE The Directors and ofﬁcers of them for any wrongful act in their capacity as a Director, ofﬁcer or employee of the Group, subject to the terms and conditions of the policy. the Company are insured against any claims against CREDITOR PAYMENT POLICY The company’s current policy concerning the payment of trade creditors is to: — settle the terms of payment with suppliers when agreeing the terms of each transaction; — ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and — pay in accordance with the company’s contractual and other legal obligations. On average, trade creditors at the year-end represented 152 days’ purchases. STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS So far as the Directors are aware, there is no relevant audit information (as deﬁned by Section 418 the Companies Act 2006) of which the Group’s auditors are unaware, and each Director has of taken all the steps that he or she ought to have taken as a Director in order to make himself or 28 ValiRX Plc Report of the Directors for the year ended 31 December 2019 herself aware of any relevant audit information and to establish that the Group’s auditors are aware of that information. AUDITORS The auditors, Adler Shine LLP, will be proposed for General Meeting. ON BEHALF OF THE BOARD: re-appointment at the forthcoming Annual G Desler Director Date: 30 June 2020 29 ValiRX Plc Statement of Directors’ Responsibilities for the year ended 31 December 2019 The Directors are responsible for preparing the Strategic Report, Directors’ Report, Corporate Governance Statement and the Group and Parent Company ﬁnancial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Parent Company 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 Parent 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 to ﬁnancial statements such ﬁnancial statements that references in the relevant part of 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 Parent Company and of the proﬁt or loss of the Group for that period. In preparing each of the Group and Parent Company ﬁnancial statements the Directors are required to: — select suitable accounting policies and then apply them consistently; — make judgements and estimates that are reasonable and prudent; — for the Group ﬁnancial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU, subject to any material departures disclosed and explained in the ﬁnancial statements; that Act — for the Parent Company ﬁnancial statements, state whether they have been prepared in accordance with UK GAAP, subject to any material departure disclosed and explained in the Parent Company ﬁnancial statements; and — prepare the ﬁnancial statements on the going concern basis unless it presume that the Group and the Parent Company will continue in business. is inappropriate to the Parent Company and enable them to ensure that The Directors are responsible for keeping adequate accounting records that are sufﬁcient to show and explain the Parent Company’s transactions and disclose with reasonable accuracy at any time the ﬁnancial position of the ﬁnancial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Parent Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the ﬁnancial statements contained therein. The Directors are responsible for ensuring the annual report and the ﬁnancial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of ﬁnancial statements, which may vary from legislation in other jurisdictions. 30 ValiRX Plc Report of the Independent Auditors to the Members of ValiRX Plc Opinion We have audited the ﬁnancial statements of ValiRx Plc (the ‘Parent Company') and its subsidiaries (the ‘Group') for the year ended 31 December 2019 on pages 31 to 58. The ﬁnancial reporting framework that has been applied in the preparation of the Group ﬁnancial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The ﬁnancial reporting framework that has been applied in the preparation of the Parent Company ﬁnancial statements is applicable law and United Kingdom Accounting Standards (United Kingdom including FRS 102 “The Financial Reporting Standard Generally Accepted Accounting Practice) applicable in the UK and Republic of Ireland. In our opinion: — the ﬁnancial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2019 and of the Group’s loss for the year then ended; — the Group ﬁnancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; — the Parent Company ﬁnancial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice – FRS 102; and — the ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the ﬁnancial statements section of our report. We are independent of the group 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, 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 your attention to note 2 to the ﬁnancial statements, which indicates that the accounts have been prepared on the going concern basis. The Board has referred to the fact the company is reliant on future fund raisings to continue its activities as budgeted. Should future fund raisings be impact on the group and company’s plans to develop its products. As stated unsuccessful, this will in note 2, this condition indicates that a material uncertainty exists that may cast signiﬁcant doubt on the group and company’s ability to continue as a going concern. Our opinion is not modiﬁed in respect of this matter. Key audit matters judgment, were of most signiﬁcance in Key audit matters are those matters that, in our professional our audit of the ﬁnancial statements of the current period and include the most signiﬁcant assessed risks of material misstatement (whether or not due to fraud) we identiﬁed, including those which had resources in the audit; and the greatest effect on: directing the efforts of the engagement team. These matters were addressed in the context of our audit of the ﬁnancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The key audit matters identiﬁed were: the overall audit strategy, the allocation of Impairment of goodwill and intangibles Area of focus The Group has goodwill of £1.6m and intangible assets of £1.6m. 31 ValiRX Plc Report of the Independent Auditors to the Members of ValiRX Plc indeﬁnite-lived IAS 36 requires at intangible assets and intangible assets that are not yet ready for use, with more regular assessment should an impairment trigger be identiﬁed. impairment assessments in relation to goodwill, least annual The determination of recoverable amount, being the higher of value-in-use and fair value less costs of disposal, requires judgement on the part of management in identifying and then estimating the recoverable amount for the relevant CGUs Recoverable amounts are based on management’s view of future cash ﬂow forecasts and external market conditions such as future pricing and the most appropriate discount rate. Management engaged an expert impairment assessment which included the assumptions and estimates around the success of the future development and commercialisation of its products VAL 201, VAL101 and VAL 401. Changes in these assumptions might give rise to a change in the carrying value of intangibles and goodwill. them in performing an annual to assist How our audit addressed the area of focus We obtained the report prepared by the expert and gained an understanding of the key assumptions and judgements underlying the assessment. We assessed the appropriateness of the methodology applied and tested the mathematical accuracy of the models. We obtained an understanding of the stage of product development and management’s expected including updates on the achievement of expected timelines for product commercialisation, milestones. We determined the judgement made by the Directors that no impairment was required, and that the disclosures made in the ﬁnancial statements to be reasonable. to note 2 of Going concern Area of focus related accounting Refer they have a reasonable policies, the Group will have sufﬁcient cash resources and cash inﬂows to continue its expectation that activities for not less than twelve months from the date of approval of these ﬁnancial statements and have therefore prepared these ﬁnancial statements on a going concern basis. judgements and estimates. The directors have concluded that the directors’ disclosures of the ﬁnancial statements for The Group had cash and cash equivalents of £nil at 31 December 2019. Since the year end, the Company has raised £1.4m through the placing of new ordinary shares. Management produces a cash ﬂow forecast based on the board plans. The key judgements within the cash ﬂow forecast that we particularly focused on were: — The continued availability of funding. — The likely recovery of other receivables. — Cash ﬂows expected from research and development tax credits. — Flexibility of development programme. How our audit addressed the area of focus We assessed the reasonableness and support forecast, as well as the sensitivity of projections to these judgements. We reviewed managements ﬁnancing plans and as the Company is reliant on future fund raisings to continue as a going concern this represents a material uncertainty as disclosed further in note 2 of the ﬁnancial statements. the judgments underpinning management’s for We considered the reasonableness of reduction actions, should future fund raisings be lower than anticipated. Our conclusion on management’s use of the going concern basis of accounting is included in the going concern section of the report above. the assumptions within management’s proposed cost 32 ValiRX Plc Report of the Independent Auditors to the Members of ValiRX Plc 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 and to evaluate the effects of misstatements, both individually and on the ﬁnancial statements as a whole. During planning we determined a the ﬁnancial magnitude of uncorrected misstatements that we judge would be material statements as a whole (FSM). During planning FSM was calculated as £93,600, which was updated during the course of our audit to £101,200 based on an average of 5% of adjusted loss before tax and 3% of net assets. We agreed with the Audit Committee that we would report to them all unadjusted differences in excess of £5,000, as well as differences below those thresholds that, in our view, warranted reporting on qualitative grounds. for the audit An overview of the scope of our audit team obtained sufﬁcient and appropriate audit The audit was scoped to ensure that evidence in relation to signiﬁcant operations of the Group during the year ended 31 December 2019. This included the performance of full statutory audits on each of the subsidiary undertakings. As part of our planning we assessed the risk of material misstatement including those that required signiﬁcant auditor consideration at the component and group level. Procedures were designed and performed to address the risk identiﬁed and for the most signiﬁcant assessed risks of material misstatement, the procedures performed are outlined above in the key audit matters section of this report. Other information The directors are responsible for information comprises the information in the Annual Report but does not include the ﬁnancial statements and our Report of the Auditors 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. information. The other the other the ﬁnancial statements, our responsibility is to read the other In connection with our audit of 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. inconsistencies or apparent material misstatements, we are required to If we identify such material in the ﬁnancial statements or a material determine whether 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. there is a material misstatement Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: — the information given in the Group Strategic Report and the Report of the Directors for the ﬁnancial year for which the ﬁnancial statements are prepared is consistent with the ﬁnancial statements; and — the Group Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements. 33 ValiRX Plc Report of the Independent Auditors to the Members of ValiRX Plc Matters on which we are required to report by exception In the light of the group and the parent company and its environment obtained in the course of the audit, we have not identiﬁed material misstatements in the Group Strategic Report or the Report of the Directors. the knowledge and understanding of We have nothing to report requires us to report to you if, in our opinion: — adequate accounting records have not been kept by the parent company, or returns adequate the following matters where the Companies Act 2006 in respect of for our audit have not been received from branches not visited by us; or — the parent company ﬁnancial statements are not in agreement with the accounting records and returns; or — certain disclosures of directors’ remuneration speciﬁed by law are not made; or — we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the Statement of Directors’ Responsibilities set out on page 26, 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 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. Auditors’ responsibilities for the audit of the ﬁnancial statements Our objectives are to obtain reasonable assurance about whether the ﬁnancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors 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 they could reasonably be expected to inﬂuence the material economic decisions of users taken on the basis of these ﬁnancial statements. A further description of our responsibilities for the audit of the ﬁnancial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors. individually or in the aggregate, if, 34 ValiRX Plc Report of the Independent Auditors to the Members of ValiRX Plc 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 a Report of the Auditors 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. Christopher Taylor (Senior Statutory Auditor) for and on behalf of Adler Shine LLP Chartered Accountants & Statutory Auditor Aston House Cornwall Avenue London N3 1LF Date: 30 June 2020 35 ValiRX Plc Consolidated Statement of Proﬁt or Loss and Other Comprehensive Income for the year ended 31 December 2019 CONTINUING OPERATIONS Other operating income Research and developments Administrative expenses OPERATING LOSS Fair value loss on derivative ﬁnancial assets Provision for bad debt Finance costs LOSS BEFORE INCOME TAX Income tax credit LOSS AFTER INCOME TAX Non-controlling interest Notes 2019 £ 2018 £ 7 6 7 8 146,517 (984,457) (1,860,379) (2,698,319) — — (21,175) – (1,698,791) (2,166,798) (3,865,589) (442,229) (506,755) (14,565) (2,719,494) 293,738 (4,829,138) 461,296 (2,425,756) 37,049 (4,367,842) 69,020 TOTAL COMPREHENSIVE LOSS FOR THE YEAR (2,388,707) (4,298,822) LOSS PER SHARE – BASIC AND DILUTED 10 (0.26p) (0.94)p 36 ValiRx Plc (Registered number: 03916791) Consolidated Statement of Financial Position — continued 31 December 2019 ASSETS NON-CURRENT ASSETS Goodwill Intangible assets Property, plant and equipment Investments CURRENT ASSETS Trade and other receivables Tax receivable Cash and cash equivalents TOTAL ASSETS EQUITY SHAREHOLDERS’ EQUITY Called up share capital Share premium Merger reserve Reverse acquisition reserve Share option reserve Retained earnings Non-controlling interests TOTAL EQUITY LIABILITIES CURRENT LIABILITIES Trade and other payables Bank overdraft Borrowings TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES Notes 2019 £ 2018 £ 11 12 13 14 15 16 17 1,602,522 1,620,207 — — 1,602,522 1,623,950 — — 3,222,729 3,226,472 90,083 291,787 — 174,089 461,193 372,872 381,870 1,008,154 3,604,599 4,234,626 9,417,225 20,596,143 637,500 602,413 830,449 (29,729,817) 8,680,694 19,779,905 637,500 602,413 885,963 (27,461,771) 2,353,913 (130,813) 3,124,704 (93,764) 2,223,100 3,030,940 18 16, 19 19 1,182,084 5,634 193,781 889,987 — 313,699 1,381,499 1,203,686 3,604,599 4,234,626 The ﬁnancial statements were approved by the Board of Directors on 30 June 2020 and were signed on its behalf by: G Desler Director 37 ValiRx Plc (Registered number: 03916791) Consolidated Statement of Financial Position 31 December 2019 ASSETS NON-CURRENT ASSETS Intangible assets Property, plant and equipment Investments CURRENT ASSETS Trade and other receivables Tax receivable Cash and cash equivalents TOTAL ASSETS EQUITY SHAREHOLDERS’ EQUITY Called up share capital Share premium Merger reserve Share option reserve Retained earnings TOTAL EQUITY LIABILITIES CURRENT LIABILITIES Trade and other payables Bank overdraft Borrowings TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES Notes 2019 £ 2018 £ 12 13 14 15 16 17 100,000 — 3,617,838 120,000 – 3,617,834 3,717,838 3,737,834 2,954,352 270,346 — 2,788,478 421,700 372,190 3,224,698 3,582,368 6,942,536 7,320,202 9,417,225 20,596,143 637,500 830,449 (26,119,974) 8,680,694 19,779,905 637,500 885,963 (24,111,988) 5,361,343 5,872,074 18 16, 19 19 1,381,641 5,771 193,781 1,134,429 – 313,699 1,581,193 1,448,128 6,942,536 7,320,202 The ﬁnancial statements were approved by the Board of Directors on 30 June 2020 and were signed on its behalf by: G Desler Director 38 ValiRx Plc Consolidated Statement of Changes in Equity for the year ended 31 December 2019 Notes Share capital £ Share premium £ Merger reserve £ Reverse acquisition reserve £ Share- based payment reserve £ Non- controlling interest £ Retained earnings £ Total £ Balance at 1 January 2018 Changes in equity Loss for the year Issue of shares Costs of shares issued Lapse of share options and warrants Movement in year Balance at 31 December 2018 Changes in equity Loss for the year Issue of shares Costs of shares issued Lapse of share options Movement in year Balance at 31 December 2019 8,432,708 16,419,494 637,500 602,413 464,000 (24,744) (23,378,744) 3,152,627 — 247,986 — — 3,861,177 (500,766) — — — — — — — — — — — — — — — — — (69,020) — — (4,298,822) — — (4,367,842) 4,109,163 (500,766) (215,795) 637,758 — — 215,795 — — 637,758 8,680,694 19,779,905 637,500 602,413 885,963 (93,764) (27,461,771) 3,030,940 17 — 736,531 — — — — 1,105,969 (289,731) — — — — — — — — — — — — — — — (120,661) 65,147 (37,049) — — — — (2,388,707) — — 120,661 — (2,425,756) 1,842,500 (289,731) — 65,147 9,417,225 20,596,143 637,500 602,413 830,449 (130,813) (29,729,817) 2,223,100 Merger reserve The merger reserve of £637,500 exists as a result of the acquisition of ValiRx Bioinnovation Limited. The merger reserve represents the difference between the nominal value of the share capital issued by the Company and the fair value of ValiRx Bioinnovation at 3 October 22, the date of acquisition. Reverse acquisition reserve The reverse acquisition reserve exists as a result of the method of accounting for the acquisition of ValiRx Bioinnovation Limited and ValiPharma Limited. 39 ValiRx Plc Company Statement of Changes in Equity for the year ended 31 December 2019 Notes Share capital £ Share premium £ Merger reserve £ Share- based payment reserve £ Retained earnings £ Total £ 8,432,708 16,419,494 637,500 464,000 (20,218,087) 5,735,615 — 247,986 — — 3,861,177 (500,766) — — — — — — — — — — — — (4,109,696) — — (4,109,696) 4,109,163 (500,766) (215,795) 637,758 215,795 — — 637,758 8,680,694 19,779,905 637,500 885,963 (24,111,988) 5,872,074 17 — 736,531 — — — — 1,105,969 (289,731) — — — — — — — — — — (120,661) 65,147 (2,128,647) — — 120,661 — (2,128,647) 1,842,500 (289,731) — 65,147 9,417,225 20,596,143 637,500 830,449 (26,119,974) 5,361,343 Balance at 1 January 2018 Changes in equity Loss for the year Issue of shares Costs of shares issued Lapse of share options and warrants Movement in year Balance at 31 December 2018 Changes in equity Loss for the year Issue of shares Costs of shares issued Lapse of share options Movement in year Balance at 31 December 2019 Share capital The nominal value of the issued share capital. Share premium account Amounts received in excess of associated with the issue of shares. the nominal value on the issue of share capital less any costs Merger reserve The difference between the nominal value of the share capital value of ValiRx Bioinnovation at the date of acquisition. issued by the Company and the fair Share option reserve The fair value of the share-based payment, determined at the grant date, and expensed over the vesting period. Retained earnings Accumulated comprehensive income for the year and prior periods. 40 Notes 1 ValiRx Plc Consolidated Statement of Cash Flows for the year ended 31 December 2019 Cash ﬂows from operations Cash outﬂow from operations Interest paid Tax credit received Net cash outﬂow from operating activities Cash ﬂows from investing activities Proceeds from sale of investments Purchase of intangible ﬁxed assets Net cash outﬂow from investing activities Cash ﬂows from ﬁnancing activities Loan repayments Share issue Costs of shares issued Net cash inﬂow from ﬁnancing activities Decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 2 2 2019 £ 2018 £ (1,801,714) (3,093) 463,144 (3,776,840) (866) 424,197 (1,341,663) (3,353,509) 146,517 (396,776) — (324,028) (250,259) (324,028) (138,000) 1,576,000 (224,584) (25,000) 3,720,000 (346,001) 1,213,416 3,348,999 (378,506) 372,872 (328,538) 701,410 (5,634) 372,872 41 ValiRX Plc Notes to the Consolidated Statement of Cash Flows for the year ended 31 December 2019 1. RECONCILIATION OF OPERATING LOSS TO CASH GENERATED FROM OPERATIONS Operating loss Amortisation and impairment of intangible assets Decrease/(increase) in trade and other receivables Increase/(decrease) in trade and other payables Proﬁt on sale of investments Other non-cash movements Share-based payments charge 2019 £ (2,698,319) 400,519 84,006 346,097 (146,517) — 212,500 2018 £ (3,865,589) 142,988 (31,996) (504,279) — (957) 482,993 Net cash outﬂow from operations (1,801,714) (3,776,840) 2. CASH AND CASH EQUIVALENTS The amounts disclosed on the Statement of Cash Flows in respect of cash and cash equivalents are in respect of these Statement of Financial Position amounts: Cash and cash equivalents Cash and cash equivalents 31 December 2019 £ 1 January 2019 £ (5,643) 372,872 31 December 2018 £ 1 January 2018 £ 372,872 701,410 42 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 1. 2. STATUTORY INFORMATION ValiRx Plc is a company incorporated in the United Kingdom under the Companies Act 1985, which is listed on the AIM market of its registered ofﬁce is Stonebridge House, Chelsmford Road, Hatﬁeld Heath, CM22 7BD. the London Stock Exchange Plc. The address of The registered number of the Company is 03916791. The principal activity of the Group is the development of oncology therapeutics and companion diagnostics. The presentation currency of the ﬁnancial statements is the Pound Sterling (£). ACCOUNTING POLICIES Basis of preparation The Group ﬁnancial statements have been prepared in accordance with International Financial Reporting Standard as adopted by the European Union ('IFRSs'), International Financial Reporting Interpretations Committee ('IFRIC') interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The Group ﬁnancial statements have been prepared under the historical cost convention or fair value where appropriate. Going concern As part of their going concern review the Directors have followed the guidelines published by the Financial Reporting Council entitled “Guidance on the Going Concern Basis of Accounting and Reporting on Solvency Risks – Guidance for directors of companies that do not apply the UK Corporate Governance Code”. The Group and Parent Company are subject to a number of risks similar to those of other development stage pharmaceutical companies. These risks include, amongst others, generation of revenues in due course from the development portfolio and risks associated with research, development, its pipeline products. the attainment of proﬁtable operations is dependent on future uncertain events Ultimately, which include obtaining adequate ﬁnancing to fulﬁl the Group’s commercial and development activities and generating a level of revenue adequate to support the Group’s cost structure. testing and obtaining related regulatory approvals of The current economic environment is challenging, and the Group has reported an operating loss for the year. These losses will continue in the current accounting year to 31 December 2020. there are signiﬁcant uncertainties around the impact of the COVID-19 pandemic In addition, including the extent and duration of social distancing measures, the closure of academic institutions and the impact on the economy. Management has considered the current economic uncertainty and market volatility caused by the COVID-19 outbreak. In assessing whether the going concern assumption is appropriate, management has reviewed the impact on the business to date and developed a range of downside scenarios that could impact the business together with mitigating actions. the inability to travel, In the downside scenarios a liquidity shortfall would result. Accordingly, a series of cost saving and cashﬂow measures have been implemented. These actions include, temporary pay cuts, delaying non-essential capital expenditure and tightening of working capital. This is supplemented by additional funding in respect of share placings, explained further in note 22. The net proceeds of the placings have been used to strengthen the Group’s balance sheet, working capital and liquidity position. regular fund-raising exercises in order The company carries out it can provide the necessary working capital for the Group. Further funds will be required to ﬁnance the Group’s the Group has raised work programme. As detailed in note 22, since the year end, approximately £1.4m before expenses through 3 issues of new ordinary shares. The board funding as and when required to cover the Group’s expects to continue to raise additional development, primarily from the issue of further shares. that 43 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 the approval of the Directors have made assumptions based upon their view of forecasts and cash ﬂows looking beyond The Directors have prepared detailed ﬁnancial these ﬁnancial statements. In developing these 12 months from the date of forecasts, the current and future economic conditions that are expected to prevail over the forecast period. The Directors estimate that the cash held by the Group together with known receivables will be sufﬁcient to support level of activities into the fourth quarter of 2020. The Directors are continuing to explore sources of ﬁnance available to the Group and based upon initial discussions with a number of existing and potential investors they have a reasonable expectation that they will be able to secure sufﬁcient cash inﬂows for the Group to continue its activities for not less than 12 months from the date of approval of these ﬁnancial statements; they have therefore prepared the ﬁnancial statements on a going concern basis. the current Basis of consolidation The Group ﬁnancial statements consolidate the ﬁnancial statements of the Company and all its subsidiaries (“the Group”). Subsidiaries include all entities over which the Group has the power to govern ﬁnancial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control commences until the date that control ceases. Intra-group balances and any unrealised gains and losses on income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated ﬁnancial statements. the On 3 October 2006, ValiRx Bioinnovation Limited ('Bioinnovation') acquired 60.28% of issued share capital of ValiPharma Limited ('ValiPharma') in exchange for shares in Bioinnovation. Concurrently, the Company, (“ValiRx”), acquired the entire issued share capital of Bioinnovation in a share for share transaction. As a result of these transactions, the former shareholders of ValiPharma became the majority shareholders in ValiRx. Accordingly, the substance of the transaction was that ValiPharma acquired ValiRx in a reverse acquisition. Under IFRS 3 “Business Combinations”, the acquisition of ValiPharma has been accounted for as a reverse acquisition. In May 2008 the Company acquired the remaining 39.72% of the issued share capital of ValiPharma, which is now wholly owned by the Group. This acquisition was accounted for using the acquisition method of accounting. In November 2013 ValiSeek Limited was formed to enable the company to enter into a joint venture agreement. The company has a 55.5% holding in the issued share capital of ValiSeek. Goodwill Goodwill on acquisition of subsidiaries represents the excess of the cost of acquisition over the fair value of liabilities acquired. Identiﬁable assets are those which can be sold separately, or which arise from legal rights regardless of whether those rights are separable. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is tested annually, or when trigger events occur, for impairment and is carried at cost less accumulated impairment losses. the identiﬁable net assets and contingent the Group’s share of is not amortised but Other intangible assets Acquired licences, straight-line basis over their useful 16 – 20 years. trademarks and patents are capitalised at cost and are amortised on a life. Patents are amortised over 16 years and licences over Impairment of non-current assets At each reporting date, the Directors review the carrying amounts of property, plant and equipment assets, goodwill and other intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the is estimated in order impairment loss (if any). Where the asset does not generate cash ﬂows that are independent to determine the extent of the asset 44 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 from other assets, the Directors estimate the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. the estimated future cash ﬂows are discounted to their present In assessing value in use, value using a pre-tax discount rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the asset for which the estimates of future cash ﬂows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. Property, plant and equipment Property, plant and equipment are stated at cost less depreciation. Depreciation is provided at the following rates per annum to write off the cost of property, plant and equipment, less estimated residual value, on a straight-line basis from the date on which they are brought into use: Plant and machinery Computer equipment 33% per annum straight line 33% per annum straight line Financial assets The Company classiﬁes its ﬁnancial assets in the following categories: — ﬁnancial assets at fair value through proﬁt or loss; — loans and receivables; — held-to-maturity investments; and — available-for-sale ﬁnancial assets. Management determines the classiﬁcation of its investments at initial recognition. Loans and receivables These assets are non-derivative ﬁnancial assets with ﬁxed or determinable payments that are not quoted in an active market. The principal ﬁnancial assets of the Company are loans and receivables. They are included in current assets, except for maturities greater than twelve months after the balance sheet date. These are classiﬁed as non-current assets. The Group’s loans and receivables are recognised and carried at their original amount less a provision for impairment. A provision is made when collection of the full amount is no longer considered possible. The Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents. the lower of Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand and short-term deposits with an original maturity of three months or less. The Company considers overdrafts (repayable on demand) to be an integral part of its cash management activities and these are included in cash and cash equivalents for the purposes of the cash ﬂow statement. Derivative ﬁnancial instruments Derivative ﬁnancial contract value recognised in the Income Statement. instruments are initially recognised at is entered into and are subsequently carried at fair value on the date a derivative fair value with the changes in fair 45 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 Financial liabilities The Group does not have any ﬁnancial the proﬁt or loss. Therefore, all ﬁnancial liabilities are classiﬁed as other ﬁnancial liabilities. The Group’s ﬁnancial recognised at their original amount. liabilities that would be classiﬁed as fair value through trade and other payables and are liabilities include borrowings, Leases Leases are recognised as ﬁnance leases. The lease liability is initially recognised at the the lease payments which have not yet been made and subsequently present value of measured under the right-of-use asset the amortised cost method. The initial cost of comprises the amount of the initial measurement of the lease liability, lease payments made prior to the lease commencement date, initial direct costs and the estimated costs of removing or dismantling the underlying asset per the conditions of the contract. Where ownership of the right-of-use asset transfers to the lessee at the end of the lease term, the right-of-use asset is depreciated over the asset’s remaining useful life. If ownership of the right-of-use asset does not transfer to the lessee at the end of the lease term, depreciation is charged over the shorter of the useful life of the right-of-use asset and the lease term. Finance income and ﬁnance costs Finance income is recognised when it is probable that the economic beneﬁts will ﬂow to the company and the amount of income can be measured reliably. It is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable. Borrowing costs are recognised as an expense in the period in which they are incurred. Taxation The taxation charge represents the sum of current tax and deferred tax. The tax currently payable is based on the taxable proﬁt for the period using the tax rates that have been enacted or substantially enacted by the balance sheet date. Taxable proﬁt differs from the net proﬁt as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Group ﬁnancial statements. Deferred tax is determined using tax rates that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised of the deferred tax liability is settled. Deferred tax assets are only recognised to the extent it that proﬁt will be available against which the asset can be utilised. is probable that future taxable Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity. Research and development Expenditure on research activities is recognised as an expense in the period in which it incurred. is is All on-going development expenditure is currently expensed in the period in which it the incurred. Due to the regulatory and other uncertainties inherent Group’s programmes, the criteria for development costs to be recognised as an asset, as prescribed by IAS 38, ‘Intangible assets’, are not met until the product has been submitted for regulatory approval, such approval has been received and it is probable that future economic beneﬁts will ﬂow to the Group. The Group does not currently have any such internal development costs that qualify for capitalisation as intangible assets. in the development of 46 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 Development costs are capitalised when the related products meet the recognition criteria of an internally generated intangible asset, the key criteria being as follows: — technical feasibility of the completed intangible asset has been established; — it can be demonstrated that the asset will generate probable future economic beneﬁts; — adequate technical, ﬁnancial and other resources are available to complete the development; — the expenditure attributable to the intangible asset can be reliably measured; and — the Group has the ability and intention to use or sell the asset. Expenses for costs, depreciation on non-current assets and directly attributable overheads. research and development include associated wages and salaries, material research and development costs, whether All licence and development agreements or not, are included within operating expenses and classiﬁed as such. funded by third parties under Foreign currencies the primary Items included in the Financial Statements are measured using the currency of in which the Company and its subsidiaries operate (the functional economic environment currency) which is UK sterling (£). The Financial Statements are accordingly presented in UK sterling. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or at an average rate for a period if the rates do not ﬂuctuate signiﬁcantly. 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 Consolidated Statement of Comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Share capital Financial instruments issued by the Group are treated as equity only to the extent that they do liability. The Group’s ordinary and deferred shares are not meet classiﬁed as equity instruments. the deﬁnition of a ﬁnancial Share-based payments IFRS 2 “Share-based Payments” requires that an expense for equity instruments granted is recognised in the ﬁnancial statements based on their fair values at the date of the grant. This expense, which is in relation to employee share options, is recognised over the vesting period the scheme. The fair value of employee services is determined by reference to the fair of value of the awarded grant calculated using the Black Scholes model. At the year-end date, the Group revises its estimate of the number of share incentives that are expected to vest. The impact of the revisions of original estimates, if any, is recognised in the Statement of Comprehensive Income, with a corresponding adjustment the remaining vesting period. to equity, over When options expire or are cancelled the expensed value of transferred from the share-based payment, reserve to retained earnings. these lapsed options is 47 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 Adoption of new and revised international ﬁnancial reporting standards With effect from 1 January 2019, the Company has adopted IFRS 16 ‘Leases’. This provides a new model for lessee accounting in which all leases, other than short-term and small-ticket- item leases, will be accounted for by the recognition on the Balance Sheet of a right-to-use asset and a lease liability, and the subsequent amortisation of the right-to-use asset over the lease term. The adoption of Company only held a short during any of the periods presented. the standard has no impact on the Company’s ﬁnancial statements as the these ﬁnancial statements and the date of sign off of lease at New standards and interpretations As at the date of approval of these ﬁnancial statements, the following standards were in issue but no yet effective. These standards have not been adopted early by the Company as they impact on the ﬁnancial statements other than requiring are not expected to have a material additional disclosure or alternative presentation. IFRS 3 IFRS 7, IFRS 9, IAS 39 IFRS 17 IAS 1, IAS 8 IAS 1 Amendment – Deﬁnition of a Business Amendment – Interest Rate Benchmark Reforms Insurance Contracts Amendment – Deﬁnition of Material Amendment – Correction of Liabilities as Current and Non-Current Effective date (period) beginning on or after 01/01/2020 01/01/2020 01/01/2021 01/01/2020 01/01/2022 The International Financial Reporting Interpretations Committee has also issued interpretations which the Company does not consider will have a signiﬁcant impact on the ﬁnancial statements. 3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY the ﬁnancial statements in conformity with IFRS requires the use of The preparation of estimates and assumptions that affect the reported amounts of assets and liabilities at the date the ﬁnancial statements and the reported amounts of revenue and expenses during the of reporting period. Although these estimates are based on management’s best knowledge of the amounts, events or actions, actual results ultimately may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised. The material areas in which estimates and judgements are applied as follows: Goodwill and other intangible assets impairment The Group is required to test, on an annual basis, whether goodwill and other intangible assets have suffered any impairment. Determining whether there has been any impairment requires an estimation of the cash-generating units. The value in use calculation requires the Directors to estimate the future cash ﬂows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. the value in use of 48 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 Share-based payments The estimates of share-based payments costs require that management selects an appropriate valuation model and makes decisions on various inputs into the model, including the volatility the options before exercise, and behavioural of consideration of employees. A signiﬁcant element of is therefore involved in the calculation of the charge. its own share price, the probable life of judgement Capitalisation of development costs the technical feasibility and Capitalisation of development costs requires analysis of commercial viability of the costs will be made only where there is evidence that an economic beneﬁt will accrue to the Group. To date no development costs have been capitalised and all costs have been expensed in the income statement as Research and Development costs. the project concerned. Capitalisation of Fair value measurement of ﬁnancial instruments When the fair values of ﬁnancial assets and ﬁnancial liabilities recorded in the statement of ﬁnancial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Black-Scholes model. The inputs to these models are taken from observable markets where possible, but where this is not is required in establishing fair values. Judgements include feasible, a degree of considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect instruments. See Note 16 for further disclosures. the reported fair value of ﬁnancial judgement 4. REVENUE Segmental reporting the opinion that under The Directors are of there are no identiﬁable business segments that are subject to the core business of drug development. The information reported to the Directors, for the purposes of resource allocation and assessment of performance is based wholly on the overall activities of the Group. Therefore, the Directors have determined that there is only one reportable segment under IFRS8. IFRS 8 – “operating segment” to risks and returns different 5. EMPLOYEES AND DIRECTORS Number of employees: The average monthly number of employees, including Directors, during the year was: Directors Staff Employment costs Wages and salaries Social security costs Other pension costs Costs of share-based payments Details of Directors’ remuneration can be found in note 25. 49 2019 Number 2018 Number 5 6 11 2019 £ 708,305 66,975 65,192 — 5 6 11 2018 £ 909,127 90,719 39,327 482,993 840,472 1,522,166 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 6. NET FINANCE COSTS Finance costs Bank interest Other interest payable Interest on overdue tax Deferral fees on equity swap 7. LOSS BEFORE INCOME TAX Research and development Share based payment (note 24) Deﬁned beneﬁt pension cost Hire of plant and machinery Other operating leases Patents amortisation Impairment of patents Auditors remuneration Foreign exchange differences Bad debt write off Fair value loss of derivative ﬁnancial assets Proﬁt on sale of investments 2019 £ 122 622 2,349 18,082 21,175 2019 £ 984,457 — 65,192 — 120,511 155,607 217,712 30,000 (11,421) — — (146,517) 2018 £ — — 866 13,699 14,565 2018 £ 1,698,791 482,993 39,327 109 138,514 115,788 — 31,000 3,869 506,755 442,229 — 50 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 8. INCOME TAX Domestic current year tax Tax credits on research and development – current year Tax credits on research and development – prior years Current tax credit 2019 £ 2018 £ (291,788) (1,950) (461,193) (103) (293,738) (461,296) Factors affecting the tax charge for the year: Loss before income tax (2,719,492) (4,829,138) Loss before income tax multiplied by effective rate of UK corporation tax of 19.00% (2018: 19.00%) (516,703) (917,536) Effects of Non-deductible expenses Capital allowances for the year in deﬁcit of depreciation and amortisation Tax losses not utilised Research and development expenditure Adjustment to prior years Proﬁt on sale of investments Current tax charge 45,273 273,629 3,770 327,921 (124,211) (1,950) (27,838) 3,763 377,395 (198,444) (103) — 222,965 456,240 (293,738) (461,296) No corporation tax arises on the results for the year ended 31 December 2019 due to the losses incurred for tax purposes. The deferred tax asset, arising from tax losses of £19.5 million (2018: £17.7 million) carried forward, has not been recognised but would become recoverable against future trading proﬁts, subject to agreement with HM Revenue and Customs. 9. LOSS OF PARENT COMPANY As permitted by Section 408 of income of Parent Company’s loss for the ﬁnancial year was £2,128,647 (2018 – £4,109,696). the Companies Act 2006, the parent company is not presented as part of the statement of comprehensive these ﬁnancial statements. The 51 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 10. LOSS PER SHARE The loss and number of shares used in the calculation of loss per ordinary share are set out below: Loss for the ﬁnancial period Non-controlling interest 2019 £ 2018 £ (2,425,756) 37,049 (4,367,842) 69,020 Loss attributable to owners of Parent Company (2,388,707) (4,298,822) Basic: Weighted average number of shares Loss per share 902,637,711 (0.26p) 458,715,753 (0.94p) The loss and the weighted average number of shares used for calculating the diluted loss per share are identical to those for the basic loss per share. The outstanding share options and share warrants (note 24) would have the effect of reducing the loss per share and would therefore not be dilutive under IAS 33 ‘Earnings per Share’. Changes to the issued share capital since the year end are detailed in note 22 below. 11. GOODWILL Group Cost At 1 January 2018 and 2019 and 31 December 2019 Net book value At 31 December 2019 At 31 December 2018 £ 1,602,522 1,602,522 1,602,522 The goodwill arising on the acquisitions of ValiRx Bioinnovation Limited, ValiPharma Limited, is reviewed on an annual Valisrc Limited and ValiSeek Limited is not being amortised but there are indications that goodwill might be basis for impaired. The impairment the goodwill with its recoverable amount (the higher of fair value less costs to sell and value in use). ValiRx Plc has used the value in use method, applying a 15% discount rate. review comprises a comparison of impairment, or more frequently if the carrying amount of Goodwill per cash generating unit ValiPharma Limited ValiRx Bioinnovation Limited Valisrc Limited ValiSeek Limited £ 772,230 394,613 — 435,679 Sensitivity analysis is not required as a reasonably possible change in assumptions would not result in an impairment. 52 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 12. INTANGIBLE ASSETS Group COST At 1 January 2018 Additions At 31 December 2018 Additions Patents £ Brands and licences £ 1,537,060 441,655 1,978,715 396,776 375,000 — 375,000 — Total £ 1,912,060 441,655 2,353,715 396,776 At 31 December 2019 2,375,491 375,000 2,750,491 AMORTISATION At 1 January 2018 Amortisation for year At 31 December 2018 Amortisation for year Impairment 487,703 115,788 603,491 155,607 217,712 99,074 27,200 126,274 27,200 — 586,777 142,988 729,765 182,807 217,712 At 31 December 2019 976,810 153,474 1,130,284 NET BOOK VALUE At 31 December 2019 At 31 December 2018 Company COST At 1 January 2018 and 2019 Additions At 31 December 2019 AMORTISATION At 1 January 2018 Amortisation for year At 31 December 2018 Amortisation for year At 31 December 2019 NET BOOK VALUE At 31 December 2019 At 31 December 2018 53 1,398,681 221,526 1,620,207 1,375,224 248,726 1,623,950 Brands and licences £ 200,000 — 200,000 60,000 20,000 80,000 20,000 100,000 100,000 120,000 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 13. PROPERTY, PLANT AND EQUIPMENT Group and Company COST At 1 January 2018 Disposals At 31 December 2018 and 2019 DEPRECIATION At 1 January 2018 Eliminated on disposal At 31 December 2018 and 2019 NET BOOK VALUE At 31 December 2019 At 31 December 2018 14. INVESTMENTS Group COST At 1 January 2018 and 2019 Disposals At 31 December 2019 PROVISIONS At 1 January 2018 and 2019 Eliminated on disposal At 31 December 2019 NET BOOK VALUE At 31 December 2019 At 31 December 2018 Plant and machinery £ 35,165 (3,495) 31,670 35,165 (3,495) 31,670 — — Unlisted investments £ 1,333,770 (1,333,770) — 1,333,770 (1,333,770) — — — The Group and the Company disposed of their 5.5% shareholding in Morphogenesis Inc., a company incorporated in USA, during the year. 54 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 14. INVESTMENTS – continued Company COST At 1 January 2018 and 2019 Additions Disposals At 31 December 2019 PROVISIONS At 1 January 2018 and 2019 Eliminated on disposal At 31 December 2019 NET BOOK VALUE At 31 December 2019 At 31 December 2018 Shares in group undertakings £ Unlisted investments £ Total £ 3,617,834 4 — 3,617,838 1,333,770 — (1,333,770) 4,951,604 4 (1,333,770) — 3,617,838 — — — 3,617,838 3,617,834 1,333,770 (1,333,770) 1,333,770 (1,333,770) — — — — 3,617,838 3,617,834 55 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 14. INVESTMENTS – continued The Company’s investments at the Statement of Financial Position date in the share capital of companies include the following: Subsidiaries ValiRx Bioinnovation Limited Registered ofﬁce: England & Wales Nature of business: Intermediate holding company Class of shares: Ordinary shares ValiPharma Limited Registered ofﬁce: England & Wales Nature of business: Therapeutic research & development Class of shares: Ordinary shares 60.28% is owned by ValiRx Bioinnovation Limited and 39.72% by the Company. Valisrc Limited Registered ofﬁce: England & Wales Nature of business: Dormant Class of shares: Ordinary shares ValiSeek Limited Registered ofﬁce: England & Wales Nature of business: Therapeutic research & development Class of shares: Ordinary shares ValiGenx Limited Registered ofﬁce: England & Wales Nature of business: Dormant Class of shares: Ordinary shares % holding 100.00 % holding 100.00 % holding 100.00 % holding 55.55% % holding 100.00 56 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 15. TRADE AND OTHER RECEIVABLES Current Amounts owed by Group undertakings Other receivables Rent deposit VAT Prepayments and accrued income Group Company 2019 £ 2018 £ 2019 £ 2018 £ — 23,252 31,807 13,033 21,991 — 2,843,650 20,953 31,807 35,951 21,991 15,354 25,926 77,814 54,995 2,609,278 13,059 25,926 85,398 54,817 90,083 174,089 2,954,352 2,788,478 In the Directors’ opinion, approximation of fair value. the carrying amounts of receivables is considered a reasonable 16. CASH AND CASH EQUIVALENTS Bank accounts Bank overdraft Group Company 2019 £ 2018 £ 137 (5,771) 372,872 — 2019 £ — (5,771) 2018 £ 372,190 — (5,634) 372,872 (5,771) 372,190 57 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 17. CALLED UP SHARE CAPITAL 2019 Number 2018 Number 2019 £ 2018 £ Allotted, called up and fully paid Ordinary shares of 0.1p each Deferred shares of 0.5p each Deferred shares of 0.9p each Deferred shares of 12.4p each 1,334,827,184 58,378,365 157,945,030 30,177,214 598,296,049 58,378,365 157,945,030 30,177,214 1,334,828 2,918,918 1,421,505 3,741,974 598,297 2,918,918 1,421,505 3,741,974 9,417,225 8,680,694 the Company raised £0.5 million, before expenses, In February 2019, through the issue of 83,333,333 new ordinary shares at a price of 0.6 pence per share. The funds were to be used the Pre-clinical progress of other for advancing the clinical programmes. trial of VAL201 and for the Company entered into a subscription agreement (the “Agreement”) with In April 2019, European High Growth Opportunities SF (the “Investor”). The ﬁrst Tranche of 71,000,000 new shares were issued at a price of 0.6 pence per share in May 2019 raising £426,000 before expenses. the Company raised £0.3 million, before expenses, In June 2019, through the issue of 150,000,000 new ordinary shares at a price of 0.2 pence per share. The funds were to be the Pre-clinical progress of other trial of VAL201 and for used for advancing the clinical programmes. In June 2019, the Company agreed to terminate the Agreement with European High Growth Opportunities SF. The Company agreed to a ﬁnal settlement of £212,500 which was settled by the issue of 121,428,571 new shares at a price of 0.175 pence per share. the Company raised £0.35 million, before expenses, In October 2019, through the issue of 269,230,769 new ordinary shares at a price of 0.13 pence per share. The funds were to be the Pre-clinical progress of other used for advancing the clinical programmes. trial of VAL201 and for In October 2019, the Company issued 41,538,462 new shares at a price of 0.13 pence per share to settle liabilities amounting to £54,000. The deferred shares have no rights to vote, attend or speak at general meetings of the Company or to receive any dividend or other distribution and have limited rights to participate in any return of capital on a winding-up or liquidation of the Company. 58 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 18. TRADE AND OTHER PAYABLES Current Trade payables Amounts owed to Group undertakings Social security and other taxes Wages and salaries Other payables Accruals and deferred income Group Company 2019 £ 2018 £ 2019 £ 2018 £ 945,854 — 119,169 6,310 23,109 87,642 772,244 — 71,742 10,001 — 36,000 723,296 447,187 107,953 5,221 23,109 74,875 724,876 300,670 68,882 10,001 — 30,000 1,182,084 889,987 1,381,641 1,134,429 In the Directors’ opinion, approximation of fair value. the carrying amounts of payables is considered a reasonable 19. FINANCIAL LIABILITIES – BORROWINGS Current: Bank overdraft Equity swap loan Group Company 2019 £ 2018 £ 2019 £ 2018 £ 5,634 193,781 — 313,699 5,771 193,781 — 313,699 199,415 313,699 199,552 313,699 Swap settlement In September 2018, Yorkville and the Company agreed a ﬁnal settlement Swap Agreement and entered into a deed to terminate that agreement. At Company owed Yorkville £418,275 under the agreement. in respect of the time, the the It was agreed that the Company would pay Yorkville £325,000 plus £40,000 deferral fee in full and ﬁnal settlement by quarterly instalments. At it may settle a quarterly instalment by issuing Ordinary Shares in the Company to Yorkville, on the basis of the share price at the time of repayment. Due to the deferral of the ﬁrst instalment, the parties agreed a deferral late payment fees were due by the Company to Yorkville. the Company’s discretion, letter whereby further 2019 £ 313,699 — (138,000) 18,082 2018 £ — 325,000 (25,000) 13,699 193,781 313,699 At 1 January Agreed full and ﬁnal settlement Repayment Deferral fee At 31 December 59 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 20. OTHER FINANCIAL COMMITMENTS At 31 December 2019, the company was committed to making the following payments under non-cancellable operating leases in the year to 31 December 2020:- Operating leases which expire: Within one year 21. RELATED PARTY DISCLOSURES Land and buildings 2019 £ 2018 £ 26,163 110,906 During the year bookkeeping services totalling £18,450 (2018: £19,219). the Director, G Desler, provided the Company and its subsidiaries with During the year (2018: £49,500) for research and development work. the Director O de Giorgio – Miller invoiced the Company £41,250 At the year end, the amounts owed to Directors were as follows: G Desler O de Giorgio-Miller (Died 21 October 2019) G Morris (Resigned 14 April 2020) S Vainikka (Ceased to be a director 14 April 2020) K Alexander 2019 £ 7,147 5,800 — — — 2018 £ 8,036 5,579 — — — 22. EVENTS AFTER THE REPORTING PERIOD Placing and issue of share warrants the Company raised £0.2 million of gross proceeds through the issue of In January 2020, 200,000,000 new ordinary shares at a price of 0.1 pence per ordinary share (“Placing Shares”) with new and existing investors. The net proceeds of the Placing were to be used to analyse the Phase I/II clinical trial of VAL201 to treat prostate cancer and associated metastatic conditions and continue the development of ValiRx’s pre-clinical VAL301 and VAL101/GeneICE programmes towards the clinic, and for general working capital purposes. Each Placing Share carries a warrant to subscribe for one further share at a price of 0.10p per share, exercisable at any time from Admission (10 January 2020) up to the third-year the Company’s joint anniversary of Admission. The funds were raised through ETX Capital, broker. As part of their fee arrangement, the Company agreed to issue to ETX Capital with a warrant over 20,000,000 ordinary shares in the Company, exercisable at any time from Admission at a price of 0.10 pence per share up to the third-year anniversary of Admission. Capital Reorganisation At a General Meeting in February 2020, a Capital Reorganisation was approved consolidating 125 Existing Shares into 1 Consolidated Share of 12.5 pence, followed by the Sub-Division of each Consolidated Share into 1 New Ordinary Share of 0.1 pence each and 1 New Deferred Shares of 12.4 pence each. The New Deferred Shares have the same rights as the Existing Deferred Shares and are therefore effectively be worthless. 60 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 22. EVENTS AFTER THE REPORTING PERIOD – continued Placing following approval of Capital Reorganisation In April 2020, the Company raised £200,000 of gross proceeds through the issue of 5,714,288 new ordinary shares (post reorganisation) at a post reorganisation price of 3.5 pence per share. Placing and issue of Fundraise Warrants the Company placed 16,666,667 new ordinary shares at 6 pence per share In May 2020, (“Placing Price”) raising gross proceeds of £1m before expenses. Attached to every share issued pursuant to the Placing (“Fundraise Share”) is a warrant (“Fundraise Warrant”) allowing the holder of a Fundraise Share to subscribe for an additional ordinary share in the Company for every two Fundraise Shares held at an exercise price of 13 pence per share (the “Fundraise Warrants” or “Warrant Exercise Price”). The Fundraise Warrants will vest the closing mid-market share price of the Company exceeds 15p over a 5-consecutive day period within 12 months of the date that the Fundraise Shares are admitted to trading on AIM. The Company may serve notice (“Notice”) on the Fundraise Warrant holder to exercise their Fundraise Warrant in the event that the vesting criteria is met. Such Notice will be served by way of a regulatory notiﬁcation, the Company serves Notice, any Fundraise Warrants remaining unexercised after 5 business days following the notiﬁcation of the Notice will be cancelled. The Fundraise Warrants are not transferable. In the event if Conversion of liabilities In May 2020, alongside the Placing, the Company settled existing liabilities amounting to £84,168 through the issue of 1,402,800 new ordinary shares at the Placing Price (“Conversion Shares”). Kevin Alexander, a Director of the Company and Suzanne Dilly, a then proposed Director of the Company, converted existing liabilities of £10,000 each, in aggregate £20,000 into 333,333 ordinary shares at the Placing Price, included within the above ﬁgure of 1,402,800 Conversion Shares. The Conversion Shares have Fundraise Warrants attached – details of which are set out above. 23. ULTIMATE CONTROLLING PARTY The Directors consider that there is no ultimate controlling party. 61 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 24. SHARE-BASED PAYMENT TRANSACTIONS The number of shares and the share prices shown in this note do not take into account the share capital re-organisation that was effected after the year end (note 22). At 31 December 2019 outstanding awards to subscribe for ordinary shares of 0.1p each in the Company, granted in accordance with the rules of the ValiRx share option schemes, were as follows: 2018 Brought forward Granted during the year Lapsed during the year Carried forward 2019 Brought forward Lapsed during the year Carried forward Weighted average remaining contractual life (years) Weighted average exercise price (pence) Number of shares 3,460,960 17,300,000 (48,000) 20,712,960 8.52 Weighted average remaining contractual life (years) Number of shares 20,712,960 (3,325,400) 17,387,560 7.53 50.98 4.00 43.13 11.76 Weighted average exercise price (pence) 11.76 12.23 11.67 All options were exercisable at the year end. No options were exercised during the year. The following share-based payment arrangements were in existence at the balance sheet date. Options Number Expiry date Exercise price 1 2 3 4 5 Granted 8 July 2011 Granted 19 January 2014 Granted 21 October 2014 Granted 26 June 2015 Granted 9 February 2018 268,000 792,000 872,000 905,560 14,550,000 08/07/2021 19/01/2024 21/10/2024 26/06/2025 09/02/2028 93.75p 43.13p 45.00p 51.00p 4.00p Fair value at grant date 12.50p 5.00p 3.75p 4.04p 2.79p The fair value of model. The assumptions used in the calculation of outstanding during the year are as follows: the remaining share options has been calculated using the Black-Scholes the share options the fair value of Options 1 2 3 4 5 Granted 8 July 2011 Granted 19 January 2014 Granted 21 October 2014 Granted 26 June 2015 Granted 9 February 2018 Grant date share price Exercise price Expected volatility Expected option life (years) Risk-free interest rate 80.00p 43.13p 45.00p 50.50p 4.00p 93.75p 43.13p 45.00p 51.00p 4.00p 52.00% 17.00% 17.00% 16.00% 196.00% 3.00 3.00 3.00 3.00 3.00 1.24% 0.99% 1.00% 0.38% 0.88% The fair value has been calculated assuming that there will be no dividend yield. 62 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 24. SHARE-BASED PAYMENT TRANSACTIONS – continued Volatility was determined by reference to the standard deviation of expected share price returns based on a statistical analysis of daily share prices over a 3-year period to grant date. All of the above options are equity settled. All of the share options are equity settled and the charge for the year is £nil (2018: £482,993) Warrants At 31 December 2019 outstanding warrants to subscribe for ordinary shares of 0.1p each in the Company, granted in accordance with the warrant instruments issued by ValiRx, were as follows. 2018 Brought forward Granted during the year Exercised during the year Weighted average remaining contractual life (years) 2.34 Number of shares 85,040,011 25,413,725 (8,400,000) Carried forward 102,053,736 1.30 Weighted average exercise price (pence) 6.46 4.55 1.43 6.40 Weighted average remaining contractual life (years) Weighted average exercise price (pence) 1.30 2019 Brought forward Granted during the year Lapsed during the year Number of shares 102,053,736 42,756,410 (54,733,721) Carried forward 90,076,425 2.11 All warrants were exercisable at the year end. The following warrants were in existence at the balance sheet date. Warrants Number Expiry date Exercise price 1 2 3 4 5 6 7 8 9 10 11 Granted 7 April 2016 Granted 22 April 2016 Granted 12 July 2016 Granted 16 September 2016 Granted 16 September 2016 Granted 2 January 2018 Granted 14 May 2018 Granted 31 December 2018 Granted 28 February 2019 Granted 18 June 2019 Granted 11 November 2019 4,926,741 1,710,922 8,333,333 2,000,000 20,000,000 1,882,353 1,800,000 6,666,666 8,333,333 7,500,000 26,923,077 31/03/2021 31/03/2021 12/07/2021 16/09/2021 16/09/2021 02/01/2021 14/05/2021 31/12/2021 28/02/2022 18/06/2022 11/11/2022 9.00p 9.00p 9.00p 6.00p 9.00p 4.25p 2.50p 0.75p 0.60p 0.20p 0.13p 63 6.40 0.23 5.46 3.82 Fair value at grant date 0.92p 0.67p 0.36p 0.78p 0.13p 1.95p 1.40p 0.40p 0.35p 0.14p 0.10p ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 24. SHARE-BASED PAYMENT TRANSACTIONS – continued The fair value of the remaining warrants has been calculated using the Black-Scholes model. The assumptions used in the calculation of the share options outstanding during the year are as follows: the fair value of Warrants Granted 7 April 2016 Granted 22 April 2016 Granted 12 July 2016 Granted 16 September 2016 Granted 16 September 2016 Granted 2 January 2018 Granted 14 May 2018 Granted 31 December 2018 Granted 28 February 2019 1 2 3 4 5 6 7 8 9 10 Granted 18 June 2019 11 Granted 11 November 2019 Grant date share price Exercise price Expected volatility Expected option life (years) Risk-free interest rate 9.30p 8.60p 7.60p 6.50p 6.50p 4.13p 2.90p 0.80p 0.61p 0.22p 0.13p 9.00p 9.00p 9.00p 6.00p 9.00p 4.25p 2.50p 0.75p 0.60p 0.20p 0.13p 17.00% 17.00% 18.00% 18.00% 18.00% 112.00% 107.60% 105.60% 133.60% 159.20% 223.40% 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 0.48% 0.62% 0.23% 0.14% 0.14% 0.60% 0.83% 0.78% 0.86% 0.54% 0.54% The fair value has been calculated assuming that there will be no dividend yield. Volatility was determined by reference to the standard deviation of expected share price returns based on a statistical analysis of daily share prices over a 3-year period to grant date. All of the warrants are equity settled and the charge for the year is £65,147 (2018: £213,395). As the warrants relating to the charge were all in consideration of shares issued during the year, the charge has been taken directly to equity and charged against the share premium as costs in respect of the issue of shares. 25. KEY MANAGEMENT PERSONNEL COMPENSATION Key management personnel are those persons having authority and responsibility for planning, directing and controlling activities of the Group, and are all Directors of the Company. Salaries and other short-term employee beneﬁts Salaries and other short-term beneﬁts – research and development Post-employment beneﬁts 2019 £ 189,324 213,790 45,832 2018 £ 343,431 209,250 32,541 448,946 585,222 S Vainikka (Ceased to be a director 14/04/2020) G Morris (Resigned 14/04/ 2020) K Alexander G Desler O de Giorgio-Miller (Died 21/ 10/2019) Salary £ Bonus £ Beneﬁts in kind £ Post- employment beneﬁts £ 2019 £ 2018 £ 165,280 124,025 25,625 52,890 30,000 397,820 — — — — — — 1,813 3,481 – – – 25,494 192,587 213,572 20,338 — — — 147,844 25,625 52,890 177,491 47,968 80,566 30,000 65,625 5,294 45,832 448,946 585,222 Details of fees paid to Directors are shown in note 21 above. The number of Directors for whom retirement beneﬁts are accruing under money purchase pension schemes amounted to 2 (2018: 2). 64 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 25. KEY MANAGEMENT PERSONNEL COMPENSATION – continued The number of shares and the share prices shown in this note do not take into account the share capital re-organisation that was affected after the year end (note 22). The Directors interests in share options as at 31 December 2019 are as follows. S Vainikka ceased to be a director on 14 April 2020 and G Morris resigned on 14 April 2020. They have 12 months from resignation in order to exercise their options, failing which they will lapse. Options at 31 December 2019 Exercise price Date of grant First date of exercise Final date of exercise S Vainikka S Vainikka S Vainikka S Vainikka S Vainikka G Morris G Morris G Morris G Morris G Morris K Alexander K Alexander K Alexander K Alexander K Alexander G Desler G Desler G Desler G Desler G Desler 80,000 192,000 192,000 222,000 3,625,000 4,311,000 48,000 176,000 176,000 191,000 3,125,000 3,716,000 48,000 160,000 160,000 173,800 2,500,000 3,041,800 48,000 176,000 176,000 189,760 3,000,000 3,589,760 93.75p 43.13p 45.00p 54.00p 4.00p 93.75p 43.13p 45.00p 54.00p 4.00p 93.75p 43.13p 45.00p 54.00p 4.00p 93.75p 43.13p 45.00p 54.00p 4.00p 08/07/2011 19/01/2014 21/10/2014 26/06/2015 07/02/2018 08/07/2011 19/01/2014 21/10/2014 26/06/2015 07/02/2018 08/07/2011 19/01/2014 21/10/2014 26/06/2015 07/02/2018 08/07/2011 19/01/2014 21/10/2014 26/06/2015 07/02/2018 08/07/2011 19/01/2014 21/10/2014 26/06/2015 07/02/2018 08/07/2011 19/01/2014 21/10/2014 26/06/2015 07/02/2018 08/07/2011 19/01/2014 21/10/2014 26/06/2015 07/02/2018 08/07/2011 19/01/2014 21/10/2014 26/06/2015 07/02/2018 08/07/2021 19/01/2024 21/10/2024 25/06/2025 07/02/2018 08/07/2021 19/01/2024 21/10/2024 25/06/2025 07/02/2018 08/07/2021 19/01/2024 21/10/2024 25/06/2025 07/02/2018 08/07/2021 19/01/2024 21/10/2024 25/06/2025 07/02/2018 instruments used by the Group, 26. FINANCIAL INSTRUMENTS The principal ﬁnancial arises are as follows: — derivative ﬁnancial assets; — trade and other receivables; — cash and cash equivalents; and — trade and other payables. The main purpose of these ﬁnancial instruments is to ﬁnance the Group’s operations. from which ﬁnancial instrument risk 65 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 26. FINANCIAL INSTRUMENTS – continued Financial assets Loans and receivables Trade and other receivables Cash and cash equivalents Total loans and receivables Total ﬁnancial assets Financial liabilities Trade and other payables Cash and cash equivalents Total ﬁnancial liabilities 2019 £ 90,083 — 90,083 90,083 2019 £ 2018 £ 174,089 372,872 546,961 546,961 2018 £ 1,256,696 5,634 1,131,944 — 1,262,330 1,131,944 The Directors consider that approximates to their fair value. the carrying value for each class of ﬁnancial asset and liability, Financial risk management The Group’s activities expose it to a variety of risks, including market risk (foreign currency risk and interest rate risk), credit risk and liquidity risk. The Group manages these risks through an effective risk management programme, and, the Board seeks to through this programme, minimise potential adverse effects on the Group’s ﬁnancial performance. The Board provides written objectives, policies and procedures with regards to managing currency and interest risk exposures, liquidity and credit risk including guidance on the use of certain derivative and non-derivative ﬁnancial instruments fails to meet Credit risk Credit risk is the risk of ﬁnancial loss to the Group if a customer or counterparty to a ﬁnancial instrument risk is primarily attributable to its receivables and its cash deposits. It is Group policy to assess the credit risk of new customers before entering contracts. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. its contractual obligations. The Group’s credit Liquidity risk and interest rate risk Liquidity risk arises from the Group’s management of working capital. the Group will encounter difﬁculty in meeting its ﬁnancial obligations as they fall due. The Board regularly receives cash ﬂow projections for a minimum period of twelve months, together with information regarding cash balances monthly. is the risk that It The Group is principally funded by equity and invests in short-term deposits, having access to these funds at short notice. The Group’s policy throughout the period has been to minimise interest rate risk by placing funds in risk free cash deposits but also to maximise the return on funds placed on deposit. All cash deposits attract a ﬂoating rate of interest. The benchmark rate for determining interest receivable and ﬂoating rate assets is linked to the UK base rate. 66 ValiRX Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2019 26. FINANCIAL INSTRUMENTS – continued Foreign currency risk The Group’s exposure to foreign currency risk is limited; as most of its invoicing and payments are denominated in Sterling. Accordingly, no sensitivity analysis is presented in this area as it is considered immaterial. 67 Black&Callow — c116706

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