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RNS Number : 1752S
Premaitha Health PLC
29 September 2017
 

Premaitha Health PLC

("Premaitha," the "Company" or the "Group")

 

Full year results to 31 March 2017 and half-year trading update

 

Manchester, UK - 29 September 2017: Premaitha (AIM: NIPT), a leading international molecular diagnostics group focused on non-invasive prenatal testing ("NIPT"), announces its full year results for the twelve months ended 31 March 2017; and provides an update on trading performance in the current financial year to date. 

 

Financial highlights

·     Revenues increased by 26% to £3.1m (2016: £2.5m), including one month contribution from Yourgene Bioscience ("Yourgene"), which was acquired in March 2017

Revenues increased by 48% excluding a non-recurring 2016 equipment sale

·     Gross profit increased by 83% to £1.3m (2016: £0.7m)

·     Gross margin improved to 42% (2016: 29%) due to benefits of scale and reduced product costs

·     General administrative expenses increased by 8% to £7.1m (2016: £6.6m), before separately disclosed exceptional items

·     Operating loss reduced by 37% to £7.6m (2016: £12.0m)

·     Cash of £1.3m at 31 March 2017 (31 March 2016: £5.3m)

Additional US$5.0m loan funding secured from Thermo Fisher in July 2017

 

Operational highlights

·     Test volumes increased by 41% to over 24,000 (2016: over 17,000) in second full year since its commercialisation

·     Completed the acquisition of Yourgene in March 2017, a significant provider of NIPT in Asia

Post-period end, in June 2017, Premaitha launched SAGETM, an advanced NIPT analysis solution available through Yourgene, significantly expanding Premaitha's addressable market

·     Successful expansion of geographic footprint, with Premaitha now commanding a significant distribution network across Europe, the Middle East, India and the Far East

·     In July 2017, the legal proceedings in connection with the patent infringement suits filed by Illumina were heard in the English High Court - judgment expected in Q4 2017

·     Genoma SA, Premaitha's Swiss customer, was placed into bankruptcy in May 2017 with an outstanding debt to Premaitha of £0.8m

Premaitha is actively pursuing options to recover the debt or equivalent assets

 

Trading update

·     Six month revenues to 30 September 2017 are expected to be up by approximately 75% to £2.6m (H1 2016: £1.5m)

·     Test volumes for the first half are expected to be in excess of 22,000, demonstrating significant momentum (H1 2016: 11,000 tests; full year to March 2017: 24,000 tests)

First half test volumes, excluding Yourgene, are up 140% to c.15,000 tests (H1 2016: 6,000 tests - excluding Genoma)

·     Continued geographic diversification, significantly reducing the proportion of revenues from regions with intellectual property exposure

Recently announced launch into South Africa and the award of Good Manufacturing Practice in Brazil

·     Strong focus on achieving positive cashflows through sales ramp-up, implementing cost-per-test efficiencies and overhead cost control

 

Adam Reynolds, Non-executive Chairman of Premaitha Health, commented:

 

"I am delighted with the commercial progress made by Premaitha in the last financial year. This is reflected in both growing revenues and increasing test volumes.

 

"The Company is also making significant strides in its geographic and product diversification strategy which we believe will ensure that, whatever the outcome of the UK intellectual property disputes, Premaitha is developing a business that will succeed in what will inevitably become a huge global market for non-invasive prenatal testing.

 

"While the UK litigation remains a distraction, Premaitha's strong technology, growing international commercial footprint, support from Thermo Fisher and dedicated global team, place us extremely well for continued growth. In the current financial year the Company has already delivered some record sales months and has already almost exceeded the total test volumes for the whole of the previous financial year."

 

A copy of the 2017 Annual Report and Accounts has been uploaded to the Company's website at www.premaitha.com

 

For shareholders who have opted to received printed copies of the Annual report and Accounts, these are being posted today. 

 

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

 

For more information, please contact:

 

Premaitha Health PLC
Dr Stephen Little, Chief Executive Officer

Barry Hextall, Chief Financial Officer

Joanne Cross, Head of Marketing

investors@premaitha.com

 

Tel: +44 (0)161 667 1053
 

 

Cairn Financial Advisers LLP (NOMAD)
Liam Murray / James Caithie

Tel: +44 (0)20 7213 0880

finnCap (Broker)

Adrian Hargrave / Scott Mathieson (Corporate Finance)

Tony Quirke (Corporate Broking)

Tel: +44 (0)20 7220 0500

Vigo Communications

Ben Simons / Fiona Henson / Antonia Pollock

premaitha@vigocomms.com

 

Tel: +44 (0)20 7830 9700

 

 

About Premaitha

 

Premaitha is an international molecular diagnostics group which uses the latest advances in DNA analysis technology to develop safer, faster and regulatory approved genetic screening tests. The Group's primary focus is on non-invasive prenatal tests (NIPT) for pregnant women - an emerging, multi-billion dollar global market.

 

Premaitha's IONA® test was launched in 2015 as the first CE-IVD NIPT test in Europe. It enables laboratories and healthcare practitioners to offer a complete CE-marked NIPT system in-house. The IONA® test is performed on a maternal blood sample - which contains traces of fetal DNA - and estimates the risk of a fetus being affected with Down's syndrome or other genetic conditions.

 

Unlike existing prenatal screening methods, due to its high level of accuracy, the IONA® test can significantly reduce the number of women subjected to unnecessary invasive follow up diagnostic procedures, such as amniocentesis, which are costly, resource intensive and carry a risk of miscarriage.

 

In March 2017, Premaitha acquired Yourgene Bioscience, a specialist next generation sequencing and bioinformatics company based in Taiwan, with its own NIPT screening test that operates on the same Thermo Fisher next-generation sequencing platform as Premaitha's IONA® test. Yourgene brings significant benefits to the Group through expanded market access in Asia - the world's fastest growing NIPT market - as well as opportunities for cross-selling and the ability to jointly develop expanded test content both within NIPT and beyond.

 

Premaitha is headquartered in Manchester, England, with Yourgene offices in Taipei and Singapore. Its shares trade on the AIM market of the London Stock Exchange (AIM: NIPT). For further information, please visit www.premaitha.com. Follow us on twitter @PremaithaHealth.

 

Chairman's Statement

 

Premaitha's acquisition of Yourgene in March 2017 has created a leading international molecular diagnostics group of scale. The acquisition was highly complementary and the integration of Yourgene is progressing extremely well. The additional geographic reach of Yourgene opens up new channels to market for Premaitha's products, broadens the range of products available across all regions and adds significant capabilities to the Group.

 

The ongoing intellectual property dispute with Illumina continues to impact our share price and in many respects overshadows the impressive progress the Group is making. The litigation remains a significant  distraction and uncertainty for the business, but we continue to strive to de-risk the Group through international expansion and product diversification, as well as mounting a very strong and multi-faceted defence.

 

Commercial progress

In the last year, the Group has continued to expand its international presence into Asia, the Middle East and Southern Europe, whilst building on its strong bases in the UK and France. We have also focused on developing our product suite, launching the myNIPT® portal and SAGETM prenatal screening solution while we continue to develop the IONA® test. We are making significant strides in leveraging Yourgene's customer base across South East Asia and India to accelerate the Group's growth trajectory.

 

Litigation

The legal context in which we operate continues to be challenging, with Illumina and Sequenom aggressively pursuing market dominance against ourselves, some of our customers and also our competitors. The UK trial has now concluded and we await the Court's ruling in Q4 2017. The EU's Competition Commission is looking closely at Illumina's behaviour and we are confident that their actions will be recognised for their anti-competitive motivation. In September 2017, Illumina filed another similar patent infringement suit in the UK against the IONA® test, in another example of such behaviour. We will continue to build a diverse international group to reduce the impact of these pressures and I would particularly like to thank our legal advisers and the Group's management for their tireless efforts.

 

Financial position

We continue on our journey to becoming profitable and intend to achieve this objective during the current financial year, despite the litigation-related uncertainties described elsewhere in this report. The Company remains encouraged by the significant support and facilities we continue to receive from our shareholders and Thermo Fisher, reinforcing both the Group's strategy and exciting potential. This was demonstrated by our successful fundraisings in both September 2016 and February 2017 enabling us to execute on our strategy.

 

Strategic relationship

The relationship with Thermo Fisher has continued to strengthen throughout the year with effective collaboration on commercial and product development initiatives as well as with the additional funding provided by Thermo Fisher in September 2016 and July 2017. This is testament to our strong mutual interest in creating a successful channel for their next generation sequencing platforms.

 

Board changes

Following the acquisition of Yourgene I am very pleased to welcome Alan Chang and Bill Chang to the Board. Alan is a very experienced international IP lawyer and Bill has been key in building the Yourgene business and developing a strong network of scientific collaborators. 

 

People and science working effectively together

Both the Premaitha and Yourgene teams continue to innovate within the field of clinical genetics, achieving impressive scientific developments and improving services for the pregnant women we support. I would like to thank them all for their continued efforts.

 

Outlook

With our growing scale, Premaitha is now working to extend its footprint, both through the acquisition of new customers and by ensuring existing laboratory customers are successful in their markets to grow demand for both our IONA® and SAGETM products and services.

 

The Asian and Middle Eastern markets offer significant growth opportunities and the Group will be increasingly focused on those regions in the months ahead. Europe and the UK will remain our home markets with steadier progress affected by public policy and legal decisions. Whilst continuing to focus on these core markets, we will remain alert to opportunities in the Americas and for the next wave of products in adjacent sectors to NIPT.

 

The Company does continue to face a number of headwinds, not least the continued unwanted legal attention from Illumina. However, supported by strong technology, a growing international commercial footprint, support from our platform partner and a dedicated global team, I believe we have a very strong foundation from which to continue growing in 2017/18 and beyond.

 

Adam Reynolds

Chairman

28 September 2017

 

CEO Report

 

We have now completed our second full year of trading and I am immensely proud of what we have achieved at Premaitha and at the same time acutely aware of the level of effort we need to maintain to ensure our continued success. As anticipated, prenatal screening has emerged as the single biggest market for DNA testing technologies but with great opportunity comes fierce competition. Premaitha's key strengths are scientific and clinical excellence, a laser focus on the prenatal screening market and an exceptional team of people. Taken together these considerable assets will allow us to prevail in the coming years.

 

Acquisition of Yourgene Bioscience

A key event this financial year has been the acquisition of the Taiwanese genetics company, Yourgene. At the beginning of the year we were competitors fighting for the same accounts but we soon realised that the activities of our companies were complementary and the management teams found it easy to communicate and work together. The Yourgene acquisition has been a great success for both parties. Yourgene has gained access to the class leading IONA® product and Premaitha hasve extended its capabilities in the Asia Pacific region. Furthermore, as both companies share the same technology platform from Thermo Fisher, this has extended the breadth of our relationship with this major corporate supporter.

 

Expanding our geographic footprint

Premaitha is now well established in Europe, the Middle East and Asia and there is a strong pipeline of opportunities in the Americas. A focus of the coming year will be to explore how best to provide the IONA® test in these territories. This is an ongoing project and recently we announced that the Company had been approved for Brazilian Good Manufacturing Practice for the IONA® test by Brazil's regulatory authority ANVISA. Brazil's IVD registration process has a number of strict requirements  to overcome and to have obtained approval is a very positive development for the IONA® test.  The approval also demonstrates the high quality processes we have embedded at Premaitha, and our effective collaboration with Thermo Fisher.

 

Strategy

The strategy of the business remains unchanged - we were established to build in vitro diagnostic products using advanced DNA analysis technologies and this is exactly what we have done. Our first product - the IONA® test (alongside the SageTM test from Yourgene) - is available to laboratories globally and we will continue to grow sales of these products whilst expanding our product range to incorporate new genetic tests and maintaining the highest quality standards.

 

Product development

Both Premaitha and Yourgene were founded on innovation in science and technology and we continue to excel in this area. Our development programmes encompass five related areas all designed to improve and extend the range of products available to our customers. The goals of these programmes are:

·     reducing the costs of the test;

·     extending the breadth of the test;

·     improving the ease of use the test;

·     exploring novel approaches for NIPT; and,

·     developing new products outside of NIPT.

With regards to this latter activity, we have decided to focus in the short term on the reproductive health space and our activities are based around tests to support in vitro fertilisation and pre-conception screening for genetic diseases. We remain interested in applications of our technology in cancer screening but this field has not yet developed beyond the research and discovery phase and we will maintain a watching brief before investing in the best applications in this space.

 

Operations

Key performance indicators (KPIs)

The Board recognises the importance of financial and non-financial KPIs in driving appropriate behaviours and enabling the monitoring of group performance.  For the current financial year the primary KPIs were the number of tests sold or performed in-house, and net cash balances.

 

Tests performed is a direct measure of marketing effectiveness and take-up rates for NIPT, as well as driving revenues and gross profits. In the 2017 reporting period, over 24,000 tests were sold or performed (2016: 17,000 tests), including one month of Yourgene activity.  This is an increase of over 40% in only our second year of trading, due to an expanding customer base.

 

Net cash balances is a combined measure of the Group's ability to drive operating cashflows and manage working capital effectively while continuing to invest in future capabilities and attract appropriate funding into the business.  Cashflows are cyclical and in the reporting period net cash balances reduced to £1.3m at the period end (2016: £5.3m), as we funded business growth and litigation expenses.  We are appreciative of our financial backers for supporting our strategic ambitions and are striving to achieve positive cashflows in the near future.

 

The board continues to monitor business performance closely and will adopt appropriate KPIs to drive commercialisation of the business, and ensure robust financial performance.

 

Geographic footprint

Premaitha is focusing heavily on increasing its revenue-generating capabilities and has significantly expanded its international laboratory customer base and also appointed distributors in many countries across Europe, the Middle East and in Asia.  The core, highly experienced sales team, remains focused on direct sales, and we are working closely with instrumentation and distribution partners to compete effectively with our larger competitors. The acquisition of Yourgene has given us significant technical and commercial capabilities in the fast-growing Asian markets and enables the enlarged group to plan our entry into the key Chinese market as well as further expansion in India.

 

Application support

Our training and application support services are critical to customer laboratories and the feedback has been extremely positive as we endeavour to routinely outperform our competitors.  Delivering great customer service will be vitally important in retaining and growing customers as the NIPT space matures and we believe we have market-leading capabilities in this regard.

 

Clinical service laboratory

The Premaitha clinical service laboratory in Manchester has continued to deliver outstanding service performance to an increasing number of hospitals and doctors in the UK and internationally.  The laboratory back-up service has been invaluable to customers in the process of installing laboratories, experiencing workflow problems, spikes in demand and cover of religious or national holiday periods.  The service laboratory in Taipei offers similar levels of support to its customers and we are integrating the two labs to provide a seamless global offering.

 

Supply chain

Our supply chain and NGS platform partners, coupled with our in-house operational capabilities, have coped well with the scaling up of activities and we are confident there is headroom for significant further growth.

 

 

Dr Stephen Little

Chief Executive Officer

 

Financial Report

 

Income statement

In the trading year, revenues were up 26% at £3,079k (2016: £2,452k), or up 48% after excluding non-recurring equipment revenues from one customer in 2016.  These revenues include one month of Yourgene sales after the acquisition which completed on 2 March 2017.  Gross profit was £1,282k (2016: £701k) representing a gross margin of 42% (2016: 29%) due to scale benefits and product cost reductions.  General administrative expenses of £7,079k (2016: £6,573k) were principally incurred on staff costs, sales and marketing and product development expenditure which grew at a slower rate than revenue increased. Research and development tax credits are anticipated to be £806k (2016: £294k) reflecting our ongoing commitment to developing high quality products. Total administrative expenses were £8,886k (2016: £12,733k) after separately disclosed items as explained below.

 

Separately disclosed items

Significant irregular administrative expenses have been shown separately in the consolidated statement of comprehensive income, with further detail in the Annual Report and Accounts. These costs comprise charges related to the ongoing UK patent litigation of £388k (2016: £5,834k); adjustments to the valuations of share-based payments and warrant expenses of £332k (2016: £325k); costs associated with the Yourgene acquisition of £301k (2016: nil); and, a provision for doubtful debts of £785k (2016: nil) related to the Group's Swiss customer, Genoma SA, which is now in bankruptcy and for which debt recovery is ongoing.

 

Operating loss

There is a resultant operating loss after total administrative expenses of £7,603k (2016: £12,032k).

 

Finance income/(expenses)

During the period the Group incurred a net finance charge of £247k (2016: net charge of £84k), with interest and unwinding discounts on the Thermo Fisher loan instrument offsetting interest earned on cash balances.

 

Taxation and foreign exchange

The loss on ordinary activities after taxation of £7,859k (2016: £12,076k) generated a tax loss, the benefit of which will not be recognised until the Group can be more certain of recoverability through future profitability. The Group made a loss of £24k (2016: £54k) on translation of its foreign subsidiaries and foreign currency balances to the presentational currency.

 

Loss per share

The total comprehensive loss of £7,883k (2016: £12,130k) represents a loss per share of 3 pence (2016: 6 pence).

 

Statement of financial position

At the balance sheet date, the Group had total assets of £17,563k (2016: £10,490). Goodwill of £7,014k (2016: nil) and intangible assets of £1,539k (2016: nil) have been recognised on the acquisition of the Yourgene business, its existing customer relationships and its exciting prospects for future synergies.  Property, plant and equipment increased to £2,890k (2016: £1,936k) due mainly to the acquired Yourgene assets. Current assets reduced to £6,119k (2016: £8,554k) due to cash consumption partially offset by higher debtors.

 

Total equity and liabilities increased to £17,563k (2016: £10,490k) with a higher merger relief reserve of £10,013k (2016: £955k) arising from the Yourgene acquisition, new loan funding from Thermo Fisher in September 2016 and an equity fundraise in March 2017, being partially offset by the comprehensive loss.   The litigation provision has not been increased (2016: £5,834k) as management deems it already covers all costs associated with the July 2017 trial and ongoing counterclaims.  However, there is significant uncertainty over the outcome of the trial, which is expected to be received in Autumn 2017, and any potential cost awards or appeal costs arising.  Any appeal by either party, if granted by the Court, is likely to take over 12 months to complete and any estimates would be purely speculative at this time.

 

Cashflow

The Group had an opening cash position of £5,337k (2016: £2,709k) and expended £4,036k during the period (2016: surplus of £2,628k). Cash and cash equivalents at the end of the period were £1,301k (2016: £5,337k).  During the period the Group used £7,862k (2016: £7,042k) of cash in operating activities due to higher operating losses and increased net working capital. Investing activities were broadly neutral at £2k (2016: deficit of £1,131k) due to capital expenditure being offset by inflows associated with the Yourgene acquisition. Financing activities generated a surplus of £3,832k from Thermo Fisher loan funding and an equity raise in March 2017 (2016: surplus of £10,800k).

 

As with all businesses at this early stage of development, the Board carefully assesses the Group's ability to operate as a going concern and has detailed plans for revenue growth, margin improvement and cashflow control which are intended to achieve positive cashflows in the 2018 financial year.  More detail on these plans can be found in Note 2 in this announcement.

 

In September 2016, the Group secured additional funding from Thermo Fisher Scientific in the form of a £4,000k extension of their secured loan facility and the issue of two tranches of warrants (see note 31 in the Annual Report and Accounts for full details)  In February 2017, there was a share placing of 17 m shares to Harwood Capital, which raised £1,475k.

 

Dividends

No dividend is recommended (2016: £nil) due to the early stage nature of the Group.

 

Capital management

The Bboard's objective is to maintain a balance sheet that is both efficient at delivering long-term shareholder value and also safeguards the Group's financial position in light of variable economic cycles and the principal risks and uncertainties outlined in this report. As at 31 March 2017, the Group had cash of £1,301k (2016: £5,337k).  Business growth is expected to enable the Group to operate as a going concern for the foreseeable future, whilst material uncertainties surrounding the litigation are acknowledged in this report, with mitigation strategies being actively pursued including geographic and product diversification.

 

Post-balance sheet events

After the balance sheet date there was a further extension of the Thermo Fisher loan faciliites including a cash injection of £3.1m ($4m) and an additional secured facility of $1m in return for further issues of warrants.  The patent litigation trial finally commenced in the UK Courts in July 2017 and the ruling is expected to be known in Q4 2017.  The costs of the trial were fully provided for in prior years. Future costs of any appeal, if any, by either party are uncertain and therefore no additional provision has been made.  If they materialise, such costs are anticipated to be substantially lower than the trial costs to date.  Other aspects of the legal battle, such as assisting the EU Competition Commission with its anti-trust investigation, are ongoing and provisioned.  In September 2017, Illumina filed a further similar patent infringement claim against Premaitha in the UK.  The costs and timing of this latest action are unknown at the time of completing this report.

 

 

 

Barry Hextall

Chief Financial Officer

 

Consolidated Statement of Comprehensive Income

 

 

2017

 

2016

 

Notes

£

 

£

 

Revenue

4

3,078,744

 

2,452,378

Cost of sales

 

(1,796,334)

 

(1,751,395)

 

 

 

 

 

 

 

Gross profit

 

1,282,410

 

700,983

Other operating income

 

263

 

-

 

Administrative expenses

General administrative expenses

 

(7,079,130)

 

(6,573,384)

Increase in litigation provision and other litigation expenses

 

(387,983)

 

(5,834,345)

Share-based payments and warrant expenses

 

(332,261)

 

(325,429)

Costs associated with the acquisition of subsidiary

 

(301,216)

 

-

Provision for doubtful trade receivables

 

(785,317)

 

-

 

 

 

Total administrative expenses

(8,885,907)

 

(12,733,158)

 

 

 

 

 

 

 

Operating loss

 

(7,603,234)

 

(12,032,175)

 

Financing income

 

45,374

 

15,000

Financing expenses

 

(292,243)

 

(99,232)

 

 

 

 

 

 

 

Loss on ordinary activities before taxation

 

(7,850,103)

 

(12,116,407)

 

Tax on loss on ordinary activities

 

(8,943)

 

39,545

 

 

 

 

 

 

 

Loss for the year

 

(7,859,046)

 

(12,076,862)

 

Other comprehensive expense

 

 

Exchange translation differences

(24,323)

 

(53,599)

 

 

 

 

 

 

 

Loss and total comprehensive loss for the year

 

(7,883,369)

 

(12,130,461)

 

 

 

 

 

 

 

Loss per share (£)

Basic

5

0.03

 

0.06

Diluted

5

0.03

 

0.06

 

 

 

 

 

 

             

 

Consolidated Statement of Financial Position

 

 

 

2017

 

2016

 

 

 

 

Notes

£

 

£

 

 

Assets

 

 

 

 

Non-current assets

 

 

Goodwill

 

6

7,014,447

 

-

 

 

Intangible assets

 

6

1,539,392

 

-

 

 

Property, plant and equipment

 

 

2,890,446

 

1,935,891

 

 

 

 

 

 

 

 

 

 

 

 

Total non-current assets

 

11,444,285

 

1,935,891

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

Inventories

 

 

427,925

 

461,407

 

 

Trade and other receivables

 

 

3,289,012

 

1,661,275

 

 

Tax asset

 

1,101,345

 

1,094,643

 

 

Cash and cash equivalents

 

1,300,667

 

5,336,859

 

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

6,118,949

 

8,554,184

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

17,563,234

 

10,490,075

 

 

 

 

 

 

 

 

 

 

 

 

Equity and liabilities attributable to equity holders of the company

 

 

 

 

Equity

 

 

Called up share capital

 

 

32,266,188

 

32,173,133

 

 

Share premium account

 

 

28,482,061

 

27,023,661

 

 

Merger relief reserve

 

 

10,012,644

 

954,545

 

 

Reverse acquisition reserve

 

 

(39,947,033)

 

(39,947,033)

 

Foreign exchange translation reserve

 

 

(58,364)

 

(34,041)

 

Warrants reserve

 

 

3,069,382

 

1,770,363

 

 

Retained losses

 

 

(27,980,078)

 

(20,453,293)

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

5,844,800

 

1,487,335

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

 

3,497,907

 

2,091,964

 

 

Borrowings

 

 

119,087

 

-

 

 

Provisions

 

8

3,321,995

 

5,386,326

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

6,938,989

 

7,478,290

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Borrowings

 

4,310,54

 

1,362,767

 

 

Long term provisions

 

173,960

 

161,683

 

 

Deferred tax liability

 

294,492

 

-

 

 

 

 

 

 

 

 

Total non-current liabilities

 

4,779,445

 

1,524,450

 

 

 

 

 

 

 

 

 

 

Total equity and liabilities

 

17,563,234

 

10,490,075

 

 

 

 

 

 

 

 

 

 

                                         

 

Statement of Changes in Equity

 

Share capital

Share premium account

Merger relief reserve

Warrants reserve

Reverse acquisition reserve

Currency translation reserve

Retained losses

Total

 

Notes

£

£

£

£

£

£

£

£

 

 

Balance at 1 April 2015

 

28,173,133

23,307,021

954,545

-

 

(39,947,033)

19,558

 

(8,611,027)

3,896,197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 31 March 2016:

 

Loss for the year

 

-

-

-

-

-

-

 

(12,076,862)

(12,076,862)

Other comprehensive loss

 

-

-

-

-

-

 

(53,599)

-

 

(53,599)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss for the year

 

-

-

-

-

-

 

(53,599)

(12,076,862)

(12,130,461)

 

Transactions with owners

 

Issue of share capital

 

4,000,000

4,000,000

-

-

-

-

-

8,000,000

 

Share issue expenses

 

-

 

(283,360)

-

-

-

-

-

 

(283,360)

Share-based payments

 

-

-

-

-

-

-

234,596

234,596

 

Warrants issued

9

-

-

-

1,770,363

-

-

-

1,770,363

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners

 

4,000,000

3,716,640

-

1,770,363

-

-

234,596

9,721,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2016

 

32,173,133

27,023,661

954,545

1,770,363

 

(39,947,033)

(34,041)

(20,453,293)

1,487,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                               

 

 

Share capital

Share premium account

Merger relief reserve

Warrants reserve

Reverse acquisition reserve

Currency translation reserve

Retained losses

Total

 

 

£

£

£

£

£

£

£

£

 

 

Balance at 1 April 2016

 

32,173,133

27,023,661

954,545

1,770,363

 

(39,947,033)

(34,041)

(20,453,293)

1,487,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 31 March 2017:

 

Loss for the year

 

-

-

-

-

-

-

 

(7,859,046)

(7,859,046)

Other comprehensive loss

 

-

-

-

-

-

 

(24,323)

-

9,033,776

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss for the year

 

-

-

-

-

-

 

(24,323)

(7,859,046)

(7,883,369)

 

Transactions with owners

 

Issue of share capital - other

 

17,000

1,470,500

-

-

-

-

-

1,487,500

 

Share issue expenses

 

-

(12,100)

-

-

-

-

-

 

(12,100)

 

Issue of share capital on acquisition

 

76,055

-

9,058,099

-

-

-

-

9,134,154

 

Share-based payments

 

-

-

-

-

-

-

332,261

332,261

 

Warrants issued

 

-

-

-

1,299,019

-

-

-

1,299,019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners

 

93,055

1,458,400

9,058,099

1,299,019

-

-

332,261

12,240,834

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2017

 

32,266,188

28,482,061

10,012,644

3,069,382

 

(39,947,033)

(58,364)

(27,980,078)

5,844,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                     

 

Consolidated statement of cash flows

 

 

 

2017

2016

 

 

 

 

 

£

£

 

Cash flows from operating activities

 

 

 

 

Loss for the year after tax

 

(7,859,046)

(12,076,862)

 

 

 

Adjustments for:

 

 

Taxation charged/(credited)

8,943

 

(39,545)

 

Finance costs

292,243

99,232

 

 

Investment income

 

(45,374)

(15,000)

 

Loss on disposal of subsidiaries

 

7,596

-

 

Depreciation and impairment of property, plant and equipment

724,028

557,323

 

 

Amortisation of intangible non-current assets

12,936

-

 

 

Foreign exchange movements

 

(24,323)

(53,599)

 

Share based payment and warrant expense

332,261

234,596

 

 

(Decrease)/increase in provisions

 

(2,052,054)

4,923,088

 

 

 

Movements in working capital:

 

 

Decrease/(increase) in inventories

118,271

 

(11,369)

 

Decrease/(increase) in trade and other receivables

 

182,063

(1,371,470)

 

Increase in trade and other payables

 

447,132

1,006,146

 

Decrease in tax asset

 

(6,702)

(294,189)

 

 

 

 

 

 

 

 

 

 

Cash used by operations

 

(7,862,826)

(7,041,649)

 

Tax paid

 

(7,018)

-

 

 

 

 

 

 

 

 

 

 

Net cash outflow from operating activities

 

(7,869,844)

(7,041,649)

 

 

 

Investing activities

 

 

Net outflow on disposal of subsidiary undertaking

 

(2,557)

-

 

Net inflow on acquisition of subsidiary undertakings

 

 

400,294

-

 

Purchase of property, plant and equipment

 

(406,236)

(1,146,543)

 

Proceeds on disposal of property, plant and equipment

 

-

609

 

Interest received

 

10,824

15,000

 

 

 

 

 

 

 

 

 

 

 

Net cash generated from/(used in) investing activities

 

2,325

(1,130,934)

 

 

 

Financing activities

 

 

Net proceeds from issue of shares

 

 

 

1,475,400

7,716,640

 

Proceeds from borrowings

 

 

 

2,356,986

3,083,450

 

Interest paid

 

 

 

(1,059)

(3)

 

 

 

 

 

 

 

 

 

 

 

Net cash generated from financing activities

 

3,831,327

10,800,087

 

 

 

 

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

(4,036,192)

2,627,504

 

 

 

Cash and cash equivalents at beginning of year

 

5,336,859

2,709,355

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of year

 

1,300,667

5,336,859

 

                   

 

 

 

                                     

 

Notes to the consolidated financial statements

 

1  Basis of preparation

 

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined by section 434 and 435 of the Companies Act 2006.  The financial information for the year ended 31 March 2017 has been extracted from the Group's financial statements upon which the auditor's opinion is unmodified and does not include any statement under section 498(2) or 498(3) of the Companies Act 2006.  The statutory accounts for the year ended 31 March 2017 will be delivered to the Registrar of Companies following the Annual General Meeting.

 

This financial information has been prepared in accordance with International Financial Reporting Standards (IFRS), adopted for use in the European Union and including IFRIC interpretations issued by the International Accounting Standards Board (IASB) and the Companies Act 2006.

 

The Group has applied all accounting standards and interpretations issued relevant to its operations for the year ended 31 March 2017.  The consolidated financial statements have been prepared on a going concern basis.

 

The consolidated financial information has been prepared on the basis of accounting policies set out in the Group's financial statements for 2017.

 

2  Going concern

 

In their assessment of Group and Company's ability to continue as a going concern, the directors have focused on the potential outcome of the patent infringement legal case, the rate of growth of revenue - especially outside the litigation jurisdiction, decisions available to them for management of the cost base of the Group and the potential for future fundraising.

 

As described in the strategic report, the Group has made progress towards achieving positive cashflows through growth in revenues since launching the IONA® test in February 2015 and acquiring Yourgene in March 2017. The Group has however reported a loss for the year; which reflects that break-even levels of revenues have not yet been reached.  The Group's forecasts include assumptions of further growth in revenue; which are key in achieving positive cashflows.

 

The directors have also assessed the Group and Company's ability to meet its commitments in respect of the ongoing patent infringement litigation claims as detailed in note 23 in the Annual Report and Accounts. These outgoings are subject to significant uncertainty as to the outcome of the July 2017 UK patent trial (expected late Autumn 2017), the likelihood of an appeal against any negative outcomes, any potential damages awarded and the costs associated with defending the additional 321 patent claim received in September 2017. 

 

There is an ongoing commitment to constrain costs in order to achieve positive cashflows before the end of the 2018 financial year.  Detailed sensitivity analysis has been performed to assess the potential impact on the Group's liquidity caused by delays in revenue growth against budgeted levels or a potential adverse outcome to the litigation along with potential mitigating actions which can be taken to safeguard the Group's cash position. These include working capital controls and reductions in discretionary spending.

 

If events transpire differently to this assessment, for example if revenues fail to grow at the anticipated pace, or if there is an adverse outcome to the litigation, then there could be lower cash headroom or even a cash shortfall. In this situation, the Group and Company will need to secure additional finance through either the issue of additional shares or obtaining additional external borrowing. The directors have not yet sought to raise the additional funding therefore the availability of this in the future is inherently uncertain.

 

The directors have concluded that the combination of these circumstances represent a material uncertainty that, if they were to transpire adversely, may casts significant doubt upon the Group and Company's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the ordinary course of business. Nevertheless, after making enquiries, and considering the uncertainties and business plans described above, the directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts.

 

3  Critical accounting estimates and judgements

 

 

 

In the application of the Group's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below.

 

 

 

 

Critical judgements

 

Treatment of Thermo Fisher loan and warrant arrangements

 

During the prior year, the Group entered into a loan arrangement with Life Technologies Limited ("Thermo Fisher"), under the terms of which Thermo Fisher provided a loan facility of £5m to the Group. On the same day, the Group entered into a share warrant agreement with Thermo Fisher ("2015 warrants"). During the current year, the Group entered into an amended and restated 8-year loan facility granted by Thermo Fisher. In return for an increase in the facility of £4m, Premaitha granted two tranches of warrants to Thermo Fisher ("2016 and 2017 warrants").

 

The Group assessed the accounting treatment of the loans and warrant agreements and have concluded that, although they are separate financial instruments, it is necessary to allocate the initial proceeds received between the loan and the warrants based on their fair values, because the instruments were entered into at the same time.

 

Having considered the terms of the 2015, 2016 and 2017 warrants, it has been concluded that they represent equity instruments. The warrants are accounted for at fair value on inception in accordance with IAS 32. The loan is initially recognised at fair value on inception and subsequently measured at amortised cost using the effective interest rate method, in accordance with IAS 39.

 

In respect of the 2017 warrants, these were initially recognised as a derivative liability on inception and prior to the date of issue on the basis that the number of shares issued under the terms of the warrant was not fixed.  On the date of issue, 31 March 2017, the derivative liabilitywas reclassified as equity as per the above.

 

Prior to drawdown of the relevant facilities, the value of the warrants when issued are treated as a commitment fee for the advancement of the increased loan facility. The commitment fee is reflected within prepayments and is released against the loan facility balance as the facilities are drawn by the Group.

 

 

Impairment of goodwill

 

The Group's management undertakes an impairment review annually, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable.

 

Cashflow assumptions

The key assumptions for the value in use calculations are those regarding discount rates, growth rates and expected cashflows.  Changes in revenues and expenditures are based on past experience and expectations of future growth.

 

Growth rates

The value in use of the intangible assets is calculated from cash flow projections for the relevant business activities based on the latest financial projections covering covering the anticipated useful economic life of the intangible assets.

 

Discount rates

The pre-tax discount rate used to calculate value is determined in relation to the relevant business activities and their geographic location, using external benchmarks where possible to arrive at a relevant weighted average cost of capital.

 

 

 

Going concern

 

As with all businesses at this early stage of development, the Board assesses carefully the Group's ability to operate as a going concern and has detailed plans for revenue growth, margin improvement and cashflow control which are intended to achieve positive cashflows in the 2018 financial year.  The Board assessment is detailed above and in the Annual Report and Accounts.

 

 

Key sources of estimation uncertainty

 

Acquired intangibles

 

 

Intangible assets (customer relationships) have been acquired as part of the acquisition of Yourgene Bioscience.  These intangible assets were capitalised at their fair value at the date of acquisition.  Determining the value of acquired intangibles required the calculation of estimated future cash flows expected to arise from the intangible assets at a suitable discount rate in order to calculate their present value.  In addition, an estimate of the useful life of the intangible asset has to be made over the period in which the cash flows were expected to be generated.  The carrying amount of the acquired intangibles at the reporting date was £1,539,392 (2016: £Nil). 

 

 

Patent infringement litigation provision

 

Premaitha is defending patent infringement litigation claims filed in the English courts which claim that Premaitha's non-invasive pre-natal test infringes patents owned or licensed by the claimants. The first claim was filed in March 2015 by the claimants Illumina, Inc., Seequenom, Inc. and Stanford University. The second claim was filed in September 2015 by the claimants Illumina, Inc. and the Chinese University of Hong Kong. The cases were heard in the UK High Court in July 2017.

 

The Group has assessed the expected costs of defending these claims, and has provided in full for the expected litigation costs. The Group recognised a provision in the prior year financial statements of £5,386,326 following the filing of the second claim. In the current year, management have further re-assessed the Group's legal strategy and the litigation costs expected to be incurred in defending both claims and no additional provision has been recognised. The actual costs incurred may be affected by the outcome and the duration of the claims, and any appeals filed by Premaitha or by the claimants. As the Group cannot reliably estimate what proportion of the litigation costs will be paid after more than 12 months from the reporting date, the amount is classified as current.

 

 

 

 

 

4  Revenue

 

In the opinion of the Directors, the Group has one class of business in two geographic areas, a molecular diagnostics business based in the UK which sells into the UK and Rest of World and a Taiwan-based molecular diagnostics business which sells into Rest of World.

 

The Group is therefore considered to have a single operating segment which is monitored by the Group's chief operating decision makers. Strategic decisions are made on the basis of unadjusted operating results.

Revenue, analysed by category, was as follows:

 

 

 

 

 

 

2017

2016

 

 

£

£

 

 

Turnover

 

 

 

Sales of goods

2,425,157

2,005,782

 

 

Rendering of services

653,587

74,548

 

 

Non-recurring sale of equipment

-

372,048

 

 

 

 

 

 

 

 

 

 

 

3,078,744

2,452,378

 

 

 

 

 

 

 

 

 

 

 

Other significant revenue

 

 

 

Interest income

45,374

15,000

 

 

 

 

 

 

 

 

 

 

Revenue analysed by geographical market

 

 

2017

2016

 

£

£

 

 

UK

1,018,359

738,333

 

Rest of the World

2,060,385

1,714,045

 

 

 

 

 

 

 

3,078,744

2,452,378

 

 

 

 

 

 

During 2017, the second year of trading revenues for the Group, £2,140,450 (69.5%) (2016: £2,047,219) of the Group's revenue depended on a total of five (2016: two) customers who each represented more than 10% of Group revenues.

 

                         

 

5  Loss per share

 

 

Basic

Basic loss per share is calculated by dividing the total comprehensive loss for the period of £7,883,369 (2016: loss £12,130,461) by the weighted average number of ordinary shares in issue during the period 236,277,783 (2016: 218,109,064).

 

Diluted

Diluted earnings per share dilute the basic earnings per share to take into account share options and warrants. The calculation includes the weighted average number of ordinary shares that would have been issued on the conversion of all the dilutive share operations and warrants into ordinary shares. 93,377,225 options and warrants (2016: 58,993,088) have been excluded from this calculation as the effect would be anti-dilutive.

 

 

 

6  Intangible assets

 

Goodwill

Customer Relationships

Total

 

 

£

£

£

 

 

Cost

 

 

Additions - purchased

7,014,447

1,552,328

8,566,775

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2017

7,014,447

1,552,328

8,566,775

 

 

 

 

 

 

 

 

 

 

 

Amortisation and impairment

 

 

Charge for the year

-

12,936

12,936

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2017

-

12,936

12,936

 

 

 

 

 

 

 

 

 

 

 

Carrying amount

 

 

At 31 March 2017

7,014,447

1,565,264

8,579,711

 

 

 

 

 

 

 

 

 

 

Details of the acquisition of the Yourgene business which gave rise to goodwill is included below. As part of that transaction the Group has acquired an intangible asset, being the customer relationships of the acquired group and this has been recognised as a separately identifiable asset.

 

Intangible assets are subjected to annual impairment test to ascertain if the value in use is greater than the carrying value in the financial statements.  The intangible assets arising from the Yourgene acquisition were tested over the estimated 10 year useful economic life using growth and discount rate assumptions, applied to a baseline of current business activity and forecasts.  Growth was forecast on a declining rate to reflect the increasing size of the cashflows, from an initial 35% per annum down to 5% per annum for the final 5 years of the useful economic life.  Discount rates were set at 13%, being representative cost of capital for similar companies.  The headroom compared to the carrying value was over £2.6m.  Increasing the discount rate to 19% would lead to the recoverable amount being equal to the carrying value of the intangible assets.

 

 

                   

 

7  Acquisition of a business

 

On 2 March 2017, the company acquired 100% equity interests in Yourgene Bioscience Co. Ltd, Kang Qiao Bioscience Ltd and Jian Qiao Bioscience Co. Ltd (companies incorporated in Thailand), as well as Yourgene Bioscience Singapore Pte Limited (a company incorporated in Singapore), for total consideration of £9,540,064.

 

These companies offer similar products and services to the Group and have built a substantial customer base in South East Asia and India which increases the geographic reach of the newly enlarged Group. A summary of the net assets acquired in this transaction and the consideration paid is as follows:

 

 

 

 

Book Value

Fair Value

 

 

£

£

 

 

 

 

Cash and cash equivalents

806,204

806,204

 

 

Intangible assets

-

1,552,328

 

 

Property, plant and equipment

1,272,347

1,272,347

 

 

Trade and other receivables

679,405

679,405

 

 

Inventories

84,789

84,789

 

 

Trade and other payables

(958,348)

(958,348)

 

 

Borrowings

(616,166)

(616,166)

 

 

Deferred tax

-

(294,942)

 

 

 

 

 

 

 

 

 

 

1,268,231

2,525,617

 

 

 

7,014,447

 

 

 

 

 

 

 

 

 

Total consideration

9,540,064

 

 

 

 

 

 

 

 

 

Satisfied by:

£

 

Cash

405,910

 

Issue of shares

9,134,154

 

 

 

 

 

9,540,064

 

 

 

 

 

Net cash inflow arising on acquisition

£

 

Cash consideration

(405,910)

 

Cash and cash equivalents acquired

806,204

 

 

 

 

 

400,294

 

 

 

 

The goodwill arising on the acquisition of the business is attributable to the anticipated profitability of the distribution of the Group's products in new markets and the future operating synergies from the combination.

 

Yourgene's revenue for the post-acquisition period, 2 March to 31 March 2017, was £253,826 and the pre-tax profit was £73,302.  Full year information including the pre-acquisition period is not provided as the information was not readily available.

 

                       

 

8  Provisions for liabilities

 

2017

2016

 

 

£

£

 

 

 

Dilapidation provision

173,960

161,683

 

 

Litigation provision

3,321,995

5,386,326

 

 

 

 

 

 

 

 

 

3,495,955

5,548,009

 

 

 

 

 

 

 

 

 

Movements on provisions:

Dilapidation provision

Litigation provision

Total

 

 

£

£

£

 

 

 

At 1 April 2016

161,683

5,386,326

5,548,009

 

 

Utilisation of provision

-

(2,064,331)

(2,064,331)

 

 

Unwinding of discount

12,277

 

-

12,277

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2017

173,960

3,321,995

3,495,955

 

 

 

 

 

 

 

 

 

 

Dilapidation provision

As part of the Group's property leasing arrangements there is an obligation to return certain premises in the same state that they were received and repair damages which incur during the life of the lease, such as wear and tear. The cost is charged to profit and loss as the obligation arises. The provision is expected to be utilised between 2017 and 2021 as the leases terminate.

 

 

 

Litigation provision

Premaitha is involved in litigation to defend itself against two patent infringement claims filed in the English courts which claim that Premaitha's non-invasive prenatal test infringes patents owned or exclusively licensed by the claimants. The first claim was filed in March 2015 by Illumina, Inc., Sequenom, Inc. and Stanford University. The second claim was filed in September 2015 by the Illumina, Inc. and the Chinese University of Hong Kong. The two cases were combined into a combined action by the courts as they involve 3 patent families and a complicated series of inter-related claims.  As part these actions the Company has filed counterclaims of non-infringement for potential alternative processes and these will also be determined in the forthcoming ruling.  In addition, there are investigations underway by the EU Competition Commission, and pending in the UK courts, into the claimants' behaviour which may result in compulsory licencing of the patents in question.  Similar claims by the claimants against another competitor were also integrated into the action and the combined trial was heard in the High Court in London in July 2017.  A ruling is expected in late 2017 which may or may not be definitive, and there is a possibility that either party will be given leave to appeal or that both parties cross-appeal different aspects of the ruling.

 

The Group has assessed the expected costs of defending these claims and has provided for the expected litigation costs, insofar as these can be reasonably ascertained. The Group recognised a provision in the prior year financial statements of £5,386,326 following the filing of the second claim. In the current year, management have further re-assessed the Group's legal strategy and the litigation costs expected to be incurred in defending both claims and no additional provision has been recognised.  There remains significant uncertainty about what the ruling will be, the size or nature of any cost awards against either party, the likelihood and costs of any appeal by either party or a cross-appeal by both.  The eventual outcome may not become clear for over 12 months from the date of these accounts and any estimate of potential damages awarded against either party would be purely speculative at this time. 

 

The consequences, timing and quantum of this litigation therefore presents a material uncertainty at this time.

 

                   

 

9  Thermo Fisher Scientific loan and warrants

Thermo Fisher 2015 warrants

On 11 December 2015, the Group entered into a loan agreement with Life Technologies Limited ("Thermo Fisher"), under the terms of which Thermo Fisher provided a loan facility of £5m to the Group subject to their approval over the usage of drawn funds. The term of the loan is 8 years and the rate of interest applied to the loan is 6%. The loan is secured by a fixed and floating charge against the intellectual property of the Group.

 

The Group simultaneously entered into a share warrant agreement with Thermo Fisher, issuing warrants over 20,325,204 shares to Thermo Fisher. The warrants have an exercise price of 24.6p per share, and have a term of 8 years.

 

Initial consideration received was £2,760,000.

 

 

Thermo Fisher 2016 & 2017 warrants

On 22 September 2016, Premaitha entered into an amended and restated 8-year loan facility granted by Thermo Fisher. In return for an increase in the facility of £4m, Premaitha granted two tranches of warrants to Thermo Fisher. These are respectively the 2016 and 2017 warrants.

 

The 2016 warrants issued by the Group on 22 September 2016 are over 17,094,018 shares with an exercise price of 11.7p per share and a term of 7.25 years.

 

The 2017 warrants issued by the Group on 31 March 2017 are over 16,913,319 shares with an exercise price of 11.825p per share and a term of 6.75 years.

 

Application of IAS 32/IAS 39

The Group assessed the accounting treatment of the loans and warrant agreements and have concluded that, although they are separate financial instruments, it is necessary to allocate the initial proceeds received between the loan and the warrants based on their fair values, because the instruments were entered into at the same time.

 

Having considered the terms of all of the warrants, it has been concluded that they represent equity instruments. The warrants are accounted for at fair value on inception in accordance with IAS 32. The loan is initially recognised at fair value on inception and subsequently measured at amortised cost using the effective interest rate method, in accordance with IAS 39.

 

Prior to drawdown of the relevant facilities, the value of the warrants when issued are treated as a commitment fee for the advancement of the increased loan facility. The commitment fee is reflected within prepayments and is released against the loan facility balance as the facilities are drawn by the Group.

 

The Group allocated the proceeds of the 2015 warrant, according to the respective fair values of the loan and warrant instruments as follows:

 

£

 

Loan

 

989,637

 

Warrants

 

1,770,363

 

 

 

 

The 2015 warrants are accounted for, as noted above, as an equity instrument under IAS 32, and are not subsequently re-measured. As the loan is subsequently measured at amortised cost using the effective interest rate method, an accretion charge is recognised over the life of the loan to restore its carrying value to the amount drawn down. The charge recognised in the year is as follows:

 

 

£

 

Fair value brought forward

 

1,362,767

 

Amounts drawn down in the year

 

2,356,986

 

Interest charged to 31 March 2017

 

236,745

 

Commitment fee released

 

(143,034)

 

 

 

 

 

Carrying value at 31 March 2017

 

3,813,464

 

 

 

 

The total amounts included in prepayments as a commitment fee for the undrawn increased facility in respect of the fair values of the 2016 and 2017 warrants totalled £1,069,417 (2016: £Nil) as at the balance sheet date. This represents the fair value of the equity instrument issued in respect of the 2016 warrants at 22 September 2016 of £559,330 and the fair value of the equity instrument issued in respect of the 2017 warrants at 31 March 2017 of £739,689, less an amount of £143,034 released against the balance of the loan on drawdown of amounts against the additional facility of £4 million.

At 31 March 2017, the following warrants were outstanding in respect of Ordinary shares:

 

2017

2016

 

Date of grant

Exercise period

No.

No.

 

11 December 2015

11 December 2015 to 10 December 2023

20,325,204

20,325,204

 

22 September 2016

22 September 2016 to 10 December 2023

17,094,018

-

 

31 March 2017

31 March 2017 to 10 December 2023

16,913,319

-

 

 

 

 

 

 

The fair values of the warrants granted were determined using a variation of the Black-Scholes model, incorporating the dilutive effects of the warrants. The following principal assumptions were used in the valuations:

 

 

2015

2016

2017

 

warrants

warrants

warrants

 

 

Share price

20.63p

10.625p

11.625p

 

Volatility

68%

48.63%

59%

 

Dividend yield

0%

0%

0%

 

Risk-free interest rate

1.74%

0.6%

0.979%

 

Expected option life

8 years

7.25 years

6.25 years

 

 

 

 

 

 

 

Options and weighted average exercise prices are as follows for the reporting periods presented:

 

 

Number of share options

Weighted average exercise price

 

No.

p

 

 

Outstanding at 1 April 2016

20,325,204

25

 

Granted

34,007,337

12

 

 

 

 

 

 

 

Outstanding at 31 March 2017

54,332,541

17

 

 

 

 

 

 

 

Exercisable at 31 March 2017

54,332,541

17

 

                               

 

10  Events after the reporting date

After the balance sheet date there was a further extension of the Thermo Fisher loan faciliites including a cash injection of £3.1m ($4m) and an additional secured facility of $1m in return for further issues of warrants.

 

The patent litigation trial finally commenced in the UK Courts in July 2017 and the ruling is expected to be known in Autumn 2017.  The costs of the trial were fully provided for in prior years. Future costs of any appeal, if any, by either party are uncertain and therefore no additional provision has been made.  If they materialise such costs are anticipated to be substantially lower than the trial costs to date.  Other aspects of the legal battle such as assisting the EU with their anti-trust investigation are ongoing and provisioned.  In September 2017, Illumina filed a further similar patent infringement claim against Premaitha in the UK.  The costs and timing of this latest action are unknown at the time of completing this report.

 

 

11  Emphasis of matter

The auditor's report includes Emphasis of Matter paragraphs in respect of the litigation provision and going concern. Extracts from the auditor's report are reproduced below:.

 

Litigation provision

 

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in fra 23 to the Annual Report and Accounts concerning a litigation provision.  The group and parent company are involved in litigation to defend themselves against two patent infringement claims and the parent company has filed counterclaims. There remains significant uncertainty about what the ruling will be, the size or nature of any cost awards against either party, the likelihood and costs of any appeal by either party or a cross-appeal by both.

 

 

Going concern

 

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in notes 1 and 23 to the Annual Report and Accounts concerning the group's and parent company's ability to continue as a going concern. The group incurred a loss for the year of £7,859,046 and, at that date, the group had current assets of £6,118,949 and current liabilities of £6,938,989. In their assessment of the group and parent company's ability to continue as a going concern, the directors have focused on the potential outcome of the patent infringement legal case, the rate of growth of revenue, management of the cost base of the group and potential for future fundraising.

 

These considerations, along with the other matters explained in notes 1 and 23 to the Annual Report and Accounts, indicate the existence of a material uncertainty which may cast significant doubt about the group's and parent company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the group and parent company were unable to continue as a going concern.

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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