XEROS TECHNOLOGY
GROUP PLC
ANNUAL REPORT
FOR THE YEAR ENDING
31 DECEMBER 2022
COMPANY NUMBER: 08684474
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
01
CONTENTS
1
2
3
4
Introduction
Reports
Auditor’s
Report
Financial
Statements
06
13
31
35
48
53
61
68
74
81
85
102
104
106
108
110
142
144
145
About Xeros
Our Technologies
Chairman’s Statement
Chief Executive Officer’s Review
Financial Review
Strategic Report
Directors’ Report
Directors’ Remuneration Report
Corporate Governance Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report to the Members
of Xeros Technology Group plc
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial
Statements
Company Statement of Changes in Equity
Company Statement of Financial Position
Notes to the Company Information
XEROS
TECHNOLOGY
SUBJECT: POLYCOTTON
UNDER MICROSCOPE
OBSERVATION:
MIXED POLYMER FIBRES
MAGNIFICATION:
@15.8MM 400X/300MM
02
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
03
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
01
INTRODUCTION
04
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
05
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 1
INTRODUCTION
INTRODUCTION
SECTION 1
Xeros
to the power
of change
06
06
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
07
07
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 A collective
of innovators,
delivering
visible solutions
for the invisible
issues facing
our planet.
XEROS
TECHNOLOGY
SUBJECT:
MIXED FIBRES
OBSERVATION:
CLUMP OF NATURAL AND MAN MADE FIBRES
MAGNIFICATION:
@19.1MM 400X/300ΜM
08
08
09
INTRODUCTIONSECTION 1INTRODUCTIONSECTION 1XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 1
INTRODUCTION
INTRODUCTION
SECTION 1
FOR THE PROBLEMS
WE CAN’T SEE,
A DIFFERENCE WE CAN
Microplastics in the sea. Aquifers deplete faster than they recharge.
Sometimes the biggest problems are the ones we can’t see. We shed light
on issues that are affecting our planet, and the big ideas it takes to solve
them.
We are a collective of innovators who believe in a future where limited
resources are no longer limited. So far, our technology has saved millions
of litres of water and could prevent billions of microfibres from ending up
in our oceans.
Launching our textiles technologies is just the beginning of our long-
term mission to reduce waste wherever possible.
XEROS
TECHNOLOGY
SUBJECT:
POLYESTER THREAD
OBSERVATION:
WOVEN PLASTIC FIBRES
MAGNIFICATION:
@15.3MM 80X/1MM
010
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
011
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 OUR TECHNOLOGIES
Filtration, Care, Finish
Xeros is revolutionising the way
we make and care for our clothes.
Our textile technologies have
been developed as part of our ongoing
mission to innovate new solutions
to reduce waste wherever possible.
We show what’s
possible, and
our partners
make it scalable.
Through our
technologies, we
welcome a world
of profound
possibility.
012
013
INTRODUCTIONSECTION 1INTRODUCTIONSECTION 1XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 Xeros Filtration
Even on an eco-setting, washing our
clothes releases 700,000 microfibres
with every wash. Those tiny fibres can
have a lasting impact. They end up in
our oceans, in our food chain and in our
water supply.
Our Filtration technology, XFilter,
can be integrated into a washing
machine for the home, or built at a large
scale for industry. It stops over 90%
of microfibres from ever entering our
oceans.
014
015
INTRODUCTIONSECTION 1INTRODUCTIONSECTION 1XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 1
INTRODUCTION
INTRODUCTION
SECTION 1
XEROS COMMERCIAL XF2 FILTER
XF1 FILTRATION TECHNOLOGY
016
016
016
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
017
017
INTRODUCTIONSECTION 1INTRODUCTIONSECTION 1XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 1
INTRODUCTION
INTRODUCTION
SECTION 1
Xeros Care
What if we told you that you can do your
laundry using less water? Using only
half the energy and half the chemicals?
And that fabric would be cared for more
gently, allowing your clothes to last
much longer?
Our Care technology uses XOrbs,
reusable polymer spheres, to wash
and care for clothes. It’s scalable from
domestic washes to heavy industrial
use, and it’s designed to save tens of
millions of litres of water every year.
018
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
019
XEROS
TECHNOLOGY
SUBJECT:
COTTON JUMPERS
OBSERVATION:
JUMPERS IN XORB WASH
MAGNIFICATION:
GF 120MM Ƒ/4.0
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 1
INTRODUCTION
INTRODUCTION
SECTION 1
INCREASED
SEAM STRESS
REDUCED COLOUR FADE
PATCHY DYE
NORMAL
WASH
INCREASED
WRINKLING
SOLID FABRIC
SURFACE
XC1
MAINTAINED SHAPE
GARMENT:
DENIM SHIRT
# WASHES:
10
LOAD WEIGHT:
2.5KG
XORB MASS:
4KG
020
020
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
021
021
INTRODUCTIONSECTION 1INTRODUCTIONSECTION 1XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 1
INTRODUCTION
INTRODUCTION
SECTION 1
Xeros Finish
Making one pair of jeans can use up to
10 years worth of drinking water for one
person. Chemicals used in the process
escape with wastewater, polluting
our planet. Today, jeans are still made
using pumice stones, which constantly
need replacing and create chemically
contaminated sludge.
Our XFN technology uses patented
reusable XOrbs to replace pumice, and
reduces water and chemistry use by
up to 50%.
XEROS
TECHNOLOGY
SUBJECT:
XORBS AND DENIM
OBSERVATION:
JEANS IN XORB WASH
MAGNIFICATION:
GF 120MM Ƒ/4.0
022
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
023
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 1
SECTION 1
INTRODUCTION
INTRODUCTION
INTRODUCTION
INTRODUCTION
SECTION 1
SECTION 1
XEROS DOMESTIC XF1 FILTER
XFN1 FINISH TECHNOLOGY
024
024
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
025
025025
INTRODUCTIONSECTION 1INTRODUCTIONSECTION 1XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 FILTRATION
CARE
FINISH
A Journey To Better
90%
50%
REDUCTION OF MICROFIBERS
WATER SAVING
30%
30%
ENERGY SAVING
DETERGENT SAVING
WE ARE CONSTANTLY DEVELOPING OUR TECHNOLOGY. SO FAR, THESE ARE THE
RESULTS FROM FILTRATION, FINISH AND CARE TECHNOLOGIES.
ALL PERCENTAGES ARE UP TO FIGURES
026
027
INTRODUCTIONSECTION 1INTRODUCTIONSECTION 1XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 02
REPORTS
028
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
029
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 2
1.1
REPORTS
PAGE TITLE
REPORTS
SECTION 2
CHAIRMAN'S
STATEMENT
Dear Shareholder,
At the time of writing this annual statement I find myself in Paris, where
the restoration of the Notre Dame is in full swing. It is very gratifying to
think that the workwear used by the Paris Fire Brigade, who’s heroic
efforts saved much of the majestic building, is cleaned and cared for by
our long-standing laundry partner Georges, with Xeros enabled machines
supplied by IFB. Overcoming adversity, with the optimism of what
tomorrow may bring, must be our theme for 2023.
Challenges come in many forms and looking back at 2022, it was
a challenging year for Xeros. We did not yet manage to deliver tangible
evidence of market adoption at scale. Consequently, we had to complete
a further £6.3 million equity fundraise, during the turmoil of the disastrous
UK mini-budget.
2022 was also a year of transition in the leadership team. We saw
the departures of Mark Nichols, Chief Executive Officer and Paul Denney,
Chief Financial Officer. I would like to thank Mark and Paul for their
stewardship of the business . We are very pleased that the Company
managed to attract Neil Austin to succeed Mark in August, ahead of our
September financing. David Baynes, Non-Executive Director, also departed
in December with a replacement expected to be announced in the course
of this year. Under Neil’s leadership, a further reorganisation took place in
December, making Xeros now a leaner, more focused business ready to
drive forwards.
030
030
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
XEROS TECHNOLOGIES -------- ANNUAL REPORT -------- DEC 2022
031
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 Despite this challenging year for Xeros, the Company has continued
to make solid progress in all major business areas, and the long-term
trends, about which I have written before and will not repeat this time,
remain very favourable.
— In Filtration, the Company has signed up two further licensing
agreements for its domestic XFilter.
— In Care, licensing partner IFB has launched a first high-end 11kg
machine into the market, and further technical progression
continues on the mass-market 9kg product.
— In Finish, the Company has progressed a brand-endorsed trial with
a major European fashion retailer. A Xeros-enabled machine has
been installed in one of the retailers preferred denim suppliers,
with the initial results showing significant water and energy
savings. Commercial conversations have begun.
— In commercial Care, our licensing partner IFB has adopted the
Xeros technology across four different machine sizes, and is
gradually rolling out machines, as evidenced by my opening
comment. We are in continuous dialogue with IFB to explore how
we can support them in accelerating the commercial roll-out and
adoption.
— And finally, in Finish, licensing partner Qualus (a Xeros spin-out),
has started to pay first royalties for its leather finishing technology.
Thank you to everyone (shareholders, management, staff, and
partners) who stayed with us or joined us during this year of transition.
Over the course of this year, we will endeavour to provide sufficient
evidence of commercial traction to encourage many of our warrant
holders to exercise the warrants they obtained as part of the September
equity raise. We truly believe Xeros has much to offer.
KLAAS DE BOER, CHAIRMAN - 17 APRIL 2023
XEROS
TECHNOLOGY
SUBJECT:
XFILTER
OBSERVATION:
EXPLODED RENDER OF XF1
GENERATION:
01
032
033
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 CHIEF EXECUTIVE
OFFICER’S REVIEW
As the world finally seemed ready to fully emerge from lockdown, we have
collectively been faced once again with challenges due to the appalling
invasion of Ukraine. Economic hardship generated by those events has
been felt across the world as rising fuel prices and shortage of goods
impacted the economy and people’s lives. In these times of economic
downturn, does the world still feel as strongly about making the changes
necessary so that we can consider how our behaviour is impacting the
planet? The answer seems to be a resounding ‘yes’. We receive ever more
encouraging signs that when it comes to their commitment to ESG issues,
people have not been deterred by the economic squeeze. A recent report
drawing on research from McKinsey and Nielsen IQ into FMCG purchases
indicated that “Over the past five years, products making ESG-related
claims accounted for 56 per cent of all growth”. Indeed, The Economist
suggests that rather than impeding the transition to energy efficiency and
renewables deployments “the war in Ukraine may, in fact, have fast-
tracked the transition by an astonishing five to ten years”.
This past year has been one of change for Xeros not least with my
arrival in August and a change of leadership. As well as change though
has come progression. The Xeros mission to bring real environmental
transformation to two of the world’s largest industries is on the cusp
of something significant.
034
035
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 2
REPORTS
REPORTS
SECTION 2
This sense of purpose has been captured and expressed with the
impactful messaging and visuals introduced in May last year which have
clearly signalled that at our core, Xeros is a collective of innovators
bringing visibility to the issues that matter the most.
That the Company has a clear identity was important to me when
I was first approached about joining Xeros. As Henry Kissinger said,
“If you don’t know where you are going, every road will get you nowhere”.
As well as ‘direction and identity’ there were four other reasons that
made the decision to join Xeros an easy one.
Firstly, the maturity of the technology. On our three core propositions
of Care, Finish and Filtration we have either existing technology at work,
whether that be processing denim in Bangladesh, laundering Air France
uniforms in Paris, or prototypes that are proven to offer market-leading
solutions, as evidenced by the Hohenstein Institute on XFilter.
The second area of appeal is market readiness. As confirmed by the
McKinsey report above; consumer sentiment and demand for products
that are as efficient and considerate to the environment has never been
stronger: “The overall trend … was clear … products that made ESG-related
claims grew faster than those that didn’t.” In the apparel and appliances
industry, we see regular reports and initiatives introduced to answer this
growing requirement such as the Apparel Impact Institute’s $250m
Fashion Climate Fund, designed to unlock a total of $2B in blended capital
towards verified impact solutions in order to remove up to 150 million
tonnes of CO2 from the apparel supply chain.
036
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
037
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 2
REPORTS
The third area of strength relates to business readiness. The licensing
partnerships we have in place with the likes of IFB on Care, Hanning on
Filtration and Ramsons on denim Finish mean Xeros is well positioned for
market adoption. The business processes, particularly on ‘technology
transfer’, have been honed by several years of working with these industry
leaders and are now lean, efficient, and scalable. Equally as important, the
people within Xeros are some of the brightest and most capable technical
and scientific minds that I have ever encountered. In short, our setup and
partnerships mean we are now in position to maximise the
implementation of our innovative solutions to those receptive apparel and
appliance markets.
Finally, and perhaps most importantly, the question I had was, how
could I add value. The implementation of the ‘IP rich / Asset light’ business
model over the last few years has laid the foundations. The need now is
for focus and commercial execution. After 20 years of leading sales,
marketing, and strategy initiatives, with some of the world’s largest
consumer electronics and major domestic appliance brands, I feel well
placed to put to use my commercial know-how, contacts and industry
understanding to help guide Xeros through this crucial commercialisation
stage.
To elaborate upon some of the progression we have made in my short
term with the Company, strides have been taken in all three of our core
technology propositions.
038
038
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
039
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 2
REPORTS
REPORTS
SECTION 2
FINISH BUSINESS REVIEW
XEROS
TECHNOLOGY
SUBJECT:
XDRUM
OBSERVATION:
RENDER SHOWING POPPET AND LIFTERS
GENERATION:
02
In our denim processing business we have progressed a brand-endorsed
trial with a major European fashion retailer through a partnership between
the brand and their supply chain. A Xeros enabled machine has been
installed in one of the retailers preferred denim suppliers at their request,
and has demonstrated very positive initial results showing significant
water and energy savings.
This brings us closer to our aim of having retail brands specifying the use
of Xeros finishing technology in their supply chain.
The Company’s attendance in June 2023 at ITMA in Milan, the world’s
most influential textile and garment technology exhibition, will see us
further amplify the Xeros story to the apparel processing machinery
manufacturer, garment manufacturer and fashion brand community.
Qualus, a leather processing spin-out which uses Xeros proprietary
technology, has continued to make good progress with further factory
installations in Mexico, Brazil, India, and South-East Asia for the
processing of leather hides. Although not materially relevant from a
revenue perspective, in this ‘start-up’ phase this further highlights the
receptivity of the apparel and accessory industry adoption for core Xeros
technology.
040
041
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
FILTRATION BUSINESS REVIEW
Further validation of the strength of our XFilter proposition came with the
signing in March 2023 of two commercial development agreements with
two of Europe’s largest, most reputable and established component
suppliers to the major domestic appliance industry. Alongside the
partnership with Hanning, Xeros is now perfectly placed to service OEM
brand requirements for filtration.
Last year Xeros co-created a letter sent to the UK Environment
Secretary demanding legislation for filtration in washing machines.
This led to a direct discussion with the Minister and the Department of
Environment, Food and Rural Affairs and Xeros continues to support a UK
private members’ bill on this very topic. This year we are readying facts
and evidence to coincide with the EU’s recommendations, currently
scheduled to be published in May 2023, on ‘Measures to Reduce the
Impact of Microplastic Pollution on the Environment’. This evidence is also
being used to support a new bill in California to mandate microfibre
filtration in washing machines that was introduced in February of this year
and has passed the first committee hearing. Xeros are working closely
with the NGO 5 Gyres, who co-authored the bill, to support the filtration
effectiveness and standards. Xeros continue to be recognised for leading
these standards as highlighted by a Washington Post article earlier this
year that referenced the University of Plymouth study concluding that
XFilter is the most effective microfibre capture system for the laundry
industry.
With France having established a precedent by mandating a deadline
of 1 January 2025 for a microfibre capture requirement in all washing
machines, the rest of the EU, the UK and California are expected to follow
suit. The Xeros view is that with XFilter partnerships in place, we are well
positioned to respond to an imminent need for five of the leading global
washing machine markets.
042
043
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 2
REPORTS
REPORTS
REPORTS
SECTION 2
SECTION 2
CARE BUSINESS REVIEW
In the Commercial laundry business unit, we announced in December last
year that IFB have commenced a trial of the XDrum and XOrb technology
with Indian Railways, in a 90kg capacity machine. This trial is taking
learnings from the successful model used by our partner Georges in
France with SNCF. The ultimate aim is for Indian Railways to use the
technology to drive energy and cost efficiencies to launder the linens used
on sleeper trains across India. Indian Railways is one of the largest
organisations in India and is an established customer of IFB.
The Georges business continues to thrive with six new Xeros-enabled
machines installed in line with Georges tripling their production capacity
in 2022. This demonstrates that Europe’s leading businesses, such as
SNCF and Air France, are prepared to commercially back companies like
Georges that use the Xeros technology as part of their proposition.
In Asia, our licensing partner Jiangsu SeaLion Technology
Developments Company (“SeaLion”), the largest commercial laundry
manufacturer in China is cautiously optimistic about a revival of the
Chinese hospitality industry following China’s exit from a prolonged
Covid-related lockdown in January. They remain a well-placed partner
for that region in the long term.
Our IFB partnership facilitated a significant milestone in December
with the launch of a commercial / consumer cross-over semi-professional
11kg machine. Fulfilling a long-held aspiration, the Xeros Care technology
is now available for use by consumers in India in their homes.
At the time of writing IFB continue to make technical progression in
order to facilitate a mass market launch
to the 280m+ households in India.
044
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
045
045
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 2
REPORTS
REPORTS
SECTION 2
OUTLOOK
The £6.3m funds raised in a placing and open offer in October 2022 will be
applied to three main areas: supporting the technical requirements of our
existing partners, seeking out partnerships in new geographies, and
crucially raising awareness and adoption of the solutions our technology
offers to all stakeholders in our target industries.
As a technology licensing business, we have the benefits of low
overheads and an ability to scale up significantly at a high gross-margin
with minimal cost increase. The other side of the coin, however, is that we
are unable to directly influence timings and the ‘Go to Market’ decisions.
Indeed, as we are offering innovation to the market this is further
heightened.
The recent signing of two further commercial development
agreements for XFilter has been highly significant and, when combined
with the existing partnership with Hanning, suggests that XFilter
represents a very real opportunity for the Group. Should the global
legislative landscape continue to compel industry adoption of microfibre
filtration the company believes this is becoming an ever more tangible
route to yield revenue and contribution. This positive development offsets
the fact that trials with IFB for a mass market product still remain ongoing,
as referenced above.
Whilst we still remain of the view that Xeros will be capable of achieving
month on month EBITDA and cashflow breakeven during 2024, as we said
at the time of last year’s fundraising (with the caveat at that time that
more clarity would be provided over the course of coming year), we expect
that this will likely occur during the latter part of the year, with XFilter
royalties (at near 100% gross margin, but a lower per unit value than
domestic unit sales) likely to contribute more to the overall product mix.
Whilst all of this means that near term expectations are lower than
previously envisaged, we would contend they are on a sounder footing
and we remain firmly of the view that there remains a clear path for our
early adopter licensing brands to achieve wider market implementation
globally.
XEROS
TECHNOLOGY
SUBJECT:
COTTON JUMPERS
OBSERVATION:
JUMPERS IN XORB WASH
MAGNIFICATION:
GF 120MM Ƒ/4.0
NEIL AUSTIN, CHIEF EXECUTIVE OFFICER - 17 APRIL 2023
046
046
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
047
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
SECTION 2
REPORTS
REPORTS
SECTION 2
1.1
FINANCIAL REVIEW
The financial results in 2022 reflect a year of transition as the Group
supported early-stage licencing contracts, and the transition of more
established partnerships to new relationships in line with the Group’s
overall strategy.
Future revenue growth is dependent on the pace of commercial
adoption of products incorporating the Group’s technology platforms in
their respective markets. The Group’s licensing business model does not
require administrative expenses to increase in line with revenue growth,
thereby creating future operating leverage to drive the business to
profitability as revenue increases in future years.
Further information on these financial results is provided below.
Group revenue fell by 65.4% to £0.2m in the year ended 31 December
2022 (2021: £0.5m). With the implementation of the Group’s licensing
model, the revenue mix is changing with revenue now derived from three
principal sources:
— Service revenue: reflecting the servicing of existing estate, based
principally in Europe.
— Licensing revenue: reflecting royalty payments from licence
partners and up-front fees for access to Group intellectual
property.
— Sale of goods: reflecting sales of XOrbs to licence partners and
sales of machines in Europe on behalf of license partners.
The Group continues to receive service revenue related to the
retained estate of commercial laundry machines in the UK and Europe.
As the licensing model grows, this service revenue is expected to become
a smaller part of the overall revenue mix.
Licensing revenue in the period was £0.1m (2021: £0.1m), a reduction
of 48.4%; revenue from sale of goods was £0.0m in the period (2021:
£0.2m), a decrease of 88.4%. Service revenue in the period was £0.1m
(2021: £0.2m), a reduction of 56.8%.
The timing of third-party sales and contractual customer milestones
drove a decrease in gross profit in the period to £0.1m (2021: £0.3m),
048
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
XEROS TECHNOLOGIES -------- ANNUAL REPORT -------- DEC 2022
049
049
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 Group revenue
was generated
as follows:
Year ended 31
December 2022
£’000
Year ended 31
December 2021
£’000
Service Revenue
Licensing Revenue
Sale of Goods
Other
82
64
18
-
Total Revenue
164
190
124
155
5
474
resulting in a gross margin of 51.2% (2021: 59.3%).
The Group increased its adjusted EBITDA loss by 17.3% to £7.4m
(2021: loss £6.3m).
Gross profit/loss and adjusted EBITDA are considered the key
financial performance measures of the Group as they reflect the true
nature of our trading activities. Adjusted EBITDA is defined as the loss on
ordinary activities before interest, tax, share-based payment and warrant
expense, depreciation and amortisation.
Administrative expenses, increased by 4.1% to £7.5m (2021: £7.2m),
following investments in the Group’s marketing and communications,
as well as a return of travel to pre-pandemic levels. Headcount was
broadly static in the year, increasing by 2.5% during the year with the
average number of operational staff in the year to 31 December 2022
rising to 41 (2021: 40).
The Group reported an operating loss of £7.4m (2021: loss £6.9m),
an increase of 7.1%. The loss per share was 14.29p (2021: loss 28.11p).
Net cash outflow from operations increased to £7.0m (2021: £5.8m)
from a combination of increased cash used in operations, £7.5m (2021:
£6.3m) and the receipt of £0.5m R&D tax credits from HMRC relating
to 2021. Cash utilisation was in line with the Board’s expectations.
Cash utilisation is expected to be below £450,000 per month in 2023.
The Group agreed a new ten-year lease on its premises in Sheffield
during the year, leading to the addition of right-of-use assets of £0.8m
and right of use liabilities of £0.7m.
The Group had existing cash resources, including cash on deposit, as
at 31 December 2022 of £6.5m (2021: £7.8m) and remains debt free. Group
cash as at 31 March 2023 was £4.5m. The Going Concern statement on
page 78 draws attention to the Directors’ views on the Group’s ongoing
prospects and the key assumptions behind the preparation
of these accounts on a going concern basis.
ALEX TRISTRAM, DIRECTOR OF FINANCE - 17 APRIL 2023
050
051
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 2
REPORTS
REPORTS
SECTION 2
STRATEGIC REPORT
Principal activity: Xeros Technology
Group plc (LN: XSG) is the creator of
technologies that reduce the impact
of clothing on the planet.
Our Care and Finish technologies use patented, reusable XOrbs housed
in our engineered XDrum for minimum disruption. Together, these
components significantly reduce the amount of water and chemistry used
in the dyeing, finishing or laundering of garments and fabrics. They
increase the efficiency of these processes which require molecules to be
either affixed or removed from substrates. In the case of laundry, they are
proven to significantly increase the life of clothes and fabrics. The results
are major improvements in economic, operational, product and
environmental outcomes.
The Group has signed multiple licence agreements for its Care and
Finish technologies with leading OEMs in major commercial and domestic
markets.
XFilter is the Group’s proprietary washing machine filtration
technology which prevents harmful microfibres including microplastics,
generated during washing cycles, from being released into the world’s
rivers and oceans. Microfibres released into the environment from
clothing and fabrics during their laundering are a major source of pollution
in the environment and contamination in the food chain.
The Company is incorporated and domiciled in the UK.
052
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
053
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 2
REPORTS
REPORTS
SECTION 2
BUSINESS MODEL
The Group seeks to generate a return through the licence of its
proprietary technology to third parties in order to generate royalties and
through the sale of XOrbs to support the production and distribution of
products which incorporate Xeros technology. Further information on the
Group’s activities and how it seeks to create added value is included in the
Chairman’s statement, Chief Executive Officer’s review and financial
review on pages 31 to 51.
BUSINESS REVIEW AND RESULTS
A review of the Group’s performance and future prospects is included in
the Chairman’s statement, Chief Executive Officer’s review and financial
review on pages 31 to 51. The loss for the year attributable to equity
holders was £7.9m (2021: £6.4m). The Directors do not recommend
the payment of a dividend (2021: nil).
KEY PERFORMANCE INDICATORS
As the Group is in the process of commercialising its platform
technologies, the Directors consider the key quantitative performance
indicators to be: the level of cash and deposits held in the business of
£6.5m (2021: £7.8m), gross profit/loss and adjusted EBITDA. Adjusted
EBITDA is defined as the loss on ordinary activities before interest, tax,
share-based payment and warrant expense, depreciation and
amortisation. Adjusted EBITDA is discussed in more detail in the financial
review on pages 48 to 51. The Board performs regular reviews of actual
results against budget, and monitors cash balances on a regular basis
to ensure that the business has sufficient resources to enact its current
strategy. Certain qualitative measures, such as the performance of
commercial initiatives, are also monitored on a regular basis. The Board
will continue to review the KPIs used to assess the business as it grows.
054
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
055
XEROS
TECHNOLOGY
SUBJECT:
XORBS
OBSERVATION: SCIENTISTS
WORKING WITH XORBS
MAGNIFICATION:
GF 63MM Ƒ/4.0
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 KEY RISKS
The Board carefully considers the risks facing the Group and endeavours
to minimise the impact of those risks. The key risks are as follows:
DEPENDENCE ON KEY EXECUTIVES
AND PERSONNEL AND THE ABILITY TO
ATTRACT AND RETAIN APPROPRIATELY
QUALIFIED PERSONNEL
The Group’s future success is substantially
dependent on the continued services and
performance of its Executive Directors and
senior management, and its ability to attract and
retain suitably skilled and experienced personnel.
The Group cannot give assurances that
members of the senior management team and
the Executive Directors will continue to remain
within the Group. Finding and hiring any such
replacements could be costly and might require
the Group to grant significant equity awards or
other incentive compensation, which could
adversely impact its financial results.
In mitigation, the Group seeks to
appropriately reward and incentivise key Group
personnel, alongside succession planning to
reduce the impact of departures should they
occur.
INTELLECTUAL PROPERTY
The Group’s success will depend in part on its
ability to maintain adequate protection of its
intellectual property, covering its processes and
applications. The intellectual property on which
the Group’s business is based is a combination
of patent applications and proprietary know-how.
Patents for which the application is pending or
for which applications are expected in the future
may not be granted or that any such grant will be
on a timely basis. The Group believes that the
portfolio it holds is robust but there remains a
risk that the portfolio will not provide the
anticipated commercial advantages, or that the
patents within it will be held valid if challenged,
or that third parties will not claim rights in, or
ownership of, the patents and other proprietary
rights held by the Group.
The Group is also subject to risks that
others may develop similar products to the
Group, duplicate any of the Group’s products or
design around any patent applications held by
the Group. Others may hold or receive patents
056
which contain claims having a scope that covers
products developed by the Group (whether or not
patents are issued to the Group). In addition, no
assurance can be given that others will not
independently develop or otherwise acquire
substantially equivalent techniques or otherwise
gain access to the Group’s unpatented
proprietary technology or disclose such
technology or that the Group can ultimately
protect meaningful rights to such unpatented
technology.
Any claims made against the Group’s
intellectual property rights, even without merit,
could be time-consuming and expensive to
defend and could have a materially detrimental
effect on the Group’s resources.
In mitigation of the above risks, the
Group holds significant patent litigation
insurance, on which it could call should any
litigation be required, in either in defence of a
claim against the Group or to prosecute those it
believes infringe on IP protected rights. The
Group actively engages in contingency planning,
both internally and externally, and continues to
monitor the wider IP landscape as to be aware of
any relevant issues.
ACCEPTANCE OF THE GROUP’S
PRODUCTS
The success of the Group will depend on the
market’s acceptance of, and attribution of value
to, its core technologies and the benefits of
incorporating the same into various applications.
There can be no guarantee that this acceptance
will be forthcoming, that an acceptable value will
be placed upon such technology, or that the
Group’s core technology will succeed as an
alternative to other applications.
The Group has performed extensive testing, both
internally and with its technology partners, to
ensure that the technology works and can fit into
the processes and equipment in the production
chain. The Group acts as an influencer and
thought leader to provide a path to long-term
advocacy and acceptance within the relevant
industries.
LACK OF PROGRESS WITHIN THE
LEGISLATIVE ENVIRONMENT
The Group expects the legislative environment
for domestic laundry filtration to be a significant
factor in widespread adoption of the Group’s
technology. There remains a risk that the relevant
legislation within the Group’s target markets is
not enacted, or that the legislation that is
enacted is not of the standards anticipated.
The Group works with industry and NGO
partners to provide the relevant support and
data to legislative assemblies in important
jurisdictions, and continues to lobby for the
protections it believes are required to safeguard
the environment from worsening microparticle
pollution. In addition, the Group has multiple
applications with commercial potential and as
such spreads risk in this way.
SUPPLY AND LOGISTICS OF KEY
MATERIALS
The Group is dependent on a small number of
key suppliers for the production, manufacture
and logistics of key materials used in the Group’s
technology and by licence partners. There
remains a risk that these suppliers cannot fulfil
the Group’s requirements on terms the Group
considers acceptable and this could cause
delays in the commercialisation of the Group’s
technology, or reduce the returns from the
Group’s commercial agreements.
The Group has been working with a
number of suppliers for key materials, and seeks
to have long-term sourcing agreements in place
with multiple suppliers to mitigate this risk.
IT SECURITY
There is a risk that the Group suffers a breach
of IT security, including a ransomware attack
or significant data breach.
In mitigation, the Group has strong IT
security policies, and requires all staff to
complete regular training to ensure they are up
to date with the latest developments.
RISK OF COMPETING TECHNOLOGY
There is a risk that technological advances in
competing technology and/or the lower cost of
such technology may impede the commercial
exploitation of the Group’s technology.
In mitigation, the Group has developed
specific propositions to offer to customers and
continues to monitor the global marketplace to
keep up to date with the latest developments.
ECONOMIC CONDITIONS, CURRENT
ECONOMIC WEAKNESS AND
GEOPOLITICAL RISKS
Any economic downturn either globally or locally
in any area in which the Group operates may
have an adverse effect on the demand for the
Group’s products. A more prolonged economic
downturn may lead to an overall decline in the
volume of the Group’s sales, restricting the
Group’s ability to generate a profit.
As a UK domiciled business, the Group is
exposed to the risks associated with the UK’s
decision to leave the EU (“Brexit”). The Board
expects future revenues from the
commercialisation of its technology in the EU to
be in the form of royalties on its intellectual
property. The international patent laws that apply
to the protection of intellectual property are not
affected by the status of the UK’s membership of
the EU and, therefore, the Board does not view
Brexit as posing a material risk to the Group’s
future revenues.
Travel restrictions and the associated
disruption of Covid-19 have caused a significant
level of economic uncertainty on a global basis.
Any additional disruption may have a negative
impact upon the Group’s ability to work closely
with international licence partners.
The Group operates, or is seeking to
develop its operations, in several geographic
regions and countries, some of which are
categorised as developing and, as a result, is
exposed to a wide range of political, economic,
regulatory, social and tax environments. These
environments are subject to changes in a
manner that may have a material adverse effect
on the Group, including changes to government
policies and regulations governing import and
export controls, tariffs, subsidies, income and
other forms of taxation (including policies
relating to the granting of advance rulings on
taxation matters), repatriation of income,
royalties, the environment, labour and health and
safety. The geopolitical risks associated with
operating in a variety of regions and countries, if
realised, could affect the Group’s operations and
could have a material adverse effect on the
Group’s business, financial condition or results.
057
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 REPORTS
SECTION 2
FUTURE DEVELOPMENTS
Future developments are described in the Chairman’s statement, Chief
Executive Officer’s review and financial review on pages 31 to 51
STATEMENT IN RESPECT OF SECTION 172 OF THE COMPANIES
ACT 2006
Under section 172 of the Companies Act 2006, the Directors of Xeros
Technology Group plc have a duty to promote the success of the Group
for the benefit of the members as a whole and, in doing so, have regard to:
i. the likely consequences of any decision in the long term;
ii. the interests of the Company’s employees;
iii. the need to foster the Company’s business relationships with
suppliers, customers and others;
iv. the desirability of the Company maintaining a reputation for high
standards of business conduct; and
v. the need to act fairly between members of the Company.
The directors of Xeros Technology Group plc consider the following areas
of key importance in fulfilment of this duty:
— Long-term strategic planning and budgeting to allow the Group
to project a path to creating value for shareholders;
— Continued emphasis on health and safety, with regular and
comprehensive dialogue with employees;
— Open and fair dealings with partners, customers, and suppliers,
leading to long-term mutually beneficial relationships;
— A Group built on improving sustainability, with innovative
technologies serving a range of industries; and
— Consideration of the Group’s operations on the community and
the environment.
The strategic report on pages 53 to 58 was approved by the Board and
is signed on its behalf.
NEIL AUSTIN, CHIEF EXECUTIVE OFFICER - 17 APRIL 2023
058
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
059059
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 1.1
DIRECTORS’ REPORT
DIRECTORS’ REPORT
The Directors hereby present their annual report and audited consolidated
and parent company financial statements for the year ended 31 December
2022.
SHARE CAPITAL AND FUNDING
Full details of the Group and Company’s share capital movements during
the year are given in note 18 of the financial statements.
DIRECTORS AND THEIR INTERESTS
The following Directors held office during the period and up to the date
of signing this report except where noted otherwise:
— Klaas de Boer
— David Armfield
— Neil Austin (appointed 1 August 2022)
— David Baynes (resigned 31 December 2022)
— Paul Denney (resigned 28 February 2023)
— Mark Nichols (resigned 1 August 2022)
— Rachel Nooney
Directors’ interests in the shares of the Company, including family
interests are included in the Directors’ remuneration report on pages
68 to 71.
DIRECTORS’ INDEMNITY INSURANCE
The Group has maintained insurance throughout the year for its Directors
and officers against the consequences of actions brought against them
in relation to their duties for the Group.
RACHEL NOONEY, NON-EXECUTIVE DIRECTOR
060
060
XEROS TECHNOLOGIES -------- ANNUAL REPORT -------- DEC 2022
061
061
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
SECTION 2
REPORTS
REPORTS
SECTION 2
DIRECTORS
KLAAS DE BOER, Chairman
Klaas joined Xeros as Chairman in January 2020. In June
2021 he left Entrepreneurs Fund Management LLP,
where he had served as Managing Partner since 2008.
Klaas holds numerous board positions with
international companies including SmartKem, Inc.,
General Fusion, Inc., where he is Chair, and veriNOS
Pharmaceuticals GmbH. Klaas began his career with
McKinsey & Company before transitioning to venture
capital with Baan Investment more than 20 years ago.
He holds an MSc in Applied Physics from Delft
University of Technology and an MBA from INSEAD.
Klaas is Chair of the Nominations Committee.
NEIL AUSTIN, Chief Executive Officer
Neil joined Xeros in August 2022 from Strix Ltd, an AIM
listed global leader in domestic appliance heating
control, where he led the consumer goods and group
marketing divisions. Prior to that Neil was CCO of
Neurovalens Limited, an innovative med tech company
working in cerebral stimulation. He has also held
leadership positions in sales, marketing & strategy
functions with the Glen Dimplex Group and Whirlpool
EMEA. As well as general management, Neil has worked
on M&A, integration projects, project management
approaches and commercial excellence initiatives.
KLAAS DE BOER, CHAIRMAN
062
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
063
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 REPORTS
SECTION 2
DAVID ARMFIELD, Senior Independent Director
David joined Xeros in June 2018. His background is
in corporate finance, having previously worked for
Lehman Brothers Limited as its Co-Head of European
Industrial Coverage. He has also served as a partner
at PwC, and as the firm’s National Head of Industrial
Products. He is a founding Partner of Kinetix Critchleys
Corporate Finance LLP, which provides advisory
services to companies in the Clean Technology and
Resource Efficiency industries. David is Chair of the
Audit Committee and Remuneration Committee.
RACHEL NOONEY, Non-Executive Director
Rachel joined Xeros in July 2021. Her background is in
brand development, strategy, marketing planning, and
creative. She has held senior Head of Brand and
Marketing roles at Marks and Spencer plc and New
Look, where she was responsible for leading brand
development, marketing campaigns, digital and retail
marketing, talent, creative and production. Rachel has
worked both client and agency side in marketing, and
is the founder and principal consultant of shoreseven,
a brand and strategic marketing consultancy. Rachel
is a member of CIM and has provided mentorship for
marketeers and young people wanting to develop and
break into the creative industries with both CIM and
Creative Mentor Network.
064
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
065
065
DAVID ARMFIELD, SENIOR INDEPENDENT DIRECTOR
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SUBSTANTIAL
SHAREHOLDERS
EMPLOYMENT POLICIES
The Group supports employment of disabled people where possible
through recruitment, by retention of those who become disabled and
generally through training, career development and promotion.
The Group is committed to keeping employees as fully informed as
possible with regard to the Group’s performance and prospects and seeks
their views, wherever possible, on matters which affect them as employees.
DISCLOSURE OF RISKS
As at 31 March 2023, shareholders holding more than 3% of the share
capital of Xeros Technology Group plc were:
The Group’s exposure to price risk, credit risk, liquidity risk and cash flow
risk are discussed in note 15 to the Financial Statements.
Name of shareholder
Number of
shares
% of voting
rights
Entrepreneurs Fund LP
35,767,534
23.69
Canaccord Genuity Wealth Management
21,598,119
14.31
Dowgate Capital
15,846,250
10.03
Lombard Odier Investment Managers
Spreadex
Hargreaves Lansdown
W H Salomon Esq
Richard Griffiths
12,893,266
10,093,834
6,834,668
6,548,631
5,009,137
8.54
6.69
4.54
4.34
3.32
RESEARCH AND DEVELOPMENT
The Group is engaged in research and development in respect of current
and future applications of its technologies, improving both existing
processes and developing new ones where appropriate.
KEY DEVELOPMENTS FOLLOWING THE YEAR END
In March 2023, the Group signed two additional licences for its XFilter
technology with global component manufacturers. In February 2023,
the Group’s CFO, Paul Denney, stood down from his position.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR
The Directors who were in office on the date of approval of these financial
statements have confirmed that, as far as they are aware, there is no
relevant audit information of which the auditor is unaware. Each of the
Directors have confirmed that they have taken all the steps that they ought
to have taken as directors in order to make themselves aware of any
relevant audit information and to establish that it has been communicated
to the auditor.
AUDITOR
The Board will put Grant Thornton UK LLP forward to be re-appointed as
auditor by the shareholders and a resolution concerning their appointment
will be put to the forthcoming AGM of the Company.
ON BEHALF OF THE BOARD
NEIL AUSTIN, CHIEF EXECUTIVE OFFICER
17 APRIL 2023
UNIT 2, EVOLUTION, ADVANCED MANUFACTURING PARK
WHITTLE WAY, CATCLIFFE
ROTHERHAM, S60 5BL
066
067
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
DIRECTORS’
REMUNERATION REPORT
This remuneration report is not intended to
comply with the quoted company remuneration
reporting requirements in company law and is
provided in order to meet the requirements of
AIM rule 19.
It is the Company’s policy that Executive
Directors should have contracts with an
indefinite term providing for a maximum of six
months’ notice. In the event of early termination,
the Directors’ contracts provide for
compensation up to a maximum of basic salary
for the notice period.
Non-Executive Directors are employed
on letters of appointment which may be
terminated on not less than one month’s notice.
Companies with securities listed on AIM
do not need to comply with the UKLA Listing
Rules. The Remuneration Committee is, however,
committed to maintaining high standards of
corporate governance and disclosure and has
applied the guidelines, as far as practicable, given
the current size and development of the
Company.
REMUNERATION COMMITTEE
The Remuneration Committee consists of David
Armfield as Chairman and Klaas de Boer.
The Remuneration Committee will review
and make recommendations in respect of the
Directors’ remuneration and benefits packages,
including share options, and the terms of their
appointment. The Remuneration Committee will
also make recommendations to the Board
concerning the allocation of share options to
employees under the share incentive schemes.
The Remuneration Committee will meet at least
once a year.
The main elements of the remuneration
packages for Executive Directors and senior
management are:
BASIC ANNUAL SALARY (INCLUDING
DIRECTORS’ FEES)
The base salary is reviewed annually from the
beginning of each calendar year. The review
process is undertaken by the Remuneration
Committee and takes into account several
factors, including the current position and
development of the Group, individual
contribution and market salaries for comparable
organisations.
DISCRETIONARY ANNUAL BONUS
All Executive Directors and senior managers are
eligible for a discretionary annual bonus which is
paid in accordance with a bonus scheme
developed by the Remuneration Committee. This
takes into account business performance and
commercial progress, along with financial results.
SHARE INCENTIVE SCHEMES
The Group operates share option plans, under
which certain Directors’ and senior management
have been granted options to subscribe for
ordinary shares. All options are equity settled.
The options are subject to service and
performance conditions, have an exercise price
of between 15 pence and 30,500 pence and the
vesting period is generally three years. If the
options remain unexercised after a period of 10
years from the date of grant, the options expire.
The Group has no legal or constructive obligation
to repurchase or settle the options in cash.
REMUNERATION POLICY FOR NON-
EXECUTIVE DIRECTORS
Remuneration for Non-Executive Directors is set
by the Chairman and the Executive Members of
the Board. Non-Executives do not participate in
bonus schemes.
DIRECTORS’ REMUNERATION
The remuneration of the main Board Directors’ of Xeros Technology Group plc who served from 1
January 2022 (or date of appointment if later) to 31 December 2022 (or date of resignation if earlier) was:
Salary
and Fees
£’000
Bonus
Payments
£’000
Benefits
£’000
Total year ended
31 December 2022
£’000
Total year ended
31 December 2021
£’000
Klaas de Boer
87
Mark Nichols
(note 1)
Neil Austin
(note 2)
Paul Denney
David Armfield
David Baynes
(note 3)
Rachel Nooney
(note 4)
402
92
212
35
35
35
–
-
20
45
–
–
–
Total
898
65
–
3
-
2
–
–
–
5
87
405
112
259
35
35
35
968
70
335
-
253
35
35
16
744
Note 1: Mark Nichols resigned as a Director on 1 August 2022
Note 2: Neil Austin was appointed as a Director on 1 August 2022
Note 3: Directors fees for David Baynes are payable to IP Group plc (see note 22 for further details).
Note 4: Rachel Nooney was appointed as a Director on 20 July 2021
DIRECTORS’ SHAREHOLDINGS
The interests of the Directors holding office at 31 December 2022 in the shares of the Company,
including family interests, were:
Ordinary shares of 0.1p each
Klaas de Boer
David Armfield
Neil Austin
Paul Denney
Rachel Nooney
2022
Number
2,650,000
50,000
200,000
275,000
200,000
2022
%
1.76
0.03
0.13
0.18
0.13
068
069
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 CHANGES IN DIRECTORSHIPS
On 18 March 2023 it was announced that Mark Nichols would step down from his role as CEO. He
subsequently resigned from the Board, with effect from 1 August 2022. Remuneration for Mark
includes £71,000 in respect of payment in lieu of contractual notice and £71,000 as a severance
payment. Performance criteria in respect of options issued to Mark Nichols in 2020, 2021 and 2022
were waived and these options remain capable of exercise for a further three and a half years from
Mark’s leaving date. All other options were cancelled on the date of his departure, leaving him with
415,246 options. Further detail on options issued to Directors is shown below.
DIRECTORS’ INTERESTS IN SHARE OPTIONS
Directors’ interests in share options, for Directors who held office at any point during the period,
granted under either the Xeros Technology Group plc Enterprise Management Incentive Share Option
Scheme or the Xeros Technology Group plc Unapproved Share Option Scheme, to acquire ordinary
shares of 0.01 pence each in the Company at 31 December 2022 were:
At 1
January
2022
Granted
during the
period
Exercised
during
the
period
Forfeited/
lapsed
during the
period
Termination
of
directorship
At 31
December
2022
Exercise
price
–
–
–
–
–
–
-
213,543
22,000
109,703
-
70,000
5,000
3,000
150,195
81,770
–
–
–
-
-
-
-
56,000
1,582.774
4,529.403
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Mark Nichols
(note 1)
Mark Nichols
(note 2)
Mark Nichols
(note 2)
11,401
2,500
5,000
Mark Nichols
(note 3)
45
Mark Nichols
(note 4)
Mark Nichols
(note 5)
Mark Nichols
(note 7)
Mark Nichols
(note 8)
Paul Denney
(note 6)
Paul Denney
(note 6)
Paul Denney
(note 4)
Paul Denney
(note 7)
Paul Denney
(note 8)
Paul Denney
(note 9)
Neil Austin
(note 9)
070
(109,703)
-
175 pence
(70,000)
-
(11,401)
(2,500)
(5,000)
-
-
-
(45)
(213,543)
(22,000)
–
–
–
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,500.0
pence
21,000.0
pence
22,500.0
pence
15 pence
70 pence
70 pence
93.5
pence
21,000.0
pence
22,500.0
pence
5,000
3,000
150,195
70 pence
81,770
175 pence
56,000
93.5
pence
1,582,774
5 pence
4,529,403
5 pence
Note 1: There were employment conditions in relation to
1,000,000 options granted on 12 November 2015 which
allowed for vesting in three annual instalments between
14 September 2016 and 14 September 2018, and a further
250,000 options granted on 16 December 2015 which allowed
for vesting in three annual instalments between 16 December
2016 and 16 December 2018. As part of the Group’s share
capital reorganisation during 2020, the numbers of options
in issue were reduced by a factor of 100 and the exercise
price increased by a factor of 100, leaving the overall value
of the options unchanged. As part of the Group’s capital
reorganisation in October 2022, these options were amended
to be over ordinary shares of 0.1p and deferred shares of
14.9p.
Note 2: There were employment conditions in relation to
750,000 options granted on 25 January 2017 which allowed
for vesting in three annual instalments between 25 January
2018 and 25 January 2020. As part of the Group’s share
capital reorganisation during 2020, the numbers of options
in issue were reduced by a factor of 100 and the exercise
price increased by a factor of 100, leaving the overall value
of the options unchanged. As part of the Group’s capital
reorganisation in October 2022, these options were amended
to be over ordinary shares of 0.1p and deferred shares of
14.9p.
Note 3: There are no performance conditions attached
to 4,504 options grated on 26 January 2018 which vested
immediately upon grant. As part of the Group’s share
capital reorganisation during 2020, the numbers of options
in issue were reduced by a factor of 100 and the exercise
price increased by a factor of 100, leaving the overall value
of the options unchanged. As part of the Group’s capital
reorganisation in October 2022, these options were amended
to be over ordinary shares of 0.1p and deferred shares of
14.9p.
Note 4: There were employment and performance conditions
in relation to the 21,354,350 and 15,019,500 options issued
on 14 May 2020 which allowed for vesting in three equal
proportions on or after the Company’s share price reaching
133 pence per share, 267 pence per share and 400 pence per
share. As at 31 December 2021, the first of these performance
conditions had been met. As part of the Group’s share
capital reorganisation during 2020, the numbers of options
in issue were reduced by a factor of 100 and the exercise
price increased by a factor of 100, leaving the overall value of
the options unchanged. The performance condition targets
were also increased by a factor of 100. As part of the Group’s
capital reorganisation in October 2022, these options were
amended to be over ordinary shares of 0.1p and deferred
shares of 14.9p. The options in respect of Paul Denney lapsed
upon his departure from the Group on 28 February 2023.
Note 5: There were employment and performance conditions
in relation to the 22,000 options issued on 1 December 2020
which allowed for vesting in three equal proportions on or
after the Company’s share price reaching 133 pence per
share, 267 pence per share and 400 pence per share. As at
31 December 2021, the first of these performance conditions
had been met. As part of the Group’s capital reorganisation
in October 2022, these options were amended to be over
ordinary shares of 0.1p and deferred shares of 14.9p. The
options in respect of Paul Denney lapsed upon his departure
from the Group on 28 February 2023.
Note 6: There were employment conditions in relation to
800,000 options granted on 18 January 2018 which allowed
for vesting in three annual instalments between 18 January
2019 and 18 January 2021. As part of the Group’s share
capital reorganisation during 2020, the numbers of options
in issue were reduced by a factor of 100 and the exercise
price increased by a factor of 100, leaving the overall value of
the options unchanged. The performance condition targets
were also increased by a factor of 100. As part of the Group’s
capital reorganisation in October 2022, these options were
amended to be over ordinary shares of 0.1p and deferred
shares of 14.9p. The options in respect of Paul Denney lapsed
upon his departure from the Group on 28 February 2023.
Note 7: There were employment conditions in relation to the
109,703 and 81,770 options issued on 1 January 2021 which
allowed for vesting in three equal proportions on or after the
Company’s share price reaching 275 pence per share, 375
pence per share and 475 pence per share. As at 31 December
2021, none of these performance targets had been met. As
part of the Group’s capital reorganisation in October 2022,
these options were amended to be over ordinary shares of
0.1p and deferred shares of 14.9p. The options in respect of
Paul Denney lapsed upon his departure from the Group on 28
February 2023.
Note 8: There were employment conditions in relation to
the 70,000 and 56,000 options issued on 1 January 2022
which allowed for vesting in three equal proportions on 1
January 2023, 1 January 2024 and 1 January 2025. As part of
the Group’s capital reorganisation in October 2022, these
options were amended to be over ordinary shares of 0.1p
and deferred shares of 14.9p. The options in respect of Paul
Denney lapsed upon his departure from the Group on 28
February 2023.
Note 9: There were employment conditions in relation to the
1,582,774 and 4,529,403 options issued on 10 November 2022
which allowed for vesting in three equal proportions on 11
November 2023, 11 November 2024 and 11 November 2025.
ON BEHALF OF THE BOARD
DAVID ARMFIELD, CHAIRMAN OF THE REMUNERATION COMMITTEE – 17 APRIL 2023
071
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 2
REPORTS
REPORTS
SECTION 2
072
072
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
073
073
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 CORPORATE
GOVERNANCE REPORT
In April 2018, the Quoted Companies Alliance released a new version of
its code for small and mid-sized quoted companies (the “Code”). The
Board fully supports the underlying principles contained within the Code,
has reviewed the Code in detail and complies with parts of the Code
where it deems it appropriate for the size and operations of the Group.
The responsibility for ensuring compliance and accurate reporting of
Corporate Governance resides with the Board. Corporate Governance will
be continually monitored and reviewed by the Board at least annually, as
part of the Annual Report and Accounts process each year.
The Board sets out its view on compliance with the corporate
governance principles as detailed in the Code below and set out on the
website at www.xerostech.com.
PRINCIPLE ONE: ESTABLISH A
STRATEGY AND BUSINESS MODEL
WHICH PROMOTE LONG-TERM VALUE
FOR SHAREHOLDERS
PRINCIPLE TWO: SEEK TO
UNDERSTAND AND MEET
SHAREHOLDER NEEDS AND
EXPECTATIONS
The Group’s strategy is to develop into an IP-rich,
capital-light licenser of polymer-based water-
saving solutions to multiple scale industries, all
of which deploy the same Xeros core
technologies. Given the scale of the markets in
which the Group operates, the strategy is to
commercialise the Xeros technology with
partners who already have strong international
market positions and who also demonstrate a
strategic intent to deliver increased levels of
sustainability.
The Group remains committed to an ongoing
dialogue with shareholders to ensure that its
strategy, direction and performance are clearly
understood. Understanding the opinion of
analysts and investors in the Group and, as a
result, helping our business be better
understood, is a crucial objective for the Group,
and the Group actively seeks to engage in this
area.
Private shareholders: The AGM is the key forum
for dialogue between retail shareholders and the
Board. The Notice of Meeting is sent to
shareholders at least 21 days before the meeting.
The Board and the Executive Directors routinely
attend the AGM and are available to answer
questions raised by shareholders. For each vote,
the number of proxy votes received for, against
and withheld is announced at the meeting. The
results of the AGM are subsequently published
on the Group’s website.
Institutional shareholders: The Directors seek to
build long-term relationships with institutional
shareholders. These relationships are primarily
managed by the Chief Executive Officer and the
Chief Financial Officer. This process includes
presentations to institutional shareholders and
analysts following the release of the full-year and
interim results, alongside other meetings as
appropriate.
The Board as a whole is updated on
these relationships, including any views or
concerns held by shareholders, by the Executive
Directors on a regular basis. Analyst reports are
also circulated to the Board as and when they are
produced.
PRINCIPLE THREE: TAKE INTO
ACCOUNT WIDER STAKEHOLDER AND
SOCIAL RESPONSIBILITIES AND THEIR
IMPLICATIONS FOR LONG-TERM
SUCCESS
The Board believes that the long-term success of
the Groups is reliant on good relationships with a
wide variety of stakeholders, both internal and
external to the Group. The Board is regularly
updated on key stakeholder engagement by the
Executive team and through other members of
senior management, who manage stakeholder
relationships where appropriate.
Employees: The Group is committed to employee
engagement, as the knowledge, skill and
application of its employees is the defining factor
in the long-term success of the Group. The
Group takes the employee value proposition
seriously, engaging with employees to establish
what is important to them, through direct
feedback and ongoing dialogue. The annual
performance review cycle is key to the Group,
ensuring that staff are given the necessary
support in their development throughout the
year, as well as allowing the senior management
team to get feedback at a one-to-one level.
Suppliers: The Group has relationships with key
suppliers which are managed closely by relevant
senior management to ensure ongoing supply of
products or services which are crucial to the
Group. The Board is actively updated on supplier
relationships on a regular basis.
Customers: As the medium- and long-term
strategy of the business evolves into the IP-rich,
capital-light licensor of water saving solutions,
relationships with licensees become longer term
and more co-operative. These key relationships
are managed by the appropriate members of the
Group’s senior management, with Board support
where necessary. The Board is updated on key
relationships on a regular basis.
PRINCIPLE FOUR: EMBED EFFECTIVE
RISK MANAGEMENT, CONSIDERING
BOTH OPPORTUNITIES AND THREATS,
THROUGHOUT THE ORGANISATION
The Group has established a framework of
internal controls which the Directors believe to
be appropriate for the size and operations of the
Group. This framework is reviewed by the
Executive team, the Audit Committee and the
Board on an ongoing basis.
The Board is responsible for reviewing
and approving overall Group strategy, approving
Group budgets and determining the financial
structure of the Group. Monthly results, including
variances and commentary are reported to the
Board on a regular basis.
The Audit Committee assists the Board
in discharging its duties regarding the financial
statements, accounting policies and the
maintenance of proper internal business, and
operational and financial controls.
The Board has ultimate responsibility for
the Group’s system of internal control and the
effectiveness thereof. Any such system can only
mitigate partially against the risk of material
misstatement or loss to the Group. The Board
considers that the internal control environment
in place within the Group is appropriate for the
size, complexity and risk profile of the Group. A
formal risk management document is presented
to and reviewed by the Board on a regular basis,
alongside updates on the functioning of the
environment on an ad hoc basis.
074
075
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 PRINCIPLE FIVE: MAINTAIN THE BOARD
AS A WELL-FUNCTIONING, BALANCED
TEAM LED BY THE CHAIR
The Board comprises the Non-Executive
Chairman, one Executive Director and two
Non-Executive Directors. The Board believes that
the Non-Executive Chairman and the Non-
Executive Directors are classified as
independent.
The Board believes that the make-up of
the Directors currently provides a balance
between independence and knowledge of the
Group which allows them to discharge their
responsibilities effectively, alongside the relevant
Board committees. Board members are expected
to commit time for a minimum of eight Board
meetings a year, alongside adequate preparation
time. Other meetings and commitments may be
required as appropriate.
PRINCIPLE SIX: ENSURE THAT
BETWEEN THEM THE DIRECTORS HAVE
THE NECESSARY UP-TO-DATE
EXPERIENCE, SKILLS AND CAPABILITIES
The Board believes that the current
make-up of Directors offers a well-balanced mix
of skills in areas relevant to the long-term
strategy of the Group. This belief is gained
through a knowledge and understanding of the
backgrounds of Board members, alongside the
understanding of the needs of the Xeros Group.
Details of the Directors, their backgrounds and
the skills and expertise they bring to Xeros can
be found above in this Annual Report and
Accounts. Board members keep their skills up to
date through regular updates from professional
advisers.
The Board considers succession
planning through the work of the Nomination
Committee, considering the long-term benefits
of an appointee and how their skills fit in to the
existing skills possessed by the Board. The
continuous improvement process the Board
undergoes ensures that they are aware of the
areas in which they would like to strengthen, and
it is through this lens that Director recruitment is
performed. Executive Director and senior
management succession planning is informed
through the annual review cycle.
PRINCIPLE SEVEN: EVALUATE BOARD
PERFORMANCE BASED ON CLEAR AND
RELEVANT OBJECTIVES, SEEKING
CONTINUOUS IMPROVEMENT
The Board, through an internal survey of
Board members and led by the Chairman and the
Senior Independent Director, performs an
evaluation procedure at least annually. The
results of this are presented to the board
alongside any actions or recommendations. The
Board has acted and continues to act on the
results of this evaluation where appropriate.
PRINCIPLE EIGHT: PROMOTE A
CORPORATE CULTURE THAT IS BASED
ON ETHICAL VALUES AND BEHAVIOURS
The Group exists to provide solutions to
global environmental challenges of water
scarcity and pollution. The Board believes that
Xeros technology provides genuine solutions to
these challenges and prides itself on the impact
that the Group can make in these critical areas. It
is through this lens that the Group promotes a
corporate culture based on ethical values and
behaviours.
This process is led by the Board, through
actions such as committing resources to
projects with an ethical and societally beneficial
purpose and setting a tone at the top which
encourages these within the wider Group. The
Board receives feedback on the corporate
culture through regular employee surveys and
employee-led committees, such as the health
and safety and sustainability committees.
PRINCIPLE NINE: MAINTAIN
GOVERNANCE STRUCTURES AND
PROCESSES THAT ARE FIT FOR
PURPOSE AND SUPPORT GOOD
DECISION-MAKING BY THE BOARD
The Board meets at least eight times a
year in accordance with its meeting calendar.
This meeting calendar is established each year to
align with the Group’s financial calendar, ensuring
a spread across the financial year alongside
meetings at key times during the year. This
calendar can also be supplemented with
additional meetings as and when required.
The Board and the associated
committees receive appropriate information in a
timely manner prior to each meeting.
Roles of the Board, Chairman and Chief
Executive Officer
The Board is responsible for the long-
term success of the Group. There is a formal
schedule of matters which are reserved for the
Board. These matters reserved for the Board
include:
— the overall strategy for the Group
— the structure and capital of the Group
— the financial reporting and control
environment of the Group
— the Group’s internal control framework
— major contracts for the Group
— shareholder communications
PRINCIPLE TEN: COMMUNICATE HOW
THE GROUP IS GOVERNED AND IS
PERFORMING BY MAINTAINING A
DIALOGUE WITH SHAREHOLDERS AND
OTHER RELEVANT STAKEHOLDERS
The Group communicates with
shareholders through the Annual Report and
Accounts, full-year and half-year
announcements, the AGM, meetings with
institutional shareholders and online shareholder
presentations. More detailed corporate
information, including all announcements and
presentations, can be seen on the Xeros website.
The Board is provided with updates on these
communications by the Executive team and
through the Group’s brokers as appropriate. The
Group maintains an open dialogue with other key
stakeholders, including Group employees.
— the delegation of authority and other key
THE BOARD
Group policies.
There is clear distinction between the
roles of the Chairman and the Chief Executive
Officer. The Chairman is responsible for providing
leadership to the Board and ensuring that the
long-term strategic focus of the Group is in the
best interest of shareholders. The Chief
Executive Officer is responsible for implementing
the strategy as agreed by the Board and
managing the direction of the Group through the
Executive and wider senior management teams.
Board committees: The Board has established
three subcommittees – the Audit, Remuneration
and Nomination committees – which exist to
support the Board in its objectives.
The Board believes the current
governance structure is appropriate for the
current size and scope of the Group. The Board
remains committed to good corporate
governance and will evolve the governance
policies and procedures in place as the nature
and scope of the Group evolves.
The Board currently comprises one
Executive Director and three Non-Executive
Directors.
AUDIT COMMITTEE
The Audit Committee consists of David
Armfield as Chairman and Rachel Nooney. Klaas
de Boer and Neil Austin attend by invitation. The
Audit Committee will, inter alia, determine and
examine matters relating to the financial affairs
of the Company including the terms of
engagement of the Company’s auditor and, in
consultation with the auditor, the scope of the
audit. It has in the year received and reviewed
reports from management and the Company’s
auditor relating to the annual accounts and the
accounting and internal control systems in use
throughout the Group. The Audit Committee
meets at least twice a year.
076
077
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 REPORTS
SECTION 2
NOMINATIONS COMMITTEE
GOING CONCERN
The Nominations Committee consists of
At 31 December 2022, the Group had
Klaas de Boer as Chairman, David Armfield and
Neil Austin. The Nominations Committee
monitors the size and composition of the Board
and the other Board committees and is
responsible for identifying suitable candidates
for Board membership and monitoring the
performance and suitability of the current Board
on an ongoing basis. During the year the
committee considered the composition of the
Board, appointed Neil Austin as Chief Executive
Officer and considered the Group’s need for
finance representation following the departure of
Paul Denney. The Nominations Committee meets
at least once a year.
INTERNAL CONTROL
The Board is responsible for maintaining
a sound system of internal control. The Board’s
measures are designed to manage, not eliminate
risk, and such a system provides reasonable but
not absolute assurance against material
misstatement or loss. As it is AIM listed, the
Company is not required to apply the full
provisions of the UK Corporate Governance
Code. The Board has adopted features of the
QCA Corporate Governance Code where it
considers it appropriate for the size and scope of
the business.
Some key features of the internal control
system are:
(i)
Management accounts
information, budgets, forecasts and business risk
issues are regularly reviewed by the Board which
meets at least eight times per year;
(ii)
The Company has operational,
accounting and employment policies in place;
(iii)
The Board actively identifies
and evaluates the risks inherent in the business
and ensures that appropriate controls and
procedures are in place to manage these risks;
(iv)
There is a clearly defined
organisational structure; and
(v)
There are well-established
financial reporting and control systems.
£6.5m of cash and cash equivalents. At this
stage in its development the Group incurs
operating cash outflows and is reliant on existing
cash resources. During October 2022, the Group
completed an equity placing and open offer
which provided £6.3m before fees, which also
included the issue of warrants which, if exercised,
would provide a further £6.3m. The Directors
consider that the Group’s existing cash resources
provide the Group with sufficient cash to meet
its obligations as they fall due for at least twelve
months following the date of this report, with
some changes to discretionary expenditure, if
necessary. While the Group actively manages key
customer stakeholders where appropriate, the
revenue generated by these contracts is reliant
on the progress of third parties and there
remains risk that progress is not forthcoming in
the timeframes anticipated by the Directors.
Should there be significant delays in the receipt
of this revenue, the Group’s existing cash balance
may not be sufficient to support the Group’s
expenditure until the point the Group’s revenue
allows it to reach cash breakeven. The Directors
expect that the Group will incur operating cash
outflows during the 12 months following the
signing of this report.
The Directors consider that they have
options in place that may allow them to reach
this breakeven point, including existing and
potential commercial agreements and further
restrictions on discretionary spending. Given the
lack of certainty around these scenarios, the
Directors consider that the Group’s current
funding position constitutes a material
uncertainty that may cast significant doubt as to
the Group’s ability to continue as a going
concern; in the absence of significant customer
revenue, the Group’s cash resources will run out.
Notwithstanding this uncertainty, the Directors
believe that they have sufficient options in place
in order to allow the Group to continue trading in
the short and medium term. Therefore, after
making enquiries and considering the
uncertainties as described above, the Directors
have a reasonable expectation that the Group
has and will have adequate resources to
continue in operational existence for the
foreseeable future. For these reasons, they
continue to adopt the going concern basis of
accounting in preparing this financial
information.
078
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
079
079
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 STATEMENT OF DIRECTORS’
RESPONSIBILITIES
The Directors are responsible for preparing the Strategic Report, the Directors’ Report
and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year.
Under that law the Directors have prepared the consolidated financial statements in accordance
with UK-adopted international accounting standards and the parent company financial statements
in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law, including FRS101 ‘Reduced Disclosure Framework’).
Under company law the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company
and the Group for that period. In preparing these financial statements, the Directors are required
to:
— select suitable accounting policies and then apply them consistently;
— make judgements and accounting estimates that are reasonable and prudent;
— state whether applicable international accounting standards in conformity with the
requirements of the Companies Act 2006 or UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the financial
statements; and
— prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient
to show and explain the Company’s transactions and disclose with reasonable accuracy, at any
time, the financial position of the Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. The Directors are also responsible for
safeguarding the Company’s assets and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors confirm that:
— so far as each director is aware, there is no relevant audit information of which the
Company’s auditor is unaware; and
— the Directors have taken all the steps that they ought to have taken as Directors in order
to make themselves aware of any relevant audit information and to establish that the
Company’s auditor is aware of that information.
— the Directors are responsible for the maintenance and integrity of the corporate and
financial information included on the Company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
XEROS
TECHNOLOGY
SUBJECT:
FABRIC CLOSE UP
OBSERVATION: FABRIC
CARED FOR WITH XORBS
MAGNIFICATION:
GF 120MM Ƒ/4.0
080
081
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 03
AUDITOR’S REPORT
082
083
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 SECTION 3
AUDITOR’S REPORT
AUDITOR’S REPORT
SECTION 3
INDEPENDENT
AUDITOR’S REPORT
to the members of Xeros Technology Group plc
OPINION
Our opinion on the financial statements is unmodified
We have audited the financial statements of Xeros Technology Group plc
(the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended
31 December 2022, which comprise the Consolidated Statement of Profit
or Loss and Other Comprehensive Income, the Consolidated Statement
of Changes in Equity, the Consolidated Statement of Financial Position,
the Consolidated Statement of Cash Flows, the Company Statement of
Changes in Equity, the Company Statement of Financial Position, and
Notes to the Financial statements, including a summary of significant
accounting policies. The financial reporting framework that has been
applied in the preparation of the group financial statements is applicable
law and UK-adopted international accounting standards. The financial
reporting framework that has been applied in the preparation of the
parent company financial statements is applicable law and United
Kingdom Accounting Standards, including Financial Reporting Standard
101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted
Accounting Practice).
— In our opinion:
— the financial statements give a true and fair view of the state of
the group’s and of the parent company’s affairs as at 31 December
2022 and of the group’s loss for the year then ended;
— the group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
— the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
— the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
XEROS
TECHNOLOGY
SUBJECT:
MESH FILTER
OBSERVATION: FINE
LATTICE STRUCTURE
MAGNIFICATION:
@20.7MM 400X/300ΜM
084
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
085
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the ‘Auditor’s responsibilities
for the audit of the financial statements’ section of our report. We are
independent of the group and the parent company in accordance with
the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
MATERIAL UNCERTAINTY RELATED TO GOING CONCERN
We draw attention to note 1 in the financial statements, which
indicates that the Directors believe that the current levels of cash held
provide the group with sufficient cash to meet its obligations as they
fall due for at least twelve months following the date of this auditor’s
report, with some changes to discretionary expenditure, if necessary.
However the group is reliant on the actions of third parties to generate
revenue anticipated from customer contracts and there remains risk
that progress is not forthcoming in the timeframes anticipated by the
Directors. Should there be significant delays in the receipt of this
revenue, the Group’s existing cash balance may not be sufficient to
support the Group’s expenditure until the point the Group generates
sufficient revenue to reach cash breakeven. As stated in note 1, these
events or conditions, along with the other matters as set forth in note 1,
indicate that a material uncertainty exists that may cast significant
doubt on the group and parent company’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that
the director’s use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
OUR EVALUATION OF MANAGEMENT’S ASSESSMENT OF THE
ENTITY’S ABILITY TO CONTINUE AS A GOING CONCERN
INDEPENDENT
AUDITOR’S REPORT
Our evaluation of the directors’ assessment of the group’s and the parent
company’s ability to continue to adopt the going concern basis of
accounting included the following audit procedures:
TO THE MEMBERS OF XEROS TECHNOLOGY GROUP PLC
— obtaining management’s going concern assessment including
future financing expectations, cash flow forecasts and sensitivity
analysis covering the period to 30 April 2024;
— updating our understanding of the design of processes and
controls in place over management’s forecasts supporting the
going concern assessment and confirming that they are
implemented as designed;
— challenging management over the key cost assumptions (including
staff costs, IP costs, legal & professional costs) applied in the
forecasts to determine whether these are reasonable and
consistent with the trading expectations and history of the
business;
— challenging management over the likelihood, timing and quantity
of future revenues forecast;
— assessing the quality of management’s forecasting through a
review of prior year actual results compared to forecasts; and
— assessing the adequacy of the disclosures in the financial
statements.
In performing our audit procedures, we observed the following:
— in management’s most likely outcome forecast in the period to
30 April 2024, the group is reliant on generating revenue from its
contracts with third parties and there remains risk that progress
in these contracts is not forthcoming in the timeframes
anticipated by the Directors. Should there be delays in the receipt
of this revenue, the group’s existing cash balance may not be
sufficient to support the group’s expenditure; and
— the assumptions made by management in its best-case, worst-
case and most likely outcome assessment did not indicate bias.
086
087
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 OUR RESPONSIBILITIES
We are responsible for concluding on the appropriateness of the
directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the group’s and
the parent company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw
attention in our report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify the auditor’s
opinion. Our conclusions are based on the audit evidence obtained up to
the date of our report. However, future events or conditions may cause
the group or the parent company to cease to continue as a going concern.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of this
report.
OUR APPROACH TO THE AUDIT
Materiality
Key audit
matters
Scoping
Overview of our audit approach
Overall materiality:
Group: £632,000, which
represents 8.5% of the Group’s
loss before tax.
Parent company: £200,000
which represents 2% of the
parent company’s total assets.
In addition to the matter described in the Material uncertainty related to
going concern section we have determined the matter described below
to be the key audit matter to be communicated in our report:
— Recoverability of intercompany receivables owed to the parent
company (same as previous year).
Our auditor’s report for the year ended 31 December 2021 included
the same key audit matters that have been reported as key audit matters
in our current year’s report.
We have performed the following audit work:
— an audit of the financial information of one of the components
using component materiality (full scope audit) which represents
79% of the loss before taxation for the group;
— an audit of one or more account balances, classes of transactions
or disclosures (specified audit procedures) of the financial
information of the parent company; and
— analytical procedures at group level for the remaining component
in the group during the year.
There was a change in scoping of the group audit this year resulting
in specified audit procedures being applied to the parent company. In the
prior year we performed an audit of the financial information of the parent
company using component materiality.
088
089
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These
matters included those that had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
Description
Audit response
KAM
Disclosures
Our results
In the graph below, we have presented the key audit matters
and other significant risks relevant to the audit.
Recoverability
of intercompany
receivables owed
to the parent
Going
concern
Management of
override control
Cash
Share
Revenue
recognition
Key audit matter
Significant risk
Other risk
Low
Extent of management judgement
High
High
Potential
financial
statement
impact
Low
090
KEY AUDIT MATTER – PARENT
COMPANY
HOW OUR SCOPE ADDRESSED THE
MATTER – PARENT COMPANY
RECOVERABILITY OF INTERCOMPANY
RECEIVABLES OWED TO THE PARENT
COMPANY
In responding to the key audit matter, we
performed the following audit procedures:
— obtaining an understanding of the
We identified recoverability of intercompany
receivables owed to the parent company as one
of the most significant assessed risks of material
misstatement due to error.
International Financial Reporting
Standard (IFRS) 9 Financial instruments is
relevant when considering the recoverability of
the intercompany receivables.
The financial statements presented for
audit recorded an intercompany receivable in the
parent company of £4.2m, due from Xeros
Limited. Xeros Limited is the trading entity for
the group and recorded a loss for the year ended
31 December 2022 and had net liabilities of
£115.3m at 31 December 2022. The group is loss
making and has been negatively impacted by
delays in the progression of licensing revenue
caused by the ongoing Covid-19 impact in key
markets.
Management’s assessment of any
potential impairment is inherently subjective, due
to limited historical evidence of trading under a
licensing operating model, and therefore requires
significant judgement in making assumptions
around the timing and extent of future revenue
from contracts with third parties and in
consideration of external factors.
RELEVANT DISCLOSURES IN THE
ANNUAL REPORT AND ACCOUNTS 2022
Financial statements: Note 2, Significant
accounting policies.
relevant business processes and
controls around the recoverability of
the carrying values of intercompany
receivables and confirming that they
were implemented by assessing
the accounting paper prepared by
management;
— obtaining management’s assessment
of the expected credit losses on the
intercompany loan and challenging
the probability-weighted amount
by reference to evidence including
the group’s share price and broker
reports, and checking consistency with
management’s going concern forecasts;
and
— assessing the adequacy of the
disclosures included within the financial
statements for compliance with IFRS 9
‘Financial Instruments’.
OUR RESULTS
From the work performed we identified that
management had not considered all external
factors as part of their initial assessment of
impairment of intercompany receivables.
As a result of our audit procedures,
management reperformed their assessment and
determined that the £8.9m intercompany
receivable was fully impaired.
091
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing the audit, and in evaluating the
effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the
financial statements and in forming the opinion in the auditor’s report.
Materiality was determined as follows:
MATERIALITY MEASURE
GROUP
PARENT COMPANY
MATERIALITY FOR
FINANCIAL STATEMENTS
AS A WHOLE
We define materiality as the magnitude of misstatement in the financial statements that,
individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of these financial statements. We use materiality in determining the
nature, timing and extent of our audit work.
Materiality threshold
£632,000 which represents 8.5% of the
group’s loss before tax.
£200,000 which represents 2% of the parent
company’s total assets.
Significant judgements
made by auditor in
determining the materiality
In determining materiality, we made the
following significant judgement:
Loss before taxation is considered to be
the most appropriate benchmark for the
group because it is a key performance
indicator used by the Directors to report
to investors on the financial performance
of the group.
Materiality for the current year is higher
than the level that we determined for
the year ended 31 December 2021 as the
losses in the year ended 31 December
2022 are higher.
In determining materiality, we made the
following significant judgement:
Total assets is considered to be the most
appropriate benchmark for the parent company
because the parent company’s principal activity
is that of a holding company.
Materiality for the current year is lower than the
level that we determined for the year ended 31
December 2021 despite having used a higher
percentage against the benchmark. A higher
percentage was used as there have been no
changes to the operations of the Group and no
new significant developments. The decrease in
materiality is due to reduced total asset values
of the parent company for the year ending 31
December 2022.
PERFORMANCE
MATERIALITY USED TO
DRIVE THE EXTENT OF
OUR TESTING
We set performance materiality at an amount less than materiality for the financial statements
as a whole to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for the financial statements
as a whole.
Performance materiality
threshold
£474,000 which is 75% of financial
statement materiality.
£150,000 which is 75% of financial statement
materiality.
Significant judgements
made by auditor
in determining the
performance materiality
SPECIFIC MATERIALITY
In determining materiality, we made the
following significant judgements: our risk
assessment identified a strong internal
control environment and no significant
issues were identified in the prior year
that would have an impact on the current
year audit.
In determining materiality, we made the
following significant judgements: our risk
assessment identified a strong internal control
environment and no significant issues were
identified in the prior year that would have an
impact on the current year audit.
We determine specific materiality for one or more particular classes of transactions, account
balances or disclosures for which misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Specific materiality
We determined a lower level of specific
materiality for the following areas:
We determined a lower level of specific
materiality for the following areas:
COMMUNICATION OF
MISSTATEMENTS TO THE
AUDIT COMMITTEE
Threshold for
communication
Directors’ remuneration.
Directors’ remuneration
We determine a threshold for reporting unadjusted differences to the audit committee.
£31,600 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£10,000 and misstatements below that
threshold that, in our view, warrant reporting on
qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
Overall materiality – Group
Overall materiality – Parent company
Loss before tax
£8.43m
FSM
£632k, 7.5%
PM
£474k, 75%
TFPUM
£158k, 25%
Total assets
£10m
FSM
£200k, 2%
PM
£150k, 75%
TFPUM
£50k, 25%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected
misstatements
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
We performed a risk-based audit that requires an understanding of the
group’s and the parent company’s business and in particular matters
related to:
Understanding the group, its components, and their environments,
including group-wide controls
— The engagement team obtained an understanding of the group,
its environment and risk profile, including group-wide controls, and
assessed the risks of material misstatement at the group level. We
considered the structure of the group, its processes and controls
and the industries in which the components operate; and
— We obtained an understanding of the relevant processes and
controls that were operating in relation to the significant risks
identified above.
092
093
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
Identifying significant components
OTHER INFORMATION
— In order to address the risks identified, the engagement team
performed an evaluation of identified components to assess their
significance and to determine the planned audit response based
on a measure of materiality, calculated by considering the
component’s significance as a percentage of the group’s total
assets, revenue and loss before tax.
Type of work to be performed on financial information of parent and
other components (including how it addressed the key audit matters)
— There is only one company in the group that is individually
financially significant, Xeros Limited, based on the total assets,
revenue and loss before tax of the entity.
— Xeros Limited contributed £5.9m (79%) to the group’s loss before
tax and £2.1m (26%) to the group’s assets and therefore required
an audit of their financial information (full scope audit).
The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report
thereon. The directors are responsible for the other information contained
within the annual report. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial
statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information,
we are required to report that fact.
— The parent company, Xeros Technology Group Plc, was determined
We have nothing to report in this regard.
by the engagement team to not be individually financially
significant as the majority of Xeros Technology Group plc
transactions are intra-group transactions. There are no external
revenues in the parent company, nor group significant risks. As
such, the audit of the parent company was conducted specifically
on certain classes of transactions, account balances and
disclosures, including cash, shareholder’s equity, and director’s
remuneration, to reduce the risk of material misstatement in the
group financial statements to an acceptable level. This is a change
in approach to the prior year when the parent company was
considered to be individually financially significant.
— We performed analytical procedures at a group level over the
remaining component, Xeros Inc. These procedures, together with
the additional procedures outlined above, performed at the group
level gave us the audit evidence we needed for our opinion on the
group financial statements as a whole.
All audit work has been undertaken by the group engagement team
OUR OPINION ON OTHER MATTERS PRESCRIBED BY THE
COMPANIES ACT 2006 IS UNMODIFIED
In our opinion, based on the work undertaken in the course of the audit:
— the information given in the strategic report and the directors’
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
— the strategic report and the directors’ report have been prepared
in accordance with applicable legal requirements.
MATTER ON WHICH WE ARE REQUIRED TO REPORT UNDER THE
COMPANIES ACT 2006
In the light of the knowledge and understanding of the group and the
parent company and their environment obtained in the course of the audit,
we have not identified material misstatements in the strategic report or
the directors’ report.
094
095
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY
EXCEPTION
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL
STATEMENTS
We have nothing to report in respect of the following matters in relation
to which the Companies Act 2006 requires us to report to you if, in our
opinion:
— adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
— the parent company financial statements are not in agreement
with the accounting records and returns; or
— certain disclosures of directors’ remuneration specified by law are
not made; or
— we have not received all the information and explanations we
require for our audit.
RESPONSIBILITIES OF DIRECTORS FOR THE FINANCIAL
STATEMENTS
As explained more fully in the directors’ responsibilities statement set out
on page 81, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary
to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group’s and the parent company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis
of these financial statements.
Irregularities, including fraud, are instances of non-compliance with
laws and regulations. The extent to which our procedures are capable
of detecting irregularities, including fraud, is detailed below:
— We obtained an understanding of the legal and regulatory
frameworks applicable to the group and parent company, and the
industry in which it operates. This was achieved through inquiries
with management and a review of board minutes and papers
provided to the Audit Committee. We determined that the
following laws and regulations were most significant; UK-adopted
international accounting standards, United Kingdom Generally
Accepted Accounting Practice, Companies Act 2006 and the
Alternative Investment Market rules. In addition, we concluded
that there are certain laws and regulations that may have effect on
the determination of the amount and disclosures in the financial
statements including the Data Protection Act and Employment
Law and those laws and regulations that relate to health and
safety;
— We obtained an understanding of how the parent company and
the group is complying with those legal and regulatory frameworks
by making inquiries of management and those responsible for
legal and compliance procedures. We corroborated our inquiries
through our review of board minutes and papers provided to the
Audit Committee;
096
097
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the company
and the company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
MARK OVERFIELD, BSC FCA
SENIOR STATUTORY AUDITOR
FOR AND ON BEHALF OF GRANT THORNTON UK LLP
STATUTORY AUDITOR, CHARTERED ACCOUNTANTS
LEEDS
17 APRIL 2023
— We enquired of management whether there were any instances of
non-compliance with laws and regulations or whether they had any
knowledge of actual, suspected fraud. We corroborated the results
of our enquiries to supporting documentation such as board
minutes reviews and papers provided to the Audit Committee.
From the procedures performed we did not identify any material
matters relating to non-compliance with laws and regulation or
matters in relation to fraud;
— These audit procedures were designed to provide reasonable
assurance that the financial statements were free from fraud or
error. The risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from
error and detecting irregularities that result from fraud is
inherently more difficult than detecting those that result from
error, as fraud may involve collusion, deliberate concealment,
forgery or intentional misrepresentations. Also, the further
removed non-compliance with laws and regulations is from events
and transactions reflected in the financial statements, the less
likely we would become aware of it;
— The engagement partner has assessed the appropriateness of the
collective competence and capabilities of the engagement team,
including consideration of the engagement team’s knowledge and
understanding of the industry in which the group and parent
company operate, and its practical experience through training and
participation with audit engagements of a similar nature. All team
members are considered to have sufficient knowledge and
experience of companies of a similar size and complexity,
appropriate to their role within the team;
— Team communications in respect of potential non-compliance
with laws and regulations and fraud included the potential for
fraud in revenue recognition and
— We obtained an understanding of the group’s operations, including
the nature of its revenue sources, expected financial statements
disclosures and business risks that may result in a risk of material
misstatement; and the group’s control environment including the
adequacy of procedures for authorisation of transactions.
098
099
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 04
FINANCIAL
STATEMENTS
0100
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
0101
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 CONSOLIDATED STATEMENT
OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
CONTINUING OPERATIONS
REVENUE
Cost of sales
GROSS PROFIT/(LOSS)
Administrative expenses
ADJUSTED EBITDA*
Share-based payment credit/(expense)
Depreciation of tangible fixed assets
OPERATING LOSS
Net finance income
LOSS BEFORE TAX
Taxation
LOSS AFTER TAX FROM CONTINUING OPERATIONS
Loss from discontinued operations
LOSS FOR THE PERIOD
OTHER COMPREHENSIVE (EXPENSE)/INCOME:
Items that are or may be reclassified to profit or loss:
Foreign currency translation differences - foreign operations
TOTAL COMPREHENSIVE EXPENSE FOR THE PERIOD
LOSS PER SHARE
Basic and diluted on loss from continuing operations
Basic and diuted on total loss for the period
NOTES
YEAR ENDED
31 DECEMBER 2022
YEAR ENDED
31 DECEMBER 2021
£’000
£’000
3
-
-
6
-
21
10
-
7
-
8
-
7
-
-
-
9
9
164
(80)
84
(7,518)
(7,368)
79
(145)
(7,434)
(14)
(7,448)
515
(6,933)
-
(6,933)
(3)
(6,936)
(14.29)p
(14.29)p
474
(193)
(281)
(7,225)
(6,281)
(463)
(200)
(6,944)
14
(6,930)
492
(6,438)
-
(6,438)
(1)
(6,439)
(28.11)p
(28.11)p
* Adjusted EBITDA comprises loss on ordinary activities before interest, tax, share-based payment expense, warrant expense depreciation and amortisation.
0102
0103
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
SHARE
CAPITAL
SHARE
PREMIUM
DEFERRED
SHARE
CAPITAL
WARRANT
RESERVE
MERGER
RESERVE
FOR THE YEAR ENDED 31 DECEMBER 2022
£’000
£’000
£’000
£’000
£’000
FOREIGN
CURRENCY
TRANSLATION
RESERVE
£’000
RETAINED
EARNINGS
DEFICIT
TOTAL
£’000
£’000
BALANCE AT 31 DECEMBER 2020
2,997
113,073
Loss for the year
Other comprehensive income
Loss and total comprehensive expense for the period
Transactions with owners, recorded directly in equity:
Issue of shares following placing and open offer
Excercise of share options
Costs of share issues
Share-based payment expense
Total contributions by and distributions to owners
AT 31 DECEMBER 2021
Loss for the year
Other comprehensive expense
Loss and total comprehensive expense for the year
Transactions with owners, recorded directly in equity:
Change in nominal value of ordinary shares
Issue of shares following placing and open offer
Costs of share issues
Warrant expense
Share-based payment expense
-
-
-
562
9
-
-
571
3,568
-
-
-
(3,544)
127
-
-
-
-
-
-
8,438
32
(525)
-
7,945
121,018
-
-
-
-
6,234
(539)
947
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,544
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(947)
-
Total contributions by and distributions to owners
(3,417)
6,642
3,544
(947)
15,443
(2,205)
(124,786)
4,522
-
-
-
-
-
-
-
-
-
(1)
(1)
-
-
-
-
-
(6,438)
(6,438)
-
(1)
(6,438)
(6,439)
-
-
-
463
463
9,000
41
(525)
463
8,979
15,443
(2,206)
(130,761)
7,062
-
-
-
-
-
-
-
-
-
-
(3)
(3)
-
-
-
-
-
-
(6,933)
(6,933)
-
(3)
(6,933)
(6,936)
-
-
-
-
(79)
(79)
-
6,361
(539)
-
(79)
5,743
AT 31 DECEMBER 2022
151
127,660
3,544
(947)
15,443
(2,209)
(137,773)
5,869
0104
0105
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
NOTES
31 DECEMBER 2022
AT
31
DECEMBER
2022
£’000
AT
31
DECEMBER
2021
£’000
NOTES
AT
31
DECEMBER
2022
£’000
AT
31
DECEMBER
2021
£’000
EQUITY
Share capital
Share premium
Deferred share capital
Warrant reserve
Merger reserve
Foreign currency translation reserve
Accumulated losses
TOTAL EQUITY
18
18
18
18
18
19
19
151
3,568
127,660
121,018
3,544
(947)
-
-
15,443
15,443
(2,209)
(2,206)
(137,773)
(130,761)
5,869
7,062
Approved by the board of Directors and authorised for issue on 17 April 2023.
Klaas de Boer
Chairman
Company number: 08684474
Neil Austin
Chief Execuitve Officer
ASSETS
Non-current assets
Property, plant and equipment
Right of use assets
Trade and other receivables
TOTAL NON-CURRENT ASSETS
Current assets
Inventories
Trade and other receivables
Cash on deposit
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Right-of-use liabilities
Deferred tax
TOTAL NON-CURRENT LIABILITIES
Current liabilities
10
10
12
11
12
13
14
16
17
104
717
6
827
164
387
4
6,465
7,020
7,847
114
14
30
158
108
346
5,323
2,483
8,260
8,418
(624)
(38)
(662)
-
(38)
(38)
Trade and other payables
16
(1,316)
(1,318)
TOTAL CURRENT LIABILITIES
(1,316)
(1,318)
TOTAL LIABILITIES
NET ASSETS
(1,978)
(1,356)
5,869
7,062
0106
0107
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
CONSOLIDATED STATEMENT
OF CASH FLOWS
NOTES
FOR THE YEAR ENDED
31 DECEMBER 2022
OPERATING ACTIVITIES
Loss before tax
Adjustment for non-cash items:
Depreciation of property, plant and equipment
Share-based payment
Increase in inventories
Increase / (decrease) in trade and other receivables
(Increase) / decrease in trade and other payables
Finance income
Finance expense
Cash used in operations
Tax receipts
10
21
11
12
16
7
7
8
YEAR ENDED
31
DECEMBER
2022
£’000
YEAR ENDED
31
DECEMBER
2021
£’000
(7,448)
(6,930)
145
(79)
(56)
(15)
(46)
(16)
30
200
463
(12)
161
(184)
(17)
3
(7,485)
(6,316)
515
492
Net cash outflow from operations
(6,970)
(5,824)
NOTES
YEAR ENDED
31
DECEMBER
2022
£’000
YEAR ENDED
31
DECEMBER
2021
£’000
INVESTING ACTIVITIES
Finance income
Finance expense
Purchases of property, plant and equipment
Cash placed on/ (removed from) deposit
Net cash inflow/(outflow) from investing activities
7
7
10
13
FINANCING ACTIVITIES
Proceeds from issue of share capital, net of costs
18
Payment of lease liabilities
Net cash inflow from financing activities
Increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at start of year/period
Effect of exchange rate fluctuations on cash held
CASH AND CASH EQUIVALENTS
AT END OF YEAR
14
15
(30)
(63)
5,319
5,241
5,821
(113)
5,708
3,979
2,483
3
6,465
17
(3)
(56)
(5,323)
(5,365)
8,515
-
8,515
(2,674)
5,158
(1)
2,483
0108
0109
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
1) BASIS OF PREPARATION
Xeros Technology Group plc is a public limited
company domiciled in the United Kingdom. The
financial statements of Xeros Technology Group
plc are audited consolidated financial statements
for the year ended 31 December 2022. These
include comparatives for the year ended 31
December 2021. The level of rounding for
financial information is to the nearest thousand
pounds.
The Company’s registered office is Unit
2, Evolution, Advanced Manufacturing Park,
Whittle Way, Catcliffe, Rotherham, S60 5BL.
The consolidated financial statements
have been prepared under the historical cost
convention in accordance with UK-adopted
international accounting standards.
The cost of an acquisition is measured
as the fair value of the assets given, equity
instruments issued and liabilities incurred or
assumed at the date of exchange. Acquisition
costs are expensed as incurred. Identifiable
assets acquired and liabilities and contingent
liabilities assumed in a business combination are
measured initially at their fair values at the
acquisition date. The excess of the cost of
acquisition over the fair value of the Group’s
share of the identifiable net assets acquired is
recorded as goodwill. If the cost of the
acquisition is less than the fair value of net
assets of the subsidiary acquired, the difference
is recognised directly in the income statement.
All intragroup balances and transactions,
including unrealised profits arising from
intragroup transactions, are eliminated fully on
consolidation.
Business combinations and basis
of consolidation
Going Concern
Subsidiaries are all entities (including structured
entities) over which the Group has control. The
Group controls an entity when the Group is
exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability
to affect those returns through its power over
the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to
the Group and are deconsolidated from the date
control ceases.
Intercompany transactions, balances and
unrealised gains and losses on transactions
between Group companies are eliminated.
Where the acquisition is treated as a
business combination, the purchase method of
accounting is used to account for the acquisition
of subsidiaries by the Group.
At 31 December 2022, the Group had £6.5m of
cash and cash equivalents. At this stage in its
development the Group incurs operating cash
outflows and is reliant on existing cash
resources. During September 2022, the Group
completed an equity placing and open offer
which provided £6.3m before fees, which also
included the issue of warrants which, if exercised,
would provide a further £6.3m. The Directors
consider that the Group’s existing cash resources
provide the Group with sufficient cash to meet
its obligations as they fall due for least twelve
months following the date of this report, with
some changes to discretionary expenditure, if
necessary. The Directors also believe that these
financial resources, alongside the Group’s
existing and anticipated customer contracts,
provide the Group with a platform to reach cash
breakeven in the latter part of 2024. While the
Group actively manages key customer
stakeholders where appropriate, the revenue
0110
generated by these contracts is reliant on the
actions of third parties and there remains risk
that progress is not forthcoming in the
timeframes anticipated by the Directors. Should
there be significant delays in the receipt of this
revenue, the Group’s existing cash balance may
not be sufficient to support the Group’s
expenditure until the point the Group generates
sufficient revenue to reach cash breakeven. The
Directors expect that the Group will incur
operating cash outflows during the 12 months
following the signing of this report.
The Directors consider that they have
options in place that may allow them to reach
this breakeven point, including existing and
potential commercial agreements and further
restrictions on discretionary spending. Given the
lack of certainty around these scenarios, the
Directors consider the Group’s current funding
positions constitutes a material uncertainty as to
the going concern status of the Group, as, in the
absence of significant customer revenue, the
Group’s cash resources will run out. The
Directors also believe, however, that they have
sufficient options in place in order to allow the
Group to continue trading in the short and
medium term. Therefore, after making enquiries
and considering the uncertainties as described
above, the Directors have a reasonable
expectation that the Group has and will have
adequate resources to continue in operational
existence for the foreseeable future. For these
reasons, they continue to adopt the going basis
of accounting in preparing this financial
information.
The Group is subject to a number of
risks, including those as set out in the strategic
report on pages 53-58. These risks include the
global macro-economic conditions, particularly in
the global markets in which the Group and its
partners operate. The going concern assessment
as carried out by the Directors has taken the
impact of these into account as far as possible.
While this inclusion does not change the
assessment of the Directors in respect of going
concern, the Group remains reliant on the
progress of international licence partners in
order for it to execute the commercialisation
strategy.
When making their going concern
assessment the Directors assess available and
committed funds against all non-discretionary
expenditure, and related cash flows, as forecast
for the period ended 31 March 2024 These
forecasts indicate that the Group is able to settle
its liabilities as they fall due in the forecast
period. In these forecasts the Directors have
considered appropriate sensitivities, including
the progress of the Group’s commercial
contracts. Accordingly, the Directors continue to
believe that the going concern assumption is
appropriate for the Group and the financial
statements have been prepared on that basis.
Note 15 to this financial information
includes the Group’s objectives, policies and
processes for managing its capital, its financial
risk management objectives, details of its
financial instruments and its exposure to credit,
liquidity and market risk. The Directors have
considered their obligation, in relation to the
assessment of the going concern of the Group
and each statutory entity within it and have
reviewed the current budget cash forecasts and
assumptions as well as the main risk factors
facing the Group.
2) SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied are set
out below.
REVENUE RECOGNITION
Licence revenue
When the Group receives payments in the form
of upfront payments or technology fees, the
Group assesses those payments against the
contracts in accordance with the provisions of
IFRS 15, and allocates the revenue against the
performance obligations accordingly.
Where licence revenue is based on sales
of equipment by the licensee, the Group
recognises revenue at the time of that sale.
Sale of goods
Where the Group sells either equipment or
consumables to a customer directly, revenue is
recognised when the product in question is
delivered to the customer, and, if required, any
installation or setup of the equipment has been
performed.
Service contracts
Where the Group has a service contract in place,
revenue is recognised in line with the profile of
the delivery of the service to the customer on an
outputs basis.
0111
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 Linked contracts
When the Group sells equipment, services and
consumables in a package under a single
contract, the Group assess the contract against
the five steps of IFRS 15. This process includes
the assessment of the performance obligations
within the contract and the allocation of contract
revenue across these performance obligations
once identified. Revenue is allocated according
to the value of consideration expected to be
received for the transfer of the relevant goods or
services to the customer. This consideration is
calculated on an inputs basis using cost data
and an appropriate margin.
Revenue is shown net of Value Added
Tax or Sales Tax as appropriate.
The difference between the amount of
income recognised and the amount invoiced on a
particular contract is included in the statement
of financial position as deferred income.
Amounts included in deferred income due within
one year are expected to be recognised within
one year and are included within current
liabilities.
FOREIGN CURRENCIES
The individual financial statements of each group
entity are presented in the currency of the
primary economic environment in which the
entity operates (its functional currency). For the
purposes of the consolidated financial
statements, the results and the financial position
of each group entity are expressed in pounds
sterling, which is the functional currency of the
Company and the presentational currency for the
consolidated financial statements.
In preparing the financial statements of
the individual entities, transactions in currencies
other than the entity’s functional currency
(foreign currencies) are recorded at the rates of
exchange prevailing at the dates of the
transactions. At each balance sheet date,
monetary items denominated in foreign
currencies are retranslated at the rates prevailing
at the balance sheet date. Non-monetary items
carried at fair value that are denominated in
foreign currencies are retranslated at the rates
prevailing at the date when the fair value was
determined.
Non-monetary items that are measured
in terms of historical cost in foreign currency are
not retranslated.
0112
The assets and liabilities of foreign
operations are translated using exchange rates
at the balance sheet date. The components of
shareholders’ equity are started at historical
value. An average exchange rate for the period is
used to translate the results and cash flows of
foreign operations.
Exchange differences arising on
translating the results and net assets of foreign
operations are taken to the translation reserve in
equity until the disposal of the investment. The
gain or loss in the statement of profit or loss and
other comprehensive income on the disposal of
foreign operations includes the release of the
translation reserve relating to the operation that
is being sold.
EXCEPTIONAL ITEMS
One-off items with a material effect on results
are disclosed separately on the face of the
Consolidated Statement of Profit and Loss and
Other Comprehensive Income. The Directors
apply judgement in assessing the particular
items which, by virtue of their scale and nature,
should be classified as exceptional items. The
Directors consider that separate disclosure of
these items is relevant to an understanding of
the Group’s financial performance.
RESEARCH AND DEVELOPMENT
Expenditure on research activities is recognised
as an expense in the period in which it is
incurred. Development costs are only capitalised
when the related products meet the recognition
criteria of an internally generated intangible
asset, the key criteria being as follows:
— it is probable that the future economic
benefits that are attributable to the asset
will flow to the Group;
— the project is technically and
commercially feasible;
— the Group intends to and has sufficient
resources to complete the project;
— the Group has the ability to use or sell
the asset; and
— the cost of the asset can be measured
reliably.
Such intangible assets are amortised on
a straight-line basis from the point at which the
assets are ready for use over the period of the
expected benefit and are reviewed for an
indication of impairment at each reporting date.
Other development costs are charged against
profit or loss as incurred since the criteria for
their recognition as an asset are not met.
The costs of an internally generated
intangible asset comprise all directly attributable
costs necessary to create, produce and prepare
the asset to be capable of operating in the
manner intended by management. Directly
attributable costs include employee costs
incurred on technical development, testing and
certification, materials consumed and any
relevant third-party cost. The costs of internally
generated developments are recognised as
intangible assets and are subsequently
measured in the same way as externally acquired
intangible assets.
However, until completion of the
development project, the assets are subject to
impairment testing only.
No development costs to date have been
capitalised as intangible assets as it was deemed
that the probability of future economic benefit
was uncertain at the time the costs were
incurred.
LEASES
As a lessee
Where the Group enters a new contract, the
Group considers whether this contract is, or
contains, a lease. A lease is defined as “a
contract, or part of a contract, that conveys the
right to use an asset for a period of time in
exchange for consideration”. To apply this
definition, the Group assesses whether the
contract meets three key evaluations, which are
whether:
— the contract contains an identified asset,
which is either explicitly identified in the
contract or implicitly specified by being
identified at the time the asset is made
available to the Group;
— the Group has the right to obtain
substantially all of the economic
benefits from use of the identified
asset throughout the period of use,
considering its rights within the defined
scope of the contract; and
— the Group has the right to direct the use
of the identified asset throughout the
period of use.
Measurement and recognition of leases as a
lessee
At the lease commencement date, the
Group recognises a right-of-use asset and a
lease liability in the statement of financial
position. The right-of-use asset is measured at
cost, which is made up of the initial
measurement of the lease liability, any initial
direct costs incurred by the Group, an estimate
of any costs to dismantle and remove the asset
at the end of the lease, and any lease payments
made in advance of the lease commencement
date (net of any incentives received).
The Group depreciates the right-of-use
assets on a straight-line basis from the lease
commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end
of the lease term. The Group also assesses the
right-of-use asset for impairment when such
indicators exist.
At the lease commencement date, the
Group measures the lease liability at the present
value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the
lease if that rate is readily available, of the
Group’s incremental borrowing rate.
Lease payments included in the
measurement of the lease liability are made up
of fixed payments, variable payments based on
an index or rate, amounts expected to be payable
under a residual guarantee and payments arising
from options reasonably certain to be exercised.
Subsequent to initial measurement, the
liability will be reduced for payments made and
increased for interest. It is remeasured to reflect
any reassessment or modification, or if there are
changes in in-substance fixed payments.
When the lease liability is remeasured,
the corresponding adjustment is reflected in the
right-of-use asset, or profit and loss if the
right-of-use asset is already reduced to zero.
The Group has elected to account for
short-term leases and leases of low-value assets
using the practical expedients. Instead of
recognising a right-of-use asset and lease
liability, the payments in relation to these are
recognised as an expense in profit or loss on a
straight-line basis over the lease term.
On the statement of financial position,
right-of-use assets are shown separately and are
0113
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 included in property, plant and equipment notes
for disclosure purposes. Lease liabilities are
shown separately.
As a lessor
If the Group transfers substantially all
the risks and benefits of ownership of the asset,
a receivable is recognised for the initial direct
costs of the lease and the present value of the
minimum lease payments. As payments fall due,
finance income is recognised in the income
statement so as to achieve a constant rate of
return on the remaining net investment in the
lease.
ACCOUNTING STANDARDS AND
INTERPRETATIONS NOT APPLIED
At the date of authorisation of these financial
statements, the following IFRSs, IASs and
Interpretations were in issue but not yet
effective. Their adoption is not expected to have
a material effect on the financial statements
unless otherwise indicated:
Amendments to IFRS 17 - 1 January 2023
Amendments to IAS 12 - 1 January 2023
Amendments to IAS 1 - 1 January 2023
Amendments to IAS 8 - 1 January 2023
INTANGIBLE ASSETS AND GOODWILL
— Software - 3 years
Amortisation methods, useful lives and
residual values are reviewed at each reporting
date and adjusted if appropriate. Assets
considered to have indefinite useful economic
lives, such as goodwill, are tested annually for
impairment.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost
less accumulated depreciation and any
impairment losses. Cost includes the original
purchase price of the asset and the costs
attributable to bringing the asset to its working
condition for its intended use. Depreciation is
charged so as to write off the costs of assets
over their estimated useful lives, on the following
basis:
Leasehold improvements
- over the term of the lease on a straight-line
basis
Plant and machinery
- 20% on cost on a straight-line basis
Fixtures and fittings
- 20% on cost on a straight-line basis
Computer equipment
- 33% on cost on a straight-line basis
Vehicles
- 20% on cost on a straight-line basis
Recognition and measurement
The gain or loss arising from the disposal
Goodwill arising on the acquisition of
subsidiaries is measured at cost less
accumulated impairment losses.
Other intangible assets, including
customer relationships and brands, that are
acquired by the Group and have finite useful lives
are measured at cost less accumulated
amortisation and any accumulated impairment
losses.
Amortisation
Amortisation is calculated to write off the cost of
intangible assets less their estimated residual
values using the straight-line method over their
estimated useful lives and is generally
recognised in profit or loss. Goodwill is not
amortised. The estimated useful lives for current
and comparative periods are as follows:
— Customer lists - 5 years
— Brands - 5 years
0114
of an asset is determined as the difference
between the sales proceeds and the carrying
amount of the asset, and is recognised in the
statement of profit or loss and other
comprehensive income.
IMPAIRMENT OF NON-CURRENT
ASSETS
For the purposes of assessing impairment,
assets are grouped at the lowest levels for which
there are separately identifiable cash flows
(cash-generating units). As a result, some assets
are tested individually for impairment and some
are tested at cash-generating unit level. Goodwill
is allocated to those cash-generating units that
are expected to benefit from synergies of the
related business combination and represent the
lowest level at which management monitors
goodwill. Cash-generating units to which
goodwill has been allocated are tested for
impairment at least annually. All other individual
assets or cash-generating units are tested for
impairment whenever events or changes in
circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is
recognised for the amount by which the assets
or cash-generating unit’s carrying amount
exceeds its recoverable amount. The recoverable
amount is the higher of fair value, reflecting
market conditions less costs to sell, and value in
use based on an internal discounted cash flow
evaluation.
INVENTORIES
Inventories are valued at the lower of cost and
net realisable value. Cost incurred in bringing
each product to its present location and
condition is accounted for as follows:
Raw materials, work in progress and
finished goods – purchase cost on a first-in,
first-out basis.
Net realisable value is the estimated
selling price in the ordinary course of business.
CASH ON DEPOSIT
Bank deposits where maturity is greater than
three months from the date of investment, the
Group cannot access the funds prior to the
maturity date and the Group is not relying on the
funds to meet its short-term operating
requirements are disclosed as cash on deposit.
SHARE-BASED PAYMENTS
Certain employees and consultants (including
Directors and senior executives) of the Group
receive remuneration in the form of share-based
payment transactions, whereby employees
render services as consideration for equity
instruments (“equity-settled transactions”). This
policy applies to all schemes, including the
Deferred Annual Bonus scheme open to certain
management personnel.
The cost of equity-settled transactions
with employees is measured by reference to the
fair value at the date on which they are granted.
The fair value is determined by using an
appropriate pricing model. The cost of equity-
settled transactions is recognised, together with
a corresponding increase in equity, over the
period in which the performance and/or service
conditions are fulfilled, ending on the date on
which the relevant employees become fully
entitled to the award (“the vesting date”). The
cumulative expense recognised for equity-
settled transactions at each reporting date until
the vesting date reflects the extent to which the
vesting period has expired and the Group’s best
estimate of the number of equity instruments
that will ultimately vest. The profit or loss charge
or credit for a period represents the movement in
cumulative expense recognised as at the
beginning and end of that period.
No expense is recognised for awards
that do not ultimately vest, except for awards
where vesting is conditional upon a market
condition, which are treated as vesting
irrespective of whether or not the market
condition is satisfied, provided that all other
performance and/or service conditions are
satisfied. Where the terms of an equity-settled
award are modified, the minimum expense
recognised is the expense as if the terms had not
been modified. An additional expense is
recognised for any modification, which increases
the total fair value of the share-based payment
arrangement or is otherwise beneficial to the
employee as measured at the date of
modification.
Where an equity-settled award is
cancelled, it is treated as if it had vested on the
date of cancellation and any expense not yet
recognised for the award is recognised
immediately. However, if a new award is
substituted for the cancelled award and
designated as a replacement award on the date
that it is granted, the cancelled and new awards
are treated as if they were a modification of the
original award, as described in the previous
paragraph. The dilutive effect of outstanding
options is reflected as additional share dilution in
the computation of earnings per share.
WARRANTS
The cost of equity-settled transactions with
shareholders, in the form of warrants, is
measured by reference to the fair value on the
date on which they are granted. The fair value is
determined by using an appropriate pricing
model. The warrant charge is recognised over the
vesting period of the warrants, if appropriate.
Where warrants are issued to shareholders in
their capacity as such, the warrant charge is
recognised directly in equity.
0115
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
FURLOUGH CREDITS
Where the Group has claimed a credit in respect
of employees furloughed in accordance with the
relevant government support schemes, the
credit is recognised in the statement of profit or
loss and other comprehensive income in the
period to which the credit relates and is netted
off against staff costs.
FINANCIAL ASSETS AND LIABILITIES
Financial assets and financial liabilities are
recognised in the consolidated statement of
financial position when the Group becomes party
to the contractual provisions of the instrument.
Financial assets are derecognised when the
contractual rights to the cash flows from the
financial asset expire or when the contractual
rights to those assets are transferred. Financial
liabilities are derecognised when the obligation
specified in the contract is discharged, cancelled
or expired.
Financial assets, other than those
designated and effective as hedging instruments,
are classified into the following categories:
— amortised cost
— fair value through profit or loss (FVTPL)
— fair value through other comprehensive
income (FVOCI).
In the periods presented, the Group does
not have any financial assets categorised as
FVTPL or FVOCI.
After initial recognition, these are
measured at amortised cost using the effective
interest rate method. Discounting is omitted
where the effect is immaterial. All of the Group’s
financial assets and financial liabilities fall into
this category.
Trade receivables
Trade receivables are recognised initially at fair
value and subsequently measured at amortised
cost less expected credit losses. Appropriate
provisions for estimated irrecoverable amounts
are recognised in the statement of profit or loss
and other comprehensive income when there is
objective evidence that the assets are impaired.
Cash and cash equivalents
Cash and cash equivalents comprise cash on
hand, demand deposits, and other short-term
0116
highly liquid investments that are readily
convertible to a known amount of cash and are
subject to an insignificant risk of changes in
value.
Equity instruments
An equity instrument is any contract that
evidences a residual interest in the assets of an
entity after deducting all of its liabilities. Equity
instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
Trade and other payables
Trade payables are initially measured at their fair
value and are subsequently measured at their
amortised cost using the effective interest rate
method; this method allocates interest expense
over the relevant period by applying the “effective
interest rate” to the carrying amount of the
liability.
Impairment of financial assets
The Group accounts for impairment of financial
assets using the expected credit loss model as
required by IFRS 9. The Group considers a broad
range of information when assessing credit risk
and measuring expected credit losses, including
past events, current conditions, reasonable and
supportable forecasts that affect the expected
collectability of the future cash flows of the
instrument.
TAXATION
The tax expense/(credit) represents the sum of
the tax currently payable or recoverable and the
movement in deferred tax assets and liabilities.
Current tax is based upon taxable profit/
(loss) for the year. Taxable profit/(loss) differs
from net profit/(loss) as reported in the
statement of profit or loss and other
comprehensive income because it excludes
items of income or expense that are taxable or
deductible in other years and it further excludes
items that are never taxable or deductible.
The Group’s liability for current tax is
calculated by using tax rates that have been
enacted or substantively enacted by the
reporting date.
Credit is taken in the accounting period
for research and development tax credits, which
have been claimed from HM Revenue and
Customs, in respect of qualifying research and
development costs incurred. Research and
development tax credits are recognised on an
accruals basis with reference to the level of
certainty regarding acceptance of the claims by
HMRC. The Group accounts for R&D tax credits
as an investment tax credit accounted for on a
flow through basis – R&D tax credits, while
investment tax credits, are not considered to be
substantially different from other tax credits and
they are recognised when the conditions
required to receive the credit are met and they
are claimed on the Group’s tax return.
Deferred tax is calculated at the tax rates
that are expected to apply to the period when the
asset is realised or the liability is settled based
upon tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax is charged or credited in the
statement of profit or loss and other
comprehensive income, except when it relates to
items credited or charged directly to equity, in
which case the deferred tax is also dealt with in
equity.
Deferred tax is the tax expected to be
payable or recoverable on differences between
the carrying amounts of assets and liabilities in
the financial statements and the corresponding
tax bases used in the computation of taxable
profit and is accounted for using the liability
method. Deferred tax liabilities are generally
recognised for all taxable temporary differences
and deferred tax assets are recognised to the
extent that it is probable that taxable profits will
be available, against which deductible temporary
differences can be utilised. Such assets and
liabilities are not recognised if the temporary
difference arises from goodwill or from the initial
recognition (other than in a business
combination) of other assets and liabilities in a
transaction that affects neither the profit nor the
accounting period.
The carrying amount of deferred tax
assets is reviewed at each reporting date and
reduced to the extent that it is no longer
probable that sufficient taxable profits will be
available to allow all or part of the asset to be
recovered.
DISPOSAL GROUPS AND
DISCONTINUED OPERATIONS
Non-current assets (or disposal groups) are
classified as held for sale if their carrying amount
will be recovered principally through a sale
transaction rather than through continuing use
and a sale is considered highly probable. They
are measured at the lower of their carrying
amount and fair value less costs to sell, except
for assets such as deferred tax assets, assets
arising from employee benefits, financial assets
and investment property that are carried at fair
value and contractual rights under insurance
contracts, which are specifically exempt from
this requirement.
An impairment loss is recognised for any
initial or subsequent write-down of the asset (or
disposal group) to fair value less costs to sell. A
gain is recognised for any subsequent increases
in fair value less costs to sell of an asset (or
disposal group), but not in excess of any
cumulative impairment loss previously
recognised. A gain or loss not previously
recognised by the date of the sale of the
non-current asset (or disposal group) is
recognised at the date of derecognition.
Non-current assets (including those that
are part of a disposal group) are not depreciated
or amortised while they are classified as held for
sale. Interest and other expenses attributable to
the liabilities of a disposal group classified as
held for sale continue to be recognised.
Non-current assets classified as held for
sale and the assets of a disposal group classified
as held for sale are presented separately from
the other assets in the balance sheet. The
liabilities of a disposal group classified as held
for sale are presented separately from other
liabilities in the balance sheet.
A discontinued operation is a component
of the entity that has been disposed of or is
classified as held for sale and that represents a
separate major line of business or geographical
area of operations, is part of a single co-
ordinated plan to dispose of such a line of
business or area of operations, or is a subsidiary
acquired exclusively with a view to resale. The
results of discontinued operations are presented
separately in the statement of profit or loss.
CRITICAL ACCOUNTING ESTIMATES
AND AREAS OF JUDGEMENT
Estimates and judgements are continually
evaluated and are based on historical experience
and other factors, including expectations of
future events that are believed to be reasonable
under the circumstances. Actual results may
differ from these estimates. The estimates and
assumptions that have the most significant
0117
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
effects on the carrying amounts of the assets
and liabilities in the financial information are
discussed below. The point listed below is
considered to be an area of judgement.
Research and development costs
Careful judgement by the Directors is applied
when deciding whether the recognition
requirements for capitalising development costs
have been met. This is necessary as the
economic success of any product development
is uncertain and may be subject to future
technical problems. Judgements are based on
the information available at each reporting date
which includes the progress with testing and
certification and progress on, for example,
establishment of commercial arrangements with
third parties. Specifically, the Directors consider
production scale evidence of commercial
operation of the Group’s technology. In addition,
all internal activities related to research and
development of new products are continuously
monitored by the Directors. To date, no
development costs have been capitalised.
Recognition of revenue from and the
loan issued to ESTR Ltd
The Directors apply judgement in respect of the
relationship that the Group holds with ESTR Ltd.
The Group has an outstanding loan owed by
ESTR Ltd, against which the Group recorded an
expected credit loss in accordance with IFRS 9 in
a prior period. The Directors review this loan on
at least an annual basis and apply judgement as
to the recoverability or otherwise of the loan. At
the date of this report, the Directors believe there
remains significant doubt regarding the
recoverability of this loan and therefore the
expected credit loss remains in place.
In addition, the Group has a technology licence
with the same entity. The Directors consider the
revenue recognition with respect to this licence
against the criteria of IFRS 15 and assess at
which point the revenue receivable under this
licence is to be recognised. The licence contains
minimum annual royalty payments for the
duration of the licence, and under IFRS 15, given
the Group’s performance obligations under the
contract, these minimum royalty payments could
meet the criteria for recognition. However, given
the commercial circumstances, the Directors
consider that payment of these minimum
royalties is not probable and future contractual
revenue is not recognised.
0118
3) SEGMENTAL REPORTING
The financial information by segment detailed
below is frequently reviewed by the Chief
Executive Officer, who has been identified as the
Chief Operating Decision Maker (“CODM”). The
Group’s transition to a licensing organisation has
led to a change to how the results of the Group
are reviewed internally. The results are no longer
split by segment but are reviewed in terms of the
type of revenue. As such, the analysis below
does not split the Group’s results into separate
operating segments and instead reports results
as one single segment.
4) LOSS FROM OPERATIONS
Loss from operations is stated
after charging to administrative
expenses:
Foreign exchange losses
Depreciation of plant and equipment (note 12)
Operating lease rentals – land and buildings
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
16
145
42
7
200
42
Staff costs (excluding share-based payment charge)
4,009
3,711
An analysis of revenues by type is set out below:
Research and development
837
316
Year ended
31 December
2022 £’000
Year ended
31 December
2021 £’000
Sale of goods
Rendering of services
Licensing revenue
Total
18
82
64
164
160
190
124
474
The Group’s largest customer was
responsible for 31% of Group revenue in the year
to 31 December 2022.
During the year ended 31 December 2021
the Group’s largest customer was responsible for
19% of Group revenue.
An analysis of revenues by geographic
location of customers is set out below:
Year ended
31 December
2022 £’000
Year ended
31 December
2021 £’000
Europe
North America
Rest of the World
Total
120
31
13
164
271
61
142
474
An analysis of non-current assets by
location is set out below:
Year ended
31 December
2022 £’000
Year ended
31 December
2021 £’000
Europe
North America
Total
821
-
821
158
-
158
Auditor’s remuneration
Audit of these financial statements
Audit of financial statements of subsidiaries
Audit related assurance services
Total auditor’s remuneration
5) STAFF NUMBERS AND COSTS
The average monthly number of persons (including
Directors) employed by the Group during the year was:
Directors
Operational staff
Total
38
30
5
73
24
23
4
51
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
6
41
47
6
40
46
The aggregate remuneration, including Directors, comprised:
Wages and salaries
3,446
3,278
Social security costs
Pension contributions
Share-based payment (credit) / expense (note 21)
Furlough credit
Total costs
Directors’ remuneration comprised:
Emoluments for qualifying services
438
132
(79)
-
335
88
463
(15)
3,938
4,149
857
744
Directors’ emoluments disclosed above include £405,000 paid to the highest paid director (year ended 31 December 2021: £335,000). There are
no pension benefits for Directors. Please see Directors’ remuneration report on pages [68 to71] for further information on Directors’ emoluments.
0119
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 On 18 March 2023 it was announced that Mark Nichols would step down from his role as CEO. He
subsequently resigned from the Board, with effect from 1 August 2022. Remuneration for Mark in-
cludes £71,000 in respect of payment in lieu of contractual notice and £71,000 as a severance pay-
ment.
Performance criteria in respect of options issued to Mark Nichols in 2020, 2021 and 2022 were waived
and these options remain capable of exercise for a further three and half years from Mark’s leaving
date. All other options were cancelled on the date of his departure, leaving him with 415,246 options.
6) EXPENSES BY NATURE
The administrative expenses charge by nature is as follows:
Year ended 31
December 2022
Year ended
31 December 2021
£’000
£’000
Staff costs, recruitment and other HR
Share-based payment (credit)/expense
Premises and establishment costs
Research and development costs
Patent and IP costs
Legal, professional and consultancy fees
IT, telecoms and office costs
Depreciation charge
Travelling, subsistence and entertaining
Advertising, conferences and exhibitions
Bad debt expense
Other expenses
Foreign exchange losses/(gains)
Furlough credit
4,221
(79)
157
259
687
1,088
265
145
329
360
64
6
16
-
Total administrative expenses
7,518
3,908
463
150
316
476
910
213
200
124
299
161
13
7
(15)
7,225
7) NET FINANCE INCOME
Bank interest receivable
Finance expense in relation to right-of-use assets
Finance income from lease receivables
Net finance income
8) TAXATION
Tax on loss on ordinary activities
Current tax:
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
13
(30)
3
(14)
12
(3)
5
14
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
UK Tax credits received in respect of prior periods
(517)
(505)
Foreign taxes paid
Deferred tax:
2
13
(515)
(492)
Origination and reversal of temporary timing differences
-
-
Tax credit on loss on ordinary activities
(515)
(492)
0120
0121
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
The credit for the year/period can be reconciled to the loss before tax per
the statement of profit or loss and other comprehensive income as follows:
Factors affecting the current tax charges
The tax assessed for the year varies from the main company rate
of corporation tax as explained below:
The tax assessed for the period varies from the main
company rate of corporation tax as explained below:
Loss on ordinary activities before tax
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
(7,448)
(6,929)
Tax at the standard rate of corporation tax 19% (2021: 19%)
(1,415)
(1,317)
Effects of:
Expenses not deductible for tax purposes
(15)
88
9) LOSS PER SHARE (BASIC AND DILUTED)
Basic loss per share is calculated by dividing the loss attributable to equity holders of the parent
by the weighted average number of ordinary shares in issue during the year. Diluted loss per share
is calculated by adjusting the weighted average number of ordinary shares in issue during the period
to assume conversion of all dilutive potential ordinary shares.
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
Total loss from continuing operations
(6,933)
(6,438)
Total loss from discontinued operations
-
-
Total loss attributable to the equity holders of the parent
(6,933)
(6,438)
Weighted average number of
ordinary shares in issue during the year
Loss per share
No.
48,526,649
No.
22,898,879
Research and development tax credits receivable
(517)
(505)
Basic and diluted on loss from continuing operations
(14.29)p
(28.11)p
Unutilised tax losses for which no deferred tax asset is recognised
1,430
1,229
Basic and diluted on loss from discontinued operations
-
-p
Employee share acquisition adjustment
Foreign taxes paid
Tax credit for the year/period
-
2
-
13
(515)
(492)
The Group accounts for Research and Development tax credits where there is certainty regarding
HMRC approval. The Group has received a tax credit in respect of the year ended 31 December 2021.
There is no certainty regarding the claim for the year ended 31 December 2022 and as such no
relevant credit or asset is recognised.
Basic and diluted on total loss for the year
(14.29)p
(28.11)p
The weighted average number of shares in issue throughout the period is as follows.
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
Issued ordinary shares at 1 January 2022/1 January 2021
23,784,483
19,976,090
Effect of shares issued for cash
24,742,166
2,922,789
Weighted average number of shares at 31 December
48,526,649
22,898,879
The Company has issued employee options over 10,852,514 (31 December 2021: 2,087,895) ordinary
shares which are potentially dilutive. There is, however, no dilutive effect of these issued options as
there is a loss for each of the periods concerned.
The share options in issue were amended in the year following the Group’s share capital
reorganisation. Options over ordinary shares of 15p were amended to be options over ordinary shares
of 0.1p and over deferred shares of 14.9p. There was no impact on the share option numbers or charge
as a result of this change.
0122
0123
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 10) PROPERTY, PLANT AND EQUIPMENT
11) INVENTORIES
31 December
2022
£’000
31 December
2021
£’000
Right-of-
use assets
£’000
Leasehold
improve-
ments
£’000
Plant and
equipment
Computer
equipment
£’000
£’000
Fixtures
and
fittings
£’000
177
548
273
19
-
97
37
-
-
-
548
292
134
29
-
1
-
32
-
775
577
293
165
Disposals
(177)
COST
As at 31
December 2020
Additions
Disposals
As at
31 December 2021
Additions
At 31
December 2022
DEPRECIATION
At 31 December
2020
Charge for the
year
Disposals
At 31 December
2021
Charge for the
year
-
-
177
775
54
-
163
72
109
439
194
87
-
43
-
526
236
24
-
31
-
87
12
-
99
17
-
Disposals
(177)
At 31
December 2022
NET BOOK VALUE
At 31
December 2022
At 31
December 2021
At 31
December 2020
57
550
267
116
718
14
68
27
22
109
26
55
79
49
35
10
All the right-of-use assets relate to land and buildings.
48
-
-
48
-
-
48
42
4
-
47
1
-
48
1
2
6
Total
£’000
1,443
56
(328)
1,199
837
(177)
1,859
871
200
-
1,071
145
(177)
1,038
821
128
272
Finished goods
164
108
In the year ended 31 December 2022, changes in finished goods recognised as cost of sales
amounted to £11,000 (year ended 31 December 2021: £27,000).
12) TRADE AND OTHER RECEIVABLES
31 December
2022
£’000
31 December
2021
£’000
Due within 12 months
Trade debtors
Other receivables
Prepayments and accrued income
Due after more than 12 months
Other receivables
24
134
229
387
6
110
63
173
346
30
There is no material difference between the lease receivables amounts included in other receivables
noted above, the minimum lease payments or gross investment in the lease as defined by IFRS 16.
The minimum lease payment is receivable as follows:
Not later than one year
Later than one year not later than five years
Total
25
6
31
35
30
65
Contractual payment terms with the Group’s customers are typically 30 to 60 days. The Directors
considered the carrying value of trade receivables at 31 December 2020 and made a provision of
£55,000 (31 December 2021: £90,000) for potential impairment losses arising from balances which
were considered to be past due. The Directors believe that the carrying value of trade and other
receivables represents their fair value. In determining the recoverability of trade receivables the
Directors consider any change in the credit quality of the receivable from the date credit was granted
up to the reporting date. For details on credit risk management policies, refer to note 15.
Other receivables of £6,000 (31 December 2021: £30,000) due after more than one year
comprise the long-term portion of finance leases where the Group acts as lessor.
0124
0125
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
13) CASH ON DEPOSIT
Bank deposits maturing between 3 and 12 months
31 December
2022
£’000
31 December
2021
£’000
4
4
5,323
5,323
At 31 December 2022, the Group held £4,000 (2021: £5,323,000) in 95 day deposit accounts.
This balance is denominated in pound sterling (£). The Directors consider that the carrying value
of cash and cash equivalents approximates to their fair value. For details of credit risk management,
see note 15.
14) CASH AND CASH EQUIVALENTS
A+
A
BBB+
Held outside banking institutions
Cash and cash equivalents
31 December
2022
£’000
31 December
2021
£’000
6,449
7
7
2
1,427
1,005
49
2
6,465
2,483
The above has been split by the Fitch rating system and gives an analysis of the long-term credit
rating of the financial institutions where cash balances are held.
All of the Group’s cash and cash equivalents at 31 December 2022 are at floating interest rates.
Balances are denominated in UK sterling (£), US dollars ($) and euros (€) as follows:
31 December
2022
£’000
31 December
2021
£’000
Denominated in pound sterling
6,430
2,323
Denominated in US dollars
Denominated in euros
Cash and cash equivalents
13
22
52
108
6,465
2,483
The Directors consider that the carrying value of cash and cash equivalents approximates to their fair
value. For details of credit risk management policies, refer to note 15.
15) FINANCIAL INSTRUMENTS
The Group’s principal financial instruments comprise short-term receivables and payables, and cash
and cash equivalents. The Group does not trade in financial instruments but uses derivative financial
instruments in the form of forward foreign currency contracts to help manage its foreign currency
exposure and to enable the Group to manage its working capital requirements.
(a) Fair Values of Financial Assets and Financial Liabilities
Derivative Financial Instruments – Fair Value Hierarchy
The following hierarchy classifies each class of financial asset or liability depending on the valuation
technique applied in determining its fair value:
— Level 1: The fair value is calculated based on quoted prices traded in active markets for
identical assets or liabilities.
— Level 2: The fair value is based on inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly or indirectly. The fair value of a financial
instrument is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date.
— Level 3: The fair value is based on inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The Group considers any forward foreign exchange contracts to be Level 2 in the fair value
hierarchy should it enter into any. The Group has not entered into any such contracts in either the
current or the prior year. There have been no transfers between categories in the current or preceding
year. The fair value of financial instruments held at fair value have been determined based on available
market information at the balance sheet date.
(b)
Credit risk
Financial Risk Management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial
instrument fails to meet its contractual obligations.
The Group is exposed to credit risk in respect of trade and lease receivable balances such
that, if one or more customers or a counterparty to a financial instrument encounters financial
difficulties, this could materially and adversely affect the Group’s financial results. The Group attempts
to mitigate credit risk by assessing the credit rating of new customers and financial counterparties
prior to entering into contracts and by entering into contracts with customers on agreed credit terms.
The Group is potentially exposed to credit risk in respect of its cash, both bank deposits and
cash held on deposit, in the event of failure of the respective banks. The Group attempts to mitigate
this risk through ongoing monitoring of the credit ratings of those banks. Further details are set out in
note 16. At 31 December 2022, the Directors were not aware of any factors affecting the recoverability
of the Group’s bank balances.
Exposure to Credit Risk
At 31 December 2022, the Group had gross trade receivables outstanding of £79,000 (2021:
£182,000). The Directors have considered the recoverability of outstanding balances at 31 December
2022 and have made provisions for bad and doubtful debts amounting to £55,000 (2021: £72,000).
The Group had gross lease receivable balances outstanding of £79,000 (2021: £109,000) and provision
in place in respect of these lease receivables of £50,000 (2021: £45,000).
0126
0127
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 The concentration of credit risk for trade and other receivables and lease receivables at the balance
sheet date by geographic region was:
31 December
2022
£’000
31 December
2021
£’000
392
1
393
372
4
376
United Kingdom
United States of America
(c) Liquidity Risk
Financial Risk Management
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will
encounter difficulty in meeting its future obligations as they fall due. The Group’s policy is to ensure
that it will always have sufficient cash to allow it to meet its liabilities when they become due.
To achieve this aim, it seeks to maintain cash balances to meet its expected cash requirements.
The following are the contractual maturities of financial liabilities:
Non-derivative financial liabilities
31 December
2022
£’000
31 December
2021
£’000
585
458
624
1,209
-
458
Due within one year
Trade and other payables
Due after one year
Right of use liabilities
Total
(d) Market Risk
Financial Risk Management
Market risk is the risk that changes in market prices, such as interest rates or foreign exchange rates,
will affect the Group’s income. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters. Market interest rate risk arises from the Group’s
holding of cash and cash equivalent balances and from cash held on term deposit accounts (see
notes 13 and 14. The Board makes ad hoc decisions at its regular Board meetings, as to whether to
hold funds in instant access accounts or longer-term deposits. All accounts are held with reputable
banks. These policies are considered to be appropriate to the current stage of development of the
Group and will be kept under review in future years.
Foreign Currency Risk
The Group is exposed to currency risk on sales and purchases and cash held in bank accounts that
are denominated in a currency other than the respective functional currencies of Group entities,
primarily pound sterling (GBP), US dollars (USD) and the euro (EUR). The Group’s policy is to reduce
currency exposure on sales and purchasing through forward foreign currency contracts where
appropriate.
The Group had no forward currency contracts in place as at either 31 December 2022
or 31 December 2021.
The Group’s overall exposure to foreign currency risk is as follows. This is based on the carrying
amount for monetary financial instruments.
At 31 December 2022
Sterling
US Dollar
Euro
£’000
£’000
£’000
Chinese
Yuan
£’000
Cash and cash equivalents
6,426
13
Cash on deposit
4
Trade and other receivables
378
-
5
Trade and other payables
(1,769)
(173)
Balance sheet exposure
5,039
(155)
22
-
10
3
35
-
-
-
(1)
(1)
Total
£’000
6,461
4
393
(1,940)
4,918
Net exposure
-
(155)
4
(1)
(152)
At 31 December 2021
Sterling
US Dollar
Euro
£’000
£’000
£’000
Chinese
Yuan
£’000
Cash and cash equivalents
2,323
Cash on deposit
5,323
Trade and other receivables
323
52
-
10
Trade and other payables
(1,182)
(85)
107
-
44
2
Balance sheet exposure
6,787
(23)
153
-
-
-
(2)
(2)
Total
£’000
2,482
5,323
377
(1,267)
6,915
Net exposure
-
(23)
153
(2)
128
0128
0129
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 Sensitivity Analysis
A 10% weakening of the following currencies against the pound sterling at 31 December 2021 would
have increased equity and profit or loss by the amounts shown below. The calculation assumes that
the change occurred at the balance sheet date and had been applied to the risk exposure existing at
that date.
This analysis assumes that all other variables, in particular, other exchange rates and interest
rates remain constant. The analysis is performed on the same basis for the period ended 31 December
2020.
Based on the Group’s above balances at 31 December 2022, if interest rates had been 5%
higher, then the impact on the results for the year would be a reduction in the loss for the period of
approximately £323,000 with a corresponding increase in the Group’s net assets. If the interest rate
had reduced to 0%, there would have been no effect on the reported loss or on the Group’s net assets.
(e) Capital Management
The Group’s capital is made up of share capital, share premium and retained losses, totalling
£5,869,000 at 31 December 2022 (31 December 2021: £7,062,000).
Equity
Profit or Loss
The Group’s objectives when managing capital are:
31 December
2022
£’000
31 December
2021
£’000
31 December
2022
£’000
31 December
2021
£’000
US Dollars
Euros
(4)
-
(2)
(15)
(4)
-
(2)
(15)
— to safeguard the entity’s ability to continue as a going concern, so that it can provide returns
for shareholders and benefits for other stakeholders; and
— to provide an adequate return to shareholders by pricing products and services
commensurately with the level of risk.
The capital structure of the Group consists of shareholders’ equity as set out in the
consolidated statement of changes in equity. All working capital requirements are financed from
existing cash resources. There are no externally imposed capital requirements. Financing decisions
are made by the Board of Directors based on forecasts of the expected timing and level of capital and
operating expenditure required to meet the Group’s commitments and development plans.
A 10% strengthening of the above currencies against the pound sterling at 31 December 2021
would have had the equal but opposite effect on the above currencies to the amounts shown above
on the basis that all other variables remain constant.
16) TRADE AND OTHER PAYABLES
Interest Rate Risk
At the balance sheet date, the interest rate profile of the Group’s interest-bearing financial
instruments was:
FIXED RATE INSTRUMENTS
Financial assets
Financial liabilities
VARIABLE RATE INSTRUMENTS
Financial assets - cash
Financial liabilities
31 December
2022
£’000
31 December
2021
£’000
4
-
4
5,323
-
5,323
6,465
2,482
-
-
6,465
2,482
Trade payables
Taxes and social security
Other creditors
Accruals and deferred income
Right-of-use liabilities
Current
Non-current, comprising right-of-use liabilities
31 December
2022
£’000
31 December
2021
£’000
528
98
33
600
57
439
110
38
661
19
1,316
1,267
1,316
624
1,940
1,267
-
1,267
0130
0131
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 Trade payables, split by the currency they will be settled in are shown below:
18) SHARE CAPITAL AND WARRANTS
Sterling
US dollars
Euros
Chinese yuan renminbi
Trade payables
31 December
2022
£’000
31 December
2021
£’000
405
125
(3)
1
528
398
41
(2)
2
439
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing
costs. They are non-interest bearing and are normally settled on 30 to 45 day terms. The Directors
consider that the carrying value of trade and other payables approximate their fair value. The Group
has financial risk management policies in place to ensure that all payables are paid within the relevant
credit timeframe and no interest has been charged by any suppliers as a result of late payment of
invoices during the period.
17) DEFERRED TAX
31 December
2022
£’000
31 December
2021
£’000
Accelerated depreciation for tax purposes
Deferred tax credit/(expense) for the period
38
-
38
-
At beginning of year
Tax expense
At end of year
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
38
-
38
38
-
38
As at 31 December 2022, the Group had unrecognised deferred tax assets totalling approximately
£13,642,000 (31 December 2021: £12,664,000), which primarily relate to losses and the IFRS 2 share-
based payment charge. The Group has not recognised this as an asset in the Statement of Financial
Position due to the uncertainty in the timing of its crystallisation.
Number
Share
capital
£’000
Share
premium
£’000
Deferred
share
capital
£’000
Merger
reserve
£’000
Total
£’000
19,976,090
2,997
113,073
15,443
131,513
Total ordinary shares of 15p
each as at 31 December 2020
Issue of ordinary shares
following placing and open
offer
3,749,919
562
8,438
Issue of ordinary shares on
exercise of share options
58,474
Costs of share issues
-
9
-
32
(525)
-
-
-
9,000
41
(525)
Total ordinary shares of 15p
each as at 31 December 2021
23,784,483
3,568
121,018
15,443
140,029
Change in nominal value of
ordinary shares
-
(3,544)
-
3,544
Issue of ordinary shares
following placing and open
offer
127,195,640
127
6,233
Costs of share issues
-
-
(418)
-
-
-
9,000
6,360
(418)
Total Ordinary shares of 15p
each as at 31 December 2022
150,980,123
151
126,833
3,544
15,443
145,971
The Group undertook a share capital reorganisation exercise during the year ended 31 December 2022,
splitting the ordinary shares with a nominal value of 15p into ordinary shares of 0.1p and deferred
shares of 14.9p. The new deferred shares have no significant rights attached to them and carry no right
to vote or participate in distribution of surplus assets and have not been admitted to trading on the
AIM market of the London Stock Exchange plc, nor will they in the future. Accordingly, deferred shares
are excluded from the calculation of earnings per share in note 9.
Total deferred shares of 14.9p each as at 31 December 2020
Total deferred shares of 14.9p each as at 31 December 2021
Issue of deferred shares as part of share capital reorganisation
Total deferred shares of 0.149p each as at 31 December 2022
Number
-
-
23,784,483
23,784,483
0132
0133
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 As permitted by the provisions of the Companies Act 2006, the Company does not have an upper
limit to its authorised share capital.
The following is a summary of the changes in the issued share capital of the Company during
the period ended 31 December 2022:
I The Group underwent a share capital reorganisation during the period, with the Group’s
ordinary shares of 15p being split into two classes of shares, ordinary shares of 0.1p and
deferred shares of 14.9p.
II 127,195,640 ordinary shares of 0.1p per share were allotted at a price of 5p per share, for total
cash consideration of £6,360,000 upon the placing and open offer of the Company’s shares
in October 2022.
At 31 December 2022, the Company had two classes of share, being ordinary shares of 0.1p each and
deferred shares of 14.9p each.
The Group’s Share Capital reserve represents the nominal value of the ordinary shares
in issue. The Group’s Share Premium Reserve represents the premium the Group received on issue
if its shares. The Group’s Deferred Share Capital reserve represents the nominal value of the deferred
shares in issue. The Merger Reserve arose on the combination of companies within the Group prior
to the flotation on AIM.
19) MOVEMENT IN ACCUMULATED LOSSES AND FOREIGN CURRENCY TRANSLATION RESERVE
Accumulated
losses
£’000
Foreign currency
translation reserve
£’000
AT 31 DECEMBER 2020
(124,786)
(2,206)
Loss for the period
Other comprehensive expense – Foreign currency
translation differences – foreign operation
Shared based payment charge
(6,438)
-
463
-
(1)
-
AT 31 DECEMBER 2021
(130,761)
(2,206)
As part of the placing completed in October 2022 the Group issued warrants to purchase
Loss for the year
ordinary shares of 0.1p for a fixed fee of 5p per share.
Other comprehensive expense – Foreign currency
translation differences – foreign operation
Number of warrants
Weighted average
exercise price (p)
Weighted average
contractual life (years)
Shared based payment charge
(6,933)
-
(79)
-
(3)
-
At 31 December 2020
At 31 December 2021
-
-
Issued in the period
127,195,640
At 31 December 2022
127,195,640
-
-
5
5
-
-
1.5
1.5
AT 31 DECEMBER 2022
(137,773)
(2,209)
The Group’s accumulated losses reserve represents the accumulation of losses of the Group since
inception. The foreign currency translation reserve represents the cumulative differences recognised
on the translation of the net assets of the Group’s overseas subsidiaries.
20) LEASES
The Group has leases for office buildings and associated warehousing and operational space. With
the exception of short-term leases and leases of low-value underlying assets, each lease is reflected
on the balance sheet as a right-of-use asset and a lease liability. The Group classifies its right-of-use
assets in a consistent manner to its property, plant and equipment (see note 12).
Leases of buildings end within ten years. Lease payments are generally fixed.
Each lease generally imposes a restriction that, unless there is a contractual right for the
Group to sublet the asset to another party, the right-of-use asset can only be used by the Group.
Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee.
Some leases contain an option to extend the lease for a further term. The Group is prohibited from
selling or pledging the underlying leased assets as security. For leases over office buildings and
factory premises, the Group must keep those properties in a good state of repair and return the
properties in their original condition at the end of the lease. Further, the Group must insure items
of property, plant and equipment and incur maintenance fees on such items in accordance with
the lease contracts.
0134
0135
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 The table below describes the nature of the Group’s leasing activities by type of right-of-use
There is one lease with a termination option and no leases with extension options.
asset recognised on the balance sheet:
Right-of-use asset
No. of right-
of-use assets
leased
Remaining
range of term
Average
remaining
lease term
No. of
leases with
termination
options
Land and buildings
1
112 months
112 months
1
Right-of-use assets
Additional information on the right-of-use assets by class is as follows:
Land and buildings
Balances as at 31 December 2020
Depreciation charged in the year
Disposals in the year
Foreign exchange differences
Balance as at 31 December 2021
Additions in the year
Depreciation charged in the year
Balance as at 31 December 2022
Lease liabilities
Lease liabilities are presented in the statement of financial position as follows:
£’000
68
(54)
-
-
14
775
(72)
718
31 December
2022
£’000
31 December
2021
£’000
57
624
681
19
-
19
Current
Non-current
0136
The lease liabilities are secured by the related underlying assets. The undiscounted maturity analysis
of the lease liabilities at 31 December 2022 is as follows:
Within
1 year
1-2 years
2-3 years
3-4 years
5+ years
Total
Lease payments
(92)
Finance charges
35
Net present value
(57)
(92)
31
(61)
(92)
27
(65)
(92)
23
(69)
(483)
(851)
54
170
(429)
(681)
Lease payments not recognised as a liability
The Group has elected not to recognise a liability for short-term leases (12 months or less) or for
leases of low-value assets. Payments made under such leases are expensed on a straight-line basis.
The expense relating to payments not included in the measurement of the lease liability is as follows:
Short term leases
£’000
42
42
At 31 December 2022 the Group was committed to short-term leases and the total commitment
at that date was £9,000 (2021: £21,000).
0137
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 21) SHARE BASED PAYMENTS
Share options
The Company has share option plans (The Xeros Technology Group plc Unapproved Share Option
Scheme and The Xeros Technology Group plc Enterprise Management Incentive Share Option
Scheme) under which it grants options over ordinary shares to certain Directors, employees and
consultants of the Group. Options under these plans are exercisable at a range of exercise prices
ranging from the nominal value of the Company’s shares to the market price of the Company’s shares
on the date of the grant. The vesting period for shares is usually over a period of three years. The
options are settled in equity once exercised. If the options remain unexercised for a period after
10 years from the date of grant, the options expire. Options are forfeited if the employee leaves the
Group before the options vest. Options issued in 2019, 2020 and 2021 have vesting conditions based
upon the share price meeting certain targets.
The number and weighted average exercise prices of share options are as follows:
EMI
options
Unapproved options
Deferred Annual Bonus plan
Total
Weighted average exercise
price per share (£)
AT 31 DECEMBER 2020
1,257,013
Granted in the period
Exercised in the year
Forfeited/lapsed in the year
AT 31 DECEMBER 2021
Granted in the period
593,450
(52,664)
(42,017)
1,755,792
6,510,356
Forfeited/lapsed in the period
(347,234)
AT 31 DECEMBER 2022
7,918,914
190,256
149,007
(5,810)
(1,395)
332,058
2,841,858
(240,361)
2,933,555
45
-
-
-
45
-
-
45
1,447,324
742,457
(58,474)
(43,412)
2,087,895
9,352,214
(587,595)
10,852,514
7.501
1.750
(0.700)
(2,931)
5.620
(4.560)
(0.518)
0.543
There were 500,853 share options outstanding at 31 December 2022 which were eligible
to be exercised. The remaining options were not eligible to be exercised as these are subject to
employment period and/or market-based vesting conditions, some of which had not been met at
31 December 2022. Options have a range of exercise prices from 5 pence per share to 30,500 pence
per share and have a weighted average contractual life of 8.87 years (31 December 2021: 8.48 years).
0138
0139
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 Options granted
in the period
EMI options
granted in
January
2022
Unapproved
options
granted in
January
2022
EMI
options
granted in
July
2022
Unapproved
options
granted in
November
2022
EMI
Options
granted in
November
2022
22) RELATED PARTY TRANSACTIONS
During the year, the Group entered into transactions, in the ordinary course of business, with other
related parties. Those transactions with Directors are disclosed below. Transactions entered into,
along with trading balances outstanding at each period end with other related parties, are as follows:
Dividend yield
0%
0%
0%
0%
0%
Expected volatility*
30.00%
30.00%
30.00%
30.00%
30.00%
Risk free interest rate (%)
1.25%
1.25%
2.08%
3.29%
3.29%
Expected vesting life of
options (years)
4.5
4.5
4.5
4.5
Share price (pence)
93.5
93.5
43.5
5.0
4.5
5.0
Fair value of an option
(pence per share)
0.25
0.25
0.12
0.02
0.02
* Expected volatility is based upon the Company’s historical share price.
Any share options which are not exercised within 10 years from the date of grant will expire.
A credit/(charge) has been recognised in the consolidated statement of profit or loss and other
comprehensive income for each period as follows:
Related
party
Relationship
IP Group
plc
Fund manager
for certain
shareholders
(note)
Purchases
from related
party
31 December
2022
£000
Amounts owed
to related party
31 December
2022
£000
Purchases
from related
party
31 December
2021
£000
35
4
30
Amounts owed
to related party
31 December
2021
£000
13
Note: IP Group plc provide the services of David Baynes, who was a director of the Company until 31 December 2022,
and invoice the Group for related fees. David Baynes was a Director of both the Company and of IP Group plc.
Terms and conditions of transactions with related parties
Purchases between related parties are made on an arm’s length basis. Outstanding balances are
unsecured, interest free and cash settlement is expected within 60 days of invoice.
Transactions with Key Management Personnel
The Company’s key management personnel comprise only the Directors of the Company. During the
period, the Company entered into the following transactions in which the Directors had an interest:
Share options
(79)
463
31 December
2022
£’000
31 December
2021
£’000
Directors’ remuneration:
Remuneration received by the Directors from the Company is set out below. Further detail is provided
within the Directors’ remuneration report:
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
Short-term employment benefits*
857
744
*In addition, certain Directors hold share options in the Company for which a fair value share based charge of £93,000 has been
recognised in the consolidated statement of profit or loss and other comprehensive income (year ended 31 December 2020:
£153,000).
On 18 March 2022 it was announced that Mark Nichols would step down from his role as CEO.
He subsequently resigned from the Board, with effect from 1 August 2022. Remuneration for Mark
includes £71,000 in respect of payment in lieu of contractual notice and £71,000 as a severance
payment.
The highest-paid Director in the year received a total remuneration of £405,000 (year ended
31 December 2021: £335,000). During the year ended 31 December 2022, the Company entered into
numerous transactions with its subsidiary companies which net off on consolidation – these have not
been shown above.
0140
0141
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
Share capital
Share premium
Deferred share
capital
Warrant reserve
Merger reserve
Retained
earnings reserve
£000
£000
£’000
£’000
£000
£000
Total
£000
Attributable to the equity holders of the Company
COMPANY STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
AT 31 DECEMBER 2020
Total expense and other comprehensive loss for the period
Transactions with owners, recorded directly in equity:
Issue of placing shares
Exercise of share options
Costs of share issues
Share based payment expense
Share based payment expense in respect of services
provided to subsidiary undertaking
Total contributions by and distributions to owners
AT 31 DECEMBER 2021
2,997
-
562
9
-
-
-
571
3,568
113,073
-
8,438
32
(525)
-
-
7,945
121,018
Total expense and other comprehensive loss for the period
-
-
Transactions with owners, recorded directly in equity:
Issue of placing and open offer shares
Costs of share issues
127
-
6,234
(539)
Change in nominal value of ordinary shares
(3,544)
-
Warrant expense
Share based payment expense
Share based payment expense in respect of services
provided to subsidiary undertaking
-
-
-
(947)
-
-
Total contributions by and distributions to owners
(3,417)
6,642
AT 31 DECEMBER 2022
127,660
6,625
(82,120)
40,575
(39,759)
(39,759)
-
-
-
-
-
-
-
-
-
-
3,544
-
-
-
3,544
3,544
-
-
-
-
-
-
-
-
-
-
-
(947)
-
-
(947)
(947)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,625
121,416
(10,137)
(10,137)
-
-
-
123
340
463
-
-
-
947
93
(172)
(79)
9,000
41
(525)
123
340
8,979
9,795
6,361
(538)
-
947
93
(172)
5,743
5,401
6,625
(131,632)
0142
0143
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
COMPANY STATEMENT OF
FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER
Notes
At
31 December
2022
Restated At
31 December
2021
£’000
£’000
C5
C6
ASSETS
Non-current assets
Intercompany loan balance
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
C7
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium
Deferred share capital
Warrant reserve
Merger reserve
Retained earnings
TOTAL EQUITY
4,232
9,853
80
5,698
5,778
5,778
9,853
9,853
32
279
311
10,164
(377)
(377)
(369)
(369)
5,401
9,795
20
20
151
3,568
127,660
121,018
3,544
(947)
6,625
-
-
6,625
(131,632)
(121,416)
5,401
9,795
The Company reported a loss for the year ended 31 December 2022 of £10,137,000 (2021: £39,759,000).
The accounting policies and notes on pages [110 to 148] form part of these Financial Statements.
Approved by the Board of Directors and authorised for issue on 17 April 2023.
Klaas de Boer
Chairman
Neil Austin
Chief Executive Officer
Company number: 08684474
0144
C1. Basis of preparation and accounting
policies
Xeros Technology Group plc is registered in
England and Wales as a public limited company.
The address of its registered office is Unit 2,
Evolution, Advanced Manufacturing Park, Whittle
Way, Catcliffe, Rotherham, South Yorkshire, S60
5BL.
The principal activity of Xeros
Technology Group plc (together the “Group”) is
that of a platform technology company that is
transforming water-intensive industrial and
commercial processes. The principal activity of
the Company is that of a holding company.
The separate financial statements of the
Company have been prepared in accordance
with the Financial Reporting Standard 101
“Reduced Disclosure Framework” (FRS 101), on
the going concern basis under the historical cost
convention, and in accordance with the
Companies Act 2006 and applicable Accounting
Standards in the UK. The principal accounting
policies are consistent with those set out in the
financial statements of the Group.
The following exemptions from the
requirements in IFRS have been applied in the
preparation of these financial statements, in
accordance with FRS 101:
— The following paragraphs of IAS 1
“Presentation of Financial Statements”
I 10f Requirement to present a statement
of financial position as at the beginning
of the preceding period in the event of a
retrospective restatement;
II 16 (statement of compliance with all IFRS);
and
III 134–136 (capital management disclosures)
— IFRS 9 “Financial Instruments:
Disclosures”;
— IAS 24 (paragraphs 17 and 18a) “Related
Party Disclosures” (key management
compensation); and
— IAS 24 “Related Party Disclosures” – the
requirement to disclose related party
transactions between two or more
members of a group.
As the Group financial statements
include the equivalent disclosures, the Company
has taken the exemptions available under FRS 101
in respect of the following disclosures:
— A cashflow statement and related notes
— IFRS 2 “Share-Based Payments” in
respect of Group settled equity share-
based payments; and
— Certain disclosures required by IFRS
13 “Fair Value Measurement” and
disclosures required by IFRS 7 “Financial
Instruments: Disclosures”.
Critical accounting estimates and areas
of judgement
Estimates and judgements are continually
evaluated and are based on historical
experiences and other factors, including
expectations of future events that are believed to
be reasonable under the circumstances. Actual
results may differ from these estimates. The
estimates and assumptions that have the most
significant effects on the carrying amounts of
the assets and liabilities in the financial
information are discussed below:
Carrying value of intercompany
loan balances
Xeros Technology Group has previously held
significant balances as investments in
subsidiaries and intercompany loan balances.
The Directors consider the valuation and
recoverability of these balances based on the
potential future cashflows from utilisation of the
Xeros technology. The Directors consider all
available evidence in making their judgements on
the recoverability of these balances, including
both internal and external valuations of the
Group, the likelihood and extent of any Group
funding requirements and the anticipated
timescale to recovery of the balances. During the
year, a provision of £9,626,000 was made
against the outstanding intercompany loans
from Xeros Ltd, reducing the carrying value of
the investment in Xeros Ltd to nil and the
carrying value of the intercompany loans
receivable from Xeros Ltd to £nil. The Group does
not in any case expect the intercompany loans to
be repaid within the next twelve months.
0145
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
C2. Company results
C4. Investment in subsidiary companies
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not
to present the parent company’s statement of profit or loss and other comprehensive income. The
parent company’s result for the year ended 31 December 2022 was a loss of £10,137,000 (year ended
31 December 2021: loss of £39,759,000).
The audit fee for the Company is set out in note 5 of the Group’s financial statements.
C3. Staff numbers and costs
The average monthly number of persons (including directors)
employed by the Group during the year was: Directors
The aggregate remuneration,
including Directors, comprised:
Wages and salaries
Social security costs
Share based expense (note 22)
Directors’ remuneration comprised:
Emoluments for qualifying services
Year ended
31 December
2022
Number
Year ended
31 December
2021
Number
6
6
5
5
£’000
£’000
928
125
132
1,185
857
685
92
123
900
744
Directors’ emoluments disclosed above include £405,000 paid to the highest paid director (Year ended 31 December 2021:
£335,000). There are no pension benefits for directors. Please see Directors’ Remuneration Report on pages [68 to 71]
for further information on directors’ emoluments.
On 18 March 2023 it was announced that Mark Nichols would step down from his role as CEO. He subsequently resigned from
the Board, with effect from 1 August 2022. Remuneration for Mark includes £71,000 in respect of payment in lieu of contractual
notice and £71,000 as a severance payment.
Performance criteria in respect of options issued to Mark Nichols in 2020, 2021 and 2022 were waived and these options
remain capable of exercise for a further three and half years from Mark’s leaving date. All other options were cancelled on the
date of his departure, leaving him with 415,246 options.
At 31 December 2022, the Company held the following investments in subsidiaries;
Undertaking
Sector
Xeros Limited
Xeros Inc*
Research, development and commercialisation of polymer
technology alternatives to traditional aqueous based
technologies
Commercialisation of polymer technology alternatives to
traditional aqueous based technologies
Xeros Environmental
Protection Technology
(Shanghai) Co. Ltd*
* Held through Xeros Limited
Commercialisation of polymer technology alternatives to
traditional aqueous based technologies
Share of issued
capital and voting
rights 2021
100%
100%
100%
Xeros Limited, is incorporated in England and Wales as a private limited company under registered
number 05933013. Its registered office is Unit 2, Evolution, Advanced Manufacturing Park, Whittle
Way, Catcliffe, Rotherham, S60 5BL.
Xeros Inc. is incorporated in Delaware, USA. Its registered office is 195 Dupont Drive, Providence,
Rhode Island, 02907, USA.
Xeros Environmental Protection Technology (Shanghai) Co. Ltd.’s registered office is 15F, HSBC
Building, Pudong, Shanghai, 200120, China.
Cost and net book value
AT 31 DECEMBER 2020
Additions
Impairment
AT 31 DECEMBER 2021
Diminutions
Reversal of impairment
AT 31 DECEMBER 2022
£000
9,513
340
(9,853)
-
(172)
172
-
0146
0147
Additions comprise amounts in respect of the IFRS 2 share-based payment contribution relating
to options granted to employees of the Company’s subsidiaries. Impairment relates to provisions
against the investment in Xeros Ltd as the Directors believe that this amount may not be recoverable.
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
C5. Intercompany loans
31 December
2022
£000
31 December
2021
£000
Intercompany loan
-
9,853
Loans comprise a loan of £nil (31 December 2021: £9,853,000) to Xeros Limited. No interest was
payable on this loan. All intercompany loans are repayable on demand. The expected credit loss
recorded in the year was £4,998,000.
C6. Trade and other receivables
Prepayments
Other debtors
C7. Trade and other payables
Trade payables
Social security and other taxes
Accruals
31 December
2022
£000
31 December
2021
£000
33
47
80
33
(1)
32
31 December
2022
£000
31 December
2021
£000
220
27
130
377
166
28
175
369
0148
0149
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022 DIRECTORS AND OFFICERS
DIRECTORS
Klaas de Boer (Chairman)
Neil Austin (Chief Executive Officer)
COMPANY SECRETARY
Alexander Tristram
David Armfield (Non-Executive Director)
COMPANY WEBSITE
Rachel Nooney (Non-Executive Director)
www.xerostech.com
REGISTERED OFFICE
COMPANY NUMBER
Unit 2 Evolution
Advanced Manufacturing Park
Whittle Way
Catcliffe
Rotherham
S60 5BL
AUDITOR
Grant Thornton UK LLP
No 1 Whitehall Riverside
Leeds
LS1 4BN
NOMINATED ADVISER AND BROKER
finnCap Ltd
1 Bartholomew Close
London
EC1A 7BL
08684474 (England and Wales)
REGISTRAR
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
LEGAL ADVISER
Squire Patton Boggs (UK) LLP
Premier Place
2 & A Half Devonshire Square
London
EC2M 4UJ
0150
0150
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022
0151
XEROS
TECHNOLOGY
SUBJECT:
POLYCOTTON
OBSERVATION:
MIXED POLYMER FIBRES
MAGNIFICATION:
@15.8MM 400X/300ΜM
0152
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2022